When looking for a mortgage in the run up to purchasing your own home, your primary focus is probably to secure a deal that you can afford. However, although it’s crucial that you consider how your monthly repayments will fit into your budget, there are a number of other aspects of your mortgage you’ll need to assess. Here are just a few mortgage clauses to be aware of.
Overpayment clauses
Mortgages spread out over long repayment periods are becoming increasingly common, with more and more home buyers opting for 30 and 35-year deals. Although these long term mortgage deals can enable buyers to purchase homes they couldn’t otherwise afford, they could see themselves paying thousands more in interest than they would if they’d secured a deal over a shorter period of time.
Thankfully, many lenders allow their customers to make overpayments when they find themselves with extra cash. Overpaying on your mortgage could see you paying off your debt earlier and saving thousands of pounds. Even if you don’t intend to overpay in the early stages of your mortgage, it’s nice to have the option, so be sure to check with your potential lender that they’ll offer you that flexibility.
Some mortgage deals have strict overpayment clauses stating that borrowers will face fees when they overpay.
Early repayment charges
Another thing to consider is whether you’ll face early repayment charges if you repay your loan earlier, whether that’s in small installments in the form of overpayments, the occasional large lump sum, or a full remortgage.
In some cases, the early repayment charges can be a drop in the water compared to the amount you’ll save by overpaying or remortgaging, but it’s essential you do the sums before signing any contracts.
Porting your mortgage
If you decide to move home, you may wish to take your existing mortgage deal with you. This is known as ‘porting’. Not all lenders will allow you to port your mortgage, so look out for clauses in relation to this before committing to a particular deal.
Interest rate caps and collars
It’s no secret that interest rates can be unpredictable, rising and falling with little notice. If your mortgage comes with a cap, this means that rate cannot go any higher. If it comes with a collar, this means the rate cannot fall. Therefore, a cap could protect you from increasing mortgage repayments whereas a collar could see you missing out on better rates.
All monies charge clause
If your mortgage includes an ‘all monies charge’ clause, this means that your mortgage can be used as security against debts on credit accounts with the same lender. So if you defaulted on a personal loan or credit card that you have with your mortgage lender, your home could be repossessed.
To ensure your home is protected, look out for details of this type of clause within any documents you sign.
