Mortgage Advice - Types of Products & Insurances?

[Big Tav]

Hi, I am currently approved in Principal for a mortgage and am meeting with the broker next week to decide exactly what product I am going to go for.

I am buying a house for £197,000 and I am told i need to put in £78,800 to get the best rate. Ideally I want to put only £75,000 in. I was told the payment over 25 years would be around £600 on the lower deposit or £560 if I put in the extra money. My wife thinks that it is better to have the extra £3,800 in the bank for security and have the slightly higher payment.

What sort of loan should I go for? Fixed or tracker? I don't want to get scammed and end up in the wrong product. I got badly burnt once in Australia and since things are very different here in the UK I want to be careful. Some have no fees, some are £995. Is that normal? It seems like a lot.

Also, he mentioned that I should have life insurance along with sickness & accident Insurance. Is this really necessary?

I sell cars for a living and I know how to make money selling finance on cars so I want to make sure I don't pay over the odds. Are these things he is trying to say I need like me selling the Total Loss Protection and Paint Protection? Nice I guess but are really just an earner for him?

Sorry for all of the questions but I am new to the UK loan market.

Cheers!

[dalenorth]

I personally can't see rates increasing in the next 2 years so take that as you will. Make sure you understand all the fees.

With regards to life insurance etc, you need to think about what situation your family would be in if they were left without yourself, or wife and without those incomes.

[Sargeant Orange]

Search for the mortgage spreadsheet on money saving expert forums, you'll typically find there's not a lot of difference between fee free and fee mortgages. Don't be suckered into looking at the 25 year cost, most are 2-5 term, after which you can swap. It's the total cost in that initial term which is key.

First direct tracker looks good at 2.79%, £75k deposit, £565p/m.

[Sarnie]

I'm a mortgage broker, feel free to drop me a line if you'd like a second set of eyes over your details to ensure your on the right track?

Is this an Estate Agent mortgage advisor giving you this information? It seems like is 'telling' you a lot things rather than explaining/recommending options to you.

What is the reasoning behind needing £78,800 deposit to get the best rate? Seems awfully specific?

With regards to the product type, I'm not sure how you can get scammed? As long as you know the pro's and cons of each, make your own decision based on your own experience/knowledge and the input of the broker.

Some product will have a low rate and higher fee's, some will have a higher rate and lower fee's, generally it works out even over 2-3 years. Lenders will have a range of products to incorporate both. Some people are rate chasers and happy to pay fee's, other are vice versa. It just comes down to personal preference.

Life Insurance/ASU is not a requirement of any UK lender. You don't HAVE to have it but it is highly recommended, especially if you have dependants. If you would struggle to pay your mortgage if you couldn't work or if your family would struggle without your income then it's worth consideration. It just comes down to your attitude to risk.

Perhaps you need to get away from what the benefits are to him, and think about the costs Vs. benefits to you of the policy. If you don't think you need the policy or the cover, then just say so. Any advisor worth his salt with advise you of your options without railroading you into something you don't want or need.

Edited by Sarnie on Friday 21st September 22:23

Edited by Sarnie on Friday 21st September 22:27

[Big Tav]

He said that 40% deposit gave me a better rate which was £78,800 (from £197,000) and my payment would drop to £560ish but it looks like that First Direct tracker in the post above works out to be that anyway?

When I got a mortgage in Australia, I was told I had an offset account when I signed up but 5 days later they called me and told me that there was a mistake and I didn't have it after all but it was too late. I then went to pay off a substantial amount which they said I could when I borrowed and changed their story and they told me (after I was in my house) that I could only pay $5,000 a year. You can see why I was angry and am not willing to get it wrong again.

So the best advice is to check the total amount payable over the term is that the best way to see if I am getting the best deal? Tracker or fixed?

[Sargeant Orange]

If you haven't already, look at the moneysupermarket comparison tool to get an idea what kind of figures you should be talking with your broker (Ignore the sponsored products which get listed first & sort by "Actual cost over x):

http://www.moneysupermarket.com/mortgages/results....

Fixed or tracker/variable? It's up to your personal attitude to risk. Factor in a realistic worst case scenario rate increase and see if you can afford it. If you can i'd be looking to go with that as my personal view is that base rate won't be moving anytime soon.

[Big Tav]

Thanks for that! That has really helped. So I should look at the total cost over the term right? What do most people suggest is the best term these days? 2,3 or 5? Also if you take a 2 year term (for example) you would want a loan with no set up fee of like £995 because if you went to a different lender you might have to pay the same again next time which would mean £2,000 in fees on 4 years worth of loan which would negate any benefits of a great rate right?

Thanks for your help everyone!

[S6PNJ]

Big Tav said:

When I got a mortgage in Australia, I was told I had an offset account when I signed up but 5 days later they called me and told me that there was a mistake and I didn't have it after all but it was too late. I then went to pay off a substantial amount which they said I could when I borrowed and changed their story and they told me (after I was in my house) that I could only pay $5,000 a year. You can see why I was angry and am not willing to get it wrong again.

Tav, The way to avoid this in the future is to read the small print - I am serious - read your mortgage offer from cover to cover. It's probably only 12 pages or so and most of that is blank space. It will explain everything you can and can't do as well as telling you the penalties for overpaying too much etc. As has been advised, look at the cost of the mortgage products over the term you are likely to hold them for. If this is their special rate term, then only look over that period but make sure you are then prepared to either re-mortgage to another product (with potential for more fees) or say on their variable lending rate.

[Big Tav]

Hi Sarnie, I just sent you a PM.

I have been given two offers now. It is a bit tricky to just go off comparison sites as I work on commission and I have been accepted in principal through a broker using Nationwide and one through my bank Halifax. I have an appointment with my broker on Thursday to sign up for Nationwide so any advice would be greatly appreciated before then. Has anyone had experience with Nationwide or Halifax?

[Willber]

I am a first time buyer and have just applied for a Halifax mortgage. They were the only ones who would lend to me currently with the amount I need to borrow so it was my only choice. My broker did say they are a very lenient lender though. Not sure if this helps?