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What
things should I look out for? |
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In this section
we aim to give you a number of useful tips and hints to help you to be savvy when
choosing your mortgage. You need to think carefully about this huge commitment,
so here we have listed some things that you should consider when browsing the
market.
• Know your stuff. Don’t just grab the first mortgage that comes along,
even if time is precious. Look around, understand the product in its entirety
and compare a variety of mortgages before finally deciding.
• Being accepted for a mortgage in principle can be a real advantage when
looking for a property. You will be taken more seriously and it can really speed
up the process when you decide to buy.
• Remember to do the tedious thing and read the small print. It is of vital
importance that you understand in full the terms and conditions to which you will
be bound. A mortgage is a huge responsibility and you must be confident of your
ability to shoulder it.
• You must ensure that you will be able to afford your mortgage repayments.
If you are going for a mortgage with a variable interest rate then make sure that
you will be able to make your repayments even if interest rates happened to double.
• Ask your lender about overpayment. If you decide to pay back your mortgage
earlier than you agreed then you could incur a penalty for this- ask about your
lender’s policy on this.
• Enquire about any additional fees that a potential lender might impose
before you get too far into the proceedings. Administration, application and broker’s
fees can usually be avoided so don’t fall prey to hidden charges at the
last minute. Often such charges are used to offset good deals, so watch out. Ask
for an individually prepared quote that details all the expenses.
• Check whether or not redemption fees are applicable to your mortgage deal.
Redemption penalties are sometimes imposed if the borrower pays off their mortgage
or switches mortgage providers within a certain time period. Find out whether
this is applicable to you, and, if it is, the length of time and charge that could
be involved.
• If you are planning on taking out a buy to let mortgage then it is a good
idea to get some help from a local estate agent. You will be able to get a good
idea of the level of rent you can expect to receive for a property from a professional
in the business.
• If you are going for a mortgage with a capped, fixed or discounted rate
then be sure to ask your mortgage provider what will happen when this occurs.
Some providers will offer you new products at this time whereas others will simply
shift you to the standard variable rate without notification.
• Some mortgage providers will try and convince you to take out home insurance
with them, and sometimes it may even be a condition of a particular deal. However,
policies are nearly always found cheaper elsewhere so be sure to shop around before
you agree to anything.
• Flexibility can be incorporated with a mortgage. If this is a priority
for you then it will be worth your while looking around for a mortgage that will
allow you to make overpayments, underpayments, or even allow you to take a payment
holiday if you so require.
• Find out about MIG (mortgage indemnity guarantee). This provides cover
for the lender but none for you, the borrower, and can cost thousands of pounds.
MIG is most common with larger mortgages, of 90% or more.
• Find out if the interest is charged annually or daily. It is best to go
for a mortgage on which the interest is charged daily if you can, as whenever
you make a payment the outstanding balance will reduce, as will the interest owed.
• Although 100% mortgages are popular for the benefits they offer, especially
to first time buyers, borrowers should be aware of the risks of negative equity.
If house prices fall shortly after you have bought your property then you would
go into negative equity- meaning that the actual value of your home would be less
than the amount remaining outstanding on your mortgage.
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Media Group Limited which is authorised and regulated by the Financial Services
Authority.
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