The process of applying for and getting a mortgage can be quite daunting, especially for first time buyers. It's important, though, that you shop around and make sure that you're getting the best possible deal.

In determining which mortgage is best for your individual needs, it's not just a case of looking for the best rate, although rate is undoubtedly important. You also need to consider the overall mortgage package, including fees and any rules that might limit what you can do once you've taken out the mortgage.

So, what things should you assess when choosing a mortgage?

1. Interest rate.
   It's important that you shop around and get quotes from several lenders. Even something as small as a 1% difference can make a big difference to your pocket over the course of the mortgage term. Let's take this example: Imagine that you required a $200,000 mortgage over 30 years, and that Provider A offers 5% and Provider B 6%. At 5% you'd pay $1,069 per month. At 6% you'd pay $1,193 per month. So that's a difference of $124 per month or $1,488 over a year. It becomes easy to see that a decision to go with the more expensive mortgage could end up costing you a lot of extra money over the 30 year duration of the mortgage!
2. Special offers.
   Often lenders offer special deals such as discounted rates for 3 years, or a rate that's fixed for 5 years. These can be great but make sure that you look too at what the default rate will be once that initial promotion is over.
3. Type of mortgage: Variable or Fixed rate?
   It's easy to be confounded by the array of mortgage packages that banks offer. However, the buying decision basically comes down to whether you want to opt for a variable or fixed rate offering. If you feel that interest rates are likely to increase over the next few years, then a fixed rate option may be the best bet. It will also provide you with the confidence of knowing exactly what your payments are going to be. However, if you think rates are going to go down, then a variable rate mortgage may end up providing better value.
4. Does the mortgage allow you to repay early?
   The earlier you repay your mortgage, the less interest you will have ended up paying. It's therefore worth checking if the mortgage package allows you to step up payments or make lump sum payments if you find that you are in a financial position to make these payments. Paying your performance bonus into your mortgage each year as a lump sum payment could save you thousands of dollars and enable you to repay years early.
5. Are there any penalty clauses?
   Make sure you read the small print and that there aren't any nasty surprises hidden there. One thing in particular to check is whether fees are charged if you decide to refinance your mortgage with another lender. Remember, you're not obliged to stick with the same mortgage. If it becomes uncompetitive you have every right to refinance your mortgage with another lender..

With current fears over sub-prime lending and the state of the US housing market, it's particularly important that today's home-buyers do their research, work out how much they can comfortably afford to repay, and then secure the best possible deal. A little bit of time and effort spent now could provide a very good pay-off in the long term.