Voices in Finance » Mortgages

This Land Is My Land…

Mike — Tue, 04 Oct 2011 08:56:06 +0000

Everyone longs for their dream home, a sanctuary from the world that instils them with pride and contentment. While some people choose to buy a home that already exists, others decide to build their own home. They may hire an architect to design the home or choose from existing plans.

Building your own home does not have to be out of your financial reach. By finding an economical contractor that provides excellent work, you can often afford to build your own home. Before deciding on building a new home, it is important to consult a mortgage repayment calculator so that you know how much money you have available to you.

One of the main advantages of building a house is the fact that you can design it exactly the way you want it. By building your own home, you decide the size of the rooms, the number of bathrooms, the type of flooring in the home and every other detail.

Since you are purchasing a lot of land, you also get to choose the size of the lot. If you do not like to do a great deal of yard work, you have the opportunity to choose a lot that will not require extensive maintenance.

All of these factors make your house truly unique, helping to improve its resale value as well. If you choose to resell the home, potential buyers will be drawn to the original architecture and design of your home.

Since the home is brand new, all of the appliances and fixtures within the home are also new. They will be protected by warranty, saving you money in case the appliances or fixtures experience problems in the future.

Another important benefit is that a new home will also be located in a new subdivision surrounded by other new houses. The newly constructed subdivision is often near the best shopping centers, restaurants and schools.

Despite all of the benefits of building your own home, there are also disadvantages. Sometimes when you build your own home, the construction experiences a variety of delays.

Inclement weather, inspections, difficulties obtaining construction materials and other problems may plague a construction project. These types of problems do not occur with homes that already exist.

The contractor may have multiple construction projects as well. This may turn his attention away from your home as he directs the construction of other projects.

While you are waiting for your home to be built, you often are still paying rent or mortgage on your current apartment or home.

These expenses are in addition to the money you spend on the home currently under construction. This can cause financial hardship to people who are trying to build a new house.

If you have purchased land in a new development and you have moved into your new home, you may have to live with noise as the construction company builds the other homes in the subdivision.

New subdivisions usually require that homeowners pay homeowners’ association fees as well. In contrast, a home in an older neighborhood may not require residents to pay these types of fees.

The decision to build your own home can be an exciting but scary prospect. You have the opportunity to create a completely original home that will express your personality and lifestyle.

By weighing the pros and cons of building your own home, consulting a mortgage repayment calculator and choosing a reputable contractor, you can make smart choices concerning obtaining a new home for you and your family.

Choosing Your Mortgage Deals

J. Hamilton Fraser — Wed, 15 Sep 2010 20:07:10 +0000

Many people just get mortgages without considering what kind of mortgage to get. The choice which exact mortgage to choose seems to be trivial to many people. They are bored by financial details and don’t want to spend any time on choosing the type of loan they take. They just take the first deal that is offered to them and often don’t even notice that they could save thousands of dollars if they just sat down for some hours and did some research before they decided which mortgage deal to go with.

This is very understandable, there are so many types of mortgage deals that it is very hard for a beginner to get into the topic. There are fixed rate mortgages and flexible mortgages, the shared ownership mortgage, the tracker mortgage, the reverse mortgage, the list goes on and on. Many people get disturbed by all those terms and give up soon. Some people try to hand off the decision to a financial advisor. While this is probably a lot better than doing nothing, it still isn’t optimal. Many financial advisors are payed a commission-based salary, so it is in their interest that you get the loans that earn them the most money, not the ones that save you the most.

The only solution to this dilemma is either to find someone you really trust and who knows a lot about finance-related topics, or to put in the work yourself. Ask for the exact rate you have to pay, look for every detail and explore different kinds of mortgages. How does a shared ownership mortgage work? What is a tracker mortgage? Get the concept of a reverse mortgage explained until you really understand it.

It probably won’t be fun do research all this, but it will definitely pay off.Just one tenth of a percent may save you thousands of dollars over the next few years.

The Mortgage Options For Those With Bad Credit

J. Hamilton Fraser — Tue, 27 Apr 2010 08:43:37 +0000

A bad credit mortgage is synonymous with the sub-prime mortgage, that has been in the news since the advent of the downturn in the housing market. This type of mortgage covers people who obviously have less than stellar credit, whether from their own poor management of money or unforeseen circumstances, such as a major illness, leading to a bankruptcy.

Under any circumstances, the people whose credit is not good, like somewhere in the low 700s as rated by the 3 credit rating agencies, such as Equifax, will be penalized when it comes to obtaining a mortgage. The credit rating is expressed as a FICO score, though banks and lenders use more than this as the criteria for determining the creditworthiness of a mortgage seeker.

A bad credit mortgage, in most cases, will entail paying a higher interest rate and having to put down at least 20% of the price of the home. Unfortunately, 95% mortgages are often not available to those with a poor credit history. Banks are presently not in the mood to make risky mortgages, so these people will even have difficulty in obtaining a mortgage at a higher than average rate. In addition PMI (Private Mortgage Insurance) which will be an additional monthly payment, will be required by all those fortunate enough to get a mortgage without putting down 20 %. This insurance paid by the buyer insures the bank for any losses from the buyer not being able to afford the home, leading to foreclosure.

An important fact for the prospective home buyer with bad credit is that the more money put down, the better the chance of obtaining a mortgage. There is a formula the lenders use that can compensate for a low FICO score. The more money put down on the home, the higher the FICO score goes in relation to getting a loan. The FICO score will not rise but the added down payment will add points to the score, solely for the purchase of the home.

Getting Super Jumbo Loans

J. Hamilton Fraser — Thu, 11 Mar 2010 00:15:37 +0000

Getting super jumbo loans can be a little more tricky than you might think. Even though the people who are usually applying for super jumbo loans are people that 1) have more money, 2) have higher paying jobs, and 3) have more assets to back themselves with, they still can find it hard to find a lender who will give them such a loan.

The problem is not that lenders don’t want to make the loan – the problem is that lenders have to take on more risk with a super jumbo loan then they would otherwise take with mortgage loans less than the current jumbo and super jumbo limits. The reason for this is two fold:

First, super and jumbo loans are not back by the federal government. While the government wants everyone to be able to get into a home, they do not believe that they need to subsidize the ‘wealthy’ when it comes to the home purchase like they do with the middle class of America. That’s just the way it is, and because of this Freddie Mac and Fannie Mae will not back/buy such loans from the banks – effectively making such loans more expensive and more risky for the bank to process and hold.

Second, super jumbo loans are also more risky when they go into default than traditional mortgages. Because a super jumbo mortgage is on that is for more than $650,000 there is naturally going to be less demand for those homes (i.e. there are less rich people in the world and the USA than middle class Americans) than other homes. This makes it harder for the bank to sell in case of foreclosure.

However, do not get discouraged if you find yourself falling into this category – just realize up front that you will possibly have to put a little more cash down to get the loan than you otherwise would, or look for a home that falls withing the regular categories.

Buy to Let Mortgages – Best Buys

Mike — Wed, 18 Nov 2009 11:26:29 +0000

If you are looking at buy to let mortgages, best buys can be hard to find. But this article will help you find your way through what can be a bit of a minefield.

History and Overview

in 2008 and 2009, the global economy has taken something of a nosedive. Whereas just a few years ago, many investors were taking out buy to let mortgages to buy rental properties, that is something that is now happenign a lot less.

The reason for this is that many of those rental properties are now worth significantly less than they were. Mortgage lenders have been forced to foreclose on many of these loans and as a result, they are now becoming much more stringent in their offers.

What kind of deals are currently available?

Mortgage lenders are offering a lot less than they were. In some countries (such as the UK), only 5% of the deals that were available in late 2007 were still available in mid 2009. Borrowing is more difficult, with lenders requiring not only larger deposits, but also charging higher interest rates even though bank base rates have decreased.

But there are still deals to be had. You just need to be able to show the lender that you are offering them a sound inves
Photo by Dominic’s picstment. If you can prove that the property will have a decent rental income, than you should be able to borrow up to three times your annual salary plus 50% of the annual rental profits.

What types of mortgages are offered?

These are some of the types of mortgage that you might be able to get on a buy-to-let deal:

Fixed rate
Variable rate
Discount rate for early repayment
Cashback mortgage
Interest only mortgage

Other Points to Consider

Treat your rental property as a business, and your mortgage application as if you were a businessman seeking an investor. In effect, this is what you are doing. When seeking out buy to let mortgages, best buys can be found when you offer the mortgage lender a low-risk, high-return proposal.

Fixed Rate Buy to Let Mortgages

Mike — Wed, 18 Nov 2009 11:07:47 +0000

First of all, let’s just explain exactly what a fixed rate buy to let mortgage actually is.

This type of mortgage is one where you would borrow money from a mortgage lender, at an interest rate fixed for a certain period (usually somewhere between three and five years), to pay for a property that you intend to rent out.

So what you are doing is borrowing money to pay for an investment. An investment that will hopefully not only grow in value over time, but also provide you with a regular monthly income in the form of rental payments from your tenants.

What happens at the end of the fixed rate period?

Photo by tim caynesUsually, when the fixed rate period comes to an end, the mortgage lender will either offer you the choice of going on to a standard variable rate (probably a couple of points over the prevailing bank base rate) or a new fixed rate for another three to five years.

Who can apply for one of these mortgages?

A number of factors are taken into consideration by mortgage lenders when evaluating applications. Here are some of the things they are likely to want to know:

Is the property going to be used purely for rental purposes?
Is the property in good condition?
Will it be sub-let?
Do you have loans against other buy to let properties?
Are you currently over 18 and will you be under 75 when the loan matures?

Advantages of Fixed Rate Buy-to-Let Mortgages

The main advantage of a fixed rate buy to let mortgage, rather than a variable rate mortgage, is the stability and predictability of outgoings, which makes the whole process of budgeting easier. If interest rates suddenly go up, you don’t have to worry because your rate is fixed. Of course, the flip side of this is that you won’t see realise the advantages of a drop in interest rates either.

Buy to Let Mortgages – Interest Only

Mike — Wed, 18 Nov 2009 10:50:07 +0000

As the workplace has evolved and more and more people in the workforce have become more mobile, there has been a massive growth in the requirement for rental properties and short-term leases. As as direct result of this, many investors have moved into the rental property market by taking out buy to let mortgages. Interest only deals have provided these new landlords a way of paying less per month than traditional capital repayment mortgages.

There are other benefits too:

As a long term investment, rental properties can provide a significant return
The monthly rent from tenants gives a solid, recurring income
If your current portfolio consists of other types of investment, owning one or more rental properties will help you to diversify

An Investment for the Long Term

Photo by rmcgerveyOwning a rental property should not be viewed as a short-term investment. But by taking out an interest-only loan to purchase the property, the amount you need to pay to the lender each month is lowered, so the amount you need to make on rent is lower too. You can use the extra income from the rent to either re-invest or to pay back part of the loan’s principal. Of course, once the loan is repaid, you then have a property that is giving you a continued monthly income.

Diversifying Your Portfolio

Common sense dictates that it is never a good idea to put all your investment eggs into one basket. Versatility and diversification are the key to having a strong investment portfolio. And any investment that not only grows in value but generates its own monthly recurring income has to be a strong performer in the portfolio. A well-chosen rental property will satisfy both of these criteria.

Conclusion

When buying a property for rental, it is always worth considering the benefits of buy-to-let mortgages. Interest only mortgages provide the added advantage of requiring lower monthly payments. Be aware however that you can lose money on these deals if a) interest rates rise and remain high; b) the value of your property decreases or c) you cannot make enough money from rental income to cover the payments.