Learn to be a Financial Hunter - Not the Hunted

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How to buy the right mortgage

at the best price in 4 easy Steps

Step 4 : Ask these 3 fail-safe questions
Now it's time to ask your mortgage advisor/broker 3 fail-safe questions about the individual mortgage you've zeroed in on. The questions are specifically designed to highlight any financial irregularities, probably relating to semi-hidden charges.

Make sure you get the answers in pounds and pence and not percentages.

  1. What are the total upfront fees and all further charges relating to the mortgage

  2. What is the total interest charged over the first 5 years - not counting the loan principal and assuming the rate stays at the present level

  3. What are the total closing costs for years 1, 2, 3, 4 and 5 and are there any closing costs after year 5 - by 'closing' I mean if you were to remortgage, ie cancelling your present deal with say Barclays and moving to a new mortgage with The Nationwide
Ask those questions and you'll instantly be able to see the best value mortgage(s) because they're -
  1. Simple to understand and answer, and
  2. Can't be fudged

For example, the total upfront charges for a certain mortgage are either £1,025.56 or they're not, they can't for example be 'around £1,000'. So don't let any 'expert' try to bamboozle you as you're asking for details on a simple mortgage deal and not questions relating to the potential financing of the 2012 London Olympics.

Also, be aware of any advisor that offers wishy-washy talk rather than dealing in hard facts as it can only mean one of 2 things -

  1. They don't know what they're talking about (or know how to get hold of the answer), or
  2. They do know their business, but they're trying to hide some important facts

If you come across either of the above it's best to make your excuses and strike that advisor off your list.

Why 5 years for the interest rate calculation
Some people have asked why concentrate on the costs and interest bill over 5 years, why not 3 years, 10, or the full life of the mortgage? Because 5 years is often the medium timeframe that many people stay with their current deal before looking at the possibility of remortgaging.

5 years also gives plenty of time for any early repayment/redemption charges to naturally expire. If it was 1 or 2 years then many mortgages would seem to be overly expensive when some of the fees were taken into account.

Again, as I've said before don't be scared of high early redemption penalties during the first few years as these are generally fair (otherwise we'd all be remortgaging every year). So costly penalties to cancel a mortgage in the first few years are natural, it's only when they're still higher after 3 years that we should get concerned.

Important - Get the answers in writing
Most people who sell mortgages (even if they work in a bank) will be on some sort of commission. Sign more deals and earn more money. The trouble is it's common for the worst value mortgages (for the customer) to pay some of the highest commissions to the salesman.

Unfortunately whenever top bonuses are paid it means there's always scope for monkey business, ie a salesman might not always tell the truth, or perhaps he conceals facts to make the sale.

Look no further than the mortgage mess in America which started to implode in 2006 and 2007. There a myriad of unscrupulous and over aggressive salesmen were fuelled by large commissions to sign up new customers with little regard or concern as to whether they were suitable for the product.

So I strongly advise that you get the answers to the 3 questions in writing and on official company notepaper (a company email would probably do but check this as I'm no lawyer). By all means talk about the figures on the phone but say you need them in writing for your records.

Tip:

If you're uncomfortable asking for this kind of detailed information then use the 'unseen advisor trick'.

Say that your father/mother/brother/sister/friend who's an accountant/lawyer advises you on all your financial matters and they insist that all financial information is confirmed in writing for your records.

And if the broker asks to speak to the imaginary advisor, say no as they prefer to stay in the background

If a bank or mortgage broker refuses to furnish this information in writing, perhaps they say it's not possible due to company policy etc, then probabilities would suggest they're trying to hide something.

You're about to enter a major financial deal for probably hundreds of thousands of pounds and one side refuses to commit some simple information to paper. Common sense says that's not right.

Remember, you choose who to do business with - not the other way around. So if any broker/lender starts to play games cut them off straight away and start talking with another firm, there are plenty of them.

What this step has accomplished
If you've got proper answers to the 3 fail-safe questions then you should have found the right mortgage for your needs and at the best possible price.

Plus, as a bonus you will have gained an invaluable education in mortgages so should you wish to remortgage in the future you can be sure of getting another great deal.

Did you know? - 'Reserving' a mortgage deal is often possible

Many lenders will allow you to reserve a certain mortgage deal for up to 3 months before you actually sign the papers. This makes sense as the buying and selling of property can take time.

Note, there's usually a fee for this.

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