A Calm, Smarter Way to Choose Your Mortgage
Why “decision clarity” beats second‑guessing the market
If you’re a time‑poor director, contractor or partner with mixed income, mortgage choices shouldn’t consume your week. The most common trap we see is trying to predict rates. A better approach is to anchor your decision to your life first, then compare on total cost, and only then use pricing as a signal of lender sentiment — never as a fortune‑teller.
This article distils our playbook for this week: frameworks that simplify choices, remove avoidable admin, and respect your diary.
The 5‑step Mortgage Decision Map
1) Life horizon
List what’s likely in the next 24–60 months: role moves, bonus cadence, equity events, relocations, school transitions, family changes, planned renovations, health considerations. Your likely horizon in months becomes the first constraint on product length.
2) Flexibility guardrails
Match features to your horizon: early‑repayment charges (ERCs), portability if you move, overpayment allowances, and product transfer options. Think of flexibility as insurance against plausible “what‑ifs”.
3) Total‑cost maths
Compare on total cost of ownership over the initial term, not just the headline rate. Include product fees (and whether they’re added to the loan), any cashbacks/legals, the monthly payments, and the estimated balance outstanding at month 25/61 (or at the end of your chosen fix). Two shorter fixes can cost more in fees than one longer fix even if the nominal rate looks lower.
4) Pricing as a signal (not a prophecy)
Treat banks as what they are: profit‑motivated businesses. If 2‑year fixes are materially cheaper than 5‑year fixes, that can be a signal of how lenders expect to earn a return — often by bringing you back to refinance sooner. Useful input, not the decision itself.
5) Execution discipline
Whatever you choose, diary your review six months before the fix ends. Keep a clean digital document pack updated (see the checklists below) so re‑underwriting isn’t a last‑minute scramble.
Complex income, simple story: map first, then evidence
Underwriters read for coherence. If your income includes salary, bonuses, dividends, retained profits, day‑rates or profit share, the right sequence is:
Income Map (one page). Define which policy approach fits your reality: salary + bonuses; salary + dividends; latest year’s net profit; a multi‑year average; or annualised day‑rate. Separate stable from variable elements.
Narrative note. In 6–10 bullet points, answer the first questions an underwriter will ask: what’s stable, what varies and why, evidence source, and why the loan remains affordable under sensible scenarios.
Labelled exhibits. Each file name should match the point it proves (for example, “Bonus_3yr_Average_Calc”, “Dividends_Last4Q”, “Accounts_FY24_RetentionNotes”, “Contract_Umbrella_Terms”).
Directors (Ltd Co.)
Agree the narrative with your accountant before you apply. Decide whether the case leans on salary + dividends, latest year’s net profit, or a multi‑year average. Explain dividend policy and any retention logic up‑front.
Contractors
Clarify umbrella vs limited, reconcile payslips to contracts, and add a short note for any gaps between assignments (project end, onboarding, sabbatical). Lenders typically annualise day‑rates using sensible working‑day assumptions — make that calculation transparent.
LLP partners
Translate partnership statements into plain English: drawings, allocations, retention policy, seniority/track, and 12–24‑month outlook. Reconcile statement lines to bank credits.
Bonuses/variable pay
Evidence frequency and calculation basis (discretionary vs formula). Reconcile employer letters to bank credits and explain spikes/dips (role changes, buy‑outs, deferrals).
The result of this sequence is fewer queries, cleaner underwriting, and far less interruption to your week.
2‑year vs 5‑year (and 10‑year): the price‑gap test
There’s no exact science — but there is a sensible order:
Life first: choose the shortest fix that comfortably covers your stability window. If your horizon is ~36 months, a 2‑year can be too short; a 5‑year may provide headroom.
Total‑cost comparison: include fees, incentives, and the balance you’re likely to carry into the next deal.
Price as signal: if a 2‑year is significantly cheaper than a 5‑year for your profile, banks may be signalling they expect to make more from a sooner reset. If the gap is marginal, and certainty matters, a 5‑year can be rational. Let life be the tie‑breaker.
Common missteps
• Chasing the lowest headline rate and paying more in fees later.
• Ignoring ERCs when a move or lump‑sum overpayment is likely.
• Building a plan on a rate prediction rather than on your real constraints.
Protection that flexes with variable income
A mortgage plan without a resilience plan is unfinished work — particularly when earnings fluctuate.
Start with essentials: what must continue if income paused — mortgage and core bills.
Income protection: consider own‑occupation definitions, benefit level within provider limits, and a waiting period aligned to savings or sick pay.
Critical illness cover: for severe health events that cause large one‑off costs or long income disruption.
Keep it proportionate: align to your goals and budget; review when income changes.
No scare tactics; just a simple safety net so your plan can absorb shocks.
Insurance is subject to eligibility and terms. Always read key features and exclusions. This section is not a personal recommendation.
Remortgaging: free legals vs paid legals
“Free legals” can be excellent on straightforward remortgages. Consider paying for your own solicitor if you’re adding/removing a party, dealing with leasehold complexities, working to tight deadlines, or you value proactive communication. The right choice depends on speed, scope and case complexity — not just sticker price.
Quick checklists you can copy
A) Income Map (one‑page) template
Your stability horizon (months)
Income components (stable vs variable)
Policy approach chosen (e.g., bonus average / latest year net profit / day‑rate)
Known outliers (with reasons)
Exhibit list (exact file names → point proven)
B) Total‑cost worksheet inputs
Product fee (added vs paid)
Monthly payments over initial term
Incentives (cashback/legals)
ERC structure and portability/overpayment limits
Estimated balance outstanding at the end of the fix
C) Contractor prep
Engagement type (umbrella vs ltd)
Contract(s) and renewal evidence
Payslip reconciliation to contract schedule
Gap notes (dates + reason)
D) LLP evidence pack
Partnership statements with plain‑English summary
Drawings vs allocation, retention policy
Bank reconciliation
E) Accountant brief (directors)
Evidence route agreed (salary + dividends / latest year net profit / average)
Dividend policy + rationale for retention
Document formats and naming convention
FAQs
Do lenders always need three years of evidence?
Not always. It depends on your income type and the lender’s policy. The key is a coherent narrative with sufficient evidence.
Is a product transfer always easier than a remortgage?
Often simpler and faster, but we still compare total cost and flexibility against a full remortgage.
What if rates move while I’m deciding?
We’ll explain what changes in your short‑list and why. The framework stays the same: life first, total cost second, pricing signal third.
Do I have to buy insurance to get the mortgage?
No. Protection is optional. We include it because resilience is part of a complete plan.
Next steps
If you’re within 6–9 months of a remortgage, or planning a purchase with complex income, request any of the following and we’ll send a copy:
Income Map template
Contractor prep checklist
LLP evidence checklist
Bonus summary sheet
Total‑cost comparison worksheet
Or book a 30‑minute clarity session and we’ll map your route together.
Important information
This article is for general information only and does not constitute personal advice. Mortgage availability and terms depend on your circumstances and on lender criteria. Your home may be repossessed if you do not keep up repayments on your mortgage. Insurance products have exclusions and limitations; always read key features and seek advice if unsure.
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© 2025 CIK Finance. All rights reserved. Prepared for the week commencing Monday 25 August 2025.