3 Things to Consider when Buying Your First Home

One of the major milestones and most exciting times of your life is when you make the decision to buy your first home. However we often get caught up in the status quo, whether it is because your friends are all buying homes, or you have reached the magic age where it is determined you should have one.

While you may be eager to find that perfect house and move  in, there are a three major things you should consider before buying a home.

Buying your First Home

Are you actually ready for home-ownership?

Although it may sound crazy, the first question you should be asking yourself is if buying a home makes sense for you.  Since you were little, you probably dreamed of growing up and owning your own house in an area that you like.  After some consideration, you may come to the conclusion that you are better holding off. For example, if you travel often for work, you will not be able to enjoy the home that you are making your mortgage payments on. Worse yet , you may find yourself in a situation where you need to relocate soon after you purchase your home,  and forcing yourself to have to go through the house selling ordeal.

Can you actually afford it?

We live in a time when many people try to live above their means. People are constantly buying the newest cars, electronics, and whatever other toys their hearts desire. They are also putting themselves into tons of debt every time they buy something new. It’s important to take a good look at your finances and make sure that you are in this for the long term.  Consider how steady your pay is, debts you already have (student loans, credit card bills, etc) and an emergency fund for any unseen circumstances.  Often times it’s a hard realization that you might have to settle for something a little different than your dream home.

Are you responsible?

You may have reached a point in your life where you are finally financially responsible. You pay everything on time, never call out of work, and generally don’t live beyond your means. Great, you can probably afford your mortgage and not miss any payments. Have you considered what to do with your home when you go on vacation? In the summer, you may need to hire someone to come and take care of your lawn for the week, and in the winter you may need someone to make sure your heat is on so your pipes don’t freeze. You are now responsible for the maintenance of your house, and it is important to stay on top of it or you may have a few large bills later down the road.

If you still think that you are ready to buy a home, then the first step is to begin talking to different lenders and see what is offered. You should be looking to get the lowest mortgage rate you possibly can. A loan officer can also point you towards a program that will fit your needs. After talking with the loan officer and deciding on your program, you rate will be locked. Your home will go through a final appraisal, underwriting will approve the conditions, and you will get a final approval. Once you are approved, you can get ready to move in, and enjoy your new home!

Fixed vs Variable Mortgage Rates for Buying a New House

Before buying and moving into a new home there is one big decision to make and that is whether to choose a fixed or a variable mortgage rate. This decision will determine what interest rate you are going to pay on a monthly basis for your mortgage for the next twenty years or so, so choosing the right rate is definitely one of the most important things to do. However, there isn’t one correct way to go about this, as there are many factors you need to take into consideration before you make that initial decision, but here are some facts to help you out.

Fixed and Variable Mortgage Rates

What is a Fixed-Rate Mortgage?

A fixed-rate mortgage is one where there is a set interest rate that cannot change in the duration of the mortgage (if you don’t refinance). The fixed mortgage rate guarantees you a determined interest that you have to pay each month.

The advantage of a fixed-rate mortgage is that the homeowner will not have to contend with varied loan payment sum of money that changes with the interest rates.

What is a Varied-Rate Mortgage?

A varied-rate mortgage or adjustable-rate mortgage (ARM) is one where typically the interest rate is not fixed and can vary from month to month, potentially going either higher or lower over longer periods of time.

The biggest advantage of variable rate mortgage is that the interest rate modifies periodically. Monthly principal and interest payments vary according to a preset agenda throughout the life of the loan.

Most creditors and private firms need a down payment of about 5 to 20 percent of the entire sum of money from a borrower. This is more than the government mortgage loans with lower down payments. Your down payment also affects your loan-to-value ratio, or the amount of stake you have in your home compared to your mortgage. If you put down a larger down payment, you’ll start off with more equity in your home.

Factors to Keep in mind before Applying for a Mortgage Loan

While taking a fixed or varied rate mortgage loan for purchasing a brand-new house, it is important to keep in mind your monthly income, interest rate of the loan and actual price of your house.

You need stable and reliable sources of monthly income before applying for a mortgage loan.

The interest rate of the loan is an important factor to consider as it will decide how much money you will have to pay every month. While the whole act of loan processing will continue with paperwork and reviewing, the rate of interest will vary.

The price of a house impacts your mortgage. For example, if you want to purchase an expensive house you will have to make a larger sum of money as down payment or convince the seller to make some reduction in the price. Similarly, if the house costs lesser, the amount of money as down payment will be less.

It’s Personal

While you may be able to find great real estate deals online, make sure you don’t get carried away and rush into anything when applying for a mortgage. Only you know your financial situation which is the main thing to bear in mind when deciding to go with fixed or variable mortgage rate. Variable-rate mortgages can be risky for those who don’t have a high or constant income. If your financial situation fluctuates throughout the year, fixed rate may be the better option for you. If you are willing to take the risk, and believe that in the future the rates will go down, choosing the variable interest rate is the way to go. Especially nowadays, with all that economic turmoil going on choosing the variable interest rate can possibly save you some money.

Take Your Time

Last but not least, take your time. Do your research and homework and find out as much as possible about your possible lenders and what interest rates they offer. Use the internet as a source of information. Read about other people’s experiences, and ask yourself these questions: What monthly mortgage payment could you afford at the moment? If interest rates rise would you still be able to afford those payments? How long are you planning on living in the property? Either way you go, make sure you understand the consequences of your choices.

Keep in mind that making the decision to go with fixed or variable interest rate doesn’t have to be the last decision you’ll ever make, as you can always refinance your mortgage. Whatever you do, make sure you evaluate your personal situation as well as what’s going on in the market at the moment, taking into consideration all these factors will help you to make the right decision.

Choosing the Right Mortgage Loan

In Canada, if you plan to purchase a home, more than likely you are interested in learning about the various types of home mortgage loans that are available. A mortgage is nothing more than a loan that uses the home you purchase as collateral. This means if you do not repay the loan as specified in your mortgage agreement, the lender will retain the home to resell in order to obtain the money you borrowed. Many different institutions lend money to those looking to purchase a home including pension funds, finance companies, credit unions, trust companies, and banks.

In order to obtain a loan, you should be aware of the different types of loans that are available in Canada so you can make an educated decision on the one that will fit your needs the best.

Mortgage Loan

A conventional mortgage is one that will provide you around 80% of the appraised value of the home or in some cases 80% of the purchase price of the home. To obtain a convention mortgage, the home buyer will be required to pay a down payment of 20% of the purchase price upfront.

A high-ratio mortgage is one that will provide you around 80% of the purchase price of the home. With this type of loan, you will be required to pay around 5% of the purchase price as a down payment. This type of loan does require the home buyer to carry mortgage loan insurance. This type of insurance will protect your lender if you cannot pay back the mortgage loan. In the majority of cases in Canada, lending companies are required to have mortgage insurance by law.

An open mortgage is one in which you can repay the loan in full or in part without paying any penalty cost. In the majority of cases, this type of loan has a higher interest rate than closed loans, but is often chosen if you plan to make extra payments or if you are plan to sell the home in a short amount of time after purchasing.

A closed mortgage is one that does not allow the home buyer to make any extra payments and will charge a fee or penalty for those that wish to pay the mortgage off before the term of the loan. The interest rate offered by this type of loan is usually lower than other mortgages.

A fixed rate mortgage is one in which the interest rate will not change at all during the term of the mortgage.

A variable rate mortgage is one that has interest rates that change according to the changes seen in the financial market. In the majority of cases, the amount you pay monthly will remain the same but the amount of money that goes for the principle will be different.

5 Essential Tips For Securing a Mortgage

Getting a mortgage need not be a painful endeavour. While the idea of saving in earnest can be something of a burden, there are some failsafe tips that you can use. For many, the thought of homeownership seems like an unaffordable and unobtainable dream. But, it doesn’t need to be that way. In fact, you can be on the route to owning your own property by using these five essential tips.

  1.    Check Your Credit Rating

Your credit rating could be the thing that is holding you back. You need to make sure that you have a clean bill of financial health before you choose to go for a mortgage. With a vast array of online tools to help you, you can check what your credit score is before going to the bank. This is important. You need to make sure that you have an excellent credit score. If your score is less than anticipated, now is the time to start making positive and proactive steps into fixing it. The simplest way to do this is to make sure that you are paying your bills on time.

  1.    Look into Government Schemes

Government Help to buy plans is ensuring that everyone can get on the property ladder. With only a 5% deposit required for many of these mortgages, a 5 bedroom 3 bath home in Rickmansworth doesn’t have to be a dream. It can be a reality. Government schemes are in place to help those on low incomes get on the first rung of the property ladder. Speak to your mortgage advisor to see what can be done for you. Alternatively, look at the Gov.uk site for more information.

  1.    Have a Budget in Mind

Budgeting when you are looking into securing a mortgage may seem like an oxymoron. But, if you are keen on buying property make sure that you have a budget in mind. Aiming for the lower end of the market will ensure that you have ‘play money’ at the end of the month. You don’t want all of your spare cash tied up in property. Make sure that you factor in living expenses and stick to your budget.

  1.    Be Flexible When it Comes to Location

While you may dream of living in central London, where all the hip and happening people are, this is going to cost you a fortune. By being flexible on location, you can grab a fantastic property at an exceptional price. What is more, you are more likely to secure a mortgage on a property that is cheaper. You don’t have to go to the other end of the country to find a great deal. Even the neighbouring postcode to your preferred location could save you a small fortune in the long term.

  1.    Independent Mortgage Advice

Many people seek the advice of banks. But, there is no substitute for independent mortgage advice. By doing this, you will not be tied to one provider. What is more, independent mortgage advisors don’t have vested interests in your cash. Explore all avenues for a brilliant deal on your mortgage.

Find The Best Mortgage Advice

You must be equipped with a lot of information about available mortgage products to make up your mind as to what will suit your purpose and pocket. Need advice? Where to locate a good advisor? And how much do you have to pay for getting advice on a mortgage product?  This article throws focus on how you will find the best mortgage advice when so many financial advisors are all around to extend their help.
How to Start?
With too many offers available at a time, making a choice will be tough. What will you do? Will you walk along the highway and drop in every financial house to seek their advice? Though it is less likely that you will do so, still even if you do so, there is a little chance of getting unbiased advice. They are doing business and so will want you as a marginal addition to the list of their clients. Even if they claim to have a separate advisory body which works independently, an unbiased approach is least expected. A few of us are aware of the fact that all mortgage products are not be presented to the prospective borrowers as some reserved choices are only made available through the agents’ network.
Internet surfing is the best course of action to learn the rates and quotes as offered by different companies. Most of the companies have opted for online advertising by providing details about their products on the World Wide Web. Browse through their website to get the best rate and conditions pertaining to a particular product. Conditions are important but may not appear in publicly advertised material of the lender. However, you have to pay a fee for placing your business. Generally, normal service fee is within 1% of the total amount borrowed but may differ depending on how much effort has been put in.
Hiring an advisor for searching on your behalf and making necessary comparison between the available offers won’t be a bad idea, especially when you can afford to pay for the service. The mortgage advisors can be divided under two heads – Independent Mortgage Advisor and Independent Financial Advisor.
Independent Mortgage Advisor
Till date, the independent mortgage advisors are not guided by any statutory regulation. However, majority of them subscribe to Mortgage Code. It puts them under obligation to conform to certain procedures in regards to conduct and advice. Many lenders prefer introduced business from the advisors who are registered on the Mortgage Code Register of Intermediaries. For registration, an adviser must own a current credit license issued by the Office of Fair Trading. All these set a standard guideline for both the mortgage lenders and intermediaries as well as protect the borrowers’ interest too.
Independent Financial Adviser
These advisors are regulated by the Financial Services Act, 1986 and Conduct Rules of 1987. They have the legal authority to offer advice on the regulated products and sell the same. These regulated products include investments, pensions, endowments, mortgages etc. These advisors must be registered on the Mortgage Code.

5 Tips to Get Best Mortgage Broker Online

The most challenging part of getting a good mortgage deal is to find out a reliable broker. The task becomes more difficult when you search for a broker online. There are so many frauds in the industry that it is really difficult to trust an agent. Though a large number of them have been weeded out of the industry during the last economic meltdown, it is still wise to practice caution. There are some simple ways to scan the credibility of a broker and deal with the right person. Ask a broker the following 5 questions and you can decide whether the person is worth relying or not.

Can you help me in getting the best interest mortgage loan?

It is important to go with the interest rate that you can afford comfortably. The broker gets commission once you sign up a deal. So, it is not in the best interest of the person to get you the lowest possible rate. That is why you should prioritize the broker who thinks what works in his clients’ favor. The broker must be patient to provide you with the latest updates on mortgage rate that keeps on changing frequently.

How much closing cost will I need to pay?

Lenders and other parties involved in mortgage loan transaction spin quite a goodly sum on processing fees. Your broker is required to inform you about the estimated fee before any deal is finalized. Ask the broker to give every piece of information in writing.

Can you get me any lock on mortgage interest rate?

Mortgage interest rate is very much volatile and keeps on sliding up and down almost day in and day out. You may want to place a lock on the rate if it shows any continuous upward rise. Locking may increase the interest rate by one percent or may keep it fixed. Also inquire if you have to pay any additional fees for locking and the time duration of ‘lock on mortgage’ rate.

How much is the prepayment penalty for mortgage loan?

Prepayment penalty can go up to 1% of what you have received as loan. It will be roughly $3,000 in figure on an average home. You may also pay six months’ interest as prepayment penalty. However, this will be much less than the amount what you pay as per current low rate. It is sometimes possible to avail the lowest mortgage rate if you agree to stringent prepayment penalties. Find out which penalty criteria suits your case and try to optimize benefits on it.

Will the down payment have any impact on the cost of total mortgage?

Your broker may ask you to make down payment 3-5% of mortgage loan. However, paying so little will cost you a heavy sum for bearing the consequent expenses. Majority of the lenders will require you to pay less than 20 percent as down payment for availing private mortgage insurance. It is better if you consider both the plus and minus points of making larger and smaller down payment.

Is Buy-To-Let A Good Bet In 2013

Demand for rental properties is set to continue to increase in 2013 with four in 10 landlords predicting rises, according to a recent poll.  The LSL Property Services landlord survey from December shows that for every investor who expects to lower rents, 39 expect to increase them.

Of the 1,223 landlords polled for the survey, 10 per cent are anticipating greater than 5 per cent rises.

It follows last month’s report by the Association of Residential Letting Agents predicting demand to significantly outstrip supply for landlords in 2013.

As house prices have rocketed in the last decade home ownership has become more difficult for young people to achieve.

Statistics from the Council of Mortgage Lenders show the average age of a first-time buyer standing at 33 and rising. Deposits are tough to raise, mortgages are hard to obtain and houses are expensive. Many are being forced into renting, particularly in areas where homes are expensive such as London and the south-east. Tough mortgage conditions are dovetailing with demographic trends to boost the UK buy-to-let mortgages.

Whether it is the greater desire for flexibility young people, immigrants needing housing or a growing student population renting has been the answer over the last decade.

These trends create a huge opportunity for private landlords and boosted demand form tenants, pushing up rents and creating huge opportunities for good returns.

How do I become a landlord?

The potential profit to be made by entering the UK buy-to-let market in 2013 is clear but how do you get started?

Aspiring landlords will need to choose a property that can be rented with a specific target in mind. It could be students, young people or even families. The next step is to get your hands on a buy-to-let mortgage, which operate quite differently to your normal mortgage.

Firstly, you will need to raise a deposit. The level of deposits required for buy-to-let deals has relaxed in recent years but the barrier to entry is still high. The minimum deposit will be 15% of a property’s value and such deals remain rare with most lenders requiring deposits of 25% to 40%.

It is also worth bearing in mind that the lower the deposit raised the higher the interest rate you will pay for the privilege.

Secondly, the affordability criteria is not based on your own personal salary but on the ability of the house to generate rental income. Lenders will have ways to evaluate expected rental income and this should be the basis of your application.

Which lender should I choose?

For amateur landlords with two or three properties the main players are BM Solutions, part of Lloyds Banking Group, and The Mortgage Works, part of Nationwide Building Society.

Between them these two lenders take up the lion share of buy-to-let lending in the UK. They can offer good rates but as the biggest can be more inflexible than the smaller, specialist lenders.

But in the last two years a growing number of banks and building societies have entered the market as a result of growing tenant demand.

Banks such as Santander  and Barclays are making the market more competitive and pushing down rates along with prominent building societies such as Skipton, Yorkshire and Coventry.

Amateur landlords now have a wide choice of lenders to choose from and a good mortgage broker can compare the costs and criteria across the market.

There are also specialist lenders such as Paragon Mortgages who cater for professional landlords with a number of properties. Paragon will only deal with professionals and not the amateur landlord with one or two properties to rent.

Is it worth it? 

Getting a buy-to-let mortgage is much easier than it was a few years ago with a growing number of lenders offering 15% deposits. More lenders is also creating less stringent criteria and better rates.

As a landlord there is always a risk of void periods, when no rent is received, but the mortgage payments still need to be met. There are also maintenance costs and potential drops in property prices.

A buy-to-let mortgage is an investment product and should be seen in the context of the associated risks. But the UK property market has weathered the storm well on property prices and rental yields are strong making buy-to-let a potentially good bet for 2013.

The Different Types Of Building Society Mortgages

Unless you have the luxury of being able to turn to a lump sum in order to acquire your dream house, it’s likely that you may have the chance to sign with a building society in order to secure the necessary funding. Before you do so it’s always wise to conduct a little research on the types of finance options available to you, just so you know how to source the best deal.

Lost already? Well, building societies and therefore the mortgage rates from building societies – as opposed to banks – are member-owned institutions found in the UK and British Commonwealth countries that provide a range of lending products, very much like the options offered by banks. Many building society loans are in fact mortgage products for prospective homeowners, which is where you come in.

The only issue is knowing what to go for when you’re faced with the decision. Every provider will compete to provide a lower interest rate on a deal if they decide you are someone good to lend to – here are a few options they’ll likely have to offer.

Fixed rate mortgages

Perhaps the most popular option among homeowners is the fixed rate mortgage, which guarantees a fixed interest rate for the entire term. As the title suggests, this rate does not change during the entire duration of the loan, which can range from anything as little as two years right the way up to 25 in some rare cases.

This model will allow you to plan your finances and organise a budget to run alongside your monthly payments. You can therefore rest assured, safe in the knowledge your product will not be affected by interest increases during the period in which the fixed rate applies.

Variable rate mortgages

As the title hints, when you are considering choosing variable rate mortgages you are expected to pay the required interest rate – which in this case could change during the period of your mortgage. The monthly payments decrease if interest rates fall, but payments may also increase by the same logic.

The benefits of this product are obvious. If you believe the market will improve, you may fancy your chances of getting a better deal in the long run. Furthermore, the initial interest rate of this product is usually lower than a fixed rate mortgage – something which may interest borrowers on a tight monthly budget. Any changes to your monthly repayments may be calculated on a set month each year, taking into account any increases or decreases in interest rates.

First time buyer mortgages

Due to the trouble that some Brits have with taking their first step on the property ladder, societies have started to offer products designed to help them along the way. These will commonly include much lower deposits as part of a fixed rate deal.

The fixed rate terms present a safe option for first-time buyers, while the low deposit value (usually in the single figures, down from around 20 per cent) allows them – and possibly you – to declare an interest right away.

Buy-to-let mortgages

If you’re so much as looking into a buy-to-let mortgage, you should understand this isn’t for the first-time buyer keen to purchase a home for themselves. Buy-to-let products allow prospective landlords to borrow money in order to buy a property for rental purposes.

 Article by Brandon Watts-A research student in Accounting & Finance, I am keen to keep myself updated about anything and everything related to business & finance.

Live Mortgage Free by Letting Your House to a Lodger

The rent amount is on a steady rise which means that the homebuyers can easily manage their mortgages by renting a room and invest the income for buying a home. Depending on the regions where they are renting, they can make a saving of tidy figure. The homeowners in the area of low house prices stand a good chance of earning a surplus over their mortgage expenses as compared to those living in the south.

The government-supported rent scheme has paved way for attractive earning as much as £4,250 a year or £354 a month tax-free. According to Santander – one of the big mortgage lenders in Britain – the number of people taking in lodger for extra income has already crossed 1 million and it is going to rise in coming days.

SpareRoom.co.uk website, one of the most popular flat and house share websites, has revealed the fact that there are many cities in UK where the homeowners can live mortgage free through spare room renting. The site did a comprehensive calculation by taking into consideration of several realities such as the average rent of a two-bedroom house in the UK cities and the annual for the fixed rate two year mortgage loan (which is 80pc LTV or loan to value at present).

The homeowners living in Blackpool and Manchester can save up to £800 over their mortgage expenses whereas the figure drops down to a little over £200 a month in Birmingham. In the Belfast and Glasgow, the householders also enjoy a good figure of surplus. However, London makes a distinct absence in the list. It is because the UK capital is counted among the cities where living as well as housing cost is very much excessive. The two-bedroom living accommodation in London comes at £350,000 with annual mortgage cost of £12,040 whereas the average rent procured from a lodger is only £8,268.

Half of the UK towns and cities where living mortgage free is not a distant dream for the house owners are seated on the north sides and a third is located in the Midlands. The noteworthy fact is that no town from the South makes an appearance in the list. It makes sense to take in the lodgers where the house price is extremely higher and the demand for the rented apartments has also gone up to a high. The house owners definitely want to make money out of renting with the least of inconvenience and this can be done by letting house to the commuters.

So if you want to live with surplus during the mortgage term, renting your house is the best option to go for. Nothing can make you happier than paying the mortgage out of your lodger’s pocket.

Benefits of Re-mortgaging Your Home

Your mortgage is more than likely to be the biggest single expense in your household budget and one that has to be paid for anywhere up to 25 years, sometimes more.

Why remortgage?

With the pressure on household finances continuing it’s important to make sure that you’re getting the best possible deal on your mortgage. You could benefit from shaving significant amounts off your monthly payments by remortgaging.

The first thing you need to do is to review your current product. Check the rate and the term of any deal you are on. You also need to make sure there are no exit penalties that can be applied by the lender if you try to break out of the mortgage earlier than the terms allow.

Even if there are exit penalties to pay, it may be still be cheaper to move but you will need to calculate this very carefully to avoid being stung by high charges. You also need to check the fee on any new mortgage as some can be very hefty.

With interest rates historically low, mortgage rates are also very competitive so it’s potentially a good time to switch. However the best deals are reserved for people who have plenty of equity in their home and so present a lower risk to lenders.

Other benefits of remortgaging

Some people will want to remortgage so they can raise money. This can be more cost effective than borrowing any other way, for example using a loan or on a credit card, but you must make sure you can keep up the payments.

If you get a new, lower rate it may be possible to borrow extra money and still pay not pay much more than you do at the moment, but remember that your home could be at risk if you cannot keep up the mortgage payments.

Remortgaging may also allow you to extend the term of your mortgage for longer which has the advantage of making monthly payments cheaper, but will cost you more in the long run.

If you do get into financial difficulties then IVAs managed by Churchwood are a good way to manage your debt. An IVA allows you to pay off your debts with an affordable monthly payment. In addition an IVA comes with a guarantee that remaining unsecured debts will be written off after an agreed time   normally 60 months.

What kind of mortgage should I get?

Anyone remortgaging will need to compare all the available mortgage products from different lenders. You will also need to decide if you want to lock into a fixed rate deal and for how long. Another option is to consider a discounted or tracker product, where you would benefit if the Bank of England Base Rate dropped even further, but pay more if it started to rise.

With some experts predicting that rates will stay low for many years to come, a lifetime tracker may be a good deal in the longer term.

Whatever the reason for a possible mortgage switch, it’s a fast moving market with new mortgages coming into play all the time and others being removed quickly, so you will need to act fast if you see a competitive product that’s right for you.