Consumerline - Search

Search

Home: Money Matters:

Mortgages

Introduction

Buying a house is, for most people, the biggest financial deal in their lives. And it can be the biggest headache. The problem is that while you know what your personal and financial circumstances are now, you don't know how they will change during the period of the mortgage. But it helps if you find out as much as possible about all the different types of mortgages you can get. And, as with any product, you should shop around for the best buy.

What the law says

The Financial Ombudsman Service was set up by Parliament to help settle disputes between consumers and business providing financial services. They are able to provide assistance to resolve complaints about mortgages and other financial services.

Useful information

You can get a mortgage from a bank, building society, finance or insurance company. But remember, each one of these will only tell you about their own products. An independent financial adviser or mortgage broker should be able to tell you about the whole range of mortgages on the market.

Many lenders offer mortgages with lower interest rates for the first few years. Some may also offer a loan which is larger than you expected, but which you may later find hard to repay. Don't be blinded by these offers. Work out what you can reasonably afford to repay, taking account of all that you spend now and any new things you'll have to pay like rates and maintenance and remember you will have to furnish your home. Then work back from there to the amount of your mortgage. Your new home should be enjoyable, not a millstone round your neck.

There are two main types of repayment methods. First, you can repay the loan gradually over the mortgage period; or second, you can use a life insurance endowment policy, or some other type of investment, to repay all the loan at the end. Picking the right one is very difficult.

Here are a few things you should think about:

CERTAINTY OR RISK

If you keep up the payments on a gradual repayment mortgage, you can be certain that your mortgage will be cleared at the end of the loan period. With an endowment policy mortgage, you cannot be sure of the amount of the final payment which is intended to pay back the money you borrowed. Often the payment is greater and you get back more than is needed, but it could be less!

CHANGES IN YOUR CIRCUMSTANCES

Think about how your financial circumstances might change over a long period. It is important to have a mortgage that is flexible enough to help you cope with these changes.

SURRENDER PENALTIES

Many people end their mortgages early. When this happens, you don't get back all the money you've paid in. All you get is the surrender value. As a general rule, the surrender value on gradual repayment mortgages is greater than that for endowment mortgages.

What to do if you have a complaint

Raise it first with the lender and give them a chance to put it right. If that doesn't work, get in touch with the manager at the lender's headquarters. If, after you get his response, you still think you've been treated unfairly, put your complaint to the Chief Executive of the firm. If you are still unhappy complain to the Financial Ombudsman Service. Its address and phone number is shown below.

From category: Money Matters