10 Key Mortgage Questions
The Department of Trade and Industry recommends that you ask 10 key questions before committing to a mortgage. We reprint them here, along with our explanations.
The Questions:
How much can I afford to borrow?
The traditional limit for the size of a mortgage was 2 1/2 to 3 times your income, either single or joint. Nowadays, many companies are willing to lend more than this - in some cases up to 6 times your salary. It's important that you realistically assess how much you can afford to borrow, and ask your lender / broker for advice if unsure. Remember that interest rates are currently at historically low levels. If rates go up, your repayments may not look so affordable.
How can I tell which kind of mortgage rate is best for me?
Fixed rate, capped rate, variable rate..... all have their advantages and disadvantages. Make sure you understand what each one means, and then decide which one is best for you. Ask your broker or advisor for advice if unsure. Make sure you're told how your mortgage rate will change over time.
What is the best type of mortgage for me?
Offset, self-cert, tracker... the jargon can be all too much. Under the terms of the Mortgage Code, your broker should explain in clear terms what it all means, and offer advice on which ones are suitable for your circumstances.
How should I repay it?
Mortgages usually come in these flavours: Capital Repayment, Endowment, Interest-only or a mixture. Familiarise yourself with each kind, and make sure you understand the good and bad points of each.
Can I make lump sum repayments to reduce the size of the outstanding mortgage?
Some mortgages are flexible and allow overpayments - paying more than usual in order to reduce your balance, and therefore the amount of interest you'll pay. If you think this may be important to you, check if overpayments are allowed and how much you can overpay by.
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