What are the risks?
If payments are not made on time the lender can repossess the property and sell it to obtain repayment of the outstanding loan.

What other costs are there which I need to allow for when I move?
The costs related to taking out a mortgage will be clearly shown on your personal illustration, but apart from the mortgage monthly payment you will need to be aware of the following:

Valuation fee (payable on application)

Booking fee (payable on application if applicable)

Arrangement fee (payable on application if applicable)

Legal costs, including stamp duty, which is a government tax on properties over £60,000, land registry fees and various search fees. A quote from a solicitor would list all these items.

Mortgage Guarantee premium (if applicable)

Term assurance (recommended, but not always compulsory by the lender)

Accident, sickness and unemployment insurance (recommended, but not always compulsory by the lender).

Buildings insurance (either from the lender or other provider, small charge can be made if you go elsewhere by the lender),

Contents insurance (recommended but not compulsory).

Do I have to have a deposit?
No. 100% mortgage are available, but often if you have a deposit you can access better interest rates, a typical deposit is 5% if the purchase price.

One charge that is applicable on high loan to value mortgages is a mortgage guarantee premium, although this is the most common term used, different lenders use different names to describe it. It is a one off premium paid by the lender to an insurance company on high loan to value mortgages, so that in the event of the property being repossessed and sold at a loss, they can recoup any losses they incur from the insurance company.

This premium is sometime passed onto the borrower, either by adding it to the mortgage or by requiring the borrower to pay it on completion.

The majority of lenders only charge the mortgage guarantee to borrowers where the mortgage is over 90% of the value of the property. However, this varies from lender to lender.

An illustration will show you if a MIG is charged and if so how much it will be.

Even if you are having a 100% mortgage remember you must consider the other costs involved, such as solicitors fees, stamp duty etc.

What if I lose my job or am long term sick?
We would always recommend that you protect yourself against such eventualities, as if you do not your home is at risk. You can protect your income by arranging an accident sickness and unemployment plan. This would pay a set income if you are unable to work usually after a set number of days, the aim is to cover the mortgage costs and household bills.

Can I repay the outstanding amount sooner than the agreed term?
With most mortgage you are able to repay the mortgage earlier that the agreed term. However, you would need to check your mortgage offer letter, which would list the terms, and conditions, which are relevant to you’re your mortgage. It is a common place if you have reduced rate period that there could be penalties for any payment extra to the monthly payment to incur a penalty.

How long will it take to apply for and obtain a mortgage for the property I have in mind?
The length of time will vary from lender to lender, but generally speaking the lender would take 14 days to issue an offer to your solicitor, which is the legal document he require to finalise your house purchase.

Can I change my mortgage provider before I have finished paying it off?
You may change your mortgage provider at any time. It could be that a penalty is incurred if you move lenders during a special rate period such as a fixed, or discounted periods. You would need to check your mortgage offer which contains the terms and conditions of your mortgage.

What type of insurance should I consider to protect my home in the event of my death or disability?
Some lenders insist that you have life cover but it is always recommended that you cover your mortgage debt against death and critical illness. This ensures that your mortgage is paid off on death and if you suffer from an illness which effects your earning power such as a stroke, heart attack or cancer that the mortgage would also be repaid. The cost of this cover is determined by your age, health, term and whether you smoke.

How much will it cost me?
Before looking at how much the mortgage will cost monthly, you need to look at how much a lender would advance you.

The amount of mortgage is normally calculated as a multiple of your salary.

Typical multiples are 3 to 3.5 times income for sole applicant.

For joint application 2.5 to 2.75 times joint income.

If you receive overtime, bonus and commission most lenders will take a percentage of this into consideration, normally 50%. If these were guaranteed then 100% would be used in the income calculation.

Again this varies from lender to lender and some lenders now use affordability rather than a multiple of salary.

For self employed application the net profit is used as the salary.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
The Financial Services Authority does not regulate all forms of Mortgages and loans. Written Quotations are available on request. Loans subject to status.