Mortgages, Tips to Getting the Best Deal
March 12, 2010
The credit crunch has bought good and bad news for home buyers. The good news is that house prices are sliding, bringing homes within the reach of first-time buyers. The bad news is that mortgage loan conditions have tightened up so much that only those with the largest deposits and the cleanest of credit records stand a good chance of getting exactly the loan they need.
In fact despite no change in base rate since the 0.25% cut in April, fixed-rate, tracker and discounted rate mortgage costs have been rising – not for existing customers but for those looking to arrange a new mortgage or a remortgage. Inflation fears, thanks in large part to the soaring oil price, have sent money market interest rates, on which many of these mortgage deals are based, sharply higher.
Getting the best mortgage deal
If you are not a first-time buyer and are thinking of moving, you probably have some equity in your property from past years’ rise in prices. So, unless you bought your current home very recently, you should still be able to move your mortgage without difficulty. While you may get less for the sale of your present home than you might have done last year, you will also be paying less for your new house.
Unless you are trading down a long way to release equity, the general fall in prices should mean that things will even out in the end. You might even find yourself paying less stamp duty if the fall in prices brings the cost of your new home below one of the tax thresholds.
Hard times for new borrowers
The prospects for new borrowers are not so rosy – and this applies to first-time buyers, existing borrowers whose current deals are coming to an end and anyone needing to move house whose current deal is not “portable”, so they will need to take out a new loan.
Over the past few years, fixed-rate mortgages have been all the rage, because even with the arrangement fees that they attract they have worked out cheaper for borrowers. People who opted for short-term fixed rate deals felt they could easily find a new, and maybe even cheaper, rate when their first deal came to an end. Indeed, some people found it tempting to cash in existing mortgage deals and suffer an early repayment penalty because it could be cheaper to remortgage at a lower rate.
Mortgage arrangement fees are higher
To make matters worse, fees are also jumping. According to recent research, the number of fixed mortgages with high fees has rocketed by as much as 1,368% in the past 18 months, as lenders get tough on customers looking for the best deals.
Some 323 fixed mortgages – 34% of the total fixed rate mortgage market – charged application fees of £750 or more. This compares with September 2006 – before the credit crunch hit the UK – when only 22 fixed mortgage deals charged that much.
Average application fees on fixed mortgages have risen by 66% over the same period, from £517.19 in September 2006 to £860.25 now. The highest fee on record 18 months ago was £1,499 on Halifax’s two-year fixed mortgage for homeowners with a 25% deposit or more.
But now the Halifax charges a fee of £3,999 on a three-year fixed deal for its existing customers who have homes worth between £500,000 and £2 million.
Figures from the Council of Mortgage Lenders (CML) have shown that, ironically, fixed-rate mortgage deals grew in popularity in April, with the proportion of borrowers taking out a fixed-rate mortgage up 5% to 59%, compared with 54% in March, the largest proportion since last December.
Go for a longer fix
However, anyone taking out a two-year fixed rate mortgage could be tying themselves in, not just to a deal with high fees, but to the prospect of paying out all over again in just two years’ time. Darren Cook of analysts Moneyfacts, said: “With fears of base rate increases, swap at over 6.3% and rising, and lenders continuing to price more for risk, it is likely that mortgage rates will continue to follow suit. Under these uncertain times, many borrowers are looking to fix their mortgage payments and a five-year deal could become a preferred option rather than the popular two years.
“The current average rates for a two-year fixed deal stands at 6.68%, which equates to a monthly repayment of £1,029.75 on a £150k repayment mortgage. In comparison, the average five-year fixed stands at 6.66%, with a monthly repayment of £1,027.86.
“There is little difference between the initial monthly repayments of these two deals and, in my view, we have now seen the end of loss leading product pricing within the two-year market.
“With the short and medium term economic outlook not looking too promising, homeowners are less likely to move home due to falling property values and banks lowering the maximum loan to values available. There is now new scope for a borrower to possibly take a more prudent approach, to look past previously popular two-year deals and look for longer term stability.”
Beware of tracker mortgages?
It seems like only yesterday that mortgage experts were telling everyone to go for tracker loans. Fixed rates were going up, but the Bank of England base rate – to which most trackers are linked – seemed likely to fall.
The experts are changing their minds, or maybe the pessimists have louder voices, as economists are now warning that the Bank of England base rate may need to increase to keep inflation under control. Opting for a tracker loan could be a bit of a gamble until the outlook for base rates seems more certain.
Bigger deposits attract the best mortgage deals
In its report the CML warned that lenders need not only to pass their own higher borrowing costs on to borrowers, but they also need to protect themselves in case house prices fall further. Therefore some lenders have been putting up the cost of mortgages for borrowers who can put down only a small deposit.
According to Moneyextra.com’s most recent monthly review of the mortgage market, the average loan-to-value (LTV) being considered by first-time buyers in May was just under 82%. However, many lenders are routinely restricting borrowers to loans of no more than 75% of the value of the property they want to purchase, while some will only offer their “best” rates on 60% LTVs. There are now none of the plentiful 100% loan deals that were on offer at the start of the year.
Robin Amlôt, senior editor of Moneyextra.com, said: “First-time buyers are being pushed out of what’s left of the housing market – being asked for deposits that could run to several tens of thousands of pounds.”
The CML said that new buyers put down an average of 13% during the month, the highest figure since November 2004 and up from 11% in March.
Mortgage Tips and Advice From Top Ranked Houston Realtor
March 11, 2010
A mortgage is the largest expense that homeowners will have to pay in their lifetime. Homeowners, particularly first-time homeowners, can easily become confused with the terms and conditions of understanding a mortgage. But because this is a loan that will follow you for fifteen to thirty years, it is essential to fully understand the loan agreement and mortgage basics before signing your name to anything.
The three most important terms that you need to become familiar with before entering into any mortgage are: term, rates, and cost. The term of the mortgage refers to the amount of time that the homeowners will have to fully pay off the loan. This is generally between ten and thirty years. The longer the term is, the lower the monthly payments will be. However, if you choose a shorter term, the interest rates will generally be lower.
The rate refers to the interest rate. This is basically the amount of money the lender will charge for providing you with the loan. Rates will vary depending on the homeowner’s credit history, how much of a down payment is made, how much income the homeowner makes, and the price of the home that is to be bought. Costs generally refer to the closing costs, which are incorporated into every mortgage. These include appraisals, administrative fees, and attorney fees. Some mortgage packages include a “no costs” offer but the rest of the mortgage package needs to be carefully reviewed before determining if this is actually saving the homeowner money.
When it comes to financing a home, you want the best deal available to you. The good news is that there are many different options available for homebuyers from local lending companies and banks to a mortgage broker that can be found online. A mortgage broker should be working in the best interest of their client in terms of rates, monthly payments, and the life of the loan. It is important to speak to the mortgage companies first as then you can truly know what you can afford and you will be able to compare companies beforehand to determine if you will have a good relationship with them before entering into any long-term agreements.
Adjustable rate mortgages may seem like the perfect solution for some and a huge risk for others. This is because with adjustable rate mortgages, the monthly payment of the mortgage is determined by the interest rates for that month. While it makes for a varying monthly payment, these can be a great fit for first-time homeowners or for those that are only looking to live in their home for a short time and then sell. When the mortgage is at an adjustable rate, it is important to continuously review the interest rates so that you can switch into a fixed rate mortgage by refinancing your home. This will save money for the long-term.
Paying off a mortgage early can be a great feeling and there are a few simple steps to do it. The first is to pay a little bit extra on the principle of the loan every month. As little as twenty extra dollars a month can add up in a hurry and will considerably shorten the term of the loan. The second step that can be taken is to make an extra payment in full once a year. This will also lessen the loan’s term by a few years. The third is to put any extra money available back into the home. This is either by giving it to the lender to pay on the principle or by making home improvements. The biggest areas that are looked at by buyers are the kitchen and the bathroom so to boost your home’s resale value, start with these homes first.
If you are interested in prepaying your loan, you need to carefully review your mortgage agreement. Many companies will have a fee for prepaying a loan and it is usually a predetermined amount, or a percentage on the amount of loan that has yet to be paid. These prepayment fees are most commonly found in high-interest and high-risk loans.
An interest only mortgage provides a homeowner with the opportunity to only pay the interest of the home for the first few years of repaying the loan. This makes the payments significantly smaller and the principal that is not being paid will be distributed throughout the rest of the loan. When first looking at homes to buy, be sure to calculate exactly what you can afford by determining an amount that includes both interest and the principle so you are not in a bad position when the interest only period ends. When taking out one of these loans, it is important to have the loan agreement stipulate when the principal will be paid and to also pay for as much of the principal when you are able to.
Many people need to obtain a mortgage quickly, because of a short closing period or for other reasons. One of the quickest ways to obtain a mortgage is to shop around online. Online mortgage companies have calculators set up so you can determine yourself what kind of loan and payments they can offer you. They also have automatic credit checks, applications for the loan, and income verification that will speed the process along that much more quickly.
Are Credit Card Offers Still Competitive?
March 9, 2010
For practically the last decade we’ve seen the credit card change from something only the rich use to something practically every person in the UK owns. I think the average number of credit cards per person in the uk is 2 or 3 and I know it’s commonplace for people to have 5 credit cards in their wallet or purse!
In my opinion the internet is responsible for most of the change in attitude, not only to credit cards, but finance in general, accross the UK. Something like 57 per cent of UK homes have broadband access today and this is obviously only set to increase over time.
So, how has this affected credit card and finance industry over the last 10 years? Firstly, there has been an increase in new internet only banks and credit card companies springing up. The traditional high street banks and building societies also created their online brands and products. Many financial products on offer via the internet have additional benefits or lower interest rates becuase the banks have less overheads and administrational work to do if customers are applying and managing their accounts online.
The internet has fuelled the consumer demand for credit cards and loans and certainly the banks have only helped fan the fire by offering attractive 0 per cent and low rate deals in order to attract new customers and increase their market share. More people have built up debts on credit cards and loans than ever before and the total UK debt mountain now stands at a staggering £1430 billion. According to Credit Action Britain’s personal debt is increasing by £1 million every 5 minutes. It’s no wonder that the credit crunch has hit the UK hard and people are now struggling to keep up with repaying their debts.
You might expect the credit card market to have taken a simlar stumble but this isn’t the case so far..Amazingly, amongst all the mortgage mysery and reports of house prices falling, credit cards seem to have stood up to these issues. Today there are credit card companies offering 15 month interest free on purchases and balance transfers. The best credit card deals not so long ago were 12 months 0 per cent for purchases and 13 months 0 per cent for balance transfers, but even in the midst of the credit crunch we are seeing better deals on offer every month.
This is good news for consumers but should not mean that people continue spending on their card without thinking about the consequenses; every credit card bill has to be repaid. Credit card companies are continuing to increase their 0 per cent offers because they want new customers, and now looks like a good time to take advantage of these fantastic 0 per cent deals.
The main advantage with a 0 per cent balance transfer period is the peace of mind it can give to customers wanting to keep interest payments at a minimum.
5 Highly Effective Ways to Use your Mortgage Business Card…part II
March 5, 2010
5 Highly Effective Ways to Use Your Mortgage Business Card…Part II
In Part I we talked about adding value to your card and using the back of the card to promote your mortgage marketing message. I’m sure these remaining business card tips will help you in your mortgage business:
3. Set a goal indicating the number of business cards you want to hand out each day.
If you’re a newbie (new person) in the mortgage business with a limited budget…or if you’re an experienced originator experiencing a period of very few referrals…this tip is for you. Even the best of us get back in the trenches to generate business.
Tom Domin is currently publisher of “Tom’s Mortgage Tips” a twice-weekly Mortgage Newsletter for Mortgage Professionals and the author of “101 Ways To Originate Mortgages” at: http://www.101WaysToOriginateMortgages.com/
Now here’s the deal: You pick the number and set your daily goal. The only thing I suggest is that you pick a good number…it can be three, five, seven, ten, etc.
You’ll have to meet your goal every day. Now, I don’t expect you to work on Sunday and…you can also take off Saturday…but only if you’ve reached your goal the previous five days in a row.
So…if you picked five as your daily goal and you reached your goal each day…you now have twenty five cards out there working for you. Do this for a month or two or three and all of a sudden you have three hundred cards out there working for you.
Are you going to get some business as a result…of course you are. It’s a numbers game…the more people you talk to…the greater your chance of success.
When I first started in this business, this is how I did it. I picked ten as my number and at the start of my day I set aside ten business cards. I made a promise to myself that I wouldn’t go home until I had handed out every one of those cards.
I did that for over six weeks straight and even worked in a couple of Saturdays. No matter what I had going that day, I made sure that I hit my goal. I have to tell you…it works. In six short weeks I had distributed over 330 cards. It wasn’t long before I had some calls coming in from these contacts and eventually loans in my pipeline.
4. Print your own cards. Even if your company supplies business cards, find a way to print a few cards.
Most employers don’t object to this. Plus, this gives you the opportunity to create an identity with your card as well as produce cards with multiple backs.
Why multiple backs you may be asking? For different sales messages of course! For example…If you spend a fair amount of time calling on Realtors, then the back of your card should relay a message geared specifically towards Realtors.
Over the years I’ve seen cards with various back designs including the following:
1. A mini-certificate good for $250 which can be applied towards closing costs.
2. A list of documents needed to begin the application process.
3. An Amortization Schedule.
4. A list of loan programs available to borrowers.
5. A special loan program like the low start rate program.
6. A statement like “I save commissions!” or “Last year we saved $146,000 in commissions.” This is obviously geared for Realtors.
7. “We offer easy Builder approval!”
8. The possibilities are absolutely endless…think about your market…and you’ll find a message.
Ok, here’s my last point on the subject of Business Cards:
5. We touched on it above…use your business card to create an identity for yourself. Printing your own card helps to do this. Personally, I don’t like the picture idea at all…I’ll leave that idea for the Realtors.
Instead, create a consumer-friendly phrase to separate yourself from other loan officers. Many loan officers use “Loan Officer for life” theme. Think original, such as; “Moving? Take me with you to finance your next home.” Spend some time on this and pick a good brand for yourself.
Best Real Estate Financing And Home Mortgage Tips You Can Use Now
March 4, 2010
It’s important to know when looking for real estate financing that the advertised mortgage rates are not always what you’ll get from the lender. The change in rates can be due to market fluctuations, economic news and any other of a dozen reasons. Interest rates can change throughout the day. With adjustable rate mortgages the initial interest rate is usually lower than a fixed-rate mortgage and the monthly payment is also lower. An adjustable rate mortgage may or may not be a good choice because on the average, most people move or refinance within seven years.
Check to see if the property taxes are deductible. Talk with your CPA or other tax advisor for current tax information. The 30-year loan is your best choice if you’re looking for a long-term stable loan; for instance, if you’re planning to stay in your house for a long time. It’s usually the safest home mortgage you can get also. If you’re buying a second home or second property, you’ll need to identify the sources for your down payment, since you will not be selling your current house and using the proceeds to buy the home. You’ll need to expect a larger monthly payment for housing or other expenses too.
The disadvantages of fixed-rate mortgage include higher cost; they are usually priced higher than an adjustable-rate mortgage. The real estate financing situation for each buyer is different. Check with your CPA or accountant, you may be able to deduct the interest you pay on the mortgage loan and some of the financing costs of the home, such as points on your income tax return.
If you’re working with a builder within a sub-division or housing development and just making carpeting, lighting and appliance selections for a brand new home, you’ll probably be able to get a standard home mortgage loan; but if you’re hiring contractors, electricians, plumbers, and painters, you’ll probably need a construction loan, which provides funds to pay the subcontractors as the work goes along. Make sure to get an estimate of your real estate financing closing costs from the lender you’ve chosen. By current law, the lender is required to provide a statement to you within three days of receiving your loan application. And there are many options for those who have a few bad credit marks on their credit report.
If you’re having a problem getting a home loan or home mortgage, why not consider a lease-option on a property. A lease-option on the real property will allow you to set a good purchase price now, and then you apply a portion of the rent each month toward your down payment, building equity in the process. 30-year fixed-rate mortgages offer consistent monthly payments for the 30 years you have the home mortgage. And if the market is good, you can benefit from locking in a lower rate for the full term of the loan. If you don’t get approval a mortgage application can be resubmitted several times; it’s not uncommon for this to happen.
Now if you’re on a fixed income, an adjustable rate mortgage, especially a short-term ARM, may not be your best choice. The advantages of a fixed-rate mortgage include a stable interest rate, consistent principal and interest payments making this loan stable. The rate won’t change; a good choice if you’re likely to stay in the house for many years.
Keep in mind that low credit scores don’t mean you cannot buy a home or other real property. Continue to explore all the options and you’ll come up with the best real estate financing. Work with a reputable mortgage broker or lender to create a customized loan program with the best combination of rates, points, and closing costs to meet your needs.
Most importantly you have to be careful not to assume that you can cut back on your expenses and stretch yourself into a house payment. You don’t want to be cutting into healthy eating habits by eating fast food, for a house that you may not be well enough to live in for a long time. Make sure you know what you can afford to spend each month on a house payment when you start searching for the best real estate financing.