Dilpreet Bhagrath, who is a mortgage expert at online broker Trussle, is warning borrowers they could risk problems further down the line by overlooking some of the finer details in their offer.
It comes following research in which 61% of borrowers admitted they did not read their mortgage agreement in full before signing.
Meanwhile, 50% said they did not understand the terminology used during the homebuying process. Nearly half of those questioned said they found the process of buying a home confusing.
Bhagrath said: “Buying a home is one of the biggest emotional and financial commitments you’ll make in your lifetime.
“And it’s important to take it seriously. A mortgage offer is a binding contract between you and the lender, so it’s essential you read and review everything in this document to make sure it’s correct.”
Bhagrath’s first tip is, when receiving your offer, to ensure you review the details to make sure it’s correct. “It’s shocking to see how many don’t read their mortgage agreement before signing,” she said.
Look out for the following terms – loan amount, term, monthly payments, products and fees.
Overpayments
Check to see if your mortgage allows you to make overpayments. If you are able to make overpayments, this will shorten the term of your mortgage allowing you pay off the loan sooner. What’s more, this will have the effect of reducing the overall amount of interest you pay to a lender.
According to Bhagrath, most fixed deals allow overpayments of up to 10% of the balance each year without being charged early repayment fees.
She added: “While overpaying into your mortgage can be great, homeowners should avoid putting everything they have into overpayments and keep a buffer of savings for a rainy day.”
Risk warnings
According to Trussle, some offers include risk warnings which could affect your mortgage repayments. An example of this could include interest rate rises, something which could affect your mortgage rate in future if you are not on a fixed rate.
These warning will be listed on your agreement, so the advice is to make sure you are familiar with them in case you find yourself in this situation in the future.
Bhagrath said: “Every lender has different conditions so it’s worth reviewing these to make sure they work for you. Lenders state that you must have buildings insurance, or they may ask that any credit commitments must be paid on completion, so be aware of these before agreeing to the offer.”
Portability
If you ever consider moving home, and your mortgage deal has not finished, you may want to ‘port’ it so you can continue to benefit from the rate.
As such, one of the things you should be looking for in your agreement is whether or not your mortgage is portable.
Check the end date
Make sure you check when the deal ends. This is vital because, by knowing the end date, you can make a note of when to start looking for a new mortgage – or remortgaging.
Bhagrath explained falling onto the lenders’ Standard Variable Rate (SVR) instead of remortgaging to a new deal, can be costly. But you can avoid this by switching to a better deal at the end of your fixed term.
Bhagrath added: “If you are unsure of any details or the language used in your offer, always speak to your broker or lender before signing it.”
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