Best buys: mortgage guide

Mortgages we like. Mortgages we don't like. And how to buy a house.
We like...early repayments

It is a good idea for borrowers to overpay on their mortgage to eat into the capital balance. It will see the mortgage repaid early, cutting the amount of interest paid over the life of the mortgage.

Effectively, the borrower earns the mortgage rate on their savings and there is no tax to be paid. For example, if the mortgage rate is 5%, a higher rate taxpayer would need to earn 8.33% gross on their savings to earn the same return.

But it is important to make sure that there are no penalties for paying off and that the benefit of the overpayment will be felt immediately. Many deals offer partial penalty free overpayments even if they are not completely penalty free products.

We don't like... endowments

Endowments are the major cause of headaches for many borrowers whose policies fall short of the amount required to repay the mortgage.

It's best to tackle the problem sooner rather than later as things often get worse.

It does not necessarily mean the endowment should be ditched. Overpaying on the mortgage can reduce the capital balance to make up the shortfall amount, or the shortfall can be switched to repayment, leaving the endowment to pay off the remainder. This can be done with the existing lender or, if free to move, the mortgage could be switched to a better rate minimising the impact on monthly payments.

If you decide to get rid of the policy, don't forget to check the second hand policy market for a better price.

How a house

1. How much can you afford?:
See GU's budget planner

2. Mortgage options:
Choose between repayment or interest-only. If opting for interest-only, you must sort out a repayment scheme such as an Isa or endowment.

3 . Mortgage type:
Fixed, capped, discount, tracker or variable? Trackers move rates down (and up) in line with base rate. Fixes make sense on very big loans, where rate rises would hurt the borrower.

4. Find a house/make an offer:
Currently the typical offer is 5%-10% below the asking price.

5. Do a survey and valuation:
find a surveyor at or call RICS on: 0870 333 1600. Three levels of surveys. Basic is a simple valuation survey, paid by the lender. The homebuyer's report: a surveyor reports on property's defects. Typical cost £250. A full survey covers everything in the homebuyer's survey but in more depth. Typical cost £450.

6. Appoint a solicitor:
The Law Society's Records Office: 0870-606-6575 or at Ask for a breakdown of costs before you appoint one.

7. Your offer is accepted:
The house will be sold "subject to contract". You may have to pay a deposit. This stage is not legally binding.

8. Complete your mortgage application:
Check out our best buys for the right deal.

9. Contracts exchanged:
A contract legally commits you to the purchase. The seller signs an identical one; these are then swapped. You have to pay a deposit at this stage.

10. Completion:
The balance is paid to the seller's solicitor in return for the house's title deeds.

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