Mortgages: 2) Steps to tailoring your first mortgage

Banks and Building Societies are constantly promoting their advanced and customer friendly way of banking. We continuously hear about how much your bank can do for you and applying for a mortgage is certainly the time to put this to the test.

Banks, building societies and indeed mortgage brokers are proud to tell us that they have the mortgage designed to suit our individual needs, but this is of no value to us if we don't know what's on offer. When entering into a mortgage it is important to ensure that your Lender will allow for the fact that your situation is going to change drastically and in many ways over the next 20-30 years. It is always a good idea to think seriously about your future and what it may hold and how this may affect your financial situation. Keep in mind that not all Lenders will offer the same flexibility with regards your mortgage as some do. Consider what you feel to be the most important aspects of your future and how that could affect your financial life.

It is quite a financial shock for the first time buyer during the first year of their mortgage. Not only do you now have a substantial monthly debit from your account, you also have to consider associated costs, furniture and, of course, bills. Some Lenders understand this and (where applicable) will advance the first time buyer's grant with your loan cheque. This can be either added to your capital sum or repaid when same is processed by the Department of Environment.

Lenders are not out to make your life difficult. They are aware of the strains that a young couple or indeed an individual can come under when trying to tie up all the loose ends regarding the purchase of their new home. They do want to make the whole experience as painless as possible. A deferred start in relation to your mortgage payments can be available depending on the Lender.

This works on the principle that you do not make any payments for the first 3 months of your mortgage and these are added on to the capital sum and repaid over the remaining term. This can make life that bit easier for the beginning of your mortgage.

Of course, we all hope that our financial situations will improve as we get older and that we will be able to consider paying lump sums off our mortgages as time goes by. These could be as a result of bonuses, increased ability to save, matured investments etc.

Discuss this with your Bank's financial advisor at the onset to ensure that you will not be penalised for doing so. Also, it would be a good idea to establish whether or not these lump sum repayments would be made against capital only, interest only or against capital and interest. There is a double benefit to making these repayments in that you are also reducing the term of your mortgage by doing so as there is less capital to pay. The alternative to this is to reduce your monthly mortgage repayments and leave the term as it is.

Mortgage "breaks" have also become an option with some Lenders. Again, this is of benefit in those situations that just can't be planned. Essentially it gives us the option to have a break from our mortgage repayments with the "missed" payments added on over the remaining term. Of course, this means that future payments will be slightly higher to make up for the payments missed during the break.

There are many ways by which to tailor your mortgage. Often they are so simple we would not even think of them, for example, if you set up your mortgage repayments on a fortnightly basis, you will be making a slightly bigger per annum payment and in this respect you could, in fact, clear your mortgage earlier.

Also, don't be afraid to take your mortgage over the longer term to make things easier at the onset. It will always be easier to reduce the term if things go your way financially, rather than trying to extend it should you find yourself in a tight squeeze.

Speak to your financial advisor. Demand that your needs are met and that your Lender fulfils their promises to you. Bear in mind that all of the above are subject to certain criteria, so ask what you are entitled to. Value the opinion of your financial advisor and discuss the ways in which you think your life could change so that you get the best fit in your mortgage package.