Compare mortgages: learn the art of mortgage comparison

Learn how to compare mortgages and you'll know how to get the very best mortgage deal for you

compare mortgages
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Knowing how to compare mortgages is essential if you want to make the most of your mortgage. If you're applying for the first time, it may seem like there's not much more to it than choosing a mortgage with the lowest interest rates. However, comparing interest rates is only one aspect of finding the best mortgage deal, which can be a lengthy process. Use this guide to get an idea of all the different aspects of comparing mortgages, from fees to using our mortgage calculator.

Comparing mortgages: where to start

Bank

Most people still start their mortgage search by speaking to the mortgage advisor at their bank. It's convenient and it may seem like the natural thing to do, but – taking out a mortgage with your bank does not guarantee you the best mortgage deal. 

Broker

Using the services of a mortgage broker, whether traditional or online, is likely to get you a better mortgage deal – that is a lower interest rate, and a lower overall debt. See our guides below for more on the different services available. 

Credit check

The credit check is an essential part of both looking and applying for your mortgage: your mortgage lender will use your credit rating to to determine how much you can borrow for a mortgage. If you're really not sure what you credit rating is, it's a good idea to request a credit report from a credit check company before you start looking for mortgages. If your credit is not as good as you'd like it to be, then read our guide to mortgages with bad credit before doing anything else.

Why compare mortgages?

If you're a first time buyer, here are the basics: a mortgage is a loan taken out to cover the cost of a property (minus any downpayment you are able to make, or 'deposit'), with interest charged by the lender. It is a legally binding contract; and if you can't make the repayments, your chances of owning a home in the future will be harmed. So comparing mortgages to find the most affordable one for you is vital.

Compare mortgages like a mortgage broker

  • Know what your credit score is before you start: it's easy to find out with websites such as Experian and uSwitch;
  • Always compare like mortgage for like: make sure that you're comparing the same type of mortgage (for instance, fixed rate for five years), with the same term length (say, 25 years);
  • Use our online mortgage calculator (below) or others provided by mortgage brokers: it will work out what you can afford and compare deals; otherwise, you'll be looking at 75 million search results for 'mortgage lenders', and it's easy to become overwhelmed.

Mortgage calculator

Using an online mortgage comparison tool is a great way to begin your mortgage journey. We've teamed up with mortgage experts Habito to bring you the online mortgage calculator below – it not only allows you to compare deals from lots of different lenders, but it will calculate the true cost of borrowing (including fees) for you, too. 

Use the tool to compare mortgages, then get in touch with Habito for mortgage advice. Their expert brokers can also look over your documents, help you find the best deal and even assist with paperwork. 

How to compare mortgage interest rates

The interest you'll be paying on the loan made to your bank can be fixed or variable, which gives rise to the terms 'fixed rate mortgage' and 'variable rate mortgage'.

However, bear in mind that fixed rate mortgages are never fixed rate for the whole duration of the mortgage – rather, they can be seen as introductory offers for the first two, five, or 10 years of your mortgage. This will be made clear from the outset.

At the end of that term, your interest rate will revert to the lender's standard variable rate, which will then fluctuate based on a number of factors, such as the Bank of England's base interest rate. A fixed rate mortgage will give you peace of mind about the exact amount you'll be paying each month, but not for the full 25 years. 

How to compare fixed rate mortgages 

Fixed-rate mortgages are the easiest to compare – if you're making sure you're comparing the true cost of the different mortgages rather than just the interest rates. Always make sure you're adding up any fees that will be payable in order to work out the total cost of the mortgage per month, especially if you'll be spreading the cost of your fees rather than paying them upfront. Note that the Habito calculator gives you the 'true cost' of a fixed-term mortgage, which factors in the lender's fees. 

The other thing to think about is exit fees. You may think that this does not apply to you as you don't intend to move within the fixed-rate period, but you just never know what may happen, so factoring in the cost of an early exit is important. If, for whatever reason, you had to move halfway through the term, what would the financial implications be?  

How to compare mortgages when remortgaging

If you decide to remortgage – say, after your fixed rate period has finished – there are a few things to consider before you take the plunge. 

The fixed interest rate on the mortgage deal may be more attractive than the variable rate on your current mortgage – but what fees will you have to pay the new lender, or your existing one? You'll often have to pay an arrangement fee on your new deal, and maybe a solicitor's fee. 

If you are switching lenders, your existing lender may also charge you an exit fee – see more on exit fees below. Get more advice on how to remortgage in our dedicated guide.

Exit fees and remortgaging: what you need to know

Many people choose to remortgage for a better deal once their fixed rate period is up; lenders know this and many will charge high exit fees if you decide to remortgage with a different lender. It is, therefore, very important to know what those fees are before you take out the mortgage. Get more advice on how to remortgage in our guide. 

Fees the mortgage lender charges you

The cost of the monthly repayments with interest is not all you need to consider when working out the total amount of your loan. Most mortgage lender charge fees, such as an arrangement fee, a booking fee, and in some cases an evaluation fee. 

Typically, if you are prepared to pay those fees upfront, your mortgage deal will be better. If you don't pay them upfront, some lenders will let you add them onto your overall loan; this is, understandably, the only option for people who will have little to no savings left after the deposit they've paid on a house, but it's not great financially speaking, because you will end up paying interest on those fees as well as on the loan itself. 

Mortgage lender overpayment or underpayment

This is one of the more important terms of your mortgage agreement. If you were able and wiling to overpay your monthly amounts, shortening your mortgage in the process, would the lender allow you to do this? And vice versa, if you found yourself in financial difficulty, would the lender allow you a break from repayments? 

If you are planning to offset your total mortgage cost with savings at some point (for example, you are expecting an inheritance), look for an 'offset mortgage'. Again, not all mortgage deals automatically give you the option to do this.

APRC: what it is and how to use it

APRC stands for Annual Percentage Rate of Charge and is quite simply the total annual cost of debt to you, the consumer. It takes the total amount you need to repay (including fees and interest), and the mortgage term, and then converts the amount you'll be repaying for every pound you've spend into a percentage. 

This figure will take into account the rate changes after the fixed rate period, too. It is important to at least take a look at the APRC figure as it could give a more realistic idea of how much borrowing with this particular lender will cost you over the years. And all lenders have to calculate the APRC in the same way, which makes it easier to compare different lenders. 

How to compare mortgages for buy to let

Buy to let mortgages are quite different from standard residential mortgages: first of all, they're interest-only, meaning that you'll be paying off only the interest on the monthly repayments until the end of the mortgage payment, when the rest of the loan needs to be repaid. 

When comparing different buy-to-let mortgages, pay particular attention to how much deposit will be required (always a higher amount than for a regular mortgage), what the fees will be (they're also typically higher), and how much you'll be able to borrow, which is calculated slightly differently to regular mortgages. Find out more in our guide to buy to let mortgages

How to compare interest only mortgages

Let's say that you have family assets, whether in the form of property or cash tied up in investments, and you are confident that you could get an interest only mortgage. While these type mortgages aren't easy to qualify for, they can be even more difficult to navigate if you do qualify for one. 

How do you compare them? We recommend focusing first and foremost on how the lender will want you to repay the loan and whether that aligns with your long-term financial plans. Will they want the property to be sold in the future? Is that what you also would want? There's lots to think about. Read our guide to interest only mortgages to find out more. 

How to get a mortgage in principle

When you compare mortgages online, the interactive comparison tool works in much the same way as the initial chat you'd be having with your broker. The resulting provisional amount you could borrow is what's known as a mortgage in principle. Mind, this is mainly for your information and isn't legally binding, and could change. It's also different from getting an agreement in principle. For an in-depth explanation of the difference between the two terms, see our guide to mortgages in principle

Comparing guarantor mortgages

A guarantor mortgage allows a first-time buyer to get on the property ladder without a deposit, in exchange for family members tying up a certain amount of their savings in a special ISA account for a fixed time period. These mortgages are currently offered mainly by the big banks, so there's not that much to choose from, but you should still compare the different terms offered by different banks; some will offer a better interest rate on the savings your family would be guaranteeing the mortgage with, while others will have a shorter term, allowing your parents/other family to have their savings back quicker. Find out more in our guide to guarantor mortgages.

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