When you are tying to find a new mortgage there are plenty of web sites available with mortgage best buy comparison charts, a whole variety of mortgage tools and a lot, lot more to get you confused. But the big problem with these tools is that although they are great for quickly showing and finding you the best mortgage on the market and which lenders are currently offering the lowest mortgage interest rates that day, they are missing out a valuable piece of information, which will affect what is available to you. That is why a lot of the tables now shown on many major websites include a disclaimer that before hitting the apply button, you should check your selection with a mortgage broker to ensure that the mortgage product you are considering really is a suitable one for you.
So what else do you need to consider when you are trying to compare top mortgage rates and what is this vital missing piece of information that a mortgage broker can consider, that the charts might be missing? In fact, when you look at the charts and know the answer, you know that the charts are always missing this highly important piece of information, without which, you cannot look at anything other than typical rates on the best buys chart, whereas you want to see the mortgage rates that are likely to be applied to you.
This vital piece of information is something that you are likely to know, or at least have a good idea about. It’s how good are you as a credit risk? There are loads of factors that may be under consideration, but you probably have a good idea yourself, if not an exact answer to the question. You will know far better than the charts you are referring to when you are trying to compare lowest mortgage interest rates anyway!
Factors such as how well you have managed loans, your current income and that of a partner and the amount you are able to put down for the purchase as a deposit against your property will all affect the actual rate you will be offered. One set of mortgage charts assumed that the person was able to put down at least a 40% deposit, which is quite a hefty chunk, especially for first time buyers.
What is the answer to this then? Well there are a whole array of websites out there that can arrange for a local mortgage broker to contact you for free and suggest the best suitable mortgages for you, based on your current circumstances. Don’t be surprised if these are a lot more expensive than those that you see on mortgage charts. So save yourself the time and effort, get a mortgage broker to do the work for you!
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If you are like most nationwide property owners, you may be pursuing a loan modification. Whether you need a home loan modification because your ARM adjusted, the hours at your work have cut back, or you have received a pay cut, you need to know the answers to some common questions to make sure you will even qualify for a modification. Even more important, you need the answers to these questions long before you make the initial contact with your lender, or even a loan modification company. Though there are many more questions than are addressed here, this will help answer some of the most common questions regarding loan modification success, or failure.
I’ve recently lost my job – Do I need a job for a successful loan modification?
Yes, you will need a job for loan modification success. The reason for this is because your lender will look to see if you can afford a new mortgage under any terms. If you became unemployed and attempt a loan modification, your lender will turn you down because you simply won’t be able to afford the new mortgage under any terms. The best advice for this situation is to quickly apply for and get a new job as soon as possible.
I want to modify my investment property or 2nd home – Is this possible?
Yes, it is possible to perform a loan modification on a non-owner occupied property. The question that that you need to ask yourself (and the question that the lender will be answering with research) is “where does the financial hardship originate”? If your financial hardship is caused by an excess of mortgage obligation that is not covered by renters, or from another property, then the odds of modification success are slim. Each of these modifications should be reviewed carefully and will be taken on a case by case by the lender, or one of the law firm backed home loan modification companies.
Do I need to be late on my home loan?
This is an interesting question. Currently, some lenders are allowing for a modification before any late payments are made, whereas a majority of lenders are not. Though Fannie Mae and Freddie Mac are both implementing policies to hedge default by allowing for modifications pre-late payment, these policies are yet to become the ‘norm’. That said, if you are current on your mortgage payment, but want to pursue a modification, you will need to make a strong case that you are facing imminent default. A hard hitting hardship letter supported by underlying financials will help make the case for a loan modification before you find yourself falling behind on your mortgage.
I am self employed – How do I document my income?
This is a wonderful question. Your lender will want to see a Profit and Loss statement from your most recent Quarter of business activity. Make sure that your Profit and Loss statement matches the financials indicated in your personal and business bank statements. You can calculate your monthly income by taking the average of the income over this period of time. Your lender will want to see this most recent P&L because it will help provide a currenteconomic snapshot of your household income.
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With the mortgage interest rates dropping as they have done over recent months, there’s likely to be a lower rate available than the one you are currently on. Should you be rushing out to a mortgage broker to see if there are cheaper mortgage rates on the mortgage market for you?
Maybe, maybe not. It’s not always that simple in the world of financesand that’s the reason that whether you are looking at mortgage tables online or by visiting banks, you should always seek free, independent advice from a mortgage advisor. Don’t just swap mortgage rates because your new bank tells you they have a better deal for you. Don’t just find a lower rate on the internet comparison tables and apply for it, thinking all will be well once you have completed your new loan.
Why might it not be a good idea in all cases? Well, one of the first fact finding questions an independent mortgage broker will ask you at a first interview may be about any tie-ins you have with your current mortgage. If you move your mortgage now, will you have to pay any penalties to your current lender? These could be quite significant. If the penalty is to pay a few months’ interest just to get out of an existing deal, then it might require you to be able to reduce your monthly repayments a lot in order to recover the extra expense, and this might not be possible.
Assuming that your current mortgage product has ended its comfy initial introductory period and you are now on the bank’s standard variable rate product, without any tie-ins, then there are still plenty of warning flags that might make it harder or financially uncomfortable for you to remortgage. These, along with any other relevant warnings that need to be looked at, should be discussed and worked through with along with other help and advice from your mortgage broker.
For example, do you still count as the same level of credit risk as when you took out the mortgage to begin with, or have you missed any repayments, or have you made a lot of credit applications lately? Has the value of your property fallen, maybe meaning that your new level ofborrowing will be an even larger proportion of the house price than when you took out your current product? These might mean that lenders won’t be as happy to consider your application and offer you a mortgage, or at least not as good an offer as the one you currently have. You could be shoved onto a more expensive product because of a change of circumstances.
And even these aside, there are arrangement fees, completion fees on your existing mortgage, other legal fees and maybe survey fees on your property. All of these charges have to be paid for. Pay for them up front, and then you have to work out what the long term impact is effectively. Add them to your mortgage and you end up paying more each month for the entire life of the mortgage.
Either way, reducing your monthly repayments isn’t just about finding lower mortgage rates. You have to take into account all of the associated costs and impacts and total up over the next few years if moving mortgage will save you any cash. Ask a mortgage broker to give you a written model, comparing your current position mortgageto your proposed position.
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Currently hot in the news a lot of recent times are the tracker rate mortgages. The theory goes with these mortgages that they will always exactly follow, or track, the Central Bank’s announced base rate. Every time it increases or decreases, the tracker rate mortgage product is expected to move in exactly the same way. Usually you agree with your lender what the rate difference will be between the base rate and the interest rate you are charged.
So why are these popular and could we be expecting to see more people taking them out when they remortgage, or are they a huge financial risk? They are popular for those that are willing to gamble on interest rate changes and are more happy to see their interest rate change and benefit from future lowering rates, rather than having the security of knowing what future mortgage repayments will be. They are suitable for those wanting to gamble that interest rates will go down in the future and if they do go up, they can afford to make the repayments. Maybe they have other investments that if interest rates go up will be earning them more income, so the net result isn’t an issue.
This type of mortgage rate does come with a huge risk. If the central banks suddenly decide that the best way out of the current financial situation is to hike the base rates, then mortgage holders with tracker mortgages are going to find payments shooting up.
At the moment there doesn’t seem too much of an attraction or benefit for new home buyers to take out tracker rate mortgages. With base rates already breaking the historic low, they can’t really be expected to fall much further. Yes, there is still room to fall, but not much. If a tracker is for a few years, then there’s a good chance that during that time interest rates could rise above current levels in that time. And with interest rates being so low at the moment, lenders have bumped up the increment between the base rates and the interest rates that they are charging. Thus, when the central bank’s base rate eventually recovers, be it in the next year or in a couple of years, there is a risk that tracker rate mortgages could be very expensive.
There is also the current issue that some lenders have placed a lower limit on how far tracker mortgages will follow the base rate and in some cases, the base rate has already fallen below this enforced limit. Therefore, the restriction has been triggered and the tracker interest rates are not following. Financial authorities are not thought to be happy with this and are looking into whether it is legitimate or should be stopped. Time will tell.
If you think that loan interest rates could drop further and are happy that if they do rise you will immediately be paying more, then tracker rate mortgages might be the mortgages for you. Check first with a local mortgage broker that you have fully understood and can accept the risks.
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With interest rates plummeting to a historic low, now is a good time to be looking for a new mortgage product in the hope of reducing your monthly outgoings, and hopefully a lot of money over the long term. But if you are wanting to compare mortgage interest rates, what precisely are all of these different types of mortgages available from the lenders?
First, for about a third of mortgage holders, the fixed rate mortgage is the preferred type of mortgage. With this type of mortgage you agree with your selected bank that for a certain length of time you will be charged a fixed . The fixed term duration may be a few months up to several years, it depends on the offers currently on the market. How low the interest rate is will depend on how long you are signing up to it. The lesser the time period, the more reduced the risk there is to the lender that the rates could go back up in that time period, so normally the interest rate offered is typically more favourable. It is this fixed element of the mortgage that many mortgage holders do want. For the agreed period you know precisely how much you will be paying out for your mortgage. There can be no interest rate increase surprises to upset your budget. You are sure that unless you move your mortgage, precisely what you will be paying.
But this is not solely seen as an advantage, it is also a disadvantage. If interest rates do drop further, as has been in the news a lot at the moment, then the rate that you are paying doesn’t benefit. And this is the chance of this type of mortgage. You know precisely what you will be paying, regardless of whether interest rates increase or decrease.
When your fixed rate mortgage has ended, you may then have a tie in period with the bank during which you have to stay with the bank and pay the variable rate product. This is the payback to the bank when they have given you a very good fixed rate mortgage. A variable rate mortgage is the basic mortgage that a lender will offer. It is their basic no frills mortgage and moves with the base rate, although not always matching the base rate exactly.
Usually brokers will advise that all customers on the bank’s variable rate mortgages should look at their mortgage and think about moving to another mortgage, or bank. It is usually not discounted in any way and is at risk of increasing with every rate change. Quite often this type of mortgage is seen as the lender’s way of making money. They are typically no frills, no savings and a sign that you should be reviewing your mortgage. If this is what you have currently got, then it is well high time that you decided to compare today’s mortgage rates and find yourself a brand new mortgage.
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With the base interest rate at an all time low, is it a good time to look fixed rate mortgages? You will be forgiven for thinking that because rates are near enough rock bottom, then now is when you should fix your mortgage deal. But be wary of changing mortgages and take professional advice before you try to compare top mortgage rates on your own!
Yes, interest rates are lower than ever before, but at the time of writing, the banks are yet to announce if they will reduce their interest rates. If they do, that will be the variable rates that will be changed – the rate they impose on customers that are not on special deals. This will also apply to capped rates and discounted mortgages.
But the banks are not soft. They know that with mortgage rates at an all time low, rates are more than likely to go up in the future – especially over the period of a 25-year mortgage. They will be calculating whether they think the central banks will hold the low levels for a short time, lower them further or start to increase them back up later in the year.
If they think there is any possibility of interest rate rises in the next year, then they are not going to tie their own hands by offering low rate fixed mortgages for 2, 3 or even 5 years. Instead, they will offer low looking fixed rates that revert to the variable rate at the end of 2009 . Or they will add a percentage point onto the rate and let it run into 2010.
So who out of the many mortgage payers are may be benefiting at the moment from the low base rate? Well the 30% on fixed rates most certainly are not – their fixed rates have stayed fixed. Variable rates, including discounted and capped rates, might have found themselves better off, but with reports that only 19 of the 90 lenders passed on December’s cut fully, there’s a good probability that those on variable rates aren’t benefiting either.
The group paying less at the moment should be those on tracker products, but even some of these have lower limits built into them, stating that if the central bank’s base rate is reduced below a given level they don’t have to keep tracking it, whilst other banks have increased the amount above the base rate their new tracker mortgages track.
So are tracker mortgages the way forward and you should try to compare top mortgage rates for these? Well with capped floors and an widening gulf between base rate and rate charged, plus no doubt interest rates will climb over the next few of years, it is anyone’s guess what is best. It all relies on your financial situation and outlook. Are you wanting to take the risk of a low rate with trackers, but able to pay if they do go up? Do you need to budget carefully with a fixed rate mortgage so that you can budget what you will be spending? You really need to speak to a financial advisor who can advise you.
Are You Entitled To For The Most Favourable Mortgage Rates On Show Today?
For people setting out on the path of taking out a mortgage, how important is it to compare top mortgage rates? What can comparing rates do for you? Well, in honesty, you need to do much more than just compare the mortgage interest rates on offer. The entire mortgage products on offer to you need to be looked at in detail. What hidden costs are included within the mortgage? How much are the setup costs of the new mortgage and at the end of the term complete it? What are the fees to be paid if before the end of the 25 year term you wish to transfer to a cheaper product or another lender?
Locating the best mortgage rates is more than just choosing the lowest interest rate from a mortgage chart. It is about examing what is on offer on the market and what of all that you can find are on offer to you? Your financial history will determine which mortgages you could be accepted for and whether you are will be offered the best rates, which are the ones the charts are displaying, or whether you will have to be charged penalties and pay higher rates than the best rates that are printed in the rate comparison charts.
What usual personal finance indicators can affect whether you can apply for the best rates or whether you might have to settle for a more expensive mortgage? Well, too much. Until recently, potential home buyers could easily borrow from specialist banks 125% of the property value. Extra charges were still incurred. Now you are clever if you can find a lender offering to lend you 90% of the property value and there are a lot of lenders that charge you a couple of tenths of a percentage point more if you are not able to use at least 25% of the property’s value as your deposit on the purchase. First time buyers without equity earned from a current property, this can make getting onto the property ladder far more costly.
There are other factors as well that can and will affect your mortgage application. For a start, if you have anything but a perfect credit rating you might not be offered a mortgage and if you are it is almost certainly going to be above the displayed best rate. These credit risks can be a variety separate things. For example, you have moved employers too many times in the recent years, making the lender concered that you might not have a stable job and therefore you might be redundant soon and not able to make your repayments. Or you have been requesting a lot of credit recently, which could be a sign that you are finding it difficult to make current repayments. Don’t get stuck in the mire of trying to compare today’s mortgage rates for yourself – get someone to help you to do it!
My view on this bill is that it will be a dismal failure. Any program being run by the crooks in our federal government, combined with lenders that have pocketed billions of dollars in government handouts,the screw the homeowners attitude of lenders, the high upfront costs to the homeowners (who are already behind on payments) and the fact that only a small percentage of homeowners will be covered means certain failure.
The Hope for Homeowners Act of 2008 is intended to provide mortgage relief for owners of homes that have home mortgages they can no longer afford. The Act authorizes the Federal Housing Administration (FHA) to insure up to $300 billion of 30-year fixed rate loans for homeowners so they can refinance out of their existing loans into an FHA.
Here is an overview of what’s in the Act:
Hope for Homeowners follows FHA’s long-standing requirement that new loans be based on a family’s long-term ability to repay the mortgage. Only homes that homeowners are living in are eligible for FHA-insured mortgages. So if you have a second home or an investment property, they are not covered. Borrowers must also meet the following eligibility criteria:
* Their mortgage must have originated on or before January 1, 2008;
* Their mortgage debt-to-income must be at least 31 percent;
* They cannot afford their current loan;
* They did not intentionally miss mortgage payments; and
* They do not own second homes.
Attributes of FHA-insured loans under the new program include:
* 30-year, fixed rate mortgage;
* Maximum 90 percent loan-to-value ratio;
* No prepayment penalties;
* $550,440 maximum mortgage amount;
* Extinguishment of any subordinate liens; and
* New home appraisals from FHA-approved appraisers.
HUD, Treasury, FDIC and the Federal Reserve will form the Congressionally-mandated Board of Directors and work together to establish additional program standards.
Voluntary Lender Participation
This is where the success of the bill gets dicey because the lenders have generally taken the recent government bailout money and used it to pay the bonuses for their corporate officers. FHA wants lenders to offer homeowners an alternative to foreclosing on borrowers. Lenders have been encouraged to write-down the outstanding mortgage principal balances to 90 percent of the new value of the property.
In many cases, reductions in principle will cost lenders less than the losses associated with foreclosure. However, I have seen that most lenders are not cooperating with distressed homeowners. Only God knows what the lenders have done with the their government handouts, they certainly have not used them to help home owners.
Funding
FHA is insuring up to $300 billion in new loans. Borrowers will pay an upfront premium of 3 percent of the original mortgage amount and an annual premium of 1.5 percent of the outstanding mortgage amount. This means that most homeowners will not be able to take advantage of the program – after all, if you are behind on your mortgage payments to begin with – who has 3% to put down.
Any additional costs incurred by FHA will be reimbursed by Fannie Mae and Freddie Mac (remember these are the two companies that recently received multi billion government bailouts and then rewarded their CEOs with is your opinion ? Will this really help any homeowners or will it just make bank CEOs wealthier?
More information on foreclosure avoidance and loan assistance, plus how to prevent becoming a victim of loan fraud is available at stop foreclosure and behind on payments.
Important hints to remember when searching for a mortgage.
Buying your property is one of the significant financial transactions we will go through in our lives. Many of us will have to use a mortgage in order to purchase the house and so choosing the right mortgage for you is important.
To help when hunting for a loans here are some easy pointers for you to remember:
Shop around – If you choose to accept the first loan that you find then you may be loosing out on a better offer elsewhere. Try to save yourself cash by shopping around and comparing other mortgages to see which have the best compare mortgage rates for you.
Percentage fees – When choosing a loan check the percentage fees that are included in it. Some of the lowest percentage fees around today are 2.5%. With this size percentage fee it may mean that on a mortgage of around £100,000 you will have to pay an extra £2500 in percentage fees. Seeking a low percentage can save you thousands.
How will you pay – Before you look for your loan, work out how you will repay it and the additional costs that are involved. Some building societies will charge set up fees upfront, others may add them onto the amount of your mortgage.
Exit fees – when your loan offer has ended you may be charged an exit fee if you want to move to an alternative bank. Check up front and make sure this loan is appropriate for you and the exit fee is not too high if you should wish to change lenders.
Flexible repayments – dependent on your budget you may like a mortgage that allows you to overpay, underpay or take payment holidays. Again, check what your mortgage lender will permit you to do and make sure it is the best for you.
Higher lending charge – If you are choosing a mortgage that is 90% or over the home’s cost then you can expect to pay a higher lending charge. Some banks can have very costly lending charges so be aware and shop around before you decide which mortgage to apply for.
Incentives – Many mortgage lenders will include for you ‘freebies’ as an inducement to go with them. However, a lot of the time these incentives aren’t actually free, they are just added into the overall cost of your offer. Make sure you do your research on the deal and don’t let them trick you.
Read the small print – As with every transaction, make sure you read the small print. Sometimes there can be negative aspects of the deal that you are unaware of. Be aware and do your research before you take out a particular mortgage.
Mortgage broker – these are your friends in hunting down a mortgage and can take the unease of trying to compare best mortgage rates for you with their knowledge. In addition, their services are usually free.
Mortgages are difficult to comprehend for borrowers, make sure you don’t be a victim!
Plenty of people assume that searching for a mortgage can be quite overwhelming, and you can really blame them. If you have never had a mortgage before then understanding them can be quite difficult work. There is always a lot to understand to begin with, a load of words and phrases you have almost certainly never heard of and a whole pile of mortgage types thrown in just to try and confuse you. Not ignoring the point that a mortgage is most probably the largest financial transaction you will take part in in your life, at least until your next mortgage! So what do you need to know before you start to compare all mortgage rates?
To understand mortgages easily, a mortgage is a loan from a building society you use for the purchase of a property. The property is then held by the bank as security until the entire amount of the loan has been paid off along with the associated interest payments. Paying back a mortgage can take a very long time, on the whole 25 years or longer.
To try and confuse you many banks like to use a variety of words for different things. Some mortgage lenders may refer to themselves as a mortgagee. This is basically the legal name for the mortgage lender. They may also refer to you by the word ‘mortgagor’. This is the legal name for you – the mortgage holder or borrower.
When repaying your mortgage there are two alternative methods you can opt to go about it. The first mortgage repayment method is the capital repayment method. This type of repayment is where you pay back the interest on the mortgage along with a small amount of the initial capital each month. This will continue until the whole amount of the loan is repaid to your bank.
The second method is by paying the bank the interest only for the term of the loan. This type of repayment is where you will only pay back the interest on the initial mortgage each month, and the mortgage itself is paid back by using some sort of investment that runs along side the loan. This is very dependent on ensuring a reliable investment that will guarantee to pay off the mortgage at the end of the period. Endowment policies have been used for this in the past and other people have relied on increasing house prices to secure the repayment of their mortgage. Obviously, both of these methods are not without their problems!
As it is for everything, mortgages are different for every borrower. There are a variety of types of mortgage for nearly every situation and finding the correct one can sometimes be time consuming. Getting help the help of a mortgage broker or mortgage advisor if you have never done it before can be a very worth while task and they can help you to compare best mortgage rates. There is nothing worse than having a mortgage that isn’t the correct choice for you.
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