Kathy Bowes, business development manager of The Cambridge Building Society, says advisers should ensure they fully understand their clients’ needs and have undertaken a full affordability assessment to ensure the mortgage is affordable now and in the future.
The Department for Communities and Local Government has the following checklist to make sure the candidate understands the ramifications of becoming a home owner with Right to Buy:
1) Do you fully understand the terms and conditions?
2) What is the interest rate? And what happens to your mortgage payments when the interest rate changes – for example, does your payment change when your mortgage interest deal runs out?
3) What happens if you miss any repayments?
4) What would it cost to repay the loan early – and does the deal let you do that?
5) What are the fees for setting up your mortgage or loan, e.g. arrangement and valuation fees?
6) What happens if you sell your home?
The DCLG encourages advisers to make their clients consider if they can afford the loan, and the other costs of buying and looking after their home?
Advisers are told to give the client some breathing space to think about what would happen if they lost their job or fell ill?
If buying a flat or leasehold house, the adviser is told to get the client to consider the service charges they will have to pay as a leaseholder, which could be substantial.
