Remember, for most people, at least those that don't take the time to research what they're buying, the mortgage lenders are the hunters - the customers the hunted. But anyone, including you, armed with the right knowledge and ready to ask the right questions can easily turn into the hunter with the lenders now becoming the prey.

This is important because although many mortgages are bad value and far too expensive there are still plenty of good deals on the market. And believe me, these deals are obtainable if you read this guide and take the suggested action.

The first question to ask yourself is how much you can afford to pay on a monthly basis for your mortgage. You might already have this figure in your head or you might need to do a personal budget, see how much money you're got coming in every month and how much is being paid out.

• Budget form in excel format (This one does all the adding/subtracting for you)
• Budget form in PDF format (have to do all the adding/subtracting manually)

Do some initial research into the best style of mortgage for your needs. See -

• what are all the different styles of mortgages - how do they work - their pros & cons

Are you favouring an interest only fixed rate deal, or a discounted tracker, perhaps you have large savings so an Offset looks attractive. Also, make sure you fully understand how the different interest rates work and what the LTV is (Loan-To-Value).

• What is Loan-to-value in relation to mortgages

Spend an hour or so checking out the web but always be on the lookout for spammy mortgage sites with names like www.no1-cheap-mortgages.co.uk or www.best-mortgage-4-u.co.uk. Chances are they'll be lead collection sites wanting all your personal information which will then be sold to the higher bidder, and my experience they also tend to be suspect.

Also, it is a good idea to buy one of the mortgage magazines, such as What Mortgage, as they will be full of adverts and they always list hundreds of different deals in their mortgage tables. These magazines are excellent for initial research.

Don't spend any more than a few hours doing this initial research. Just get a load of different ideas together (some will be good, others bad) as there's plenty of time to look into the finer points in the later Steps.

1. Some ideas of what you can afford to pay per month, and
2. A number of different mortgage styles to consider

Have an initial chat with at least 3-4 mortgage brokers and the same number of banks or building societies, including your own bank. Some of the larger brokers are -

• Chase de Vere
• John Charcol
• Savills Private Finance

The good news is that most mortgages these days are brokered over the phone so it won't matter if you live in London and the broker or bank is in Manchester.

Give them the following information

When you first talk to the different brokers/lenders be ready to explain the following -

• What your financial circumstances are, including a rough idea of what you can afford to pay every month
• What sort of property you're interested in buying, how much it costs and whether you can put up a cash deposit
• Some mortgage ideas you've been thinking about, you might for example insist on it being a fixed rate repayment style, or a tracker etc
• But tell the different brokers/lenders you're also interested in hearing their suggestions. Important - make sure they break down all the fees for the products they recommend

Maybe the brokers/lenders will offer some advice and information straight away or it might take a few days for them to get back to you.

When you've got all the information you should be able to spot some deals which look interesting and should be investigated further.

• Will you be paying a discounted rate, fixed rate or the Standard Variable Rate, and if a special rate how long will it last, 6 months, 1 year, 5 years etc
• What will happen at the end of the discounted/fixed rate period, will for example the interest rate be set at the lender's SVR (Standard-Variable-Rate) - more information on the introduction to mortgages page

• Useful information can often be gleaned here as some lenders, notably the Building Societies, have traditionally had lower SVRs than the banks
• Look to see who is charging a high or a low SVR and then tend to favour those institutions with low SVRs even if you're not going to be paying it (you might have to pay it though in the future if/when a discounted deal expires)

• Also, ask what the difference would be for every 1% rise in the interest rate and then stress test your ability to pay, for example -

  If the current rate is 4% the monthly paying is £600 and that rose around £150 per 1% increase in rates

  So if rates were to rise 1%, 2% or 5% could you still afford the mortgage? If not then the mortgage might be too large

  Remember, it's only common sense to prepare for the worst even if it never happens

• APRs enable us to compare like with like, and it will offer a true reflection of what the loan will cost, including all fees and charges
• If the just the interest rate is quoted it would be possible for a mortgage charging 4% to be more expensive to service than one charging 5% because the 4% deal lumps the consumer with massive fees
• That's the theory anyway but in reality an APR is not perfect so only use it as a guide

• It's good if redemption charges use a sliding scale, ie expensive in year 1, less in year 2, and further reduced in year 3 etc
• Don't be scared by high initial redemption charges during a discounted interest rate period (usually 1 - 3 years) as I think they're only fair, a contract was signed and we must respect that
• It's also important to check the exact date when no exit-fees are charged (or at least only nominal ones)
• Be wary of mortgages that still levy a redemption fee after 5 years as they make the mortgage very inflexible

• Sometimes called initial fees - more information on mortgage fees & charges
• Will the mortgage broker be charging a fee or will he collect a commission directly from the lender?
• Don't be worried initially if the broker wants to charge you for advice as sometimes it can work out cheaper that way

• Some lenders will insist it's part of the mortgage deal that you also buy some insurance from them, perhaps household or life insurance etc
• But they'll normally allow you to opt out for a set fee, in the £25 - £50 range
• But if they do insist then how long will you be locked into buying it, 1 year, 2 years etc?

• This question is important as it gauges how flexible a mortgage is as some mortgages put restrictions on the payments
• Overpayments are where extra money is paid, say £150 this month, none next month and £175 the following etc
• An underpayment is where you're supposed to pay £600 but can only afford £400 that month
• A payment holiday is where you miss a payment altogether
• Each mortgage will handle the above differently so get all the details

• If you're asking for a large loan in relation to a property's value then many lenders will make you pay MIG - more information on mortgage indemnity guarantee
• As the name suggests it's an insurance policy which guarantees to pay the lender's losses if you default, but the cheeky thing is you pay for it
• And if you're forced to pay how long will you have to keep paying the premiums, 1, 2, 3+ years etc

Get proper and detailed answers to the above questions and you're getting ever closer to finding the right deal. What's needed now is for you to mull over the different mortgages you've been offered, and that's what the next step is about.

• You're getting further educated in the finer points of mortgages and have probably become a minor expert
• Plus, your confidence level will have risen dramatically. You should now be sure that you're going to get the right deal and more importantly nobody is going to be able to pull the wool over your eyes especially when it comes to charges and fees

When thinking about the different mortgages you've been offered spend time on the following points.

Look closely at their figures taking special care to understand how the charges and fees work with each individual mortgage.

Also, make sure you understand how the mortgage broker will charge for his advice. Most advice will be free (they collect a commission off the lender) but some do charge, if they do make sure this figure is taken into account.

• Compare the flexibility of each mortgage against one another
• Remember, the more flexible a financial product is, including mortgages, the better it is
• Who knows for example what your family's financial situation will be like next year, the year after or even in 5 years
• So the ability to make overpayments, underpayments, maybe even take a payment holiday are important

But balance flexibility with the price of the mortgage

What I mean is that many of the best deals are inflexible for the first 1-5 years whereas more expensive deals can offer far more flexibility, at least in the short term. Personally, I wouldn't mind having an inflexible mortgage (if the monthly repayments and initial costs were cheap) for a few years as long as it became more flexible as time progressed. For example -

• During the first 2 years there might be hefty early repayment penalties plus no chance of overpaying/underpaying
• But in year 3 and beyond the redemption charges expire and overall the loan became far more flexible

You've now spent a fair amount of time researching the mortgage market and are probably seriously considering between 2 and 12 different mortgages.

However, as indicated at the beginning of this guide you're not an expert in mortgages. This means the lenders probably still have the upper hand as it's possible that you might have missed some of the small print tricks which normally mean sneaky charges. And it's charges and fees that almost always make the difference between a good deal and a bad one.

So in the next Step you're going to be asking your broker/lender 3 simple yet fail-safe questions that will cut right to the heart of whether a mortgage deal is good, so-so or bad.

• You've now fully researched the mortgage market, thought about a few different deals and come up with a list of between 3 and 10 to choose from
• Not bad considering there are 3,000+ mortgages on the market

Contact the brokers/lenders again and for each mortgage ask them the following 3 questions making sure the answers are in pounds and pence and not percentages -

If you ask the above and get answers you'll instantly be able to see the best value mortgage. And the beauty of the questions are -

a) They're simple and
b) Impossible to fudge

For example, the total upfront charges for a certain mortgage are either £1,025.56 or they're not, they can't be 'around £1,025.56'. Remember, this is a simple mortgage loan we're talking about not the potential financing of the 2012 London Olympics.

So anyone that tries to fob you off with wishy-washy answers is at best incompetent and at worst trying to hide something.

Some people have asked why concentrate on the costs and interest bill over 5 years, why not 3 years or the full life of the mortgage? Because 5 years is about right as it's probably the average time that people hold a mortgage before changing or refinancing into a new deal.

5 years also gives plenty of time for any early repayment/redemption charges to naturally expire. If it was 1 or 2 years then most mortgages would seem unnaturally expensive when some of the fees were taken into account.

Again, don't be scared of high early redemption penalties during the first few years as these are mainly fair. Otherwise many people might refinance their mortgage 2-3 times a year. So high penalties in the first few years of a mortgage are natural, it's only when they still exist after 5+ years that we should be concerned.

Most mortgage sellers (even if they work in a bank) will be on some sort of commission. Sell more mortgages and earn more money and often the worst value mortgages (for the customer) will pay the highest commission to the salesman.

Unfortunately whenever high bonuses are paid that means there's always scope for monkey business, ie a salesman might not always tell the truth, or perhaps he conceals facts to make the sale.

So I strongly advise that you get the answers in writing and on official company notepaper (a company email would probably do but check this as I'm not a lawyer). By all means talk about the figures on the phone but say you need them in writing as well for your records.

Remember, you are in full control of whom to do business with, not the other way around. So if a broker or lender starts to play games you must realise there are many other companies that would love your business and will be only too happy to be completely transparent with you.

To summarise - get the figures in writing and if they refuse dump that company immediately.

• If you've followed all the Steps and got proper answers to the last 3 questions then you've found the right mortgage for your needs at the best price
• Plus, as an added bonus you will have learnt so much about mortgages in general that if you want to remortgage in the future the process of picking the best deal will be easy

Many people view the mortgage market as a maze making it hard to find the right deal but easy to get lost and land up with the wrong deal. Sadly I think this analogy is only too true but only for those that don't take the time and effort to research the market and fully understand what they're buying.

Remember, what I said right at the beginning -

• The banks and finance firms normally play the role of the hunters, and the majority of consumers the hunted

But if you follow the 4 Steps listed above you can easily turn the tables and become the hunter - then the best deals will be easy to spot making sure you get the right mortgage for your circumstances at the best price

Good luck when you go mortgage hunting!