Page 2 of 2

Remember

Your home may be repossessed if you do not keep up repayments on your mortgage.

You must be sure you can make the repayments before entering into an agreement.

If you purchase with a partner you should make sure that you have sufficient life cover to repay the mortgage on the death of either partner to make sure that the surviving partner is not left with a debt they cannot afford.

You should obtain independent advice before entering into a mortgage commitment.

Protecting payments

Sometimes you are unable to make your mortgage payments because you have suffered an accident, become sick or lost your job. As the government will not provide any assistance for the first nine months that you are unable to work, it is essential that you take out suitable insurance to meet your monthly payments for this period. Discuss the options with your adviser before you complete your mortgage.

Mortgage Related Insurance

Besides life insurance and accident sickness and unemployment insurance, you will also be required to have adequate buildings insurance. Most schemes also offer contents insurance. Some lenders will insist that you use their panel insurer, but if you opt not to use the set scheme, they will charge a small fee for registering your insurance details.

Impaired credit and low income.

Some borrowers may have had credit problems in the past, for example, County Court Judgements, rent or mortgage arrears, defaults, or a poor payment profile - missed or been late with some monthly payments - on existing credit. They may also have a low income. These borrowers are particularly vulnerable and are viewed by lenders as a greater risk. Inevitably the lender charges an increased interest rate and it is therefore essential that the borrower is very aware of the charges and is sure they can make the repayments. 4Most has special relationships with specific lenders in this market, who have agreed to abide within certain guidelines when lending to people in this portion of the market. Borrowers must always disclose any problems they have had in the past to ensure that they receive proper and impartial advice, and do not increase their problems by having declined mortgage applications added to their poor credit rating.

Fees

Inevitably arranging a mortgage can be expensive, and it is essential that you make allowance for the costs that are involved.

The lender or broker will initially make a charge for the administration of your mortgage, and the valuation of the property to be offered as security.

Some special schemes involve an arrangement fee, which is normally charged on completion of the mortgage, and can sometimes be added to the mortgage. Sometimes the lender will also charge a booking fee for holding fixed rate funds.

Existing lenders charge a fee for providing a reference.

If you borrow over a certain percentage of the value of the property, say 70 or 75%, the lender will charge a Higher Lending fee, which is used to buy insurance which the lender can claim on if you default on a mortgage and the lender sells your property at a lower price than your outstanding balance of the mortgage. If a claim is made by the lender, the insurer may well pursue you for repayment of the claim.

Your adviser may also charge a fee, (commonly known as a broker or arrangement fee). This is to cover his time researching the market and ensuring you get a suitable mortgage to match your particular needs and circumstances.

Procurement Fees & Commissions

It is common for some lenders to offer to pay a fee or commission to a broker for introducing the mortgage. Under The Financial Services Authority regulations the broker must disclose this fee to you.

This guide is also available in PDF format. The PDF can be downloaded and read off-line. It is also suitable for printing. Download PDF version.