Monthly Archives: August 2018

How to Choose your UK Mortgage

This quick guide shows you potential mortgage choices for each type of borrower. Please note that this is a general guide and we should stress that you are always better off talking to a specialist mortgage adviser

General

One thing that applies to almost all types of mortgage is the choice of a fixed rate mortgage or one with a variable interest rate.

The best choice depends on your own circumstances and to an extent on interest rate levels at the time, but things to consider are:

* Can you afford to have your payments go up each month? This could happen with a variable rate mortgage.

* Are rates generally low at the moment? It could be a good time to get tied into a fixed rate mortgage.

* Do you want the security of a fixed monthly payment for several years? Fixed rate periods from 1 to 10 years are available.

* Are you having difficulty borrowing enough money? An interest only mortgage can mean lower monthly repayments ie you can borrow more against your salary. But there are drawbacks.

To understand which option will suit your circumstances, discuss your options with a UK mortgage specialist, who will advise you on suitable choices.

Here are some specific tips depending on your particular mortgage needs

First Time Buyers

As a first time buyer, you are likely to have some particular requirements. You will probably have a very small deposit or possibly no deposit at all. You may be having to push your budget to the limit just to afford a mortgage, but are determined to get a foot on the property ladder.

There are several suitable solutions:

· 100% mortgages to many lenders offer 100% mortgages aimed at first time buyers. These are normally repayment mortgages and can be a good option to get you started.

· If you have a deposit, but can’t afford large monthly payments, an option to consider might be an interest-only mortgage, where your monthly payments only consist of interest, and you don’t make any payment towards the capital sum.

· Choose a mortgage term longer than 25 years to it may seem daunting but many lenders will offer mortgages with terms up to 40 years.

Any of these choices can be a good way to get started in home ownership, with a view to moving to a better deal in 2-5 years time when you have some equity in your property and are perhaps able to afford larger monthly payments. Remember, very few people stick with the same mortgage for 25 years anymore. It is normal to change mortgages for a new deal every 2-5 years.

Self-Employed Mortgages

Getting a mortgage for self-employed people has always been a bit more of a challenge. Even if your business is well established, it can be hard to prove your income and since mortgage lenders assess your ability to pay based on net income, you could find that they underestimate your borrowing ability.

So what are the choices?

· Self-Certified Mortgages. It is not necessary to provide audited accounts and to prove your income, although you will still be required to provide some evidence that you can afford the monthly payments.

· If your business is well-established, and you can provide 3 years or more of audited accounts, showing a stable income, you should not have too many problems. Lenders are more flexible than they once were.

As with other specialist mortgages, it can be worth getting the advice of an Independent Financial Adviser to make sure you get the best deal for you.

Already a Homeowner?

If you are already a homeowner (with or without a mortgage) then you might want to release some equity from your home to give you a cash lump sum.

This means that if you have paid off a significant amount of your mortgage and/or property prices have risen, you can benefit from some of the “profit” that is locked into your house without having to sell the house.

Lenders provide a variety of packages for doing this, but they are generally described as “equity release” mortgages.

Typically you will be able to borrow up to 95% of the equity in your home, given to you in a lump sum which you then pay back like a normal mortgage. This can be used to pay for home improvements, lifestyle changes, home repairs to almost anything, really.

Get a Better Mortgage Deal

Don’t forget that just because you have a mortgage, it doesn’t mean that you can’t get a better one that will cost you less, or alternatively a mortgage with a shorter term so that you can pay it off sooner.

Hunt around to whether you want to find a more competitive interest rate, a long-term fixed rate deal or you want to increase or decrease the remaining duration of your mortgage to you will probably find a lender who is able to offer just what you want, and could save you a significant amount every year.

Discussing your requirements with an IFA can often help uncover the best mortgages, which sometimes come from quite minor building societies.

Big Bonuses, But a Low Basic Salary?

If this is you, then you might find it difficult to get a repayment mortgage that meets your requirements. This is because bonuses and overtime are hard to predict, not guaranteed and are normally excluded from your assessed income by mortgage lenders. This means you could end up being offered a much smaller mortgage than you think you can afford.

The solution to this could be a flexible mortgage. A relative of the interest-only mortgage, flexible mortgages have monthly payments which are interest-only, but allow you to make ad-hoc repayments towards reducing the capital sum.

For example, if you get a quarterly bonus, every 3 months you could make a payment towards reducing the capital sum of your mortgage, whilst paying smaller, interest-only payments each month [from your salary].

Flexible mortgages like these can be helpful for anyone with an unevenly distributed income who receives occasional large payments, rather than solely receiving salaried income.

Are You An Expatriate?

As an expatriate, your mortgage needs are a little different. Buying property abroad is difficult with a UK mortgage, although there are some high street lenders that have affiliated with foreign lenders, particularly in Spain, to provide easy access to mortgages in some other countries.

On the other hand, many expatriates look to buy a property in the UK in preparation for their eventual return. This is more straightforward and there are several big lenders who can assist with this.

The best approach is probably to find an IFA who has experience of setting up this kind of mortgage and see what they can offer you. There may be some complications but it should certainly be possible.

Buying To Let?

Buying to let has become very popular in recent years. Whether you count yourself a professional landlord or are just looking to buy a second property to rent out as an investment, buy to let mortgages are fairly mainstream now and as such are quite widely accessible.

You may notice some differences to residential mortgages:

· Can only borrow up to around 75% of property value

· Mortgage terms may not be extendable beyond 25 years, often less still for interest-only deals.

As with all mortgages, you will have to undergo a credit check and will have to provide some evidence that the property you are buying is a suitable business proposition to i.e. you can rent it for a suitable amount and/or can make the payments yourself if needed.

Want To Let Out Your Home Temporarily?

There are times when homeowners want to let their home on a temporary basis to perhaps they are moving abroad for a year or two, or elsewhere in the UK, but want to maintain their main home and rent it out to cover the costs of the mortgage.

Most residential mortgages will allow you to do this to exact terms and conditions will very from lender to lender, but as long as you tell your lender you want to let, you will probably find they are happy for you to do so.

Are you a Muslim, Looking for a Sharia-Compliant Mortgage?

Islamic mortgages used to be almost impossible to obtain in the UK, but in the last 5 years, the number of lenders offering mortgages that comply with Sharia law has grown considerably. It is now possible to get an Islamic mortgage for your house from several high street lenders with no more difficulty than a regular mortgage.

Islamic mortgages available in the UK fall into two main categories. By far the most popular are mortgages based on the Ijara principle. Also available are mortgages based on the Murabaha principle but these tend not to be affordable to most borrowers, especially younger people just starting out.

Getting Divorced, Need Two Mortgages?

Getting divorced can be a difficult and traumatic experience, often not least because of the financial complications. These can cause people with previously exemplary financial records to get into problems, and can sometimes make it difficult for the divorced individuals to get mortgages.

Mortgage Debt Consolidation Loan

A mortgage debt consolidation loan may be a solution to your high interest debts. Credit Card debt is most likely what borrowers will choose to consolidate first since interest rates and monthly payments are so high. By performing a cash-out refinance of a first or second mortgage you can consolidate your non-mortgage debt, mortgage debt, or both. Mortgage debt includes first mortgages and second mortgages such as a home equity line of credit or home equity loans. Non-mortgage debt would be credit cards, medical bills, student loans, auto loans, other consolidation loans, and personal loans. A cash-out refinance is a typical mortgage refinance method that can reduce your monthly payments, change your rate from variable to fixed, or change the term of your loan.

You have at least four popular techniques to consider when creating a mortgage debt consolidation loan. You can consolidate non-mortgage debt in a first mortgage. You may consolidate a second mortgage into a first. Another option is to consolidate non-mortgage debt and a second mortgage into your first. And finally you may wish to consolidate non-mortgage debt in a second mortgage.

Defaulting on your mortgages can lead to foreclosure and losing your home. A mortgage debt consolidation loan is not without its pitfalls. A borrower needs to be aware of all of their options when dealing with debt.

Consolidate Your Credit Card Debt

One popular debt to consolidate with a mortgage debt consolidation loan are credit cards. Over the past few years many people took advantage of easy access to credit cards with low introductory APRs or no interest balance transfers. After the introductory period the interest rates often jump into double digits. After running up a high outstanding balance the higher interest rates make credit card debt hard to carry.

Important Terminology

A cash-out refinance can reduce your monthly payments, change your rate from variable to fixed, or change the term of your loan. Typically with a cash-out refinance mortgage debt consolidation loan you refinance your existing mortgage with a larger loan using the equity in your home and keep the cash difference. This cash can then be used to payoff non mortgage debt such as credit cards, medical bills, student loans, auto loans, other consolidation loans, and personal loans. Now you will only need to repay one loan and to a single lender.

A second mortgage is a loan taken after your first mortgage. Types of second mortgages include a Home Equity Line of Credit (HELOC) and a home equity loan. A HELOC is attractive because it is a line of credit that you can tap into repeatedly. For some a home equity loan is a better choice because it usually offers a fixed interest rate.

Four Types of Loans

The simplest way for a homeowner to consolidate their debts is to consolidate all non-mortgage debt in a first mortgage. You perform a cash-out refinance and consolidate all of your non-mortgage debt. You leave your second mortgage as is if you have one or better yet you won’t need to take one out.

If you have an existing second mortgage you can consolidate it into your first. In this case you do a cash-out refinance on your first mortgage to consolidate your second. This is not desirable if you want to consolidate a substantial amount of non-mortgage debt. It is worth mentioning to show you a more complete picture of your options.

A great way to go is to consolidate non-mortgage debt and second mortgage in your first. This way you can consolidate both your second mortgage and all of your existing non-mortgage debt through a cash-out refinancing of your first. This is most desirable because you can have a single payment and a single lender for all of your debt.

One additional method is to consolidate all of your non-mortgage debt with a second mortgage. A second mortgage is a loan taken after your first mortgage. Types of second mortgages include a Home Equity Line of Credit (HELOC) or a home equity loan with a fixed interest rate. This allows you to consolidate your existing non-mortgage debt by doing a cash-out refinance of your second mortgage only, leaving your first mortgage alone.

Loan Considerations

Typically credit card debt, student loans, medical bills, and others are considered unsecured debt. First and second mortgages are secured debt. Secured debt often grants a creditor rights to specified property. Unsecured debt is the opposite of secured debt and is is not connected to any specific piece of property. It is very tempting to consolidate unsecured debt such as credit cards using a mortgage debt consolidation loan, but the result is that the debt is now secured against your home. Your monthly payments may be lower, but the due to the longer term of the loan the total amount paid could be significantly higher.

For some people debt settlements or even debt counseling is a better solution to their debt problems. A mortgage debt consolidation loan may only treat the symptoms and not ever cure the disease of financial problems. Rather than convert your unsecured debt to secured it might be better to work out a settlement or a payment plan with your creditors. Often a debt counselor or advisor who is an expert in what your options are can be your best solution.

Just One Option

You have many options for a mortgage debt consolidation loan. Educating yourself is well worth it when considering your next steps. Review the four techniques mentioned above and decide if any are best for you. Also consider contacting your non-mortgage debt creditors directly to work out a payment plan or a debt settlement if necessary. Sometimes before committing to any action you should meet with a debt advisor to learn more about credit counseling.

Mortgages and Remortgages

If you’re using a mortgage to buy your home but are not sure which one will suit your needs best, read this handy guide to mortgage types in the UK. Taking out a mortgage has never been easier.

Fixed Rate Mortgages – the lender will set the APR (Annual Percentage Rate) for the mortgage over a given period of time, usually 2, 3, 5, or 10 years as an example. The APR for the mortgage may be higher than with a variable rate mortgage but will remain at this ‘fixed mortgage rate’ level, even if the Bank of England raises interest rates during the term of the mortgage agreement. Effectively, you could be said to be gambling that interest rates are going to go up, above the level of your fixed rate mortgage interest rate. If this happens, your mortgage repayments will be less than with a variable rate mortgage.

Variable Rate Mortgages – the lender’s mortgage interest rate may go up or down during the life of the mortgage. This usually happens (though not exclusively) soon after a Bank of England interest rate change. Most people consider that opting for a variable interest rate mortgage is best done when interest rates in general are likely to go down. They can then take advantage of these lower rates when they occur. It’s a bit of a gamble but if they are right, it could really work in their favour.

Tracker Mortgages – have a lot in common with variable interest rate mortgages in that the APR of the mortgage can go up or down over the term. The key difference between a tracker mortgage and a variable interest rate mortgage is that the lender will set a margin of interest to be maintained above the Bank of England base lending rate. So, as the Bank of England, in line with monetary policy, raises or lowers the base lending rate of interest, so the tracker mortgage interest rate will follow. Over the lifetime of the mortgage, it could be said that the borrower will neither be better off nor worse off because of interest rate fluctuations.

Repayment Mortgages – you will be required to pay a proportion of the capital element of the mortgage (how much you originally borrowed) together with a proportion of the interest that will have accrued on the capital element, with each monthly repayment. In recent years, repayment mortgages have become highly popular over the previous favourite – endowment mortgages. This is because, unlike endowment mortgages, as long as you keep up your monthly repayments, you are guaranteed to pay the mortgage off at the end of the agreed term. Monthly repayments may possibly be a little more expensive but many borrowers say that at least, they have peace of mind.

Interest Only Mortgages – very common amongst borrowers who are looking to secure a second property. The reason being, with an interest only mortgage, the borrower will only be required to make monthly repayments based on the interest element of the mortgage. The lender will require the capital element to be repaid at the end of the term of the mortgage. Again, as with variable rate mortgages, this could be regarded as being a little bit of a gamble because the borrower is hoping that the property will be worth at least as much at the end of the term of the mortgage, as it was at the beginning, allowing it to be sold and the capital element of the mortgage to be paid off. Any capital gain on the property (although possibly subject to tax) is yours. It could be argued that experience tells us that property prices rarely go down in the long term, but it can never be guaranteed.

Capped Mortgages – a combination of the fixed rate mortgage and the variable interest rate mortgage. A cap or ceiling is fixed for a set period of time. During this period, if interest rates in general rise, above the capped interest rate, the borrower will not pay anything above the capped level. Correspondingly, if interest rates fall, then the rate of interest charged by the lender, will also fall so it could be argued that the borrower gets the best of both worlds. It could also be said that a capped rate is like having a set of brakes on your mortgage, but beware, the lender is also likely to charge a redemption penalty on this type of mortgage, making it less portable than some of the other options available.

Discounted Rate Mortgages – here, the lender may offer a reduced level of interest to be charged over a set period at the start of the mortgage term. Many first time buyers or people who expect their salaries to rise considerably during the discounted rate period opt for this type of mortgage but it should be noted that the reduced rate period will come to an end and when it does, the monthly mortgage repayments to the lender may rise sharply. The lender may also charge a slightly higher rate of interest compared with other types of mortgage over the rest of the term of the loan in order to recoup the monies that they have foregone during the discounted rate period. There’s no such thing as a free lunch!

Offset Mortgages – an interesting newcomer to the UK mortgage market, although still comparatively rare in terms of choice and availability. The mortgage is linked to the borrower’s current account. Every month, the minimum mortgage repayment is paid to the lender but where there is a surplus of cash in the account after other uses and debts have been paid, this is also paid to the lender. Over the months and years, the borrower can potentially pay off their mortgage much quicker and have accrued much less interest than with other types of mortgage provided that a reasonable surplus is maintained in the current account.

Texas Mortgage Loans

Did you know that if you are searching for a mortgage online you are one of the most valuable commodities on the internet today? Why?

Because you may be money in the bank if you APPLY ONLINE! Many who search online for anything from mortgages to socks go to a search engine, type in their request and are happily led down a path of ease and convenience right into the arms of an advertiser (usually on the first search page) claiming they have just what they need. In the mortgage business there are three types of advertisers: mortgage lead generators, mortgage lenders and mortgage brokers. They spend millions of dollars every year just to have a chance to sell you their products and services. Two of the above advertisers are not always the best option and could end up costing you serious money, time and a few headaches. We’ll explain below:

The Mortgage Lead Generator – This company’s primary function is to make money by enticing you to apply online. Then they sell your information (lead) to mortgage lenders and mortgage brokers. Keep in mind this is how they make money! They advertise convenience and the fact that you will be in control when several mortgage lenders or mortgage brokers compete for your business. If you are an experienced mortgage shopper you might come out of this experience unscathed but if you are a first time home buyer and have little experience with the mortgage process here are some questions to think about.

1. Do you know anything about the company or companies that will be calling you? Do they have good track record?

  • These companies may be reputable but you are blindly trusting the mortgage lead generator who just sold your information at a premium to these random companies you know nothing about! The inexperieced mortgage shopper simply does not know the right questions to ask. Most think it’s all about the lowest rate and never focus on the company or the personal experience of the loan officer they are speaking with which is exactly what the lender is hoping for! It’s simply a roll of the dice!

2. Does the loan officer you’re speaking with have any experience?

  • Did you know that the position with the highest turnover in the mortgage industry is none other than that of the loan officer! I have 20 years of experience to back this up. Trust me when I say that the Loan Officer position is a revolving door espeically at large lenders. An inexperienced loan officer can cost you serious money and time especially if you don’t know the difference! Roll the dice!

3. Does the ease and convenience of applying for a mortgage online outweigh all the negatives and still save you time and money in the long run?

  • Many mortgage lead generators charge another fee on top of their initial lead fee in the event a lender closes a loan for you. This additional fee is many times charged directly back to you at close! This fee is generally in the $200.00 to $300.00 range! Now what you thought was an easy and convenient way to find a mortgage online actually costs you significant dollars! Easy and convenient are rarely ever free ! Roll the dice!

4. Will you enjoy persistent sales calls from several sales people daily for at least the next 30 days?

  • If you apply with a mortgage lead generator you are authorizing this wonderful experience so thoroughly enjoy it. Most people find this quite annoying. If you aren’t up to the task of sifting through the endless barrage of phone calls and emails you may cave in and go with the smooth talker and not the best deal. Not to be redundant but Roll the Dice!

The Mortgage Lender – Of course this is the company with the money that you need. They have underwriters who look at your application and decide if you are approval worthy. They have processors who work with you to get all the documentation necessary to close your loan and they also have, you guessed it, loan officers, who will sell you their specific lenders products. Some say this is the best way to go when shopping for a mortgage loan because you are dealing directly with the money source. No middle man means savings. But the mortgage lender stilll may not be ideal choice for the reasons cited below.

1. The Loan Officer – Again you may get someone who knows what they’re doing and then you may not!

  • Remember that large mortgage lenders have the highest turnover within the loan officer position. Mortgage Lenders unfortunately are most often glorified Loan Officer Training Centers. The Loan Officers that actually begin to understand their role most often move on to mortgage brokers where there is more opportunity to succeed. (see reasons cited below) And you still may be working with a middle man depending on the operational structure of the lender. At many lenders the loan officer has no direct access to the underwriting and processing departments effectively reducing the so called direct lender benefit. Many times you are forced to deal with someone you’ve never met to try and get your loan closed!

2. Limited options with products and rates!

  • The lender is always limited to selling you their specific products and rates which many times puts you at a disadvantage in finding the best available rates and programs for your unique situation. This is a Huge factor! Mortgage Brokers on the other hand are not tied to one speicific lenders products and programs. More about this later.

3. Efficency always trumps service!

  • Because profit margins continue to shrink for the mortgage lender especially those who sell their loans on the secondary market lenders are constantly looking for ways to automate their processes and become more efficient. Bad news for the consumer because this means doing more with less people. Ever heard the expression overworked and underpaid? This happens quite often at mortgage lenders. Again I’ve seen this in action. Frustration for borrowers runs high when there are delays and a general lack of personalized customer service.

The Mortgage Broker – OK I won’t throw any punches here because I work with a mortgage broker! The Mortgage Broker has the same problem finding and keeping experienced loan officers. Generally the larger broker shops with 10 or more loan officers have the biggest problem policing what their loan officers are doing. Normally the smaller brokers have more stability and experience on their side.

  • Mortgage Brokers simply have more available options in products and programs for the mortgage loan shopper because they are not tied directly to any one mortgage lender but have relationships with many. This makes a mortgage broker a much more attractive option for a mortgage shopper online.
  • In addition most mortgage brokers have relationships with Realtors, Builders, Appraisers, Title Companies, Surveryors, Home Inpsectors, Insurance Agents etc…. full service, one stop benefit for most mortgage shoppers who don’t have these relationships established.
  • Mortgage Brokers can provide invaluable one on one personalized service that large lenders simply cannot. If you like you’re hand held, frequent updates, phones answered and calls returned quickly and the ability to quickly place your file with another lender if one lender fails then working with a professional experienced mortgage broker is the way to go. If you are a first time homebuyer it really makes good sense.

Also as you begin your search online for the right lender or broker follow this rule. Don’t apply with anyone you’ve never met. Meaning talk with a loan officer before you ever apply online. (Of course this rule of thumb precludes utilizing the mortgage lead generator.) This way you never feel obligated to anyone and can remain objective until you firmly decide who you want to trust with your mortgage loan needs. There are many excellent informational sites that fully explain the mortgage loan process and many that offer free tips for inexperienced mortgage shoppers. Take the time to use the web to educate yourself. You’ll be glad you did!