An advance mortgage is a loan that you can take to buy property. You can get an advance mortgage from most banks and building societies as well as specialist mortgage lending companies. Several firms also offer advice on advance mortgage.
Types of Advance Mortgage
There are two types of advance mortgages: repayment mortgages and interest-only mortgages. In both types, you make monthly repayments to the lender. However, in interest-only mortgages, the monthly repayment covers only the interest on your loan. Normally, you also have to pay a savings or investment plan that would pay off the loan amount at the end of the term. On the other hand, in repayment mortgages, you make a monthly payment over a fixed period that pays not only the interest but also the loan.
Think well before choosing either type of advance mortgage, as both have their pros and cons. Repayment mortgages involve higher payments than interest-only mortgages. However, in interest-only mortgages, you need to plan your investments and savings in such a way to be able to pay off the loan amount. If you do not repay the loan at the end of the term, you could lose your home.
Choosing an Advance Mortgage
Ask yourself the following questions before you consider an advance mortgage.
Is the mortgage agency authorised?
The first thing to check is whether the broker, adviser, or advance mortgage agency is authorised by the Financial Services Authority (FSA), the UK's leading financial watchdog. If something goes wrong, you can always file a complaint.
Does the mortgage agency follow prescribed rules?
Check if the advance mortgage agency is following FSA rules and procedures while dealing with you. For example, they should give you a 'KeyFacts' document before you sign up for an advance mortgage. This document lists different advance mortgage services and products offered by the lender.
Does the mortgage adhere to standards?
Check for the CAT standard. The UK government confers the CAT standard on certain mortgages that offer clear and fair terms. Remember, a CAT standard advance mortgage may not always be the best for you. Use it only to compare with other advance mortgages.
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