Mortgage advice works on the principle that not every person has enough knowledge to back his mortgage decision with. A few of them do not have time enough to spend on the decision-making. They will try to supplement this lack of knowledge by discussing with friends and relatives, searching relevant topics in magazines and journals, and talking with independent financial advisors. This article intends to provide mortgage advice through special emphasis on certain important topics.
Type of mortgageThere is a long list of mortgages that are available in the UK now. First time buyer mortgages cater to borrowers who are buying house for the first time. Council tenants have a specially designed mortgage for them in the form of council right to buy mortgage. Then there are mortgages depending on the manner in which interest is charged. These are adjustable rate mortgages and fixed rate mortgages. The list goes on endlessly. Mortgage advice is not limited to explaining the terms in detail. Mortgage advice also includes recommending to the borrowers, which out of the several mortgage products will be most suitable for the borrower, given the special circumstances of the borrower. An independent financial advisor explains and suggests products. However, the final decision is to be made by the borrower himself, and he must not be forced into making selection for a particular product.
Mortgage options
Mortgage options include clauses such as prepayment penalty. Prepayment is the payment of mortgage before its due term. Conventionally lenders did not allow premature payment because they would lose on the interest part. Prepayment penalty usually declines after a period of say 5 years. Some lenders accept to amortise the mortgage beforehand. Borrowers must carefully read the terms and conditions on which the mortgage is being entered into. Clauses that allow or disallow prepayment must be discussed with the mortgage provider in detail.
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| You Will not Allow Your Mortgage to Go Astray in the Absence of Mortgage Advice |
Term of repayment
The term of payment of the mortgage has a two-sided effect. On one hand, it effects the monthly instalment. On the other hand, the interest cost is affected. Therefore, while you can lessen the monthly instalments by extending the term of repayment, you are adding to your interest cost. The term must then be decided accordingly. Interest only mortgages, where only interest is paid during the life of mortgage, has the longest term. Typically, mortgages are available for a period of 30 and 15 years. 15 years term is the best one can get because the rate of interest will be the lowest. The rate of interest increases with an increase in the term of repayment. Mortgage advisors recommend the term for which a borrower must extend repayment after studying the borrowers financial condition. Mortgage advisors also suggest alternative repayment options to further save on the interest.
Fees
You take up a mortgage and are handled a list of fees that you will have to pay as fees to enjoy the loan. Mortgage advice helps you distinguish between fees that are justifiable and those which are not. Fees in the field of mortgages are referred to as points. Thus, where a fee of 2 points is being charged of a mortgage value of ₤100,000; the actual fees payable will be ₤2000. Paying points is like an investment made for getting a better rate of interest. Thus, a greater point paid will lessen the rate of interest. A typical situation arises when the lender agrees to pay certain points to the borrower if the mortgage is pegged at a higher rate of interest. Borrowers who are cash-short can use this as an opportunity to get cash. In this case, the points will be depicted in negative.
Down payment
Loan providers accept down payment from the borrowers as a sign of credibility. When a borrower has his own money locked in a particular property, there is a lesser chance of his becoming late in payments or not paying altogether. The down payment is calculated by deducting the loan amount from the lower of sale price or increased value of house. Down payment facilitates the borrower to have mortgage at favourable terms. Mortgages are available also to those who cannot pay a down payment. It is difficult to qualify for a mortgage without a down payment because there are strict guidelines on the credit history of the borrowers.
Lock period
Lock period is referred to the time for which the rate of interest is kept stable on a particular rate of interest. Borrowers go for locking the rate of interest in order to insure themselves from the constantly changing rate of interest. When the lender is losing on the current rate of interest that is greater than the rate locked, he needs to be compensated. For this extra points will be repayable. Rate locks makes borrowers lose on a further decline in rate of interest. Mortgage advice will be necessary to decide on the time the rate must be locked, the time for which the lock must be valid, etc.
The term of payment of the mortgage has a two-sided effect. On one hand, it effects the monthly instalment. On the other hand, the interest cost is affected. Therefore, while you can lessen the monthly instalments by extending the term of repayment, you are adding to your interest cost. The term must then be decided accordingly. Interest only mortgages, where only interest is paid during the life of mortgage, has the longest term. Typically, mortgages are available for a period of 30 and 15 years. 15 years term is the best one can get because the rate of interest will be the lowest. The rate of interest increases with an increase in the term of repayment. Mortgage advisors recommend the term for which a borrower must extend repayment after studying the borrowers financial condition. Mortgage advisors also suggest alternative repayment options to further save on the interest.
Fees
You take up a mortgage and are handled a list of fees that you will have to pay as fees to enjoy the loan. Mortgage advice helps you distinguish between fees that are justifiable and those which are not. Fees in the field of mortgages are referred to as points. Thus, where a fee of 2 points is being charged of a mortgage value of ₤100,000; the actual fees payable will be ₤2000. Paying points is like an investment made for getting a better rate of interest. Thus, a greater point paid will lessen the rate of interest. A typical situation arises when the lender agrees to pay certain points to the borrower if the mortgage is pegged at a higher rate of interest. Borrowers who are cash-short can use this as an opportunity to get cash. In this case, the points will be depicted in negative.
Down payment
Loan providers accept down payment from the borrowers as a sign of credibility. When a borrower has his own money locked in a particular property, there is a lesser chance of his becoming late in payments or not paying altogether. The down payment is calculated by deducting the loan amount from the lower of sale price or increased value of house. Down payment facilitates the borrower to have mortgage at favourable terms. Mortgages are available also to those who cannot pay a down payment. It is difficult to qualify for a mortgage without a down payment because there are strict guidelines on the credit history of the borrowers.
Lock period
Lock period is referred to the time for which the rate of interest is kept stable on a particular rate of interest. Borrowers go for locking the rate of interest in order to insure themselves from the constantly changing rate of interest. When the lender is losing on the current rate of interest that is greater than the rate locked, he needs to be compensated. For this extra points will be repayable. Rate locks makes borrowers lose on a further decline in rate of interest. Mortgage advice will be necessary to decide on the time the rate must be locked, the time for which the lock must be valid, etc.
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| You Will not Allow Your Mortgage to Go Astray in the Absence of Mortgage Advice |
Requirement of documents
The requirement of documents is for verifying the candidature of the borrower for approval. The demands of lenders vary from the strictest "full documents" to the lenient most "no-docs". As the requirements for documents go on lessening, the interest rate goes up. For a faster approval of the loans, the borrower must have all documents ready.
The requirement of documents is for verifying the candidature of the borrower for approval. The demands of lenders vary from the strictest "full documents" to the lenient most "no-docs". As the requirements for documents go on lessening, the interest rate goes up. For a faster approval of the loans, the borrower must have all documents ready.
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