Posts Tagged ‘mortgages’

We all know that putting extra payments down on your mortgage is going to pay off your mortgage faster and save you money. But what not everyone knows are the little insider tips that allow you to know to the penny, EXACTLY, when to use them to pay off your mortgage, how much to make them in, and exactly what you’ll save as a result.

See, it’s really NOT about how many you make, or how often, or even how much you make them in. When you’re trying to pay off your mortgage faster their is only one thing that matters.

Timing.

You see mortgages are structured pretty creatively. Mortgage companies tell you that you’re only paying the 5-7% rate, but they never explain what that really means. Our mortgage payments are almost completely wasted on interest at the beginning of our mortgage. This is what makes it so difficult to pay off your mortgage.

What it means is that a $4000 payment may only $250 of principle. The entire rest of that payment goes to PURE INTEREST. It’s basically burning a hole in your pocket when it should go to pay your mortgage off.

Now, here’s how to beat it. If you make a $250 principle payment on its own… right before you make the $4000 payment then guess what? You just completed that entire payment without wasting $3750 on interest. You moves you amortization down the line to pay off your mortgage. Sure, you’ll still have to make a $4000 payment, but you pay your mortgage off $3750 earlier and it only cost you $250! That’s how banks think.

If you could get $3750 for every $250 you put in, how many times would you do it? As many as you good and you wouldn’t just pay your mortgage off, it’d evaporate.

If this doesn’t quite make sense yet then grab a copy of your amortization schedule or The Mortgage Loophole Report and analyze how they’ll pay off your mortgage. You’ll see.

So…

Catch #1 - If you make a small prepayment at the beginning of the term, you’d pay off your mortgage MUCH earlier than you would by making a bigger principle payment at the end of your mortgage.

When you put the money in at the end you don’t even pay your mortgage off as fast or save near the amount of interest because most of your payment is going to principle anyway. As you pay off your mortgage they weaken. Your mortgage pay off time literally depends on this.

So, the secret to pay off your mortgage is to understand the way a mortgage amortization has been structures to accommodate certain methods to pay off your mortgage.

Catch #2 – Although you probably realize that this information is important to pay off your mortgage you probably won’t be able to apply it the the extent that you wish you could. Honestly, if you had all the extra cash to pay off your mortgage with, then you’d have made a bigger down payment on your home. It’s not until most of us have already been trying to pay off our mortgage that we start to get the extra cash to put towards the pay off.

There is a solution.

There is a “mortgage loophole” that home owners are finally realizing and using to pay off their mortgage. It truly is a revolution in the mortgage industry to help people pay off their mortgage. Don’t expect your local bank to tell you about it. They not only don’t want you to pay off your mortgage early but they haven’t been spreading the news among their mortgage brokers.

Anyway, I’d better stop upsetting banks with this insider information. Hopefully you can apply this information to pay off your mortgage immediately before your mortgage begins to amortize.

Also, if you truly want the keys to pay off your mortgage lightening fast and save big bucks, then grab your free copy of The Mortgage Loop Hole Report.

As the baby-boomers prepare for retirement reverse mortgages are going to be the next mortgage boom according to most analyst. The baby boom began in 1946 and continued through 1964. During those 19 years, 76 million people were born. As this segment of America begins to retire a large portion of them will need to rely on their homes equity to make “ends meet.” How they access that equity will be the mortgage industries primary focus in the years to come.

The traditional “forward” mortgage has the homeowner borrow the money by way of a traditional mortgage or home equity line and make payments on that amount. The homeowner takes the money, places it in a safe interest bearing account and uses the money to augment their income. The interest that is earned on the money is used to supplements the monthly payment that the homeowner has to make. The problem is that the interest shrinks as the money is used and the mortgage payments stay the same.

Reverse mortgages have actually been around since 1989, but their popularity is skyrocketing as a result of the wave of baby-boomers that are retiring. These mortgage products are safe and beneficial when applied to the right homeowner and circumstances. Lendfast.com recommends that borrowers use FHA-insured Home Equity Conversion Mortgage (HECM) when considering these mortgage products. Getting a reverse mortgage from the private sector may include more headaches and costs. However, as with financial product, there are some dangers that you need to be aware of; here are the top three reverse mortgage pitfalls to lookout for.

1) Repayment and Forfeiture – Most, if not all reverse mortgages will not require you to make payments or repay the loan for as long as you live. Once you pass on your heirs will have the opportunity to remortgage the debt or sell the house and repay the loan. If the home has equity above the amount owed to the bank your heirs will receive those proceeds. If the home is “upside down” your heirs have no obligation to repay the debt, but they will forfeit the home unless they pay the amount owed.

However FHA rules state: “When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender.” The danger here is “no longer use it for your primary residence. This means if you have to go to a hospice, nursing home or intend to live in another home and use the house as a second home the bank will call the debt due. This is definitely something you want to consider before taking out a reverse mortgage.

2) Cost and Interest Rates – At the inception of reverse mortgages they were almost exclusively offered with adjustable interest rates. Adjustable rates are still standard practice and you are almost certain to be offered this option to begin with. Don’t! There are fixed rate programs available now and at today’s rates adjustable rates are only going to go up in the future. It’s easy to be lured into an adjustable rate because lower interest rates in a reverse mortgage have higher monthly payments. If the interest rate increases your payment decreases, as does the time frame you have to draw on the mortgage. Just remember, adjustable interest rates are a gamble and Las Vegas wasn’t built on winners.

A considerable downside to reverse mortgages is the high up front costs. This cost can be compensated by a lower interest rate over time, but some seniors choose other options to draw on their home equity. Reverse mortgage closing costs should be about the same as most loans except the 2% mortgage insurance premium that FHA charges to insure the loan. FHA insures the lender will be paid regardless of the home’s value when and if the lender has to take over the property.

At Lendfast.com we have noticed that many homeowners are paying higher closing costs for reverse mortgages than traditional forward mortgages. We believe this is because most homeowners are unfamiliar with reverse mortgages and tend to not shop around as with traditional mortgages. This is why we recommend the FHA insured type of reverse mortgages because they have closing cost limits that lenders must abide by. Always get two quotes or use the “lenders compete” method to apply for a reverse mortgage. You should also read How Does a Reverse Mortgage Work an article that explains reverse mortgages better.

3) Upkeep, Taxes and Insurance – On traditional mortgages your escrow payments are added to your payment but they are subtracted from your monthly check on a reverse mortgage. Most of the time you will be shown the monthly amount you will receive each month BEFORE the escrows are taken out. This means that you could sign up expecting to get $900 per month and only receive around $700. Make sure you are given the monthly payment LESS your escrow payment. Like most mortgages you will usually be given the option to escrow or not to escrow, however the bank has a vested interest in your home. Meaning if you do not maintain your insurance and taxes as they deem responsible they can call the loan or force an escrow account on you.

When you consider that the bank is basically buying your home you can understand why they would want you to keep their property in good shape. The problem is that this loan is being made to senior citizens. As they age they may become unable to do the necessary maintenance that the bank requires.“Good shape” can mean thousands of dollars out of pocket for the homeowner when you consider what a new roof or a fresh coat of paint costs these days. Ask the loan officer what the lenders policy is on maintenance and repair. You may want to take enough money up front to have future repairs taken care of so that your monthly payment stays the same.

On July 9th, the Department of Finance moved to tighten Canada’s mortgages markets by announcing changes to the requirements for federally-backed mortgage insurance. The changes set minimum credit scores that home purchasers must meet to qualify for mortgage insurance on so-called ‘high-ratio mortgages” while restricting amortization terms to 35 years and requiring a minimum 5% down payment on mortgages insured through the Canadian Mortgage and Housing Corporation (CMHC) or other government-backed private mortgage insurers.

The tightening of Canada’s mortgage insurance rules, which will take effect on October 15th, is widely seen as a measure to further tighten Canadian mortgages market and forestall the credit problems that have crippled the U.S housing market. In announcing the changes, the Department of Finance characterized them as “a responsible and measured approach by the government to ensure Canada’s housing market remains strong and to reduce the risk of a U. S.-style housing bubble developing in Canada.”

Under the Bank Act, mortgages from federally-regulated lenders, including banks, credit unions, and caisses depots, must be insured where the value of the mortgage exceeds 80% of the value of the property or home being purchased or financed. Such high-ratio mortgages are insured primarily through the Canadian Mortgage and Housing Corporation, a federal Crown Corporation, but also through a handful of private mortgage insurers – Genworth Financial Canada, AIG and PMI Mortgage Insurance. The federal government guarantees the obligations of these mortgage insurers to lenders in the event of their not covering the costs of defaulted mortgages.

Effective October 15th, new federal rules will require that the loan-to-value ratios for federally-backed mortgages not exceed 95%, that amortization periods not exceed 35 years and that prospective borrowers have a minimum credit score of 620 and a debt service ratio (the percentage of income that goes to servicing existing debts and housing costs) of no more than 45%. The new rules will also require evidence of the reasonableness of the mortgaged property’s value and of the borrower’s source and level of income.

The new rule changes come at a time when Canadian real estate markets are already cooling off. Growth in housing prices showed a very moderate 1.1% year-over-year gain in May, according to the latest numbers from the Canadian Real Estate Association, as Canadian markets and consumer expectations have adjusted in response to the constant barrage of bad news about the worst U.S. housing market slump since the Great Depression and sobering forecasts about the state of a Canadian economy that is coming to grips with escalating energy and commodity prices.

The tightening of amortization periods and loan-to-value ratios will likely have a further dampening effect on Canadian housing markets, which already have sharply increased levels of resale and new home listings. However, this dampening effect may not be felt until after October 15th when the new rules come into effect. In the short term, the move to tighten mortgage lending standards could have the opposite effect – providing an impetus for Canadians to take the plunge into highly leveraged, no-money-down mortgages before the October 15th deadline.

(An October 15th implementation date was chosen to give home purchasers with mortgage pre-approvals the opportunity to exercise their options before the pre-approvals expire at the end of their usual 90-day term. Note, also, that the mortgages of existing home owners with high-ratio mortgages, amortization periods in excess of 35 years and substandard credit scores will be grandfathered under the new rules so that they will not be precluded from obtaining mortgage insurance when it comes time to refinance their homes.)

Industry feelings have been mixed about this latest move to ensure the solidity of Canada’s mortgages and housing markets. Most industry analysts applaud the move to ensure that Canadian home purchasers do not get sucked into the same speculative frenzy that fueled the meltdown of U.S housing prices when the sub-prime mortgage market unraveled. Other analysts seem to be expressing the view that this is a case of too-little-too-late or mere window dressing.

Derek Holt, Scotiabank’s vice president of economics, acknowledged that mortgage lending rules had been “modestly tightened” but noted that, “The changes are more about optics.” Meanwhile, a more pessimistic analysis came from BMO Nesbitt Burn’s deputy chief economist, who observed that the rule change is “a bit like closing the barn door after the horse has already run down the road.”

Canada’s mortgages and housing markets have not experienced the wild speculative bubble that erupted and burst south of our border, largely due to much more conservative lending practices here at home. Canadians were not privy to such innovative and speculative mortgage products as the so-called NINJA mortgages (“no income, no job, no assets), where borrowers could qualify for mortgages without adequate proof of income or employment that would enable then to afford the requisite mortgage payments, and only a small percentage of Canadians took out the sub-prime mortgages that scuppered U.S. markets. As a result, the percentage of Canadian mortgages in arrears are at the lowest levels – 0.27 per cent – they have been at since 1990, whereas Americans are facing mortgage foreclosures at a rate not seen since the Great Depression. This tightening of Canada’s mortgage insurance rules seem to be largely a pre-emptive move to reassure Canadian markets and ensure that Canadian home buyers do not go down the same path trodden by snake-bitten home buyers south of the border.

100% Mortgage – This is when you borrow the full property value from a mortgage broker. This type of mortgage requires no deposit or down payment, and is therefore popular with first-time buyers. However, because of the credit crunch, 100% mortgages are hard to come by.

Adverse (or bad) Credit Mortgages – These are, as the name suggests, available to people with a low, or nonexistent, credit score. These are increasingly hard to come by, and usually have a very high interest rate attached. It’s better to rent and work on improving your credit score before applying for a mortgage. They are also known as sub-prime mortgages.

Base Rate Tracker – Interest rates on all mortgages fluctuate, but a Tracker mortgage will vary depending on the base rate set by the Bank of England. For example; if the deal you find offers base rate plus 0.75% for life, you will always pay exactly 0.75% over the base rate, whatever it is. The advantage of this is that if the base rate goes down, so do your repayments, and quicker than with a standard variable mortgage (covered below).

Capped Rate Mortgage – Another rare deal, the capped mortgage guarantees that you will not pay more than a pre-determined amount of interest on your repayments over a set period of time, no matter how much they go up. The admin fees on this type of mortgage are usually higher than on more standard deals, but there is the advantage of knowing, at least for a few years, that your payments won’t rise above a certain level.

Current Account Mortgages – Relatively new on the mortgage market, this type of mortgage, often called a combined mortgage, works like a bank account. You get a fully functioning bank account with direct debit facilities, chequebook and statements, and your earnings are paid into this account. The amount of the mortgage is also paid into this account, and it works like a big overdraft – you can borrow money from it to pay for holidays etc, but this theoretically gets repaid as your wages are paid in. the temptation is to borrow a little too much when faced with such a large amount of cash, so this is only really good for those who can manage their money well!

Divorced Mortgages – Some lenders recognise that a couple in the midst of divorce, or a newly divorced homeowner, may need special assistance. Therefore, certain mortgages come with a fixed interest rate for up to 5 years, with an interest free period for the first few months. For the new divorcees buying a home, alimony payments can be calculated into the income when determining a mortgage limit. These mortgages are often 100% deals, and are only offered to divorcees.

Endowment Mortgage – These mortgages are linked to the Stock Market. Often called an ‘interest-only’ mortgage, your monthly repayments only cover the interest due; the idea being that your investments will do well enough to pay off the whole capital at the end of the term. Of course, if your investments fail to make you money, you could be faced with a huge debt at the end of the term.

Fixed Rate Mortgage – Like all mortgages, this has good and bad points. You get a fixed monthly payment amount for a set term – usually between 1 and 5 years – and during this time you are guaranteed to pay that amount no matter what happens to interest rates. It’s good because you know exactly what you’ll be paying for that term but at the end, you might be in for a nasty shock if rates have risen substantially. In addition, if rates drop below the rate you’re paying during your fixed term, you’ll be paying more than you would on a different type of mortgage.

Flexible Mortgage – This type of mortgage deal has massive benefits as it allows you to vary your mortgage payment amounts, under- or over-pay as needed, and even miss payments altogether if you need cash for a holiday or Christmas. Potentially you could save thousands in interest if you pay off this type of mortgage early, as there are no repayment penalties as with other deals. But again, you need to be responsible with this as the interest will keep mounting up during a payment holiday.

Guarantor Mortgages – A guarantor is a person who acts as a kind of financial backup for a borrower. In the case of mortgages, the guarantor would be responsible for repayments should the borrower default. It’s a huge responsibility which involves a lot of trust on both sides, but for a first-time buyer it can be a good solution to a first mortgage. A guarantor needs to prove that they could afford your repayments as well as their own commitments in the event of a default. Most lenders will look favourably on an applicant with a guarantor, so it’s worth securing one even if you don’t foresee any problems.

This concludes part one of the mortgages guide. Part two will cover more mortgages such as offset mortgages and the classic repayment mortgage.

Investment Mortgage – More commonly known as a buy-to-let mortgage, this type of deal involves getting a mortgage on a property which you intend to rent out to someone else. Instead of being calculated according to your income, an investment mortgage is calculated based on the projected income from your investment, for example a house being rented out as student accommodation. A BTL mortgage deposit is typically 10%, and is available is a repayment or interest-only option.

Key Worker or Shared Ownership Mortgages – These are a newer type of deal which allows someone in rented accommodation from a Council or housing association to purchase part of the property they occupy, while still paying rent on the other half. This option is also available for ‘key workers’ such as nurses, teachers or police officers, who are typically on lower incomes. First-time buyers can also benefit from these schemes, as there are some which allow part-purchase of new homes from participating builders.

Offset Mortgage – If you have substantial savings, an offset mortgage can be a great way to keep your repayments to a minimum. It takes the amount you have in a savings account and counts this towards you total mortgage debt and therefore reduces the amount you owe. When you earn interest on your cash savings, you avoid paying interest on the equivalent amount of your mortgage. The principle is similar to a current account, or combined mortgage (see part 1).

Overseas Mortgage – This is self-explanatory; it’s a mortgage you take out on a property abroad. It typically involves more work and potentially higher admin costs, and of course if you’re planning on renting out the property to tourists you need to make sure the demand is there. But if you choose the location carefully you could reap the rewards and recoup your initial costs. Different countries have different property laws so you’re better off consulting with a specialist overseas mortgage broker before making any final decisions.

Pension Mortgage – This is a form of endowment mortgage, with the repayments going towards paying the interest each month. But instead of investing directly in shares, a pension mortgage requires you to pay an additional sum into a pension plan to cover the capital at the end of the term. This is still tied to the Stock Market and therefore cannot guarantee to cover the whole capital at the end. Payments into the pension plan must be kept up regardless of other financial hardships if the final sum is to stand a chance of clearing your capital, but as a pension plan is not legally accessible until after the age of 55, some of the temptation to spend it is removed. One major disadvantage this has over a repayment mortgage is that there is no opt-out; you’re tied to the deal until you reach retirement age. Potentially this could mean a term much longer than the standard 25 years, and therefore more interest would be paid.

Repayment Mortgage – We come to the mainstay of the mortgage industry, and the most common type of deal. A repayment mortgage is the only way you are guaranteed to have full ownership of a property at the end of the term, provided you’ve kept up with repayments. The amount you pay each month on this type of mortgage is used to pay off part of the interest and part of the capital, so there is nothing left to pay at the end of the mortgage period. The early years of a repayment mortgage are mainly spent paying off the interest and only a small amount of the capital, but this is often preferable to other types where you pay off nothing but the interest.

Remortgage – If you’re part-way through paying off your mortgage, and find you need a large amount of cash for repairs, renovations or perhaps even a holiday or wedding, you could remortgage your home and release some of the equity on it. This often involves switching lenders to find a better deal i.e. a lower interest rate, or perhaps taking out a new mortgage for the full property value and using this cash to pay off your current, lower, one. But be careful if you decide to do this, as there may be an early repayment penalty on your existing mortgage.

Self-certification Mortgage – Often assumed to be only for the self-employed, this type of mortgage is useful for anyone who cannot guarantee or prove an exact income amount or do not wish to disclose their total annual salary. People such as seasonal workers or freelancers, or perhaps company directors who do not have a fixed annual salary are all eligible for a self-certification mortgage. Other than the standard credit checks, there are no checks made on your financial status, income or employment record, so it stands to reason that a good credit rating is necessary for this mortgage.

Standard Variable Rate Mortgage – An extremely common type of mortgage, this takes its interest rates from the base rate like a tracker mortgage, but charges a higher additional percentage. So, the interest rate you pay will fluctuate when the base rate does, but you may pay 2% over instead of 0.75% (see part 1 of this guide for more details on base rate tracker mortgages). In addition, any drops in the base rate won’t necessarily pass benefits to you straight away, as the interest on these mortgages tends to be calculated monthly or annual rather than daily. Those with poor credit scores will end up paying a higher additional percentage than those with good credit histories.

It’s important to remember than none of these mortgages are mutually exclusive. For example, you could have overseas mortgages with capped rates, or remortgage from a tracker base rate to a standard variable rate. In all circumstances, it’s best to seek expert advice and shop around for the best rates.

Buying real state properties could be the one amongst your most important investments. Purchasing real state properties in San Mateo (California) is very exciting but for making quick and better decisions you should be well prepared of all the real estate buying aspects. It pays to get your-self acquainted with the major steps involved in purchase of any real state properties in (California). Purchasing or buying real estate properties in San Mateo can be a complex procedure where several important, legal, financial details are required. A close study and a deep understanding can help in having better real estate buying experiences in California CA.

Here are some of the important guidelines to know before you purchase any residential or commercial properties in San Mateo Real Estate California CA

Step 1: The prime and first stride is to figure out your purchasing power and decide how much you can afford to pay. This saves your time by allowing you to focus on only specific price-range real estate properties. Verify your credit report to examine your credit worthiness and clear up problems if any before going to a lender. A good credit rating will result in receiving lower interest rates. The mortgage you get is largely dependent on your credit history, as all prospective lenders will have a look at your credit report before offering you any loans or mortgages.

Step 2: After that it is very essential to get pre-approved for a mortgage from a mortgage broker or lender, with an assurance to fund your mortgage in writing. Many people frequently avoid this step and choose to look out for real estate before getting a mortgage pre-approved. Moreover, you should examine potential lenders after you have your credit check. The lender like brokers, banks can check out your credit history, and give you an official letter stating how much of a mortgage you qualify for. In addition to this look out for several payment options and pre-payment options.

Step 3: Now it is very important to identify what you are looking for. It is very vital step to list down on paper what you actually want in your real state property. Prepare a list of all the specifications you want in your residential or commercial properties and prioritize them based on your requirements. Performing this exercise will really narrow down your search and will simplify your process when the time comes to truly go out for searching real estate properties.

Step 4: Now after you have recognized what you want in your real estate property, the next logical step is to get good real estate agent who can assist you in locating a property in a wanted location. Finding the right real estate agent or realtor can make easy for you to buy any real estate properties. A reputable real estate agent can assist you in having right residential or commercial properties, while focusing your likings and price range in mind.

Step 5: After viewing many San Mateo real estate properties, hopefully you may find some properties that you would like to consider more seriously. Now after your agent provides you with a list of properties that are reasonable and match your criteria, there are certain critical aspects of property that you have to be very sure like its structure, features or how much renovations may be needed and many more. Consider factors like safety, school districts, freeway access, recreational options, work commute time etc.

Step 6: When you and your San Mateo real estate agent finally derive to the conclusion to have a specific real estate property then you can make an offer. But before making an offer compare its price with other properties in the area. Get your real estate agent to evaluate the value of the property.

Your real estate agent should be actively involved in brokering the offer, as they can give advice you on a realistic offer that further optimize your chances of buying that property. Don’t get into any negotiations with that agent without the presence of your own agent and if all looks good, then write an offer.

Step 7: Once you have made the offer or the offer has been accepted, now you must confer with your San Mateo ca real estate agent to find out when real estate inspections should be handled. But this step is valid only when you make an offer on houses, townhouses, condominiums, and cottages.

Consult your real estate agent to obtain only professional inspections necessary to answer any questions you may have about the property. Some concerns may include: the condition of the roof, foundation, walls, ventilation, insulation etc. You should not close the deal until all home inspection has been completed.

Step 8: After you and seller have agreed to the deal, then plenty of administrative tasks need to be done in order to finalize the deal. You must try to reduce everything to Black and White so that there are least problems later on. However, in this step you should be focused and try o avoid any changes that can affect your mortgage payments. Also be sure to have a proper sale-deed if possible through a qualified or experienced document writer in the industry. The final sale-deed should be registered at the suitable local area office.

A mortgage calculator is a useful tool to help we budget for our new mortgage. A good mortgage calculator allows us to calculate our monthly payments based on our desired interest rate, taxes, and insurance. Here is how this useful tool can help we avoid common mistakes when refinancing our mortgage.

Mortgage calculators can provide us valuable information about our mortgage. A good mortgage calculator will show us monthly payment information and amortization tables to help us understand how our mortgage works. Amortization with a mortgage calculator describes the process of paying interest and principle graphically; using a mortgage calculator can help us get our head around a complicated financial concept like amortization.

In many parts of the country the average price for a home has gone up significantly over the past few years. This makes it difficult for many people to qualify for the financing they need using a traditional mortgage lender. Many of these individuals have turned to 80/20 mortgages to secure 100 percent of the mortgage financing they need.

Internet mortgage leads are indispensable for mortgage lending companies and brokers. The mortgage leads are lifelines to their business. That’s why they always look for qualified and cost-effective Internet mortgage leads. Borrowers often search for mortgage lending companies on the web. Initially they get in touch with the lead generation companies with their loan requests. They submit their requests to the mortgage lead generation companies by filling out an online application form. The lead generation companies send the applications, after screening them carefully, to the mortgage brokers and lending companies. Here the screening is necessary to ascertain the reliability of the loan application. The mortgage applications then become leads. Mortgage brokers and lending companies in turn contact the borrower via e-mail or telephone.

Lead generation companies use advanced technology to find suitable Internet mortgage leads. Here the quality of Internet mortgage leads depends on how sophisticated the lead generation process is. Mortgage-generating companies always aim to offer suitable and profitable mortgage leads to lending companies.

The major advantage of a fixed rate mortgage is that it presents a predictable housing cost for the life of the loan. A fixed rate mortgage guarantees that our interest rate stays the same, which means that our monthly principle and interest payments through the entire term of the mortgage remain unchanged. With a fixed rate mortgage, our monthly payments would only increase due to increases in property taxes or insurance rates.

In general, fixed rate mortgages are seen as the safer alternative to an adjustable rate mortgage. An ARM is considered riskier than a fixed rate mortgage because our payment may change significantly. If we have an ARM, it may be best to lock in a fixed rate mortgage now, in advance of our current loan adjustment.

To learn more details about this website, visit- http://www.inlinebusiness.com/adwatcher/tracker.php?t=3

As everyone knows, buying a home is stressful and one of the most important decisions that one has to make is what kind of mortgage to get. Choosing the mortgage that works best for you and addresses your specific needs can potentially save -or cost you -thousands of dollars over the length of the mortgage.

Perhaps the biggest decision is whether to take a fixed rate (FRM) or an adjustable (ARM) mortgage. A fixed rate mortgage is just that -the interest rate on your loan will not change even if interest rates go up or down. An adjustable rate mortgage will go up or down, depending on the prevailing interest rate at the time. It all depends on the state of the economy, your personal and financial situation and just how much of a risk you want to take. Around 70% of all mortgages are fixed rate.

A fixed rate mortgage offers stability -you do not need to worry about your monthly payment going up, although you may be missing out on a better rate. An adjustable rate mortgage carries an interest rate that is connected to the prevailing market rate -the monthly mortgage payment will be more or less, depending on what the market rate is doing. An adjustable rate mortgage does offer some safeguard – there may be a limit on the amount the rate can change during a certain period; there may also be a limit on the amount that rates can be increased over the length of the loan.

A change in the interest rate can mean a big difference in how much you pay for your home. An interest rate of just one point less can mean a savings of around $50,000 on the average thirty-year mortgage and around $5,000 on the average 15-year mortgage. In addition, an increase in the interest rate of just one or two percent can mean monthly payments that are between $50 and $250 higher. Another option is to take out the fixed rate mortgage and then re-finance if interest rates go lower.

The length or term of the mortgage is also important. Most home buyers opt for the traditional 15 or 30 year mortgage, but it is also possible to take out a mortgage that is 10, 25 or even 40 years. It all depends on how much you can afford to pay each month and how quickly you want to own your home outright -obviously, the shorter the term of the mortgage, the higher your monthly payments are.

It is also possible to take out a 30-year mortgage and when you can afford it, pay more towards the principal, thus making the term shorter. Simply making an extra payment a month will significantly reduce the term of the mortgage -as well as saving a substantial amount in interest charges. If you pay extra, make sure the payment is going towards the principal, rather than the interest.

There are some other options available. An option adjustable rate loan has an interest rate that adjusts every month -it allows homebuyers to enjoy lower monthly payment amounts at first and then to make higher payments later, when they can better afford it. A so-called balloon mortgage offers a payment schedule similar to the traditional 30 year mortgage -but with a shorter term of up to seven years. At the end of the term, the buyer must pay the outstanding balance.

You may also be eligible for an FHA (Federal Housing Authority) loan -a fixed rate mortgage that is designed for home buyers with a low income or poor credit, who are buying a home for the first time. An FHA loan usually requires less of a down payment and offesr a lower interest rate than a regular mortgage. An FHA mortgage loan is also secured to the lender in the event of default by the purchaser.

Another option is a VA (Veteran’s Affairs) mortgage, which applies to buyers who have experience of serving in the military, as well as a surviving spouse. VA loans have several advantages – it’s possible to get a mortgage with little or no down payment, the loans are assumable and there is no penalty for prepaying the loan. However there is a maximum loan amount – in most states this is $417,000 -and you still have to qualify as far as income and credit are concerned.

Your home is probably the biggest single purchase you will make. It is worth taking the time to find the mortgage option that works best for you. The types of mortgages that are available all affect your payments differently. The type of mortgage chosen mostly depends on personal income and the length of time in which you are looking to pay for the mortgage.

1. Am I eligible for a Reverse Mortgage?
• To qualify for a reverse mortgage, you must:
• Be at least 62 years old. In the case of a couple or co-owners, both must be 62 if they want their names to be on title of the home.
• Be a homeowner with enough equity in the home.
• Seniors may qualify even if they have an outstanding balance on a mortgage.
• Single-family homes and qualified condominiums, townhouses, manufactured homes, and 2 to 4-family owner occupied residences are eligible.
• Reverse mortgages are available only for homes occupied by owners as a principal residence.
• Can own up to 4 dwellings.

2. Are Reverse Mortgages legitimate?
Yes. Reverse Mortgages are federally regulated and insured and are safer than most traditional mortgages.

3. If I get a Reverse Mortgage that means the government holds title to my home?
False. Title does not get transferred into the governments name. Throughout the life of the loan, you own your home.

4. If I decide to sell my home, will the lender make me pay back the loan and will they collect a portion of the appreciation?
False. The lender will only collect the amount that is due to them. If the loan balance is larger than the home value, the lender will only collect the proceeds from the sale. You can never owe more than what your home is worth.

5. What do I have to pay to get a Reverse Mortgage?
In most cases there are no out of pocket costs to get a Reverse Mortgage. All costs deferred and only due when the homeowner moves out permanently, sells the home or passes away.

6. What are my payment options?
You decide how to receive the money generated by a Reverse Mortgage. In general, your payment options are:
• An upfront lump sum payment.
• Line of credit.
• Fixed monthly payments for as long as you remain in your home (or a predetermined, shorter period).
• A combination of lump sum, monthly income and line of credit.

7. Are Reverse Mortgages only for desperate seniors, or for the “House Rich, Cash Poor?”
False. The Reverse Mortgage is an excellent financial planning tool that has been used by homeowners from all walks of life to enhance their retirement years. While some have needed the cash from a reverse mortgage more than others, the growing popularity of this product is evidence of its benefit in a wide array of financial circumstances.

8. Am I required to pay anything during the course of the Reverse Mortgage loan?
No. The flow of payments is reversed during the term of the Reverse Mortgage – the lending institution pays you. However, you are responsible for keeping up payments for your homeowner’s insurance and property taxes, and to maintain the condition of your home.

9. What happens when my house gets passed to my heirs?
Once your home is passed to your heirs, the Reverse Mortgage comes due. Your heirs may either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage. If they sell the home, they get to keep any excess sale proceeds.

10. Can I do a Reverse Mortgage if there already is a conventional mortgage on the home?
Yes. Existing mortgages must be paid off at closing. The proceeds from the Reverse Mortgage may be used for that purpose. This will eliminate any monthly mortgage payments.

11. Can a Reverse Mortgage be closed in a living trust?
Yes. Generally this is acceptable. The complete trust documents will need to be copied and put in as part of the file.

12. Will a Reverse Mortgage affect my Social Security, Medicare or pension benefits?
No. Proceeds from a Reverse Mortgage do not affect these benefits.

13. Can I get a Reverse Mortgage from anyone?
No. Only federally approved lenders may offer HUD insured reverse mortgages. Rob Jones will close your Reverse Mortgages up to three times faster than the competition. Why not use a pioneer in the reverse mortgage profession, Sun American has over 20 years of Reverse Mortgage experience.

14. How do I get started?
Call Rob Jones at Sun American Mortgage. He will need your birth date, approximate value of your home and the amount of money remaining on your mortgage, if any.

With housing prices stalled, or even having falling in some local markets, Canadian home owners seeking mortgage refinancing and who are looking at a high ratio mortgage – i.e., home owners who are refinancing a mortgage where the mortgage exceeds 80% of a home’s current market value, or those looking at a second mortgage but who lack the requisite 20% down payment – need not be discouraged. Mortgage loan insurance is available, and affordable, commercially through the Canadian Mortgage and Housing Corporation (CMHC), a federal crown corporation, or through private mortgage loan insurers such as Genworth Financial Canada.

Most federally regulated lending institutions in Canada – the banks, credit unions and caisses populaires that compete for the bulk of the Canadian mortgages market – are prohibited by regulations under the Canadian Bank Act from providing mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or property purchases with less than a 20% down payment.

Homeowners who initially started out with a high ratio mortgage, or whose home equity is flirting with the 20% equity ratio under the Bank Act can readily access affordable mortgage loan insurance for high ratio mortgages. The CMHC explains that “mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with little or no downpayment – with interest rates comparable to those with a 20% downpayment.” Similarly, mortgage insurance is available for high ratio second mortgages where home owners do not meet the 20% equity threshold and need financing but are unwilling or unable to renegotiate their first mortgage because the interest rate on their first mortgage loan is significantly lower than current interest rates, termination penalties are too high, or they would not re-qualify for the same mortgage amount today.

As with any other form of insurance, there are insurance premiums to be paid, although they need not be prohibitive nor unduly expensive. Insurance premiums for high ratio mortgage loans vary and can range between 0.65% and 2.75% depending upon how much of the home’s value is to be financed.

The structure and costs of a high ratio mortgage will, of course, vary between lenders, as will the price and coverage for mortgage loan insurance. The best step for a homeowner who is looking at his or her refinancing options and is at or past the cusp where mandatory mortgage insurance coverage kicks in, is to comparison shop with the assistance of an experienced mortgage broker. The options that are available when looking at refinancing a high ratio mortgage or financing a high ratio second mortgage can vary significantly between lenders and insurers.

Some options that are available to qualifying home owners who are looking at a high ratio second mortgage include:

- High Ratio, equity based 2nd mortgages up to 85%
- Insured second mortgages that are typically available for up to 95% of the property value;
- High-ratio second mortgages that are usually available for up to 100% of the property value, albeit with limited fees;
- Open 2nd mortgages and Lines of Credit typically available for up to 90% of the property value;
- Mortgage amortizations of up to 35 years, or interest only mortgages; and
- Loan terms ranging from 1 – 5 years.

Those homeowners who are looking at refinancing and are faced with the prospects of refinancing with high ratio mortgages, or who may be seeking second mortgage financing in order to avoid the real and hidden costs of refinancing their first mortgage, should seek the services of an accredited Canadian mortgage broker so that they can investigate the full range of mortgage and insurance options that are available to them.

With so many different types of mortgage available, it’s difficult to determine the right one for you. Before you start looking at available mortgages, however, it’s important to first evaluate your finances, as your financial situation is an important factor that will dictate the type of loan you need, and how much you can afford to borrow.

Step One: Evaluating Your Finances

Before you even think about the type of mortgage you should obtain, it’s important to evaluate your financial situation. Check your credit rating and FICO score, evaluate your income and debt level, figure out the size of the down payment you can afford, and determine how much mortgage you can afford and what your credit rating will allow you access to.

When it comes to your credit rating, know that between 620 and 699, you’ll probably pay a higher interest rate than if your credit rating is over 700, due to a slightly higher perceived risk on the part of lenders. If your credit rating is below 620, you may find it’s better to wait and improve your credit rating rather than be forced into a sub-prime mortgage with a high interest rate.

Step Two: Choosing the Best Mortgage

Once you have completed an evaluation of your financial situation, you’re ready to start thinking about the kind of mortgage you want. The mortgage that best suits you will depend on a long list of factors, not all of which are related to the amount of money you have for a mortgage. Think not only about how much mortgage you can afford, but also your credit rating, how long you plan to stay in the home, and whether you think your plans or financial situation might change in the future.

So what are your main mortgage options?

Fixed rate mortgage

Normally a 10, 15, or 30-year mortgage, you pay the same interest rate over the life of the loan.

Good for: If you like the security of paying the same amount every month and you’re planning on owning the home long-term, this is definitely the best option. There are some variations on this theme, including jumbo mortgages, which are larger-than-standard loans with a slightly higher interest rate.

Adjustable rate mortgage

These are mortgages with adjustable interest rates, which come in several different varieties. When you first get an adjustable rate mortgage the interest rate is lower than that you’d get with a fixed rate mortgage. However, at intervals, the interest rate can increase or decrease according to current market rates. This means your monthly repayments aren’t fixed, so these types of mortgages are more risky in comparison to fixed rate mortgages.

Good for: If you want a mortgage with an initial low rate and you’re prepared to take a risk on later rates (or you only plan to own the home for a few years), this may be a good prospect.

Interest-only mortgage

The standard type of mortgage is amortized, meaning your monthly repayments include both principal and interest. An interest-only mortgage is just what its name suggests – your monthly repayments don’t have to include principal (but you can pay off principal amounts at any time). This means you are not building up equity in your home while you’re only paying interest, but there are no pre-payment penalties.

Good for: This type of loan can work well if your income is at a consistent level overall but is subject to highs and lows, since you can pay off extra principal when you can afford to do so, and pay interest only when your income is at a lower level.

Balloon mortgage

This type of mortgage has a fixed interest rate and stable repayments over the life of the loan, with lower repayments in comparison to a fixed rate mortgage. However, the terms of the loan are generally short, with three, five, and seven years being the most common options. At the end of this time period, the entire balance of the loan is due. The final payment is typically very large, so a balloon mortgage is one which shouldn’t be taken lightly.

Good for: This type of mortgage can be a good option if you plan to stay in the home long term, want to get your mortgage paid off quickly, or if know you can afford the balloon payment. Alternatively, a balloon mortgage can be useful if you know you’ll be moving or refinancing before the balloon payment is due.

30-due-in-7

For the first seven years of the mortgage you have a fixed interest rate which is generally lower than that of a standard fixed rate mortgage. In the eighth year of the mortgage, the interest rate changes to be in line with whatever the current rate is at that time. For the remaining 22 years of the mortgage, the interest rate stays fixed at that rate. Another option is a 30-due-in-5 mortgage, where the interest rate changes in the sixth year.

Good for: These mortgages can be a good option if you’re planning to stay in the house for more than five or ten years and you are willing to risk the possibility that your monthly payments may change substantially when the second interest rate is due.

Purchasing a property, especially in real estate is a big financial leap for anyone. This is why you would need to get all the help that you can get so you can land a good deal and avoid unnecessary hassles in the future.

A title company is one of the best choices in aides when it comes to buying a home. Why? Because they’ll do most of the dirty legal work that you might find hard to do on your own. They will look at every nook and cranny of the property that might turn out as a complication for you once you’ve already purchased the home and clean it, so you can have a good title.

Title company duties and how they can make your life easier

Tons of title companies have already made their mark in the real estate business, having helped both the sellers make a better sale and the buyers get the best worth of their money. How they do it is based on their duties.

Again, as said earlier, these companies will make your life and home buying process a lot easier by handling the important things that you will find difficult to do on your own. One of these duties is drafting an “abstract of title” of the property you’re about to purchase. In order to complete this ‘abstract’, they would need to do a little investigation and digging into legal and public documents, which might be tiring for a regular homebuyer to do.

This little investigation will look into the background of the property. As it has already been owned at least once or twice before, surely, there’ll be a good number of paper trails on it, and some might not be too desirable for any home buyer. The title company will look for those and have them fixed for your benefit.

The things a title company will look into will include possible financial and legal hassles the property can pose to the new owner. For example, the company will look at open mortgages on the deed, as well as judgments and other kinds of lien that will be troublesome for an uninformed new homeowner. It will also look at the property’s tax records and bring to attention any unpaid taxes. Then, it will also look at the legality of the sale, like whether the selling party is fully entitled to put the property on the market and whether the posing homeowners are the real deal. It will also dig in possible disputes and claims that can prohibit or limit your use of the property or even grant the said use to other people who are not the property’s owners.

After drafting the abstract, the title company will then see to it that the arrangement of the legal papers and documents for the closing of the transaction will move forward. It will issue the “title opinion letter” or the “Commitment of Title Insurance”, depending on whether title insurance is needed or asked for the property, and then wait for the papers to be furnished, set down all of the fees you’d need to settle, and make sure that all of the documents are completed and filed.

APR – This stands for Annual Percentage Rate. It enables you to compare the full cost of the mortgage. Rather than just being an interest rate, it includes up front and ongoing costs of taking out a mortgage. The formula for calculating APR is set by Government Regulations and therefore enables direct comparison of the cost of mortgages.

Capital and Interest Mortgage – This is when part of your monthly payment contributes to paying off the outstanding mortgage in addition to paying the interest on the mortgage. The payments are structured so that at the end of the term, your mortgage will have been completely paid off. For this reason this type of mortgage is also called a Repayment Mortgage.

Capped Rate – This is a mortgage where the lender agrees that the interest charged will never exceed a specific percentage. This deal lasts for a set period of years. After the set period, the rate usually reverts to the lenders standard variable rate. During the capped period, the interest charges can move up and down with the lenders interest rate – but cannot exceed the capped rate.

Cashback – An amount, either fixed or a percentage of a mortgage, which you can opt to receive when you complete your mortgage. The lender may well claw back this money through a higher interest rate.

CAT marks/standards – CAT stands for Fair Charges, Easy Access and decent Terms. They were created by the Government in an attempt to provide consumers with simple, clear financial products with straightforward, easy to understand terms. A CAT mortgage will have no arrangement fees, no redemption fees and will have interest calculated daily. It will also have a minimum loan of just £5000, offer you repayment flexibility and the mortgage should be portable should you move home. Finally, you will not have to buy the lender’s insurance products and there will be no penalties should you find yourself in arrears but can subsequently catch up.

Completion – This is end of the house buying process, when the funds are transferred and the keys are handed over. Happy moving!

Contract – A contract is a binding agreement between the buyer and seller. In the context of house buying, after the contract is signed by both the buyer and the seller it is then ‘exchanged’ between the respective solicitors for a set completion date. At that point, the contract is legally binding on both parties.

Conveyancing – This is the legal process in which property is bought and sold. You can do it yourself or hire a solicitor or specialised conveyancer to perform the tasks for you. The buying of a freehold is much less complicated than the buying of a leasehold.

Discounted Rate – This is where the lender makes a guaranteed reduction off the standard variable rate for an agreed period of time. After the discounted period ends, the mortgage usually moves to the lenders’ standard variable rate. Watch out for redemption penalties that overhang the initial discount period.

Early Redemption Charges – Redemption is when the borrower pays off the capital and the interest on the mortgage and thus owns the property outright. Early redemption fees are the charges incurred for paying off the mortgage early, either to buy the house outright, move or re-mortgage. Always ask about early redemption charges before you agree a mortgage.

Endowment – Endowments are life assurance policies with an investment element designed to pay off the outstanding capital on an interest-only mortgage. There are a few types of endowments, such as ‘with profits’, ‘unitised with profits’ and ‘unit-linked’. In the 1980s, these were sold by salesman who seemly suggested that these policies were “guaranteed” to pay off the mortgage at the end of the term. However, the investment returns on these policies have fallen to below what was previously considered to be the norm. Consequently, many policies are not worth what was originally forecast and may not fully repay the money borrowed at the end of the mortgages’ term.

Equity – In housing terminology, equity is the difference between the value of the property and the money owed on the property. So if the property is valued at £200,000 and you owe £150,000 on the mortgage, you have equity of £50,000. If you sold at that moment, you would receive £50,000. Should the value of the home be less than the mortgage outstanding then you have negative equity.

Freehold – Owning the freehold means that you own the total rights to the property and the land on which it is built.

HLC – This is the Higher Lending Charge (it was previously known as a Mortgage Indemnity Guarantee). It is levied by around three quarters of all lenders on clients who cannot afford to put down a deposit of 10% of the price of the property. In practice it is a type of insurance aimed at protecting the lender should you default on your mortgage when the value of your home is less than the capital you borrowed. The insurance only provides cover for the lender, not you, and typically costs £1,500.

Homebuyers Report – A property survey aimed at providing more information than a mortgage valuation but less information than a full structural survey. It will help the borrower to decide whether to purchase and help the lender to decide how much to lend.

Interest Only Mortgage – This is a mortgage where your monthly repayments only pay the interest on the mortgage. Therefore, at the end of the mortgage you still have to repay the full sum you borrowed. You are advised to have a separate investment vehicle into which you make payments aimed at building up a fund capable of paying off the mortgage capital at the end of the term. Typical investments include ISA’s, a pension or an endowment policy.

IFAs – Stands for Independent Financial Advisor. These advisors are regulated by the Financial Services Authority. To be classified as “independent” they have to be able to offer you the full range of products from all financial product providers. They are not entitled to describe themselves as “independent” if they can only offer products from a restricted panel of financial companies. A Financial Advisor can be one man band or work for very large companies. Before they make any recommendation, an IFA must carry out a detailed fact find so they fully understand your financial circumstances. They can then make their recommendations to suit your personal circumstances.

ISA – An ISA is an Individual Savings Account, which is a tax-free method of owning shares, building up a cash savings account or a life assurance policy. You can use an ISA to build up a capital sum to repay an interest only mortgage.

Leasehold – If your property is leasehold, ownership of the property reverts to the Freeholder at a set date. Many houses were originally sold on 999 year leases which means that 999 years after the initial date of the Leasehold, ownership of the property reverts to the Freeholder. Building in multiple occupation such as apartments, are always sold on a leasehold and usually have a much shorter leasehold period – 100 and 125 years is quite common. Often, with a block of apartments, the apartment owners individually own the leaseholds whilst a management company, in which they hold shares, owns the freehold. These days, however, leaseholders who live in the property have the legal right to buy their freehold under terms laid down by UK law.

Life Insurance – This can also be called Term Insurance or, when specifically linked to proprty purchase, as Mortgage Protection Insurance. It is designed to pay a tax free lump sum in the event of your death to enable your mortgage to be repaid in full. There are a number of variants such as Level Term Life Insurance and Decreasing Term Life Insurance. At the outset you take out insurance for the full sum you have borrowed from your mortgage lender and for the same number of years as you have agreed on your mortgage. These insurance policies do not have any investment or surrender value. The premiums are based on a number of factors – the main ones being the amount of cover you need, your age, health and how many years you want to be insured for.

Lock-In Period – This is the minimum period you have agreed to stay with the lender. Depending on the deal, it could be as low as six months up to the whole of the term. Should you wish to repay the mortgage or remortgage during the lock-in period, you will invariably have to pay redemption penalties. Always make sure you know how long you are locked in for with your mortgage.

LTV – Literally means Loan to Value. This is a measurement of the mortgage amount against the value of the property or the price that you are actually paying. A £157,500 mortgage on a property for which you paid £175,000 would be a LTV of 90%. Lenders tend to charge a Mortgage Indemnity Premium on mortgages with a loan to value of anything about 75%. Some don’t so ask about this.

MIG – This has now changed its name to HLC. See above.

Mortgage – A mortgage is a long-term loan taken out in order to buy a property with repayment secured on that property. So if you don’t keep to the repayment terms, the lender can repossess the property, sell it and retain the money they are owed. Any balance is then paid to you. If the property is sold for less than you owe your lender, you still remain liable to repay the shortfall.

Mortgage Advisor - On October 31st 2004 the selling of mortgages in the UK came under the remit of the City watchdog, The Financial Services Authority (FSA). As from that date any person providing mortgage advice had to be registered with the FSA and abide by its rules of conduct, methods of operating and training programmes etc. The objective has been to improve life for the consumer by offering better protection, clear information and access to redress for poor advice.

Negative Equity – Negative equity is when the value of your home is less than the amount that you owe on your mortgage plus any other loans secured against it. It can happen very easily if you take out a 100% mortgage or if property prices fall. (Also see Higher Lending Charge)

Portable – This is a measure of how easy it is to move a mortgage from one property to another should a property move be required. This is vital if you are moving during your lock-in-period and wish to avoid redemption penalties.

Repayment Mortgage - This is the same as a Capital and Interest mortgage – see above.

Searches – During the conveyancing process, the buyer has to be sure that the seller has title to the property and identify any matters may affect the prospective owners ownership of the property. For example, whether the property is affected by any proposed road building, whether there are preservation orders affecting the property, is it a listed building and has it been built in accordance with planning conditions and building regulations. Searches will also show whether there are mines under or close by the property. This information is obtained by the person undertaking the conveyancing from HM Land Registry and the relevant Local Authority. These investigations are collectively known as “Searches”.

Self-Certification – Should you have difficulty in providing documentation that “proves” your income to a prospective mortgage lender, you may need a self-certification mortgage. In essence you personally certify what your full income is. If you receive high bonuses, or work seasonally or on commission, or are self-employed this may be your best option. You declare your income plus some evidence that your declaration is reasonable. Ideally lenders want to see as much guaranteed income as possible. To compensate the lender for the increased risk they are taking on a self-certified mortgage, they will charge you a higher rate interest, typically 1% over their standard variable rate.

Stamp Duty Land Tax (commonly known simply as Stamp Duty) – You pay Stamp Duty Land Tax on property like houses, flats, other buildings and land. If the purchase price is £120,000 or less, you don’t pay any Stamp Duty Land Tax. If the price is more than £120,000, you pay between one and four per cent of the whole purchase price, on a sliding scale.

Upto £120,000 – No duty payable

£120,001 to £250,000 – 1% duty payable*
£250,001 to £500,000 – 3% duty payable
£500,001 and over – 4% duty payable

*If you’re buying a property an area designated by the government as ‘disadvantaged’, you don’t pay any Stamp Duty Land Tax if the purchase price is £150,000 or less.

Did you know? Stamp Duty was originally introduced by William of Orange when he was King of England.

Structural Survey – The most thorough report you can get on the condition of the property you are considering to buy. The surveyor will look in detail at the inside and outside of the property and will tell you if the property is structurally sound. All major and minor defects in the building will also be listed and should tell you what maintenance work may be needed either now or in the future. You should make sure the scope of the survey is agreed in writing before you commission it. Should the survey identify problems, use them to negotiate a reduction in the price before you exchange contracts.

Variable Rate – This is when the interest rate you pay on your mortgage can go up or down depending on changes to the lender’s standard variable rate. If you have a variable rate mortgage your monthly mortgage payments will change whenever the lender changes the interest rate.

Valuation – This is where a valuer appointed by your proposed lender, visits the property in order to estimate its current value. This value is then used by the lender as a basis for its security and to calculate its Loan to Value Ratio. The borrower never sees the valuation. With some mortgage deals the lender absorbs the cost of the valuation but in many cases the borrower has to pay upfront.

Finding the best offset mortgage deal can be challenging. There is a huge amount of information on the internet and on the high street about offset mortgages, but instead of giving you clarity, it can leave you overwhelmed and confused as to which is the best offset mortgage deal on the market.

What is an offset mortgage?

Offset mortgages link the balances in a borrower’s mortgage account and/or savings account. Interest earnt from the savings and/or current accounts is used against the mortgage debt and in theory; the mortgage can be paid off quicker. An offset mortgage is also flexible and allows overpayments, underpayments, and sometimes payment holidays.

The concept of an offset mortgage is very different from a standard type mortgage and you can’t just compare interest rates to find the best offset mortgage deal. Offset mortgages come in a variety of shapes and sizes that can suit your particular needs and circumstances. Therefore, you need to look at an offset mortgage deal as a whole before you decide which is the best offset mortgage deal for you. The Council of Mortgage Lenders (CML) said in 2006, approximately 170,000 offset mortgages were sold, which was worth £23.9 billion.

Many households looking for a new mortgage deal would be better off with an offset mortgage, yet they account for a minority of the market – about 7%. Most householders tend to settle with what they know, i.e. a traditional type of mortgage, because many people find it hard to understand the potential benefits that an offset mortgage could offer, such as yearly savings, flexibility, and tax benefits.

An independent mortgage broker

To help you choose the best offset mortgage deal for you, it is advisable to seek assistance from trained personnel who give impartial advice, such as an independent mortgage broker. Like any financial service in the UK, an independent body called the Financial Services Association (FSA) regulates them. The FSA applies the Principles of Business to companies, for example, Principle 6 states all customers must be treated fairly, and Principle 7 states information provided must be clear, fair and not be misleading. Therefore, you can rely on independent mortgage advisors to help you find the best offset mortgage deal.

Research by the CML showed that the majority of offset mortgages are sold through intermediaries. By the end of last year, intermediaries accounted for 60% of all offset mortgages sold, compared to 45% in April 2005.

Different types of offset mortgages

Since the first offset mortgage was introduced into the UK in 1997, the number of offset mortgage lenders has increased five-fold over the last decade, and the number and range of offset mortgages has increased to about 250 offset products. For example, the buy-to-let offset mortgage lets borrowers pay in their rental income into their savings/current accounts to offset the outstanding mortgage balance. There are offset mortgages suitable for people with irregular income, such as the self-employed, commission based employees, and first-time buyers.

Offset products are often associated with people moving home and remortgagers, who are slightly older and higher income individuals. However, offset mortgages are now suitable for some younger first-time homebuyers. These include the ‘family offset’ that allows the borrower’s family and/or friends to use their saving balances to offset the borrower’s mortgage debts.

In conclusion

Offset mortgages are growing in popularity and they are being described as a ‘lifestyle tool’ that can help mortgage borrowers maintain control of their finances. An independent mortgage broker can provide invaluable advice in helping you choose the best offset mortgage deal for you.