Below are some of the most
commonly asked mortgage questions. If
you have a mortgage related question
that is not answered below please contact
us and we will answer as soon as possible.
What
is a mortgage?
Who provides them?
What are the risks?
What other costs are
there which I need to allow for when
I move?
Do I have to have a deposit?
What if I lose my job
or am long term sick?
Can I repay the outstanding
amount sooner than the agreed term?
How long will it take
to apply for and obtain a mortgage
for the property I have in mind?
Can I change my mortgage
provider before I have finished paying
it off?
What type of insurance
should I consider to protect my home
in the event of my death or disability?
How much will it cost
me?
What
is a mortgage?
The purpose of a mortgage is, quite
simply, to enable a person or organisations
to borrow money using the property
as security.
A
mortgage is a loan, which will enable
you to purchase a property. The property
is the lenders security and therefore
your home is at risk if your mortgage
payments are not met.
Who
provides them?
The main providers are Banks and building
Societies.
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?
We at IMS save nearly all our remortgage
most of the following costs, HOwever,
dealing with leender direct or other
brokers you may well incur all the
costs listed below
Valuation
fee
Booking fee
Arrangement
fee
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
Term assurance
Accident, sickness and unemployment
insurance
Buildings insurance
Contents insurance
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, however many lenders
work on affordability of repayment calculations.
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.
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