What Are ISA Mortgages?
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- What Happens During The Mortgage Application Process?
- The mortgage application process, once underway, does not take very long. Once you have decided to go with a certain lender and signed a purchase contract, the lender will run a full credit check verifying your income, liabilities and your ability to repay the loan.
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- If you find that you cannot afford your monthly mortgage repayments and do not wish to switch your mortgage to another lender – then you will need to negotiate new terms with your existing lender.
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- When you apply for a mortgage, the lender will require from you proof that you will be able to maintain the mortgage payments, and do not present a risk of non-payment for the large amount of money you are borrowing.
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- If you have been turned down for a credit card or loan, then you need to find out why your application was rejected before you apply for a mortgage.
If you take out an intrest only mortgage your lender will expect you to put in place a ‘financial vehicle’ capable of repaying your mortgage at the end of the mortgage term. There are several suitable vehicles in today’s market and these include endowments, pensions, and also ISAs.
Every month, with an ISA mortgage you will be expected to pay the interest on the loan, you then take out the ISA to build up a fund which will pay back your mortgage at the end of your mortgage term.
ISAs are the most flexible investment vehicle available in today’s market, you can’t stop paying into an endowment and start again, because you will be liable for penalty charges or may lose money to charges. With a pension mortgage, you can't access any of the fund until you are at least 50 years old so repayment of the loan is impossible till after this time. With ISAs, you can stop paying into them and start again with little or no penalty charges.
Note, taking out any form of interest only mortgage is far riskier than taking out more traditional types such as repayment mortgages. No type of investment is 100% secure and you could, potentially find your savings to be insufficient at the end of your mortgage term.
The advantage of the ISA mortgage is that you get tax breaks on the income invested in them, which makes them a more tax efficient vehicle than a endowment. Should your investment grow fast you may be able to pay off before the end of your mortgage term. The flexibility is also a good thing, as you can stop and start contributions at any time.
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