The following is a monster compilation of advice I researched when adding pages to an old website of mine. Thus, the HTML may be wonky and there may be some repetition. I may titivate it as I go along, if it proves popular.
That said, it contains everything you need to know in advance in order to negotiate a better mortgage deal anywhere in the world.
So here we go!
- Settle up with creditors and get on to Experian, Equifax and CallCredit and make sure errors are removed from your credit report.
- Find out the true value of your property. Get more than one independent appraisal. Compare it with the prices of similar-sized houses for sale in the same area. Be like mortgage lenders and estate agents and use the sales (or market data) comparison approach.
- Don’t sign documents without reading them. As soon as possible, before you close the deal, read the documents you’ll be signing carefully, and make sure you understand them, so you won’t have to sign them in a hurry.
- Shop for insurance well before you are ready to sign off. If you wait until the last minute, you may have no time left to shop around for the best policy. A paid insurance policy (or a paid receipt for one) is required at the close of the deal.
- Don’t take the vendors’ word that repairs have been made. If the vendor agrees to make repairs, have your inspector verify the work’s been done before closing.
- Don’t buy a property without full, professional survey(s). Human beings can be perverse; happy to spend £250,000 on a house after a half-hour viewing, but be-grudge spending £500 finding out whether it’s worth buying in the first place!
- Don’t look for a property without being pre-approved for your mortgage. You will have much more negotiating power with the vendor, and may be able to save thousands of pounds.
- Only pay up-front fees to well-known or highly recommended lenders. While most lenders are reputable, it is always best to be cautious.
- Remember the closing costs. Every mortgage has hidden costs associated with it, from legal fees to home inspections to lender’s closing costs. Before you commit, remember to ask about the closing costs. You don’t want a big surprise on closing day.
- Get pre-approved. You can save yourself headaches. Essentially, you apply to the lender for a potential mortgage up to a certain amount. From there, you have a clear idea of your budget, and you can then make an offer that won’t be dependent on potential financing.
- Budget for insurance and property taxes. No lender will offer a mortgage on a home that has tax liens on it or isn’t properly insured. When laying out your budget, remember to calculate a monthly cost for associated taxes and home insurance.
- Choose a reputable lender. Don’t just accept the first mortgage offer you get. Instead, look for a lender that’s stable, reputable and able to offer good client service. You will likely be dealing with them for umpteen years, so finding a stable one with a good reputation should be a priority.
- PREPAYMENT PENALTIES. Usually they are are one per-cent or less of your existing mortgage balance, expire after the first six months, or can be waived entirely upon the sale of your property.
- REFINANCE TO A FIXED RATE FROM YOUR ADJUSTABLE RATE. During times of declining interest rates take advantage of long term fixed rates. Fixed rates give you peace of mind.
- Implement a budget. Look at where your money is going. There should be more money coming in than going out. Track and record your spending habits over at least a month. Write down everything you spend. Examine your spending habits and see what you can do without.
- Work on your credit. Spend a year or two making sure all your payments get in on time. Stop applying for new credit. Reduce the balance on your current debts. Because interest rates are already rising, you can’t afford to lock in at a credit penalty rate. An additional year before buying could save you tens of thousands over the life of the mortgage.
- Build a sizable deposit of 20% or more. This allows you to direct negotiations with lenders. Not only will you save on insurance and your interest rate, you’ll also have pre-established home equity.
- Watch out for fly-by-night mortgage lenders closing their doors and selling their mortgages on the secondary market. You want a lender that’s going to give you good client service and do so for thirty years. Look for one whose personnel answer questions, doesn’t try to rush you and is genuinely interested in helping you.
- By having a monthly financial plan, you know how much you need to spend on groceries, bills, mortgage etc. By doing so, you can pay additional amount of money to reduce your debt.
- Never provide personal credit information to unsecured web sites. If you’re unsure, try calling their client service line or asking about them with client associations.
- When researching mortgage rates online, try to choose sites that are local. Average mortgage rates differ by state and by county.
- Look for quotes that cover specific credit ratings, if you know your credit score beforehand.
- One way out of debt is to increase your income. You could get a higher-paying job or even a part-time job. You could even work from home by selling at eBay or selling other people products (affiliate products).
- Confirm that your finances are sound and that you do not have a bad credit history.
- Your debt-to-income ratio is another determining factor. Debt-to-income is actually often overlooked. If you have too many payments to make; cars, house, or credit card, pay some of it off.
- Obtain multiple offers before you settle on the best one. There are a large number of lenders to choose from, so you should obtain multiple offers and quotes. Compare the fee structure, the mortgage amount and the rate.
- GET your ‘Good Faith Estimate’ upfront and hold your lender accountable.
- GET a ‘Good Faith Estimate’ from both a broker and a direct lender, for comparison, NOT two brokers. With brokers “the biggest liar gets the deal. ” AVOID pre-payment penalties.
- WATCH for ‘bait and switch’ tactics. For example, as the closing date gets closer the lender may change the rate or other condition, for any excuse. He’ll try to put you in a corner, calculating you’re unable to do anything about it.
- Most lenders are trying to get as much money as they can from you. Be wary.
- Shop around for your payment protection cover. Having this type of cover to protect your repayments in the event of redundancy, accidents, or illness, is important. You don’t have to take it through the lender that you take your mortgage through. Instead, shop around as the different deals.
- • 1. Credit report. The three major credit bureaus: Equifax, TransUnion and Experian provide your credit report. It is important to review these for errors because according to statistics, errors are present in 40 percent of credit reports. These errors can lead you to get higher interest rates or not get the mortgage at all.• 2. Credit Cards. Lenders become suspicious when you apply for new credit cards or close current accounts when you are applying for mortgage.• 3. Outstanding Credit. This figures much in the approval of your mortgage. Pay off all debt before applying for the mortgage.• 4. Income. A steady income will give you plus points in securing a mortgage so you should avoid changing jobs or quitting your job before applying for a mortgage.• 5. Available funds. Make sure that you do not make purchases that could eat up your available funds before buying a home. Aside from a down-payment, you have to consider other expenses such as closing costs.• 6. Down payment. A bigger deposit assures you of lower interest rates on the mortgage.• 7. Interest rate. This determines how much you will have to pay each month. It is best to consider ‘lock-in’ fees to guarantee yourself that you still get the advantage should interests rise in the market. Remember that interest rates continuously change.• 8. Price Range. From your current financial assessment of your situation and by figuring out your debt-to-income ratio, determine the cost of your home. A lender will not approve of a mortgage whose cost you cannot meet.• 9. Lender. Know your lender and inquire about the statistics concerning those mortgage applications they turned down and approved. According to financial experts, it is not a good sign if the lender denies 20% of those who applied for a mortgage.• 10. Your honesty. Be honest when filling out all the information the lender requires from you to increase your mortgage approval. Beware that providing inaccurate information may backfire on you and no lender will be willing to work with you.
- Some deals can either make or break depending on the broker you choose. Here are some guidelines:• The mortgage broker must be affiliated to many lending institutions and should be licensed.• The mortgage broker should be working at a reputable institution. The name of the broker could be checked at the Best Business Bureau or the Chamber of Commerce.• The mortgage broker should provide you with the names and contact numbers of people who can be contacted for credibility check.• The mortgage broker should ask you what you want on your mortgage. He must ask you questions rather than on giving you lots of facts. He should prioritise what you need and should come up with ways to fit this with various deals available in the industry.• The broker should have with him various lists of deals that he can offer. This is a good because if not, you might not get the best deal. • The broker should be knowledgeable and competent with everything that concerns the mortgage. • The broker should be paid on commission which will make him or her work harder for you. • It is recommended that the mortgage broker should have a local branch near you for it to be accessible should there be any problems with your mortgage.
- Be wary of internet sites with names like Go4mortgage.co.uk or Yourmortgage.gb.uk. These sites are often the tertiary site of the real mortgage lender; they might be a big name in the business, or they might be a few East London geezers chancing their arm in the mortgage leads game.The site may have been set up by a big lender to focus solely on mortgages, and get more internet ‘traffic’ from people looking for same, or it may just be a ‘throwaway’ site with no proper support, run by people who sell on your contact information. Internet sites of this type won’t be able to help you with unusual queries. Your information will be flogged on to three or more ‘real’ mortgage lenders, with the result your phone will be ringing off the hook for the next two weeks with calls from eager salesmen, flicking through a database, and finding your name.
- If your credit is bad, or you get into trouble with your mortgage, get in touch with the CCCS: the Consumer Credit Counselling Service. They are a charity dedicated to helping people in a financial pickle to get back on the straight and narrow. Other ‘advisory’ services you may find on the internet are just fronts for professionals looking to set you up with a debt consolidation or secured loan, or a remortgage, while charging their own fees on top.
- You need to cut to the chase when getting quotes for a mortgage. What you really need is the APR (Annualised Percentage Rate) for comparison purposes, which should be the interest rate PLUS associated fees for taking out the loan. Ask for a personalised illustration. Also look out for prepayment penalties; charges made if you pay back the mortgage early. Then, hopefully, you can do a true cost comparison.
- The internet and your high street bank aren’t the only places you can get a mortgage; consider smaller banks, building societies or credit unions. Some building societies and all credit unions are founded on the principle of mutuality; they are set up for the benefit of all members, not for shareholders or owners. So search on the phrase ‘fully mutual building society UK’, and see what kind of deals on mortgages you can get.It depends on how ‘on the ball’ the members are, and whether the fraternal ethic still exists in the organisation i.e. are they still looking to get the best deal for their members?
- The majority of mortgage lenders aren’t charities. They’re in business to make a profit, and only the simple-minded would begrudge them. So they add in fees and penalties and charges, either upfront, or into the interest rate. They get lots of queries from people who haven’t got the ‘scratch’ to repay a mortgage, so you can forgive them if they’re a bit brusque; they’ve heard it all before.Your mortgage request will be judged according to a formula, and any soft talk you get is merely them being eager and/or polite. If you can tick all the right boxes truthfully, you get a better deal; if not, a worse one. They’re gambling on your ability to cover your mortgage debt, and your interest rate reflects the ‘odds’ of repayment.This being a business deal, they’ll try and get as much out of you as possible, but with the internet you can compare deals, and haggle a bit.
- You can get mortgages even if you have a bankruptcy; CCJs; Mortgage arrears; Hire purchase defaults; Debts; IVAs.
It’ll just cost you more. Therefore it makes sense to settle these ‘out of court’, before they arise, or make a settlement with your creditors, so you don’t end up with a negative credit rating. A negative credit rating increases the cost of a mortgage.
You may be surprised to learn there are lenders out there eager for your custom, if you have bad credit. Why? Because they can make more money from you! This is especially true if you’re borrowing to buy property, or a car; the debt is secured against a good that can be sold off if you get into difficulties. They get their money back, regardless.
However, lenders don’t like to repossess if they can help it; it’s too much trouble. They’d rather have the money. This allows you some ‘wiggle room’ to re-negotiate.
- While a mortgage at any price may seem a good idea, getting a fat loan at the limit of your credit is not the wisest move. You should be looking at getting the property you want, for the least mortgage you can wangle. This means having a serious chat with yourself, or your partner. You need to ask “What do I/we want the property for? What purpose is it to serve?” It’s not like you’re buying a video recorder. An extra twenty grand on the price can add years to your repayment schedule; money that could be saved up for your retirement, the children’s schooling, or for an emergency.
- An important question before you get your mortgage to ask is: What is the property you’re using it to get for?. What purpose is it to serve? Your ‘dream home’ will be where you park your carcass at the end of a day’s work. It will get scuffed from use. It will cost money to maintain, and you could lose the lot in a divorce or business break-down. The local council could have it off you to pay for your geriatric care in old age. Are you allowing your bright fantasies gleaned from magazines and television to overwhelm your good sense?The market is still ‘hot’ at the time of writing, so property prices do not reflect their ‘real’, long term worth to you. When all is said and done, your main home or a business property is a good that serves a purpose; shelter. Value appreciation is secondary. Don’t blight your life to service a fantasy. Live for more than paying off a mortgage. Use the energy of your life to serve a nobler vision. Define exactly what for, or if, you need the mortgage. Then go for a walk, and think about the best way to get it. A big fat mortgage may not be the smartest way to get what you want.
- Speak to a professional mortgage advisor.
- With a fixed rate you can pay back the loan with an interest rate which does not change over a certain amount of time i. e. it is not affected by the changes in the marketplace. Capped rate deals are the same as fixed rate in most ways, however, there is a set capped rate, and if the variable rate of interest goes below this, then the client will pay according to the lower rate. In discounted rate deals there is a set SVR (Standard Variable Rate) interest rate from which the lender in question will deduct a certain percentage. Finally, we have variable rate deals in which the payments made by the respective borrowers will change in accordance with the SVR (Standard Variable Rate). Flexible/Lifestyle deals are those which allow you to change the amount you pay off each month as the loan term progresses. A current account deal can be described as a “flexible deal linked to a current account”. Cashback is when the lender gives back a sum of money after the agreement has been made.
- The first step in the hunt for mortgages is to work out how much you can afford to borrow based on your income and your outgoings. It is always worth making a few calculations, aided by a mortgage calculator, as your finances vary from time to time, as do the interest rates payable on mortgages. It makes sense to see how much, or how little, you can afford to borrow before doing more mortgage research.
- An interest-only deal requires that only the interest on the mortgage is paid off on a regular monthly basis, the rest of the actual amount borrowed is then paid off via another method e.g. a pension, an endowment, or an ISA. This means that the monthly repayments do not actually pay back any of the initial loan. The borrower must be sure to make regular payments to the other method (pension, endowment, or ISA) to ensure the complete payment of the mortgage by the end of the agreed period. There are also many different forms of interest rates associated with the various types of mortgage deal offered.
- With a repayment-only deal, your monthly repayments pay off the capital amount borrowed together with accrued interest.
- When interest rates fall: Try and leave your repayments the same as prior to the rate drop. This means you will actually be paying more than the minimum each month. You’ll repay your loan years sooner. The more rates fall, the sooner you will repay your loan. You will have been paying at the higher rate, so if rates rise again later you may not have to change your repayment. Pay fortnightly instead of monthly. Many people get paid weekly or fortnightly, so have the mortgage payment come out of your account around the same time you get paid. You’ll be less likely to miss the money. You will actually save money and pay your mortgage off sooner. Divide the monthly payment by two or four and pay that each week or fortnight. BUT, this only works if your outstanding mortgage is calculated week to week. Many lenders calculate your repayments as yearly totals, thereby increasing their profits.
- Don’t take out a Mortgage Indemnity Guarantee (MIG) – MIGs are now usually only charged on loans of 90% to value. A MIG is a one-off payment made to the lender that protects them if you fail to keep up your repayments and your property is repossessed. If you can avoid paying for one, do, it will save you money.
- Get cheaper property insurance – Reduce your expenses by shopping around for your buildings and contents insurance. It’s convenient to buy from your lender, but search the market and you could save a packet.
- The majority of lenders offer mortgages of up to a maximum of 95% of the value of the property, or its purchase price, whichever is lower. Therefore you will need to save up a deposit of at least 5% of the price. 100% loans are available but you they are more expensive, in terms of the interest charged. Although you automatically pay more by borrowing the full amount, many lenders charge you additional interest on 100% loans. Another major cost to take into account is the mortgage indemnity guarantee (MIG) premium. This fee covers the lender for the added risk of advancing larger loans. It is usually activated when the loan is for more than 75% of the property’s value and rises with the amount you borrow. On loans over 95% it is usually quite high.
- The first step towards buying your property is to find out exactly how much money you can borrow. This is worked out according to your income, usually three times your annual salary before Tax and National Insurance are taken away. If it’s a joint loan, the lender is likely to offer you either three times the annual income of the higher earner plus the total second income, or two-and-a-half times the total joint income. You can add your savings to the amount offered by your lender in order to estimate the range of house prices available to you.
- Roughly, total costs could amount to as much as 3 or 4% of the purchase price. In some cases the costs are based on a fixed scale; in others they are variable. Fees can include:
Valuation Fee (For Basic Valuation Only); Mortgage Indemnity Guarantee Premium; Arrangement Fees; Booking Fees.
- NOTE: Your property is at risk if you do not keep up payments on a mortgage or other loan secured on it.
- Whether you are buying a new property or changing lenders for re-mortgaging, you need to be sure you can afford the repayments. Lenders consider a number of things working out how much you can borrow, like your income and employment status, the property value, the outgoings and your credit history. Make sure you do not exaggerate your income in the hopes of receiving a larger mortgage.
- This is not free money and it must be paid back and it will affect your credit if you don’t. In light of this, it makes sense to simply state what you believe to be your income and ability to pay. Mortgages also require a deposit.
- Many individuals with adverse credit cringe at the idea that a sub prime lender might approve their mortgage loan only on the condition of high interest rates. However, this is not as much of a drawback as long as the loan allows you to pay more than your monthly payment without penalty.
- A bank will run credit checks, confirm income with an accountant, or even access your bank account to review your balance over a period of time. Not all lenders will do this; however, they do have the right to check your income is what you claim it is.
- While the option to stretch your income to receive a larger mortgage loan may be tempting it is not advisable. The reason for this is that you are required to pay back the mortgage you receive and if you stretch your income then actually coming up with the money to pay for it could be very difficult indeed. So, if you are applying for a mortgage report your income as closely as possible.
- If you do not find a mortgage that seems to match your needs and/or budget remember that banks and lenders can negotiate a bit when it comes to interest rates, points, fees and pre-payment penalties.
- Don’t be afraid to ask for what you want. You might be surprised and be approved for the perfect mortgage for you.
- Before you fill out mortgage application, take whatever steps you can to improve your credit. Pay off old loans, and once they are paid off, ask your creditors to remove negative information from your credit report. If you need new, positive credit listings, get a department store credit card, make a few charges on it, and pay them off promptly.
- If your credit is still not good enough, talk to family and friends and see if you can find someone with a good credit rating to co-sign your mortgage with you.
- The best way to find a subprime lender is to search on the internet. The internet allows you to find and compare multiple lenders so you can get the best rate for you.
- If you end up mortgaging with a subprime lender and are unhappy with the interest rate you receive, remember that you can always remortgage again later. Be sure to maintain a good repayment history and keep working on improving your credit so you will be ready to remortgage again when the time comes.
- Be sure to check and compare enough lenders before you choose one of them, as different mortgage conditions may represent a significant amount of money on the long term.
- You may find a lot of lenders offering very low initial rates, but hiding high additional costs within the small print. Ask the lender to explain all additional costs, variable rates and payment conditions, do not only read the small print yourself. If you have doubts, or if you have a feeling that this particular lender is hiding something from you, just go away and continue looking for a more convenient mortgage.
- Fixed rate loans often come with higher penalty costs, so if there is a good chance that you will repay the mortgage before the end of the agreed term, perhaps considering one that has a variable interest rate but has lower redemption penalties is a smarter choice.
- You should also be aware of the penalties applied when extending the duration of the loan, in case you need additional payback time.
- Consider using a mortgage broker. Although a broker will require you to pay for his services, it is wiser to let someone who is experienced handle the process of looking for the best deal for you.
- Try to keep the duration of the loan as short as you can. If the agreed payback term is too long, you will be paying a lot more money in interest, thus the total payment will be higher. Ask many mortgage lenders for quotes and compare both the monthly payments (to see if they fit your budget) and the total payment at the end of the loan duration (to get a real idea of which deal suits you best).
- Something to look out for in any mortgage web site how old the site is. Is it a johnny-come-lately, or has it been around for years? Another thing is whether it has a physical address: P. O. Boxes or ‘Suites’ don’t count. Are they regulated by the Financial Services Authority? Do they have a Consumer Credit Licence?
- As with so many other purchases in life, there’s a price point below which you’ll not be getting good quality mortgage. See for yourself: get a few quotes from different mortgage lenders. Some can shave a half-percent here or there, but you may pay it back with fees, insurance or potential penalties later. Watch the small print.
- Before going out looking for convenient mortgages, sit down and begin doing some budgeting. Get paper and pen ready, and start by making a complete list of your expenses:
The maintenance costs of your car; Your own living costs; Payments you have to make to support any relatives that are depending on you (and this may not be limited to your children’s care);
Contributions to pensions and every other household expenditure.
- Do a budget. Make sure you use realistic figures. Keep all of your receipts, or keep a record, for all of the money that you spend for a month. Use that to help you compile the first draft. Be prepared to review and update it regularly. A co-ordinated budget allows you to get the most ‘bang’ for your money without beggaring yourself, while getting rid of wasteful spending.
- Choose a mortgage lender with a clean record with the industry watchdogs. The mortgage industry receives a great number of complaints against it. In Britain, credit brokers of any kind must have a licence from the OFT, and if they lose it, the OFT publishes this on their website.
- Phrases that you may come across when looking for mortgages are:- APR, an acronym for “annualised percentage rate”, the amount of interest charged on your loan plus additional fees and charges.- Arrears, a term used to describe the amount that a borrower is behind in their agreed repayment plan, measured by either money or time.- Security, term used to describe assets or property put up as security for a loan. The lender will be entitled to reclaim the assets as compensation if repayments are not kept up.- Fixed interest rate, the type of interest that remains the same throughout the term of the loan.- Overpay, term that describes the making of payments over and above those outlined by the loan repayment plan.- Secured, type of loan that requires property or a security to be put up against the loan.- Term, the length of time over which you agree to repay your loan.
- Improve your credit-rating. Find out what it is at Equifax, Experian and CallCredit. Lenders may access them all.
Then do the following:
– Make sure you are on the electoral register.
– Satisfy liens and public judgements, such as in the County Court (CCJs).
– Correct errors, including erasing judgements older than seven years. Paid-off debts can be legitimately recorded up to seven years after settlement.
– Add information showing stability:
— Current employment, employer’s name and address and your job title.
— Previous employment, if you’ve had your current job less than two years.
— Current residence, and if you own it.
— Previous residence if you’ve been at your current place under two years.
— Date of birth.
Close unneeded accounts. Close them off slowly, not all at once. Keep only two credit cards.
Pay off credit cards. Keep balances low, and paid off on time.
Keep your debt low; below 75% of available credit.
Build a good payment history. Pay your bills on time!
Open a savings account at your bank.
- Interest rates for mortgages were up to recently are at a 30-year low. Lenders are discounting their rates and offering special deals.There are several additional costs that should be taken into consideration:
Estate agents fees: 1.5 to 1.75% of the eventual selling price.
Solicitor’s fees: A few hundred pounds.
Stamp duty: Payable on properties over £60,000 – 1% being payable in tax, rising to 3% for properties of £250,000 or more.
Removal Fees: You may decide to hire a van, or good removal firm will cost a couple of hundred pounds depending on the distance you are moving.Mortgage lenders are constantly trying to get the biggest market share. Only so many mortgages are taken out in Britain each day. When a mortgage lender starts to lose its market share it approaches independent consultants with better interest rate and deals. You would not really be aware of this as it is changing constantly. Use an independent mortgage agent to find these products for you.
- In order to give you their best mortgage, the lender you apply to will need at least your: Name; Address (with post code); Time at that address; Amount you want to borrow; Employment (how long in your current job); If you have a bank account (and how long you’ve had it).You may have to get used to the idea of getting cold calls from other mortgage lenders for weeks or months afterwards. Try to stop this by telling the initial mortgage lender “Please do not sell or pass my personal data on to other lenders. Thank you.”
- Some lenders will offer a mortgage up to seven times your salary. They’re not doing you a favour. A mortgage is a big loan that has to be paid back.
- Some people think they can declare bankruptcy to get out of paying off debts. This is a false hope. Go bankrupt, and you may find it impossible to get credit of any kind, except at loanshark rates.
- You can improve your credit-worthiness by:
Staying in one place for two years or more; Your house or flat not having had previous occupiers with bad credit; Being on the electoral register; Having a credit card or store card; Paying off your credit-cards, store cards and video rentals regularly; Getting black marks removed from your credit report. Go to Experian, CallCredit and Equifax; Paying your bills before the due date;
Having the same bank account for two years or more; Being in credit on your bank account (no overdraft, no unauthorised overdrafts); Having £50,000 in the bank already; Owning property.
- If you want to get a mortgage, the property you buy has to be worthy of one. This means it should: Be brick built (not a mobile home or other temporary structure); Be structurally sound i.e. not a wreck; Ideally have no outstanding liens or attachments on it (loans or mortgages); Have Clear Title (the current owner is the sole and legal owner of record).
- It’s a smart move to get as much of a deposit upfront as you can. The interest and insurance on a mortgage can really cramp your lifestyle in later years, especially if you go through a bad patch financially. Some people think &Great!, I can get a 100% mortgage. I don’t have to pay anything, oh happy day!&.The reality is you are taking money out of your pocket in handfuls, and putting it in the pocket of your lender, all for want of a bit of scrounging and saving. Interest, fees and insurance can easily double the amount you have to pay back. In the past people relied on inflation taking the sting out: £50,000 in 1975 was worth a lot less in 1995. People wages had gone up, the value of the money had gone down, so the mortgage payments became easier.Times change. Inflation, at the time of writing, is about 2% P.A., as opposed to 5% or more in times past. Wages have not gone up much in the past ten years; a starting salary is still about £20,000. Result: young people priced out of the market, and older ones not as comfortable with their mortgage payments as they might have expected.The reality in 2006 is different. Inflation is low, interest rates are low, house prices are high, wages rises are barely keeping place with inflation; result: hefty mortgage payments for years to come.
- 95-100% mortgages attract higher interest rates and fees. A lender is much happier if they know you’ve got access to large amounts of money, for a deposit, upfront. It suggests you’ll be a good credit risk. You’ve covered part of their risk by putting money into the property already. The old saying is true; banks prefer to lend money to people who’ve got it already!
- Widen your horizons. What do you want? Money. How does one get more money? By:
Getting a second job or paying hobby; Getting a different job that pays better; By scrounging from friends or family; By selling an unnecessary asset, like a flash car; By saving what you’ve already got – no holiday, give up cigarettes and booze for a while!
It’s a small amount of initial hardship, versus years of fretting over barely-manageable monthly payments. Money and sex problems are two things that put a real strain on a marriage or partnership. The second is easy to fix, and the first not too hard either! An extra hundred quid in your pocket per month can make all the difference.
- More ideas: Buy out of season, in November and December; Buy at auction – hidden costs, possibly dodgy property, but worth a look; Advertising your need in freebie local papers, and online – let them come to you; Buy a repossessed property – competition from pros, but again, worth a look; Reassess your needs. Do you really need a jacuzzi, or a recreation room? Buy a place in need of slight renovation or re-decorating; Buy a smaller property; Buy a property in a borough with lower Council Tax – more money to put to your mortgage.
- Your best way to find a mortgage is to use Google, and add ‘stop’ words to the query. Your query would look like this: mortgage -USA -biz -“bad credit”, where ‘USA’ and ‘biz’ are words, and ‘bad credit’ is a phrase, from type of sites you don’t want in the search results.
- Any mortgage site on the internet you find should be scrutinised according to the following checklist:Has it got a lender name?; Has it got a registered office?; Has it got a street address, rather than a P.O. box?; Has it got a telephone number?; How long has the lender been in business?; How quick are they to respond to queries?; How far away are they from you physically?; Are lender personnel mentioned by name on the site?Once you’ve settled on a few mortgage lenders, you can enter their business name in a search engine with the words ‘problem’ or ‘scam’, and see what comes up.
- Overpay your mortgage if you can do so without penalty, especially if your mortgage payments are re-calculated week-to-week or month-to-month. This means you will incur much less interest over time, and get peace of mind sooner. Get your outstanding mortgage amount down, and get on with the fun things in life.
- A self certification mortgage is available to the self employed, employed, first time buyers and those with a bad credit history. If you are self-employed, you may simply not be able to prove your income; you’ve no formal or recent accounts or accounts prepared by a professional. A slightly larger deposit is required to reduce the perceived risk from a lenders perspective. You may also be a self-employed, or employed person, who has some buy to let or investment properties.Do you fit in any of the following categories? Then a self-certification mortgage UK may be the one for you:Self-employed; Short-term or part-time employees; Employees on a bonuses or commission system; City of London workers or others who get a large bonus annually; Lender directors who are unsalaried; The low-salaried with other material assets or income which they depend on for future payment; Those with seasonal earnings; Those with more than one, low, income; Contract workers; Freelancers.
In short, those without official documentation of regular income.
- What mortgage you can afford is calculated on you and your partner’s annual income, but lenders will also take into account second income, pension, bonuses, and commission i.e. any legitimate extra ongoing income. The mortgage lender will normally require self certified applicants to have a minimum deposit of 10-30%. Only a small number of mortgage lenders will lend up to 90% LTV (loan to value) on a self-certification mortgage. The bigger the deposit you are able to put down, the better terms you will get.The mortgage lender will carry out a credit check and credit score, instead of using your bank statements, accounts or other proof of income. They may request a banker or landlord’s reference. Self certification mortgages are available in all rate options: capped rates, variable rates, fixed rates, discount rates, tracker rates etc. All different types of mortgage are available too, from first time buyer, to buy to let etc.
- There are mortgages with fixed repayments and those that vary in line with the Bank of England Base Rate (BEBR)Here is a simple guide to the different types of mortgage available in Britain:
Variable rate: lenders usually change their Standard Variable Rate (SVR) in line with the BEBR. A mortgage lender’s SVR is high, which is activated after your intial low rate offer period is over.Fixed rate: If you need your payments to stay at a fixed amount for a set period of time, usually two years, these types of mortgage are set for a short initial period, and usually revert to the lender’s SVR.Some lenders offer long-term fixed rates. If, however, rates were to drop very low indeed, you would miss out on big savings. There are also Early Repayment Charges (ERC) that tie you in. If you think it’s at all likely you’ll want to change after a couple of years, avoid mortgage lenders who impose ERCs (Early Repayment Charges), especially ERCs that go beyond the offer period or carry an overhang. Many products with low introductory rates are likely to carry ERCs to discourage you from moving at the end of the offer period.
Discount: These mortgages offer a discount off the lender’s SVR. Although the initial rate may seem attractive, this is still a variable rate and could go up and down with the SVR, which will in turn move in line with the BEBR. Therefore, while your rate could drop, it could also rise. Regardless, you will revert to the SVR after the discount period.
Capped: A capped mortgage offers a variable rate with a fixed ‘ceiling’. It will not go above a set rate, even though your interest may move up or down with the base rate. This means your repayments will be kept down. Don’t confuse the initial pay rate with the capped rate.
Tracker: These products are synchronised with the BEBR. A tracker will offer a set percentage above the BEBR and move up and down in in sync.It could mean your rate and your monthly repayments could drop. However, if you’re looking for reliability, this may not be the way to go.
Look out for the Annualised Percentage Rate (APR), which lenders are obliged to give, which indicates the interest rate plus any other charges.
- Many mortgage lenders will offer or include buildings and contents insurance and/or Mortgage Payment Protection Insurance (MPPI). You may be able to get a better deal on insurance from someone, such as an independent broker, so don’t be lazy; shop around for a bit.
- Credit cards and easy lending can be a curse. You can get into default if you don’t keep track of your income and expenditure. You get a nice paying job and find that you are being offered credit cards by various lenders. If you’re smart you’ll find a low interest card from a solid company, sign up, keep track of your purchases, pay off your credit card bills in full each month, and ignore offers; from other lenders, or your current one. Fools are captivated by all the ‘free money’ on offer and will end up with cards from several companies. They end up making lots of purchases ‘on tick’ while making the minimum monthly repayments. Then they hit a bad patch financially and the monthly payment is no longer manageable.
- You just need to fill a form with all your requirements and personal details. To ensure that you are getting accurate quotes, fill out the form as completely as possible. A slight difference in income or employment dates can reduce your interest rate. The borrower gets a call regarding suitable deals. Then the client chooses a deal that fits their financial requirement and current financial standing. If applying over the internet, you shouldn’t have to pay processing fees, as there is little manual labour involved. You can save lot of time and money in the approval process.
- Study lenders. Only by requesting quotes and comparing the fine print can you be sure of getting the lowest rate. With some sites you can make side-by-side comparisons, while other sites will email you multiple financing offers. Mortgage brokers work hard to attract customers by negotiating lower rates with lenders, so you often will find better deals through their sites than through the high street, or newspaper or TV ads.
- It’s important to note that the mortgage application process will be influenced by the amount you’re trying to borrow, your credit history, your debt-to-income ratio and other factors. With that said, here’s how the basic process works when you apply online for a mortgage. You can be sure that lenders will review your credit report and credit score (two different things), so it makes sense for you to review these yourself first. Make sure your credit report doesn’t have any errors or discrepancies. If it does, submit a correction request to the company with the mistake; either Equifax, TransUnion, CallCredit or Experian.
- You need to know how much of a mortgage you can afford. Don’t rely on the lender; find out yourself. When a mortgage lender approves or disapproves a mortgage, they do so based on credit scores, risk factors, and other data-driven elements. They don’t consider how the mortgage will affect your life. Use an online mortgage calculator. This will help you determine where your mortgage ‘comfort zone’ lies.
- Some unethical ‘lenders’ use the Internet to take advantage of consumers through their online applications. This can lead to identity theft or passing your details onto umpteen other companies. Before you apply online, always make sure you are using a trusted, well-known company. Most online mortgage lenders will only ask you for some preliminary information regarding your income, debt, etc. They do this for screening; they want to make sure you’re reasonably qualified for a mortgage mortgage before spending more time and money processing you.
- By providing only basic information initially, you can find out if the lender will touch you. You can avoid filling out a full mortgage application for a company who can’t help you. This will also limit the number of credit enquiries made by lenders. If you have too many, it can send up a red flag to other lenders that you’re having trouble being approved.
- Online lenders can offer better interest rates than traditional high-street lenders. They can be extremely efficient in processing your application. This obviously limits face-to-face time, paperwork, and other factors that can increase the lender’s overheads.
- The world of lending is a highly competitive one. If you have decent credit and are generally a good candidate for a mortgage, online lenders will try to offer you the lowest rate and best terms possible, in order to get your business. Interest is only part of the picture. So when comparing online lenders, be sure to ask about closing costs, prepayment penalties and other aspects of the ‘fine print’.
- It’s important that you get everything in writing. This is good financial practice in general, but it’s especially important with large financial transactions. For example, if a lender promises you a certain interest rate based on your qualification and credit score, ask them for it in writing.
- The traditional 30-year fixed rate mortgage will give you the peace of mind of knowing that you’re not at the whim of the finance markets. However, if interest rates drop it will cost you thousands in charges to refinance to a lower rate. Also, if your financial or credit situation has changed you may no longer qualify for the best rates.
- There are advantages to getting a variable rate mortgage other than initial lower monthly payments.• If you intend to pay off a large portion of your mortgage principal early;• Or if you anticipate higher income in the future;• Or if you would like to completely pay it off as quickly as possible.The initial lower interest rate allows you to pay more of your monthly payment to the principal. You should understand the associated risks before agreeing to one. Ask your lender to explain the interest rate ceilings or caps associated with the mortgage so that you aren’t caught out a few years later with a much higher payment because your interest rate just jumped 2%. When interest rates rise indebtedness rises also, as pressures to afford payments increase. This can lead to a potential growth in IVAs and repossessions as people begin falling into arrears.
- Roughly 35% of your credit score is determined by your bill-paying history: late payments, bankruptcy, late collections etc, can all give you a low credit rating. It is generally checked over a two-year period and it is the more recent debts that carry the most weight. lenders also take into account your income and your potential earnings in the future. Someone with a poor credit score may find themselves being refused a mortgage. An adverse credit rating can make it harder to remortgage – especially if your credit score is lowered by defaulting on payments to your current lender.
- Underwriters of mortgages will look at how you have paid your rent as this will be replaced with your monthly payment. It is important to be able to document your rent payment history.Fixed-rate mortgage – The monthly payments are stable. The interest rate throughout the term is the same as at the start. The major benefits of a fixed-rate are inflation protection and a relatively low risk.Variable-rate mortgage (Adjustable Rate) – Has variable interest rates and monthly payments for the term of the mortgage. It often starts with lower monthly payments and a lower interest rate. However, your monthly payment would change subsequently.
- Equity is the difference between the amount you owe on your current mortgage and the current value of your home. Ssuppose you sell your home: the amount of money left in your pocket after paying off the mortgage is called Equity. This equity when taken as a mortgage, from a lender, without actually selling your home, comes to be known as a home equity mortgage.
- Some factors to consider when choosing from the different mortgage programs.• Your current financial situation, do you expect this situation to change?• How comfortable are you with a changing mortgage payment? A fixed rate mortgage can save you thousands in interest over the period of the mortgage, but it will also give you higher monthly mortgage rates. A variable rate will start you out with lower monthly payments but you could face higher monthly payments if the rates change.
- Answer the following questions:• What is your current financial situation (including income, savings, cash reserves and debt-to-money ratio)? • How you expect your finances to change in coming years? • Have you a plan to repay the mortgage before retirement? • How long you intend to keep your house? • How comfortable you are with a changing mortgage payment amount? The answers to these questions will give you the idea of your financial position. Now the next step is to decide two key options: • Mortgage length, • Type of interest rate (fixed interest rate or variable interest rate).
- The length of mortgage can be minimum 15 years; it can be 20, or a maximum 30 years. Adjustable rate mortgages are more risky because the interest rate will change, while a fixed-rate mortgage offers more stability because of the locked-in rate. You will be able to pay off a shorter-term mortgage more quickly, but your monthly payments will be substantially higher. Long-term fixed-rate mortgages are popular because they offer certainty, and many people find that they are easier to fit into their budget. In long run they will cost you more, but you will have more available capital when you need it and you will be less likely to default on the mortgage should an emergency arise.
- Consulting with a mortgage advisor is recommended for those with poor credit. He will be knowledgeable about the types of options available to you.
- When consulting with the mortgage advisor, clients should be completely honest about their financial situation and should provide the broker with all the information he needs.
- It is important that you make sure that the mortgage quote you get from lending lenders that you are interested in should include information about other costs that you are expected to pay. Some of these include property taxes, closing costs, insurance fees, PMI and other miscellaneous expenses.
- Estate agents represent the seller – not you, the purchaser. There are seller and purchaser realty staff. If you are using an agent, be sure he’s representing you. When buying perhaps you should consider hiring an agent or lawyer who represents you exclusively.
- Prepare a payment plan for your future dream home once you have your budget in hand. Make your monthly payment higher than your current housing expenses. Put the extra money you don’t use monthly into a savings account.
- Take advantage of free lock-ins. Look for lenders who are willing to offer you a free 60-day lock-in. But when it comes to mortgage, you have to be cautious and ask all the right questions. You may be promised a free lock-in, but your mortgage officer might charge you a fee or a very high cost for lock-in protection.
- Be wary of ‘free’ application costs. Keep in mind that in terms of mortgage, free can come with a cost. Instead of focusing on looking for applications offered at zero cost, focus on the interest rates and points.
- Make smart comparisons of interest rates. Your goal is to work with a lender who offers the lowest interest rate. If numbers are too confusing for you, then ask around. There are always people who are willing to share their knowledge with you.
- You can use the websites of county recorders to learn of the latest notices of default (the first type of notice issued in foreclosure proceedings). Also foreclosure listing sites to see what properties are about to be offered for sale at a public auction or trustee sale.
- Get your financing in place. You should be approved for the mortgage money you need. This is to ensure your ability to settle the buy of the property without delay. Keep in mind that it can take 1 to 3 weeks to qualify for a mortgage.
- The bigger the deposit, the better. The lower your deposit, the more you’re going to pay. With a 5 percent deposit, for example, you’ll be expected to pay for mortgage insurance and will most likely be subject to higher interest rates. Most lenders like to see a deposit of at least 10-20 percent.
- Look out for any hidden costs. You will find that some lenders charge a range, under different names. Make sure that you know everything that you are going to be charged for, whether it is in the form of an upfront fee or whether it is added to the mortgage.
I hope these ideas will assist you in getting worthwhile mortgage easily and in good time.