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Paying off a mortgage.

My wife inherited a substantial sum of money. We have a mortgage of pounds 25,000 that we are thinking of paying off with a lump sum. How can we do this, and will there be any financial penalties?

L Jones

Kent

When redeeming a mortgage the first step is to contact your lender who will arrange for a redemption letter to be sent. This will tell you the amount required to pay off your mortgage and the daily rate of interest being added to it. You then send the redemption funds to your lender. Once the funds are received a closing statement will be sent to you showing the nil balance and any transactions on your account for the year so far. Your lender must explain the full cost of doing this, especially if you are on a fixed, discounted or capped mortgage rate as you may be liable for an early redemption charge.

Permission to let

After a career change, I will be overseas for at least five years. I was going to sell my flat, but I am now thinking of letting it on a long- term lease. I have been told I have to seek my bank's approval. Is this correct?

P Kiernan

Liverpool

Yes, you will usually need to seek your lender's written approval before letting your property. This will be part of the terms and conditions of your mortgage agreement. You should ask your lender for a copy of their requirements for letting the property. Usually, the bank or building society will want to see a draft copy of the tenancy agreement. Your lender will usually charge a fee for this.

First time confusion

I want to buy my first home and I'm confused by all the options. How do capped, fixed and discounted mortgage rates work?

P Bodley

Wolverhampton

A capped rate is an interest rate charged for a set period of months or years that can go up and down in line with changes in the standard variable rate. There is a maximum (capped) interest rate that it cannot go above, but there is no limit on how low the rate can fall. With a fixed rate, the interest charged is for a set amount for an agreed period of months or years. A discounted rate is a guaranteed reduction on the standard variable mortgage rate, possibly for a guaranteed number of months or years or until a set date in the future.

Report to me

Could you explain what a homebuyer's report is? Must I have one carried out when buying a new property?

C Lloyd

Devon

This is when a professional surveyor checks the structural state of a property. It is more detailed than a valuation but less detailed than the structural survey. The report is optional, but it should pick up any problems and may help you negotiate a lower price. It also gives better grounds to sue or gain compensation from the surveyor for a poor report than a simple valuation.

George Wise is managing director of NatWest UK Mortgage Services.

q Send your queries on practical property issues to: Home Truths, Travel & Money, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL; Fax: 0171-293 2043; e-mail: sunday-property@independent.co.uk.

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