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Applying for a mortgage

When shopping around for a mortgage, you'll need the following information.

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  • The amount you've saved toward the price of the house.
  • The amount you want to borrow – remember to allow for the lawyer's and valuer's fees, moving costs, immediate renovations that may be required and any loan application fee.
  • Your age, occupation and before-tax income. If you're applying to your own bank, it'll probably already have access to this information. If not, you'll have to provide the lender with some proof, such as bank statements or a letter from your employer.

Insurance

Your lender may insist you have some kind of insurance to ensure the house won't have to be sold if you die or are disabled, and can no longer pay the mortgage. Your options include mortgage-repayment insurance, term-life insurance and income-protection insurance. Several lenders offer mortgage-repayment insurance themselves, but they can't force you to take theirs. Shop around.

Also, mortgage lenders usually insist that you insure the house. Once again, shop around.

Negotiating tips

Many lenders are willing to bargain over fees and rates – they often expect it as part of the deal. Whether you're successful in driving a hard bargain depends on your skills and on how hard a bargain you're willing to strike.

  • Ask your lender to match a competitor's price as well as lowering or dropping their establishment fee.
  • Make sure you deal with senior people – the further up the management structure you go, the more authority the employee has to bargain with you.
  • If you don't like haggling, get a mortgage broker to do the dirty work for you.
  • Don't just bargain when you get the mortgage – each time your fixed rate rolls over, bargain hard to avoid roll-over fees.

Switching lenders

If you don't like your deal, shop around. Sometimes the establishment fee at the new lender costs less than your rollover fee. And some lenders may subsidise or pay the legal fees involved in switching.

Any bank that's after your business will subsidise your costs. See what your new lender will offer in the way of discounted fees.

However, before making a switch find out whether your existing bank is offering "free" banking for mortgage holders – not charging you fees to operate your account. If this is the case, you'll need to compare how much you'll pay in bank fees if you switch to another mortgage lender, or bargain with the new lender for "free" banking.

Moving your mortgage may also mean moving your bank account, overdraft arrangements, and all your automatic payments to the new lender.

Also be careful when re-mortgaging through brokers. They may pressure you to change, because they earn upfront fees each time you move lender. You don't pay these additional fees – the lender does. But changing lenders may be an issue if you want to establish a "track record" of loyalty.

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