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Buying a house can be one of the most exciting yet stressful things you may ever do and unless you have thousands stashed away in an offshore account or have just won the lottery, chances are you will have to apply for a mortgage to buy your dream home. There’s no time like the present if you are thinking of buying a property; Bank of England’s base rate has remained low at 4.0% for over a year; so, it could be a good time to borrow. The types of mortgages are endless; fixed rate, capped rate, tracker rate, ISA mortgages, cash back mortgages (ha ha, makes a mortgage sound like getting cash-back on your Switch card at Sainsbury’s!) variable rate, flexible etc, etc. I know looking at mortgages can sound incredibly boring but when one considers how much time people spend on buying fashion accessories or advance booking next year’s holiday it is only fair that you should consider how to make your mortgage work ‘with’ you and not ‘against’ you! Think about it… this is the biggest financial decision you will ever make in your life and one you should spend time thinking about.
[Caution! This is detailed in parts but I feel its really important to understand a mortgage product before committing and deciding which one is for you. Please fast forward >>to relevant parts as required, thanks]
WHY I Chose Intelligent Finance (Mortgage product) --------------------------------
Having had several years previous experience stuck in a Fixed rate mortgage product - which basically means agreeing to pay interest at a fixed rate for an agreed amount of time often with built in restrictions, I was determined not to take out another Fixed rate mortgage. Essentially, I was looking for a mortgage product that’s flexible (by this I mean it allows overpayment or underpayment), requires a minimal deposit (5%, i.e. 95% mortgage) a no-frills mortgage with no penalties for leaving early! I also did not wish to pay an ‘arrangement fee’ like I had to do so with my previous lender for the privilege of the lender pushing a few buttons on a PC saying they’ve arranged my mortgage and added on a whopping amount of interest too! What one really needs to look at together with flexibility is the ‘Annual Percentage rate’ (APR), this usually represents the true picture of borrowing taking into consideration all costs and this is the figure you should use to compare different lenders mortgages not just the interest rate itself.
Fortunately, many banks now offer attractive flexible mortgages with no tie-in periods though many still charge arrangement fees. There may even be a few appetisers offered such as cashbacks, free valuations etc though you may end up paying literally thousands and thousands more than you really need to.
Intelligent Finance fitted my criteria nicely; it’s flexible, currently offers one type of basic ‘variable rate’ mortgage with a competitive APR (variable basically means the interest rate fluctuates loosely in line with Bank of England’s base rate), no arrangement fees, no penalties and is available for 95% mortgages yet allows freedom to design your mortgage to meet your lifestyle and demands, and one that can save you money too! When making my decision it was comforting to know Intelligent Finance [IF] does have a big name behind it…it’s a subsidiary of Halifax –the largest mortgage lender in the UK. IF have also heavily invested in Information technology making mortgage applications easier and accounts accessible via the internet and telephone they have very large Customer Service centres based in Scotland working round the clock.
The mortgage product – what do you get? -----------------------------------------
Intelligent Finance only offers one variable rate mortgage, which allows 2 options 1. ‘Repayment’ mortgage: which is a straightforward mortgage whereby you are paying back both the capital and interest each month and hence reducing the loan.
2. Interest only: whereby you pay only the interest and will need to set up a separate investment account to repay the money you've borrowed (a bit like an endowment! Anybody remember those awful things?!!!)
Or you can set up a combination of both these options. I opted for the repayment type.
At time of writing Intelligent Finance still has a variable rate of 4.85% (4.9% APR), which is still discounted to 3.35% for the first 3 months of my mortgage, after that it reverts to whatever the variable rate is. This is a good incentive in that it gives you a bit of breathing space to sort your finances out at a busy time of moving when so many other fees need to be paid. The best thing however is that interest is calculated daily (not monthly). With my last mortgage lender (Northern Rock) the interest was calculated monthly and even though I sold my house at the beginning of a month I had to pay the mortgage for the whole month end as that’s how the older type mortgages work.
Initially you are sent a plan outlining what your discounted payments are and a summary of your regular payments assuming the variable rate stays as it is. You can also overpay (yes, this is a good thing, it will lower your debt and interest charged monthly. When you overpay you build up a reserve that you can delve into later if you need too! There is a set minimum amount though that needs to be paid monthly. If things get bad, you are allowed two payment holidays a year (currently) so you can take a break. There are further bonuses available if you play your cards right like linking your savings to your mortgage which will lower the overall interest you pay monthly (I’ll discuss this later).
Application Options -----------------------
Now Intelligent Finance is being pushed currently by a lot of Independent Financial Advisors (IFA’s) though I made my decision independently. Please don’t feel pressurised to go with the advice of your IFA you can ‘think’ for yourself, if you are unsure you can always double check advice given by your IFA and if you felt that was the product you were after then by all means take the help of the IFA –it’s usually free (always check first just to be sure) and if anything goes wrong you can blame him/her! If you choose to apply through an IFA, they will already have the printed application pack and help you do all the paperwork. After studying the mortgage market a few months I made my decision to go ahead with Intelligent Finance independently based on the criteria above. Please note you do not need to have a current bank account with Intelligent Finance to apply for a mortgage; you can stick to your old bank.
One first port of call before making an application –I urge you to visit Intelligent Finance’s website at http://www.if.com and under the mortgage products menu click on ‘quick quote’ as that is where you can get a quote showing you what your monthly payments will be over the term you chose based on the current variable interest rate. You can save and print out various proposed plans and if you have any queries about any of the plans you can telephone IF on 0845 609 4343.
My application was made online and was very simple; there were no forms to download or print out. They even allow you to give cute names to your mortgage! You can apply for many Intelligent Finance products known as ‘jars’. I just filled in all the details online for one product and within 48hrs the printed application with my details arrived on my doorstep awaiting signatures only.
Please note, you MUST have proof of your own Buildings cover before Intelligent Finance will release any mortgage funds if you are not taking their cover. One also has to send the usual forms of original identification papers required to open loan/bank account i.e. name/address verification and for mortgage or loan products proof of income is required e.g. payslips or bank statement showing salary. All my documents were returned to me promptly without any delay. A few days later a security reference number is issued which one must set up by telephone or post before accessing the account online. You do have to pay a valuation fee, which at the time of my application was £165, however this is free for re-mortgages.
The website maintains a high degree of security by using encryption and Secure Sockets Layer technology. There is another good security feature in operation; say you don’t use your plan for 5 minutes or more, you get logged out. This security feature is meant to help reduce the risk of others accessing your details if you leave your computer unattended. If you should lose your Internet connection or say if IF’s website was down the Customer Services are available by phone 24 hours a day throughout the year. Intelligent Finance [IF] also guarantees if anyone should become a victim of Internet fraud, they will be reimbursed in full and will not lose any money.
Comparison to Other Similar Mortgages :- ----------------------------------------
It is always a good idea to consider your own bank too as quite often they will come up with just as competitive rates as other mortgage lenders plus you wont have the hassle of applying to a new bank, and your decision will be made quickly.
I also approached my own bank First Direct [FD], I was impressed by their variable rate mortgage (termed a ‘smartmortgage’ which is also a flexible mortgage and currently has an interest rate 4.75% (4.9% APR), so the APR is the same as the Intelligent Finances mortgage. But something FD don’t mention on outset is this mortgage is only available for at least 80 – 90% mortgages (meaning you should have a deposit of 10-20% and there is also a one-off arrangement fee (at time of writing this is £195). I will mention a few other mortgages (95%) similar to IF’s that are easy to maintain and manage and also have internet accessibility though the APR’s are higher and there are arrangement fees to pay.
DirectLine – a 2 yrs stepped mortgage 4.09% interest for 1st year, rising to 5.21% in 2nd year with an APR of 5.3% (IF’s APR is only 4.9%) and there is an arrangement fee of £295 to pay!
Other similar offers were offered by Egg and although the APR was competitive at 4.8% I did not find the application simple and the charges were not always clear, they also took too long to reply back to me despite me being an existing customer (of the very popular Egg card) by which time I’d already arranged the Intelligent Finance mortgage! There is an arrangement fee which Egg calls a ’completion fee’ on the Egg Saver Mortgage it’s £99 if you're an existing Egg customer, and £199 if you're new to Egg. However, it is still worth exploring the Egg variable rate mortgage if you have the time.
There were quite a few other mortgages I looked at but they all had high APR’s and hidden arrangement fees to pay and even though some said they were ‘flexible’ mortgages in reality they were not very flexible at all. I will explain what to look for in flexible mortgages below.
How FLEXIBLE is the mortgage really? ------------------------------------
Flexible mortgage is rather a popular buzzword these days in financial circles of borrowing. So I think its important to understand what is meant be flexibility and what Intelligent Finance offers in real terms of flexibility.
Firstly the loan is portable, this means you can leave at any time if you see a better mortgage product you will not incur heavy redemption penalties (like I did when I left my previous lender I had to pay a whopping 4% of the balance).
Secondly, you can overpay –you will not be penalised. What you overpay will go into a ‘reserve’. Also, unlike some flexible mortgages you can dig into your reserve and take money back if you need to. You can also take a payment break, currently its 2 payment holidays a year, but always check with IF beforehand.
Thirdly, I’m sure you are aware that most mortgage lenders are all boasting about how much interest you can save if you link your savings account or current account (i.e. funds you have in credit) to your mortgage, its called ‘offsetting’ your mortgage with funds in your current or savings account. This works by agreeing to earn NO interest on your savings, (so you avoid paying tax on your savings too! A real bonus if you’re a taxpayer!) which in turn means you will pay no interest on the equivalent amount, you borrow. By reducing the interest charged on your mortgage, which will save you money means you can pay off your mortgage faster. Initially we did not choose this option but after 6 months through the mortgage, we have linked the mortgage to a savings account and it has already brought down the interest charged monthly. Taking Intelligent Finances illustration, using a £100,000 mortgage over a 25 year term, if you had say £5000 in your savings this would save you £10,800 off your mortgage and reduce the term by 1 year and 6 months. You can work this the other way also by linking your savings to your mortgage, earn borrowing rates of interest on your savings and continue to pay interest on your full mortgage, so you can never lose! I just can’t understand why mortgages weren’t always designed like this it makes so much sense and saves the customer money by making their money work more intelligently!
Customer Services -----------------
I've called customer services many a times for general enquiries and get through quite quickly to friendly staff. The only time I’ve had to wait a while in a call queue is a weekday lunchtimes. You can also e-mail the customer services, which I do more than phone and find it more effective. Note- If you are having any queries on a mortgage matter and are not satisfied by speaking to customer services (i.e. the Call centre staff) try and speak to a “Service Quality Consultant” or complaints person; you can do this via e-mail (so its in writing!) and they will return your call. I did as I had a few questions with which I was not totally satisfied with the answers by call centre staff and I am very impressed by the prompt action of the Quality consultant who also agreed to put everything in writing for me as we discussed by telephone, as imagine 10 years down the line trying to prove a telephone conversation, get it in black and white, it always helps!
To summarise then, as I’m sure I have got carried away with this topic (I get excited if I am impressed you see!)
The GOOD points:
Intelligent Finances mortgage is really flexible allowing mortgages from a 3 –47 year term with ability to offset against your savings if you want. The mortgage benefits (competitive APR) and initial 3 month discount period is avialable for 95% mortgages and there is no indemnity premium charged – this is an insurance premium that lenders use to protect themselves against loss against people borrowing more than say 80% of the value. There’s also no arrangement fee or ‘completion fee’ as Egg like to call it! One of the best points is interest is calculated daily and you have access to your account anytime via a secure internet site and also by telephone 24 hours a day. One thing I’ve found particularly useful is that you don’t need to rely on the internet or telephone to stay in touch with your mortgage account as each month you are sent paper statements of your mortgage, so there is no need to download statements off the website like some internet/telephone based mortgage accounts. There is also no charge for receiving monthly paper statements. So you are reaping the benefits of an internet/telephone based accounts whilst getting the security and peace of mind of a traditional branch based account.
The BAD Points:
Well, theres hardly any here, though one thing did annoy me when I completed the house buying earlier this year - I was surprised to learn Intelligent Finance do not store the property deeds and these had to be returned back to me by my solicitors. Another small point that needs clarification for new customers is the initial mortgage payments do not go according to the ‘plan’ received at outset as the first months payment is an ‘interest only’ payment even if you’ve chosen a repayment interest and capital mortgage. I had to make contact with ‘customer services’ regarding this matter as I thought they were not taking the full amount as agreed in the plan, this point should have been made clearer at the start or explained by a phone call perhaps before the mortgage kicks in. Lastly, I feel this mortgage may not be suited to older people as IF want the loan paid off by your 65th birthday, which in todays modern times when folk are living longer and will need to take out longer term mortgages to cope with rising house prices so at least 70 years would be ideal. Again I’m sure this point can be negotiated with Intelligent Finance they are after all a part of Halifax, the biggest mortgage lenders.
Overall, a simple to use, flexible and competitive package that’s working ‘with me’ and not against me. My rating 4 stars +, it would be 5 stars as most other IF opinions on Ciao if it hadn’t been for the confusion of initial payments.
I hope this has helped somewhat understand how Intelligent Finances mortgage product works and some comparison to similar market products. If you have any questions/comments, I'll be most happy to help. Always take independent Financial Advice –this is just my personal opinion which worked well for me based on the criteria I was looking for.
Brilliant review, at the moment i am trying to find out some more information about this kind of staff and i really think that your review is very helpful. Thanks. kriss
LouZ 23.04.2003 20:02
WOW a very detailed, excellent review - you really deserved that diamond! I've been accepted by IF too, so now just have to find a house! By the way, it's becoming normal practice for mortgage companies not to keep the deeds (saves them costs, which is great if they pass the savings onto the customer). I read a review of one ciaoer who'd used copies to wallpaper her downstairs loo (they were impressive looking deeds and stained with tea for the 'old' look!
miniloopie 31.03.2003 17:39
Great review! Im in the process of sorting out a new mortgage at the moment. Although I like the look of IF, they turned me down on application and wouldnt lend me much at all :( I ended up with Abbey National who would lend me £10k more and had a lower rate at the time... is all a game though, you never know what the rates etc will be from day to day at the moment!