Erin Ryan asked:


Finding independent mortgage advice is not as hard as it sounds. It is very important though if you want to make the right decision about which mortgage is the best one for you.

There are plenty of information about mortgages in the public domain on websites, in magazines and tabulated over and over again in mortgage comparison tables. We believe that because there are so many variables within the minefield that is mortgages, that seeking mortgage advice is essential. In fact, we even recommend you speak to independent mortgage advisors or brokers who have access to the whole UK mortgages market because otherwise you might not get advice covering all mortgages available to you.

This is even more important if you are trying to get onto the first rung of the property ladder and are a first time buyer. With the property market being so tough in the UK, there are more and more first time buyer mortgages on the market now and good mortgage advice for your first home is essential.

Since 2004 the giving of personal financial and mortgage advice in the UK has been governed by the Financial Services Authority. Companies or individuals offering personal financial or mortgage advice must comply with the Financial Services Act or they are breaking the law. Many companies offer consultations on an ‘information only’ basis and you would need to formally agree to having requested to be advised on financial matters. Adherence to the rules of the Financial Services Act is called ‘compliance’.

Mortgage advice can be sought from a number of sources:

• A tied mortgage adviser: These work – and will therefore recommend products – on behalf of just one lender.

• A multi-tied adviser: These will recommend products from a limited range of lenders.

• An Independent Financial Adviser (IFA) or Independent Mortgage Advisor: These will recommend products from the whole market.

You are perfectly entitled to ask on what basis your advisor is operating.

Be warned though, that if you go to see an Independent Mortgage Advisor, they will be independent on mortgages but perhaps not insurance – and most homebuyers take buildings insurance alongside their mortgage.

By researching and reading it is relatively easy to glean a certain amount of useful information but by seeking personal mortgage advice from a mortgage advisor, you will be gaining the expertise of someone who knows all about all the different first time buyer mortgages on the market, what special deals are on offer, the peculiarities of the one lender versus another, what the latest mortgage releases are and of course they will always take your personal plans and circumstances into consideration.

As well as verifying who you are, you will be required to provide evidence of major income (your salary) and your major out-goings like car-loans, student loans etc. If you have loans or debts, it does not mean that you cannot apply for a mortgage.

Mortgage advice can be given in a number of different ways. It can be given by phone, email or in person – different advisors work in different ways. These days professionals are pretty flexible. In order to give you proper mortgage advice, mortgage advisors will need to a great deal of information about your personal finances. They want to determine that you can and will be able to make the mortgage payments. The last thing they want is to repossess your property if you fail to be able to make the mortgage payments. They will ask your permission before they give financial or mortgage advice. You will probably need to sign an agreement form saying that you agree to being given mortgage advices as opposed to just mortgage information.

When the mortgage advisor or mortgage brokers has taken all the information from you about what you want and your finances, you might, after agreeing which mortgage and which mortgage lender is appropriate to you, make a mortgage application.

The selected mortgage lender will scrutinise your form and carry outs some checks of their own

Some advisors gain their income form commission they earn from selling insurance policies and mortgages whilst others charge for giving mortgage advice. You are perfectly entitled to ask about what charges will be applicable in your instance.

Don’t be intimidated by mortgage advisors. Though they have trained for a considerable time to be able to offer mortgage and financial advice, they are human, just like the rest of us.

Andy Silk asked:


If you’re using a mortgage to buy your home but are not sure which one will suit your needs best, read this handy guide to mortgage types in the UK. Taking out a mortgage has never been easier.

Fixed Rate Mortgages – the lender will set the APR (Annual Percentage Rate) for the mortgage over a given period of time, usually 2, 3, 5, or 10 years as an example. The APR for the mortgage may be higher than with a variable rate mortgage but will remain at this ‘fixed mortgage rate’ level, even if the Bank of England raises interest rates during the term of the mortgage agreement. Effectively, you could be said to be gambling that interest rates are going to go up, above the level of your fixed rate mortgage interest rate. If this happens, your mortgage repayments will be less than with a variable rate mortgage.

Variable Rate Mortgages – the lender’s mortgage interest rate may go up or down during the life of the mortgage. This usually happens (though not exclusively) soon after a Bank of England interest rate change. Most people consider that opting for a variable interest rate mortgage is best done when interest rates in general are likely to go down. They can then take advantage of these lower rates when they occur. It’s a bit of a gamble but if they are right, it could really work in their favour.

Tracker Mortgages – have a lot in common with variable interest rate mortgages in that the APR of the mortgage can go up or down over the term. The key difference between a tracker mortgage and a variable interest rate mortgage is that the lender will set a margin of interest to be maintained above the Bank of England base lending rate. So, as the Bank of England, in line with monetary policy, raises or lowers the base lending rate of interest, so the tracker mortgage interest rate will follow. Over the lifetime of the mortgage, it could be said that the borrower will neither be better off nor worse off because of interest rate fluctuations.

Repayment Mortgages – you will be required to pay a proportion of the capital element of the mortgage (how much you originally borrowed) together with a proportion of the interest that will have accrued on the capital element, with each monthly repayment. In recent years, repayment mortgages have become highly popular over the previous favourite – endowment mortgages. This is because, unlike endowment mortgages, as long as you keep up your monthly repayments, you are guaranteed to pay the mortgage off at the end of the agreed term. Monthly repayments may possibly be a little more expensive but many borrowers say that at least, they have peace of mind.

Interest Only Mortgages – very common amongst borrowers who are looking to secure a second property. The reason being, with an interest only mortgage, the borrower will only be required to make monthly repayments based on the interest element of the mortgage. The lender will require the capital element to be repaid at the end of the term of the mortgage. Again, as with variable rate mortgages, this could be regarded as being a little bit of a gamble because the borrower is hoping that the property will be worth at least as much at the end of the term of the mortgage, as it was at the beginning, allowing it to be sold and the capital element of the mortgage to be paid off. Any capital gain on the property (although possibly subject to tax) is yours. It could be argued that experience tells us that property prices rarely go down in the long term, but it can never be guaranteed.

Capped Mortgages – a combination of the fixed rate mortgage and the variable interest rate mortgage. A cap or ceiling is fixed for a set period of time. During this period, if interest rates in general rise, above the capped interest rate, the borrower will not pay anything above the capped level. Correspondingly, if interest rates fall, then the rate of interest charged by the lender, will also fall so it could be argued that the borrower gets the best of both worlds. It could also be said that a capped rate is like having a set of brakes on your mortgage, but beware, the lender is also likely to charge a redemption penalty on this type of mortgage, making it less portable than some of the other options available.

Discounted Rate Mortgages – here, the lender may offer a reduced level of interest to be charged over a set period at the start of the mortgage term. Many first time buyers or people who expect their salaries to rise considerably during the discounted rate period opt for this type of mortgage but it should be noted that the reduced rate period will come to an end and when it does, the monthly mortgage repayments to the lender may rise sharply. The lender may also charge a slightly higher rate of interest compared with other types of mortgage over the rest of the term of the loan in order to recoup the monies that they have foregone during the discounted rate period. There’s no such thing as a free lunch!

Offset Mortgages – an interesting newcomer to the UK mortgage market, although still comparatively rare in terms of choice and availability. The mortgage is linked to the borrower’s current account. Every month, the minimum mortgage repayment is paid to the lender but where there is a surplus of cash in the account after other uses and debts have been paid, this is also paid to the lender. Over the months and years, the borrower can potentially pay off their mortgage much quicker and have accrued much less interest than with other types of mortgage provided that a reasonable surplus is maintained in the current account.

So, to sum up, the UK mortgage market has many types of mortgage; any or all of which may be open to the potential borrower, dependent on their circumstances. If you’re looking to take out a mortgage, remember that whilst your broker will take care of the vast majority of the work on your behalf, it may still take around 3 months to complete as there is an enormous amount of work that goes on behind the scenes with solicitors and searches, valuations etc. At least now you’re armed with all of tehinformation you need on each type of mortgage available to you.

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