What term is sensible
for my Mortgage?
The mortgage payment term has
often been 25 years, but in
recent years 'flexible' mortgages
have seen many different terms,
some as long as 40 years. The
length of the term will affect
the total amount of interest
to be paid and the amount of
your monthly payments over the
lifetime of the loan. If you
have an interest
only mortgage, the term
of the investment designed to
repay the loan is likely to
affect the amount of your contributions.
Thus, the shorter the term,
the higher your contributions
are likely to be.
Most lenders will ask to see
proof that a borrower applying
for a loan going beyond the
borrower's normal retirement
date, can afford the repayments
in retirement as well as during
employment. Be careful, as changing
the term of a mortgage can often
incur extra charges, especially
if the mortgage is in the early
years or has an outstanding
incentive period, for example
a fixed,
capped or discounted rate.
What's the amount I can borrow?
The first step in buying a home
is to find out how much you
can borrow. We will be able
to tell you the amount by taking
into account your income and,
if relevant, your partner's
income. Although lenders differ
slightly in the amount they
will lend, it is usually three
times your gross annual earnings.
If it is to be a joint loan
then the lender may be prepared
to lend you and your partner,
for example, two-and-a-half
times your joint income. It
must be remembered, however,
these are usually the maximum
amounts you can borrow. Often,
lenders will subtract from the
amount you can borrow, any financial
commitments you have that are
fixed, for example a personal
loan, car purchase plan or credit
card repayments. Lenders offer
different incentives to the
borrower where certain charges
can be added to the loan, for
example your legal fees or mortgage
arrangement fee. Some lenders
may rebate these fees upon completion
of your mortgage. Your lender
may charge you a Mortgage Indemnity
Guarantee (MIG) fee if you are
borrowing an amount over a certain
loan to value percentage, often
75%. Some Lenders increase this
to 90% or even 95%.
What are the CAT standards
for Mortgages?
'CAT
standards' were introduced
by the Government to ensure
that the mortgage you are choosing
meets certain minimum conditions
for charges, access and terms.
As the Government does not impose
CAT standards on lenders, not
all mortgages will meet the
conditions. The main objective
of a mortgage being CAT marked
is to ensure that the borrower
has certainty over the terms
of the mortgage and that lenders
won't change them without notifying
the borrower. As CAT standards
are specific, some mortgages
that offer very flexible terms
or special features may not
meet the standards. However,
we are able to advise you on
whether this is something you
should be concerned about.
In short, the CAT standard is
not a guarantee, but a useful
guide to the terms of a mortgage,
especially for those finding
the many choices a bit daunting!
If I miss repayments
what could happen to me?
As a first action, always contact
your lender if you think you
may or have missed a repayment.
The lender may be able to help
in a variety of ways - in some
cases by reducing or suspending
repayments for a short period
or extending the mortgage term.
Your mortgage is secured against
the value of your home. If you
stop or reduce your mortgage
payments without the lender's
agreement, the lender may take
legal action. The courts can
allow the lender to repossess
your home and sell it to recover
the money you borrowed and costs.
If you still owe money after
the sale of the home, you can
be pursued for many years until
repayment is complete.
Apart from interest,
what costs could I expect on
my mortgage?
The additional costs that might
be incurred depend on the type
of mortgage that you choose.
Below is a summary of the type
of costs that you could have:
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Mortgage
Indemnity Guarantee (MIG)
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Where
a mortgage exceeds a certain
percentage of the valuation
of the property, usually
75%, you may be required
to pay a MIG fee. This
fee is paid in order to
cover the lender if you
cannot pay your mortgage. |
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Stamp
Duty |
| |
The
tax paid on the purchase
price of the property
if the purchase price
exceeds £125,000.
Refer to the Mortgage
Glossary for the current
stamp duty bands. |
|
Solicitor's
Fees |
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Accident,
Sickness or Unemployment
(ASU) Insurance |
| |
You
may decide to take out
an ASU policy to ensure
that you would be able
to continue to meet your
monthly mortgage payments
in the event you have
an accident, fall ill
or become redundant. |
|
Investment
Premiums |
| |
If
your mortgage is interest
only then you would need
to take out an investment
policy such as an endowment
policy, an ISA or a pension
in order to pay off the
loan amount at the end
of the mortgage term.
You would therefore have
to pay premiums into any
such policy each month
on top of your mortgage
interest payments. |
|
Term
Assurance |
| |
If
you have a repayment mortgage,
then your lender may insist
that you have adequate
life cover. |
This information does not constitute
financial advice. For advice
on mortgages, please contact
us.
If I were
to repay my mortgage early,
what additional charges could
I expect to pay?
Early repayment of a mortgage
may incur an additional charge
known as an early redemption
charge, especially if the repayment
takes place during an outstanding
incentive period. These charges
can differ from lender to lender.
If you would like to discuss
this in further detail, please
contact us.
What is the point of taking
out a mortgage protection payment
policy?
There are two types of mortgage
protection policy. If you've
got dependents, a life insurance
just in case you die will keep
the roof over their heads. Of
course, if you're single you
don't need to since the lender
can just sell the property to
get its money back (unless you're
in negative
equity). On the other hand,
did you know that there were
nearly 25,000 repossession orders
in Q3 2009 alone. Many of these
are for those cases where the
homeowner could not keep up
the repayments because he was
out of work. So, if you become
redundant or unable to work
through injury or illness, a
policy to pay your monthly mortgage
expenses is just the thing.
I'd
heard that the State will pay
my mortgage interest. Is this
right?
Potentially, yes, the state
may help you with the interest
payments for your mortgage if
you suffer a sudden drop in
income. This does not include
capital repayments, and the
availability of this benefit
depends on your circumstances.
Financial protection products
can guarantee that your mortgage
payments (interest and repayment)
will continue to be met if you
are unable to work due to accident
sickness and or unemployment.
For more information click here
or please call.
What
is negative equity?
Sometimes the value of your
property can be less than the
amount of your mortgage. This
is termed 'negative equity'.
There was a period in the 1990s
when negative equity was extremely
common as house prices fell
sharply when interest rates
rose to double figures.
Don't forget that you
can contact
us to answer specific queries
or arrange an appointment to
discuss your personal circumstances.
If you have not found the information you are looking for, further information on residential mortgages and insurance can be found at www.hedgelandsmortgages.co.uk. |
Your home may be repossessed if you do not keep up repayments on your mortgage.
For mortgage advice we
can charge a fee of typically
£500 or we can receive
commission from the lender.
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Hedgelands Financial Services, Hedgelands, Abbotskerswell, Newton Abbot, TQ12 5PW
Hedgelands Financial Services is a trading name of Honister Partners Ltd. Honister Partners Ltd is an appointed representative of Sage Financial Services Ltd, which is authorised and regulated by the Financial Services Authority. Sage Financial Services Ltd is entered on the FSA register (www.fsa.gov.uk) under reference 150452. The information and content of this website is intended for UK consumers only and is subject to the UK regulatory regime. The FSA do not regulate will writing services and some forms of mortgages and tax planning services. Honister Partners Ltd Registered Office 1 Nicholas Road, London W11 4AN. Registered in England and Wales no. 06923303. |
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Hedgelands Financial Services
Hedgelands
Abbotskerswell
Newton Abbot
Devon TQ12 5PW
map
Telephone:
0845 165 1280
01626 360654
General Insurance:
0845 165 1281
01626 336808
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