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Mortgage FAQ's
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Must I clear my mortgage by a certain age?
Mortgages are usually designed to
be repaid no later than the borrowers normal
retirement age. That is normally 65 for employed
people (male and female) and 70 for self employed.
Most lenders will consider a longer term providing
the borrower has enough income after retirement.
- Can I get a mortgage offer before I find a
property?
Yes an agreement in principle can
be offered to get the process going but the lender
won't make a formal mortgage offer until a valuation
has been carried out on the property you wish to buy
or re-mortgage.
- What is a buy to let?
Buy to let mortgages are designed
for people who want to buy a property and let it out
to tenants. Buy to let is becoming a popular way for
private landlords to invest. They provide income from
the tenants' rental payments and growth from any
increase in the property value.
- What is a self-certification mortgage?
These mortgages are ideal for self
employed people who perhaps have not been in business
for the required 3 years or cannot produce accounts
for a 3 year period but can demonstrate usually
through an Accountant's reference that they can
service the mortgage payments. These loans usually
require a bigger deposit of around 15% of the
purchase value or if it's a re-mortgage this usually
cannot exceed 85% loan to value (LTV). Interest rates
are usually higher but from time to time there are
some good deals around.
- What is a flexible mortgage?
Flexible mortgages are loans which
allow you to increase or decrease the size of your
repayments within certain limits. Being able to do
this may help you cope with the changes in your
income or spending, and to reduce your outstanding
commitments without penalty if you get a bonus.
Many self employed people whose income varies from
one month to the next find these products helpful.
They can make overpayments when earnings are at the
annual peak, and cut their payments when earnings
fall again. Some flexible mortgages will allow you to
withdraw sums you have overpaid into your mortgage
account to help deal with emergencies.
- Why do the best discount deals vanish so quickly?
When a lender offers a particular
special mortgage, it allocates a certain sum of money
to be lent on a particular product. With particularly
good deals, this first allocation may be taken up
very quickly on a first come first serve basis.
When this happens, lenders generally go back to the
money markets to get another batch of funds for
further lending. By the time this process is
complete, economic or competitive circumstances may
have changed enough so it is no longer possible to
offer the original product.
- Do county court judgments always disqualify me?
If a county court rules against
you for defaulting on a debt, that listing is listed
on your credit rating. Having such a judgment listed
against you may mean it is difficult to obtain a
mortgage through most lenders. However there are a
number of increasing specialist lenders who will lend
to people with a CCJ or other credit problems. Use
our fillout forms for a no obligation professional
opinion.
- Should I rule out redemption penalties?
Most cashback, fixed and capped
rate mortgages, and also discount mortgages, have
redemption penalties. With fixed rates, capped and
discount mortgages these penalties will usually last
as long as the special rate but quite often they also
apply after the special rate has finished. Mortgages
with penalties extending beyond the special period
are said to have redemption tail or tie in beyond the
special rate. These redemption penalties especially
on cash back mortgages could typically last 6
years.
For most people it is best to avoid a mortgage with a
redemption tail. This allows you to keep your options
open at the end of the special rate period to look
for another deal without incurring what might be a
very expensive penalty which can equal as much as 5%
of the mortgage loan.
- How do I repay capital with an interest only loan?
If you have an interest only
mortgage, your monthly payments will pay off the
interest on your mortgage but not the money you
initially borrowed. You can pay off the original loan
you borrowed any way you choose, but you often have
to inform the lender at the start how you intend to
do this. Most people often set up and save money in a
separate plan designed to pay off the capital when
the mortgage term is complete.
The main options for saving in this way are in an
ISA, an endowment policy or a pension.
- Do I always need life insurance?
Some lenders insist you buy life
cover. We can provide an independent view along with
quotes and discount the commission from leading
providers and make the costs cheaper than normally
going direct. You may also want to consider taking
out critical illness cover, which would pay your
mortgage if you suffer an illness, which would affect
your earning power, such as a stroke to cancer.
- What happens if I lose my job?
If you lose your job and cannot
pay your mortgage payments your house could be at
risk. It is strongly recommended that you take out a
mortgage accident sickness and redundancy policy, in
connection with your mortgage, which will pay your
loan repayments for up 12 months, while you get back
on your feet.
- What are the additional costs that I might occur in
taking out a mortgage?
The costs related in taking out a
mortgage could vary considerably depending on the
type of deal selected but here are the usual things
to look out for:
Valuation Fee (payable on application) can be free
depending on the deal.
- Booking Fee (payable on application) depends on
type of deal being selected
- Arrangement Fee (usually added to the mortgage
or payable on completion) depends on type of deal
being selected
- Legal costs, to cover land registry fees and
various searches. (Sometimes these costs can be
free payable by the lender depending on what deal
is selected)
- Stamp Duty (A Government tax on purchases over
£60,000)
- MIG (Mortgage Indemnity Guarantee Insurance)
payable on loans normally over 90% loan to value
but can vary depending on the deal
- Term Assurance (recommended, but not always
compulsory)
- Accident Sickness and Unemployment Insurance
(recommended, but not always compulsory)
- Building Insurance (either from the lender or a
third party)
- Contents Insurance (recommended but not
compulsory).
- What is MIG and will I have to pay it?
MIG stands for Mortgage Indemnity
Guarantee Insurance. It is a one off premium paid
usually by the borrower to an insurance company on
high loan to value (LTV) mortgages so that in the
event of the property being repossessed and sold at a
loss, the lender can recoup any losses they incur
from the insurance company.
This cost is ether added to the loan or is repaid in
monthly installments usually over a 12-month period
after completion. The majority of lenders only charge
MIG to borrowers where the mortgage is over 90% of
the value of the property (LTV 90%). However there
are a lot of variations on this, with some lenders
not charging at all, even on 100% loans where as
others will charge on loans as low as 70% LTV.
- What evidence do you need to confirm my identity
and earnings?
- Typical documents we might need are as
follows:
- Copy of Passport or Driving Licence (to confirm
identity)
- 3-month wage slips or banks statements or
accounts if self employed (to prove income)
- What outgoings should I include on my mortgage
application?
The only information we normally
need is information on current credit or loan
commitments, which have more than 6 months to go
before they are paid off. General living expenses
such as gas, electric, groceries and general
household bills need not be included.
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