Mortgage Definitions

Investing in Property

Investing in Property Opportunities In The UK

According to a recent government survey there are 750,000 unused homes in the UK waiting to be brought back to life and that number doesn’t include the vast number of run-down houses that are still lived in. These properties represent a golden opportunity for someone who is disciplined and organised to make a tidy profit. 

The most important thing for any prospective property investor is to have the right financial backing. Before you even consider buying a property, work out what you can afford and what sort of returns you’ll need to make a good profit by checking out Santander’s mortgage payment calculator.

High Yield Property Rental Return

If you’re looking for rental return you should look for houses that can offer high yield. Yield is the rate at which you’ll earn back the money you’ve invested. So, if you spend £100,000 buying and doing up a house, and earn £10,000 a year in rent (after all fees and expenses) your yield is 10%.

Now, because of the way that the market works, getting high yield properties is only possible if the underlying house prices are low, so if you live in the south east, you’ll struggle to make fast returns on rental properties. However, in certain parts of the country, a 10% yield is common, and this represents brilliant value for money, because in ten years, not only will you have earned all the money back that you originally invested, but you’ll also own the house, which you can sell on for a tidy profit.

Investing in Expensive Property

In places where house prices are more expensive, a better option is usually to sell the property on. London, for example, is very expensive, but if you can do a house up to a nice standard and sell it on, you could make truly significant profits. The key is not to spend more than you have to on a renovation, people often get carried away and spend masses on little details, what you want is a good, solid standard of finish and not to spend too much, that way you maximise the value of your house without cutting into your prospective profit too much.

Unless you’re fortunate enough to be able to buy properties up front, you’ll need the right bank to help with your developments. Most important is to get a mortgage where you don’t have to pay a huge penalty if you pay the money back straight away. Or, if you’re going to rent the property, a good buy-to-let mortgage will help you maximise your earnings.

Property investment is not for the faint-hearted and you should never buy a house without knowing any prospective problems. Always have a good look round first, and make sure you get a survey done so you don’t run into any unpleasant surprises.

All About Interest

Your Mortgage Interest Rates

When it comes to borrowing money in any form, the most important factor is the interest rate. The interest rate is technically the rate at which you are charged for using someone else’s money. So, the higher the interest rate, the more expensive it is to borrow.

When it comes to mortgages, interest rates remain key, and they can change throughout the lifetime of the mortgage. Accordingly, if you’re shopping around for mortgages, you should make sure that you use a tool like the Santander calculator for mortgage repayments to work out how various mortgages with different rates compare in the long term.

Interest in itself is not a problem, with mortgages it becomes problematic because you pay interest on the interest you have already accrued. So, if you borrowed £1, and paid interest of 20% on it, at the end of a year (for example) you’d owe £1, the original sum borrow, plus 20% of it, to make £1.20. The problem is, at the end of the next year, you’d owe the £1.20, and 20% of that £1.20, making your overall debt £1.44 and so on.

Mortgages Compound Interest

This is called compound interest, and continues to the extent that if you borrowed £100,000 at 5% (and never paid anything back) after 25 years you would owe an astonishing £239,000. Which is why mortgages can be so expensive.

However, in practice, because you are paying back as you go, the amount you pay for a mortgage is reduced. To begin with, most of your repayments are interest, but as you chip away at the total sum you’ve borrowed, the interest you have to pay decreases and you pay more and more of the underlying debt until you finish the mortgage and own your home.

The knock-on effect of this is that many people are unwilling to remortgage, after all, if you’ve been chipping away steadily and got to a level where you’re repaying back good size portions of the actual money borrowed, why start again? Well, you can change provider relatively easily, just make sure that you switch to a mortgage (with a better rate) but that has the same details as the one you’ve just left (so if you’ve only got five years left, change to a five year mortgage, don’t start from scratch again).

Interest Only Mortgages

An alternative option is to get the type of mortgage where you just pay the interest, so, again, if you borrow £100,000 at 5%, every year you’ll pay £5,000 back whatever happens. Unfortunately, after 25 years, you’ll have paid £125,000 and still owe the full £100,000. Interest only mortgages should really only be for those who would otherwise struggle to afford to buy a house.

Interest is a complicated business, particularly compound interest, and it has huge implications for mortgages and how much you have to pay for them. If you’re thinking about getting a mortgage, it’s always worth paying for independent financial advice, although it may cost a little bit, the advice is well worth it.

Can I Refinance at No Cost (or a Low Closing Cost)

No Closing Costs Refinancing Mortgage

Refinancing plans for no cost are great for people who do not want to live in their homes for a longer period of time. When you get a trade-off for a no closing cost refinance instead of an ordinary refinance, the difference is an additional interest rate of 2 percent. With a longer term view, it is not a beneficial deal, but in the short run it can help you to save huge amounts of money.

Start applying for no closing cost refinancing loans from either banks or other mortgage providers. Usually, refinance loans with no closing costs are not approved easily because they bring up lower up-front costs for the borrower. Always compare the rates of interest offered with the loan to those of the regular closing costs.

Other Costs Except Refinancing Closing Costs

Assess the loan agreement vigilantly and look up for any other costs besides the closing costs which make the loan unappealing. You must remember that if there are no closing costs associated with the loan it does not necessarily mean that there are no appraisal fees, settlement fees and any other added costs. Check out for such terms and conditions specifically, for example, the loan origination fees, which will add up to 1 percent or even more to the cost of the mortgage.

Calculate the number of years you are likely to spend in the house with the loan to make it inexpensive to pay for the closing costs on your own.  You can now evaluate whether it is a commercially viable deal in the long term or not. It means you will be paying higher amounts of monthly mortgage.

Contrarily, a borrower can be charged 3 to 6 percent of the loan amount if he or she wish to refinance at a lower cost. The borrower has the choice to reduce the closing costs to make them more affordable. Negotiation of closing costs and research will help the borrower to save huge sums of money on the mortgage refinance.

No Closing Cost Refinanacing Process

Start applying for a mortgage refinance with the present lender. You will be asked to fill up a loan application form. You will also be required to submit two months’ bank statements, two months’ pay stubs and two years tax returns. Make a request for Good Faith Estimate for your mortgage loan. Your present lender might also waive up certain amount of fees in order to help you retain your business. 

You may also apply with two other lenders as well. You can also ask them for Good Faith Estimates on their mortgage options. Now compare all of the Good Faith Estimates. Pick the lowest estimate and ask the lender to strike that offer with the least amount of closing costs, if applicable.

Ask your lender to waive off the closing costs by means of increasing the interest rate. The lenders receive a combination of interest rates and closing costs. As a rule, higher rates of interest ensure greater profits to cover up the closing costs.

However, you must ask the lender information on streamline refinancing. It adjusts the term and rate, but not any part of the loan amount. This kind of refinancing reduces the fees and closing costs up to a great extent.

Read Related Articles:

• FHA Streamline Refinancing Guidelines
• Refinancing With Bad Credit History
• Refinance Scam Radar – How To Spot Them
• How To Negotiate Refinancing Costs Down 
• Mortgage Closing Costs & Fees Explained

What Is An Assumable Mortgage Loan – Read All About It

If You See An Assumable Mortgage – Grab It

People are asking what is an assumable mortgage ? What does an assumable mortgage do for me? What are the main benefits of such mortgages and what are the pros and cons of assuming a home loan. The assuming mortgage markets has three sides the seller side and the buyer side and the lender side. In this short review you can read more on assumable home loans and their pros and cons on each of the parties involved.

What Is An Assumable Mortgage

Assumable mortgage is when the seller sells the home together with the mortgage liability on the property to the buyer.

This financial situation will be beneficial to all sides (except the lender..) when the seller has a low mortgage rate on the home, and the current market rates are much higher. The buyer if he wants to buy the home, he will need to apply for a mortgage at current market rates, which may end up in an expensive mortgage and high payments.

Because the seller sells the home with the mortgage on it to the buyer, the lenders looses the delta between the seller rates and the current rates.

For example: If a person buys a home and took an assumption mortgage at 5%; a few years later the mortgage rates rise up to 8%. When the seller will want to sell their home, the buyer can either apply for th current 8% mortgage, or buy the home with the existing 5% mortgage left on it.

In this example, the seller will be able to sell their home in no time! Because the home has a huge incentive value to it; in some cases the seller will be asking for a price higher than the market value to benefit from the assumption mortgage added value. The buyer has an incentive to buy the assuming mortgage, and they will save 3% on the mortgage interest and saving on all the settlement costs on a new mortgage.

If it is so lucrative… Where is the sting?

Lenders Don’t Like Mortgage Assumptions

The only side loosing from such deals are the lenders. So they have an incentive to block such assuming loans from rolling between the seller and the buyer. Most lenders will block any option for such assumption mortgages by lenders have inserting due-on-sale clauses in their notes.

This means that when you get the loan you sign that in case you sell the home in the future you must pay off all remaining mortgage left on the home before the liability is moved to the buyer. With these due-on-sale clause most lender block their future losses if the interest rates rise.

Some lenders will allow the mortgage assumption, which will save some of the mortgage costs, they usually allow the mortgage loan assuming that the interest rate will be current as the market rate at the time of the new transaction between the seller and the buyer. Of coarse this takes the value from the assumed mortgage loan, if the rates are raised than the buyer has no incentive to get the home with the mortgage on it.

Remember that the buyer will need to pay the seller all the equity built on the home usually as down payment. On top of the  large down payment the buyer will be forced to pay a high (current) mortgage rate to the lender.

All except the FHA and the VA loans. The FHA mortgages are assumable mortgage loans allowing the seller to assume that future rates will rise, and to sell the FHA backed mortgage to the buyer with the lower rates as a bundle deal.

FHA Assumable Mortgage Loans In a Nutshell

What is an FHA assumable mortgage loan? these types of home loans are still available today, and they can be a smart investment because the national mortgage rates are near the lowest point they have ever been. This means that as a buyer you buy a low interest rate and also the knowledge that in the future you could sell your home at higher price (the assumable mortgage  has value!). The assumable FHA mortgage loan may cost some more because of the insured mortgage fees, but this is probably worth the price as this mortgage could be sold later on with a home at a higher market value.

The FHA assumable mortgage loans are valuable when the seller wants to sell their home in the future. In order for the buyer to be able to get the assumable mortgage loans, the buyer will need to qualify as regular FHA home mortgage borrower. If they meet all the minimum FHA requirements, the mortgage could be transfered to the buyer and all liabilities on the home are passed together with it.

There are several ways to calculate the value of the assumable mortgage loan to the buyer and to the seller, as they will both want to benefit from the value this kind of home mortgage holds in the unstable markets ahead. These calculations include the saving on settlements costs and fees, savings on the mortgage rates, and on the investment value of the savings  from the assumable mortgage loans for the time the buyer plans to stay at the new home.

5 Critical Steps At Mortgage Closing Meeting

Step by Step Tips When Closing Your Mortgage

The steps at the mortgage closing meeting can be very important, and should be planned ahead, and done correctly. The lender and the mortgage broker have been doing such mortgage closing meetings quite a lot, and can review this process with you. Here you can read the steps which will be done from the beginning to the end of the meeting.

Invest In Education

If you are in a process of a mortgage shopping or approval you must invest in some mortgage education. Now that is not free article reading like you are doing know, thats just filling your ceriousity.

The tips and tricks you realy need to know, you will not find ‘free’ on the internet. If you think education is expensive… try ignorance. This becomes true when it comes to mortgages. People just know too little about the process, and the lenders rape them with fees and costs that mey be easily avoided. Your golden hen will be learning ‘inside information’ from a former banker who have broken the lenders ‘code of silence’.

See – The Mortgage Loan Tips.

You will see below 5 critical steps and tips to know prior to the mortgage closing meeting – they will be highlighted.

Who Will Be Attending The Mortgage Closing Meeting

As mentioned before, your mortgage broker, mortgage attorney or the lender may have been in many mortgage closing meetings. The best advice would be to ask them how they expect the meeting to take place, which documentation and proofs they might want to see. This is important, because when these requests come up in the meeting and all the eyes are turned at at you, you better be ready.

Unlike all the meeting which you have been attending until now, the closing meeting may be a bit more crowded. All the people who have are connected to th deal should be there. Tip 1 - Ask in advance who will attend so you know can prepare better, if the seller brings an attorney – bring an attorney too!

Who may be attending this meeting :

• You – The buyer and borrower.
• Your mortgage broker
• The Seller (and his/her spouse partner)
• Their mortgage broker
• The lender and their attorney
• Or Title insurance or Escrow company which are permitted in some states to manage these meetings.
• Your attorney (recommended) or the seller attorney if they have one (recommended)

Prepare The Documentation For Closing

At the mortgage closing meeting will a lot of documentation signed and reviewed. Make sure you ask and prepare th documentation exactly as requested. If you think that you have not collected all the papers and approvals, contact the lender and double check. If you have difficulty knowing which information will be expected, ask even twice to be sure, you know.. ’better safe than sorry’ is relevant to the mortgage closing meeting too.

Here are some of the documents and issues commonly YOU will need to be responsible of completing before the mortgage closing meeting:

• Homeowners Insurance – The lender would like to see that you har insured by insurance for any physical damage to the property. Tip 2 - Make sure you know exactly which hazards the insurance you do covers, as the lender may want a specific insurance on common or uncommon hazards like floods, fire, earthquake, tornado storms. That is why this is called too Hazard insurance.
• Title Insurance – This insurance protects the lender from last minute ‘surprises’ – They have seen everything and been in such positions that anything may be possible for them like “unknown heirs”, forgery, credit identity theft…
• Title search report – This is important to have as it is the legal documentation proof that the property is clean from any liens, negative marks and it is ready for the legal ownership to be transfered.
• Termite, well, sewer or septic certificate – Some lenders will ask for these items to be pre-checked and certified. This may be part of the appraisal check “as is”, or may be items that must be repaired prior to the completion of the mortgage transaction. See the FHA appraisal guidelines 2011 review.

What Will You Be Signing At The Meeting

Documentation For The Mortgage closing meeting (might vary from state and property involved)

• HUD-1 Settlement Statement – This is the final document with the fees, credits and costs concerning the real estate terms you and the sellers agreed upon.  The  HUD-1 Settlement Statement may be slightly differnt from the Good Faith Estimate (GFE) document. Tip 3 - The fees in the HUD-1 should not be ore than 10% higher from those presented at the GFE. Tip 4 – Get the HUD -1 document three days in advance, as you may be requested to bring a bank cashier’s check, because your personal check may not be accepted.
• Truth in Lending (TIL) disclosure – This is part of the Truth in Lending Act (TILA), is a document you should have received by the lender, it summarizes your expected annual percentage rate (APR) payments. In this document there will be all the figure about monthly payments, rates, interests, fees and all the mortgage financing figures. Tip 5 - Since the TIL may be changed over the period of time and party agreements. By law your lender must send you the most recent TIL document they have, if had been modified they must allow you to see the recent one before the mortgage closing meeting.
• Promissory Note – This is a document where you sign that you will be paying all th payments on time. It is a ‘mirror’ document to the Truth in Lending, it summarizes your part of the deal.
• Loan Documentations - These are the documentations of the mortgage loan, with all the lien explained that if you are late on your payments, your new home you have just bought becomes the property of the lender. To prevent this from happening – You can learn how to ‘smash’ your mortgage.
• The Deed – This is the document which transfers the ownership of the home over to you – Congratulations! You are a home owner!

Well, you are not a homeowner yet.. the home belongs to the lender until the last payment is fully paid… For the best mortgage with the lowest rates and no ‘junk’ fees make sure you get the  Mortgage Loan Foolproof Tips.