Factors to Consider When Choosing A Mortgage

Question 1

List the five factors that an individual should consider when choosing a mortgage?

Answer 1

Interest rate

Incentives offered

Early repayment charge

Break from repayments charge

Type of interest

Question 2

Why should an individual consider the interest rate when choosing a mortgage?
(2)

Answer 2

The interest charged on mortgages varies greatly among lending institutions so it is important to shop around

The lower the interest the cheaper the soft of the mortgage

Question 3

Why should an individual consider the incentives offered when choosing a mortgage?

Answer 3

Some lending agencies offer incentives to first time buyers such as a lower interest rate for the first year or payment of stamp duty to the value of 1% of the mortgage

Question 4

What is stamp duty?

Answer 4

A tax payable to the government for changing documents that specify who owns a particular property

Question 5

Why should an individual consider early repayment charges when choosing a mortgage?
(2)

Answer 5

An early-funding fee may be charged by some lending companies if individuals wish to pay of their fixed mortgage early

This is a form of compensation to cover additional costs for the lending institution

Question 6

Why should an individual consider breaks from repayment charges when choosing a mortgage?
(3)

Answer 6

Some lending agencies may offer a mortgage payment break for times when individuals cannot afford repayments e.g. loss of job

This may affect an individual’s credit rating

The total postponed payment will be added onto the mortgage balance increasing the cost of future repayments

Question 7

Why should an individual consider the type of interest when choosing a mortgage?
(2)

Answer 7

The type of interest will affect the total cost of the mortgage

Fixed interest rates are usually higher than variable rates