Property: Home truths

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Should we get in a fix?

My boyfriend wants to take out a fixed-rate mortgage to buy our first home. Could you explain how this type of mortgage works and how to decide which offers the best value?

Gina Stephens, Nottingham

The interest rate you pay on a fixed-rate mortgage is fixed for a set period, typically two or five years. This means your monthly payments will be the same throughout this period, regardless of what happens to interest rates. Fixed rates are very popular because they let you plan your budget accurately.

When comparing fixed rates you should examine the total package rather than just looking for the lowest rate available. For example, there could be a "tie-in" whereby you are committed to staying on the variable mortgage rate for a given time after the end of the fixed- rate period.

There are some attractive long-term fixed rates available at the moment which are lower than the variable rate. However, the variable mortgage rate could fall in the long term, particularly if the UK decides to join the European Monetary Union.

For most fixed rates, lenders will charge a reservation or application fee. Shop around before making your choice.

Funding France '98

My wife and I plan to follow the England football team during the World Cup in France. After looking at our financial position, we think we will need a loan to help cover the costs of spending up to a month in France. We originally considered taking out a personal loan, but a friend has suggested we could simply increase our mortgage. Would this be possible, and would we have to spread the payments over the whole mortgage term?

Leo Thomas, Colchester

It may be possible to borrow the money by taking out "extra borrowing" on your property. Lenders are usually willing to allow this for non-property related reasons such as holidays. The amount you will be able to borrow depends on the lender's policy. Some will allow you to borrow up to 75 per cent of the property's value, while others will lend over 90 per cent. Some lenders allow you to choose your repayment term, usually anything from five to 25 years.

Your mortgage lender will be able to tell you what its rules are and how long it will take to arrange the loan. It will be quicker to organise your additional funds over the phone, but not all lenders offer this.

Credit records

I have been told that lenders do a credit search when you apply for a mortgage. I am considering applying for my first home loan, but I am concerned I may be rejected due to my past credit record when I was unemployed. Is it possible to see a copy of my credit history in advance of my application?

R Davies, Southampton

You do have a right to see any credit information which is held on you. There are two main providers of credit data, CCN and Equifax. For a copy of the information they hold on you, write to CCN Group, Consumer Help Service, PO Box 40, Nottingham NG7 2SS; or Equifax Europe (UK), Department 1E, PO Box 3001, Glasgow G81 2DT. There is usually a nominal charge of pounds 1.

q George Wise is managing director of NatWest UK Mortgage Services.

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

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