MORTGAGE SUITABILITY REPORT

Transcription

1 CONTENTS MORTGAGE SUITABILITY REPORT 1. Summary of my mortgage recommendation to you 2. Why the recommendation is suitable for you 3. Alternatives considered 4. Possible disadvantages 5. Affordability 6. Confirmation of our discussions regarding protection 7. Keeping in touch Prepared for: Mr J. Sample and Mrs V. Sample Date prepared: XX/XX/20XX Prepared by: Andrew Adviser - ABC Financial Planning Limited The aim of this report is to provide you with a summary of my recommendation and why this is suitable for you. It is really important that you fully understand my recommended solution. I ask that you read it carefully and come back to me with any questions you may have. 1. SUMMARY OF MY MORTGAGE RECOMMENDATION TO YOU Details of the mortgage Loan purpose Buy a home Purchase price / Valuation Loan amount Loan type Repayment Term 35 years Lender Santander Product type Fixed Initial product term 02/01/2019 Initial product rate % 1.74% 1

2 What you will pay Your monthly mortgage payment, based on the initial rate, is until XX/XX/20XX. Following your initial period, the payments will increase to , which is based on the current SVR of 4.49%. Please refer to the Mortgage Illustration provided for further details. I have explained to you the impact that any interest rise can have on your monthly payments. 2

3 2. WHY THE RECOMMENDATION IS SUITABLE FOR YOU of borrowing has been recommended because this was the amount of mortgage after deposit to enable you to buy your new home. 2. A deposit of was available, this was sourced from a combination of savings of 15,000 by you both, and a gift from Grannie for 23,000. This has been deposited in Vicky s bank account. This leaves 8,360 to repay the loan and other initial costs. 3. A term of 35 years has been recommended because you want to keep costs as low as possible in the early years, whilst Vicky is on a career break looking after Mikey. This will mean the mortgage will be finished by the time James is 65, which is his chosen retirement date. This will be reviewed and if appropriate and affordability allows then the term can be reduced at a review in the future. Alternatively to give additional flexibility the ability to overpay will potentially reduce the term and the amount of interest paid overall. 4. A M895H Fixed Rate 1.74% Until 02/01/2019 Purchase Cashback has been recommended because A fixed rate until 02/01/2019 was recommended as this keeps the payments stable and avoids potential fluctuation in mortgage payments. This allows you to budget until Vicky returns to Work in 2 years time. This coincides with Mikey also going to school. As we approach the end of fixed period we can review the situation in line with your circumstances at that time, and other mortgage deals that may be available. 5. This Repayment mortgage has been recommended because you want the mortgage debt to be repaid by the end of the term and don t want to rely on investments to repay the mortgage. Your only current investment is James pension which is solely to provide retirement income at age 65. This discounts an Interest Only solution. 6. When we originally spoke the following was important to you Fixing your interest rate for a certain period No tie in period Avoid stepped mortgage products Speed of completion Product can be ported to a new property Flexibility to choose insurance However, during our discussions I identified the following was most important to you and have based my recommendation on these preferences Fixing your interest rate for a certain period Avoid stepped mortgage products Speed of completion Product can be ported to a new property Flexibility to choose insurance 3

4 7. It is one of several similarly priced products but I selected it because it was the cheapest mortgage in terms of what is repaid including initial costs over the period until XX/XX/20XX. 8. Enables you to make overpayments up to 10% per year without penalty. Although you are not in a position to overpay at the moment, you would like the option to do so if for example James had a good financial year, it allows you to reduce the amount of outstanding mortgage. This will save on interest and potentially reduce the term of the mortgage. 3. ALTERNATIVES CONSIDERED I discounted other solutions as this is the cheapest product that satisfies your needs therefore no others needed to be considered. 4. THE POSSIBLE DISADVANTAGES You are committed to the fixed rate until XX/XX/20XX. If interests fall below the fixed rate during that period you will still have to continue to pay the monthly repayment amount as documented in the illustration. If you decide to repay any of the mortgage debt, in part or in full that exceeds 10% in any one year there will be a penalty of 2% in year 1 and 1% in year 2 of the outstanding loan. However you have confirmed that you have no intention of repaying in excess of 10% in the next 2 years. 5. AFFORDABILITY We have reviewed your income, expenditure and current budget for your monthly payments and evidenced that you can afford this recommendation. At the end of the initial mortgage term we discussed the fact that your payments are likely to increase but we have agreed that given your current income and expenditure this would be affordable. 6. CONFIRMATION OF OUR DISCUSSIONS REGARDING PROTECTION To ensure that you and your family are able to remain in your home, it is important you protect yourself against the effects of your death, diagnosis of certain critical illnesses or being unable to work through ill health or unemployment with the appropriate protection products. It is also important to ensure your home and its contents are protected against damage or loss. We discussed the importance of protecting your mortgage if you die, suffer a critical illness or are unable to work due to ill health or unemployment and you have asked me to review this on xx/xx/20xx at 6pm. 4

5 7. KEEPING IN TOUCH As agreed, I will keep in contact with you throughout the application process. Following completion of the mortgage, it is equally important that we regularly review your situation, particularly where your circumstances change, to ensure our recommendations remain appropriate. I will contact you 6 months before the end your mortgage deal with Santander to discuss options regarding your mortgage. If any changes in the meantime I will contact you, or alternatively if you have any concerns you want address please contact me. I look forward to speaking with you again in the future. If you wish to discuss this letter or need any additional information please do not hesitate to contact me on andewadviser@abcfinancial.com. Yours sincerely Andrew Adviser ABC Financial Planning Ltd Notes A first charge over your property is required as security for the loan. The formal mortgage offer of an advance will be subject to a valuation and other satisfactory references. Your home may be repossessed if you do not keep up repayments on your mortgage. {Instruction to adviser Add appendices here} 5