You may be looking to buy your first home, or it might have been a while since you applied for a mortgage; either way, it’s good to know exactly what to expect and avoid any potential bumps along the way! So, to get started, we have listed the top ten questions you should be asking your mortgage broker:
How much can I borrow?
This is probably one of the first things on your mind when it comes to looking for a new mortgage, and the amount you can borrow will differ with each lender. This will also depend on your own personal circumstances, such as your profession and credit history. It’s best to talk this through with your mortgage broker so they can provide you with an accurate, tailored quote.
Do you have access to more than one mortgage lender?
It is worth asking your mortgage broker whether they have access to a comprehensive range of mortgage products or whether they have a select/limited panel. With a limited panel, you might not get the best deal and you could end up paying more for your mortgage.
What documents will you need?
It is important to understand what documents you will need to provide to lenders when applying for a mortgage. You will probably be asked to provide your latest three months’ pay slips and bank statements as proof of your income, along with your passport or driving licence to validate your identity. However, the documents required can differ based on your personal circumstances. For example, if you are self-employed you will not be asked to provide payslips, instead you will be asked to provide your accounts or certain tax documents.
Your mortgage broker will be able to tell you which documents you will need for the lender.
What are the different types of mortgages?
Below, you can find out how each type of mortgage works:
Tracker mortgages – these ‘track’ the Bank of England (BoE) base rate, meaning that the interest rate on this loan will fluctuate depending on the BoE.
Discount mortgages – with this type of mortgage you pay the lender’s standard variable rate (SVR), but with a fixed amount of discount. This discount is usually for a set period and at the end of the period, you will revert to the lender’s SVR.
Fixed rate mortgages are simple, you pay the same interest rate for the period agreed at the outset.
And lastly, standard variable rate mortgages. SVR is an interest rate set by the lender and is separate to the rate set by the Bank of England. It is also the default rate that mortgage customers are usually moved onto when their initial mortgage deal ends.
Your mortgage adviser will talk you through each option and will recommend the best mortgage type to fit your personal circumstances.
How much deposit do I need?
Before deciding how much deposit you need, it’s important to look at how the size of the deposit can impact the size of the mortgage and the interest rates you will pay. Typically, the bigger the deposit the better the mortgage terms. However, it is a competitive market and there are lenders who will consider applicants with small deposits.
Can I overpay on my mortgage?
Most lenders will allow overpayments of up to 10% of the outstanding mortgage balance within a 12-month period. It is important to let your mortgage adviser know if you are looking for a lender who will allow overpayments, as there are some that do not offer this facility.
How long will it take to process my application?
Typically, the average length of time to process an application is up to two weeks. This time could be shortened to twenty-four hours; however this is extremely rare. The application process can be affected by your personal circumstances or by which lender you use. It is therefore worth discussing with your adviser if speed of completion is important to you.
Do I have to take out any insurance?
Buildings insurance is not a legal requirement, but almost all mortgage lenders will insist you take out a policy before they give you a loan. This protects their investment until the mortgage has been paid in full.
A mortgage is likely to be the biggest debt you have, so your adviser will also discuss financial protection with you. Having a policy in place, such as life insurance or income protection insurance, can help give you peace of mind should the worst happen.
Can my mortgage transfer to another property?
Some mortgages are portable. This means that your existing mortgage rate and all its terms and conditions could be transferred to a new property if you move. This is something to consider, especially if you have a preferential rate or early repayment charges with your existing lender. Usually, porting a mortgage is subject to a full application and credit check at the time you wish to move. Not all lenders offer this benefit.
Are you regulated?
It is important to ask your adviser if they are regulated by the FCA. If a business is FCA authorised and/or regulated, you know it’s legitimate and your money is safe with them.
You can be confident the business (and the people running it) can make informed decisions and are accountable for their actions. An FCA regulated business must comply with the rules, requirements and standards of the regulatory system.
You can also check the register at https://register.fca.org.uk/s/.