sotiris@greenlight.co.uk.
Best regards
Peter Spyr
http://www.mortgagefs.co.uk
Your Easy Guide To Mortgages (Part 1 of 2)
If you're going to be a happy homeowner, then you need to
know the rules of the home-loan game. The first thing to
understand is that your monthly mortgage repayments are
just the start of the fun, because there are dozens of
other fees and extras that you could be forced to pay for.
So here's my plain-English guide to the finances of buying
and owning a home:
A is for...
Annual Percentage Rate (APR)
The APR is meant to give you an indication of the cost of
borrowing, enabling you to shop around for low-rate loans.
However, it's complicated to calculate and open to
manipulation, so don't rely on it too much. Always dig down
into the small print to find out exactly how much you have
to pay.
Application, booking or reservation fee
These days, most special-rate mortgages (and even some
bog-standard deals) come with an upfront fee attached. You
can pay this separately or add it to your mortgage, which
will cost a lot more in the long run. In the past, this
initial fee would be around the £200 to £400 mark; these
days, it's more like £600 to £2,500 for low-rate
'bargains'. Ouch!
B is for...
Broker
A mortgage broker is a middleman who helps you to find a
good deal. However, some brokers have links only to certain
lenders, so be sure to look for a broker who can search the
whole of the market for you, and avoid brokers with high
brokerage fees. The Fool's mortgage service is an
award-winning, no-fee, whole-of-market facility, which
we're rather proud of.
C is for...
Capital repayment or interest only (IO)
With a repayment mortgage, your monthly repayments pay your
monthly interest bill plus an extra amount which chips away
at your debt. With an interest-only mortgage, you pay only
the interest bill and must make your own arrangements to
pay off your debt at the end. Interest only is usually
abbreviated to IO, which is short for 'I owe a lot of
money, so I can't afford a repayment mortgage'.
Cashback
With a cashback mortgage, you receive an upfront 'gift' (of
up to 10% of your loan) in return for being locked into a
higher mortgage rate for, say, ten years. As with most
bungs, this can backfire, so I generally warn readers
against taking out a cashback loan.
Conveyancingor legal fees
The fees paid to your solicitor or conveyancer for doing
the necessary legal work to buy or sell your home. Can add
£1,000+ to the purchase cost.
D is for...
Daily interest
Some lenders take your repayments each month, but only
subtract them from your debt at the end of the year. It's
far better to have daily interest, where each repayment
reduces your loan as soon as it hits your account. Deeds
release, exit, sealing or discharge fee A charge paid to
your mortgage lender when you pay off your mortgage.
Fifteen years ago, this would have been about £50;
nowadays, some lenders charge £300+. Learn how to reclaim
rip-off mortgage exit fees.
Deposit
This is what you need to save in order to own a stake in
your home. Even a 5% deposit (a twentieth of the purchase
price) will give you access to better mortgage interest
rates. No-deposit (100%) mortgages are riskier and thus are
more expensive.
----------------------------------------------------
Read this article by Cliff D'Arcy in its entirety at
http://www.fool.co.uk/news/property-home/mortgages/2007/07/1
8/your-easy-guide-to-mortgages.aspx
or compare mortgages at
http://www.fool.co.uk/mortgages/compare-mortgages.aspx with
The Motley Fool.
