Everything You Need To Know About Mortgages Part 2
Mortgage Advice for the Financially Distraught
Making the Most Out of Today’s Mortgage Market
We are in the middle of a financial crisis not seen since the days of the great depression, market crashes or bombs leveling the city. Asking a bank for a mortgage in today’s market is like pulling teeth with a pair of broken rusty pliers. If the person in charge of lending the money does not actually laugh at you then he or she will most likely put you over the barrel in interest rates.
Just 18 to 24 months ago it was easy to get a mortgage with fairly reasonable rates. But now, however; you might as well strap on some spiked boots, grab some floss and try to climb Mt. Olympus. The problem here is that the lending institutions are in the exact same place that you happen to be in – scary is it not?
To say that there is no “secret” to the mortgage game is an understatement. Lending institutions always love to keep their inner circles close to the breast.
The fear of losing customers is up on the same level as losing money considering, in all reality, it is the same thing! Bankers see people as money signs more than as human beings. This is what got them in the mess they now see themselves in. They looked at people as money and their lending procedures were too relaxed in order to give them mortgages and other loans.
If you had a job you had a mortgage if you wanted one. Unfortunately for them they also gave out small interest rates so the mortgage holders spent less money and less principal came off of the balances! When the bulk of the loans came due the mortgage holders couldn’t pay and their houses were taken by the banks.
Under normal circumstances taking someone’s home is a good thing for the bank as they would sell the house; get their money and a dividend on top of that.
Too bad they couldn’t foresee a down turn in the employment market which made buying a home an impossible mission so the lenders wind up sitting on several properties that they simply could not unload and their customer’s could not find work to pay them off. This made an interesting situation for the consumer’s who did not meet a demise in the job market.
Banks are now trying to give out mortgages left and right at insane interest rates as a way to make a shift in the housing market occur. Now the stars have aligned and the lenders are scurrying like rats on a sinking ship. Believe it or not buying a home in this market is not a good financial move for you.
Like any other endeavor it pays to research! Use the tools at your disposal. The Internet is the greatest tool that you can use.
Research your local bank branches and larger companies that may service your area. Get quotes from as many as you can and find out all of their rules and what not. Once you have this information you can put the ball in your court and pit these lenders against each other to haggle down their fees and rates.
Hints for the First Time Buyers
This market is like a lottery with the person just buying a home for the first time. Except in this lottery you are winning instead of throwing your money away. There are plenty of losing tickets in this current mortgage market but as a first timer buyer and mortgage seeker you will not be scratching off the proverbial dud.
Many new buyers are looking at houses on a greatly recessed market so the prices are a lot less than they have been in previous years. A house that is being sold at a savings (or as a “foreclosure”) means that your mortgage will be less than it should have been in a stable, high-priced market.
Since the lenders are feeling the crunch too they are lowering interest rates and waiving fees to entice buyers to pick up a mortgage. The type of market exists because there are is vast amount of sellers than buyers and they aren’t selling a property to buy another one and the sale can sail through the process.
Most lenders want you to supply a deposit to the tune of 15-20% for their basic mortgage packages. All of those “in the know” are not predicting a huge fall in the housing markets for the prices to drop that low.
What this means for you is that you are not likely to slip into negative equity territory within the near future. Even if you do get in the hole right out of the gate then your only hindrance will be trying to sell your home or attempting to mortgage in the short term.
Hints for Existing Homeowners
Unfortunately this new market is really meant to suck in new customers. Those of you that still own homes are being looked at as a near lost cause so you will be facing an uphill battle with lenders. Remortgaging when you are are in negative equity is a sure way to find yourself being tossed aside.
Of course you are thinking this is not fair and, you know what? It isn’t. Not by a long shot. What can you do though? You are in negative equity, you own your home and the housing market is in the gutter. The fact of the matter is that selling your home in a low market usually means that you will not get enough money from the sale in order to cover what you owe.
With this in mind it is no wonder that a lender would have difficulty wanting to take on the higher risk. When a bank decides to give you a mortgage and the house sells you will have to make up whatever the difference is be it one lump sum or in installments. If you want to “stay put” then you will have to pay your lender’s SVR (standard variable rate) when you reach the end of any fixed term deals.
Now if you are a very lucky person and have evaded finding yourself in negative equity then the lenders should not have a problem talking with you.
You may need to jump through a few extra hoops than first time buyers but, in the end, you should be able to reap the same rewards and benefits that they have. The most important aspect of these new loan packages is the lower interest rate which can save your mortgage payments from being so high.
Never be Afraid to Ask a Professional
There is no such thing as a bad question when your financial future is at stake. Getting mortgage advice from a source that knows their stuff is absolutely essential in this mortgage market.
You will need to do some digging in order to find the best rates among lenders. Even though they are more apt to give a loan at a good rate does not mean they want their rates known as “frugal”. Talking to an expert, or doing your own thorough research, will allow you to uncover those hidden deals that are more beneficial to you.
Remortgaging in a Dead Market
If my home is losing money – should I remortgage?
Like chess, and other games of strategy, the game we play with mortgages is a lot more important. Sometimes, when we fail at that game, we can remortgage at start again. Strategy plays a very important part in remortgaging so always plan out your moves well ahead! When you are reaching the end of your mortgage it is time to plan the next step and you pretty much have but two choices:
1.Start paying your lender’s standard variable rate or;
2.Remortgage your loan in hopes of finding yourself a much better deal.
The current market is bringing nothing but uncertainty with it because there is a recession on the horizon and people are scared. It is in these hard times where mortgage lending can take one of two different routes. The first idea is that due to the bad times we are facing and the lenders fearing a loss in interest funds decreasing that getting a mortgage (or remortgaging) is much easier.
The other issue is that the horizon is ever looming with pitfalls that the lenders tighten their purse strings and get to be a lot more finicky when giving out the loans. Even if you have a proven track record as a lendee and a homeowner you may still find that mortgage loans are not as inexpensive as they should be and a lot harder to get.
Over the last year or so housing prices have fallen by 10% and there are no signs at this stage of the game that they are going to stop dropping. This is backed up by predictions from the country’s leading financial experts. Many homeowners are expected to find themselves amidst a negative equity. A negative equity is when you owe more to your lender than what your home is actually worth.
Basically a person that took out a mortgage that is 100% of the current value of the home is in negative equity from the onset of the mortgage due to depreciation. The same is obvious for someone that took out a loan at 125% of the value of the home since you are already borrowing 25% more than the current value. Negative equity can also occur to homeowners that only place small deposits on their mortgage loans.
Unfortunately for you if you are in the middle of a negative equity issue then you simple cannot take out another mortgage or remortgage. If you owe £150,000 on your current mortgage it would not be in the lender’s best interest to give you another loan on a property that is now only worth £120,000.
Basically, if you find yourself getting to the end of your mortgage and you see that you will be in a negative equity, you will begin to pay your lender’s SVR. If by the end of the mortgage term you find that you still have some equity remaining in your home that a remortgage on your current line can still be possible and a good idea assuming you are doing it for all of the right reasons.
Remortgaging for the Purpose of Withdrawing Equity
There are always a myriad of reasons why someone would want to remortgage their home. Perhaps they want to get a lower rate (or at least home to) or they want to make much needed repairs, go on a vacation, increase a university savings fund, buy a new car or several thousand other reasons. Whichever your case might be the number one reason to remortgage is to take out equity from your home.
Not everyone understands the nuances or the lingo of the mortgage world and that is completely fine – that is why you have people like me to help you. One term that is confusing to some people is “equity” – what is it – why do we have it – can we take it out? Equity is its simplest terms is how much your home is worth at the time you mortgage it – not how much it was when you bought it.
Your equity can increase and decrease over time and through market up and down trends. So if you paid £120,000 for your home when you mortgage the value of your home could be £100,000 and that would be your equity.
As far as the other questions go yes we can take out the equity – that’s why we mortgage and remortgage the home. We have equity due to the market and worth; the asset of the home.
Equity typically rises and falls due to the deposit you placed on the home, any repayments you have made up to the point you are going to remortgage or mortgage and any increase or decrease over the years.
The ups and downs in the value of the home can be anything from outdated pipes that would need to be replaced by the new owner or a new roof you have placed on the home at your own expense. You will have to rely on the information from lenders and independent surveyors.
Once you have gone to a lender and withdrawn the equity from your home you will have to expect one of two things to occur. You will have to extend the original mortgage repayment period so that you can cover the added funds placed on the mortgage.
The other thing you can expect is to find that your borrowed amount – what you owe on your mortgage – will have to be paid back through higher monthly payments. Whichever of these two things actually occur the equity of your home increase what you owe on it.
If the housing market takes a tumble and continues to decrease you will be risking finding yourself in negative equity which will just continue to pile up. Of course this negative equity makes it darn near impossible to remortgage.
If you have equity in your home currently then you can draw off of it by remortgaging or mortgaging. If you are responsible in your needs then you can withdraw from your equity in your home without much risk – despite the housing market down turns. The last thing that you want to do is risk negative equity.
Remortgaging for the Purpose of Lowering Your Interest Rates or Increasing Repayments
Probably the most common reason to remortgage your home is in order to change your current deal with the mortgage lender. You will normally do this for one of two reasons:
1. Because you do not like the current interest rate that you have from your lender due to your own current research showing the market trends being lower than your currently or;
2. The payment plan that you are on at this point in time is too much for you to handle and you need lower payments but will handle somewhat higher interest rates and a longer period of time to payback the debt.
Sadly, if you are on a fixed-rate mortgage you may not be able to change your current mortgage terms in order to get a lower interest rates. Of course this is always dependant on what the current mortgage market rates are at the time you are looking to remortgage.
Regardless of the market, however; you should be able to find a much better deal than your current lender’s SVR. When you are in the middle of paying off a fixed-rate mortgage you will have to pay your lender’s SVR rate when your fixed mortgage comes to an end.
Negative equity is a very versatile pain in the neck. Just because you are paying a lower interest rate does not mean you are protected from this monster.
If you can afford it you can elect to pay more than your monthly payment to the lender (not including paying the interest) you can do so by paying more than normal payment. This decreases what you on your mortgage loan as well as decreasing your payments.
Be smart about it though because many lenders will give you a penalty fee if you happen to pay off your loan ahead of schedule. Essentially you are actively increasing the equity in your home while decreasing the likelihood of you being stuck with a negative equity. The bottom line here is that you are avoiding the possibility of damaging the value of your home.
Remortgage at 100% and Save Money
Where the world is headed financially is no mystery. If we take a long and hard look at the trends in the market we can easily surmise that we are in big trouble.
Lending institutions several years ago were looking at a boon in the housing market and thought they could “help out” the new home buyers as well as those looking to remortgage. The lenders thought it was a good idea to offer very low interest rates and payments but nail the home buyer with a balloon payment at the end of the term.
This way of thinking worked until the unforeseen occurred: employment jeopardy. No one could anticipate that there would be a mass exodus in the economy that would find companies releasing hundreds of employees. Now these poor souls were left without a job but left with a large payment they could not afford. Defaulting on the loan was inevitable and the housing market, as a result, plummeted.
If you were one of these people you may sit up nights wondering what will happen next. You may have your hands grasped in prayer hoping and pleading to the powers that be that it will work out just fine. The sad truth is that it probably will not end well unless you take action now. There are no time machines that can take us back 8, 9 or 10 years to rethink the choices we made.
Star Trek is still a long way from becoming a reality so there is no so-called “free society” where everyone is a “have” and not a “have not”. If you were given the chance to make those same choices again you would most likely change your mind on nearly all of those choices.
Do not lose all hope just yet because, believe it or not, after months of prayer it has dawned upon these lenders that they themselves are in dire straits as if you have noticed banks have been closing branches, mingling with each other or just folding completely. This is a boon for you to correct some of your folly from the past. We call this a 100% remortgage.
Despite being locked into these mortgage loans with lending companies many of us still do not have a full understanding of what a remortgage is, what equity means or even what a negative equity is. These are all important things a homeowner must know in order to survive having a mortgage in these hellish times. So let’s begin with a simple explanation of some important terms you need to know about:
Mortgage
Considering the fact that you have one it would be wise to know what one actually is, right? A mortgage is simply a loan that is paid off over a longer period time with usually a time period of around 25 years. You can usually get a shorter or longer pay back period but then the banks will level you with interest.
A mortgage is given based on the cost of your home and can include closing costs and fees as well. They pay for your home and you pay them X amount of money a month with a large, one-time payment being paid to the holding company at the end of the mortgage term.
Remortgage
If your payments are too much and you find yourself not able to handle them then you can remortgage – maybe. Being able to remortgage depends on how much equity you have available in your home. You can do a 100% remortgage or you can take a percentage of the equity.
There are times that you can take more than what your home is currently worth on the market but that creates an immediate negative equity. Basically you are transferring a mortgage loan that you currently hold with a new lender.
Equity
This is what your home is worth at the current market value. If you paid £100,000 for your home and you took out a mortgage for that amount then you will have zero equity. As you begin paying your mortgage you begin to gain equity. If your house goes up in value then you begin to earn equity. If you have paid half of your mortgage off and your house is worth more £150,000 now then you have £100,000 in equity and you can borrow that much from your bank in a remortgage. You will want to do this in order to get a better interest rate and lower payments.
Negative Equity
This is the reverse of equity. In the previous example if you have bought a home for £100,000 but you took out a £125,000 mortgage you are in £25,000 negative equity. This is reduced by making payments as most lenders will not remortgage if you are in negative equity.
These are, of course, very basic descriptions of complicated items. Any banker can fully explain all of these (and much more) if you ask or you can research them further on the internet. Right now you want to know about the 100% Remortgage.
This mortgage type allows you to borrow 100% of the value of your home. Keep note that some lending institutions can offer you more than 100% of the value but it may take some poking and prodding.
Why 100% Remortgage
I can think of a few reasons why remortgaging at 100% is something you would want to do. Perhaps you are in a position where you have some equity in your home but are fearing the possibility of a down turn in the housing market or you fear losing your job.
If either of these does happen then you are up the proverbial creek and you have a broken paddle going against the current – you may get swept away. Remortgaging at 100% can save your credit and save you from having to pay huge monthly payments.
Other borrowers look at the current market trends, are not in jeopardy of losing their homes or entering in to a negative equity situation but still feel they are being taken advantage of. A 100% remortgage can allow these borrows to pay off their current mortgage, shop around for a new one, and smile as they get a lower interest rate and better monthly payments.
You can remortgage with your current lender but many circumstances call for you to find a new lender. Your old lender may not have a rate they are willing to give that another will. It pays to shop around for the best rates from other companies before making the final decision.
Using Your Equity
You are completely free to use your money from your home for whatever you want. Your primary reason for remortgaging is to get a better rate on your loan be it monthly payments or interest rates. Those are not the only reasons though because it is your money! You can use the cash to debt consolidate other bills that may be looming over your head.
Maybe you want to increase the equity in your home and you can do this by doing some much needed home improvements (like adding solar paneling, repairing a roof etc.) or maybe you just want to use the new loan to purchase a new car or go on a family vacation.
The 100% remortgage plans provide the borrower with an opportunity to borrow large amounts of money and they are available to anyone. Even people with bad credit can use this scheme to improve their position.
Learning More About 100% Remortgage
There are lending institutions that specialize in the 100% remortgage. It is well advised to contact as many of these companies as you can that service your area so you can find a lender with the best deal. Use their advice to gain as much benefit from the loan as possible.
You can search online for 100% remortgage information and potential applicants can discover a treasure trove of options including getting a good deal.
In many instances it is a lot easier to get a 100% remortgage and get one in a lot less time then when you got your original mortgage on your home.
In essence the 100% remortgage allows you to get equity form your home and property so you can more easily deal with the hard times we are all facing.
Remortgaging in the United Kingdom
Saving Your Interest Money is Easy
When it comes to getting a mortgage on our so-called dream home we soon come realize after the papers have been filed and the terms finalized that we may have made a pretty bad mistake.
It is always the same sad story you will hear from many other people around the country and the world. We shopped around all of the lending institutions that service our area.
We did this with the best possible intentions in mind: low interest! A low interest rate means low monthly payments.
We smile and hope that the rate they printed or told us was a misprint and they wouldn’t catch us. The final fault lies with us as in most instances we fail to get out a magnifying glass to read the fine FINE print at the bottom of the loan agreement.
We also fail to locate a barrister to read over the documentation so regardless how ripped off we feel there is no one to blame but ourselves.
Many of us fail to realize that our interest rate may be fixed and it may be low but that our payments only span 10, 15 or 25 years but the math does not work out.
We hope they are using some “new math” that we have not been let in on but, as it turns out, we just failed to connect the dots that when the mortgage term comes to an end we are left with a very large final payment. For most of us this does not matter much as we can remortgage and get another really good deal. There is one small issue no one ever imagines: unemployment.
The world is going through a recession and people are losing their jobs and when this happens they obviously can’t pay off these balloon payments. The house winds up being foreclosed on and sold to make the money back. Unfortunately the housing market is also in the gutter so they aren’t selling.
All of this sounds bad, right? Rightfully so but believe it or not this has created a great opportunity for those of us who are still stable in our job.
We can still pay our monthly fees and do not have negative equity in our homes but we see the market changing and realize that the rate we have is not the greatest. We don’t want to continue paying insane monthly payments or interest rates based on a great market.
The banks are scurrying now to help people out of their holes so their interest rates have gotten better and they have been adding more products and services to their loan arrangements to entice homeowners to shop with them.
Remortgaging in the United Kingdom is becoming a lot simpler now thanks to the economic struggle. We are able to shake our financial fist at our current lender and say “No more!” to the high interest rates and no more to the insane monthly payments.
We can take our current mortgage to another company that will help to pay off the marker of the old one while giving us a new rate with lower interest, This is even more beneficial to those of us who have fixed rate mortgage loans because with the interest rates decreasing we can’t reap the rewards and are forced to stay at the same high rates.
The same applies if you happen to have a variable interest rate mortgage because your lender may increase their rates to help pull themselves out of a financial hole and next thing you know your home equity is not in the negative region. You want to save on interest in order to reduce your personal burden.
When you remortgage you are paying off your old mortgage loan by using a new loan from the new mortgage lender. You will forever be free of that lender but now beholden to the new one.
Be certain to talk to financial advisers and planners, research on the internet and ask bankers about rate information. Watch the financial news or pick up a paper or magazine on the subject. It pays to educate yourself on what all these trends mean (or don’t mean) so you can make a better decision.
You don’t want to be caught in a situation where you get your loan paid off, remortgage then come to find out a year down the road that the company you just went with closes and gets bought out by someone else. In this situation you hope you will be safe but usually they just revisit all the loans, call in markers or change your rates.
When you remortgage your home you are entering in what the lending institutions call a “secured loan”. The loan is secured because you are using your current assets to go against the loan to cover it in case you default on it. Your home is now the collateral for the loan.
They will give you up to the value of your home (in some circumstances you may be given a percentage above 100%). Lenders usually don’t have a problem giving you a loan based on the value of your home in a good market.
At the time you are remortgaging you should be very careful because the world is forever changing as is the market. I said this earlier but it should be repeated because of its importance. Read everything that you are given before you sign away your life.
Lending institutions have a nasty habit of including things in contracts to eventually hurt you – like early repayment fees, hidden costs, yearly interest rate increases and the like. If you are the least bit careless in your finances as far as your property is concerned you could find yourself being without a home.
Remortgaging: The Pros
REM had a song years ago that pretty much summed up how many of us are feeling. It was entitled: “This is the End of the World as We Know It” and though the song spoke to very dire times it seems to apply quite well to the world we live in – at least to a percentage of us.
We go through life trying to make all of the right choices and financial decisions to just have it fall on us like a rock from the heavens.
This is not justice for those of us that work extra hard to make it in this life. There are some very good people who are fighting tooth and nail to remain in the homes they worked very hard to but thanks to a number of things that may not be possible.
Balloon payments are beginning to mature and there are only two choices that a homeowner can make: file bankruptcy and hope for the best or the alternative is to let your bank seize your home then resell it to get the money back that they lent. The second option is to remortgage in hopes you get a better deal than what you originally went for the in the first place.
Buying this home meant that you had to scrimp and save and pinch every penny that you could. It is not easy trying to build up a savings in this day and age of fancy gizmos, expensive cars and electronics we simply do not need. We cut corners on our spending patterns as much as possible even if that means shopping at second hard grocers, buying a used car or getting a house that needs a lot of repairs.
We put all of this money in a savings account so it can earn interest. We seek the will of a tax professional so he can hopefully find all of the loopholes so that we can save money.
Looking for a loan or whatever is no different than buying a car. You would very rarely buy a car without driving it first let alone seeing the paper on the vehicle first – that would be financial suicide. We shop around for the best possible rates and then we strike.
It is in the nature of human kind to try and find the best way to do something. It does not matter if we are talking about dating or making mash potatoes. We buy things on impulse because we worry and then argue to ourselves that we will not get a better deal so we settle and pay for it later on down the road.
We have a tendency to regret these choices but soon realize that the payments or interest rates alone are costing us a lot more than if we had just wasted and shopped around more. We take the leap at the first low price we find instead of waiting a little bit longer for fear of that number jumping up higher. Buying a home and getting a mortgage is a lot like playing the stock market but in reverse: sell your home high, remortgage low.
Having the ability to remortgage affords you several advantages:
Debt
If you have equity in your home then you can remortgage that property at, hopefully a lower interest than what you are currently paying. You can use this money to consolidate bills to get other nagging debt off of your back. There is no need to live with the anxiety of multiple loans. These can be loans for another house, a car, university tuition and even child care or medical bills.
Lower Payments and Interest Rates
If you wait for an upturn in housing and a down turn in interest rates then remortgage. What happens is your bank (and other lending institutions) will fight amongst themselves to have you as a customer. Your interest rates will decrease and your monthly payments will also decrease. Your financial burdens will certainly be a lot less so you can enjoy your life more. But always remember to read the fine print or suffer a negative equity mountain in a few years.
Remember that the housing market is in a very low period right now so selling a house is nearly impossible. It is a dire situation with many tragic outcomes over the last 1 or 2 years. There are no signs at this moment that gives a hint to the hemorrhaging stopping.
This has created a unique situation for the homeowner that needs a way out and especially so for those that still maintains a positive home equity.
The lending institutions are also struggling with finding and keeping customers since if the home market is lousy and no one is buying then no one is taking out a loan. As a result they offer loans at insane rates just to entice people to get one. They have always loosened the methods of how you can get one – just read the fine print!
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