Mortgage offer checklist – what you should look for before you sign a mortgage

Mortgage offers can be long and complicated documents, but as you are likely to be paying them off for years, it is essential that you check the small print carefully.

There can be a vast amount of paperwork involved in buying a home and at what is bound to be a busy time it can be tempting to just sign on the dotted line. However, you could still be bound by the terms of your offer decades into the future so don’t sign until you have read and understood all of the terms and conditions.

Basic details

First of all, make sure all the basics are correct, including the property purchase price, the amount of the loan, the interest rate, the length of any fixed term and whether the loan is on an interest-only or repayment basis.

Penalties

Look for penalty clauses which will tell you how much you would need to pay if you choose to end the mortgage early. Work out what these would mean in practice for you. For example, if interest rates fall and better deals become available, would you be able to take advantage of them, or would the penalties be too substantial for you to leave the mortgage?

Warnings

The offer may contain warnings in respect of potential increases in repayments. Make sure you will be comfortable paying back higher sums than the intial repayments.

The mortgage term

Ensure that the offer specifies the correct mortgage term. The amount you repay can be considerably higher if you have a longer repayment period, so check you have the right term to suit your situation.

Portability

An advantageous rate may lock you in to your lender, but if you think you might want to move again, the offer may permit this, with the mortgage being transferred to the new property.

Can you overpay?

A mortgage which allows you to overpay whenever possible can save you considerable sums in the long run, so if you think there is a possibility you may be able to overpay, look to see if this is allowed.

Other conditions

The lender will require you to have valid buildings insurance in place for a specified sum, and will also set out conditions regarding what you can and can’t do with the property, for example a prohibition on letting it or renting rooms.