What type of borrower are you?

family of fourOne of the questions people often ask about mortgages is 'which is the best deal?', and they often feel aggrieved when they don't get a straightforward answer.

But it is an impossible question to answer accurately because there simply isn't one best mortgage product out there. All borrowers have completely different needs and preferences.

It's different strokes for different folks.
How do you choose?
Every borrower is an individual and you will need to look closely at your finances, personal circumstances and attitude to risk to assess the sort of deal that is best for you. If you really aren't sure, then an independent mortgage adviser can work with you to find the right deal for your exact needs.

However, there are certain mortgages that can broadly suit some types of borrowers – and while these are by no means set in stone, working out what kind of borrower you are from the options below can offer a useful starting point when it comes to choosing a new homeloan.

Single buyer
Single buyers cover a very broad spectrum, from those stretching every last penny of their income to get on the first rung, to buyers who are comfortably able to afford the property they desire. Chances are you are somewhere in between.

However, all single buyers have one thing in common - total exposure to your monthly mortgage commitment. If your interest rate rises, you can't share that burden with somebody else – you need to cover it yourself, and that may be a reason to opt for a fixed rate mortgage to give you some security of payments.

You may also be interested in fee-free mortgage deals, since you will need to cover all of the upfront expenses of homebuying yourself. For example Virgin Money currently offers a two-year fixed rate mortgage at 2.74% with no arrangement fees.

In addition, single buyers should consider income protection insurance to cover their mortgage costs if they are unable to work because of accident, sickness or unemployment, as there is nobody else to make up your shortfall in income.

Double income no kids yet - DINKYs
Couples in full-time work with no children often have a decent disposable income, and minimal fixed outgoings. This gives them a lot of freedom when it comes to choosing a mortgage.

For example, if you have a bit of leeway in your budget because you are both working you have the flexibility to opt for either a fixed or a variable rate, and this opens up more potential deals.

There are currently some pretty low rate variable mortgages for those who are happy to gamble that interest rates will remain low for the long term – and can afford to get it wrong. For example you can take a two-year discount mortgage from HSBC for 1.75% if you have a large 40% deposit.

Of course, many DINKYs are also first-time buyers and, while some have plenty of disposable income, not all do. It's also the case that many have never had experience of running a household budget before. If you are not confident about managing your finances, it could be worth considering fixing your rate to help you get used to budgeting.

Young family
Young families often tend to be strapped for cash, particularly if one partner is temporarily not working to look after the children, or if they are forking out a lot of money on childcare.

When budgets are tight fixed rate mortgages come into their own as they offer you security of payments for a set period, which really helps families manage their money.

Whether you choose a short- or long-term fix is up to you, but consider that you commit to a fixed rate for the length of the deal (or face steep penalties to get out early), so if you think your family will need more space in a bigger home in the future, a short-term fix rate may be more sensible.

While in theory you can transfer a mortgage to a new property, in practice it isn't always plain sailing. Two-year fixed rates are available from as little as 1.74% from Chelsea Building Society.

Borrowing big
Just because you are taking out a large mortgage doesn't mean your budget is stretched, as you could be a high earner. However, if you take a variable rate and then interest rates rise, you will really feel the difference in monthly repayments if you have borrowed big. So it could be worth considering a fixed rate mortgage.

What is very important is that you focus on the interest rate, not the arrangement fee you will need to pay, because the interest rate becomes more important the larger the loan.

This means it can often be worth paying a large arrangement fee if it bags you a super low rate of interest. First Direct's five-year fixed rate at 2.64% for example is a stunning rate (available on loans up to £1m), but you will need to pay a steep fee of £1,399 to bag it.

Modest mortgage
Those needing a small mortgage don't necessarily live in a small home. If you are nearing the end of your mortgage term you could have a small sum remaining, and if you want to remortgage you may have your pick of deals, particularly if you have a lot of equity in your property.

One thing to be aware of with small mortgages is that a large arrangement fee can skew the overall cost, so it can be worth looking at mortgages that come with low fees, or even fee-free deals.

These mortgages may come with a slightly higher interest rate than the best buys, but could work out cheaper overall. The Post-Office's five-year fix at 3.35% isn't the cheapest rate on the market (though it's still very competitive), but it does come with the bonus of no arrangement fee whatsoever.

10 top ways to add value to your home
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What type of borrower are you?

Of course with all these things, the value it adds depends on the property you have to start with, and the kinds of improvements you make, but Which? estimates the cost of a new kitchen at £8,000 and HSBC calculates the added value to your property at £4,500 - which is a clear loss.

This has been done by 41% of people in the last three years, and 29% of people plan it in the next three. It's cheaper than a kitchen, and Which? estimates the cost at £3,000. This is roughly the same value that HSBC says it will add to your property - so you'll break-even.

It may be difficult, but getting your property ready for sale means depersonalising it. 

Clutter can distract viewers and more than half (60%) of the property valuers who took part in the 2012 HSBC Home Improvement Survey said that the number one way to increase a property's chance of selling quickly, and for a good price, was to de-clutter.

This has been installed by 31% of us in the last three years, and 15% plan it in the next three. Installing central heating is a disruptive job, and according to WhatPrice it will cost you around £3,235. However, this is the first of the top ten to actually pay off. Property expert Phil Spencer says it will add £5,000 to the value.

A quick splash of paint can work wonders on tired-looking walls, and sticking to neutral tones is the safest bet.

Keeping the colour scheme simple, fresh and inviting will help potential buyers to see themselves living in your home.

Some 18% have added one in the last three years, and 30% will in the next three. This is another huge job, but with more people struggling to move and deciding to improve instead, it's increasingly popular. The amount it costs will depend on an enormous number of things, from the area you have to work with, to the size of the extension. However, assuming you add a single room you could spend around £20,000. HSBC estimates it will add around £15,500 to the value of the property, so you are unlikely to gain as much as you spend.

According to Halifax valuers, loft conversions - which require lofts with a roof height of at least 2.4 metres - are a good way to increase the potential sale price of your home.

Be sure to stick to your budget, though. The average loft conversion will cost between £10,000 and £30,000, while HSBC's figures show that they typically add £20,876 to the value of a property.

Putting in new windows adds around £5,265 to the value of the average property and can reap big rewards when it comes to energy efficiency.

It is, however, sensible to ensure that your new windows are in line with the style of your property to maximise the added value - particularly as putting them in can set you back about £5,000.

Off road parking or a garage can be especially advantageous in areas where parked cars line both sides on the street.

Nationwide's figures show that adding a garage, which can cost anything between £8,000 and £25,000, can increase the value of your property by 11%.

Outside space is just as important as inside - especially when people are seeing your home for the first time.

While 63% of the HSBC survey expert respondents said that repainting or varnishing a front door would make a difference, only 23% of homeowners recognised this. Peter Dockar at HSBC said: "It is often the smaller jobs like painting the front door that can make all the difference when looking for a sale."

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