The amount of interest that you can expect to pay when taking out a mortgage can vary considerably. In order to get the cheapest commercial mortgage rates to compare then consider going to a specialist website. A specialist will be able to search the whole of the market place for the best rates and deal based on your particular circumstances and their experience with lenders. They will also offer all the help and advice needed to make sure the individual knows what they are taking on and how to get off to the best start possible.
A specialist can get the cheapest rates because they will work with you from the beginning and help you out by putting together your package before presenting it to the lender. After looking at the scheme you are proposing and helping when it comes to getting the initial appraisal for the property and making adjustments if necessary you will get off to the smoothest start possible.
Commercial mortgage rates are tailored to the individual so unlike a residential mortgage which you could be familiar with, the rates are not set. However they will usually come somewhere between 1.5% and 2.5% above the base rate, factors such as the type of your business and the assessment of the property you are buying will all affect this.
Individuals can also benefit from the help a specialist provider gives when it comes to working out loan to project costs. The main factor taken into account when deciding the rate are the perceived gross total development values and again this will depend chiefly on the individual. However, typically finance will be based on between 70% to 75% of the costs for building and the cost of purchase.
The term of the loan will also reflect on the amount you pay. Typically a loan can be taken out from a period of one year to several years. This will be determined in part by the size of the project you are undertaking and the nature of what you intend to do. You should also be aware that the majority of commercial mortgages are based on interest only repayments. A broker will be able to give you valuable information regarding variable and fixed rates of interest, partial repayments and taking out a mortgage for a period of up to 30 years.
A specialist will have worked with lenders on a regular basis who specialise in offering the cheapest commercial mortgage rates and best deals. As such they will know where to look on your behalf when it comes to securing the best deal based on your particular circumstances. As brokers and lenders form a working partnership they are able to work together much quicker when it comes to negotiating the cheapest rates of interest. However if needed a broker will search the whole of the UK market place for your loan if this is the way to get the best deal for you. While a specialist will do all they can when it comes to finding you the cheapest mortgage, it is down to the individual to make sure they read the full terms and conditions before actually signing on the bottom line.
Wednesday, February 27, 2008
Commercial Mortgage Rates Differ Based On Individual Circumstances
Charity Calls On Government To Help People That Struggle With Mortgages
More than one million households in
Adam Sampson, chief executive at Shelter said, �Shelter has seen a massive increase in people coming to us with mortgage problems, and with repossessions set to rise throughout this year, we simply haven't got the resources to help everyone.�
According to the new report from Shelter, called Mortgages and repossessions, there has been an overall increase in repossessions since 2004. One of the reasons for this is the increase in house prices. The rise has made the houses too expensive for many people to buy. Many are therefore looking to engage in more risky borrowing, such as adverse mortgages, to be able to afford a home. When they cannot pay back the high interest rates on the mortgages it then leads to repossessions. Both arrears and repossessions are higher among sub-prime mortgage customers than among customers of mainstream, or prime, mortgage lenders, according to the report.
Although the numbers look depressing the level of repossession is, however, still not as high as in the early 1990s. But Shelter claims that there are contributory factors now that are much more significant than they were back then. One example is that the way in which debts are managed by lenders has changed. Now, it is more common for non-housing debts to be secured on the borrower�s home.
Shelter is now calling on the government to do something about the problem. It suggests that it should set up a free, confidential advice service, together with the mortgage lenders, to support those affected by the crisis. The service should give people advice in an early stage of their problems and should work both through a telephone helpline and online support.
Adam Sampson said, �A free and impartial advice service is a much needed first step on the way to stop mortgage arrears and repossessions escalating. It also helps thousands of ordinary people to keep a roof over their heads.�
Shelter is also criticizing the safety net for people getting into trouble, saying that both state welfare and private insurances are inadequate. Borrowers who have troubles are instead forced into further borrowing, which only leads to more problems.
�Instead of helping struggling homeowners to get back on their feet, the actions of some lenders, combined with a lack of government support, simply exacerbates their problems and condemns them to the despair and misery of losing their home.�
To help struggling borrowers the organization suggests, except from the helpline, that the Financial Service Authority should be harder on lenders who sell customers unaffordable products. It also suggests that county court judges should take a tougher line against unfair mortgage lenders and that a national mortgage rescue scheme should be set up to allow homeowners to remain in their homes, even tough they have difficulties, without the drawbacks of privately run schemes.
�The government, mortgage lenders and the Financial Services Authority must take responsibility and start repairing the broken state safety net to ensure that if people face difficulty, there is protection in place and somewhere to turn for advice,� said Adam Sampson.
It is not only Shelter who points out the risks on the market, the Financial Services Authority has also warned that one million homeowners could loose their homes in 2008 as the economy slows down, and the Council Mortgage Lenders has predicted a 50 per cent increase in repossessions this year. A recent Financial Service Authority investigation in the sub-prime lending market showed that there was a serious cause for concern about the lending practices in the sector.
Care Needed With Mortgage Rescue Firms
Home owners who are struggling to keep up with their mortgage repayments are being hounded by so-called �mortgage rescue firms� who promise to save potential evictees from home repossession.
The cost of borrowing has increased considerably over the past year due to rising interest rates. Previously low mortgage repayments have increased significantly for some home owners, particularly if their mortgage contains a variable interest rate or a discount rate period that has expired.
The increase in monthly mortgage repayments has lead to a rapid rise in mortgage arrears and possession orders. Home owners who are facing repossession and eviction have become easy targets for mortgage rescue firms who promise to stop the repossession process and help the home owners to stay on their properties as tenants.
Mortgage rescue firms come in various forms � from large, national firms to small companies operating as sole traders in local areas. The mortgage rescue firm will typically offer the distressed home owner a heavily discounted price for their property and allow them to remain in the property as a rent paying tenant.
The amount of money offered for the properties varies considerably. It will usually depend on how much money the distressed home owner owes on their mortgage balance plus any arrears that have accumulated. This amount can sometimes be less than half the value of the property on the open market.
While this may seem unreasonable, the point of the exercise is to rescue the property owner from repossession and many years of financial hardship. For many individuals, this offer is attractive enough to accept, despite the fact they will lose thousands of pounds of equity in their home.
Normally, the mortgage rescue firm will allow the occupant to remain in the property as a rent paying tenant. Unfortunately for many people who accept the offer, they fail to realize that they have no legal recourse to remain in the property long-term. Instead, they will become a rent paying tenant on an assured short hold tenancy agreement, and when the term expires they can be evicted.
This is the part of the deal that property owners who are in financial distress need to be aware of. While the repossession process may be stopped and the home owner is allowed to remain in the property for a short time, the mortgage rescue firm has no obligation to allow the tenant to remain in the property over the long term.
Home owners who sell their properties to mortgage rescue firms should therefore attempt to negotiate a long term lease in if they wish to obtain any form of security regarding remaining as a tenant in the property.
Instead of contacting a rescue firm in the first instance, home owners who are struggling to keep up with their mortgage repayments should first attempt to find a solution with their current lender. If they fail to find a solution the home owner should then try to remortgage their property with another lender provided they can afford to keep up with the repayments. By remortgaging the individual will be able to remain in their property and may not be forced to sell it.
Can you really afford that mortgage?
Remember all those crazy adjustable mortgage rate deals a few years ago? Good thing you weren't one of those shmucks, right? Many excited young couples leapt on to the ARM bandwagon, enticed by low rates and less money down. Now the word of the day is "foreclosure". With so many people bailing out, you just might find a good deal out there. But are you going to get in the same trap they did?
Many people try to "cheat the system" to get loans approved. I don't mean this in the illegal sense, but they fudge the numbers a little, or find a snaky broker to push something along they may not be able to afford. Keep in mind these safeguards are there for a reason. Sure, companies don't want to lose their money, but when they tell you no, they're also protecting you.
Good lending institutions employ underwriters to handle their loans.
Underwriters evaluate the risk involved with loaning you money. Essentially they tell the lender whether or not it's a good idea to lend to you. Don't take it personal, it's a very exact method to determine the amount of risk involved. Without underwriters lenders wouldn' t be able to stay in business long enough to help you.
Two institutions, FHLMC(Freddie Mac) and FNMA (Fannie Mae) set the guidelines for most lenders. Lenders sell their loans on secondary mortgage markets to these institutions, who then resell the loans to investors, insurance companies, and banks. Lenders who keep their loans, or "Portfolio Lenders" have more flexible standards, and don't neccessarily comply with Freddie or Fannie's standards. Don't stop at just one. Shop around.
They put you under the microscope to evaluate the risks involved. The first step of course is obtaining a credit report (something you should do first). So what are they really looking for?
1. Integrity - Obviously they want to know: do you pay your bills on time? Have you paid late? Have you defaulted? Chances are if you don't treat your other obligations with respect, you might not hold your word on this loan either.
2. Your Job - Your income and job stability are very important as well. Are you a seasonal worker? Are you in an industry or at a company that is circling the drain? These factors are examined, because without a job, you can't pay back your loan. Income is large consideration here. Which ties in with:
3. Debt to income ratio - Again, can you really afford this loan? Are you already over your head? They want to know. DTI is determined by comparing your income to your homeowner expenses.
4. Property value - They want to make sure you aren't buying junk property. This is what your loan is backed by, and if you bail out, they dont want to be stuck with overvalued junk. Which ties into:
5. Loan to value ratio - This is another simple formula, how much are you borrowing compared to how much the property is worth? This is why the bigger the down payment, the better your chances are of getting approved. When you minimize LTV, you improve your risk rating.
6. Savings - How much do you have saved up? Do you have any liquid assets, stocks or bonds? Lenders like to see a 4-6 month reserve, in case of emergencies. But you can get away with a 3-4 month reserve if you put down more money. A low LTV will lessen the need for a higher cash or asset reserve.
So this is what underwriters are looking for when they estimate the risk involved with loaning money to you. It's not a mysterious method, or one that discriminates you, it' s simply based on numbers, and your ability to pay, and likelyhood of sticking it out. Be honest, and don't try to make things up that might give you an edge, because you just may find that you really can't afford that loan, and you'll end up hurting in the end when you foreclose.
Denver Mortgages-How To Make Buying a Home A Stress free Transaction
Let�s face it; buying a home can be a very stressful prospect. It is an incredibly emotional process that can tax relationships and even upend friendships. But it does not have to be that way. With the right effort and forethought home buying can be a relatively simple, successful project.
Perhaps the most important part to getting pre-approved is to pull a �tri-merge� credit report well in advance of when you intend to buy. What does �tri-merge� mean? It is a credit report that includes data from each of the three credit repositories or bureaus (the terms are used interchangeably), Experian, Equifax, and Trans Union. Each of the three repositories will report a slightly different score based on the individual models they use to determine your score. Lenders will take the middle score as the representative score to help determine your particular creditworthiness.
There is often a big discrepancy between the three repositories. I have seen a great many times where prospects have come to me with a stellar report from one repository and when we pull the tri-merge we discover old or erroneous collections or other derogatory information reported by the other repositories that may hurt their chances of buying a home. Whether you as a consumer do it or have a lender do it for you, pulling the report early allows you to spot any errors far in advance and allow you adequate time to have them corrected. In many instances your lender can have errors corrected relatively easily using services they have paid for already. In some instances there are charges for these corrections and they may be passed on to you at the time of closing, but they usually amount to only a few dollars.
Do not close out old accounts or open new ones unless instructed to do so. Age of accounts has an impact on your scores, so that Visa card account from fifteen years ago that you never use, but for some reason is still open is having a positive effect on your scores. It is showing fifteen years worth of positive history, so closing it may have a negative impact on your overall scores. Additionally, opening new accounts have the same negative impact because you have now increased your overall debt capacity and you may change your debt-to-income ratios and therefore your ability to qualify. This rule applies even after you have been approved for a mortgage. Many people want to go out and start buying furniture or appliances for their new home after they have been approved. Do not do this. Lenders reserve the right to pull an additional credit report up to the day of closing, so any new accounts may suddenly impact your loan or worse yet mean you do not qualify, which is not something you want to find out the day of closing.
Do I need an appraisal if I combine ARMs and then Refinance?
Scenario: I have gone for a home purchase a year ago and have 2 adjustable rate mortgages. I�m just hoping that I can combine both the loans and then refinance. What do I need to do or be informed of? I would first talk to the bank that offered me the previous loans, find out what they can offer. But will they send me appraiser since it�s been a year over the purchase date that I have had an appraisal done. And, if you need some more info, we added some cabinets in the kitchen and also a shed in the yard. Also, my credit score is in between 650-680 and the balance that�s yet to be paid is $150,000.
Solution: First of all, the bank or any lender will not ask you for an appraisal until and unless it has approved your refinance loan and started off the loan process. And, secondly, it�s better to have an appraisal done because an appraisal holds good only for a period of 3 to 4 months after it has been carried out. So, you can surely have an appraisal done prior to refinancing your combined debt.
The appraisal will help you to determine the current home equity because if it has increased, then there�s a possibility that you can qualify for a better financing program as compared to your combo financing. There are a few factors like the credit score, monthly debt payments etc that will decide the advantage that you may get from such programs. But what�s more important is that, as a borrower, you should be careful of what the fine print of the program says. That�s what is going to ensure that you benefit from the program in the long run.
Now, considering that you have two ARMs, I guess it�s been difficult for you to cope up with increasing payments. So, you may opt for a fixed rate loan with an interest-only option in case you do not wish to stay in the property for a long term. However, you should go shopping for a mortgage loan and enquire about the rates and the loan fees that you will have to pay.
Regarding the costs of refinance, you may find lenders who are willing to pay the costs on your behalf. The costs are actually added to the loan amount. But this is possible only when there is sufficient equity in your home. And, if your loan amount to home value is about 90% or slightly less, there�s a possibility that the lender is paying for your closing costs. But in return, he may charge you a slightly higher rate of interest in order to retrieve the costs. So, what you can do is request the lender for a buy-down of the interest rate so that you can pay less on a monthly basis.
Regarding the appraisal that you�ve asked for, I feel you should get it done. This is because it will give you an estimate of the home value within a snapshot of time. There are homeowners who go for an appraisal from time to time just to keep a track of the changes in their home value. It�s a smart way of keeping a watch on your biggest asset if you wish to refinance to use your equity for home repairs, debt consolidation and vacation purposes.
If you have a question on Refinance and related issues, ask the community and let others share their opinions with you in our forums.
Extra Costs of a holiday home mortgage
If you are looking for holiday home mortgages , you know it can seem like a long and stressful process. When at last you find the right mortgage and your dream holiday home finally seems within your grasp, there is a huge sense of relief. So it�s easy to forget that there are other costs involved. But if you don�t budget for all these extra costs, you could be in for problems.
� Stamp duty. Stamp duty starts at �125,000. You will be very fortunate to find a holiday home for less than this, so you will have to budget for at least 1 per cent of your purchase price.
� Survey fees. The lender will probably arrange the survey for you and will add the fee to your mortgage. If you are arranging it yourself, shop around for a good deal, as fees do vary. Even if the lender arranges it, you are very strongly advised to arrange your own as well, especially if it�s an old or unusual property.
� Legal fees. Some people try to dispense with a solicitor and do it all themselves. But this is very unwise, especially for a holiday home mortgage. You may well have fallen in love with the property because it�s very old, or very isolated, and there could be all sorts of legal complications you don�t know about. Whether you use a solicitor or not, you will still need to pay land registry fees and local authority search fees.
� Mortgage indemnity guarantee. This will be added to your holiday home mortgage if you are borrowing more than 75 per cent of the purchase price. It could be anything from a few hundred pounds to a few thousand pounds.
� Insurance. You will very likely have to arrange for life assurance cover to go with your holiday home mortgage, and in addition the lender will almost certainly require you to have buildings insurance, either with them or with your own insurer. Both of these are extra costs. And of course you would be most unwise not to take out a household contents policy, which is likely to be more expensive than the one on your main home.
These are all the unavoidable costs that go with your holiday home mortgage. Of course, you will also need to furnish and equip your holiday home, but this can be done at your own pace.
It�s essential that you budget for all these additional costs at the outset when you are arranging your holiday home mortgage. Otherwise, at best they could come as a nasty shock, and at worst they could cause the whole transaction to collapse.
Holiday Home Mortgage Broker � Do I Need One?
Thinking of buying a holiday home? Very exciting isn�t it! Have you got a few hundred thousand pounds in your bank account? No? Then you�ll need to look for a holiday home mortgage. That�s the less exciting bit.
When looking for your holiday home mortgage there are two main ways you can proceed:
1. You can go direct to your bank or building society.
2. You can look for a holiday home mortgage broker.
The problem is that if you try to obtain a holiday home mortgage direct from your bank or building society, you will usually find it isn�t altogether straightforward.
� Not all lenders are willing to offer mortgages on holiday homes, although the number of lenders who will is increasing. Some types of holiday home will only attract a mortgage from a specialist lender. In most cases, your bank or building society will only have access to their own mortgages or to a small panel of lenders. A holiday home mortgage broker who has access to the whole market will usually be able to find a lender who will consider your request.
� Lenders on holiday homes will usually only lend 70-80 per cent of the value of the property, so you need a large deposit. Often, the larger the deposit you provide, the better the rate you can negotiate. However, if you�re not used to it, it�s quite hard to do the negotiating yourself. If you use a holiday home mortgage broker, you can have the negotiating done for you, and you have a much better chance of securing the most advantageous rate.
� If you are like most people, you will already have a mortgage on your first home. So you need to be very careful about over-extending yourself. There are pros and cons on both sides about getting a repayment versus an interest-only mortgage for your holiday home. A repayment mortgage would hasten the day when your holiday home was your very own, but could you afford repayments at that level? A holiday home mortgage broker would be able to assess your exact situation and provide the right advice.
� The cost of the �conventional� type of holiday home is escalating out of many people�s reach. There are alternative types of holiday home that cost less � such as log cabins or holiday park homes � but only a small number of specialist lenders will provide mortgages on them.. You really need a holiday home mortgage broker to find the right lender for you.
Buying a holiday home can be great fun, or it can be frustrating and stressful. You really want it to be as much fun as possible. Using a holiday home mortgage broker can iron out the hassles and make it much more likely that you will enjoy your holiday home from the very beginning.
How Much is too Much to Spend on a Mortgage?
Something that is very important for you to be taking into consideration when purchasing a home or refinancing your current home are the closing costs.
I would love to tell you that closing costs on a mortgage are not expensive, but believe me they are. Once you add up all the fees� involved, such as points, taxes, title insurance, county costs and various other fee�s, it really begins to add up, and the totals can be mind boggling.
The first thing you need to understand is that nobody in the mortgage industry works for free, so be prepared to pay at the closing table.
The total amount of fees� depends on quite a few different things. For example, the percentage of the loan origination fees� the lender is going to be charging you. Another expensive fee is the title search and insurance. The title fee varies by state and is determined by the amount of the home.
Closing costs on the average should never exceed 5% of the total amount of the purchase price, and this does not include the down payment.
The total amount of these fees� does not all go to the lender who is financing the loan. Generally only the loan origination fee and the application fee go to the financial institution financing the loan.
The rest of the fee�s such as the appraisal, credit report, interest for the period in between closing and your first monthly payment, home owner�s insurance, title insurance, pro rated property tax, etc., go to their appropriate institutions.
Before you go to closing, the mortgage lender is required by law to send you a Good Faith Estimate (GFE).The GFE discloses an accurate estimate of all the fee�s you will be responsible for when you close the loan on settlement day.
Make sure you go over the GFE carefully with a fine tooth comb, and if there are any fees� you don�t understand, call your lender or broker and ask them to explain it to you.
As I stated earlier, you must be prepared to pay the closing costs. Closing costs are not cheap, but you should not pay a dime more than what is the norm in this industry.
If your closing costs are somewhere between two and 5% of the amount of the mortgage, you should be in great condition.
How Texas Mortgages Work
First off, mortgage loans are described as funds that are sent from the lender to a borrower upon the latter's approved application for a loan. Usually, loans need a collateral. A mortgage is what you get as an official recognition once a property is pledged for security.
The mortgage papers places the rules indicating how to take advantage from the loan, the loans term, and all other information and details that is associated with the transaction. In a loan arrangement, someone who guarantees the property and assures the loan is called the borrower. While the authority or the individual who carries out the loan is called the lender. The pledged real estate can be seized when the borrower fails to pay the commitment which is on a monthly basis. The overall process of the mortgage loan basically begins with the borrower obtaining his loan amount, then begins paying for it in periodic basis, depending on the agreed conditions. Once the borrower gets to pay back the loan, then the property is handed over to him.
Texas Mortgage Loans
A lot of people across the nation are now actually interested in mortgage loans in
A lot of lenders in Texas provide different sorts of mortgage loans like hard money lending, jumbo and super jumbo, home equity loan, and commercial mortgages, residential mortgages, and multifamily mortgages. Almost everybodybuyers with bad credit, first-time buyers, good buyers, and also home buyers--can take benefit from mortgage loans. But the interest rates and rules maybe different with the kind of loan and credit rating of that certain customer.
Home Equity loans
Home equity loans in
Mortgage Loan Lenders in
A lot of
How will FED interest policy effect interest on mortgage loans
FED and Ben Bernanke have the last couple of weeks put an end to the speculations that a cut in interest was on the agenda in near future. The slowing growth in the US lead to expectations that FED would cut interest as soon as the inflation stays within the range for the FED inflation goal, this is not anything that anymore is expected to happen in near future
The market is waiting to get some further guiding what move FED will do the next couple of meetings when it comes to interest. When the market get a clear view where FED is going with there interest policy both when it come to stockmarket direction and interest on mortgage loans. The core area giving focus is inflation combined with growth, the inflation have been moving up some but there is at this stage expected strength in growth the next 6 month that been pushing interest higher which will have effect the interest on mortgage loans.
What the market is doing at this stage is adjusting to an environment where cut in interest is not anything that FED will be doing any time soon. This will when it comes to the stockmarket result in a period with uncertainty before the market adjusts to stronger growth and higher rates.
Interest will increase some further on because the strong growth, but as long inflation is not moving up rapidly the interest level will be historical low and this will keep rates on mortgage loans on historically low levels. Help will come from FED as soon as they find that cut in interest will be appropriate with consideration to inflation. FED have strong impact on the rates on mortgage loans and the key issue at this point is if FED consider that the early economic numbers indicating stronger growth is correct and what impact that will have on inflation further on.
ECB is also increasing interest for the Euro region and have recently hit 4% and expect to be 4,50% in the end of 2007, The increase in the Euro interest is also on the background of stronger growth than expected. Mentioned when it comes to expected increase on US interest on mortgage loans is that this far the strong global economic growth has so far not been pushing inflation higher in any moves that in this stage is negative for growth or input for FED to increase the interest more aggressively than is expected at the moment. This fact might ease the move on interest on mortgage loans further on which speaks for keeping away from getting fixed interest on new or existing mortgage loans.
Other aspects to effect interest level is the strong job less recovery that globally been a theme for the last 6 month and the shortage of adequate employees will effect wages and in the next step inflation and the interest level. The conundrum that Alan Greenspan often related to when he mentioned the fact that the 10 year B-note did not move though the growth was strengthening seems to come to an end and a historical more familiar stage that Alan Greenspan expected to appear much sooner considering the strong global economic growth.
Mortgage Calculator and Its Usages
When purchasing a new home most buyers choose to finance a portion of the purchase price through the use of mortgage. And since, various mortgage offers are floating in the market, it becomes tough for you to choose and evaluated as which suits the best to you. Hence going with mortgage calculator is the best option for all mortgage buyers. Mortgage calculator is a software tool that allows you to evaluate and compare various mortgages offers. It calculates essential values and amortization schedules for a number of different mortgages. Its capability can be found on most financial calculators such as the HP-
With Mortgage calculator comparing multiple loan offers becomes easy and affordable. Multiple loan offers are clearly displayed and compared in a single window. You can easily add copy, edit and remove loan offers. Also, automatic calculation of costs is possible with this software tool. Hence, monthly payments, principal and remaining interest on any given date, total amount of interest, total sum to pay are all calculated automatically.
With this it becomes easy to print amortization schedules, as mortgage Calculator generates detailed amortization schedules. The amortization schedules allow you to evaluate and compare how the principal and interest would be paid off throughout the entire term of each mortgage. Besides this, an easy-to use glossary helps you clarify obscure mortgage terms.
Therefore it proves that a mortgage calculator is an automated tool that enables the user to quickly determine the financial implications of changes in one or more variables in a mortgage financing arrangement. The major variables include loan principal balance, periodic interest rate compound interest, number of payments per year, total number of payments and the regular payment amount.
Mortgage calculators are used to help a current or potential real estate owner determine how much they can afford to borrow to purchase a piece of real estate. In addition, mortgage calculators can also be used to compare the costs or real interest rates between several different loans, determine the impact on the length of the mortgage loan of making added principal payments or bi-weekly instead of monthly payments.
One can also use an online mortgage calculator to see how much property you can afford. A lender will compare your total monthly income and your total monthly debt load. A mortgage calculator can help you add up all your income sources and compare this to all your monthly debt payments. It can also factor in a potential mortgage payment and other associated housing costs such as property taxes, homeownership dues, etc. You can test different loan sizes and interest rates with this unique software tool. So, if you are planning to take a mortgage, always trust on your mortgage calculator.
Mortgage Broker or IFA?
When you are looking for a mortgage, everyone tells you that you shouldn�t just take the first one you are offered. You need to shop around for the right one.
This is true. But it�s not exactly easy. There are thousands of products out there, all with different features. How are you supposed to know where to start in shopping around?
Obviously, the best thing is to consult a professional. But first of all, you have to decide which professional to choose! There are two main types � a mortgage broker and an Independent Financial Adviser (IFA).
What does an IFA do?
The job of an IFA is to work with individuals or businesses to help them meet their financial goals in the best possible way. The adviser works with you on a financial plan to make sure you can make the best financial choices and ensure your own financial security in the future.
First the IFA will use a fact-finding process to achieve as accurate a picture as possible of your financial situation, investment preferences, etc. On the basis of this the adviser will work out a plan and recommend the most suitable financial products. This includes not only mortgages, but investments, pensions, and insurance products.
What about a mortgage broker?
A mortgage broker, obviously, works specifically with mortgages. Like the IFA, the broker will start off with a questionnaire or a fact-finding exercise to form a clear picture of your financial situation. Then the broker will select a mortgage product that is suitable for you, help you with your application, and assist with the arrangements for obtaining the mortgage.
Which should I use?
Whether a mortgage broker or an IFA is better for you depends on what you need.
If it is simply a mortgage that you need, then a good mortgage broker is likely to have more mortgage expertise than a good IFA who doesn�t do much mortgage business. On the other hand, if you want an endowment along with your mortgage, you do need an IFA, as endowments can be tricky. And if you need your mortgage decision to be part of a wider financial review, or a complete financial plan, you should consult an IFA.
Is Paying off Your Mortgage the Best Bet with Extra Income?
If you're working on paying off your home, you might wonder if a windfall or a salary increase might be best directed to your monthly house payment. Surely, if you were to pay off your home more quickly, it might be better for your financial future, right? However, as with any financial move, you need to consider all of the ramifications of your actions before you begin. That extra money may just be what you need to fund other more profitable moves.
First of all, there's nothing wrong with paying off your mortgage when you have extra money. For those that are close to the end of their mortgage or who want to sell their home off, this is actually a great idea. It will help to free up a lot of money every month that you can use for saving up for a newer and bigger home. Some people also like the idea of simply owning their home and being able to pass it along to someone else in their family at that point. If you simply don't like the stress of having that additional debt, paying off your mortgage may be a great financial move.
But if you have extra money, you might want to consider other ways you can use that money in your life, rather than helping to pay off your home:
That said, if you have an ARM mortgage, you might want to use any additional money that you have toward paying down that type of mortgage. Because you can't always guarantee that your payments will be low, working to pay down that loan quickly is the best way to minimize the interest rate chances and their impact on your life.
Tuesday, February 26, 2008
Shopping Home Equity Loan Rates
If you have been in your home for a number of years and you have established some equity, you may be considering liquidating some of that equity. A great way to do this would be to go with a Home Equity Loan.
A home equity loan allows for you to borrow oou have established in your home through appreciation and monthly mortgage payments without having to touchff of the equity y your first mortgage.
This is why a home equity loan can also be known as a second mortgage. But before you go and start signing applications, shop around so you can find the best home equity loan rate out there.
There are two types of home equity loans on the market that you have to choose from. The first one is your standard home equity loan with a fixed rate, which of course, is based on prime. This loan you receive in a lump sum and begin to make monthly payments upon it immediately.
The second type of loan is the home equity credit line. This one, as its name implies comes in the form of a line of credit. The home equity line of credit has a rate that is variable, which means it will fluctuate with the prime rate. Many of them come with introductory rates for the first five or six months.
Once approved for a home equity line of credit, you will not receive it in the form of a lump sum. Instead you will receive it in the form of a check book giving you easy access to draw upon it in the amount you would like at your convenience. Once you do draw upon it, you will have to begin paying it back on a monthly basis. Normally in the form of interest only for the first ten years.
Suppose you were to receive a home equity line of credit in the amount of $25,000.00. If you only wanted to borrow $6000.00, than all you would have to do is write out one of the check�s the lender sent you and deposit it into your checking account. Your payment would than be based on the $6000.00 you borrowed from your line.
Keep in mind, home equity credit lines do come with a rate that is variable, and that rate is based on prime. So, if the prime rate goes up, the rate on your home equity credit line will go up as well.
On the other hand, if the prime rate goes down, than the rate on your home equity credit line will go down.
Mortgage companies are very competitive, so whichever home equity loan you decide to go with, it would be in your best interest to shop around so that you may compare rates.
After allowing for a few loan officers to assess your situation and offer you a rate and product, base your decision on the rate and product that best fits your needs and budget.
Market Conditions Affect A Home Equity Loan Rate
Curious about how a home equity loan rate is set? If you're planning on pursuing a loan, it's to your benefit to understand the market dynamics. It can save you money in the long run.
Like other rates, a home equity loan rate is determined by where the government sets their benchmark rates. Many people think that if the government lowers interest rates, home equity loan rates naturally go lower as well. Not so fast.
Typically, home equity loan rates actually rise when the Federal Reserve lowers rates. Why? When rates are lowered, the "Federal Funds" rates are lower. It's the rate at which large banks lend funds to one another and is called a "short-term" rate. But mortgage rates are long-term - up to 30 years. And longer-term rates are sensitive to expectations about inflation. So when short-term rates fall - like the ones the Federal Reserve controls - borrowing and spending usually increase, which can actually cause inflation to rise. Longer-term rates, like mortgage rates, can rise when concerns about inflation increase.
Markets are often ahead of the Federal Reserve. Interest rates are determined every day in active public markets.
If those markets believe the economy is slowing
Interest rates may fall as markets anticipate that the Federal Reserve might lower short-term rates. This happened in the last half of 2000 when mortgage rates began steadily dropping, even though the Federal Reserve left their short-term rates unchanged.
The opposite can happen as well
Mortgage rates can rise well ahead of the Federal Reserve increasing short-term rates.
Always Compare Rates
You can save money on a home equity loan rate by shopping around and comparing quotes from all the different lenders that will compete for your business.
The more questions you ask, the more likely it is you will understand how to deal and negotiate with lenders. It�s that simple. Shopping for a home equity loan rate is like shopping for an auto loan. It takes time and negotiating skills, but in the end, you will reap the rewards. Remember lenders set rates according to what they think you will agree to, which means, the rates are negotiable.
Home Equity Loan Rates - Pros And Cons
Have you owned your home for a least a couple of years? If so, you most likely have some home equity built up then. In today's real estate market, building up cash equity in your home happens rapidly.
Pros
A home equity loan can be a good way of paying for college education expenses.
A home equity loan is much easier to obtain than any other type of conventional loan.
Five tips when comparing home equity rates
1. Mortgage rates can change daily, and sometimes even multiple times per day depending on economic factors. For accurate mortgage rate comparisons, try to get quotes on the same day.
4. Compare the APR , and have lenders quote the loan points separate from other fees. In addition to standard title, escrow, or appraisal fees, lenders have other fees with names like, processing or underwriting fee. Property taxes, home insurance, and pre-paid interest are not lender fees.
5. Approximate credit scores can be used for general mortgage quotes. If you want a firm rate, the lender will need to run your credit report, but the rate is subject to change until locked. Lenders normally use the middle of 3 credit scores from the borrower who is the primary wage earner.
Credit is the key to 125% home equity loans
Homeowners with little, or no home equity, have the option of the 125% home equity mortgage loan, which can provide a loan up to 125% of the current value of your home. Even if you just recently bought your home, 125% home equity loans can provide money for home improvement, debt consolidation, or personal cash out. The key to getting a loan is a higher credit score.
By: www.crhome.com
Defaulting On Mortgage Payments
You have taken out a mortgage loan, and have been paying your dues regularly as a responsible home owner. You have been paying your home owner insurance and keeping all the tax dues well up to date. But things do go wrong with people. You are suddenly faced with retrenchment and you lose your job. You may meet with an accident and get injured. You may be faced with a dilemma, whether to pay your mortgage installment or have your car repaired, which takes you to your job, by which you get to pay your mortgage installments. It is a catch 22 situation. Hoping that you would never face such situations, it is helpful to have knowledge, which could be helpful to you.
Under normal circumstances, mortgage loans carry a grace period of 15 days. In some cases this grace period is 10 days. Many of us put off our payments or delay the payments thinking of the grace period in the terms of the mortgage contract. Very little is thought about this, and even the lender, at times, does not take notice of this delay. As the grace period of 15 days end, on the 16th day a late fee is assessed, and there could be a friendly call from your lender regarding the matter. It just could be that this delay in payment would not even show up in your credit report. The total scenario changes on day 30. Things start to turn serious at this time onwards.
Mortgage defaulting laws varies from state to state in the
By day 45, you will start to get phone calls from the mortgage collectors, and the frequency will gradually increase, limiting them to the law in that particular state. There may be aggressive demands of helping you with the foreclosure. By the end of 60 to 90 days, the lender will send you a demand notice for the amount pending. This notice is usually sent by certified mail, in which the lender provides you with a definite time, asking you to clear the outstanding within that time. The amount mentioned could carry additional charges of collection fees. If this goes unattended by you, the lender's legal department will now take over the matter, and you will start incurring serious legal charges.
The law provides every opportunity to the owner to stop the process leading up to the foreclosure, even to the minute before the auctioneer's hammer comes down. In some instances the opportunity may be available even beyond that. In some of the states, a law, right to redemption, comes into operation. You got to know the law so as not to be misguided by some of the unethical lenders. The foreclosure process may takes place in the front yard of the property in question, or it may be "by public outcry" on the steps of the county courthouse. This is embarrassing and frightening to the home owner.
by Amalorpava Mary
Remortgage Advice - Getting The Best Value For Money
Most mortgage deals have an initial offer period of between 2 and 5 years and when this term expires, you will need to think about your options going forward in order to avoid returning to your current lenders Standard Variable Rate.
Some lenders (but not all) will offer a range of products to their customers to try and retain the business but these products are usually less attractive deals than would be offered to new customers and so it definitively pays to shop around as the savings to be made can be substantial.
Undoubtedly the best way to assess your options is to speak to an impartial firm of Mortgage Brokers such as ourselves so that your needs can be properly analysed and recommendations made which suit your current and future circumstances.
Mortgage Lenders are very aware of the general public�s ability to source rate information from a variety of online sites and, in an attempt to appear competitive and continue to promote their brand awareness, have come up with a variety of ways to offer cheaper rates than their competitors.
The most common method is fee-charging. Lenders usually add on a fee for a particular remortgage product once the mortgage completes. Historically this may have been in the region of �500 but in today�s market it can be double or treble this figure. Other lenders have percentage based fees based upon the size of the loan.
This requires some careful calculations on the part of the borrower as the fee can quickly negate much of the benefit of an attractive rate. As an example, a customer requiring a mortgage of �150,000 may see two products at 5.5% from competing lenders. If Lender A provides the mortgage with a flat fee of �1000 and Lender B offers their product with a fee of 1% then the fee would be �1500. If a client looking at the above two lenders only had a mortgage of �80,000 then clearly Lender B with an �800 completion fee would work out cheaper. The complexity of fixed and variable fees has ensured that there is no longer one best product available.
Another way that lenders can offer cheaper products than would otherwise be profitable for them to promote is in the use of early repayment charges. Within the initial offer period it is common to find that there would be penalties for repaying your mortgage or trying to move it to a more competitive product. Most clients accept this in exchange for a competitively priced deal and would be happy to see out the initial 2 or 3 year period without wishing to alter the terms of their mortgage arrangements. At the end of this period however it is important that you will be free to reconsider your options either with the lender you are with or by looking at the market as a whole and this relies upon the fact that the penalty associated with the mortgage ends when the initial offer also ceases.
Some products however have �overhanging� penalties which means that even once the initial rate has ended, you must return to the lenders standard variable rate (which could easily be 2% higher) for an additional period. We do not recommend such products here at Premier Financial Services as the jump to standard rate can be quite a severe financial shock and most of the benefit of an initially cheaper deal is undone by the forced return to a higher rate.
Refinancing Mortgage: Low Payment And Low Interest Rates
Those seeking a financial alternatives are often caught thinking that low payment refer to low interest rates. They should be aware that low interest rates vastly differ from low payment. With this in mind, they can veer away from dubious loan agents who will rush them to a new mortgage with high interest rates and add-on fees.
Watch What They're Saying
When it comes to prices and fees, the words "50% off" or "slashed prices" can hook the bargain hunters. The same happens to individuals looking for an affordable refinancing mortgage program. There seems to be confusion because people think that "low" fees or "no closing fees" are for real or even applies to the interest rates.
Unscrupulous companies use these kinds of teasers to lure would-be borrowers, making them believe that they're getting a good deal. And before they can make up their minds, they are maneuvered into an ARM. A month after the contract takes effect, the borrowers are jolted awake to a nightmare. The interest rate has adjusted to a higher rate, and they are paying the fees that were supposed to be non-existent.
If you see these attractive offers, veer away from these companies. Their offers do not add up. Analyze this - the attorney who works on the legalities of the closing of the contract has to be paid. Would the company pay for it from their own pockets? Of course not. They'll have to get the money from you - lumped into your refinance mortgage loan.
Low Payment
A low payment for a refinancing mortgage loan is not about a new mortgage with low interest rates. The said low payment refers to the fees involved in the processing of the loan. You may be paying for the following: origination fee, loan discount or points, appraisal fee, credit report fee, lender's inspection fee, mortgage insurance application fee, assumption fee, underwriting or documentation, mortgage insurance, annual assessment, title charges, and settlement or closing fee.
Borrowers going to the mortgage company should have ready cash on hand to pay for fees that can run in the hundreds of dollars and more. This confirms that refinance is not cheap, nor getting any cheaper. Borrowers should indeed be ready with cash to get more cash. So a low payment mortgage should be reviewed carefully.
Low Interest Rates
Interest is the payment on the money borrowed by the lender. This is how mortgage companies earn their keep. At this time, interest rates are at their lowest and a refinancing mortgage loan is highly recommended, but borrowers should be warned that mortgage companies are stricter with their requirements.
Borrowers can get lower interest rates for their mortgage if they have good credit scores, have been paying the first mortgage amortizations on time, and have a 20% equity on their homes. If you are facing an ARM reset, get a refi to switch to a fixed-rate mortgage. A refinancing mortgage scheme offers you this chance and the opportunity for a cash-out option if you're qualified.
Low Fees and Low Interest Rates
Do take some time to do a little bit research on lower fees and lower interest rates. Some companies do charge lower fees, but find out if these are added up to your monthly amortization payment. Who wouldn't want to pay low fees for a refinancing mortgage and enjoy lower interest rates?
Refinance Mortgage Loan: Shorten Your Loan Term
A 15-year loan term has many advantages, although it may appear to be expensive because of the higher monthly amortization. However, a shorter loan term assures you that you'll be free from this burden before or at the time of retirement and save thousands of dollars. Consider having your loan restructured to a shorter loan term.
Benefits of a Shorter Loan Term
The prospect of spending 30 years paying back a mortgage is discouraging. If you have 20 years remaining on your loan, the option to shorten your loan term to 15 can be tempting. Taking away 5 years from a 20-year loan means a higher monthly bill, but freedom from the mortgage after 15 years instead of 20 is definitely more appealing. But if it's only a matter of a few hundred dollars more, why not? Never mind if you'll be paying a higher monthly bill.
You'll be saving thousands of dollars from interests alone with the five years knocked off from the 20-year loan term. Another benefit is building your home equity faster. A refinance mortgage loan offers the chance to restructure your terms.
What's Involved
For a home mortgage, the lender will pull your credit record to check if you've been paying your debts on time. You'll also be paying the fees involved before, during, and after your loan is processed.
The lender will assess all the information to evaluate if you are a good risk for a shorter loan term. If you're dealing with the same lender, the process won't be as rigorous and as lengthy like it would be if you go to a new lender.
It's a fact that lenders prefer long-term mortgages because it rakes in more profits. To counter loss in future profits, lenders penalize borrowers for paying their mortgage ahead of term. This is why prospective borrowers should always inquire if the lender charges prepayment penalties.
Assuming that your lender does not charge penalties on prepayment, you have to contend instead with the closing costs for your refinance mortgage loan.
Others get a refinance mortgage loan to switch to a short term interest only loan. They are banking on the equity of the house and intend to sell it in the near future. The proceeds of the sale will go to the interest and they can still have extra money from the profit. In your case, you're looking at the full ownership of your home in a shorter time.
For a new loan, you can decide if you want a fixed rate mortgage or an ARM. An online calculator can compute how much you're going to pay the monthly bill in 15 years' time. From the calculations, you'll be able to determine the feasibility of a short term ARM or fixed rate refinance mortgage loan.
Short Term or Long Term?
A short term, or traditional loan, will always depend on your financial situation and future plans. A short-term refi is ideal now that interest rates are low. You'll be surprised that you'll be paying the same monthly fee as your first mortgage, so there's not much of a change in the monthly bills. The prospect of paying off your loan in 15 years, however, is imminent. For those who feel secure with the stability of the traditional 30-year loan term, switching from an ARM to a fixed rate refinance mortgage loan is recommended.
Offset Mortgages - How Flexible Mortgages Work
Flexibility is a concept rather than a specific mortgage type. It is possible to have a fixed rate that is flexible or a discount that is flexible. In the
- Interest calculated daily
- The ability to overpay the mortgage on a regular basis
- The ability to underpay the mortgage on a regular basis
- Able to make Lump sum payments
- Possibility of running a current account within the mortgage
- Ability to take payment holidays
- No early redemption penalties
Advantages
- More control over the mortgage and if used proactively, can dramatically reduce the number of years you have a debt. Excellent for people who are paid irregular salaries such as commission earners and the Self-Employed.
Disadvantages
- Flexible mortgages don't always have the cheapest rates so usually one needs to be in a position where overpayments are a reasonable certainty to get the most out of this type of product.
Having the ability to regularly overpay your mortgage does not in itself justify choosing a flexible mortgage. Lender�s offering flexible and offset facilities will demonstrate how additional payments will significantly reduce your mortgage term and this is true but it must be remembered that a standard repayment mortgage with a cheaper rate will often work out better in these circumstances.
As an example, if you had a mortgage of �150,000 on a flexible interest only facility at a rate of 6.5% (which is about right for this type of arrangement at the time of writing), then your contractual payments would be �812.50. By paying approximately �300 per month extra the mortgage would finish in 20 years. Alternatively, had you have opted for a traditional repayment mortgage without the same flexibility and qualified for a rate of approximately 5.75%, then the same commitment of around �1115 pm would have meant a mortgage term of just 18 years.
Flexible and offset mortgages certainly have value but hopefully you can see that they are not always the best way of repaying a mortgage early!
Certainly where Flexible and offset mortgages score heavily is in the additional features such as being able to accept ad-hoc overpayments and also the ability to link other savings/current accounts so that the balances offset the mortgage. This is particularly useful for higher rate tax-payers as interest earned in traditional savings mediums (bank and building society accounts) will often be subject to 40% tax whereas conversely using such balances to reduce the interest accruing against the mortgage does not incur any tax liability.
Reserve funds are another brilliant feature of many flexible mortgages where the borrower is able to create a borrowing facility which can be drawn down for future needs. This means that you will only be paying for the money you need as and when you choose to take it.
Offset Mortgage Providers Are On The Increase
Offset mortgage providers are increasing in number, and it is predicted that offset mortgages will account for 30% of all
What are offset mortgages?
Offset mortgages allow homeowners to link the balance on a savings and current account with their mortgage, while still allowing instant access to their money. The amount in the savings and current account is calculated on a monthly or daily basis and used to reduce or �offset� the interest payments due on the mortgage. For example: your mortgage might be �200,000, but you have �20,000 in your savings account and �3,000 in your current account. This means you will only pay interest on �177,000.
Choosing the best offset mortgage
There are over 30 offset mortgage providers in the UK market and about 250 offset products in the market � but with so many to choose from, how do you choose the best offset mortgage deal for you?
You could traipse up and down the high street visiting all the banks and building societies, and obtain the latest information on their offset mortgages. Or you could save your shoe leather and consult an independent mortgage broker. They will calculate whether an offset mortgage is suitable for you. They have the latest deals from offset mortgage providers at their fingertips, and they will help clarify which is the best offset mortgage deal for you, as each lender is different. For example: two offset mortgage providers offer different deals on a mortgage of �150,000. One offers a two- year fixed rate at 5.29% and the other one offers a two-year fixed rate at 6.33%. On face value the offset mortgage provider offering 5.29% looks the better deal, however the fee for the mortgage is 2.5% of the loan value which totals �4,249. The fee on the 6.33% deal is �99. A borrower opting for the 5.29% offset mortgage deal would pay �1,430 more than the 6.33% borrower.
Who could benefit from an offset mortgage?
Self-employed people: the self-employed are often paid without any tax deduction. They save their money over the year in preparation of their tax bill and an offset mortgage offers them a handy way to obtain maximum benefit from their money, but still have it available when the tax bill is due. A Regulated Mortgage Survey (RMS) revealed 21% of offset borrowers in 2006 were self-employed, compared to 16% of non-offset borrowers. For the self-employed some offset mortgage providers combine their self cert products with offset features.
Savers: A general guide is about 10% of the value of the mortgage in savings. However in some cases, savers only need about 5% of the mortgage debt in savings to make the offset deal worthwhile.
Higher-rate taxpayers: Higher-rate tax payers lose 40% of any interest earnt on savings accounts to the taxman. With an offset mortgage no interest is paid on accounts linked to an offset, so there isn�t any tax to pay. Some offset mortgage providers allow ISAs to be linked to an offset mortgage. Although savers do not receive any interest, they avoid forfeiting their right to save up to �3,000 in an ISA per year. Once the mortgage has been paid for, then they start receiving interest on the ISA. Some borrowers have managed a 0% mortgage because they have enough in their ISAs, savings and current account, to offset their whole mortgage.
Conclusion
Offset mortgages are increasing in popularity as more borrowers recognize the benefits an offset mortgage offers them. More offset mortgage providers are entering the market, which is good for the borrower as it offers more choice, however, without the advice from an independent mortgage broker, it can be difficult to choose the best offset mortgage deal.
Mortgage Brokers Taking Care of Business
The lure of becoming self-employed and no longer having to answer to your boss is strong in the mortgage industry. A high proportion of mortgage brokers eventually leave their positions of employment to practise advising on their own once they gain the skills and experience necessary to do so.
Many mortgage brokers and financial advisers opt for the self-employment route in the
Mortgage brokers who opt to start their own business can choose which clients they want to work with and can specialise in certain products as well. There is a broad range of mortgage products on offer these days, including residential, buy-to-let, lifetime mortgages, bridging loans, commercial finance, and much more.
Some self-employed brokers choose to specialise in certain product types � such as buy-to-lets and bridging loans � and will also focus on specific types of clients such as property investors. By concentrating on a small section of the overall finance market the mortgage broker will gain expertise and will be able to advise their clients better.
Mortgage brokers who choose to leave employment will also be able to choose the location of their work and what hours they work. This is one of the main benefits to becoming self-employed. Some brokers may even work from home and will therefore save themselves the time, hassle, and expense of the daily commute.
Careful consideration should be given to becoming self-employed in the mortgage field, however, as regulation is strict and compliance can be costly and time consuming. Mortgage brokers who do not work under the protection of an employer will need to make their own arrangements regarding compliance with the regulatory requirements of the Financial Services Authority.