Jul 28
adminCheap Mortgages
What Is Capital and Repayment Mortgage?
Repayment mortgage (also called a capital-and interest loan)
Your monthly payments gradually pay off the amount you owe as well as paying the interest charged on the loan. Provided you make all the agreed payments, the loan will be fully paid off by the end of the mortgage term.
-Consumer Information, FSA, June 2006
Repayment mortgage and capital mortgage (or capital loan) are the exact same thing, made more confusing by the fact that this type of mortgage is known by more than one name. But dont let that confuse you! Capital and repayment mortgage is, in fact, the same thing.
How Do I Know Capital, or Repayment, Mortgage Is Right For Me?
RepaymentCapital mortgage is great for those who want to get their entire mortgage, capital and interest, paid off by the end of their mortgage term. Once the term is up on this type of mortgage, youre done and fully paid off. Many mortgage policies focus on the interest that you owe. Capital and repayment mortgages are popular because they allow homeowners to pay off everything that they owe.
The bank or company that you work with to determine your mortgage policy and payments can give you all sorts of options. Make sure to ask what the interest rate and payment structure on a Capital or repayment mortgage would be. The numbers will help you decide whats right for you. After all, the right mortgage is the one that you can afford.
Do Capital and Repayment Mortgages Cost More Than Other Types of Mortgages?
You usually pay off mostly interest in the early years and then gradually more of the capital debt. It may seem as if this is costing more but that’s because unlike the other types of mortgages you’re paying off the capital and not just the interest.
-Repayment Mortgages, Mortgage Sorter web site, June 2006
While capital and repayment mortgages do not necessarily cost more than other types of mortgages, you may feel that you are paying out for a longer period of time with a capital and repayment mortgage. This is not true, however. Capital and repayment mortgages just allow you to pay off your entire mortgage in one complete payment cycle. And once youre done, youre done. Thats the beauty of a capital and repayment mortgage, one of the most popular types of mortgages used by homeowners.
I Still Dont Know What Kind of Mortgage I Need. What Should I Do?
If you know that you want to finance or re-finance your home or property, its an easy decision to take out a mortgage policy. The only problem is, what kind of mortgage will suit your needs best? With so many options out there, and so much information about different types of mortgages available, it can make your head swim. When youve never had a mortgage before and dont know that much about mortgages in general, how do you decide whats best for you?
The only way to know what type of mortgage will fit your needs is to run the numbers. Have your bank, financial advisor, or the company that youre re-financing with gives you examples of payment plans for many types of mortgages, and be sure to get your questions answered about each policy. You will think up many different questions, some of which can only be answered by those youre working with to establish your mortgage. Youll know whats right for you when you see the plan in black and white, because youre the only one who truly understands what your financial situation is.
Jul 21
adminCheap Mortgages
Buy to let mortgages: long term investment on the concrete structure.
Buy to let mortgage market was worth 21.8 billion in 2004 and accounted to 38.2 % of commercial market in the same year. The buy to let market has grown more than any market as a whole which is remarkable. Such a strong market spells nothing but benefit to mortgage hopeful. Buy to let mortgage was a constructive effort by The Association of Residential Letting Agents (ARLA) to encourage growth in the private rented sector.
Buy to let mortgage is a specialized product for a special mortgage product. However, there is little difference between this and other mortgage products. If you understand the various details of buy to let mortgage, there is no way that you wont be successful in your attempt. Every buy to let mortgage will undergo the usual mortgage guideline. The lender will check your credit worthiness, value of your property, the amount of down payment before he approves your buy to let mortgage.
Buy to let mortgage have emerged as an increasingly popular mortgage in last few years. They are marked lower interest rates and have added to their attraction. Also rental income is more dependable form of income than other investment forms. The Association of Residential Letting Agents (ARLA) operates a buy to let scheme which is supported by a group of lenders. There are other buy to let mortgage lenders who operate outside the scheme and you dont have to go through any ARLA agent.
A buy to let mortgage lender would ask for your rental details along with your income. There are some mortgage lenders who will allow you to add your rent to the salary, while other will base the buy to let mortgage entirely on the rent. Any previous mortgage will have a say in what you can borrow with buy to let mortgage. Different lenders will have different criteria which apply also for the amount you can borrow. The maximum that you can borrow will be anywhere between 150,000 to 1m per property. Buy to let mortgage can be taken on more than one property with maximum up to 5 properties. But more than one buy to let mortgage would not be possible on the same property.
Buy to let mortgage lenders usually lend 85% of the property value. Buy to let mortgage entails down payment. The down payment varies from 15%-25%. The larger down payment you can avail the better deals. There is a little variation in the rates of buy to let mortgage and other mortgages. The rental income formula varies but usually rental income should be 130%-150% of total monthly repayments.
The interest rates offered for Buy to let mortgage are fixed, variable, capped, tracker, capped, discounted. According to the inclination of the borrower, any interest rate type can be applied for. Always ask for quotes and compare. This will enable you to sort out buy to let mortgage that corresponds with your expectations. Research is fundamental in every loan process including buy to let mortgage.
Buy to let mortgage is a secured loan which means that it is secured on your property. Late repayment will show in your credit report and inability to repay can lead to loss of property. Think before you apply for buy to let mortgage. First check affordability and then apply for buy to let mortgage. Since it is a long term investment, you have to be careful about making payments on time. Since you have rental income, it will enable you to payments during difficult circumstances. You can take deposit form tenants to make prevent making arrears. We good record with buy to let mortgage will open doors for more investment as buy to let.
Before Buy to let make sure which property you are buying and whether it is compatible with the area. The neighbourhood should be such where there is considerable scope for letting it out. Plan out how much you are ready to pay for the property, keeping in mind expenses like down payment, stamp duty, evaluation fee, solicitors fee and other expenditure like remodeling to enable anticipated usage.
A few years ago buy to let mortgage was something which would cost you higher interest rate, larger down payment and expect large penalty for changing mortgage. However, the buy to let orientation has changed considerably. Buy to let mortgage has considerably moulded itself to become more consumer friendly. In such a stable mortgage market, there is great scope for expansion.
Jul 14
adminCheap Mortgages
After last years crisis of confidence the buy-to-let market is again booming. Earlier worries that interest rates were on the up and property values would crash are firmly behind us. So, fuelled by rising rental yields confidence, landlords have been snapping up new properties and remortgaging for cheaper deals.
In the final three months of last year, rental incomes increased by an average of 3.3%. At the same time the rental yield, income as a percentage of the property’s value, edged up from 6.42% to 6.45%. The latest report from the Council of Mortgage Lenders (CML) also shows that the value of new buy-to-let mortgages increase by 47% in the second half of 2005 over the preceding six months whilst the number of these mortgages rose by 39%.
Indeed, we expect the boom to extend throughout 2006. It will be powered by the steady increases in house prices, a healthy demand from tenants, especially the first time buyers who remain priced out off the property ladder and a glut of cheaper buy to let deals.
Mortgage lenders are happy as well! Industry figures show that buy-to-let mortgages are now a safer bet for them than homeowner mortgages. According to the CML, percentage of arrears in buy-to-let mortgage is now lower than that for homeowner mortgages – and the arrears trend for buy-to-let is improving whist for homeowners it’s getting worse.
Not surprisingly, the mortgage lenders have responded by relaxing some of their lending criteria and aggressively promoting buy-to-let again.
In the past, buy-to-let lenders have required monthly rental income to exceed mortgage payments by 30% so if a mortgage was costing 750 per month, the rental income needed to exceed 975. But now several lenders have relaxed this criteria. The reason’s not just the improved risk profile. Over the last six or seven years, house prices have risen faster than rental income yields, making it increasingly difficult for landlords to meet the +30% criteria. So now the lending average is closer to +25% although Northern Rock and a few others are happy to lend where the income simply equals the mortgage payment.
Simultaneously we have seen a trend for lenders to increase the percentage of the property’s value they will lend on. Whilst 75% used to be the maximum level, the average is now closer to 85% with Northern Rock lending up to 87% and GMAC being prepared to stretch to 89%.
Interest rates on buy-to-let have also fallen. 4.75% is available from the Mortgage Trust on a three-year fix whilst 4.79% is available from the West Bromwich Building Society fixed for a two years. Both these deals incur a 1.5% arrangement fee. On the West Bromwich deal, when you recalculate the interest rate and include the arrangement fee amortised over two years, the equivalent rate rises to 5.54%.
Arrangement fees should not necessarily be a problem for landlords whose prime concern is cash flow. For these landlords it can be worth paying a large fee to obtain a low headline interest rate. That’s because the rental incomemortgage payment calculation is based on the headline interest rate and this reduces the rental that has to be charged in order to meet the lenders income criteria.
If you’re interested in joining the buy-to-let boom, remember to do your homework. Carefully research the local rental market – look at the rentals being achieved, the trends in property prices and levels of vacant to let properties.
And be especially careful especially if you’re considering a city centre. Some lenders are becoming concerned at the potential oversupply of new flats and apartments in city centres they believe are becoming overpriced. Developers are responding by offering tempting cash back and discount schemes rather than reducing prices. But this can sometimes serves to mask the problem of over pricing. Realising this for some cities, lenders are reducing the value to lending ratio back to 75%.
Also remember that it’s important to budget for the inevitable periods when the property is empty. In an essentially demand and supply market, if the rental market in your area becomes oversupplied you could be hit by lengthy vacancies or be forced to reduce your rental prices.
Jul 07
adminCheap Mortgages
A balloon mortgage is a loan that is provided for a short period of time for a set amount of money. Balloon mortgages will often involve periodic payments that are made at a fixed interest rate. During this period, the loan may not be amortized. The balance of the loan has to be paid in full at a specific time.
Another feature of balloon mortgages is that they will combine many of the features seen in adjustable rate mortgages and fixed mortgages. The interest rate will remain fixed for a certain period of time, which may be from 5 to 7 years. The payments will be based on an amortization cycle that lasts 30 years. If homeowners can’t pay the balance by the end of the term, the lender will decide how the payments will be made. The sum is usually converted into a fixed rate mortgage.
Advantages?
A balloon mortgage can be good because it offers an interest rate that is much lower than standard 30-year mortgages. If you are buying a larger home, a balloon mortgage can help you. Larger homes tend to have interest rates that are high, and this can make them difficult to pay off if you don’t have a large income. Balloon mortgages can make things easier. They are also good for people who plan on refinancing the home before the term ends.
Despite this, balloon mortgages can be much more complex than standard mortgages. Some homeowners who use them end up running into problems. You will need to make sure you have solid documents before signing up for a balloon mortgage. You will want to make sure you choose the right lender and read all contracts carefully for hidden fees or other terms. Balloon mortgages can be risky for people who don’t understand them.
Extra Charges For Balloon Mortgages
One problem that customers run into with these mortgages is prepayment penalties. These penalties will often be placed on people who choose to pay off the mortgage early. If you refinance your existing mortgage or sell the home, this can lead to prepayment penalties. The problem with these penalties is that they greatly increase the chances that your home could become foreclosed. Mortgages that have balloon payments are highly susceptible to foreclosure.
Pre Payment Penalties
The cost of prepayment penalties can be large. They are usually calculated as a percentage of the total balance owed. This could be as high as 12% and many homeowners have found themselves paying thousands of pounds more than they expected. If you choose to get a balloon mortgage you should make sure there are no prepayment penalties. If you get into a situation where you can’t afford the home, prepayment penalties can keep you from being able to refinance the home in order to get out of debt. These mortgages can be risky, and should only be used by those who fully understand the risks involved.
Short Term Mortgage Long Term Problems
A mortgage is a serious financial endeavor that you should take seriously. They involve large amounts of money that most people simply don’t have on hand. If you get into a situation where you can’t make your payments, you could end up losing your home and your credit could be ruined. Many people have made the mistake of getting involved with balloon mortgage without doing their research. They chose not to read the fine print on the applications. They often end up in situations that can haunt them for the rest of their lives.
While balloon mortgages may have low interest rates at first, you should have a plan to make your monthly payments after the first term ends. This can keep you from defaulting on your payments.
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