Ready to take the mortgage plunge? Check that you know exactly what you’re diving into.
I want a mortgage, can I actually get one?
When it comes to mortgage questions and answers, this should be top of the list. You’ll have to pass through a series of checks to make sure you’ll be able to pay back the loan. If you’ve got a bad credit rating your choice will be a lot more limited. You’ll also need to have a deposit before you take out your first mortgage. Deposits are generally around 10% of the property’s value. The more you’ve managed to save, the better deal you should be able to secure.
What are the different types of mortgage?
There are two main types of mortgage – a fixed rate mortgage and a tracker mortgage. With a fixed rate mortgage, the interest rate on the loan you take out is fixed - for a year, two years, five years or even more - so you’ll know how much you need to repay each month. This could save you money if interest rates rise, but you could find yourself paying over the odds if they fall. A tracker mortgage follows the Bank of England base rate. As that goes up or down, your mortgage payments each month will get either cheaper or more expensive.
If you decide to have a fixed mortgage, it’s best to have an idea of your future plans. Caroline Takla, founder of buying agent The Collection LLP says: “If you definitely know you’ll be moving house within five years it may not make sense to fix your mortgage for five years or more.
“However, if you’ve bought your forever home and want the security of knowing what your payments are each month then fixing is definitely a good option”.
Can you please explain that?
For financial bods, rattling on about things like interest rates is second nature. They forget that their lingo can be tricky for the rest of us to follow. So, if you don’t understand something, ask them to say it again and in a way that is less likely to make your brain cells spontaneously explode.
What is the worst case scenario?
You should ask your mortgage adviser to give you a demonstration of how much you’ll pay at different interest rates, so you can make sure you can afford it even if interest rates jump up. You should also chat through with them about your individual circumstances, taking into account your age, income and how your situation might change. They’ll be able to advise what term will work for you, which will affect how much you pay each month.
Are there any other costs?
Banks and building societies often charge fees for processing your mortgage application, and they can easily add up to more than £1,000. Make sure you know about all these costs upfront and find out when and how they need to be paid.
Can I make overpayments?
This is one of the most important mortgage questions to find out if you can overpay on your mortgage without being charged. This would allow you to make higher payments than you need to, which could knock months or even years off the term of the mortgage.
Can I take a break from making payments?
Some mortgages allow payment holidays. “Sometimes this can be up to 6 months if you lose your job or circumstances change,” says Caroline. So, it’s best to ask your advisor these questions when meeting with them.
What if I can’t keep up my payments?
We’ve all seen the adverts, and the bottom line really is that if you can’t keep up your repayment, your home will be at risk of being repossessed. It’s important to go through this with your mortgage advisor who may be able to suggest ways to avoid this awful scenario. Insuring yourself against unemployment or illness may also be options to consider.
Mortgages are complicated, so it’s important that you keep on asking questions and don’t stop asking until you understand everything.