Here at Blue Moon, we have compiled a list of the most common questions our advisers get asked on a regular basis and created our frequently asked questions page.
This allows you to have a browse through some of the questions and answers we often get asked and also illustrate how we like to keep things simple in a world of small print and get out clauses! We have split the questions between morgages and insurance to make it easier to find what you are looking for.
FAQs – Mortgages.
Can i get a mortgage before i find my property?
Most lenders will provide an Agreement In Principle (also known as a Decision In Principle or a Mortgage Promise) which means that they will look at your circumstances, how much you want to borrow and your credit history (by doing a credit check) and they will say whether ‘in principle’ they will lend the money to you. However in order to get a formal mortgage offer, they will need to check your income via payslips, bank statements etc and they will need to check that the property you are buying is sound and worth what you are paying for it, via a valuation or survey report. It is only once they are fully satisfied that the information on the Agreement In Principle is correct that they will issue a formal mortgage offer.
A word of caution: be very careful about approaching too many lenders on this basis because each credit check leaves a ‘footprint’ on your credit file and that can make it more difficult to get the actual mortgage when you are ready to make a full application. Always ask your adviser whether they will be carrying out a credit check – at Blue Moon we don’t credit check until you are ready to proceed with your chosen lender to avoid harming your credit rating.
Why do the best mortgage deals disappear so quickly?
Lenders will only allocate a specific amount of money (known as a ‘tranche’) to be lent out at a particular rate so if the deal is particularly good then they will get an influx of applications and the money will soon be used up. It is important then that, if there is a very good deal available and it is likely to be popular, you need to make a quick decision to avoid losing the opportunity to apply for that deal.
What is the difference between ‘interest only’ and ‘repayment’ mortgages?
The technical name for a repayment mortgage is a Capital and Interest mortgage which means that it is made up of two elements, one is the amount needed to pay back the money you have borrowed and the other is the interest that is charged on the borrowing.
For example a £500 monthly repayment mortgage payment could comprise of £400 in interest to the lender and £100 paying off the balance of the mortgage. The amount being paid off the mortgage is the amount that the lender has calculated that you need to pay in order to pay your mortgage off in a certain number of years.
An interest only mortgage is cheaper because it would just be the £400 interest payment and nothing would be coming off the balance of the mortgage. Most interest only mortgages do allow you to pay extra, and anything extra you pay will come directly off the balance of the mortgage however if you don’t pay anything extra or you don’t pay enough then you will still owe the money to the lender at the end of the mortgage and you may need to sell your house to pay it off.
What is the difference between fixed and variable rate mortgages?
The difference is how the interest element of the mortgage is calculated. If you choose a fixed rate, it means that the lender will set your payment for a period of time and during that period your payment will not change so it is easier to budget your costs.
If you choose a variable rate mortgage then the payment will go up and down as the lender recalculates the interest so when interest rates are coming down it means that your monthly payment will become less and less but if rates are going up then your monthly payment will get higher and higher with usually no upper limit.
What happens if I lose my job?
You should consider this seriously before you take out a mortgage and think about how it will affect your ability to pay your mortgage. You can protect your income with insurance so that if you become sick or unemployed then the insurance policy will take over your payments until you find another job or you are well enough to work again. Be sure to take advice because the type of insurance cover varies greatly and the cheapest cover could also be the one least likely to protect you when you need it.
The most important thing to remember if you lose your job is to keep the lender informed at all times so that they know what you are doing about making your payments.
What other costs will I have in taking out a mortgage?
It is important to fully consider all costs before you start the house buying process, click here to read our article for full details.
FAQs – Insurance.
What is the difference between ‘income protection’ and ASU (accident, sickness and unemployment cover)?
These two are becoming increasingly confused but the general difference is that income protection is a long term contract designed to protect your income for a number of years, usually until your normal retirement age whereas ASU is designed as a 12 month renewable contract that will protect your income for only a 12 month period.
The income protection policy will provide cover for the whole period that you choose but the ASU policy will be reviewed every year by the insurance company and can be withdrawn or premiums increased in reaction to market conditions and claims being made.
What is the difference between ‘critical illness’ and ‘terminal illness’?
Critical illness cover pays out a lump sum if you suffer one of a number of specified illnesses and then recover, so it is usually payable 30 days after diagnosis. For example a woman may be diagnosed with breast cancer, have the required treatment and fully recover and her critical illness policy will have paid out a lump sum for her to use as she needs. She does not have to pay the money back when she recovers.
Terminal illness cover is only payable if you are diagnosed as having a terminal illness giving you twelve months or less to live. Terminal illness cover is a very cheap add on with most life assurance policies because it is just a facility that allows you to receive your life assurance money before you die to enable you to distribute it as you wish.
What is an exclusion period for unemployment/redundancy cover?
All insurance companies want to be sure that you didn’t know you were going to be made redundant then suddenly decided to take out insurance so any unemployment/redundancy policy will have a period at the beginning of the policy where you can’t make a claim. Once this period (known as the exclusion period) comes to an end then you can make a claim on the policy. A word of caution: check the length of the exclusion period when you take out a new policy as it can vary from 60 days to 6 months!
How long do I have to wait before I recieve a payment from my insurance?
This period is called the deferred period and is the time from when you make your claim to when the claim becomes payable. You can choose this period yourself at the start of the policy depending on when you need the money to come in.
Most companies offer a 4, 8, 13, 26 or 52 week waiting or deferred period so if your employer will pay you for a time and/or you have savings to fall back on then you can select a longer deferred period and this will cut down the cost of the insurance. So for instance if your employer will pay you for 13 weeks if you are off sick and you have enough savings (and you don’t mind using them) to pay your bills for a further three months then you may decide to go for a 26 week deferred period to keep your insurance costs down.
A word of caution: Most insurance companies will not pay out while you are receiving an income from your employer or for example, unless previously agreed, from another job regardless of the deferred period that you choose so make sure you know what income you will keep receiving from other sources.
How much income can I claim?
Insurance companies differ in the amounts and it may also depend on the type of cover. So for instance some companies will only cover 40% of your income for unemployment and others will offer no more than £1,000 per month as long as this doesn’t exceed 50 – 65% of your income.
Can I cancel the insurance?
It is unlikely that the insurance company will have any penalties if you cancel your insurance but always consider very carefully if you no longer need cover and to be on the safe side ask your adviser before cancelling.
How will state benefits affect my policy?
Check with your adviser but most policies are not affected by state benefits.
Can I have two policies paying out at the same time?
This will depend on the type of cover and the insurers, for example there are very few companies who will pay out unemployment cover if there is another company paying out unemployment cover. There are some who do though, depending on your income, so ask your adviser.
Could I have a policy that pays an income to my family when I die?
Yes! You can choose how much they need and for how long, for example if your family would need to have your income until your youngest child is 21 then you can opt for the same amount of your income to be paid to your family until this time. It is an inexpensive way of making sure your family are well provided for during their most vulnerable time.
Do I have to have a mortgage to have insurance?
No! It is just as important to cover rent payments, funeral expenses, credit commitments and general lifestyle expenses.
Will I get any money back for premiums paid?
Some policies will promise money back at the end of the term, sometimes even as much as you have paid in but be wary of these policies, in order to give you your money back the insurance company charges you more than the cover is worth, invests the money for 20+ years then takes the profit and gives you your money back. It makes more sense to take out a policy at the best price then invest the savings and keep the profits for yourself.
FAQs – Blue Moon.
Do I have to pay a fee for your advice?
We do not charge any upfront fees and the service that we offer includes advising on the best mortgage for your circumstances, agreeing the mortgage with the lender, certifying your identification so that you don’t have to send it to the estate agent then the solicitor and then the lender, advising and helping you to provide the documents that the lender requests, speeding up the process with dedicated teams at the lender head offices, liaising with the estate agent and solicitor to make the experience much smoother for you, having office opening hours between 8.30am and 8pm so that you can contact us outside normal business hours if you need help with your mortgage and generally making the process of changing your mortgage either for a house move or just to get a better rate of interest a pleasant experience. Our fee, typically £695, is payable on receipt of a successful mortgage offer from your chosen lender, although we may waive it until your mortgage completes in some circumstances.
Are you whole of market?
We are proud to be directly authorised by the Financial Services Authority with no ties to any lenders, networks or insurance companies giving us the free choice of all the best mortgage lenders, insurance companies, solicitors, loan packagers and property surveyors.
What qualifications do you have?
All our advisers are fully qualified in recognised mortgage and insurance qualifications, either the Certificate of Mortgage Advice and Practice from the Institute of Financial Services or the Mortgage Advice Qualification from the Chartered Insurance Institute. Roughly half of our advisers also have the full Financial Planning Certificate from the Chartered Insurance Institute. All our advisers are also fully experienced, offer best advice and wholeheartedly embrace the Treating Customers Fairly guidelines issued by the Financial Services Authority.
Our independent mortgage advisers are not tied to any lenders and are working for you. Not only do we offer independent mortgage advice, we can also source all your mortgage related insurance needs from a range of insurance product providers.
For a quick, no obligation mortgage quote simply give one of our helpful advisers a call on 01933 303020.
Remember, our friendly advisers are always on the end of the phone to discuss your mortgage requirements should you need any help or guidance.