I Don’t Understand My Mortgage Offer? What Is It? Can You Explain?

In his latest blog, Timms Trainee Solicitor, Michael Radze-Constable talks ‘mortgage offer’ and helps with some frequently asked questions…

In an era of sharply increasing house prices (The average UK house price has hit a record of £294,260, up £30,000 in a year) most people, regardless of their age bracket and pay grade, have become reliant on a mortgage to purchase their new homes.

Mortgage offers come in many different styles, depending on the lender, but you will spot a few common themes:

Mortgage Offer Expiry Date

This will usually be around 6 months after the mortgage offer was formally made. You may therefore need to seek a renewed mortgage offer if your intended purchase falls through.

Cashback

To have the edge over their competitors, many lenders offer a one-off cashback paid within a month of taking out the mortgage. At a time when you are parting with a considerable amount of cash, this is always a nice bonus to have.

Deductions

You aren’t just paying for the mortgage itself! Typically, there will be an extra product fee, which can sometimes be above £1,000.00 and a drawdown of the loan fee. Consequently, most lenders will give you two figures – A gross loan amount (the total amount of your mortgage) and a net loan amount (the amount available for your purchase after taking away the product fee or other fees).

Interest Rate

This one is important to look out for and is a very current topic given the descending financial health of the UK Economy. Many providers will initially offer a fixed rate (where the amount of your monthly payment stays the same) and a variable rate, which is dependent on current interest rates. During a recession, interest rates increase to control the supply of money available to the public, which means your variable rate will increase.

Frequency & Number Of Payments

Once you take out a mortgage, it is a financial burden you will have to bear each month until the mortgage expires. It is important to look at the number of monthly payments, and determine whether you will still be in employment or have a source of income for the duration of the mortgage. Many mortgage lenders are not too keen on lending to someone aged 60 years or over, given that they will likely soon retire and lose a source of income to keep up with monthly payments.

Early Repayment

What if you win the lottery or your business really gets going and you find out you don’t need the mortgage after all! It may initially seem to be fantastic news, but lenders will charge you an early repayment penalty if you decide to redeem the mortgage early.

Special Conditions

In addition to the numerous terms and figures, there will also be certain special conditions, which are specific to your circumstances and the property you intend on purchasing. If you have previously taken out a mortgage with the same lender, this will likely have to be repaid as a special condition of your new mortgage. You may also be required to pay for a specialist survey; if you are purchasing a particularly old property, the lender may insist on a structural survey to ensure the foundations and structural well-being of the property do not pose any risks of potential devaluation or damage to the property.

How We Can Help

In summary, a mortgage offer can seem like an intimidating and confusing document to read. At Timms, we will always offer you a condensed report on your mortgage to make the daunting process a bit more plain and simple. For further information, please contact one of our Conveyancing team on freephone 0800 011 6666.

Registered Title

Michael Radze-Constable
September 2022

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