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Glossary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage secrets

Mortgage Secrets, Catches,
and Mortgage Insider Tips

When you take out a mortgage, there are several mortgage secrets, mortgages catches, and mortgage insider tips which may be not be obvious at first, especially if you are a first-time buyer or have the misfortune of choosing a untrustworthy lender.

Many of the mortgage catches take the form of hidden penalties and charges imposed on borrowers either at the end of their mortgage term, when they want to switch to another product or lender or if they want to pay off their mortgage early.

Here is a selection of just a few examples of hidden mortgage secrets from lenders for which you should be on guard.  You may also be able to glean some mortgage insider tips on how to avoid these mortgage catches.

Exit fees

One of the most common types of mortgage catches and mortgage secrets occur when:

  • you decide to switch to another mortgage lender

  • you decide to pay off the balance earlier than originally agreed

Under these circumstances, many lenders charge an exit fee to cover administrative costs.  Traditionally these fees have been around £50 to £100. However, some lenders have been known to charge as much as £200 or even more!

If you are unhappy with exit fees, try to challenge your lender directly. If you feel that this type of fee counts as unfair mortgage catches and you have not been properly informed in advance, you can make an official complaint to the Financial Services Authority.

Standard Variable Rate

One of the biggest mortgage secrets involves lenders' standard variable rate. This is the lender's fluctuating rate of mortgage borrowing which sits about 2% higher than the Bank of England base rate.

It is the default mortgage rate that existing borrowers are moved to when, for instance, their special deals come to an end. At this point, mortgage lenders make their profit when these borrowers do not bother to switch to a better deal with more favourable rates.

A good mortgage insider tip to follow is this: if you suddenly find yourself paying your lender's standard variable rate, take immediate action and remortgage as soon as possible! There is always a huge choice of attractive mortgages available that you need not endure such mortgage catches. 

Portability

Another mortgage secret to be aware of is the portability of your home loan. Many borrowers like the stability of long-term deals. However, make sure you know what will happen if you decide to move home. Make sure your mortgage allows you to move home without having to incur any unexpected penalties. If you decide to take out a mortgage that is not portable, make sure you find out how much the costs will be should you decide to move in the future.

Higher lending charge

Watch out for lenders who impose higher lending charges. One of the mortgage secrets of many lenders is to advertise incredible deals to catch the attention of any prospective customer without informing them about these higher lending charges at the start.  On deeper reflection, many borrowers will find that these so-called special or exclusive deals come with hidden mortgage catches (i.e. hidden costs), making them not as attractive in the long run.

Early redemption charges

If you have a fixed rate or tracker mortgage package, you will find these types of deals involve an early repayment charge which locks in borrowers for the length of the initial deal.  However, there are certain mortgages lenders that impose even higher charges.

A useful mortgage insider tip is to always check the early redemption charges and work out what the cost of remortgaging would be.  Do not be tricked into taking out mortgages with low initial interest rates, but which unfairly lock you to a higher interest rate after the deal expires.

Mortgage protection insurance

A significant mortgage inside tip that all borrowers should think about is to take out mortgage payment protection insurance (MPPI) when taking out their home loan. Do not just hope to rely on your savings to pay the mortgage if you find yourself suddenly out of work or ill.

MPPIs are not obligatory but some lenders will only grant you a mortgage if you agree to taking out a MPPI.  A good MPPI policy will cover all mortgage-related costs including interest and repayments.  However, be wary of lenders who insist that you should take their insurance over other. This is likely to be a money-spinner.

Before you sign on the dotted line, be sure to keep these mortgage secrets, mortgage catches, and mortgage insider tips in mind!

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