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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.
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.
Homeowners in Las Vegas are disappointed by underwater mortgage HARP relief program. The former HARP refinancing program was a complete failure for the homeowners in Las Vegas as well as a flop in the whole country. A tiny portion of the homeowners could join the HARP strict requirements, leaving too many wet eyes watching the Home Affordable Refinance Program leave the station without them. Most of Las Vegas underwater mortgage borrowers were left out of the program due to the fact their underwater mortgage was over the 125% limit of the HARP requirements.
When the Obama administration first announced the HARP mortgage relief refinancing program, it was part of the Making Home Affordable program. The reality was much more complicated and only a few thousands of the millions in need could actually refinance with the offered program.
“One reason too few homeowners have received federal help to make their mortgages more affordable has been program qualifications that are too strict for most of them to meet. Obama conceded as much in Las Vegas outside the home of Jose and Lissette Bonilla when he said that under the HARP guidelines homeowners couldn’t qualify if what they owe on their mortgage exceeds the value of their home by at least 25 percent.”And this is critically important for a place like Las Vegas, where home values have fallen by more than 50 percent over the past five years,” Obama said. “If you’ve got a $250,000 mortgage at 6 percent interest rates, but the value of your home has fallen below $200,000, right now you can’t refinance. You’re ineligible. But that’s going to change. If you meet certain requirements, you will have the chance to refinance at lower rates, which could save you hundreds of dollars a month, and thousands of dollars a year on mortgage payments.”
The Obama administration announced changes to HARP eligibility for homes with fixed-rate mortgages backed by Fannie Mae and Freddie Mac, including removal of the requirement that one’s amount owed cannot exceed the value of the home by more than 25 percent. Certain fees for borrowers will also be reduced or eliminated.
Considering the 269,560 mortgaged residences in the Las Vegas metro area that were underwater as of June, according to real estate analytics firm CoreLogic of Santa Ana, Calif., the number of Southern Nevadans helped by federal mortgage relief programs has been minimal.” Read the full post..
The new changes to the HARP program may mean more homeowners may have a part of the relief funds. Up to now it is estimated that only as little as 13% of the homeowners who need underwater HARP refinancing in Las Vegas did get aid from the program. The new HARP regulations will loosen the strict requirements, lifting the 125% equity limit, allowing more underwater mortgage borrowers to be included in the program.
Some say, better late than never.. I do not agree, because each of those homeowners who has lost his home could not be compensated by the new HARP. We will see next year if the new HARP did help Las Vegas underwater mortgage owners this time.
Getting divorced is always a bad situation, it gets worse when you have an underwater mortgage too. Who gets the home when divorcing with an underwater mortgage on the house? Getting divorced is a moment in life where a person realize that all the rational decisions made and the emotional feelings have turned all wrong. But when facing a financial decision like what to do with the under water mortgage situation, a cool rational decision needs to be made.
There may be more than 60% of the homes in a underwater situation, meaning the mortgage loan is larger than the home value. This is a situation where the monthly payments are very high on a property which is worth very little. When getting divorced, the the couple need to decide how to divide the mutual resources, and who stays with the home is a major question. Staying with the property means getting an underwater mortgage with it..
The experts from MortgageLoan.com have reviewed his situation, read the post by Kara Johnson about getting divorced and underwater mortgages:
“When a divorce occurs and the couple shares a home with a mortgage, one of two things typically occurs. The first is that one person gets the home in exchange for financial considerations in the divorce agreement, and the mortgage is refinanced into that person’s name alone. The other is that the house is sold, and the proceeds are divided among the two according to the divorce agreement.
That’s how it works when there’s equity in the house. If the mortgage is underwater, though, the house is a liability, not an asset, and things get much stickier. At the same time, the basic options are the same 1) get rid of the house or 2) one person gets it. Here are some of the ways to do that.
Refinance
If you can do it, this is probably the best-case scenario. There are programs that allow you to refinance an underwater mortgage, most specifically, the Home Affordable Refinance Program (HARP), which is due to announce new, more relaxed guidelines Nov. 15. If you can, refinance the mortgage under the name of the party keeping the house, and make some other arrangements in the divorce decree to reflect the financial liability he or she is assuming.
For this to work, the person getting the house needs to have enough financial resources to continue the mortgage on their own. In addition, some lenders may decline to do a HARP refinance if one person is coming off the mortgage, although it is permitted under the program’s basic guidelines.
Another option is a cash-in refinance, where one or both of the divorcing parties contribute money toward paying down the mortgage balance far enough that it can be refinanced. Again, these contributions need to be factored into the overall divorce settlement.
You can read more on cash out refinance solutions and requirements, it might be a way divide the funds differently when getting divorced.
Short sale
This is where you try to get the lender to agree to let the home be sold for less than balance owed on the mortgage. Usually, lenders are reluctant to do this unless it’s apparent the mortgage holder will be unable to continue making mortgage payments. A divorce may qualify if both parties’ incomes were contributing toward the mortgage payments.
One of the downsides of a short sale is that it does a lot of damage to your credit, since it goes on both of your records as a settled debt not paid in full. In addition, some lenders may still refuse to grant a short sale even though you’re divorcing, preferring to still hold both parties liable even though they are no longer married.
Foreclosure
If you’re well underwater, this may make the most economic sense, even though it will savage your credit rating for seven years. Many divorcing couples simply choose to mail the keys back to the bank and abandon the property, a process known in the industry as “jingle mail.”
In some cases, one of the ex-spouses will continue to live in the property after both have ceased making mortgage payments, simply waiting for the bank to eventually reclaim it. Since some foreclosures are taking in excess of two years these days, this can be a financial benefit to the party staying in the property. The downside, particularly for the non-occupying ex-spouse, is that it’s going to take that much longer for the blot to come off their credit, since it extends the foreclosure process.
On the upside, if you remarry soon after, you may be able to buy another home fairly quickly using your new spouse’s unblemished credit, though you may not be able to count your income toward qualifying for the loan.
On the downside, foreclosure may not get you off the hook if you have a second mortgage on the property. Typically, a lender’s only recourse in a foreclosure is whatever it can recover from the sale of the property. But if the second mortgage holder gets no payment from the property sale (since it all went to the primary mortgage holder), in some states that means its claim is still valid and it can still seek reimbursement, perhaps years.
Deed in lieu of foreclosure
This is a somewhat better option than “jingle mail,” if your lender will accept it. You tell your lender you’re getting divorced, won’t be able to afford the home anymore and ask to simply sign the deed to the property back over to them.
This gets you clear of the house without any further liability, and will have less impact on your credit than a foreclosure will – and you may be able to negotiate how the lender will report it to the credit bureaus. For the lender, the attraction is that they avoid the cost of foreclosure and get the property in better shape than a typical foreclosure, which is often in neglected condition. You also start rebuilding your credit sooner than if you let the property go straight through the foreclosure process. Get the full post here…
Underwater Mortgage When Divorced
Woody Allen once said, when you are looking for a wife pick a wife you would like to get divorced from.. If the divorce are nasty what ever you do will be total mess, because one of the sides getting divorced would invest all the energy to cause harm. Seek proper advisement from a lawyer, but keep an open mind about some of the divorced solutions for underwater mortgages.
There is a feeling of new hope as the New HARP 2.0 Program Revisions details are being reviewed. Unlike the original HARP the new HARP 2.0 Program revisions includes new terms and requirements which will apply to thousands of families who are currently hopeless.
The reformatted HARP program has improvements for the borrowers and for the lenders, the borrowers underwater limit of 125% will probably be deleted, and all the underwater mortgages would be included, the lender are free from the buyback sanction which help many of them from participating with the old HARP program.
“ Although details of HARP 2.0 have not been fully announced, some anticipated improvements are:
In the 1st HARP, the underwater limit was 125%. In HARP 2.0, it appears there will be NO limit.
Fees could be reduced – e.g. an automated appraisal may be allowed vs having to pay for a new report
There will be no “buyback” requirement, where the originating lender would have the possibility of taking back this loan from FannieMae or FreddieMac and having to reimburse them, if the borrowers went into foreclosure.
The buyback requirement in the 1st HARP program caused many lenders not to want to participate, leaving those lenders who did participate with huge, overwhelming demand. Add to that the underwater limit of 125%, and the probability that the appraisal would even further cause the borrower(s) not to qualify because of getting an appraisal that did not give the value to keep the underwater limit at or below 125% – well, you get the picture.
The intended effect of these (and probably other) improvements is designed to enable millions of underwater homeowners to get better terms on their mortgage to help them prevent foreclosure The mortgage must be currently owned by FannieMae or FreddieMac, and cannot have been refinanced under the 1st HARP program. The full details are to be announced by November 15, with applications to be taken beginning December 1″ See original Patch..
Government HARP 2.0 Revisions Cons
Here is another opinion of a mortgage broker who thinks that the new HARP 2.0 revisions are government interventions, that are interfering with the natural way the underwater mortgage housing problem should be solved:
What do you think? Will the new HARP 2.0 Program help or interfere?
