Friday, 13 April 2012

Mortgages Dorset: Importance of the FSA

There has been much talk of late about the new mortgage regulations which were introduced by the FSA last year but what does this mean to you as a consumer? Will these regulations affect you and are the individual areas within the UK, such as Dorset, affected in different ways?

The FSA (Financial Services Authority) introduced regulations within the mortgage business on the 31st of October 2004. This means that every mortgage lender you deal with today should be FSA registered and should comply with the FSA regulations. As a result this means that all the advice you receive from a professional mortgage adviser should be honest and within your best interests. This is a tremendous benefit to you as a consumer as it means that you can be sure that the advice being given to you is upfront and you should no longer have to try to second guess any hidden loopholes.

The main regulations introduced are as follows:

  • The advice given to you should be clear and accessible

  • You must be provided with an Initial Disclosure Document (IDD) which outlines the type of service which they provide and also with a Key Facts Illustration (KFI) which explains the different suggested mortgages in terms of charges and risk factors.

  • The KFI should follow the standardized format in order to make it easier for you to compare different mortgages

  • The mortgage contract, in particular the pricing information, must be outlined in a clear manner so that you can understand it and there should be no hidden charges, tie-ins or penalties

Mortgages Dorset: The mortgages basics

As you can see from our site, there is a lot of information about mortgages to take on board and it can be difficult to know where to start. What basic information about mortgages do you need to know?
What is a mortgage?
In order to purchase property we often have to borrow money from lenders. This money is then paid back over a fixed period of time. A mortgage is in fact the lender’s security for the money they have lent you. This means they can use the money from the sale of the house should they ever need to recover any debts.
Is there more than one way to pay back the money borrowed?
Yes, there are a few basic ways to pay back the lenders: a Repayment Mortgage, an Interest-only Mortgage or a Flexible Mortgage.
Repayment Mortgage
With this type of mortgage you can pay back a set monthly amount of money which will consist of the actual money you borrowed (the capital) plus a share of the interest on the money you borrowed. At the end of the agreed period of time (usually 25 years) you will have then totally paid off the mortgage. This is considered to be the least risky type of mortgage repayment.
Interest-Only Mortgages
As the name of this type of mortgage repayment states, the monthly repayments made to the lender only cover the interest owing on the amount of money borrowed. This means that you do not pay off any of the capital you have borrowed. Therefore, at the end of the fixed period of time (usually 25 years) the actual money borrowed (e.g. the capital) remains the same as when you first borrowed the money. You must find a way of saving the money in order to pay off the outstanding money at the end. There are a number of options for doing this including paying into an investment fund (ISAs being an example of this)
Flexible Mortgages
This allows you to pay a different amount of money every month dependant on your monthly salary. This is particularly used by people who have a fluctuating monthly income.

Mortgages Dorset: First time buyer’s Mortgage

Mortgages often cause stress in experienced people looking for the best remortgage deals, so what chance have first time buyers got? Are you a worried first time buyer? The rising house prices, not only in Dorset but also throughout the UK, have caused a great deal of concern for most of us. However, for many first time buyers thinking about taking out their first mortgage, the rising house prices are making them nervous about even looking into buying their first houses. In fact, it might not be as daunting as it first seems. So, what do you really need to know about getting your first mortgage?

There is a solution to most things in life and getting your first mortgage is no exception. If you are prepared to do a little research and ask for advice you will find that there will be a mortgage to suit your personal needs. Recent surveys suggest that more and more first time buyers are using the Internet to do this initial research, so why not follow their lead? Initially you should be researching:
·         Houses prices in the UK in general
·         Deciding upon which area you would like to live in, e.g. Dorset
·         The prices in that desired area (and whether this is affordable)

It is then essential that you sit down and work out how much money you have for the deposit and how much you will be able to afford to spend on your mortgage repayment each month.
Armed with these pieces of information you should then seek the advice of an independent mortgage adviser.  Here are a few guidelines for how to tackle this initial meeting:
·         Don’t be afraid to ask questions
·         Ask about special deals for first time buyers
·         Make sure the adviser gives you a range of mortgages to chose from
·         Check if you might be able to use your parents as guarantors for your mortgage

The main thing is to be up-front and honest. Remember; a good, professional Mortgage Adviser will do their up most to find the best deal out there for you. At MEM Mortgages this is certainly our top priority. We aim to provide all of our customers with the best mortgages out there so that they will come back to us again and again. If you are a first time buyer and want to discuss any of the above or you would like to know where to go from here on in simply give us a ring and one of our experienced advisers will be more than happy to help.