What mortgage is right for me?

Choosing the right mortgage

Last updated: 03/04/2023

There are lots of different types of mortgages, and it can be hard to understand how to choose between them. Choosing a mortgage for your first home is a big financial decision and a very personal one. So, what are some of the key things to think about?

How much do I have for my deposit?

A few extra pounds can make a real difference. Saving as little as an additional £100 on top of your required deposit can boost your affordability for a lot of lenders.  So if you're saving a 10% deposit for a £200,000 property, instead of putting down a £20,000 deposit, try and put down £20,100. If you can afford to save that little extra, you could speed up your mortgage application when the time comes. For help getting started with saving read our guide on how to save a house deposit.

Do I want a repayment or interest only mortgage?

Most mortgages are repayment mortgages, meaning you pay back a part of the loan each month, plus interest. 

An alternative option is an interest-only mortgage, where you just pay the interest back each month. This means at the end of your mortgage term, you will still owe the lump sum that you originally borrowed, and it will need to be paid back in full. 

Not all lenders offer interest-only mortgages, and those that do usually have strict criteria that you’ll need to meet. With an interest-only mortgage, you’ll still owe a large sum of money at the end of the mortgage term, so lenders expect to see a robust plan to pay it off. This could be using the proceeds from the sale of another property, or by using existing savings, investments or inheritance.


How long do I want my mortgage for?

While mortgages typically last 25 years, first-time buyers have been increasingly choosing longer loans. According to Bloomberg – using figures gathered by UK Finance – the average first-time buyer mortgage term hit 30 years for the first time in June 2022. A longer repayment period can mean smaller monthly payments in the short term, but also means it’ll take you longer to pay off the loan, and you’ll pay more in interest.

Do I want a fixed rate or variable deal?

Getting an affordable rate is an essential part of finding a mortgage that’s right for you. And choosing between a fixed rate or variable mortgage deal depends on your financial situation and how important it is to you that you have the certainty of a fixed rate. Our beginners guide to mortgage rates goes into more detail about the pros and cons of fixed rate and variable mortgages. 

One helpful way to compare the costs of different mortgages is by looking at the APRC, which stands for Annual Percentage Rate of Change. As well as the interest rate, the APRC takes some mortgage fees into account and expresses it as a percentage.

Using the APRC to compare deals can be particularly helpful as some mortgages initially offer a lower rate of interest, which may then increase.


How much flexibility do I need?

Elements of flexibility can allow you to make decisions that lead to big savings in the future. Things like deciding whether you might want to make overpayments could save you thousands in the long term. Flexibility can come with risk, so be sure to read up and carefully consider what’s right for you and your financial situation.

And remember

This is just an introduction and there are other options and considerations. Taking on a mortgage is a big commitment, so it’s essential you know what you’re letting yourself in for and can afford the monthly payments. If you can’t keep up with the payments, your home may be repossessed. 


What next?

  • Use our deposit calculator to work out how to save a deposit for your first home.
  • Download our free First Home Steps app for a pocket-guide to budgeting, planning, saving, and buying your first place.
  • Explore more blogs in our First Time Buyers hub.

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