Mortgage Tips
Thinking about buying a new home?
1. What types of mortgage are available to me?
Most lenders offer a range of fixed and capped rates, discounts and flexible mortgages. Some offer base rate tracker mortgages, and some will give cashbacks. Chat through which deals are available for first-time buyers, and which will best suit your needs.
What would my monthly payments be?
Get quotes on a number of deals too see what your payments would be and whether they fit your budget. Ask for a quote on what your monthly repayments would be at 10% interest. If that would be completely beyond your means, you could be over-stretching yourself.
3. Are there any redemption penalties?
Fixed, capped and discounted deals may carry redemption penalties tying you to the lender after the end of the fixed, capped or discounted period. If there are penalties, find out how long they run for, and how much your monthly payments will be on the lender's standard variable rate.
4. What will happen after a fixed, capped or discounted period?
Some lenders will automatically write to offer you new products. Others will just put you on their standard variable rate and hope you don't notice. In the latter case, you need to be positive and go out and look for a new deal when your first one runs out.
5. Is there an arrangement fee?
Many lenders charge an 'arrangement fee' of a couple of hundred pounds, or sometimes a bit more to set up the mortgage. But some special deals might waive the arrangement fee to tempt you. Some mortgages, mainly fixed rates, may also come with a booking fee that secures your funds for a set period to time (up to six months is standard). These are usually in the range of £50 to £100.
6. Are there any incentives?
Because the market is competitive, some lenders offer special incentives to get first-time buyers' business. They might pay for your valuation and/or legal fee, or waive the arrangement fee, for example.
7. Are there any tie-in insurances
A few lenders may offer mortgage deals that come with the condition that you take you their buildings and/or contents insurance, for example. Mortgage lenders are not insurance specialist and may not offer the cheapest rates (or best products) on the market. So you are better off shopping around for insurance separately. Pressure is being brought to bear to outlaw compulsory insurances altogether.
8. Is there a Mortgage Indemnity Guarantee (MIG) premium to pay?
A MIG, also know by a number of names such as a Higher Lending Fee, is charged by many lender, on mortgages representing more than 90% of the property's value. So it hits many first-time buyers. It is an insurance that protects the lender against you defaulting on your mortgage payments, but you the borrower pay for it, and it offers you no protection at all. The costs can run to thousands of pounds, although some lenders have scrapped MIGs altogether.
9. How will interest be charged?
Some lenders charge and apply interest annually, so your monthly payments are only totted up at the end of the year and taken off your debt. This means that you have been paying interest on the initial sum all year. A fairer method is to calculate and apply interest daily. Some lenders automatically apply daily interest, but with others you have to request it.
10. Is the mortgage flexible?
Mortgages calling themselves flexible should allow you to underpay, overpay, take payment holidays, apply interest daily and carry no redemption penalties.
Think carefully before securing other debts against your home.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice, the precise amount will depend on the circumstances. t is wise to get as much financial help and advice as you can. Mortgages are complicated and there are many options for you to consider. t is wise to get as much financial help and advice as you can. Mortgages are complicated and there are many options for you to consider.
Remember that there are extra costs involved with moving. These can include new curtains, carpets, fixtures and fittings, general decoration, minor (and major) repairs as well as removal costs and insurance.
Make sure you account for these and other costs before finalising your mortgageRemember that there are extra costs involved with moving.
These can include new curtains, carpets, fixtures and fittings, general decoration, minor (and major) repairs as well as removal costs and insurance. Make sure you account for these and other costs before finalising your mortgage.
