The Rules Of Borrowing

A mortgage is a legal agreement, and when you sign you are entering a legally binding contract. This means that you are bound to the terms and conditions of your mortgage – which can run to several pages of small print. It may seem like a mind-numbingly dull exercise to read your entire contract, but you should be aware of all the implications when you take on such a large commitment. Knowing the rules is an important part of learning to play the mortgage game successfully!

The number one rule when taking out a mortgage is fairly straightforward:

KEEP UP YOUR REPAYMENTS.

If you miss payments or can’t find the money to pay your mortgage, you face at least a damaged credit record, and at worst repossession. This will mean the loss of your home, and you will probably find yourself unable to borrow money for the next few years.

Making your repayments every month can be made easier by arranging for a direct debit from your account. If you do find yourself struggling to meet the payments, the first thing to do is contact your lender. Explaining your situation and keeping them informed of your efforts to remedy it will go some way towards getting the problem under control. While it may seem tempting to ignore debt problems, they are likely to get a lot worse if you don’t face up to them.

Every mortgage will have different terms and conditions – some have a two or three year period at the start when you cannot pay off your mortgage or change to a different lender without incurring penalty charges. Make sure you are aware of all such penalty clauses before you sign your agreement. Some of the different types of mortgage are explained elsewhere in the guide.

That said, there are also rules in place to protect you, the borrower. Lenders are bound to provide certain standards of service and fulfil their part of the agreement too. The Financial Standards Authority is the government body set up to regulate all financial institutions in the UK. Their website – www.fsa.gov.uk - is a starting point for any queries you may have concerning your lender. Whether borrowing from one of the larger high street banks or a smaller building society, you should be confident that everything has been clearly explained to you and your lender is providing a good service. Bear in mind the rules vary between England and Wales and Scotland.

More Information:

• Mortgages - More infoamtion and mortgage links at FinanceFool.co.uk