The Mortgage Seeker's Checklist

We list 15 criteria that you can use to help you choose between different mortgages.

Choosing a mortgage is one of the biggest financial decisions most of us make, and picking the wrong choice can cost thousands of pounds. So in this article I'm going to look at which factors you should consider when you make this decision.

Firstly, you'll need to decide whether it'll be a repayment mortgage or whether you'll just pay the interest.

You then need to decide whether to get a fixed rate or a tracker rate. You can get other rates such as `discounted variable' ones, which can be cheaper, but there is no guarantee that the lenders won't put up those rates, which they can do at any time.

If you have lots of savings you also should consider special mortgages such as current account mortgages and offset mortgages.

Finally, you need to decide on the length that you want the deal to last. This is normally two years, but five-year deals are becoming more popular. I've found that on average it hasn't made a great deal of difference in pure financial terms, but at least the longer deal means you don't have to go through the hassle of remortgaging for longer.

I've rattled through those with not much detail and few caveats, because I'm assuming you've already done your research on these things. If not, you could start by reading our mortgage guide.

Once you've decided the above basics that you're looking for, there are loads of small things to attend to. Here I shall try to make it easier for you to focus on the more important points, using this long table:

Feature/criterion	How important is it to consider this feature or criterion?
The total cost over the length of the deal	Always important. The most important thing to consider is how much will the mortgage cost during the introductory-deal period. Multiply the monthly repayment by the number of months that the deal lasts. Then you must add to that any arrangement fee, legal costs, valuation fees, compulsory insurances, exit fees, higher-lending charges and other charges, and deduct cashback if it applies. This is the only way to properly compare mortgages to each other.
The total cost over the length of the mortgage	Sometimes important. You might believe that this is the last time you'll be able to remortgage onto an introductory deal. This may be because you expect your circumstances to change for the worse, or because your mortgage will have become so small by the end of the deal that lenders won't be interested in offering you a new one. In these cases you'll need to consider the total cost over the length of the mortgage, not just the length of the deal. You do this exactly as described in the cell above, except you must also multiply what you think you'll be paying each month after the deal has expired by the number of months remaining. Add this to the total.
The initial monthly repayment	Always important. In joint first place for most important is the monthly cost during the deal period. You have to be able to afford the monthly repayments. If the rate isn't fixed, you also need to work out if you could afford it if the rate went up one or two points.
The monthly repayments after the deal ends (SVR)	Sometimes important. You should always aim to re-negotiate a deal when one expires so that you're not on the lender's expensive standard variable rate (SVR). However, you should consider the amount you'd have to pay each month if you think that you won't again be able to get another deal. (Note there are some circumstances where the SVR can be the best deal for a particular borrower.)
Overpayments	Sometimes important. This is down to the individual, but many true Fools will be constantly searching for ways reduce their mortgages and pay them off early. You'll need to check the small print to see how much extra you can pay each month, if any.
Portable	Sometimes important. If you intend to move in the next few years but your current mortgage includes early-repayment penalties then you might want the deal to be portable. However, bear in mind that when you move the mortgage your lender will still probably charge you costs, e.g. for administration. Furthermore, if you need to increase the mortgage or get a second one because your new property is bigger then it can get quite complicated and rather more costly. Still, it's nice to have the choice as to whether to move your mortgage or switch altogether.
Cashback	Never important. You should have already taken into account any cashback when you were working out the total cost of the deal or mortgage (see the first two items in the table). Therefore, considering cashback by itself is not relevant.
No arrangement fee	Rarely important. As with cashback, there should be no need to consider this by itself, because you've already worked out the true cost including all fees. However, if you don't have the savings to pay for upfront fees then you may be declined the mortgage or the lender may add the fees to it, which will increase the monthly repayments. Make sure you take this into account when calculating the true cost and monthly repayments.
Legal fee refunded	Rarely important. As with `No arrangement fee', you should already have taken these fees into account. It's only if you or the lender pulls out of the deal, or if you can't afford these fees in the first instance, that this will be important to you. However, if you can't afford these fees you probably can't afford the house!
Valuation fee refunded	Rarely important. As with `Legal fee refunded'.
No higher-lending charge (HLC)	Rarely important. As with `No arrangement fee' you should have taken this into account already. By comparing the total cost you'll be able to see whether this mortgage with its HLC is cheaper than another mortgage that doesn't have one.
No compulsory insurance	Sometimes important. This is a dubious practice, but you shouldn't necessarily rule out a mortgage on the basis that it forces you to buy some over-priced insurance. If you look at the total cost including insurance and find that it's still cheaper than a mortgage without it then fine, you're lucky. The insurance may prove useful anyway.
No exit fee	Never important. You should have taken this into account when you did the true-cost comparison, as with `No arrangement fee'.
No early-repayment penalty	Sometimes important. If you think you might want to sell or move before the initial deal expires then you'll need to check if there are any early-repayment penalties, or whether the deal is portable. These penalties can be very big, so you should consider more expensive mortgages with no penalties.
No extended early-repayment penalty	Frequently important. Some mortgages penalise you for switching even after your initial deal has expired. As there's a good chance you'll want to switch you should try to avoid such mortgages.

I hope this has helped you to organise your thoughts when comparing mortgages. If you have trouble with any of your calculations or analysis you could get help from a broker at our mortgage service. Or ask a question on the mortgages discussion board.