mortgages

Using a Broker

mortgages

Arranging a mortgage can be a complicated and time-consuming task. How do you know which rate is best for you or whether to take a fixed rate or not? With so many options available the best way forward is to take advice from a professional independent mortgage broker, whole of market adviser, who is qualified to give advice.

It is also a comfort to have the protection of statutory regulation as all mortgage advisers have to be authorised and regulated by the Financial Services Authority, the watchdog which ensures mis-selling and poor advice is stamped out.

Listening to friends and family may provide some useful tips but as everyone's situation is unique only an adviser can offer truly impartial advice on what is likely to be your largest financial commitment. Your own bank can only sell their own products so are unlikely to offer you the most suitable solution whereas price comparison sites will only feature providers who pay them a commission. An adviser has access to the full range of banks and building societies and acts on your behalf, not on behalf of the financial institutions.

Most people don't have the time or knowledge to take full responsibility for choosing their mortgage so a mortgage broker assumes this role and provides a vital link in the chain by liaising with you, the estate agent, solicitors and mortgage lender throughout the process. This saves you from the stress of making difficult financial decisions, from taking time off work to visit the bank, from making and receiving multiple phone calls throughout the process.

An adviser can obtain an agreement in principle from a lender soon after taking your enquiry and confirm this to the agent and can then deal with obtaining your full mortgage offer quickly and efficiently.

You rely on an estate agent to sell your property, a solicitor to deal with the legal work so trust a mortgage broker to arrange your mortgage.

Mortgages - The Basics

mortgages

Mortgages are one of the largest single transactions in most people's lives. Buying a property can be a stressful and time consuming experience, although nowadays the financing of a mortgage is a case of finding and selecting the most suitable deal, rather than simply accepting a lender's offer.

Hundreds of banks, building societies, and smaller niche lenders compete for your business, all offering a variety of interest rate deals, associated fees and other enhancements to attract borrowers.

There remains two main methods of repaying a mortgage loan, and it is possible to set up the mortgage on a 'part repayment and part interest only' basis.

A description of these methods is provided below:

Repayment (capital and interest) mortgages

Under a repayment mortgage your monthly repayments consist of both interest and capital hence, over time, the amount of money you actually owe will decrease. In the early years your repayments will be mainly interest and therefore the capital outstanding will reduce slowly in the early years.

Whilst this method ensures that the mortgage is repaid at the end of the term providing all payments are made on time and in full, it is generally more expensive at the start.

Interest only mortgages

As their name suggests, with an interest only mortgage you only repay the interest on the mortgage. At the end of the term the capital is still outstanding. Therefore you will usually need to take out some kind of investment policy to save up enough money to repay the mortgage at the end of the term.

Traditionally the preferred product for repaying the capital of an interest only mortgage was a mortgage endowment policy (which included a set amount of life cover) - although more recently customers are using Individual Savings Accounts (ISAs) and pensions to build up a sufficient sum and taking advantage of the tax breaks offered by these products.

Mortgage Deals

There are several terms used to describe the interest you pay on a mortgage, and the key terms are as follows:

Standard Variable Rate (SVR)

The SVR is the lenders standard rate, usually 2-4% above the Bank of England base rate. With a variable rate mortgage you are able to switch lenders at any time without being penalised. If you start a mortgage with a different type of interest repayment for an agreed term, once the term finishes you will go back to the Lenders SVR.

Fixed Rate

A fixed rate mortgage allows you to repay interest at a fixed rate, irrespective of any base rate fluctuations. In other words your monthly repayments will remain the same every month for a time period agreed between you and your lender (usually from 2 years up to 25 years). Fixed rate mortgages often have high repayment charges so you need to be sure this is suitable for you for the foreseeable future. Furthermore, the lender may also charge a 'booking/arrangement fee' to apply for this type of mortgage.

Tracker

A tracker mortgage will track any movement in the Bank of England Base rate, so you will benefit from any falls in interest rates, but will also have to pay more each month should the rates increase.

Discount

The discount mortgage rate is another variation of the standard variable rate. It provides a discount from the lenders SVR for a fixed period of time. The interest rate still fluctuates, meaning your monthly repayments may differ slightly from month to month, but the discount remains constant.

Libor

A mortgage linked to Libor (London Inter-Bank Offered Rate) works in a similar way to a Tracker mortgage but instead of being linked to the Bank of England Base rate the mortgage will track any movement in Libor.

You should ask your adviser to explain these in more detail, or ask for an illustration.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

To speak to a Mortgage Adviser contact Hyde Estate and Letting Agents:

tel: 0161 773 4583

email sales@hydepartners.com

Alternatively fill in your contact details on this form and one of our advisers will contact you.

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