Choosing your mortgage product

By: DAVID FRANKS [email protected]

David Franks is an accomplished and experienced practitioner in both UK and overseas taxation. He lectures widely on taxation issues in particular in relation to investment planning and his experience in assisting UK residents to mitigate unnecessary tax liabilities has led to the publication of a number of leading taxation works, including a number of books specifically written for those intending to retire overseas. David holds the Investment Management Certificate and is the Chief Executive and Finance Director of the Blevins Franks Group.

MANY PEOPLE enjoy house hunting and that moment when they find the right property can be very rewarding.  Sorting out the finance to buy the property, however, is much less enjoyable.

The choice of mortgage arrangements has grown over recent years and working out which is the best option for you can be quite stressful. This is the case whether you are buying a home, an investment property or looking to re-mortgage your existing property. Looking for a mortgage in a foreign country – in this case Portugal – can be even more hard work.

Others may be considering a re-mortgage or moving their mortgage to get a better rate of interest.

The current credit crunch has unfortunately made borrowing a much more complex matter, making your search for a mortgage even more difficult. Seeking advice from a professional mortgage consultant will therefore make the task easier. They would be up-to-date on the latest situation and which financial companies are likely to be willing to lend you money.

When selecting their mortgage product many people simply compare the interest rates on offer to find the cheapest one, but there are various other aspects you should consider. You need to select the best mortgage product based upon what you need the mortgage to do for you now as well as in the future.

In the current climate you also need to have a clear indication of what deposit you have, how much you need to borrow, how much you can afford to pay back each month (with proof of income), and so on, before you approach a lender.

Banks are much stricter today about who they lend money to and the how much they lend than they were a couple of months ago.

When looking for property finance, some people just walk into their own bank and ask for a mortgage. This is what many people did in the UK 10-15 years ago, but things changed over recent years so that there was a massive choice of products available in the UK.

Experienced UK mortgage consultants saw the UK market change from one where people would approach their own bank manager and probably not go anywhere else, through to the UK being arguably the most competitive and intuitive mortgaging market in the world.

This UK lending evolution, or revolution, recently began to spread into other European markets, including Portugal. More international banks are offering to lend money here.  Local banks began working harder to lend you their money, even if you are a non-resident… all at a competitive rate, of course!

This is good news for the consumer because you have more choice for your finance requirements for your Algarve property. In theory, with more banks competing for your money, and now that credit is in short supply, it is good to know we have more possible lenders to choose from.

Unfortunately, just as the choice began opening up, the credit crunch started.  A word of caution may be needed to those thinking they can easily sort their mortgage out at any time – looking at the UK market today we hear stories of lenders changing criteria and upping rates almost daily.

There are much fewer mortgage offerings available, with some lenders like First Direct completely closing their doors to new mortgage customers.  It may be better to act sooner rather then later, so as not to get caught out by an ever moving market.

All this makes the use of qualified property finance and mortgage consultants more important and should not be dismissed as just a side product of a bigger market.

A professional consultant will guide you through the options, help you establish the best arrangement for you and assist with the application process. This would make the process much less stressful and ensure you have not overlooked other options or important considerations. He will continue to look after your best interests after the deal has been signed.

As the market opened up, many FX and Fiscal Representation companies began offering mortgage advice. It is important, however, to find qualified property finance and mortgage ‘consultants’ rather than mortgage ‘brokers’.  

Qualified consultants differentiate their services from brokers because they:

• are able to demonstrate that they are qualified in their field.

• are able to source the most appropriate finance for both your current and ongoing needs.

• continually research the market to propose new finance opportunities in the future that may be advantageous to you.

• have extensive lending sources.

• be able to assist clients who require lending for properties in different markets.

• treat you as an ongoing client rather than a one off customer.

In the current situation, it is imperative that you, the consumer, get the best advice and explore all the available opportunities to get the right lending at the right price.