Other mortgage issues to consider

Once you have thought of which mortgage you might like to go for and how you might repay it, there are a few other important things to consider. The following gives you some basic knowledge, but shouldn’t substitute it for expert advice tailored to suit your needs.

Higher Lending Charge
This is sometimes charged by the mortgage lender if your mortgage is in excess of 90% of the value of your home (Loan To Value ratio). You don’t gain anything by paying it – it protects the lender. So keep a look out for it, but do not automatically rule of a mortgage deal if the charge applies. It can sometimes work out cheaper to go for a mortgage with a higher lending charge.

Extended early repayment charges
Mortgage lenders sometimes charge a fee to deter you from cancelling the mortgage during a specified period of time. It may seem fair to charge us should we wish to leave during the initial stages of the mortgage, but many borrowers consider it unacceptable to be tied to their lender after the initial rate-controlled period has ended. It’s advisable to look out for extended early repayment charges. Your mortgage adviser will be able to check the mortgage to see if they apply.

Endowment shortfall mortgage
Many UK mortgage borrowers have been warned that they will experience an endowment shortfall due to the underperformance of the investment they set up to pay off the outstanding amount on their interest-only mortgage.

If you have a predicted shortfall on your mortgage, one way to take action is to switch to the repayment method as soon as possible. You can then cash in the endowment policy and use it to pay off the mortgage, or hang on to the policy as an investment.

Using your mortgage to consolidate debt
With debt consolidation, you are taking advantage of the lower interest rates of your mortgage by rolling all your existing debt into one. Some borrowers find this a useful means of controlling their debts – particularly as there will only be one debt to keep an eye on.

It’s important to note, however, that you will be paying more in the long run as you are increasing the size of your mortgage. It may be sensible to make plans to overpay the mortgage. It’s also important to note that you are adding debts to your mortgage that were not previously secured against your home. In the event of missing payments, this could lead to the loss of your home. It’s recommended that you speak to a mortgage adviser to ensure that you are aware of the implications of debt consolidation.

Using your mortgage to raise capital
With capital raising, again you are taking advantage of the lower interest rates of your mortgage. You increase the size of your mortgage in order to release cash to spend on whatever you choose – school fees, home improvements, a new car etc.

Capital raising is a cost-effective short-term solution, since the interest rates on your mortgage will no doubt be lower than a personal loan. But, again, it does mean a larger mortgage, so you shouldn’t proceed without careful consideration.

Finally, we come to the 6 million dollar question:

How do you find a good mortgage broker?
We can wax lyrical all day about L&C Mortgages and how great we are. But there are 2 simple questions that you should pose to a mortgage broker in order to ascertain whether they can offer you the very best mortgage service possible.

Firstly, ask them whether they can search from the whole of the market?
Why should that matter? Because you want your broker to be able to choose from every mortgage currently available in the UK, not just from a panel representing the whole of the market. At L&C, your adviser will be able to access every mortgage available on the market – some 4,000 or so mortgages – in order to find the very best value mortgage to suit your needs.

Secondly, ask if they will charge you a mortgage broker fee? Many mortgage brokers charge you 1% of the size of your mortgage – that’s £1,000 on a mortgage of £100,000. There is no need to pay a mortgage broker fee. See free mortgage advice: our no broker fee policy.

So now that you have a little information to hand, why not contact us? We’re waiting for your call!