Steps to looking for a mortgage or remortgage
How much should you borrow. Obviously you will have some goal in mind and that goal will have a cost.
- How much should you borrow. Obviously you will have some goal in mind and that goal will have a cost. However mortgages run over many years and you will need to continue to keep up with the mortgage payments. So consider carefully what amount you want to borrow and what amount you can afford to borrow. There may be a difference. If you can afford to borrow more then also think about possible hidden costs. Mortgages and remortgages often attract some of the lowest interest rates around when compared to other borrowing methods.
- Shop around. Collect the information that you will need to provide lenders. Your income,
your outgoings, the amount you want to borrow and the value of the property you are looking at plus its location. Also your past credit history. Then you can start to shop around. Make certain you compare like for like as different mortgage types will attract different costs. You can shop round yourself or get a mortgage broker or someone else to do it for you.
- Do you need advice? Some people feel very at home with money matters and can come to their own decisions as long as they are given all the facts. Others require ‘advice’. The FSA now ask mortgage brokers and lenders to provide the customer with a initial disclosure document which will describe their service. In that document they will let you know if they are only going to provide information or if they will also provide advice and a recommendation. They should also give you an indication of how many lenders they deal with.
- What kind of interest rate deal are you looking for. There are fixed, tracker, discount and many more. The type of interest deal will effect the monthly cost of the mortgage not just now but also in the future. Do you know the type you want and also what the advantages and downsides each one has.
- Over what period do you want the mortgage? This will effect the monthly repayment cost. Repaying a mortgage over ten years will be much more expensive than repaying it over twenty five years. If it is a repayment mortgage then the shorter the term the quicker you build up equity in your property. If you are close to retirement or you are in employment which may have an upper age limit then you might want to tie the mortgage period with your expected work time.
- Do you require your mortgage to have any special features. For example flexible, current account or offset. These features may be important to some people and not to others.
- Read the key facts document. This may be called a key facts document, personal illustration or key facts illustration. It should contain the main key features of the mortgage but without all the legal jargon.
- Repayment or interest only. With a repayment mortgage the monthly mortgage payment includes an amount which over the period of the mortgage will totally pay off the debt assuming that you do not have any arrears. With an interest only mortgage you just pay the interest each month and at the end of the mortgage period are then left to repay the total mortgage sum plus any arrears which may have built up. With an interest only you need to have in mind how you are going to repay the mortgage or remortgage.
- What are the arrangement fees and other costs? These are the costs of getting the mortgage. There will be some. It may be possible to add these to the mortgage so that your debt increases but you do not have to pay them as a lump sum.
- Insurance check list. With the mortgage will come responsibilities and some of these can be covered in part by insurance. This may be life insurance to pay of the mortgage should you die before the mortgage ends, house insurance to cover rebuilding the property you are buying, contents insurance if you are setting up a new home, permanent health insurance if you are concerned about being fit enough to work and earn money to pay your mortgage or the cheaper version which is payment protection insurance which can also include cover against unemployment. What ever insurance you decide to add to your list, and there will be budget considerations, please make certain you take advice if you need it.
- Review your mortgage. Check your mortgage at regular periods to see how you are doing with payments, what value if left to pay off the mortgage. If it is interest only then how is the value of the payment vehicle measuring up. What interest rate are you paying as there may be better deals available out there in the market place. Please remember that if you do decide to move and remortgage make certain that you are not tied into your current lender for a minimum period to which penalties are connected.
