Mortgage Questions - What do I NEED to ask?

[mr_yogi]

Hi,
My girlfriend and I are reserving our first home tonight (it's a new build), we have got a mortgage in principal and we are having a meeting with our financial adviser tonight to finalise it.

The thing is that the mortgage (Northern Rock) was arranged over the phone very quickly the other day and I do not know all the details yet.

I know the rate and that it is fixed for 5 years, I know the repayments and the amount of the mortgage. There are also no additional fees, such as higher lending charge.

However speaking with a friend yesterday who works for a solicitors, she mentioned that sometimes lenders insist you take their buildings insurance. This got me thinking that there may be other questions I need to ask before we sign our lives away.

So PH's it's over to you...

[jacko lah]

Fixed rate good idea - Shop around and read the small print ref get out costs assuming say your relationship goes tits up and one of you wants out ? .

A couple of years back we remortgaged with a 10 year fixed rate at 4.66 % interest. To pay back in 10 years and a month. Now I've just come into some money and could pay almost all of it off, but the penalties would be silly.

[superlightr]

They cant insist you take their insurance - its illegal to do so. They can as part of their mortgage insist that you do have suitable cover.

[Parrot of Doom]

Northern Rock insisted I take their insurance for the first year, tbh it wasn't a big deal so I did it. I'm now with Sainsbury's insurance who are about £250 for buildings and contents, much cheaper than anyone else.

Check on their figures for loans and stuff, IIRC its several hundred pounds to 'arrange' an extension on the mortgage, so if you have any work in mind for the house it would be better to include that money now with the main mortgage, rather than later as an additional loan.

[k50 del]

Northern Rock didn't insist that I took their insurance, but they did require proof that there was a policy in operation before they would release the money.
They also charged me £25 admin fee for not taking their insurance!!

As far as insurance quotes go, E-sure were by far the cheapest at just over £150 per year buildings, contents, accidental damage etc.

[touchingcloth]

The most important question to be asking is about redemption penalties, if its a five year fix then you may find hefty redemption penalties within that period (or possibly even some that extend past it!!) , this is a pertinant point in your case as 5 years is a long time and, without meaning to cast doubt on your relationship, if you do split up then the last thing you want to add to the drama is an additional £5-£10K penalty, especially if you have a high percentage of property price mortgage.

Also are you repaying the loan amount or is it interest only mortgage, if its interest only then will more than likely want a repayment vehicle to run alongside it, or at least understand that the amount is not actually going to decrease. I suspect it will be a repayment mortgage but it is worth checking this.

>> Edited by touchingcloth on Tuesday 28th February 10:00

[dogwatch]

Second those comments. Never very impressed with NR admin so suggest you check paperwork carefully.
On the gloomy side look around for some term life insurance - especially if a little one comes along.

[mr_yogi]

Thanks for the reply's

Will enquire about further borrowing.

It is repayment, but the penalties are something to look at, althought we've been together for over 4 years now, lived in rented accomadation together for a year and then both moved in with my family for the last two years.

So we should be ok.

**** touches every bit of wood close to hand ****


EDIT It's a house not a flat, I used the term home to indicate that we are first time buyers so not done this before and need all the help we can get

>> Edited by mr_yogi on Tuesday 28th February 10:13

[minimax]

mr_yogi said:

I know the rate and that it is fixed for 5 years, I know the repayments and the amount of the mortgage. There are also no additional fees, such as higher lending charge. However speaking with a friend yesterday who works for a solicitors, she mentioned that sometimes lenders insist you take their buildings insurance. This got me thinking that there may be other questions I need to ask before we sign our lives away.

northern rock do not require you to take out their buildings insurance (branded as 'cover me') but in common with all lenders they will require you to have an adequate buildings insurance policy in place and for this priviledge they will lift £25 every year from your mortgage account (ie add it to your balance) for purposes of 'checking that your policy is adequate'


if you have any other questions about them I can help you

>> Edited by minimax on Tuesday 28th February 10:10

[minimax]

superlightr said:

They cant insist you take their insurance - its illegal to do so. They can as part of their mortgage insist that you do have suitable cover.

actually mortgage lenders can and do insist...it's only the contents/various other add ons that they are not allowed to insist upon.

[minimax]

Parrot of Doom said:

Northern Rock insisted I take their insurance for the first year, tbh it wasn't a big deal so I did it. I'm now with Sainsbury's insurance who are about £250 for buildings and contents, much cheaper than anyone else. Check on their figures for loans and stuff, IIRC its several hundred pounds to 'arrange' an extension on the mortgage, so if you have any work in mind for the house it would be better to include that money now with the main mortgage, rather than later as an additional loan.

fees for further advances are very expensive with NR so the best idea in all cases if you are considering borrowing extra cash on your NR mortgage is to take out the maximum you can and then immediately overpay it to bring it down to what you were originally planning to borrow so that way when you do actually need it you can get it by means of the redraw (of overpayment) facility that their flexible products offer, completely bypassing any fee and receiving the money within 2 working days as opposed to the 16 working days which they quote for a further advance

>> Edited by minimax on Tuesday 28th February 10:22

[minimax]

touchingcloth said:

Also are you repaying the loan amount or is it interest only mortgage, if its interest only then will more than likely want a repayment vehicle to run alongside it, or at least understand that the amount is not actually going to decrease. I suspect it will be a repayment mortgage but it is worth checking this.

even if it is an interest only mortgage NR will not require a repayment vehicle to run along side the mortgage, they prefer one (obviously!) but they are quite content to have you state that you will repay the mortgage by the eventual sale of the property.

all you need to do is fill out this form

[minimax]

dogwatch said:

Second those comments. Never very impressed with NR admin so suggest you check paperwork carefully. On the gloomy side look around for some term life insurance - especially if a little one comes along.

NR admin is legendarily shite

I should know

don't skimp on insurances/assurances, ascertain what your needs are (get some financial advice from someone you trust) and then use that to locate the most competitive premium...you get what you pay for!

example: egg critical illness cover provides for the contraction of 6 critical illnesses of the 33 accepted ones.

legal & general cover 32.

you will not find a great deal of difference in the premiums!

tread carefully and be suspicious

[mr_yogi]

Thanks Minimax,
Hadn't really thought about life insurance yet as we are both employed by quite considerate employers, but I hadn't considered serious illnesses.

***goes off touching wood again ***

We both have pensions will I think pay out in case of death to our next of kin but will have to look at this also.

Like I added to my previous post it is a repayment mortgage.

If you can think of anything else I should know please post it :thumbsup:

Thanks Again

[minimax]

mr_yogi said:

Thanks Minimax, Hadn't really thought about life insurance yet as we are both employed by quite considerate employers, but I hadn't considered serious illnesses. ***goes off touching wood again *** We both have pensions will I think pay out in case of death to our next of kin but will have to look at this also. Like I added to my previous post it is a repayment mortgage. If you can think of anything else I should know please post it :thumbsup: Thanks Again

nothing really springs to mind, but just a thought, if you are putting down at least a 5% deposit then the Accord mortgages 5 year fix kicks the punk ass of the NR deal, cheaper fees by some degree and a rate of anywhere from 4.79% to 4.99% which beats the NR rate of 5.39%...

...worth asking your IFA about that deal before you sign