It’s a Wonderful Time to Shop For a Mortgage

As the weather gets nicer, many UK consumers are shopping around for a mortgage. It’s been written up in the press that now is the time to buy, but are you really ready to shop around for a mortgage? Yes, you read that correctly: shop around. Going to the first company with a nice banner or advertisement in the paper is a recipe for disaster. You want to be comfortable with the process inside and out and make sure that you’re really prepared to become a homeowner.

The truth that owning your own place is a lot more difficult than people let on. You’re going to be completely and totally responsible for the insurance as well as the maintenance. This means that if something breaks, it’s going to be up to you to fix it…with your own money. Gone are the days of just calling the landlord and hoping that they will be out soon to fix it. You have to make sure that you’re really going your own way on this. That’s the only way that you’ll really be able to enjoy your home. The thing about home repairs is that they can really sneak up on you…but we’re getting ahead of ourselves.

Going back to the mortgage side of things, you want to make sure that your credit is where it needs to be. Generally speaking, the best mortgages go to the people who are paying their bills on time, every time, every single month. It also goes to the people who have a long history of being at the same place of employment. The key here is stability — you have to have it in order to get the best rates offered to you. Just having good credit isn’t enough. You have to be willing to show that you’re actually trying to put down serious roots. The lender will give you the best rate if you can prove all of this. However, if you just started at a job and you only have a few years at the same place, you still might get a good rate. It also depends on how much you make. If you’re bringing in good money and the job feels solid, the lender may let you get away with a higher loan amount than someone else.

Make sure that you’re considering saving as much as possible as well for the house. The more that you can save, the more likely it is that you’re going to be able to get a better rate and a higher loan amount. This is because you’re showing the lender that you’re truly serious about owning a home.

The more that you can save, the less likely it is that you’ll have to pay mortgage indemnity insurance. This is a fee that’s tacked onto your mortgage that basically benefits the lender without benefiting you. It’s done so that the lender can allow you to get a home with just 10% down, which might be necessary depending on which housing market you’re buying into. Still, if you can avoid extra fees then this is what you will need to look into.

It bears repeating: before you commit to any mortgage, it’s very important that you read the fine print as much as possible. Is there an early repayment penalty? When will the mortgage payments be expected every month? Is there a discount for direct debit? These are all questions that you will need to ask the lender before you get fully committed. Good luck!

What Term to go for with a Mortgage

When you borrow money for a mortgage, you will be taking that loan out for a long time. Some smaller mortgages may only last for ten years, but there are some which last for thirty. This is a long time to have a loan for and it also means that it will be expensive.

Each month that you borrow money for, will cost you. This means that the longer the term of the mortgage, the more expensive it will be in the long run. However, if you make the term too short, you will have to pay more each month.

It is important to get the right balance. You will need to be able to afford the repayments. You may be paying just the interest, but you will need to save up to pay off the lump sum that you borrowed. This will take time and although the faster you do it, the better, you need to allow yourself enough time to do that. If you have a repayment mortgage, then you will be whittling away some of the outstanding balance each month. You will need to make sure that the amount that you do pay is affordable for you.

Knowing how much you can afford does take a bit of future predictions. You may just want to consider what you earn now and whether you will manage the repayment. But consider that your salary is likely to go up over the years, but your costs may also increase if you choose to have a family. So consider the consequences of this. Most people are advised to make the payment as high as possible at the beginning because it will get easier to pay as the years go on. However, this may not always be the case and so you may need to think hard about what to do.

If you can go for a shorter term, then you will be able to pay less for the mortgage and get rid of the debt quicker. However, this means your monthly repayment amounts will be higher and you may struggle to meet the rest of your financial commitments if this is too high. You need to get a good compromise and decide what is a sensible term that you can afford but that will not need you to struggle every month to pay back.

Don’t Cheat The Mortgage Calculator!

When you’re trying to get into a home, you might have a lot of pressure on you. There are a lot of people that feel like it’s a serious sign of failure if they don’t get into the house that they first laid eyes on and bragged to everyone about finding. However, this is a trap that definitely takes you further and further away from your goals — and who really wants to be moving backward instead of forward?

You have to stop and think about the things that matter to you in a house and make sure that you stay within your budget.

Naturally, you’re going to run into a point where looking at your budget and looking at the numbers on the sheet describing your dream home really isn’t going to be enough information to really make one of the most important decisions of your life. You want to really make sure that you’re getting all of the information, and that means turning to the mortgage calculator.

Remember what we talked about at the beginning of this guide — the pressure factor? Now, you might be tempted to feed the mortgage calculator the right numbers that add up to you moving into your first choice home — even if reality says that you really can’t afford it. Some people — including overzealous agents and even your friends and family — will say that everyone plays with the numbers a bit.

Yet there are strong reasons not to try to cheat the equity release calculators. First and foremost, if something looks like it’s out of your budget — it usually is. Some people think that getting an adjustable-rate mortgage is the way to go if you can’t afford your home any other way, but that might not be the way to go — especially if you have any feeling that your income is going to decrease over the years rather than increase.

Another point that you will need to think about is that if you do play with the numbers and deviate from reality, you’re much more likely to do that on your official mortgage application — and that’s definitely a no-no. You don’t want to just jump in and get things that way, because if it’s found that you overstated your income — or understated your expenses, you are committing mortgage fraud. That is a very serious offense that can cause you to lose your home — the very last thing that you wanted!

So, if you take nothing else from this guide, take this: don’t cheat the mortgage calculator and make sure to avoid credit card debt!

Choosing a Lender

Deciding which lender t use for your mortgage can be a difficult decision. It is tricky knowing whether to decide on going for someone who is a big well known company, someone who has the best rates or has the best mortgage.

It can be a big decision, especially if you consider that most people will keep their mortgage for twenty five years. You want to make sure that you are working with a company that you trust and that you can work well with. Try out their customer service number and see how good they are at answering your questions, ask friends and family who they use and whether they would be able to recommend them and think about your own experiences with financial institutions as well.

Obviously, you will be thinking hard about the mortgage that they are offering and how expensive and flexible that is and whether it suits your needs. You may also find that you are limited in who will lend to you, because of your financial situation. However, do not overlook how important it is to find the right lender. You need to work with them and be confident that they are always giving you the best possible deal. You want to know that if you have a problem, you can go to them. Most importantly, you want to be sure that they will still be around when your mortgage term ends as some financial institutions are going out of business and this can make things difficult for mortgage holders.

Obviously, if the financial institution that you really like are far too expensive, then it is sensible to look elsewhere. However, you need to think about the lender when you are comparing mortgages as this can be a very important aspect of the decision and you do not want to regret it. So although, the best financial deal, should be at the top of your list, when choosing a lender, you do need to consider that lender and their reputation as well as how they have treated you, when you are making that decision.

PPI Basics

Experiencing problems with your finance? Or to be more specific, are you having great difficulties in paying up credit card debts, loans, and other financial obligations? No problem. What you need is a Payment Protection Insurance or PPI. This type of protection is actually a great way to secure yourself against debts, bankruptcy, and other financial trouble due to failure of accomplishing certain financial obligations. A PPI policy covers various types of payments such as credit card obligations and loans. When you are having trouble fulfilling these obligations due to illness, accident, or any situation that may hamper your capability of paying up debt, a PPI will surely come in very handy.

However, you should also be aware about mis sold PPI plans. For quite some time now, there has been a great buzz regarding the practice of mis selling PPI. Now, why in world certain individuals and even huge lending companies such as Capital One and HSBC get involved on this? It is simply because they can create more profits through mis selling PPI policies than any other usual way to make money. In truth, mis selling PPI has now been a routine among various lenders. Due to this, these lenders have been fined. But since this kind of profiteering is very lucrative, the practice or rather malpractice is still rampant. Because of this, thousands of people are filing PPI claims.

According to certain sites who intend to help people who are looking for the right insurance policy, there are ways to pinpoint mis sold PPI policies. If you have doubts about sales agents whom you think are concealing vital information about your insurance policy, you can check out these sites. They offer tips on how to ensure that you are only getting the best insurance deals no matter who you are and what your financial capabilities are.

It must also be noted that making a PPI claim for those who purchased their loans online can be quite difficult. Nevertheless, consulting your official insurance agent will help you sort out difficulties that pertain to your PPI claim. To avoid encountering problems with your insurance policy it is definitely best to make sure that your agent explain everything to you. Do not be afraid to ask questions. Getting all the necessary information that you need plays a huge role in finding the best PPI plan for you and your family. For more information about PPI claims, feel free to check out excellent resources online.

Is It Time to Shorten Your Mortgage?

If you’re thinking about joining the movement of mortgage-burning, you’re definitely in good company. No, no, it’s not some crazy revolution that will topple governments or anything like that. It’s just a movement where homeowners are thinking about actually shortening their mortgages.

This is different than the traditional advice to actually make sure that you focus on getting a mortgage with a very long term so that your monthly payments are a lot less. However, this adds a lot of mortgage interest to your loan, making it harder to pay off your mortgage in the long run. You would be a lot better off to really think about having your mortgage done in a shorter time so that you can save on all of that interest.

Now, this “mortgage burning” party assumes a few things. It’s going to assume that you have a good job with income that you can expect to either stay the same or increase in the years to come. In addition, you also want to make sure that you have other debts taken care of so that you’re not overwhelmed by debt. This is something that really makes it hard to get the benefits of the shortened mortgage underway.

Paying down your mortgage can also make you feel better, and you can end up getting a lot of satisfaction out of knowing that your mortgage will be done and that money will be freed up for other purposes in less time than the 30 year mortgage.

Quicken Loans even has a product out called Yourgage that lets you choose the term for the refinancing — the company reports that the most popular is the 8 year mortgage or the 13 year mortgage. That definitely tends to attract a bit of attention.

You need to make sure that you have good credit and you also need to make sure that you have your credit checked before you even think about refinancing. Keep in mind that the refinancing process isn’t a slam dunk. The lender still has to approve it, and credit terms are getting pretty tight in the down economy. You also need to make sure that you have at least 20% in home equity to even get the best rates. If you don’t have equity in your home, you will have a very hard time even thinking about a refinance deal.

There are some alternatives to refinancing that can really still save you money. You can always send off extra mortgage payments, which would bring down your mortgage while giving you the flexibility to still pay the minimums of money suddenly gets tight. If you are in a field where your income can really tighten at random, you might want to choose this option instead of the refinancing.

Costs are also important here. You want to make sure that you have the ability to handle the 3% to 6% in costs — the percentage will be based on the principal of your loan. That can equal a lot of money, but if you’ve got the cash to pay it on hand, this is definitely a good thing.

The final note is that you still want to make sure that future savings are going to be protected as much as possible. You really don’t want to find yourself going with a refinancing plan or a paydown plan that’s going to keep you from saving for retirement. However, if you’ve already maxed out everything, this is a good idea to turn towards looking at your mortgage with a more critical eye.

Now is the perfect time to start thinking about your financial future as it relates to your home. Check out the details for yourself!

When Will Lenders Allow a Mortgage Modification?

There are different qualifying criteria for the many loan modifications available to borrowers today. Some of the standard requirements include that you be an owner occupant of the property, that the property be a 1 to 4 unit property, and that your mortgage payment must exceed 31% of your gross monthly income before taxes among others. However, there is one requirement that applies across every loan modification program I have seen but which most people find very vague – the requirement that you have a “financial hardship” that can be documented. This can be most difficult to prove when a borrower needs a loan modification, but has not fallen behind on their payments.

The term “financial hardship” can certainly mean different things to different people. However, there are some basic signs that lenders look for when borrowers apply for a loan modification under one of the many programs being offered.

One of the most common, and most easily documented, financial hardships presented to lenders is a sudden involuntary reduction in the borrower’s income. This can occur due to a job loss, or even a cut in pay and working hours, or disability. Note the use of the term involuntary. Don’t expect the lender to be lenient if you have simply quit your job in order to try self employment. Even if you expect to make more money as an entrepreneur, such income is not considered stable qualifying income unless you have a 2 year history at that job. Lenders will, however, consider the loss of income from a spouse losing a job even if that spouse was not a borrower on the original mortgage.

A second common documentable financial hardship is an impending increase in your housing payment due to increased taxes or insurance costs, a pending scheduled interest rate increase, or balloon payment coming due on your loan. All of these are common problems for borrowers with loans which were originated between the years 2005-2009.

A third common financial hardship which will convince a lender you deserve a loan modification is a sudden unexpected increase in non-housing related expenses. The most common causes of increased expenses in this area are medical and legal bills. Many times even people with good health insurance end up with unexpected large medical bills they have to pay; and given that anyone can sue anyone else for almost any reason, legal bills can certainly appear in anyone’s life very quickly.

A fourth type of hardship that helps convince a lender that a loan modification is necessary even though a borrower is current on their payments is shown when a borrower has spent all of their savings and exhausted all available lines of unsecured credit in order to keep paying the house payment on time. If the borrower has found it necessary to draw several hundred dollars per month of savings or as cash advances on credit cards, and the savings are almost gone or the cards are nearly at their credit limits, then it follows that pretty soon the borrower will no longer be able to keep paying their loan payments on time.

There are other types of financial hardships which will convince a lender to modify a loan when the payments are current, but they all have a few things in common. Anything which has drastically lowered a borrower’s monthly income or drastically increased a borrower’s required monthly expenses will generally fit the bill as long as the change in circumstances is not the result of a present voluntary action. For example, although an interest rate increase was predictable and the borrower agreed to it when they signed the loan documents, the borrower had good reason to expect that refinancing a home would be relatively easy when the time for the payment increase arrived.

The key to getting your lender to agree to your loan modification request is to explain your financial hardship fully in writing and document it completely BEFORE you contact the lender to officially apply for your loan modification. In fact, before you officially contact your lender to request that modification, you should contact a HUD housing counselor to help you analyze and document your situation in the best way to convince the lender that you qualify for a loan modification. These counselors are available to you at no cost and you can locate one in your area through the official HUD website.

Make An Extra Payment On Your Mortgage To Lock in Thousands in Savings

We know that around the last quarter of the year is not the time that you normally think about making extra payments on your mortgage, but it can really pay off. The truth of the matter is that you just need to think things through as they relate to your overall financial situation. If you really want to make it a goal to pay off your mortgage early, then you really need to think about making an extra payment or two.

It doesn’t have to be a lot of extra payments — even once a year making an extra payment can really pay off. Not only will you basically be making your payment entirely principal-lowering, you’ll have the peace of mind of knowing that your home is truly protected. Our biggest investment is our home, so why wouldn’t you want to make a payment that not only lowers your principal, but increases your overall equity?

A little math is in order. Let’s say that you picked up a 15 year fixed-rate mortgage — it’s pretty popular to go with a 15 year mortgage in order to not have to make mortgage payments the rest of your life.

One extra payment on a 15-year mortgage for $300,000 with a 5% interest rate is essentially $200 a month. This makes it a lot more affordable than trying to save up a bunch of money at the end of the year. Even though it doesn’t seem like it, this can take your number of payments total from 180 all the way down to 161. Think about that — that’s 19 payments! If your monthly payment is $2372, that means that you’re saving $45,068! What could you do with an extra 45 thousand dollars?

Quite a bit, actually. You could invest in repairs and improvements to your home, thus raising the value, or you can send your child to college very easily. You could also invest in your retirement and watch your money grow dramatically. It’s just a matter of looking at your goals and doing what works for you.

Some people aren’t into paying a lot of money extra to their mortgage, and that’s perfectly okay. You might want to skip paying extra payments in favor of decreasing other debts that you have. If you have a lot of credit card debt, it might be smarter to tackle that first rather than worry about the mortgage. Once you have your credit debt under control, you can go back to focusing on the mortgage. It’s really the best way to really make sure that you have things taken care of from start to finish — why not plan your own extra payments today? It’s really easy to do — just use an online calculator to figure out how fast you want to pay down your mortgage and the calculator will do the math for you!

Common Indexes Used in Adjustable Rate Mortgages

For some, an adjustable rate mortgage is just something that they would never pursue. They’ve heard too many horror stories, and they know far too many people that were just fine until the mortgage adjusted. However, if you dream about the biggest home that you can get into and you really have a stable (and growing!) income, then an adjustable rate mortgage is actually not as evil as people make it out to be. It’s more a matter of being able to truly afford something that’s going to be worthwhile to you in the long run. After all, a home is an investment and if you don’t like where you live, then it takes all of the fun and pleasure out of owning your own home.

Financing your home through an adjustable rate mortgage is tricky, but as the old saying goes — knowledge is definitely power. You want to make sure that you’re always thinking about the road ahead when it comes to your adjustable mortgage, and knowing what indexes are commonly used is going to make that road a lot smoother. Never believe that you just have to go off of what your mortgage broker says. The more information that you can bring to the table when it comes to ARMs, the more well informed your decision is going to be across the board. of course, when you’re dying to own your own home it can be feel like the end of the world if you have to wait, but that’s not the case here. It’s just a matter of looking into the life that you want and going for it full stop.

Back to the topic at hand — what are those common indexes, and why are they important? Well, it goes back to how your adjustable rate mortgage is actually structured. Your payments are based off an index, a margin, the adjustment period, interest rate caps, and even payment caps. There are overall caps that limit how much the interest rate can increase over the life of your loan, but that doesn’t mean that your payments can’t go up significantly. What you’re going to need to focus on here is the index. No, you can’t decide which index your lender will use, but you can ask what index they genera.lly use and shop around for the lender that uses the most stable index. The more volatile the index, the more your payments will fluctuate. This can make planning your house payment very difficult. We still recommend making sure that you use a mortgage calculator to really ensure that you have the maximum amount that your loan could possibly be. With that number you can make sure that you’re not borrowing so much that there might come a point where you can’t make your payments anymore. Even though there are now loan modification programs to help homeowners out, that doesn’t necessarily mean that you’re going to naturally qualify for that type of assistance. This is something that people assumed would be the case for them, only to find themselves feeling trapped and helpless when the loans reset and they had nowhere else to go except to foreclosure.

The common indexes that you will need to look for are below.

Constant Maturity Treasury (CMT or TCM)

This is an index that tracks the weekly or monthly average yields on U.S Treasury securities that have a constant maturity date. Keep in mind that CMT indexes are truly volatile as they indicate the state of the economy — so if you see a mortgage linked to this index, proceed with caution — and make sure that the margin is very low to make up for how volatile this index can be.

Treasury Bill (T-Bill)

These indexes are linked to the results of actions of U.S Treasury bills, notes, and bonds. It’s not as heavily volatile as the CMT indexes, but it can definitely get a little crazy.

12-Month Treasury Average (MTA or MAT)

The Monthly Treasury Average is pretty new, but a lot of people like it. It’s an annual average, which means that it’s pretty steady. It does move about a little more than some of the other indexes, but you will still see enough stability to make it all worthwhile for you in the long run.

Certificate of Deposit Index (CODI)

This is a stable index that is based off the 12 month average of the monthly average yields on CoD rates — the 3-month variety. As you might remember, certificate of deposits are very stable savings tools that don’t grow much, but there’s no loss of principal, either. A lot of ultra-conservative investors like to have them just to make sure that everything is in proper order. Continue reading %s