How to get best mortgage interest rate in 7 steps

best mortgage interest rate

A common mistake homeowners make when moving home is excepting the first mortgage interest rate a lender offers. Most don’t think about or feel embarrassed at the prospect of trying to negotiate the best mortgage interest rate.


You should try to strike the best terms as even reducing your interest rate by a fraction of one per cent could save you hundreds, if not thousands of pounds over your life of your mortgage.


Sadly, most don’t have a clue when to comes to trying to negotiate the best mortgage rates. Often the process of securing a mortgage so stressful that some jump at the first lender who accepts them.


If you’re just about to take out a new mortgage or looking to remortgage your property, there is plenty you can do to secure a better deal. Here are the steps you need when trying to learn how to get best mortgage interest rate for your situation.



#1 Clean up your credit file

All mortgage lenders will look at your credit file. This report covers the basics like your address, date of birth and whether you’re on the electoral roll.


It has sections about your borrowing history including when you’ve taken out a loan, how much, your repayments and if you’ve ever missed a payment. It also covers if you’ve had trouble managing debt and have a County Court Judgment (CCJ) or have declared bankruptcy.


Each lender will judge you differently, but it’s critical the data in this report is accurate.


All the major credit referencing agencies (such as Experian or Equifax) offer a free copy of your credit history for 30 days (remember to cancel before they charge you!). Some offer the report for a one-off payment of £2.


It’s worth reading through your credit file carefully. If you spot any mistakes, call your lender and contest the inaccuracies. They are under no obligation to change any data, so be prepared to fight.



 clean up credit file



#2 Improve your credit score

It takes just a few minutes to improve your credit score, and the rewards are usually immediate.

  • Join the open electoral roll
  • Stay with your current bank
  • Live at one address for at least 2 year
  • Pay Your Bills on Time
  • Don’t Close Unused Credit Cards
  • Don’t Apply for Too Much New Credit


Sadly, having life insurance doesn’t have an impact on your credit score but will provide your loved ones with peace of mind, should anything happen to you.



#3 Manage debt responsibly

When thinking about negotiating a mortgage interest rate, first consider can the bank can trust you?


You can build trust with your bank by banking with them for at least 2 years. Before approving a mortgage, any bank will want proof you can borrow and repay a small amount responsibly.


If your bank will offer you a 0% credit card, then consider applying for one. Use it for your daily shopping and pay the balance off each month. Don’t miss a payment or underpay. This will help you to build a stronger credit history and lower your lending risk.



Manage debt responsibly



#4 Lower your overall debt

Before you discount this as contradictory advice, not all debt is equal. There’s a massive difference between a mortgage and using a credit card to make ends meet.


Your home’s value is likely to increase over the next 10 years. The cost of borrow will probably remain constant over the mortgage’s term. However, using a credit card that you can’t afford will increase how much money you’ll have to repay.


If possible, start today by paying off any long-term debt. Even doubling your monthly payment will reduce the amount of interest significantly.


Talk to your bank about simplify all of your short term debt (credit cards, loans and overdraft) into a single loan. This will lower the amount of debt you have, meaning you’ll be debt-free sooner.


Set a date to be debt-free. As with any goal, you need a plan. Break your goal into small chunks. For each, create a monthly personal budget, a repayment goal and a small reward for hitting your target.


The best way to get out of debt is to start today and don’t abuse credit cards! As you progress, reward yourself! Commit to building good financial habits.



#5 Check what banks are NOT lending for

Each lender works on their own criteria. You might have your heart set on a quirky cottage complete with a thatched roof, in need of a full renovation.


The bank, however, is likely to be more conservative. At best they might offer an amount of money lower than you need or a 2-year fixed rate mortgage. At worst , they could decline your mortgage application.


Also, they could be less willing to lend on new city centre builds. Some say properties occupied in the last three years, some say any properties occupied in the last year.


Sadly, each lender works on their own requirements, which can easily confuse. Read the small print and ask your mortgage advisor (read: How do mortgage brokers work), even if you think the question is dumb!


It’s not worth planning or even thinking about how to get the best mortgage interest rate if a lender isn’t issuing mortgages on the type of property you’re considering.


If you’re unsure at the end of the meeting, then you either haven’t asked all the questions you should, or you need a different advisor.



Reduce your monthly spending



#6 Increase your mortgage deposit

Our best tip when thinking about negotiating the the best mortgage rate is to increase the size of your deposit. You might be able to get a mortgage with less than 20% of the house price. However, the rate is likely to be unfavourable.


Even increasing your deposit to 30% is likely to improve the interest rate the bank will offer, particularly if you’re looking at a variable rate (svr) mortgage.


If this sounds like bad news, don’t worry. There are plenty of ideas you can try to boost your deposit. Here are a few of our favourites:

  • Buying and selling on eBay or Facebook Marketplace
  • Freelancing (e.g. on Upwork and Fiverr)
  • Selling crafts on Esty
  • Blogging (start with this guide)
  • Weekend job


Avoid ideas that are either highly risky (gambling, forex), expensive or require you to learn a new skill to start.


Saving is hard work, but there are so many ways to make a little money on the side. Even an extra £10 per day will boost your saving after a few months.



#7 Reduce your monthly spending

As our final tip to get best mortgage interest rate, you might think we’ve lost it. However, reducing your monthly spending is a way to improve affordability, allowing you to access to better products.


If your lender estimates that you can just about pay your mortgage each month and you have a small deposit, then they’ll try and sell you any product.


By reducing your monthly spending, you’ll have more money left at the end of the month. This means you can afford a higher monthly mortgage payment.


The bank might be willing to reduce your rate and term if you could pay more each month. This means it’s easier to pay off your mortgage and cheaper.



better mortgage rate



Key negotiating tips for how to get best mortgage interest rate

If you’re hoping to learn how to get best mortgage interest rate and improve your negotiation skills, then you’ll need to follow all of our steps. If not, your best hope is to compare mortgages and hope for the best.


Download your credit file and go over it with a fine tooth-comb. Be prepared to fight for changes to it, if any of the data is inaccurate.


Start getting on top of your debt today. Put a plan in place to get rid of bad debt within the next years. Remember, start small and compound.


Join the Open Register of the Electoral Roll. Mortgage lenders check this to confirm you’re registered at your current address. Doing this increases your credit score with lenders and will speed up your mortgage applications too.


Get creative with ideas to add to your deposit savings. Stick to what you know and turn your hobby into a micro business. The higher your deposit, the better the rate you’ll be offered.


Finally, reduce your monthly outgoings to boost your deposit. You’ll then be able to prove to the bank you can afford higher repayments on your mortgage.


Learning how to get best mortgage interest rate isn’t the easiest skill to master. However, there are a few ways you can help your chances.