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What term is sensible for my Mortgage?

The mortgage payment term has often been 25 years, but in recent years 'flexible' mortgages have seen many different terms, some as long as 40 years. The length of the term will affect the total amount of interest to be paid and the amount of your monthly payments over the lifetime of the loan. If you have an interest only mortgage, the term of the investment designed to repay the loan is likely to affect the amount of your contributions. Thus, the shorter the term, the higher your contributions are likely to be.

Most lenders will ask to see proof that a borrower applying for a loan going beyond the borrower's normal retirement date, can afford the repayments in retirement as well as during employment. Be careful, as changing the term of a mortgage can often incur extra charges, especially if the mortgage is in the early years or has an outstanding incentive period, for example a fixed, capped or discounted rate.

What's the amount I can borrow?

The first step in buying a home is to find out how much you can borrow. We will be able to tell you the amount by taking into account your income and, if relevant, your partner's income. Although lenders differ slightly in the amount they will lend, it is usually three times your gross annual earnings. If it is to be a joint loan then the lender may be prepared to lend you and your partner, for example, two-and-a-half times your joint income. It must be remembered, however, these are usually the maximum amounts you can borrow. Often, lenders will subtract from the amount you can borrow, any financial commitments you have that are fixed, for example a personal loan, car purchase plan or credit card repayments. Lenders offer different incentives to the borrower where certain charges can be added to the loan, for example your legal fees or mortgage arrangement fee. Some lenders may rebate these fees upon completion of your mortgage. Your lender may charge you a Mortgage Indemnity Guarantee (MIG) fee if you are borrowing an amount over a certain loan to value percentage, often 75%. Some Lenders increase this to 90% or even 95%.

What are the CAT standards for Mortgages?

'CAT standards' were introduced by the Government to ensure that the mortgage you are choosing meets certain minimum conditions for charges, access and terms.

As the Government does not impose CAT standards on lenders, not all mortgages will meet the conditions. The main objective of a mortgage being CAT marked is to ensure that the borrower has certainty over the terms of the mortgage and that lenders won't change them without notifying the borrower. As CAT standards are specific, some mortgages that offer very flexible terms or special features may not meet the standards. However, we are able to advise you on whether this is something you should be concerned about.

In short, the CAT standard is not a guarantee, but a useful guide to the terms of a mortgage, especially for those finding the many choices a bit daunting!

If I miss repayments what could happen to me?

As a first action, always contact your lender if you think you may or have missed a repayment. The lender may be able to help in a variety of ways - in some cases by reducing or suspending repayments for a short period or extending the mortgage term.

Your mortgage is secured against the value of your home. If you stop or reduce your mortgage payments without the lender's agreement, the lender may take legal action. The courts can allow the lender to repossess your home and sell it to recover the money you borrowed and costs. If you still owe money after the sale of the home, you can be pursued for many years until repayment is complete.

Apart from interest, what costs could I expect on my mortgage?

The additional costs that might be incurred depend on the type of mortgage that you choose. Below is a summary of the type of costs that you could have:

  • Mortgage Indemnity Guarantee (MIG)
      Where a mortgage exceeds a certain percentage of the valuation of the property, usually 75%, you may be required to pay a MIG fee. This fee is paid in order to cover the lender if you cannot pay your mortgage.
  • Stamp Duty
      The tax paid on the purchase price of the property if the purchase price exceeds £125,000.  Refer to the Mortgage Glossary for the current stamp duty bands.
  • Solicitor's Fees
  • Accident, Sickness or Unemployment (ASU) Insurance
      You may decide to take out an ASU policy to ensure that you would be able to continue to meet your monthly mortgage payments in the event you have an accident, fall ill or become redundant.
  • Investment Premiums
      If your mortgage is interest only then you would need to take out an investment policy such as an endowment policy, an ISA or a pension in order to pay off the loan amount at the end of the mortgage term. You would therefore have to pay premiums into any such policy each month on top of your mortgage interest payments.
  • Term Assurance
      If you have a repayment mortgage, then your lender may insist that you have adequate life cover.

    This information does not constitute financial advice. For advice on mortgages, please contact us.

    If I were to repay my mortgage early, what additional charges could I expect to pay?

    Early repayment of a mortgage may incur an additional charge known as an early redemption charge, especially if the repayment takes place during an outstanding incentive period. These charges can differ from lender to lender. If you would like to discuss this in further detail, please contact us.

    What is the point of taking out a mortgage protection payment policy?

    There are two types of mortgage protection policy. If you've got dependents, a life insurance just in case you die will keep the roof over their heads. Of course, if you're single you don't need to since the lender can just sell the property to get its money back (unless you're in negative equity). On the other hand, did you know that there were nearly 25,000 repossession orders in Q3 2009 alone. Many of these are for those cases where the homeowner could not keep up the repayments because he was out of work. So, if you become redundant or unable to work through injury or illness, a policy to pay your monthly mortgage expenses is just the thing.

    I'd heard that the State will pay my mortgage interest. Is this right?

    Potentially, yes, the state may help you with the interest payments for your mortgage if you suffer a sudden drop in income. This does not include capital repayments, and the availability of this benefit depends on your circumstances. Financial protection products can guarantee that your mortgage payments (interest and repayment) will continue to be met if you are unable to work due to accident sickness and or unemployment. For more information click here or please call.

    What is negative equity?

    Sometimes the value of your property can be less than the amount of your mortgage. This is termed 'negative equity'. There was a period in the 1990s when negative equity was extremely common as house prices fell sharply when interest rates rose to double figures.

    Don't forget that you can contact us to answer specific queries or arrange an appointment to discuss your personal circumstances.

    If you have not found the information you are looking for, further information on residential mortgages and insurance can be found at
    Your home may be repossessed if you do not keep up repayments on your mortgage.
    For mortgage advice we can charge a fee of typically £500 or we can receive commission from the lender.

    Hedgelands Financial Services, Hedgelands, Abbotskerswell, Newton Abbot, TQ12 5PW
    Registered in England No. 4694508.  Registered Office 32 Monk Street, Abergavenny, Monmouthshire, NP7 5NW
    Hedgelands Financial Services Ltd is authorised and regulated by the Financial Conduct Authority, FCA Registration Number 624282. Sitemap
    Hedgelands Financial Services
    Newton Abbot
    Devon   TQ12 5PW



    01626 360654

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    01626 438184

    Independent Financial Adviser
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