The Five Questions That Determine Your Mortgage Choice
Before looking at any product, answer these five questions. Your answers narrow the field dramatically.
| # | Question | Why It Matters |
|---|---|---|
| 1 | How long until your new build completes? | If completion is 12+ months away, your mortgage offer may expire before you need it. Some products have longer offer validity. |
| 2 | How long do you plan to stay in this property? | A 2-year fix is poor value if you're staying 15 years. A 10-year fix is wasted money if you're moving in 3. |
| 3 | Can you absorb a payment increase of £200–£400/month? | If no, you need payment certainty — that means fixed. If yes, you can consider variable products that start cheaper. |
| 4 | Do you expect to make overpayments or lump sum reductions? | Some products penalise overpayments. If you're likely to receive inheritance, bonuses, or plan to overpay, flexibility matters. |
| 5 | Are you using any government scheme or developer incentive? | Shared ownership, First Homes, and Own New Rate all restrict which mortgage products are available. |
Mortgage Product Decision Matrix by Buyer Profile
Find the profile closest to your situation and see the recommended product type.
| Buyer Profile | Key Priority | Recommended Product | Typical Fix Length | Why This Works |
|---|---|---|---|---|
| First-time buyer, tight budget, 5–10% deposit | Lowest possible monthly payment, certainty | Fixed rate | 5 years | Payment certainty is essential when you're stretched. 5-year fix avoids remortgage costs quickly and gives time to build equity. |
| First-time buyer, comfortable budget, 15%+ deposit | Best overall value | Fixed rate or green mortgage fixed | 2–5 years | More deposit means better rates. Green mortgage may give extra discount on new build EPC A/B. |
| Home mover, selling to buy, chain-free | Speed and competitive rate | Fixed rate | 2–3 years | Shorter fix captures good rates. Equity from sale gives strong LTV position. |
| Home mover, porting existing mortgage | Avoiding early repayment charges | Port existing product + top-up | Matches existing deal | Porting avoids ERC. Top-up portion can be on different product. |
| Self-employed, variable income | Flexibility to overpay in good months | Fixed rate with generous overpayment allowance (10%+) | 2–5 years | Fixed base payment provides security. Overpayment facility lets you reduce balance when cash flow is strong. |
| High earner, large deposit (25%+) | Lowest total cost of borrowing | Tracker or discount variable | 2-year tracker then reassess | Low LTV unlocks best tracker rates. If base rate falls, you save immediately. Can switch to fixed later if rates rise. |
| Investor / BTL buyer | Maximise rental yield vs mortgage cost | Fixed rate (BTL-specific) | 2–5 years | Fixed payments make yield calculations reliable. Most BTL lenders prefer fixed products. |
| Buyer using shared ownership | Mortgage only on purchased share | Fixed rate (shared ownership lender panel) | 2–5 years | Limited lender choice. Must be on housing association's approved lender list. |
| Buyer using Own New Rate | Subsidised initial rate from developer | Own New Rate product (developer-specific) | 2–5 years (subsidised period) | Developer pays lender to reduce your rate. Check what happens when subsidy period ends. |
| Buyer planning to move again within 3 years | Lowest exit costs, portability | 2-year fixed or tracker with no ERC | 2 years | Avoid long tie-ins. Check portability terms and ERC structure. |
| Buyer worried about rising rates | Maximum payment protection | Long-term fixed | 7–10 years | Locks in certainty for nearly a decade. Premium over shorter fixes but eliminates rate risk entirely. |
| Buyer expecting rates to fall | Benefit from rate decreases | Tracker (base rate + margin) | 2 years then reassess | Payments fall automatically when base rate drops. Risk: payments rise if base rate increases. |
Worked Cost Comparisons: Fixed vs Tracker vs Discount
These examples show the real cost difference between product types on a £250,000 mortgage over 25 years with a 15% deposit (85% LTV). Rates are indicative for early 2026.
Scenario A: Bank of England Base Rate Stays at 4.5%
| Product | Initial Rate | Monthly Payment | Total Paid Over 2 Years | Total Paid Over 5 Years |
|---|---|---|---|---|
| 2-year fixed at 4.35% | 4.35% | £1,370 | £32,880 | £82,200 (reverts to SVR 6.5% after 2 years = £1,709 for years 3–5) |
| 5-year fixed at 4.55% | 4.55% | £1,401 | £33,624 | £84,060 |
| 2-year tracker at base + 0.5% | 5.00% | £1,461 | £35,064 | £87,660 (assuming base unchanged, reverts to SVR after 2 years) |
| 2-year discount at SVR − 1.5% | 5.00% | £1,461 | £35,064 | £87,660 (assuming SVR unchanged) |
With rates stable, the 2-year fixed is cheapest initially but the 5-year fixed wins over 5 years because you avoid reverting to the expensive SVR.
Scenario B: Base Rate Falls to 3.5% Within 12 Months
| Product | Rate After Drop | Monthly Payment After Drop | Total Paid Over 2 Years | Saving vs Scenario A |
|---|---|---|---|---|
| 2-year fixed at 4.35% | Still 4.35% | Still £1,370 | £32,880 | £0 — fixed means fixed |
| 5-year fixed at 4.55% | Still 4.55% | Still £1,401 | £33,624 | £0 — fixed means fixed |
| Tracker at base + 0.5% | 4.00% | £1,319 | £33,360 | £1,704 saved over 2 years |
| Discount at SVR − 1.5% | Depends on lender SVR reduction | Uncertain — lender may not pass on full cut | Variable | Unpredictable |
If rates fall, the tracker buyer benefits immediately while fixed-rate buyers continue paying the higher locked-in rate. But the tracker buyer took a risk — if rates had risen instead, they would have paid more.
Scenario C: Base Rate Rises to 5.5% Within 12 Months
| Product | Rate After Rise | Monthly Payment After Rise | Total Paid Over 2 Years | Extra Cost vs Scenario A |
|---|---|---|---|---|
| 2-year fixed at 4.35% | Still 4.35% | Still £1,370 | £32,880 | £0 — protected |
| 5-year fixed at 4.55% | Still 4.55% | Still £1,401 | £33,624 | £0 — protected |
| Tracker at base + 0.5% | 6.00% | £1,610 | £35,832 | £768 extra over 2 years |
| Discount at SVR − 1.5% | Likely 6.0%+ | £1,610+ | £35,832+ | £768+ extra |
If rates rise, fixed-rate borrowers are insulated. Tracker and discount borrowers see immediate payment increases. On this example, a 1% base rate rise costs roughly £150/month extra.
Fix Length: How to Choose Between 2, 3, 5, 7, and 10 Years
| Fix Length | Best For | Rate Premium Over 2-Year | Key Advantage | Key Risk |
|---|---|---|---|---|
| 2-year fixed | Buyers who want to remortgage soon, or expect rates to fall | Baseline | Lowest initial rate, flexibility to switch quickly | Remortgage costs every 2 years, rate uncertainty at renewal |
| 3-year fixed | Buyers wanting a middle ground | +0.05–0.15% | Slightly longer stability, still relatively short commitment | Less common — fewer products available |
| 5-year fixed | Most new build buyers — particularly first-time | +0.10–0.30% | Stability through critical early years, avoids SVR revert for 5 years | Locked in if rates fall significantly |
| 7-year fixed | Buyers who plan to stay long-term and value certainty | +0.20–0.50% | Near-decade of certainty, rare to regret | Higher rate than shorter fixes, large ERC if you need to move |
| 10-year fixed | Buyers who want to "set and forget" | +0.30–0.70% | Decade of guaranteed payments, no remortgage stress | Highest rate premium, largest ERC, inflexible if circumstances change |
The ERC Factor
Early Repayment Charges (ERCs) penalise you for leaving the deal early. They're crucial when choosing fix length.
| Fix Length | Typical ERC Structure | Example on £250,000 Mortgage |
|---|---|---|
| 2-year fixed | 2% year 1, 1% year 2 | £5,000 if leaving in year 1 |
| 5-year fixed | 5% year 1, 4% year 2, 3% year 3, 2% year 4, 1% year 5 | £12,500 if leaving in year 1 |
| 10-year fixed | Sliding scale from 6% down to 1% | £15,000 if leaving in year 1 |
If there's any chance you'll move, sell, or need to remortgage within the fix period, choose the shorter fix or look for products with portable ERCs or reduced ERC after a set period.
Matching Your Mortgage to New Build Timelines
New builds create a timing challenge that doesn't exist with resale purchases. You need to secure a mortgage months — sometimes over a year — before you complete.
Mortgage Offer Validity Periods
| Lender Type | Standard Offer Validity | New Build Extension | Maximum Total Validity |
|---|---|---|---|
| Most high street banks | 6 months | 3 months (on request) | 9 months |
| Some building societies | 6 months | 6 months | 12 months |
| Specialist new build lenders | 6 months | Up to 6 months | 12 months |
| A few niche lenders | 9 months | 9 months | 18 months |
Timeline Strategy by Completion Date
| Expected Completion | When to Apply | Product Strategy | Risk to Manage |
|---|---|---|---|
| Within 3 months | Immediately — you should already have a DIP | Any product — standard timeline works | Low risk — normal process |
| 3–6 months | Now — standard mortgage application | Standard products, 6-month offer validity sufficient | Moderate — small delay could push past 6 months |
| 6–9 months | 4–5 months before expected completion | Choose lender with new build extension policy | Offer may expire if build is delayed — may need to reapply |
| 9–12 months | 6 months before expected completion | Lender with 9–12 month new build offer validity | Rates may change significantly — your offer rate is locked but a new application could be higher or lower |
| 12+ months (off-plan) | Too early to apply formally — get a DIP only | Monitor rates, apply 6–9 months before expected completion | Cannot lock in today's rate. Budget must account for rate changes. |
The key risk with new builds is the offer expiring before completion. If it does, you must reapply at whatever rates exist at that point. For more on the full timeline, see our step-by-step new build mortgage process guide.
Mortgage Term Length: 25, 30, or 35 Years?
The mortgage term — how many years you have to repay — dramatically affects both monthly payments and total cost.
| Term | Monthly Payment (£250k at 4.5%) | Total Interest Paid | Total Cost | Interest Saving vs 35 Years |
|---|---|---|---|---|
| 25 years | £1,389 | £166,800 | £416,800 | £66,600 saved |
| 30 years | £1,266 | £205,900 | £455,900 | £27,500 saved |
| 35 years | £1,186 | £233,400 | £483,400 | Baseline |
Going from 25 to 35 years saves £203/month but costs £66,600 more in total interest. The right choice depends on whether you need the lower monthly payment to pass affordability or can afford the higher payment and want to minimise total cost.
Strategy: Start Long, Overpay Short
A common approach: take a 30 or 35-year term (to pass affordability and keep payments manageable) but make overpayments as if you had a 25-year term. This gives you:
- The safety net of lower minimum payments if your income drops
- The interest savings of a shorter term when you can afford to overpay
- Most products allow 10% overpayment per year without penalty
Government Schemes and Product Choice
Several schemes affect which mortgage products are available to you.
Shared Ownership
| Factor | Impact on Product Choice |
|---|---|
| Mortgage amount | Only on your purchased share (e.g., 40% of £300,000 = £120,000 mortgage) |
| Lender availability | Must be on housing association's approved panel — typically 10–20 lenders |
| Product range | Narrower than standard purchase — fewer tracker/discount options |
| LTV calculation | Based on your share only — 90% of your share, not 90% of full property value |
| Staircasing | When buying more shares, may need product switch or remortgage |
See our shared ownership guide for the full process and costs.
Own New Rate
| Factor | Impact on Product Choice |
|---|---|
| How it works | Developer pays lender a lump sum to subsidise your interest rate |
| Typical subsidy | Rate reduced by 1–2% for initial 2–5 year period |
| What to check | What rate you revert to when subsidy ends — could be higher than market |
| Lender choice | Only available through participating lenders — cannot shop around freely |
| True cost | Developer may have inflated the property price to fund the subsidy — compare with non-incentivised price |
First Homes
| Factor | Impact on Product Choice |
|---|---|
| Discount | 30–50% off market value, permanently attached to the property |
| Mortgage basis | Mortgage on the discounted price (e.g., £200,000 property at 30% discount = £140,000 mortgage) |
| Lender willingness | Some lenders cautious about the discount restriction on resale value |
| Product availability | Standard products but from lenders comfortable with First Homes restrictions |
For eligibility details on all schemes, see our new build buyer schemes eligibility guide.
Offset Mortgages: When They Make Sense for New Builds
Offset mortgages link your savings account to your mortgage. You don't earn interest on savings, but you don't pay interest on the equivalent mortgage amount.
| Aspect | Detail |
|---|---|
| How it works | £250,000 mortgage with £30,000 savings = interest charged on £220,000 |
| Monthly saving (at 4.5%) | Approximately £112/month in this example |
| Best for | Higher-rate taxpayers (40%+) who would lose significant interest to tax on savings accounts |
| Also good for | Self-employed buyers who keep cash reserves for tax bills |
| Rate premium | Typically 0.2–0.5% higher than equivalent non-offset product |
| New build availability | Available but from fewer lenders — check new build LTV restrictions apply to offset products too |
| Break-even point | You need enough savings (typically £15,000+) for the offset benefit to exceed the rate premium |
For a new build buyer with £50,000+ in savings (perhaps from a house sale) who is a higher-rate taxpayer, offsetting can save thousands compared to a standard mortgage plus taxed savings interest.
Cashback Mortgages: Worth It or a Trap?
Some lenders offer cashback on completion, typically £250–£1,000. Developer-funded cashback schemes can be larger.
| Cashback Amount | Rate Premium (Typical) | Break-Even on £250k/25yr Mortgage | Verdict |
|---|---|---|---|
| £250 | +0.02% | 5 months | Worth it if the rate difference is tiny |
| £500 | +0.05% | 8 months | Marginally worth it — helps with moving costs |
| £1,000 | +0.10–0.15% | 12–18 months | Usually not worth it — lower rate saves more |
| £5,000+ (developer-funded) | Likely built into property price | N/A — compare total cost with non-incentivised properties | Check the property isn't overpriced to fund the cashback |
The general rule: a lower interest rate almost always beats cashback over the full mortgage term. Cashback is only valuable if you're genuinely short on moving-in costs and the rate difference is negligible.
Product Features That Matter More Than Rate
The headline interest rate gets all the attention, but these features can save or cost you more.
| Feature | Why It Matters | What to Check |
|---|---|---|
| Overpayment allowance | 10% per year is standard. Some allow unlimited. Others charge for any overpayment. | Can you overpay 10% per year without penalty? |
| Portability | If you move house, can you take the mortgage with you without paying ERC? | Is porting guaranteed or "subject to application"? |
| Fee structure | A £999 fee at 4.35% can be more expensive than fee-free at 4.50% on small mortgages | Calculate total cost including fees, not just rate |
| Rate lock / reservation | Some lenders let you lock the rate at application, protecting against rises during processing | Is the rate locked at DIP, application, or offer? |
| Payment holidays | If you lose your job, can you pause payments for 1–3 months? | What's the process and are there charges? |
| Underpayment facility | Some offset/flexible products allow reduced payments in tough months | How much can you underpay and for how long? |
| Free valuation | Saves £300–£500 on standard valuation fee | Is the valuation genuinely free or added to the loan? |
| Free legal work | Remortgage-only benefit, but saves £800–£1,200 | Usually only on remortgage products, not new purchase |
Decision Flowchart: Which Mortgage Product?
Work through this simplified flowchart to narrow your choice.
| Step | Question | If Yes | If No |
|---|---|---|---|
| 1 | Do you need certainty on monthly payments? | → Go to step 2 (fixed rate) | → Go to step 5 (variable options) |
| 2 | Are you staying for 5+ years? | → 5-year fixed (or 7/10 if very long term) | → Go to step 3 |
| 3 | Might you move within 2 years? | → 2-year fixed with portability | → Go to step 4 |
| 4 | Do you expect rates to fall before your fix ends? | → 2-year fixed (to remortgage at lower rate sooner) | → 3 or 5-year fixed |
| 5 | Do you have a large deposit (25%+)? | → Consider tracker (base + margin) | → Go to step 6 |
| 6 | Are you comfortable with some rate risk for a lower start rate? | → Discount variable or short tracker | → Return to step 2 and choose fixed |
What Happens When Your Deal Ends
Every mortgage product eventually reverts to the lender's Standard Variable Rate (SVR) unless you remortgage or switch product.
| Scenario | What Happens | Typical Cost Impact | What to Do |
|---|---|---|---|
| 2-year fix ends | Reverts to SVR (typically 6–8%) | Payments increase by £200–£400/month on £250k mortgage | Remortgage 3–4 months before end date |
| 5-year fix ends | Reverts to SVR | Same increase | Same — start looking 4–6 months ahead |
| Tracker ends | Usually reverts to SVR | May increase or decrease depending on SVR vs tracker rate | Remortgage to new deal |
| You do nothing | Stay on SVR indefinitely | Overpaying by £200–£400/month vs best available rate | Never stay on SVR unless you're about to move or pay off |
Set a calendar reminder 4 months before your deal expires. The cost of forgetting and sitting on SVR for even 6 months is £1,200–£2,400 on a typical new build mortgage.
Common Mistakes When Choosing a Mortgage Product
| Mistake | Why It Happens | What to Do Instead |
|---|---|---|
| Choosing the lowest rate without checking fees | Headline rate is the most visible number | Calculate total cost over the deal period: (monthly payment × months) + fees |
| Taking a 2-year fix when you'll stay 10 years | 2-year rates look cheapest | A 5 or 10-year fix avoids 4 or 5 remortgage cycles, each with potential fees and rate changes |
| Ignoring ERC when planning to move | ERC isn't discussed until it's too late | Check ERC schedule and portability before signing |
| Choosing a tracker when cash-poor | "I'll save money" mentality | Only take a tracker if you can absorb a £300–£400 payment increase without distress |
| Not considering overpayment | Focused on monthly payment only | Overpaying even £100/month on a £250k mortgage saves £15,000–£25,000 in interest |
| Taking developer's recommended product without comparison | Convenience and pressure at reservation | Always compare the developer's suggested mortgage with the wider market. See our lender comparison guide |
Quick Decision Summary by Situation
| Your Situation | Recommended Product | Recommended Term |
|---|---|---|
| First new build, tight budget | 5-year fixed, lowest rate at your LTV | 30–35 years (overpay when possible) |
| First new build, comfortable budget | 5-year fixed with overpayment facility | 25 years |
| Moving from existing home, good equity | 2 or 5-year fixed (depends on plans) | 20–25 years |
| Self-employed, variable income | 5-year fixed with 10%+ overpayment | 30 years (safety margin) |
| High deposit, rate-savvy | 2-year tracker then reassess | 25 years |
| Shared ownership buyer | 5-year fixed from approved panel | 25–30 years |
| Using Own New Rate | Developer's scheme (compare carefully) | Per scheme terms |
| Planning to move within 3 years | 2-year fixed, check portability | 25–30 years |
Frequently Asked Questions
Should I fix for 2 or 5 years on a new build?
For most new build buyers — particularly first-time buyers — a 5-year fix is the safer choice. It gives you payment certainty during the critical first years of homeownership, avoids the cost and hassle of remortgaging after just 2 years, and protects against rate rises. Choose 2 years only if you're confident you'll move within 3 years or strongly believe rates will fall.
Is a tracker mortgage risky for a new build?
It depends on your financial buffer. If you can absorb a £300–£400/month payment increase without difficulty, a tracker at a lower starting rate could save money if rates stay flat or fall. If that increase would cause stress, a fixed rate is the responsible choice.
Do I need a special mortgage for a new build?
Not a special product type, but you need a lender that accepts new builds. Some lenders restrict LTV on new builds, require the developer to be on an approved list, or won't lend on certain property types (e.g., new build flats above a certain floor). Your broker should filter for new-build-compatible lenders from the start.
Can I switch mortgage product after reserving but before completion?
Yes, up to the point of formal mortgage offer. After that, switching means a new application, new valuation, and potential delays. If rates drop significantly between reservation and completion, discuss options with your broker — some lenders offer rate-switch facilities.
What if my mortgage offer expires before my new build completes?
You'll need to reapply, which means a new affordability check at current rates and criteria. This is the biggest timing risk with off-plan new builds. Choose a lender with the longest offer validity that matches your expected completion date. See our guide to common mortgage problems for detailed advice on handling this.
Is it worth paying a higher rate for a cashback product?
Rarely. On a typical £250,000 mortgage, a 0.10% rate increase costs roughly £125/year. A £500 cashback is "repaid" in 4 years. If you're staying on the product for its full term, the lower rate almost always wins. Cashback only makes sense if the rate difference is negligible.
Related Guides
- New build mortgage types explained — what every product type actually is
- Mortgage affordability deep dive — what lenders check and how to maximise borrowing
- How to compare lenders and find the best rate
- Common mortgage problems and how to fix them
- The complete new build mortgage process
- Shared ownership guide
- Scheme comparison: Shared Ownership vs First Homes vs Own New Rate
- How much deposit do you need?
- Stamp duty on new builds