Buying a house can be one of the most stressful times of your life, as well as one of the most expensive purchases you may ever make.

As a result, people will often take the simplest approach to reduce the hassle as opposed to choosing the most effective and value-for-money method of paying for it. When considering a home loan, there are two major issues to think about, i.e. who to borrow the money off and how to pay it back? If you go to your bank, then you will get whatever rates they have on offer.

They may have a fixed rate, discounted rate or cashback, but in each type of loan, there will only be one "best rate" and given the huge number of lenders touting for business the odds against one institution being top of the pile in all categories are remote.

Then, of course, you have to read all the small print to see what, if any, the hidden charges or compulsory insurance is, so house buyers should tread with caution.

Because there is such competition between the lenders to attract your business, it makes a lot of sense to make sure you take advantage of this as it can potentially save you thousands of pounds.

So when it comes to arranging your mortgage, you shouldn't settle for just one company's rates.

Having sorted out who is going to lend you the money, the next decision is to find the most suitable way of repaying the loan. There are basically two types.

The traditional "repayment mortgage" guarantees the loan is paid off after the agreed number of years. Each month you pay off a mixture of the loan and interest on the outstanding amount.

For longer terms, this can mean that the loan doesn't reduce much in the early years and if you change your lender every six or seven years to take advantage of any discounts, this can work against you.

The "interest only" loan is where you pay just the interest to the lender but save an amount elsewhere to build up a lump sum over time which is used to repay the debt. This can be done using an endowment policy, a pension plan, an ISA or a unit trust.

A free factsheet on choosing the right mortgage is available by ringing 01484 860123.

Alan Mills is an independent financial adviser with A. J. Mills Independent Financial Advisers, a member of DBS Financial Management PLC, which is regulated by the Personal Investment Authority. Not all contracts of PHI are regulated by the PIA. All information is based on our understanding of current tax practices which are subject to change. The value of shares and investments can go down as well as up.

Converted for the new archive on 30 June 2000. Some images and formatting may have been lost in the conversion.