Top 5 Mortgage Tips and Myths | Equity Finance
Friday 27th February 2009
by Shaun Vickery, Mortgage Advisor and Director of Equity Finance
Here are some useful tips (and a few myths) which I hope you will find useful.
Our Top 5 Mortgage Tips
1. Interest Only mortgages
Interest only mortgages mean that you only pay the interest every month and the
debt you owe does not reduce. You therefore need to remember that somehow you will
need to repay the original loan at the end of the term. Try to avoid the temptation
to take an interest only mortgage with no means of repayment, just to keep your
payments down. It is simply deferring the problem.
2. Be up-front with your broker
A broker's role is to recommend the most suitable mortgage for you based on your
circumstances. If you don't tell them something it normally ends up coming to light
eventually and often causes a much bigger problem later in the day. A good broker
will also have experience of having dealt with various lenders and therefore has
a much better idea of what they are likely to accept.
3. Be prepared to pay for good advice
Employing the services of a good broker will normally save you much more than the
fee you pay them. And it's not always just about finding the best headline rate;
great headline rates often come with a down-side. A good broker will check every
aspect of a deal to make sure that it is suitable.
4. Financial difficulty
If you are having difficulty making your mortgage repayment talk to your lender
as soon as you know you have a problem. They are duty-bound to treat you sympathetically
under Financial Services Authority (FSA) 'Treating Customers Fairly' rules and should
do everything within reason to help. Repossessing your home will be a last resort
and is less likely if you face up to the situation and talk to them about it.
5. Agreeing the purchase price
Don't be fooled into thinking that you have to pay the asking price - be cheeky
and make a lower offer - what have you got to lose? An estate agent is duty bound
to inform the vendor who is selling the property of every offer they receive and
if they say no you can always just go back with a higher offer.
Our Top 5 Mortgage Myths
1. 'I can't get a mortgage because I've been blacklisted'
Most lenders subscribe to credit reference agencies who store information about your
payment history on any credit such as loans, mortgages, credit cards and store-cards.
They also show county court judgements for debts registered against you. You may
have been turned down for something showing on your credit file or perhaps because
some lenders use 'credit-scoring' techniques. Sometime not having any credit can
go against you. Your broker will be able to identify these issues. You can get a
copy of your credit file from Experian or Equifax by writing to them or by visiting
Experian
or Equifax
2. 'If I apply to enough places I am bound to get accepted eventually'
You might be lucky but it is unlikely because lender can see what other applications
you have made and often get concerned if you have already been turned down elsewhere.
If the new lender uses a credit scoring system this is also likely to score points
against you.
3. 'I have a joint mortgage so I am only responsible for half the payments'
Wrong! Mortgages operate under the principle of 'joint and several liability' so
if, for example you have a joint mortgage with a partner then split and you move
out of the house, you can still legally be held responsible for the entire mortgage
repayment if they don't pay. You also need to remember that if they miss the repayments
it will be recorded on your credit file. It's much better to have yourself taken
off the mortgage if possible. Remember that the same will apply for any bills in
your name.
4. 'Capital Repayment is better than Interest Only'
It's true to say that it is generally safer because, as you are repaying a bit of
the capital each month, you are guaranteed to clear the loan at the end of the term.
However interest only mortgages can be particularly useful and flexible in many
circumstances for instance where an individual's income fluctuates.
5. 'Someone else who used to live here had bad debt and it's affecting my chances
of getting a mortgage'
Although it used to be the case that this could have an impact, lenders now only
take account of your own credit information and that of anyone with whom you are
linked financially for example your spouse or a joint applicant.
If you would like to ask me any questions please feel free to contact me via the
form below.
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