What to Remember about Mortgages - dummies

What to Remember about Mortgages

Part of Buying and Selling a Home For Dummies Cheat Sheet (UK Edition)

Your home is likely to be your most expensive purchase, ever. So getting the finance right is vital. Follow these guidelines when deciding on which mortgage to go for.

  • Don’t accept the first mortgage offered to you by your bank. Shop around to see whether it’s competitive.

  • Use an independent mortgage broker to find a home loan; doing so can save you time and effort searching the market for the best deal.

  • Make sure you don’t overstretch yourself. Can you afford to meet the repayments if interest rates rise? To find out, write down your incomings and outgoings. The balance is the amount you can afford to spend on the mortgage each month. If it’s not enough to afford a decent loan, make sacrifices or delay the purchase until you can afford it.

  • Save up a deposit. Not all lenders require one, but if you have a deposit, you’ll get a better rate, have lower monthly repayments, and won’t have to pay mortgage indemnity guarantee.

    Ask your parents for help because they may be able to stump up a deposit or act as guarantors.

  • Avoid extended redemption penalties. Paying a penalty for switching mortgages before a fixed offer comes to an end is fair enough, but don’t accept a mortgage with penalties that extend beyond this period.

  • Watch out for compulsory insurance. Some lenders charge borrowers a one-off fee if they don’t take out their buildings or contents insurance. It might be cheaper to pay this and buy your insurance elsewhere.