There are various key factors that you should consider before you your mortgage.
The Up front costs – You’ll need to spend quite a lot before you even start paying the mortgage, on things like:
Usually a solicitor or licensed conveyancer needs to be appointed to deal with the legal aspects of buying a property. There will be costs involved and these can vary, so it is worth gathering a few quotes.
2.Valuation / surveys
Your lender will value the property to make sure it is an acceptable security for the loan. The type of valuation will depend on the property type and who your lender is. Some lenders conduct a drive-past valuation for low risk properties, although if you want to buy a listed thatched cottage, the valuation will be more in depth and so more expensive.
You should always consider whether to rely on the lender’s valuation, or to have your own survey done which will highlight any shortcomings in the property, like damp in the walls or in the roof. The price of the survey could save you a fortune on unforeseen repairs in the future.
Seller of the properties in England or Wales must provide a Home Information Pack. This may contain a Home Condition Report, which is effectively a survey report. This may save you time and money as a buyer.
3.Mortgage arrangement fees
Most mortgage lenders charge an arrangement or application fee when you take out a mortgage, although, some mortgage lenders will let you add the cost of this to the mortgage advance. The fee depends on the final mortgage lender and the mortgage offer.
Mortgage rates are linked to the World Bank base rate, and the rates at which banks lend money to each other.
Rates can vary and this makes a big difference to how much you have to pay each month.
Look beyond at the initial rate, as there may be hefty fees payable. The figures can be pretty scary but the true cost figure highlights how much your mortgage will cost over the years. Unless you are on a 25-year fixed mortgage it will no doubt change, but still gives you a good method to compare mortgages.
5.Repaying the loan at the end of the term
With a repayment mortgage your monthly repayment covers both the interest and capital amount. The repayments are calculated to make sure that your mortgage is completely paid off at the end of the term.
Interest only mortgages are cheaper than repayment mortgages but leave the full mortgage amount outstanding at the end of the term. So the saving on the mortgage itself needs to go towards a savings plan designed to repay the mortgage when it is due. If you are lucky the savings plan may reach the mortgage amount early so you can repay the loan. However, it may underperform leaving you with an outstanding debt. There are no guarantees.
You can get fixed rate mortgages, variable rate mortgages and discounted rate mortgages on either a repayment or interest only basis. You can also get a proportion of your mortgage on each basis to hedge your bets.
If you think you may move in the next few years, this could save you a lot of money. If a mortgage is portable, it means you can keep it with the same lender if you move house.
Lenders may waive or reduce early repayment fees if you’re on a fixed rate or discounted rate deal.
7.Mortgage related insurance
- A home buildings insurance policy will be required by the lender, covering against the usual risks. This ensures their security is protected.
- Home contents insurance covers your contents against theft, fire and damage.
- Mortgage payment protection ensures you can continue to meet your mortgage repayments in the event of unemployment, sickness and redundancy
- Life insurance for each of the mortgage holders taken out to cover the value of the mortgage allows the mortgage to be repaid in full in the event of death.
8.Using a mortgage broker
If you use a mortgage broker, make sure they are authorised by the Financial Conduct Authority
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