Which Remortgage?
Buying a home is likely to be the biggest financial commitment of your life. It can also be a stressful and complicated process, especially for the first time buyer. You have probably also heard the ‘gazumping’ horror stories which can further exacerbates your worries.
To put your mind at rest the following tips will arm you with vital information and essential questions for you to ask that will make the whole process of buying much easier (based on government advice, 2000).
Tip 1: Ask about cost
Ask your potential mortgage lender the following questions:
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How much can I afford to borrow?
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What fees will I have to pay?
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How much will the payments be each month?
Tip 2: Ask about your mortgage term
You need to know for how long you are committed to your mortgage lender before agreeing. Make sure that you are not committed to them for more than 2 or 3 years.
Tip 3: Ask about penalties
This is related to the last tip, ask if there are any (redemption) penalties or fees if you decide to end the agreement and move to another lender. Many lenders have such penalties but check that they are not too severe. Alternatively, ask if there are any fees attached to occasional lump sum payments you may wish to make in order to reduce the size of your debt quicker.
Tip 4: Shop around
Do not be able afraid to shop around for the best possible quote to meet your needs. It is also recommended that even when you have had your mortgage for a while you should continue to review other offers on the market to ensure that you have the best offer. Switching from your current mortgage to a new mortgage product or a different lender is called remortgaging.
Tip 5: Research
Learn as much as possible about the different mortgage types so that when you meet with your potential lender you will be more informed. As they say ‘knowledge is power.’
Tip 6: Don’t be afraid to ask ‘stupid’ questions
The sheer number and choice of financial products can be overwhelming and intimidating at first, however don’t let this stop you from asking questions. The mortgage industry is also full of jargon so don’t be afraid to ask your lender to explain what different terms mean.
Tip 7: Don’t rush into anything
Remember that it’s a buyers market. This means that lenders are desperate to get your business.
Tip 8: Ask about rates
There are many types of mortgage including fixed rate, variable rate, and flexible. You need to ask which one will be most suitable for you in the short and long term.
Tip 9: Ask about loan insurance
Ask if your mortgage comes with compulsory loan insurance. Mortgage loan insurance is purchased by a buyer to cover the lender’s risk of loss. It is available from the CMHC or a private insurer for a cost of between 0.5% and 3% of the amount of the mortgage.
Tip 10: Ask about payment defaults
A payment default is when you do not make a one or more of the repayments. This may be because your financial circumstances change and you cannot afford it. If this happens usually the lender will ultimately be entitles to repossess your home to recover your debt.
You should ask your potential lender what their policies are on this issue as they can vary between lenders. Different lenders will have different policies on how long they give you before they start the legal proceedings to recover the loan. Many will have a separate schedule of charges which you will incur before they start proceedings.
Tip 11: Read the small print
Always read everything carefully and make sure you fully understand the terms and conditions before signing.
Tip 12: Be realistic
When working out how much you can afford to pay for you new home make sure you factor in extra costs such as essential renovations, furnishings, conveyancing and stamp duty. If you are currently living at home remember to include monthly outgoings such as council tax, gas and electricity bills, boiler servicing, and other home repairs.