Home Mortgage Guide

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Things to Consider

Expect to change your mortgage several times over its life to take advantage of better deals.

Check for the facility to finish your mortgage early - are there any penalties?

Check for facility to pay extra to reduce the debt (and interest) - are there any penalties?

Before taking mortgage check for administration / arrangement fees - be sure these do not outweigh the advantages of chosen mortgage.

Insurance

Does the lender require you to take any insurance? Almost certainly the mortgagee will require that you take out buildings insurance to safeguard their security in the event you default on the loan. But some lenders may also require you take out other insurances, eg life insurance, payment protection insurance etc.

Check if you really need this insurance. For example, if you have no dependants, you don't need life insurance, so if it's required then probably best to look for another lender.

Check also if the insurance is beneficial, eg payment protection insurance may not be suitable for self-employed people or contractors, or come with so many restrictions or limitations as to make it worthless.

Sales people often use scaremongering tactics to sell unnecessary insurance. Avoid signing up for anything on the spot. Always take time to consider the value of what's being offered, and check if an equivalent or better deal is available elsewhere.

Beware also of mortgages that require you to take insurance from the mortgage lender. The price may be uncompetitive, and by the time this is factored in what initially seemed the best deal may not be so in reality.

Insurance can be a valuable source of security, but be sure that you only take out insurance you need and that it is bought at the best available price. Don't be fooled by attractive mortgage quotes that require you to purchase decidedly unattractive insurance packages.

Mortgage Advisors

Independent mortgage advisors can advise on the best deal from a range of lenders. They should offer a free service to borrower (paid by commission from lender), borrowers pay no more than if they'd arranged the loan directly. Before taking advice, check the advisor's qualifications, regulatory body membership, and adherence to a recognized code of conduct. Ensure they really are independent and impartial, and not driven to recommend the mortgage that pays them the highest commission.

To Pay Off or Not to Pay Off

We all dream of being mortgage free, but consider this: mortgages are great deals on the part of the lender. If you repay diligently they will get back much more than they lent. If you don't pay they get to take your house, and real estate is probably the safest investment out there. Lenders really can't lose which is why they go to great lengths to secure your business.

The result is that mortgages are generally the cheapest form of debt, so why not take advantage?

It's always advisable to have some ready money for a "rainy day", at least 3 months salary is often suggested. But what else could be done with money you might pay off the mortgage?

Is the likely return from alternative usage higher than what you're paying on your mortgage? If so, go with the alternative usage.

Do you have other more expensive debts to clear first, eg credit cards, store cards, hire purchase, personal loans...? If so, clear them first.

Final Word

As we said at the beginning your mortgage will most likely be the biggest financial commitment of your life. Take the time to consider the numerous deals on offer before finding the one that is truly best for you.

On the Web:

UKmortgagesonline.com Comprehensive online source of mortgage schemes for the UK residential marketplace