The Different Types of Mortgages Available

There are quite a few different types of mortgages out there. Understanding what each of them offers can help you to make that tough decision. A mortgage is a huge commitment so you want to be armed with the right information from the very start. First, you will find that there are fixed rates of interest and adjustable rates of interest.

With a fixed rate, that is the amount of interest you will pay over the course of your loan. The only exception will be if you refinance at a lower rate in the future. With a fixed rate, there aren’t any surprises in terms of what your payment will be each month. If the current interest rate is low, then go with a fixed rate.

For those with spotty credit, the rate of interest offered could be quite high. That is where an adjustable rate may be better. It can mean that you will get a lower rate and so you get lower payments. The risk though is that the rate will be modified at regular intervals. Sometimes it will increase and sometimes it will decrease.

While any homeowner will welcome a decrease, the increase can be tough to swallow. In the recent economy, some people have found their mortgage almost doubled due to an adjustable rate mortgage. It can be a risk that is too much for you to take on if you have a tight budget so just keep that in mind.

There are 15 year home loans out there, and they can help you to pay off the home very quickly. However, the trade off is you will have a higher monthly payment. If you can comfortably afford it though it could be a very good option for you to consider. The most common type though is a 30 year mortgage. This means a longer period of time to pay it off, but it also means lower monthly payments.

While they aren’t as common, there are bi-weekly mortgages. This means you will actually make 14 or 15 payments per year instead of 12. That is due to a few months out of the year you will get paid three times with the bi-weekly process instead of two. This can be a great way to cut down on how much you pay overall in interest.

In the tough economy, seller assisted mortgages are becoming increasingly popular. No one wants to have a home for sale on the market that just sits there. Yet some potential buyers can’t secure a loan no matter what they try. The seller can write up a contract with the buyer.

The funds for the home will go directly to the seller. The buyer will continue to make monthly payments until they pay off the home. They also have the right to get a loan in the future to pay it off all at once. Should the buyer default, the original owner still has the home in their name and that legally binding contract. They can evict the buyer and they can sell the home to someone else.

Get out of the clutches of foreclosure – Refinance with FHA mortgage

There are several benefits that you can reap from an FHA home refinance. It is not necessary that you have to have an FHA home loan initially to refinance into an FHA mortgage. When it comes to FHA loans there are a number of options available to you that can help you to refinance your home into an FHA mortgage. If you feel like you are not being able to make your financial payments and thereby falling in trouble, you should contact an FHA lender in order to save your home. There are some FHA-insured options for avoiding foreclosures that would require you to be up to date with your mortgage payments and thereby it is best for you to act as early as possible the moment you start anticipating that there might be a drop in your financial situation and you might not be able to keep up with the payments. Here are some different FHA mortgage refinancing options that you can avail.

1. Rate and Term FHA Mortgage Refinance – This kind of refinancing can be done for up to 96.5% of the value of your home. A rate and term refinance allows you to consolidate your first and second mortgage into a single loan. It is easier to obtain as it requires a credit score of minimum 620. If you have a bankruptcy that is older than 2 years or a foreclosure that is older than 3 years then you will be offered competitive rates.
2. Cash-out mortgage refinance – You can take out a cash-out refinance up to 85% of your existing FHA mortgage or new FHA mortgage of the value of your property. You can use this to consolidate your first and second mortgages into a single loan or use the cash that you get for bill consolidation programs.
3. FHA Streamline refinance – This kind of FHA refinancing is meant only for those who already have an FHA mortgage. In FHA streamline refinance there isn’t any cost interest rate reduction program or credit and income qualifications. Thus these are very easy to obtain. You can also avail refinance option that is zero cost and switch to amortization for adjustable to fixed rate or vice versa quite early. You can also shorten or lengthen the term of your existing loan quite easily.
4. FHA Secure refinance – You can refinance your mortgage at competitive rates through this even if you have a mortgage late on your credit report which is because of adjusting mortgage. The best part of FHA secure is that you can qualify for this even if you are currently in foreclosure.

The above 4 types of FHA refinance options can help you in home refinance.

Purchase your dream house – Avail the low mortgage interest rate

It is the dream of every individual to purchase your own house and this is said to be one of the biggest commitments that you make in a lifetime. When you are planning to buy your dream house but you have shortage of bucks in your pockets, you may take out a mortgage loan. It is advisable that you compare the interest rates between the different mortgage lenders before you take out a mortgage loan. You can use the mortgage calculators to calculate the mortgage payment that you can afford to pay on your loan amount.

4 Ways to get the low mortgage interest rate

While taking out a mortgage loan, you should be aware as to what amount of money you can pay on your loan. With the help of mortgage calculators, you get the facility to know the exact amount that you can afford to repay. Go through this article to know about the 4 ways how you can get the low interest mortgage rate.

Keep a track of your credit score – It is very important to have a good credit score when you’re planning to take out a mortgage loan. When you have good credit score, your lender will charge low interest rate from you on your loan amount and you will be able to get the best interest rate. However, if your credit score is not good, the lender may not approve your loan request at first and even if they approve, you will be charged high interest rate on your loan amount. If you had previously taken out a loan and paid it back on time, then your lender can take a risk to approve your loan at a low interest rate.

Lock your interest rate when you take out a loan – While taking out a mortgage loan, once you agree to a low interest rate offered by your lender, you can ask your lender to lock the interest rate. Since the interest rates change radically in the market from time to time, it may happen that you’ll have to pay different interest rate than what you had previously decided upon (after discussing with your lender) while taking out a mortgage loan. So, it is wise that you ask your lender to lock the interest rate when you take out a mortgage loan.

Close the credit card accounts that are not in use – Most of you have several credit cards and you swap them whenever you need to do so. Having multiple credit cards with you will affect your credit card accounts since you cannot remember as to how much outstanding balance you’ll have to pay on which account. When you choose to take out a mortgage loan, your lender will have a bad impression on you if you have huge credit card balances to pay off. As such, it will affect the interest rate on your mortgage loan that you take out even if your credit card is of zero balance. In order to keep a smooth balance on this risk, the lender will charge slight high interest rate on your mortgage loan.

Try to make as much down payment as you can – You should try to manage as much money as you can so that you can make more down payment on the house that you’re willing to purchase. This will enable you to lower the loan amount that you need to take out which, in turn, will lower the interest rate that you will have to pay on your loan amount in order to buy the house. You can take the help of the mortgage calculators so as to know the amount that you will have to pay on your loan amount.

Apart from these, when you’re planning to take out a mortgage loan, it is advisable that you shop around properly and compare the interest rate between the different mortgage lenders that they are offering you. You do not have to take out the mortgage loan from the first lender with whom you had a talk. With the help of various online mortgage lenders, you can compare the interest rates and choose the company that will offer you the best interest rate on your mortgage loan. You may also approach your lender to offer you the interest rate that his other competitors are offering you. This will help you get the most affordable interest rate that you want to have in order to take out a mortgage loan.

A guide to getting a first time buyer mortgage

The truth is that no matter where you end up living, there is nothing more exciting that buying your own home. But the process can be as daunting as it is exciting, and in particular you may be confused about getting a first time buyer mortgage.

New terminology

Firstly, there are a number of new terms to get to grips with. You may come across the following terms for the first time:

• loan to value ratio (LTV) – this means the ratio of the amount that you need to borrow compared to the total value of the property. You may find that the better ratio you have (ie. the less you have to borrow compared to the total value), the more attractive the  deals may be;
• fixed and variable rates. As if interest calculations were not difficult enough, which of these may you choose? Fixed rates (where you’ll make a set repayment amount for a period of time) may typically be available to people who want the security and certainty of knowing exactly how much their repayments will be. Variable rates on the other hand may change according to the bank’s rate changes, which may make it difficult to budget;
• repayment and interest only deals. With a repayment mortgage, you are repaying both the capital amount borrowed, plus interest. For an interest only deal, you repay the interest amount only. However, this does not mean that you do not have to repay the capital amount of the loan! It simply means that you have until the end of the first time buyer mortgage’s term to come up with the capital amount.

New commitments

As all the warnings on the bottom of first time buyer mortgage marketing materials point out, failure to keep up your repayments may result in repossession. This means that the bank or building society who has given you a mortgage could take possession of your flat or house and sell it to pay off the amount that is outstanding on your loan if you default on your loan repayments.

The prospect of this happening is why you may wish to pay close attention to whether your new mortgage is affordable before you sign on the dotted line and set your heart on a new house.  Accordingly, you may wish to check and double check whether you will be able to pay the mortgage when everyday living expenses like utilities bills and home and contents insurance are taken into account.

When deciding whether or not they will give you a first time buyer mortgage, lenders may also take your credit rating into account. This is where checking it yourself beforehand may be a worthwhile exercise. Mistakes in these reports are not unheard of, so it may be worth double checking that the credit referencing agency has the correct facts about you. Visit Experian (www.experian.co.uk) or Equifax (www.equifax.co.uk) for more information.

Looking for mortgage deals

Taking on a mortgage may be one of the biggest financial commitments you’re ever likely to make. The sheer number of different mortgage deals around, while offering a wide choice, may be a bit daunting.

However, trying to pick the one that’s right for you may not be as difficult as you may at first suppose or even fear!

That’s because the various deals around may be targeted at different types of mortgage requirement. So, for example, you’ll find mortgage deals specifically aimed at:

• first time buyers;
• existing customers;
• new customers;
• those looking to move home;
• those looking to remortgage or free up some equity;
• buy to let.

All of these deals may offer different incentives including things such as;

• reduced legal and valuation fees;
• free mortgage protection insurance for a period of time;
• low administration fees;
• cash back;
• early repayment without penalty;
• ability to make overpayments.

The deal that may work out to be the most suitable for you will depend on your situation and specific requirements.

First time buyer

For example, some lenders may offer special deals for first time buyers to help get them onto the property ladder.

These may offer attractive fixed interest rates for the first couple of years when budgets may be particularly tight.

Existing home owner

If you are an existing homeowner, whether you actually want to move home, reschedule your mortgage or just free up some equity, you may appreciate a deal which includes free evaluation and legal fees.  

Other attractive features could be the ability to pay more when you can afford to without incurring charges.

A mortgage deal like this may also provide you with the option of paying less in some months if you have paid more previously and others still may even give you the option of borrowing back excess repayments.

Loan to value ratio

An important consideration for the mortgage deals you actually get may be your loan to value ratio (LTV).

In other words, what percentage of the value of your property are you looking to borrow?

In general terms, the rates you see advertised may assume that you are looking for a loan that is around 70-80% of the purchase price and that you will be contributing around 20-30% yourself.

If you are looking for say a 90% loan then you could expect the interest rate to be a little higher. Similarly if you were only looking for say a 70% loan, more attractive mortgage deals may be available.

Using a mortgage calculator

The online mortgage calculator is a potentially very useful tool.

Mortgage questions

If you’re thinking about a new mortgage, then three questions will probably immediately spring to your mind:

• how much can I borrow?
• how much will it cost me?
• can I afford it?

A good mortgage calculator may give you some provisional answers to those questions.

Your mortgage

Different mortgage lenders may apply different approaches to defining how much you can borrow.

However, in principle, your mortgage advance and your monthly repayments will be based upon:

• your earnings (single or joint);
• your existing financial commitments and loan repayments etc;
• your credit history;
• the price of the property you’re buying (this will be based upon a professional valuation rather than the price you are considering agreeing with the vendor);
• current interest rates;
• the mortgage product and provider you select;
• the number of years over which you wish to repay;
• the amount of deposit you’re putting down.

This is a fairly complicated mixture and depending upon how you choose to apply some of these things, the amount you can borrow and the monthly repayment costs may vary significantly.

Mortgage calculations

Trying to do all these calculations in your head might be a bit of a challenge!

The good news is that many mortgage providers have websites that contain a mortgage calculator.

This allows you to key in things such as the above variables and in return, it will give you an indication of how much you’ll have to pay each month in mortgage repayments.

These calculators can also be very useful as a modelling tool.

For example, you can perhaps see how much less per month it would cost you if you were able to put another £5,000 into your deposit and therefore need to borrow less.

Alternatively, you might want to experiment by changing the period of time you’re planning to repay the mortgage over and see what effect that has (typically, shorter repayment periods mean higher monthly repayments but the mortgage may cost less overall).

Keeping in control

Before you finally commit to your house purchase and mortgage, you’ll probably want to ensure that you fully understand all the financial implications and that you’re going to be able to stay in control of your finances.

That’s why the mortgage online calculators can be so helpful – they allow you to see the effects of your decisions in advance.

Steps to take before acquiring a contractor mortgage

Many people don’t realise, but you don’t actually have to be a contractor in order to get a contractor mortgage. Unbeknown to many people, the term is quite loose, and many factors can be taken into consideration before a package is approved. Depending on circumstances, a contractor mortgage option is available to anyone and can be tailored to suit specific needs and situations, which in many instances proves to be a lifeline for people. The majority of the time however, only contractors apply for contractor mortgages and many factors have to be taken into account in order to get you the best deal with the minimum amount of stress as possible.
Some factors that lenders will take into consideration that you should know about are; the number of years that the contractor has been working on a self employed basis and the profits and contract rate relevant to the time of application. They will also be interested in the duration of the contract, so it is wise to make sure you have all the relevant documentation to make your application accurate and worthwhile. It may seem like quite a lot of assessments and checks to go through, but it is wise to remember that the whole process is just as much about you as it is the lender.
You need to know that the package and mortgage that you require and are applying for is the right one for you and this way, with so many guidelines in place, you will know if it is the right avenue for you to be going down.

The Difference Between Mortgage Tax and Property Tax

The mortgage tax and property tax on first inspection often look like one and the same thing. However, these two types of taxes are totally separate entities. The best way to establish the difference between the two is by looking at how the taxes work. It is important to understand that these are taxes applied on properties and are often in operation in most states in the United States.

The first difference of these two entities is the definition of each. A mortgage tax is a deduction imposed on an individual’s taxable income. The tax is deducted according to the amount the individual has paid in interest on a mortgage for the past year. In the case of property tax, it is defined as a real property tax. This kind of deduction is often based on the value of the property.

The tax deducted in both cases is used in various ways. In the case of the property tax, it is this money that is used by counties, cities, towns, schools and special districts to fund these different sectors. The money raised from the property deduction goes a long way to pay for police and fire protection.

Additionally, it is used to fund schools and also major services offered by the municipal to residents.
The money obtained from home loan taxes can be claimed by individual home owners. In this case, the deducted amount can result in tax savings. The advantage of this kind of tax is that an individual can reduce the amount of their income that is open to taxation. To claim this saved taxed amount the individual must first fill in an itemized deduction form. It is the only way that the person will receive all the benefits that come with a mortgage tax. When an individual claims this tax it becomes known as a home-equity debt. Like all types of home loans, the individual has to qualify to be able to receive the claim.

In both cases, the mortgage tax and property tax are subject to certain policies. It is these guidelines that determine the amount of taxes imposed on the home or property. The tax is determined by the value of an individual’s property at the time of the assessment. It is also established by the current rate of mortgage of when claiming the tax.

The policy that governs how much tax is imposed on a property under the property tax is based on the taxable assessment of the asset. It is also determined by the rate currently in place in the specific jurisdiction the home is in. The tax is often made on the home and other structures attached to it. These other structures may include vacant land, office buildings, farms, apartment and mobile homes.

Even with all these differences it is still possible to find similarities between mortgage tax and property tax. There is no tax that is imposed without an assessment being done. The assessment will be done on the specific properties and structures placed under the tax bracket. Additionally, the tax deducted has to be in accordance to the value of the asset at the time of the evaluation.

Remortgages explained

Why do people get remortgages? There are a variety of reasons, which may include:

• looking around to get a better deal than you currently have;
• to restructure your debt to accommodate a change in their lifestyle. Some lenders may permit remortgages when the borrower has had a child or returned to full time study to be flexible and accommodate their new circumstances;
• to release some equity for home improvements. Sometimes a lender may permit you  to remortgage for more money so that you can carry out renovations or repairs which may be designed to increase the value of the property; and
• to consolidate your existing borrowings. The availability of this type of remortgage may depend on the credit rating of the borrower and the amounts involved.

What kinds of issues might homeowners watch out for?

As a borrower, you may be focused on the interest rate that you will be paying to take out a remortgage. But you may also wish to consider how much the remortgage will cost you from the point of view of fees and valuation costs. These can add up to hundreds, maybe even thousands of pounds and are not to be ignored when you are crunching the numbers about which remortgage product to choose.

You may also wish to bear in mind how flexible the lender may be about your ability to make overpayments without incurring a penalty, or to gain access to further funds.

Also, make sure that you will not have any early repayment charges from your existing borrower if you are looking to switch to another lender.

Before you even start…

Before you even start applying for a remortgage, you may wish to check that both you and your house are attractive propositions for a lender.

Firstly, it may make sense to check that your credit history file is all correct and up to date as the information on it will influence whether a lender will grant you a new mortgage. Visit the main credit reference agencies of Experian, Equifax and CallCredit to get a copy of your report

Regarding your house, you may wish to get it valued before you start to apply for remortgages. This is because your loan to value ratio may affect the amount and quality of deals available to you.

Getting help

Mortgage help is available for many sources, whether you contact your existing mortgage provider to see what they can do, approach a new provider; or use a broker.

There are also mortgage tools available online from the websites of financial organisations. Using these tools may give you a better idea of the affordability of your remortgage.

The first time buyer mortgage

If you’re looking for a first time buyer mortgage, then you’re probably going into things with a mixture of excitement and trepidation.

Buying your first property is a big step and it’s hugely important to get it right!

Here are a few, hopefully useful, tips to think about.

Affordability

It’s sometimes tempting to stretch yourself as far as possible when going for a property – and even experienced house buyers sometimes do that.

However, it’s worth keeping in mind that buying a property also involves a lot of one-off additional expenditure that isn’t included on the estate agent’s ticket price including:

• legal and survey fees;
• property and contents insurance;
• repair, redecoration and refurbishment costs;
• removers’ bills;
• various utility connections;
• etc!

Remember also that the monthly mortgage payment won’t be your only regular outgoing. It might also be prudent to allow something each month for unexpected bills and minor disasters that hit everyone from time to time.

So, it might be sensible to think about a property that isn’t right at the very top limit of your financial reach.

Looking for a first time buyer mortgage

Although recent years have been economically difficult, many mortgage providers are still very keen to attract new first-time buyer business.

So, there’s typically no need to grasp frantically at the first offer you get – you may be able to shop around the find a suitable deal.

Period versus modern properties

This is always a question of personal taste but anyone that’s owned a period property will tell you that the ongoing maintenance and repair costs may be very significantly higher than with a relatively modern build.

If you’re targeting properties built before, say, the Second World War, that may be something to keep in mind.

Gardens and land

You may have some sort of rural idyll vision and set out with the very best of intentions relating to your garden. That may tempt you to look for properties that have a substantial plot with them.

Remember though, that if you’re working full time, actually keeping your garden or land in good tidy order may be far more difficult than you imagined.

So, before taking on a bigger first time buyer mortgage to pay for a bigger garden, make sure that you’ll be able to handle it.

Watch your boundaries

In theory your solicitor should protect your interests here but even so, pay particular attention to what the deeds are saying relating to your boundaries and rights of access for you and others.

Make sure you ask your solicitor for a plain-English written explanation that does not involve legalise.

The one thing you won’t want after final completion, is an expensive squabble with your neighbours – something that if unresolved may even negatively affect the value of your property.

Ask advice

Most first time buyer mortgage providers will be only too happy to offer further tips and guidance. So, good luck and enjoy the property hunt!

Next Page »