Mortgage Matters: Are you making a smart move?
When you're looking for a mortgage, never be afraid to ask questions. If you don't understand something, you are not alone and no, you are not an idiot. Remember, your mortgage is unique to your own personal circumstances and you do not have to navigate through the mortgage maze on your own.
Let's look at typical situations in which many borrowers, who are looking for a mortgage to suit their needs and eligibility, find themselves. General guidelines are given to illustrate the options that may be available. Any information given is for illustration purposes only.
Get to grips with the basics
Mortgages are, by their nature, long-term loans and, more often than not, for very large sums of money. It is essential that you can afford the repayments now and during the term of the loan, otherwise the security given to the lender, which is the mortgaged property, may need to be sold to repay the loan. The consequences are potentially severe - you stand to lose your home.
The choice of provider and type of mortgage is important. Every borrower has her own individual needs and two cases are never the same. The best advice is either to shop around yourself, or take independent mortgage advice from a qualified mortgage advisor before signing up to any commitment.
Keep in mind that if you go to a bank or building society they will only be able to offer you their own mortgage products. On the other hand, if you see an independent mortgage advisor they will have access to a number of different lenders, offering you a more flexible plan to better suit your circumstances because they aren't working for one sole lender.
In any case, the mortgage you are offered will depend on your own individual circumstances and the level of risk you pose to the lender.
Six scenarios and possible solutions
- You are a single 21-year-old. You are looking to buy your first house. The nights out on the town have taken a toll on your deposit. Unfortunately you've found your ideal home but the 5% deposit you need is no longer there, the decor is not to your taste and the kitchen needs replacing. You have a good credit history and a small loan. Will you have to let the opportunity pass you by?
- Mortgage products exist where you can borrow up to 125% of the value of your prospective house. For example, the first 95% is secured on the property and the remainder - up to 125% - is as an unsecured loan, which can last the same term as the secured element. This allows you to consolidate existing debts, raise money for repairs/alterations to your new home and eliminate the requirement for a deposit.
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