According to a new research from the Woolwich, an average of 19 per cent of peoples takes home pay on mortgages.
This percentage was set to increase as the effects of the base rate rise filter through in September, according to Barclays.
Woolwich reported that the cost of servicing mortgages increased in August, up 18.8% from July, to almost £550.
A new high has been registered in London, where people are spending 23.5% of their pay on mortgages. There was no change in the West Midlands in the amount people spend on their mortgages, while South-West has seen a proportional decrease.
There was a great impact on affordability due to increasing house prices, a buoyant summer and the higher cost of fixed rates.
Andy Gray, head of mortgages for Woolwich said: "It will become increasingly questionable whether another increase in interest rates is needed as the steam already seems to be coming out of the market."
Companies such as Nationwide and Assetz are very cautious about the future of the market. According to Assetz, the rate of growth was likely to ease heading into the autumn months, back to between 5% and 5.5%.
Assetz said that with the threat of another interest rate hike hanging over homeowners, the rate of growth was likely to ease heading into the autumn months, back to between 5% and 5.5%.
Why And What Is A Remortgage?
A remortgage is simply taking out a brand new mortgage on your current home, replacing your existing mortgage and generally saving money by earning a lower rate, or replacing a variable rate mortgage with a fixed one – or vice versa.
After a considerable time has passed since your initial home purchase, your mortgage payments offer continual increases in your home equity. Due to inflation and other factors your home generally increases in value as well. You are, therefore, later eligible for a new, more cost effective mortgage of that same home. While a remortgage does not involve the sale of your home or any relocation at all, it may be that your debt does leave one financial institution and become the property of a new lender.
There may be times when you need additional money for new additions on your home, or home remodeling. A remortgage may provide these funds at a lower rate of interest than other financial resources.
It can be that all other things being equal the time is just right for a remortgage savings because of the improved state of the economy. Right now we are in the midst of such an upswing in the market activity and a downswing in mortgage rates. Now is a great time for a remortgage.
Thanks to the Internet and other electronic technology a remortgage is not at all complicated. You can actually apply for a remortgage online from the privacy of your own home. Not only does this facilitate the process but it also offers you a quicker turnaround on both your approval and the availability of the remortgage funds or savings.
A remortgage can be a sensible way to accrue needed capital, if interest rates are lower than what you are paying on your current mortgage, thus decreasing your monthly payment. Or, you might choose an early payoff of your remortgage instead which could considerably free up resources down the road once your home remortgage is paid in full early. If your remortgage is going to eliminate your high interest debt payment and replace it with a low interest remortgage payment, you will save money. Usually a great deal. What you have to keep in mind, however, is that there are fees involved in the remortgage. You must make sure that the fees you pay to remortgage are not more than the difference between the total payments of your old mortgage minus the total payments of your remortgage.
The greatest expense in your remortgage will be your redemption fee. This is the upfront cost of the mortgage cancellation and remortgage process. You must learn all you can about early repayment penalties. These can have a hefty impact on your remortgage expenses. In general, the newer your current mortgage, the higher the early payment penalty.
Other remortgage fees could be for appraisal, should the new lender want a professional valuation of your home and property. You may have attorney fees as well. Your lending institution may have various fees attached to the remortgage such as transportation, faxing, long distance and so forth. All these are negotiable and you should ask.
What is very important to keep in mind before you embark on a remortgage is that your repayment of your home ownership debt begins all over again with this remortgage. While you might see a remortgage as a great savings in the short run, you could end up paying more in the long run. While you lower your interest rate in most cases – or why do it? – you will be extending the time it takes to pay back the remortgage, unless you are savvy enough to pay more and get out early.
After a considerable time has passed since your initial home purchase, your mortgage payments offer continual increases in your home equity. Due to inflation and other factors your home generally increases in value as well. You are, therefore, later eligible for a new, more cost effective mortgage of that same home. While a remortgage does not involve the sale of your home or any relocation at all, it may be that your debt does leave one financial institution and become the property of a new lender.
There may be times when you need additional money for new additions on your home, or home remodeling. A remortgage may provide these funds at a lower rate of interest than other financial resources.
It can be that all other things being equal the time is just right for a remortgage savings because of the improved state of the economy. Right now we are in the midst of such an upswing in the market activity and a downswing in mortgage rates. Now is a great time for a remortgage.
Thanks to the Internet and other electronic technology a remortgage is not at all complicated. You can actually apply for a remortgage online from the privacy of your own home. Not only does this facilitate the process but it also offers you a quicker turnaround on both your approval and the availability of the remortgage funds or savings.
A remortgage can be a sensible way to accrue needed capital, if interest rates are lower than what you are paying on your current mortgage, thus decreasing your monthly payment. Or, you might choose an early payoff of your remortgage instead which could considerably free up resources down the road once your home remortgage is paid in full early. If your remortgage is going to eliminate your high interest debt payment and replace it with a low interest remortgage payment, you will save money. Usually a great deal. What you have to keep in mind, however, is that there are fees involved in the remortgage. You must make sure that the fees you pay to remortgage are not more than the difference between the total payments of your old mortgage minus the total payments of your remortgage.
The greatest expense in your remortgage will be your redemption fee. This is the upfront cost of the mortgage cancellation and remortgage process. You must learn all you can about early repayment penalties. These can have a hefty impact on your remortgage expenses. In general, the newer your current mortgage, the higher the early payment penalty.
Other remortgage fees could be for appraisal, should the new lender want a professional valuation of your home and property. You may have attorney fees as well. Your lending institution may have various fees attached to the remortgage such as transportation, faxing, long distance and so forth. All these are negotiable and you should ask.
What is very important to keep in mind before you embark on a remortgage is that your repayment of your home ownership debt begins all over again with this remortgage. While you might see a remortgage as a great savings in the short run, you could end up paying more in the long run. While you lower your interest rate in most cases – or why do it? – you will be extending the time it takes to pay back the remortgage, unless you are savvy enough to pay more and get out early.
Mortgage Decisions Made Easy
Homeowners we want to hear from you. The mortgage industry has been through a lot of changes in the recent years. We have seen mortgage rates the lowest they have been in years and we have seen big name lenders getting in trouble for various reasons.Today there are many homeowners who are in over their heads, with interest only loans, option arms and homes that they just can't afford. In some cases, these homeowners have had their equity stretched to the max and there is not a lot they can't do but walk away from their home.My mission is simple, help homeowners prosper by doing the right thing. I have compiled a series of e-books which can be downloaded for free at www.fpf-direct.com. These e-books are beneficial to anyone who is looking to refinance or purchase a new home.Future Planning Financial has helped many homeowners save thousands of dollars and get back on the right track to financial freedom. We have done this by educating homeowners on the choices that lay in front of them. I encourage you to sample the free e-books at www.fpf-direct.com today, even if we don't earn your business, if we help you get the best mortgage our mission is complete.
Shared Ownership Mortgage
Mortgages available on shared ownership for returning the loan are termed as shared ownership mortgages. Shared ownership mortgages are considered to be more risky than the traditional loan schemes; this is the primary reason why it is considered to be limited in nature. Before discussing the advantages and limitations of shared ownership mortgage, lets see what is shared ownership mortgage in the first place.
The term, shared ownership was evolved with a view to help people who are financially unable to buy a house in that particular moment. The common perception here is that when a person is not able to take the responsibility for the whole amount he takes help from other people who agree to share the ownership. Thus, the term shared ownership mortgage. But, the exact dealing is that you buy a share of the property and pay a rent on the remaining share that you don't own. Gradually when you have sufficient money you can buy further shares and eventually you own the whole property. Owning partial ownership of the property is not a consideration for the total rights and responsibilities of a full owner. Thus, it is a boon for those with big dreams but limited resources.
Everyone has sometime or the other dreamt of possessing a house of his or her own. But many of them are not in a very financially stable state to fulfill this dream. Shared ownership mortgage helps you reach this dream. Many housing corporations offer such services but priority is given to the existing tenants of the housing associations or the councils. The only hiccup in shared ownership mortgages is that the house prices go up or down depending upon the market and this can mean that sometimes you can end up paying more or less than the original price.
Apart from the normal advantages that every other mortgage gives, shared ownership mortgage provides you with the feasibility of 99 years, which is a complete lifetime, to complete the repayment. This means that you can pay the remaining amount as per your convenience. Also, you have the owners right to the property. This condition in shared ownership mortgage makes it the most sought after mortgage in the market today. Yet, due to its large risk capacity, lenders don't easily put their money through it.
Shared ownership mortgage is mostly available with the housing trusts or cooperative societies and have simple procedures for completing the formalities. There is also no issue regarding the security to be provided at the time of taking mortgage, as it can be covered with the other half of the property that you rightfully own. This makes the process even simpler and easier to deal with. Thus, if you are planning to buy a house soon and you are looking out for a good mortgage deal you should search for lenders who accept shared ownership mortgage. Go live your dream with shared ownership mortgage!
The term, shared ownership was evolved with a view to help people who are financially unable to buy a house in that particular moment. The common perception here is that when a person is not able to take the responsibility for the whole amount he takes help from other people who agree to share the ownership. Thus, the term shared ownership mortgage. But, the exact dealing is that you buy a share of the property and pay a rent on the remaining share that you don't own. Gradually when you have sufficient money you can buy further shares and eventually you own the whole property. Owning partial ownership of the property is not a consideration for the total rights and responsibilities of a full owner. Thus, it is a boon for those with big dreams but limited resources.
Everyone has sometime or the other dreamt of possessing a house of his or her own. But many of them are not in a very financially stable state to fulfill this dream. Shared ownership mortgage helps you reach this dream. Many housing corporations offer such services but priority is given to the existing tenants of the housing associations or the councils. The only hiccup in shared ownership mortgages is that the house prices go up or down depending upon the market and this can mean that sometimes you can end up paying more or less than the original price.
Apart from the normal advantages that every other mortgage gives, shared ownership mortgage provides you with the feasibility of 99 years, which is a complete lifetime, to complete the repayment. This means that you can pay the remaining amount as per your convenience. Also, you have the owners right to the property. This condition in shared ownership mortgage makes it the most sought after mortgage in the market today. Yet, due to its large risk capacity, lenders don't easily put their money through it.
Shared ownership mortgage is mostly available with the housing trusts or cooperative societies and have simple procedures for completing the formalities. There is also no issue regarding the security to be provided at the time of taking mortgage, as it can be covered with the other half of the property that you rightfully own. This makes the process even simpler and easier to deal with. Thus, if you are planning to buy a house soon and you are looking out for a good mortgage deal you should search for lenders who accept shared ownership mortgage. Go live your dream with shared ownership mortgage!
Closing A Commercial Mortgage The Easy Way
'Time is Money' it's an old adage. Good timing can also amount to the same thing. Taking action at the right time can make all the difference between an easy commercial mortgage transaction and a major headache of stress and panic. In between the lenders offer and the commitment consider undertaking what you can to ease your commercial mortgage deal by anticipating and dealing with any problems or hiccups that may occur.
Try to intercept any future problems or anticipate extra work that could stall your commercial mortgage deal at the critical moment. If you take a little time to consider what is required you should be able to deal with them one by one in plenty of time. Once you have agreed to an offer from a lender and you are waiting for the commitment you should go ahead and run the title searches. The title work can be ordered by your real estate attorney from any number of companies that will risk loosing their title search fee if the commercial mortgage deal doesn't go through.
The title work is a very slow and labour intensive process, so the earlier you start it the quicker it will be completed. Starting it early will also allow for any delays or other issues that may pop up prior to the commercial mortgage completion.
The survey is another potential headache. Surveys have differing specifications and your new lender may have specific requirements of the survey that may not appear in your existing survey documents. Check with your lender exactly what they require of a survey and order it on receiving your offer rather than at closing. Most surveyors are very busy and they can have a very slow turnaround. So again the sooner you can get it underway the easier it will be to deal with any hitches.
Cut down on your mortgage recording tax. Ask your lender to take an assignment of the old mortgage. Early in the deal process you should let your new lender's attorneys look over and approve the old mortgage. This is generally quite quick if you work with your own attorney to ease the process.
Consider the structure of your commercial loan. Does it cover any future plans you may have to modify your property? e.g. you may wish to convert your new property into multiple apartments. Does your loan account for the 'whittling' down of your asset as apartments are sold? This is a simple example but it's better to be upfront at the start about the plans you may have for the future of your property.
Along similar lines you would be well advised to consider the possibility of an early payment penalty if you plan to sell on your property within a few years.
Make a 'To Do' list and use and any spare time to work through it and clear it. There are enough things that can go wrong or cause delays as the deal nears completion. Clear what you can before you get to closing the deal, in this way you can give the mortgage agreement your full attention rather than worry about the other jobs that still need to be done.
Try to intercept any future problems or anticipate extra work that could stall your commercial mortgage deal at the critical moment. If you take a little time to consider what is required you should be able to deal with them one by one in plenty of time. Once you have agreed to an offer from a lender and you are waiting for the commitment you should go ahead and run the title searches. The title work can be ordered by your real estate attorney from any number of companies that will risk loosing their title search fee if the commercial mortgage deal doesn't go through.
The title work is a very slow and labour intensive process, so the earlier you start it the quicker it will be completed. Starting it early will also allow for any delays or other issues that may pop up prior to the commercial mortgage completion.
The survey is another potential headache. Surveys have differing specifications and your new lender may have specific requirements of the survey that may not appear in your existing survey documents. Check with your lender exactly what they require of a survey and order it on receiving your offer rather than at closing. Most surveyors are very busy and they can have a very slow turnaround. So again the sooner you can get it underway the easier it will be to deal with any hitches.
Cut down on your mortgage recording tax. Ask your lender to take an assignment of the old mortgage. Early in the deal process you should let your new lender's attorneys look over and approve the old mortgage. This is generally quite quick if you work with your own attorney to ease the process.
Consider the structure of your commercial loan. Does it cover any future plans you may have to modify your property? e.g. you may wish to convert your new property into multiple apartments. Does your loan account for the 'whittling' down of your asset as apartments are sold? This is a simple example but it's better to be upfront at the start about the plans you may have for the future of your property.
Along similar lines you would be well advised to consider the possibility of an early payment penalty if you plan to sell on your property within a few years.
Make a 'To Do' list and use and any spare time to work through it and clear it. There are enough things that can go wrong or cause delays as the deal nears completion. Clear what you can before you get to closing the deal, in this way you can give the mortgage agreement your full attention rather than worry about the other jobs that still need to be done.
Interest Only Mortgages Inforamtion
There are two types of mortgages. The first and most popular, is the Repayment Mortgage where you pay off the capital (the amount of money loaned) and the interest every month as part of your mortgage payment. The other type is the Interest Only Mortgage where you only pay off the interest on your mortgage every month.
What this means, is that if you take out an Interest only Mortgage, once the term of the loan is over, you will have paid off all the interest, but you must find the capital i.e. the price of the house.
For example, if you bought a house for £100,000 over the course of the next e.g. 25 years, you would have managed to pay off the interest (probably about £150,000), but you will not have paid off any of the £100,000 so the lender will be expecting a payment of £100,000 at the end of the mortgage deal. A lot of money for the vast majority of us.
In order to be able to re-pay the capital on the loan, there are 3 commonly used methods which are usually employed so that the borrower has the funds available to be able to pay off the loan. They are as follows
Endowment
An endowment is an investment scheme which was very common in the 1980s and early 1990s. The idea was to have an endowment and an interest-only mortgage. You would pay a monthly premium to the company (often an insurer) who sells you the endowment, and the policy was supposed to grow over the years. This way, when the policy matures, you would be left with enough money to pay off your mortgage and most people also expected to have a significant lump sum of cash too.
However, what happened is that the performance of the endowment is linked to how well the Stock Market performs so when the Stock Market crashed in the late 1980's, the endowments weren't worth as much as people thought they would be.
In essence, if the borrower took out an endowment mortgage for £100,000, if has had happened in the past, the endowment at the end of the term of the mortgage would have been worth at least £100,000 if not more. Some policies were worth a lot more. Any excess(profits) on the £100,000 would have gone to the borrower. However, what happened is that a lot of endowments after the crash were worth a lot less. This meant that the borrower would have to find the shortfall from somewhere else.
As you can see with the above illustration, this type of mortgage is very risky, offering a potential of a big gain, however, there is always the possibility of problems.
Despite the bad publicity and the inherent problems, it may be that this type of mortgage is suitable for some people and a number of lenders still offer Endowment Mortgages.
ISA (formerly known as Peps)
With this type of mortgage, you're still paying off the interest only, however, you also pay into an ISA. There are a number of different ISA's available, however, the main advantage is that the money you pay in, earns interest free of tax.
A disadvantage though, is that you are only allowed to put a certain amount of money into an ISA every year, so by using an ISA for your mortgage, you are missing out on using the ISA for savings.
Pension
This way of paying off an interest-only mortgage, is by far the least common. Most forms of pension fund let you take 25% of their value as a tax-free lump sum at retirement. The idea behind pension mortgages is that you are paying off the loan not only using a fund which grows free of tax (like an ISA), but you are also effectively getting tax relief on your mortgage contributions as well. The problem is a distinct lack of flexibility, and the fact that you can't pay off the mortgage before retirement.
The other example of using Interest Only Mortgages is with regards to buying homes to rent out. The rental income received is often enough to cover the value of the interest only payment plus a small profit. Hopefully if you've chosen a house wisely (and luckily), then over a period of time (10 - 20 years), the house will have risen in value so at some point you will decide to cash in and sell the house for greater than you bought it for.
This policy is very very risky. There is no guarantee that the house price will continue to rise. There are no guarantees that you will be able to find tenants or attract the rental income you need. This is also stepping into the realms of business as opposed to simply home buying.
Interest Only Mortgages are suitable for some people, however, they are much more risky than Repayment Mortgages but it is possible that if everything works out right, then a nice profit can be made.
What this means, is that if you take out an Interest only Mortgage, once the term of the loan is over, you will have paid off all the interest, but you must find the capital i.e. the price of the house.
For example, if you bought a house for £100,000 over the course of the next e.g. 25 years, you would have managed to pay off the interest (probably about £150,000), but you will not have paid off any of the £100,000 so the lender will be expecting a payment of £100,000 at the end of the mortgage deal. A lot of money for the vast majority of us.
In order to be able to re-pay the capital on the loan, there are 3 commonly used methods which are usually employed so that the borrower has the funds available to be able to pay off the loan. They are as follows
Endowment
An endowment is an investment scheme which was very common in the 1980s and early 1990s. The idea was to have an endowment and an interest-only mortgage. You would pay a monthly premium to the company (often an insurer) who sells you the endowment, and the policy was supposed to grow over the years. This way, when the policy matures, you would be left with enough money to pay off your mortgage and most people also expected to have a significant lump sum of cash too.
However, what happened is that the performance of the endowment is linked to how well the Stock Market performs so when the Stock Market crashed in the late 1980's, the endowments weren't worth as much as people thought they would be.
In essence, if the borrower took out an endowment mortgage for £100,000, if has had happened in the past, the endowment at the end of the term of the mortgage would have been worth at least £100,000 if not more. Some policies were worth a lot more. Any excess(profits) on the £100,000 would have gone to the borrower. However, what happened is that a lot of endowments after the crash were worth a lot less. This meant that the borrower would have to find the shortfall from somewhere else.
As you can see with the above illustration, this type of mortgage is very risky, offering a potential of a big gain, however, there is always the possibility of problems.
Despite the bad publicity and the inherent problems, it may be that this type of mortgage is suitable for some people and a number of lenders still offer Endowment Mortgages.
ISA (formerly known as Peps)
With this type of mortgage, you're still paying off the interest only, however, you also pay into an ISA. There are a number of different ISA's available, however, the main advantage is that the money you pay in, earns interest free of tax.
A disadvantage though, is that you are only allowed to put a certain amount of money into an ISA every year, so by using an ISA for your mortgage, you are missing out on using the ISA for savings.
Pension
This way of paying off an interest-only mortgage, is by far the least common. Most forms of pension fund let you take 25% of their value as a tax-free lump sum at retirement. The idea behind pension mortgages is that you are paying off the loan not only using a fund which grows free of tax (like an ISA), but you are also effectively getting tax relief on your mortgage contributions as well. The problem is a distinct lack of flexibility, and the fact that you can't pay off the mortgage before retirement.
The other example of using Interest Only Mortgages is with regards to buying homes to rent out. The rental income received is often enough to cover the value of the interest only payment plus a small profit. Hopefully if you've chosen a house wisely (and luckily), then over a period of time (10 - 20 years), the house will have risen in value so at some point you will decide to cash in and sell the house for greater than you bought it for.
This policy is very very risky. There is no guarantee that the house price will continue to rise. There are no guarantees that you will be able to find tenants or attract the rental income you need. This is also stepping into the realms of business as opposed to simply home buying.
Interest Only Mortgages are suitable for some people, however, they are much more risky than Repayment Mortgages but it is possible that if everything works out right, then a nice profit can be made.
Subscribe to:
Posts (Atom)