FAQ - Mortgages

1. What does APR mean?
The APR is how much it really costs to borrow money. This allows one to compare the cost of various banking products on a like for like basis. It would include loan’s interest rate together with any charges for setting up the mortgage.

Do you require me to have life insurance before I apply for a mortgage?
No, you do not need to have life insurance when you apply for a mortgage.

2. Would I incur an early settlement penalty?
Some lenders might charge you a deeds release fee for paying off your mortgage earlier. You may wish to be debt-free or you are switching to a different lender, so it might be worth paying the fee, which could be anything from £25 to over £200.

Special interest rates such as a fixed rate may have a penalty if you decide to redeem the mortgage earlier.

3. Up until what age may I apply?
Various lenders have different age restrictions. Their most important consideration is whether you will be able to afford the mortgage. So if your mortgage extends into your retirement they want assurance that you will be able to keep up with the monthly payments.

4. I have an ISA. Should I keep it or should I put it into my mortgage?
Our financial advisers would endeavour to help you decide on the best possible option. Use the ISA to keep three months net salary in case of an emergency.

5. Which is best, an interest only or a repayment mortgage?
A repayment mortgage guarantees to repay your mortgage; an interest only mortgage does not. Most lenders insist on a repayment vehicle for an interest only mortgage – the interest plus the cost of the repayment vehicle will be no cheaper than a repayment mortgage.

You might be able to pay off your mortgage early by using a repayment vehicle but it might take longer. Are you willing to put your property at risk? The answer depends on your own individual circumstances.

6. I experienced a difficult period and was unable to make regular credit payments. Can I still get a mortgage?
This should not prevent you from getting a mortgage unless you are bankrupt. The rate will be higher than normal and it may cost more to arrange. If you can increase the size of your deposit, usually at least 10%, you might not experience too much difficulty in getting a mortgage.

7. I have changed jobs and am on probation. Could I still qualify for a mortgage?
Most lenders will insist that you have passed a probationary period but we know some that are very competitive and might overlook this fact.

8. Do I need a deposit?
Some lenders might not require a deposit.

9. I want to buy a house with three of my friends. Can we all get a mortgage on a single property?
Yes you could do this, but not all of your incomes will be taken into account. Most lenders will only take two incomes, but some lenders might consider all three incomes. Each person on the mortgage will be responsible for each other’s payments.

10. What is the maximum period a mortgage can run for?
Most lenders will stop at 35 years or your retirement age. You can extend a mortgage term beyond retirement age if you can demonstrate that you can afford the payments. Most lenders are not willing to lend beyond age 75 unless you want an equity release mortgage.

11. Can I get a mortgage after I am discharged from bankruptcy?
Once you have been discharged from bankruptcy you are free to apply for new credit, including a mortgage. Any prospective mortgage lender will look at your circumstances at the time, how much you want to borrow, your job security, salary etc.

If they are happy with their findings then they might send you an offer, albeit not at the best rates available; you are a slightly higher risk. Each lender has its own lending criteria so it is not possible to give you any firm indication without knowing your exact circumstances.

12. Is there an easy way to keep track of interest rate changes that might affect my payments?
Your lender will issue you with a letter as soon as your interest rate changes. This letter will contain your new repayments and chargeable rate.

13. I want to buy a leasehold house – how will this affect my mortgage options?
These types of properties should not affect the mortgage you apply for. It is, however, true that properties with short leases may be problematic. Some lenders may require that the lease should at least equal the mortgage’s term of approximately 20 years.

14. Is the mortgage industry regulated by independent bodies?
HM Treasury – this body has overall responsibility for financial services regulation.
The Financial Services Authority (FSA) - this is the statutory regulator of mortgage sales. The FSA’s Handbook contains the Mortgages: Conduct of Business (MCOB) regulations that govern sale of residential mortgages in the UK.

The Financial Ombudsman Service - deals with consumer complaints relating to the sale of mortgages under the provisions set out in MCOB. The Financial Ombudsman Service also deals with consumer complaints relating to mortgages sold prior to the introduction of MCOB, under the Mortgage Code.

Department for Trade and Industry (DTI) - has overall responsibility for the regulation of secured and unsecured loans under the Consumer Credit Act 1974. It is also responsible for the standardisation, calculation and disclosure of annual percentage rates (APRs).

The Office of Fair Trading (OFT) - responsible for national trading standards, as well as the policy on consumer credit licences; policing consumer contracts; and enforcing the Unfair Terms in Consumer Contracts regulations.

The Department for Communities and Local Government (DCLG) - formerly the Office of the Deputy Prime Minister (ODPM), has overall responsibility for housing policy, including the house sales process.

15. What happens when Interest Rates fluctuate?
Interest rate fluctuations may result in changes to your monthly mortgage payments. Consumers on a fixed rate or similarly arranged mortgage will not be affected by changes in interest rates. Your mortgage provider will inform you of any changes to your payments, and the implications on your mortgage arrangement.