Posts Tagged ‘mortgages’

It might seem like a wise, cost effective solution on the surface, but selling your home yourself can be quite a taxing exercise in more ways then one.

While the numerous home selling shows and magazines might depict it in an exciting and attractive light, in reality selling a home yourself is not all that fun. Ask anyone who has ever gone through the stressful experience of selling a home alone and they will tell you that it is a time in your life, which is anything but fun. In fact, it is far from it.

Apart from the time and demand that it commands from you and your family, selling your home yourself can be a very expensive option. What’s more it is only when you are midway through the process of selling your home yourself do you start to discover those hidden costs you were not aware about until now. And by then, as always, it is too late and before you know it you are forced to make those numerous unnecessary payments.

Some of the hidden costs you should be aware about before choosing to sell your home without the help of a real estate agent include:

Lawyer’s fees – Most people rarely need to seek the services of a lawyer in their life times and do not realize how expensive a lawyer’s services can be. When deciding to sell your home yourself you will need to pay for a lawyer to not only facilitate the process but to deal with payment, work on complex mortgages, leases, formalize contracts as well as helping close the deal.

Seeking the services of a market analyst – To ensure you are up to date on market trends, and value your house at a price that gets you are your buyer the best deal, you will need to get the help of a market analyst. Just like real estate lawyers, market analyst do not come cheap but are a must for anyone looking to sell their home themselves especially those without experience in the industry.

Insurance – Seeking insurance is something you need to consider especially when it comes to conducting home inspections. Firstly, as a home owner looking to put your home on the market you are required by law to seek professional approval before you do so. Buyers want to know that all your appliances, plumbing, heating etc work and that your foundations are termite free.

Also you want to take out the necessary insurance so that you are not liable for potential accidents that can happen when interested buyers enter your property on open day. You don’t want to have to worry about buyers slipping over in the kitchen and injuring themselves and making your liable in the process. This might sound like common sense; however, nowadays it does not take much for litigation proceedings to begin.

So if you are adamant on selling your home yourself, it is imperative that you are aware of everything and seek professional help before commencement. Alternately, take a look at companies like asisnow.com, who will buy your property for a fair price, today, without realtor commissions and tons of paperwork. They do it all so you don’t have to -and the sale goes through like a dream.

What Is Capital and Repayment Mortgage?

“Repayment mortgage (also called a capital-and interest loan)

Your monthly payments gradually pay off the amount you owe as well as paying the interest charged on the loan. Provided you make all the agreed payments, the loan will be fully paid off by the end of the mortgage term.”

- Consumer Information, FSA, June 2006

Repayment mortgage and capital mortgage (or capital loan) are the exact same thing, made more confusing by the fact that this type of mortgage is known by more than one name. But don’t let that confuse you! Capital and repayment mortgage is, in fact, the same thing.

How Do I Know Capital, or Repayment, Mortgage Is Right For Me?

Repayment/Capital mortgage is great for those who want to get their entire mortgage, capital and interest, paid off by the end of their mortgage term. Once the term is up on this type of mortgage, you’re done and fully paid off. Many mortgage policies focus on the interest that you owe. Capital and repayment mortgages are popular because they allow homeowners to pay off everything that they owe.

The bank or company that you work with to determine your mortgage policy and payments can give you all sorts of options. Make sure to ask what the interest rate and payment structure on a Capital or repayment mortgage would be. The numbers will help you decide what’s right for you. After all, the right mortgage is the one that you can afford.

Do Capital and Repayment Mortgages Cost More Than Other Types of Mortgages?

“You usually pay off mostly interest in the early years and then gradually more of the capital debt. It may seem as if this is costing more but that’s because unlike the other types of mortgages you’re paying off the capital and not just the interest.”

- Repayment Mortgages, Mortgage Sorter web site, June 2006

While capital and repayment mortgages do not necessarily cost more than other types of mortgages, you may feel that you are paying out for a longer period of time with a capital and repayment mortgage. This is not true, however. Capital and repayment mortgages just allow you to pay off your entire mortgage in one complete payment cycle. And once you’re done, you’re done. That’s the beauty of a capital and repayment mortgage, one of the most popular types of mortgages used by homeowners.

I Still Don’t Know What Kind of Mortgage I Need. What Should I Do?

If you know that you want to finance or re-finance your home or property, it’s an easy decision to take out a mortgage policy. The only problem is, what kind of mortgage will suit your needs best? With so many options out there, and so much information about different types of mortgages available, it can make your head swim. When you’ve never had a mortgage before and don’t know that much about mortgages in general, how do you decide what’s best for you?

The only way to know what type of mortgage will fit your needs is to run the numbers. Have your bank, financial advisor, or the company that you’re re-financing with gives you examples of payment plans for many types of mortgages, and be sure to get your questions answered about each policy. You will think up many different questions, some of which can only be answered by those you’re working with to establish your mortgage. You’ll know what’s right for you when you see the plan in black and white, because you’re the only one who truly understands what your financial situation is.

January 21, 2009 Maxine Waters deals with the marathon in contacting banks to refinance mortgages.

Follow the adventures of Bob and Sally as they learn about mortgages and interest rates in their home buying journey.

These days selling your home can be a stressful experience. In many regions, homes aren’t selling as fast as they were a few years ago. It can take many months, often while you’re making double payments on our old property as well as your new home.

Are you ready to hear the most effective way to sell your home FAST? Of course you are. And it’s probably not the strategy you’re thinking of.

Real estate experts will tell you all kinds of “speed up” tips like remove most of your furniture to make your home look empty, bake a pie in the oven to make your kitchen smell like home, and even do major and expensive fix-ups to any aspect of your home that doesn’t look perfect.

While those things can help sell a home, they aren’t the real “killer” sales strategy that can make any home sell almost overnight.

Offer buyers an EASY way to qualify for a good mortgage and you’ll QUICKLY sell your home. Not only will your home sell FAST, but you will sell it for FULL price and you WON’T have to do a lot of fix-ups.

Here’s why it works. The media doesn’t report on this much, but a HUGE number of hard-working Americans simply can’t qualify for a mortgage. Or when they do qualify, the terms are so bad they can’t afford the deal.

Otherwise fine people can be refused a traditional bank mortgage for any number of reasons including credit problems in the past, loss of a job, a divorce, or other problems. Those folks are usually renting somewhere, just waiting, hoping, and praying for the day when they can finally own a home.

Mind you, they aren’t looking for their dream home, they just want A home…and they’ll be quite flexible in getting it.

Today there are solid, successful firms who offer much easier to get mortgages. They make money by INCLUDING millions of Americans who are left out of the mortgage system. We’ve found a great many of the people who can’t get a mortgage are hard working folks who are excellent financial bets. So we give them a good mortgage!

Teaming up with an EZ mortgage firm can immediately make YOUR home available and affordable to a VASTLY larger audience. You will sell your home fast and for full price.

I’ve seen this happen more times than I can count all over North America. Put this powerful idea to work and make your home selling experience a great time you’ll never forget!

Do You Have Full Custody of Bad Credit?

Foreclosure, bankruptcy, and credit card problems:  if you have bad credit you probably belong to one or more of those three categories.  All of them can hurt you if you are trying to buy a house, but you might be surprised at what is possible even if you belong to one or more of these categories.

Foreclosure

Buying a house after a foreclosure is possible.  You must wait at least three years from the date that you give up ownership of the house in order to qualify for a mortgage on a new house.  It takes longer than three years to qualify for some types of mortgages, but there are good mortgages available at the three year point.  After three years the bankruptcy doesn’t stop you, but your credit still must be good enough.  Usually if you’ve been through a foreclosure your credit is not good.  More on what to do about that later in this article.

Bankruptcy

One full year after your bankruptcy has been discharged (the end of the bankruptcy process) you can qualify for a good mortgage and buy a home.  This is only if you have good credit and if you just went through a bankruptcy its unlikely that your credit is good.  It is never too soon to start improving your credit so you can buy a house.  You can even begin while you are still in the bankruptcy process.  Read on to see how.

Past Credit Card Troubles

Many, many people get into trouble with credit cards when they are young and have to deal with the consequences for many years.  Past due credit cards can prevent you from buying a house unless you deal with them in the proper way.  It is usually possible to negotiate with your credit card issuer and only pay a fraction of the total amount owed.  Sometimes you can even get them to remove the item from your credit file.

Fixing Your Credit so You Can Buy a House is Not “One Size Fits All”

Repairing your credit to the point where you can qualify for an excellent government-insured loan (the only type of loan we recommend) requires specialized knowledge depending on which of the above three categories you belong to.  Also, be sure to find training specifically geared towards helping you buy a home.  Above all, be sure you find someone to help.  Good luck!

In today’s news headlines we are hearing everyday about a collapse in the housing market. There are getting to be more and more houses that are being foreclosed on because they were financed with loans that they now can’t afford. In some cities, the builders didn’t stop building until there were too many houses on the market, which has caused too many homes to be on the market. That in turn has forced other home values down. In short, the housing market is not the boom market it was a few years ago.

If you are in the position now that you are trying to sell your house, you may be a little worried as to whether you will be able to get it sold quickly and for as much money as you hoped it would sell for. When it comes to selling houses these days the buzz word is “Home Staging”. Is home staging right for you?

Recent stats show that homes that have been staged for sale receive 3-6% increase on their equity than unstaged homes. Also, on average, a staged home sells 2-3 times faster than unstaged homes. This can mean a lot to you financially if you are trying to sell your home. No one, wants to end up selling their house for thousands less than they had hoped to sell it for, and for sure no one wants to end up paying two mortgages because the house sits on the market for a lot longer than you planned on.

So what is home staging? Home staging is basically taking stock of what your house has to offer and doing the things that highlight the best features of the house. Home stagers make your house appeal to the broadest possible range of buyers. Their goal is to make it look the best that it can look, hopefully without spending a lot of money that you won’t get back when you sell the house.

Home stagers generally charge, depending on your geographical area, $200 for their initial report of what they think should be done, and then $75 or more per hour to actually stage the area. This does not include the cost of materials or labor that may be needed.

Depending on your situation, you may not be able to afford to hire a professional home stager, but there is no reason why you can’t learn to do some of the things that a home stager would do. There are a lot of things that you can do yourself that will help your house sell for more money and much quicker.

The first thing you need to do is to take stock of what your house has to offer. If you have been living in the house for a long time, you need to look at it with fresh eyes. Start with the outside. Does the pain on the trim need to be freshened up? Do the bushes need to be trimmed back so you can actually see the house?

Your house needs to be inviting on the outside or your potential buyers will never stop to come and see what you have to offer them inside. Cut the grass. Make sure the garbage bins are out of site. Touch up your trim paint if it needs it. Hose off the siding and knock down the cobwebs.

Once you have improved the looks of the outside of your home, you need to take stock of what you have on the inside. Have you ever taken a picture of your kids and when you looked at the picture realized that there is clutter behind them? We get so used to our surrounding that we get used to the clutter and the excess stuff we have around us. That stuff is fine if you and your family are living there, but if your house is on the market to sell, you need to reassess things. You need to clear off the counters, get rid of excess furniture and toys that are lying around.

You also need to do some deep cleaning. First off, if you smoke in your home, take it outside. You will also need to do whatever it takes to get rid of the smell. The smell of cigarette smoke will turn off a lot of people. Pets are also a problem. Remember, you are trying to appeal to the largest number of buyers. It may still be your home, but if you want to get it sold quickly and for a good price, you need to court the potential buyer.

If you do not have much experience with mortgages, then it would benefit you to educate yourself before deciding whether or not to refinance a current mortgage or to buy a new home. Educating yourself on mortgages in the UK can benefit you when it comes to finding the right mortgage terms for your individual situation.

Types of Mortgages

Endowment Mortgage – This is an interest-only mortgage which involves repayment of capital using an endowment policy at the end of the mortgage’s term.

Interest-Only Mortgage – With an interest-only mortgage, the capital part of the loan is not repaid until the end of the mortgage term.

Investment Backed Mortgage – This is an interest only mortgage which uses a PEP, ISA or some other investment plan to repay the capital at the end of the mortgage’s term.

Pension Mortgage – With a pension mortgage, interest-only mortgages are repaid at retirement using a personal pension scheme’s tax-free cash lump sum.

Repayment Mortgage – This is a method for mortgage repayment which involves paying both the interest and the capital.

Types of Interest Rates

Capped Rates – A Capped rate is similar to a fixed rate, as there is a cap which prevents the interest rate from rising, however the rate can vary as long as it stays below the cap. Some capped rates also have collars, which impose a minimum rate as well as a maximum rate.

Discount Rates – Discount rates exist when there is a significant reduction of the standard variable rate for a set period of time which generally ranges from one to five years.

Fixed Rates – A fixed rate is a rate which remains constant for a set period of time, which is typically two, three, four, five or ten years. The longer-term fixed rates such as five and ten year are generally more expensive and less popular than the shorter term fixed rate loans.

Standard Variable Rate – This is the default variable rate which is offered to every mortgage borrower.

Tracker Rate – This is a variable mortgage rate which is linked to a public interest rate based on a predetermined margin. This rate is commonly linked to the LIBOR for most borrowers.

Variable Rate – this is a rate which varies solely based on the discretion of the lender.

Other Types of Mortgages

Adverse Credit Mortgage – This is a mortgage for borrowers who have credit problems.

Buy to Let Mortgage – this is a mortgage placed on residential property which is let to tenants.

Deferred Interest Mortgage

Foreign Currency Mortgage – Debt is transferred into a foreign currency in order to reduce interest payments and capital based on exchange rate fluctuation.

Flexible Mortgage – This mortgage allows for additional payments of capital without a penalty.

Let and Buy – This mortgage allows you to let your existing property in order to buy a new property.

Non-Status Mortgage – This is a mortgage where the applicant’s income does not come into play.

Offset Mortgage – This is a mortgage where the interest can be reduced by offsetting a credit balance.

Understanding the UK mortgage market and various offers available to you can seem daunting. But do not be put off by researching what is the best type of mortgage for you and your situation.

With the new mortgage bill that became effective on March 2007, banks in Turkey started to ofer a variety of mortgage products to their customers, tailored to each individual’s needs. These products and the rates differ widely from bank to bank when you include loan duration, down payment, commission fees, prepayment options and fees etc. All of these variables make decision making much more confusing to the customer. In addition, when you add foreign currency based lending, different closing costs for each bank, expertise fees, etc, choosing the best mortgage product suitable for the customer turns into a multivariate optimization problem. Therefore, the role of the mortgage broker becomes critical. To better assist his clients and find the best mortgage product and the rate, a broker must have many years of experience in their fields, in finance, and in real estate business. In addition, it is vital that a mortgage broker must be equipped with the top of the line financial calculators and mortgage software, and access to up-to-date rates and products offered by banks.

Mortgage types being offered in Turkey can be classified as follows:

1. Fixed Rate Mortgages:

This is the most common mortgage type offered and given by all of the banks. The loan duration and the monthly payments are fixed and thus do not change through out the life of the mortgage. The borrower can payoff the entire loan with a prepayment option, however there is an early closing fee, which could be up to 2% of the loan amount.

2. Variable Rate Mortgages:

This type of mortgage is based on a variable rate specified by the bank and the federal bank and changes with the rate changes in the markets. Borrowers should pay attention to setting a ceiling rate when negotiating with the bank so that when the rates change their payments do not go above a certain rate. The early closing fee that exists in fixed rate mortgage does not exist in this type of mortgage.

3. All Inclusive Mortgage:

If the borrower wants to include all the fees associated with the purchase of his home and the mortgage in the mortgage, this type of mortgage would be the most ideal one. These fees are are realtor commision, life and porperty insurance premiums, disaster insurance, moving fees, closing fees, expertise fees, etc. The amoun of these fees depend on the property and the lender. However, all of these fees could be included in the mortgage and be bundled as the mortgage package.

4. Discounted Commision based Mortgage:

If the borrower is interested in low monthly payments, he/she then can choose to pay a commision up front which consists of a percentage of the interest that needs to be paid. After subtracting this amount from the loan, the monthly payments would be lower. These types of mortgages have higher closing fees than other types, however. The early closing fee aplies to this mortgage as well.

5. Mortgage with payments specified at different months:

If the borrower is interested in making payments on only certain months, then this type of mortgage would be the most ideal one.

6. Zero Down Mortgage:

For those who has another property, this property can be used as a collateral to finance the purchase of the next property. If the other property has a higher value, then the collateral could cover the entire mortgage of the new house, thus making it a zero down mortgage payment. One thing that the borrowers should pay attention to is that most banks give mortgages up to 80% of the value of the property.

7. Foreign Currency Indexed Mortgage:

In addition to mortgages given in YTL (New Turkish Lira) currency, banks started to give out mortgage loans in other currencies as well. Some of these currencies are USD, EUR, GBP, CHF, and JPY. These types of foreign currency indexed mortgages can be obtained both as fixed rate and variable rate mortgages.

8. Refinance Mortgage:

The refinance option is now available as well. In case borrowers are interested in refinancing their mortgages with lower interest rates, they can change the mortgage either through the bank that they obtained the mortgage of through any other lender. The only caviat in applying for refinance in Turkey is that if your mortgage was applied prior to March 6th 2007, there will not be an early closing fee. However, if it started after that date, then there will be an early closing or early prepayment fee applied which could be up to 2% of the loan amount. The borrower also needs to pay for all associated fees related to the new mortgage.

9. Home Equity or Personal Loan Mortgage:

If the borrower is in need of additional finances, he/she can choose to get a loan by using his/her property as a collateral. This loan could be applied to home improvement as well as any other personal need. They are usually given at a higher interest rate than other types of loans but less than regular personal loans.

At first it might sound like a really good deal, a way to pay off your mortgage in advance, while at the same time reducing the amount that you have to pay at any single point. Bi-weekly mortgage companies are growing in popularity due to their convenience and the savings that they seem to offer over a person’s standard mortgage, but just because they are becoming a more common payment alternative to regular monthly payment doesn’t mean that they are without risk.

How Bi-Weekly Mortgages Work

Bi-weekly mortgages are actually more of a sort of payment plan for your existing mortgage than they are a new loan… you make payments equal to one half of your total mortgage payment every two weeks to the bi-weekly mortgage company and place that money into a trust fund or money market account. The company in turn makes your actual mortgage payment for you when it comes due. Of course, the benefit of this is that you end up paying in the equivalent of 13 mortgage payments each year instead of the usual 12, reducing the total amount that you owe on your mortgage by that amount (and likewise saving you the interest that you would pay on that amount as well. Depending on the amount that you borrowed for your mortgage, this can result in you paying off your loan years in advance and can save you a significant amount of money.

Costs of a Bi-Weekly Mortgage

Unfortunately, bi-weekly mortgages aren’t without their problems. One of the more noticeable of these is the fact that the services offered by bi-weekly mortgage companies aren’t exactly free. There is generally a setup fee associated with the service, and sometimes an additional fee to set up automatic withdrawals from your checking account as well. Once automatic withdrawals have been set up, there is generally a small service charge associated with each withdrawal transaction. Some bi-weekly mortgage companies even charge an additional fee when your actual mortgage payment is made. While you will still end up saving both money and repayment time, you might find that the constant fees and service charges have taken away a significant portion of the savings that you were expecting.

Potential Problems

The cost of using a bi-weekly mortgage company isn’t the only potential drawback to this sort of service. If you are not careful in choosing the company that you use, you may also end up having problems with your mortgage lender itself. While you’re making payments to the bi-weekly mortgage company, you are still legally the one responsible for making your mortgage payments. This means that if there’s some problem with the payment that the company makes or it’s late in arriving at the bank or mortgage lender’s office, you’ll still be liable for any late fees or other penalties that might arise from the payment problem. You should be able to correct the problem with the bi-weekly mortgage company afterwards, but even so you’ll still have to deal with the hassle and the up-front expense of having to cover those fees in the first place. In the case of major payment problems, you may even have to cover the cost of the full payment in order to keep from falling behind on your mortgage while the errors are sorted out.

Other problems that could occur might involve the account that your money is stored in itself; money market and trust fund accounts generally aren’t federally insured, so if there is a major account problem that results in the loss of funds there may be few options to recover your money without legal action. This is generally a worst-case scenario, but without some form of insurance for the funds you pay you will be left responsible for your mortgage payments while trying to recover any money lost.

Increasing the Benefit, Reducing the Risk

One of the biggest risks that you take when using a bi-weekly mortgage, however, is simply the risk of paying that much money for something that you could do yourself just as easily. You can greatly increase your savings by working out your own bi-weekly mortgage equivalent, and should be able to pay off your mortgage even sooner. All that you need to do is take your usual mortgage payment and divide that amount by 12, then add that much to your mortgage payment when you make it each month. This will equal out to the equivalent of an extra payment each year, but because you’re paying it in each month you’ll save even more. Pay half of that into your own savings account every two weeks and you can earn interest on it as well.

An offset mortgage comparison is not as straightforward as it would first seem. This article will give an overview of an offset mortgage and discuss how to compare offset mortgages to help you find the right one.

Offset mortgages are fairly new to the UK market place. They were introduced to the UK in the late 1990s and originated from Australia. They were seen as a niche product, but this has changed since interest rates have decreased and the market has opened up. The principle of offset mortgages is relatively simple – when a borrower takes out an offset mortgage, it is linked to their savings and/or current account. This allows the borrower to offset their mortgage debt against the money in their accounts, thus reducing the amount of interest owed. For example, if a borrower has a £250,000 mortgage and £50,000 in savings, interest will only be charged on the difference, i.e. £200,000.

The range of offset mortgages within the market place has increased in recent years and consequently, offset mortgages have becoming increasing complex. For an offset mortgage comparison, you can’t just compare the Annual Percentage Rate (APR) as you would with a traditional type of mortgage. The APR has limited value with an offset mortgage because nothing else is taken into account, such as the flexibility of the account, set-up charges, and Early Redemption Charges (ERC).

To obtain an offset mortgage comparison, it is important to look at the key aspects of an offset mortgage and to ask yourself – ‘what can my offset mortgage do for me?’ Key aspects include:

Flexibility of the account

Overpayments – are you likely to make frequent overpayments into your mortgage account? If so, you will want an offset mortgage that does not penalise for frequent overpayments or penalise you for paying off your mortgage early.

Underpayments and/or payment holidays – do you want a career break with underpayments or payment holidays from your mortgage? Not all offset mortgages offer underpayments or payment holidays, whereas some types of offset mortgage offer the service, but you usually have to make a certain amount of overpayments before you are eligible.

Credit limit – will you need a lump sum of cash in the future, for example, home renovations? Some offset mortgages allow a credit limit on top of the agreed mortgage, depending on the amount of equity in the property, which acts as a loan facility.

Debt – are you carrying credit debt and personal loans? Some offset mortgages allow the debt to be incorporated into the mortgage package, possibly leading to a lower repayment rate. The debts can also remain unsecured.

Number of accounts – can you add more than one savings/current account to your mortgage? Do you have family members that are willing to link their bank accounts to your mortgage debt? If so, you can further reduce your interest payments.

Charges and interest rates

At first glance, an offset mortgage with an initial low APR for two years and low arrangement fees may look appealing, but if it has an ERC and no underpayment facilities, it would not be suitable if you wanted to make frequent overpayments to pay your mortgage off early, but were planning to have a career break in the future.

There are many lenders in the mortgage market that offer different types of offset mortgages. To guide you through the intricacies of an offset mortgage comparison it would be best to seek advice. An independent mortgage broker can advise you and help you with an offset mortgage comparison to ensure you can have the best offset mortgage for your needs.

Offset mortgage providers are increasing in number, and it is predicted that offset mortgages will account for 30% of all UK secured lending by 2009.

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.

Having a mortgage can be expensive; with the interest that is charged over the life of your mortgage, a large portion of what you end up paying is nothing more than interest payments and not the loan itself. Obviously it’s important to be able to pay off your mortgage as quickly as possible in order to keep the interest at a minimum, just as it’s important to make sure that all of your payments are made on time so as to avoid late fees or other costs. One option that can help you to pay off your mortgage early while giving you the added benefit of having to pay less at any given time is a bi-weekly mortgage.

If you aren’t familiar with the term, a bi-weekly mortgage is a payment plan which allows you to make a partial payment on your mortgage every two weeks. It’s not an actual mortgage loan, but instead is a service which will help you to pay off your mortgage faster than you would be able to by simply making your standard payments each month. There are a number of pros and cons associated with bi-weekly mortgage services, and you should stop and consider some of these in order to make sure that a bi-weekly mortgage plan meets your financial needs.

How Bi-Weekly Mortgages Work

When you’re using your standard mortgage payment plan, you’re making one payment every month for a total of 12 payments per year. With a bi-weekly mortgage plan, however, you’re making a payment equal to one half of your current payment every two weeks… this equals out to 26 half-payments over the course of a year. A bi-weekly mortgage essentially allows you to make one extra full payment each year, taking a full month off of your repayment schedule every year that you’re using the bi-weekly mortgage plan. Even though you have to pay a service charge to the company offering the bi-weekly mortgage service, the savings that you receive in interest works out so that you still save money even with the added fees.

Advantages of a Bi-Weekly Mortgage

Obviously, the biggest advantage to a bi-weekly mortgage plan is the fact that you can pay off your mortgage early and save a significant amount of money on the interest that you have to pay. For most homeowners, this savings will be quite significant as they will be able to pay their mortgage off as much as two or three years early. Since the individual payments are lower than they would be if you were paying the full amount once per month, bi-weekly mortgage payments can also be much easier to fit into your budget. Many companies who offer bi-weekly payment services will let you tailor your payment due dates so that they best fit your income, letting you make payments when you get paid.

Disadvantages of a Bi-Weekly Mortgage

While bi-weekly mortgage payments may sound wonderful, there are some drawbacks associated with them as well. Probably the most important of these is the fact that even though you’re making your payments to the service provider, you are still the one who is responsible for your mortgage. The service provider isn’t a lender and doesn’t have any sort of influence or control over your mortgage itself. They only make your mortgage payments once per month, just like you would; in the unlikely event that there’s some problem in processing the payment, you may be required to pay it out-of-pocket while the problem is sorted out or risk receiving late fees or an interest rate increase for a late payment.

Another main drawback to bi-weekly mortgages is that the service which these companies offer isn’t anything that you couldn’t do by yourself with proper budgeting. When it comes down to it, if you have the self-control to structure your budget similar to making bi-weekly payments you could actually save significantly more by doing it yourself than you would through one of these services. You will save more because the service will charge you a transaction fee for each time they process one of your payments (in some cases you may have a fee for each time that they receive a payment from you via direct deposit, for each time that they make a payment, and an additional fee for account maintenance.) Depending on how you budget your finances, you may also be able to pay off your mortgage even faster than you would through a payment service by simply setting aside slightly more than one half of your monthly payment every two weeks. This only applies if you budget your money, of course.

An adjustable rate mortgage, commonly referred to as an ARM, is a mortgage where the interest rate on the mortgage changes periodically, on a schedule, according to an index. The most common indexes used to determine the interest rates are:

One-year constant maturity treasury securities (CMT)
Cost of Funds Index (COFI)
London Interbank Offered Rate (LIBOR)
A lending institution’s own costs of funds.

The mortgage payment that you pay will thusly change, either up or down, to ensure a steady margin for the lending institution.

For many people who are looking at mortgages, the adjustable rate mortgage can seem like a great idea, however there are many pros and cons to an adjustable rate mortgage – items that need to be weighed over the short and long term to decide whether an adjustable rate mortgage is right for you or not.

The Pros of an Adjustable Rate Mortgage

The initial interest rate on an adjustable rate mortgage looks great on paper. Most often, the adjustable rate mortgage inserts rate is much lower than a fixed rate mortgage, which also means that the payment is lower. As a borrower, this lower interest rate can also mean that they can qualify for a higher loan amount if the lender is willing to base their ability to pay on the initial monthly payment amount. It’s important to do some research on the interest rates and see where they are sitting at in comparison to the six months to a year prior.

An adjustable rate mortgage is a good idea for people who only plan on staying in a house for a few years – from three to five years. Taking advantage of the lower interest rate that accompanies an adjustable rate mortgage is a good idea in this case. It means that you will ‘pay less’ for the home that you will be living in over the period of the three to five years, and gain more in equity in your home.

The Cons of an Adjustable Rate Mortgage

The biggest issue with an adjustable rate mortgage is that the interest rate will rise and thusly, so will your monthly mortgage payments. You have to decide whether the gamble is worth it or not. If you are looking at getting a raise in the next year from your job, then you may be able to handle an increase in your mortgage payments.

Some of the adjustable rate mortgages that are offered by lending institutions have a prepayment penalty, which you incur if you pay the mortgage off early. By having this prepayment penalty, you could be opening yourself up to a lot of strife – having a prepayment penalty on your mortgage contract is never a good idea because you simply just do not know what the future will bring.

You must also consider the payment cap. A payment cap sounds great – your mortgage payment can not go above “x” amount of dollars, however, that doesn’t mean that the interest charge is capped. If the interest rate raises high enough that you go over your payment cap, the lender adds the interest to your mortgage debt, which then finds you in the position of paying interest on the interest. This can translate to you paying much more for your home than you did when you bought it – this is called negative amortization. Many lenders have a cap on negative amortization that you can have, and if you reach that point, your payment cap goes out the window and your mortgage’s monthly payments are adjusted to begin repaying the negative amortization debt.

Factors that can go either way

There are a few factors of adjustable rate mortgages that can fall on either side of the pro/con debate. Due to the fact that there are many different types of adjustable rate mortgages available from different lenders, it’s important that you research the adjustable rate mortgage and find out whether it is right for you. Some of the ‘ambiguous’ factors that you have to consider can make or break the decision to go with an adjustable rate mortgage.

One of the first things you need to consider is the lifetime interest rate cap on the mortgage. This is the maximum amount that the interest rate can raise through the period of the mortgage. There are also the periodic adjustment caps that limit the amount that your mortgage interest rate can raise from one adjustment period to the next. The law states that adjustable rate mortgages have some type of lifetime cap.

Most lenders use one of the index rates to base their interest rates on. The index rates change and fluctuate with the movement of the economy. To determine the interest rate that you will be charged, the lender adds a margin (profit percentage) to the index rate. The margin that the lender will add is also important – it determines your future interest rates with an adjustable rate mortgage. The margin is different from lender to lender, so it’s important to find out what the margin is.

If you are looking to buy your own home you need to get a mortgage to finance the deal. A mortgage is a type of loan that is usually spread over 25 years, although shorter and longer term mortgages are available. This loan then is repaid in monthly instalments which are arranged by whoever a person takes their mortgage out with. The house is yours as soon as you have your mortgage in place, however once your final instalment has been paid you will then get the deeds to your house. This means that you legally own the house outright.

Why are there so many types of mortgages?

There are various types of mortgages such as repayment, interest only, endowments and bad credit mortgages. Depending on your circumstances you will get a mortgage to suit yourself. There is no right or wrong mortgage and what is good for one person is bad for another, it is down to the individual to decide what is the best for them.

Different types of mortgages

There are many different kinds of mortgages and here are some of them on the market..

• 100% mortgage – these are mortgages where the lender gives the borrower the entire amount of the house, this is good if you have no money to put down. As well as 100% mortgages there are also 75%, 80% and 90% ones. The plus points of a 100% mortgage is that you don’t need to provide a deposit, however as you are borrowing 100% of the cost of the house you may find that the repayment term is longer and the payments are higher.

• Capped – this is where the monthly mortgage amount is capped at a certain price. If the interest goes above this price you will still only pay the capped amount, and if it falls you pay less. A capped mortgage is a very good if you want to know exactly how much you will be paying for your mortgage each month. However, there are not many lenders who will offer this type of mortgage.

• Endowment mortgages – this type of mortgage pays off the interest on the loan and is supposed to pay out a lump sum at the end of the loan period which should be enough to pay off the outstanding balance. Unfortunately this rarely happens and as a result these are not very popular today.

• Repayment mortgages – these are one of the most popular kinds of mortgage. With a repayment mortgage the interest and capital is paid off with a person’s monthly mortgage payments. This means that at the end of the loan the house being mortgaged will belong to the person who has taken out the mortgage. Repayment mortgages are ideal if you want to pay off your mortgage in full within a given timescale. Payments on these however can be higher than other mortgages.

• Bad credit, or sub prime mortgages – if a person has a bad credit score such mortgages may be their only option. Sub prime mortgages are becoming more commonplace today as the number of people with a bad credit score is increasing. Plus points for bad credit or sub prime mortgages are that they enable people who may have had a difficult time financially get on the property ladder. As a result though the payments will be high and so will the interest rate as borrowers are classed as being a risk. If the payments are made on time it is possible after a while to switch to a better mortgage.

With so many types of mortgages available it really is wise to do as much research into them as possible before opting for any particular one.