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When shopping around for a mortgage, it's important to get good advice. Financial advisers often give this for free, but you need to check how independent they are and make sure they're authorised by the Financial Services Authority (FSA).

Think about your financial situation in advance and ask the adviser some key questions about your income and the type of mortgages which may suit you.

Shop around

There are many different lenders and types of mortgage. It's worth shopping around, checking what's on offer from:

• lenders such as banks or building societies
• mortgage intermediaries or brokers (such as financial advisers or estate agents) who arrange deals with lenders
• builders or property developers, if you are buying a brand new house.
  

It's best to contact several different lenders and make comparisons. The internet can be a good place to compare mortgages - many lenders and price comparison websites have calculators to help you work out how much a mortgage would cost. However, you won't be able to ask questions and check details as easily as you could face-to-face or over the phone.

The Money Advice Service website has information about different types of mortgages.

Get good advice

You can get advice from an intermediary or broker (such as a financial adviser) or direct from a lender, such as a bank or building society.

Make sure any mortgage adviser understands your medium and long-term plans. Sometimes people end up with a mortgage that isn't as cheap or as flexible as it could have been. Read the small print on any mortgage literature or advertisement - what looks like a good deal may have a catch.

Many companies now sell mortgages direct, over the telephone or the internet. This can be a good way to compare the different products you are considering but you should still get independent advice about whether what is offered is suitable for your needs before you choose a particular mortgage or make an application.

Check who's advising you

Not all mortgage advice is impartial. Some advisers are tied to just one company's products or work on commission, so they don't always give full or independent advice. An adviser should tell you about any commission they would get from arranging a mortgage for you.

You're more likely to get impartial advice if you go to a broker or independent financial adviser (IFA). However, you should still check whether their advice is based on all of the mortgages available on the market, or if they only provide information about products available from certain companies.

Brokers and financial advisers often work on commission from the mortgage lender, but may also charge you a fee.  If you pay a fee it will typically be between 0.25 percent and 0.5 per cent of the amount you borrow, though it might be up to one per cent in complex or urgent cases.

As long as your needs are straightforward and you're prepared to contact two or three free advisers and compare the deals they offer, you'll generally end up with all you need to know without paying a fee.

Check whether the lender or broker is regulated

The Financial Services Authority (FSA) regulates most (but not all) financial service providers in England and ensures that they comply with certain standards. You can check the Financial Services Authority’s register to find out whether the lender or broker you are thinking of using is regulated. 

Ask your mortgage adviser for information

Make sure the person you speak to:

• understands your medium and long-term needs (for example, if you expect to move again quite soon)
• understands your attitude to risk (see below)
• spells out the pros and cons of the different repayment options
• explains any penalties you'll have to pay if you switch to a better deal early on in your mortgage or pay off your loan early
• spells out any commitments (such as expensive insurance) linked to what looks like a good deal
• explains what would happen if you get into mortgage arrears
• can give you a written statement of all the upfront payments involved.
  

Work out how much you want to borrow

When working out how much you can afford to pay as a deposit, don't overlook the other upfront costs of buying such as:

• solicitor's fees – you may be able to save money if the solicitor who is doing the legal work in buying the property can act for both you and the lender in processing the mortgage
• the lender's valuation and/or a full structural survey
• an arrangement fee to the mortgage broker or lender, typically between £200 and £1000 buildings insurance from the time you exchange contracts
• stamp duty 
• moving costs, and
• utilities connection costs.
  

Only take risks you are happy with

Some mortgage deals are more risky than others and you could end up still owing money at the end of your mortgage term.

Interest-only loans depend on having an investment such as an endowment policy or Individual Savings Account (ISA) to pay off the capital sum you borrowed at the end of the mortgage term, but the income from this may not be guaranteed, particularly when interest rates are low.

Some people who took out endowment mortgage plans in the past are now finding that they have a shortfall and will have to make extra top-up payments to cover the loan.

A repayment mortgage generally carries the least risk, because even though interest rates can go up and down, provided that you keep up the repayments, your mortgage should be paid off by the end of the term.

Check how interest is calculated

Interest rates will have a big impact on how much you pay overall.

A lender's basic mortgage will usually be set a few per cent above what is called the standard variable rate of interest (or SVR), which goes up and down as bank interest rates change. It is not always easy to compare rates of different lenders, but the APR (annual percentage rate) must always be shown in advertisements or leaflets and makes comparing mortgage deals easier. This includes any fees or other costs charged by the lender.

Many lenders will offer cheaper rates or special deals for the early years of your mortgage, but these can be increased later on.

Look for a lender that calculates the interest daily or monthly rather than annually. Over a 25-year mortgage term, this could save you several thousand pounds. It also makes it easier to vary your monthly payments.

Check for penalties

You may have to pay what is called a redemption penalty if you switch to a better deal or a different lender in the first few years of your mortgage or pay off your loan early. Cheap-rate mortgages which look good value often have penalty clauses like this, which could mean paying back all the savings you received from a special deal.

Check how long you would be locked into a deal before you could switch to another mortgage without paying a penalty. You may want to avoid deals with extended redemption penalties, which lock you into the lender's standard variable rate (SVR) even after the initial cheap rate deal has expired.

Check whether the mortgage meets CAT standards

Many mortgages are described as CAT standard (CAT is short for Charges, Access and Terms). Non-CAT mortgages are not necessarily worse but the Government CAT standard should mean a reasonable-value mortgage with no hidden charges or terms.

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