Owning your own home is simply the ultimate dream, and it’s probably the greatest financial move that you’ll ever make. With thousands of mortgage dealers competing against each other, it is often overwhelming to understand what each has to offer. This section aims to help you explore and study your options before making up your mind.
Getting an Advice… or Not?
As of April 2014, brokers and lenders are required to offer advice to consumers regarding the most suitable mortgage for them. This means that they should carefully assess the amount of repayments you can afford, taking into consideration your income, living expenses, and other financial obligations. While they generally must offer you advice, you are also free to reject it, and choose to secure a mortgage based on your independent research, also known as “execution-only” application.
Unfortunately, without the advice, you become fully responsible of your mortgage decision. There’s the risk of ending up with the wrong mortgage deal for your situation, causing you more financial losses over the long haul. Additionally, you may be rejected by your chosen provider simply because you are unaware of the special circumstances or restrictions that the particular deal was designed for. On the other hand, while getting some advice might incur you additional costs in the beginning, it’ll give you more rights when you file a complaint later on should the deal prove to be unsuitable for you.
Some Good Reasons to Have an Adviser
- An adviser can discuss and clearly explain to you all other features of the mortgage apart from the interest rate alone
- An adviser can help you secure exclusive deals with the lender which you otherwise won’t be able to get on your own
- An adviser is keen to reviewing your financial situation, making sure that you can afford the mortgage
- An adviser can tell you in advance which types of mortgage you are likely to qualify for and which ones are suitable for you
- The application process is faster because they often accomplish the paperwork for you
Where Should You Get Your Advice?
Banks and Building Societies
If you’re clueless about where to start, banks and building societies can be your best bet. First, getting advice from them is often free. Second, they clearly know about you, and the financial situation you are in.
Also known as “mortgage brokers”, mortgage advisers are third-party financial specialists who are well-adept of in the mortgage industry. They are experts when it comes to scouring the market, looking for deals which will best suit your needs and budget. Some brokers may be tied to specific lenders, some to a limited list of lenders, while some may have access to the whole market, giving you a broad range of products to choose from.
Depending on your mortgage’s value, your broker may charge you for the service, while in some other cases, you won’t have to pay them anything as commissions will come from the lender. You must be told from the very beginning how much you have to pay if there are any costs involved. One of the best things with going through a broker is that you can make a complaint to the Financial Ombudsman if something goes wrong.
What to Ask?
What are the costs?As previously said, ask your broker if they charge a fee, and if so, ask how much you have to pay for their service. Additionally, some brokers may still get a commission even if you’ve paid for their professional advice, so inquire if you are entitled to getting your cash back.
What is the range of cover?Does the broker search the whole market, or only a limited range of products? Be sure that you know the scope of their services as this will help you in making the right choice.
Is the broker regulated?Before working with a broker, make sure that they are registered with the Financial Conduct Authority.
Using Comparison Tables
Using comparison tables from sites like Money Advice Service can also give you a clear view of what products are available. The good thing with using these tables is that they are free to use, and they come from unbiased sources.
However, it pays to know that in using comparison tables, you should not look at the interest rates alone, but rather, check out all factors that would affect the cost of your loan such as:
APR. Your annual percentage rate includes the interest rate and initial fees. The figure is expressed in percentage, but you should be aware that it is merely a guide and not the actual cost of your loan.
Deposit amount. As a general rule of thumb, the amount of deposit you are willing to put in your loan can affect your interest rate. The higher your deposit, the lower the interest you might be offered, and vice versa.
Fixed or variable interest rates. As the term suggests, a fixed interest rate means that your interest will remain the same for the whole term of the mortgage, while variable means your interest rate may go up or down, which may leave you unprotected during inflation.
Flexibility. A more flexible deal means that you are allowed to make overpayments on your mortgage without being charged penalties. This can be very helpful if you suddenly have some cash in the future, as it can allow you to take a break from payments.
Interest schedule. Is the interest rate charged daily, monthly, or annually? Generally, interests charged daily are cheaper in the long run.