Frequently Asked Questions

* What is a mortgage?
* How much can I borrow?
* Must I visit every bank and building society myself?
* What does a mortgage broker do for me?
* I keep reading about redemption penalties. What are they?
* I’m no longer happy with my mortgage, can I remortgage?
* What home insurance will I need to get with my mortgage?
* Do I need life assurance with a repayment mortgage?
* Is there any other sort of insurance I need to buy?
* Is it sensible to buy a property with friends rather than renting together?
* Can I take a mortgage for longer than 25 years to reduce monthly repayments?
* What if I take out a mortgage and then things go wrong for me financially or I lose my job so I can’t afford the mortgage? Would I automatically lose my home?
* I smoke. Will that make it harder to get a mortgage?
* I plan to buy a two-bedroom flat and afford the mortgage by letting one bedroom. Would the mortgage lender have any problem with this?

1. What is a mortgage?
A mortgage is a loan, from a bank or building society, that is secured against your property.

2. How much can I borrow?
Most lenders will offer three times a single person’s salary or two-and-a-half times the borrowers’ joint salaries. However there are circumstances when these guidelines are not followed. In order to see if you can borrow beyond the standard limits contact our advisor to see if they can give you advice on borrowing large value mortgages

3. Must I visit every bank and building society myself?
No, you may find the perfect mortgage for you at your local building society. But shopping around could land you with a much better deal. This is where Mortgage 250 can help. Our brokers are independent and can offer you a choice from across the whole market. They can help you with advice and quotes on all your mortgage needs. Our broker do not charge fees for their service

4. What does a mortgage broker do for me?
Mortgage brokers scour the market to find the most suitable deal for you. A good mortgage broker saves your shoe leather and can save you money. They should take time to find out about your individual circumstances.

5. I keep reading about redemption penalties. What are they?
These will be charged if you cash in a fixed, discounted or capped-rate mortgage in the first few years. Redemption penalties are usually a few months’ interest, which can run into thousands of pounds. Redemption penalties can also be charged if you try to pay off a portion of the loan early.

6. I’m no longer happy with my mortgage, can I remortgage?
Yes and it can be easier than changing bank accounts. There is some legal work involved, but many mortgage brokers package the remortgage process. Beware if you’ve had a fixed, capped or discounted mortgage in the last five years. You may still be subject to redemption penalties. See if our brokers can help you with your remortgage questions

7. What home insurance will I need to get with my mortgage?
You’ll need both buildings and contents insurance, but do shop around for the best deal. All lenders insist that you have adequate buildings insurance in place so that their security on the money they are lending is safeguarded. But you don’t have to buy it from your mortgage lender who may charge you up to twice as much as you’d pay elsewhere. If you buy it direct from a cheaper insurer, your lender may charge an administration fee (typically ?25) for checking that the policy is adequate.

8. Do I need life assurance with a repayment mortgage?
You don’t have to buy life cover with a mortgage, but if you have dependants who would find it hard to pay the mortgage if you died, then you should buy a mortgage protection policy (sometimes called ‘term insurance’) designed to repay your mortgage in the event of your death. Also consider ‘critical illness insurance’ if it is offered as an add-on to the life policy. This pays out a tax-free lump sum if you are diagnosed as having one of a pre-defined list of serious diseases such as a heart attack or cancer.

9. Is there any other sort of insurance I need to buy?
You should consider mortgage payment protection insurance (mppi), which will pay your monthly mortgage payments, typically for up to a year, if you become unemployed or can’t work because of sickness or disability. It gives you a breathing space to get your finances back on track. So, if you can afford it, mppi is a safety net worth having, but it’s not cheap. The monthly cost is likely to be around ?3.50 to ?5.50 for every ?100 of your monthly mortgage payment. Also most mppi policies are pretty strict about what qualifies as a valid claim, so read the small print carefully to see it covers your needs.

10. Is it sensible to buy a property with friends rather than renting together?
It’s a big commitment to buy with friends and you should think long and hard before diving in. To go ahead, you need complete trust in each other and you all need to agree on issues like how long you plan to keep the property. Problems can arise if you fall out with each other or if one joint-owner decides they want to sell the property to release their share of the equity when the others don’t. Also, if one of the borrowers does not pay their share of the mortgage, the lender will be entitled to chase all of you for payment of the arrears. You should take legal advice on setting out your aspirations formally and on how the property ownership is set up.

11. Can I take a mortgage for longer than 25 years to reduce monthly repayments?
You may be able to take a mortgage over a longer term than the typical 25 years and this will reduce the monthly cost of a repayment mortgage. But it does mean that you will be chipping away at the capital debt more slowly and you will pay more interest over the term of the mortgage so it will cost you more in the long run.

12. What if I take out a mortgage and then things go wrong for me financially or I lose my job so I can’t afford the mortgage? Would I automatically lose my home?
No, lenders only repossess properties as a very last resort. If you find you can’t afford your monthly mortgage payments for whatever reason, the key is to talk to your lender straight away and explain the problem. Don’t leave things to get worse. Under the Mortgage Code, lenders are bound to be sympathetic and do their best to help you reschedule your payments until you get your finances back on track.

13. I smoke. Will that make it harder to get a mortgage?
No. Whether you smoke or, indeed, have any medical problems, shouldn’t have any impact on your mortgage application which asks no questions about medical matters. But it may well affect the premiums if you decide to take out life insurance.

14. I plan to buy a two-bedroom flat and afford the mortgage by letting one bedroom. Would the mortgage lender have any problem with this?
If you intend to let all or part of your property, you should definitely tell your lender, otherwise you may break the terms of your mortgage deed and risk being taken to court.