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Part 2 - FSA make move to protect homeowners
In the short time that the new regulations have been in force, individual lenders are already making their own interpretations of the rules. The Nationwide Building Society is not allowing borrowers to use a future inheritance, or future pay rises as a basis on which to set up an interest only mortgage. Similarly, expected bonuses will not be good enough either, not unless you can prove that you will definitely be receiving them. Bonuses based on performance can't be guaranteed, so would not count.
- How to Tell if a Variable Rate Mortgage is for You
- The choice between variable and fixed rate mortgages is important. Yet the decision is difficult since it depends on the future direction of interest rates.
- Mortgages. Higher Lending Charges are outrageous.
- Higher Lending Charges are often charged if your mortgage is 90% or more of your property's value. We think the charge is a form of profiteering by the lenders and should be abolished. This article explains why.
- Foreign Currency Mortgages. What are they and what are the risks?
- Foreign currency mortgages could save you a lot of money but the risks are high. This article explains.
- Mortgages. Big changes in the buying and selling of houses.
- In mid summer 2007 everyone who wants to sell a property will have to prepare a Home Information Packs before they put it on the market. This article explains what the Packs will have to include what they'll cost - and whether we expect them to work!
- House price rises – a cautionary tale
- The housing market seems to be buoyant with house sales exceeding expectations in some parts of the country. If mortgage rates start to rise, the market may see a correction. Take care not to take on too much debt.
- Buy to let – a change for the better
- Do you own a buy-to-let property? There are some proposed new rules regarding tenancy agreements. Find out more. Buy to let – a change for the better
People that already have their own home will not be subjected to the same rigorous ( cheap life insurance ) checks however. As long as you are borrowing less than two thirds of the new property's value, and you have £150,000 of net equity in your current home, then Nationwide will accept you as a customer.
On the whole, mortgage advisers will not recommend interest only mortgages, ( loans ) agreeing that they represent too much risk. Repayment mortgages guarantee that all monies owed are paid at the end of the term, but a separate savings vehicle could fail to live up to expectations, and you could end up with a shortfall. Most mortgage advisers will recommend a repayment mortgage to bypass that risk.
On the other hand, the interest only mortgage is a useful short term solution, ( mortgage quotations ) and if you can assure your mortgage adviser that you intend to switch over to a repayment mortgage as soon as you can afford to, they may well support your decision. Even in this case however, you will still need to provide the same details as if you were intending to stick with it for the full term. You simply won't be able to get an interest only mortgage without providing the right paperwork.
The best all round solution is to get an interest only mortgage that allows you to overpay. So ( life insurance policies ) if you find that you have some extra capital, you can put it onto your mortgage, and reduce the capital. These types of mortgage are widely available, and many allow you to repay 10% or more in a single year. Of course, if you can't afford it, then you don't have to - at least you have the choice. Just make sure, before signing up, that you can overpay without penalty.
Your home may be repossessed if you do not keep up your repayments on a mortgage or any debt secured on it. Security by way of a charge on your home may be required.