Property Today

As the mortgages market has tightened over the last couple of months, it has become more important than ever that you go into a deal with your eyes wide open.

The recent removal of all 100% and most 95% mortgages because of the credit crunch will have made it much harder for you to buy a house if you don't have a deposit. But that's no reason to jump at the first offer that's made to you.

Tomorrow we look at seven mortgage terms you must know. But we kick off today with seven questions to ask yourself before taking out a mortgage:

1) How much can you afford to borrow?
Look at the repayment you could comfortably afford each month, rather than what a bank will lend you. The UK seems determined to talk itself into a recession, which means there's the possibility of job losses ahead. Take this into account when setting your budget. Do you have enough savings to cover a few months' mortgage payments if you had an income problem?

2) What is the best type of mortgage for you
Capped, trackers, fixed rate... we'll explain some of these terms tomorrow. The type of mortgage you go for will depend on your circumstances, so get independent financial advice.

3) How should you repay it?
You have two things to pay back, the loan itself (the capital) and the interest. And there are three main ways to do this. With a repayment mortgage, you pay a bit of the loan and interest each month. In the first few years the interest proportion of the repayments is huge, but over time the loan part will get bigger until all the debt is paid. With an interest-only mortgage you pay the interest each month but nothing towards the capital... meaning you have to find another way to pay that off in 25 years time. And endowments are similar, except you pay into an endowment fund and hope it's big enough to pay off the capital by the end of the loan.

4) Does this mortgage come with insurance?
Insurance can be sensible, for example protecting your income if you are made redundant. You don't have to buy insurance from your mortgage provider, so shop around. And check the conditions you must meet before it pays out – if you have to be unemployed six months before it pays out, that could be unrealistic to your pressing need to get a job quickly!

5) What other charges will you have to pay?
Check to see if you have to pay a set up or final payment fee.

6) What happens if you can't pay?
Anyone can get into financial problems quickly. Check what your provider's policy is if you do have trouble keeping up with payments. Generally providers would rather work with you to find a solution than repossess the house, as that is less profitable for them.

7) What about the small print?
As with any financial transaction of this size, read everything before you sign and take independent advice if needed.