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Mortgage Strategies for the Inexperienced

Aileene Woul asked:


Mortgage is the most widespread industry that offered to loan borrowers with real estate as collateral. Mortgage has so many innovations and opportunities that a loan borrower can exploit them for their own benefit. You must have heard and read it elsewhere that mortgage rates are at an all time low. That is true. With growing competition in the mortgage industry getting lowest rates for mortgage in UK is not that difficult.

Yes that is true, but how does one find lowest mortgage rates in UK. Many borrowers are practically clueless the criteria to decide on whether the mortgage rates are lowest or not. When you are looking for Lowest mortgage rates in UK, you will see that there is not any one single rate. There is a list of rates. And when you go to different loan lenders for rates, they will give to you several mortgage rates list, sometimes identical sometimes different. “What is going on”? – You think in your mind. Is there any thing as lowest mortgage rates in UK? Yes, there is.

You will come across this message everywhere – ‘go look around lowest mortgage rates’. Look around how? – nobody tells you that. It is like standing on the start line not knowing this way you have to run. Calling loan lenders and asking for lowest interest will be practically useless. Also calling for lowest mortgage rates at different days will give you different rates for mortgage rates are changing everyday.

Who is responsible for getting you lowest rate for your mortgage in UK? Economy? President? Government? Inflation? Discard all the high words! It is you and you are one of the most fundamental factor responsible for finding lowest interest rate on your mortgage. With mortgage borrowers absolutely flooding the market place, mortgage lenders are lowering the mortgage rates to attract more and more customers. How can one attract customers for mortgage? By offering lowest interest rates.

However, it is not that easy. Every homeowner wants lowest interest rates for its mortgage in UK. Lowest rates on mortgage in UK are subject to a borrower’s personal financial condition. Therefore, different mortgage borrowers will have different lowest rate for mortgage. One way to figure it out is to apply for mortgage quotes at different loan lenders. But are these quotes really consistent keeping in mind the fact that mortgage rates are continually changing. Most loan lenders will give you a correct quote for mortgage. A mortgage borrower looking for lowest rate should use APR to compare rates. APR will enable you to know true interest rates on mortgage including the interest, discounts, mortgage insurance and other related fees. This will enable you to get a true quote without any hidden fee which the lender might be concealing behind the lowest mortgage rate claim.

Prequalification is a way of discovering whether for mortgage will also enable you to know whether you are getting lowest interest rates or not. A lender will see your present current income, debt and basic credit history situation in order to qualify you for a maximum mortgage amount. When you find lowest interest rate for mortgage in UK, you can lock in your interest rate. A lock means the lender will lock in the lowest interest rate and points for a specific period of time that is usually the time during which the loan application is processed.

Lowest interest rates in UK are possible if you have good credit history. A good credit history has innumerable benefits in the loan market. Also lowest interest rates are possible adjustable rate mortgage. Adjustable interest rate mortgage in UK have interest rates lower than traditional mortgage. Also loan term of a mortgage should be lesser. A 15 year mortgage will mean lower rate of interest than a 30 year mortgage. A shorter loan term will always save money.

No other single factor has so much effect on your mortgage as mortgage rates. Getting a mortgage in UK at lowest rates will mean that you have agreed to all those who asked you to get the “best mortgage deal”. A little decrease in interest rates would mean big in terms of savings. There is loads of information available on internet to know how the market is currently fairing. Don’t settle for the first mortgage rate you stumble upon because they seem lowest. Go to different mortgage lenders. And then decide. Lowest rate for mortgage is not the only factor to look out while mortgaging for but it certainly is one of the deciding factors.

So while you are jumping frantically from one site to another in order to get lowest interest rate, you forget that it will need some patience and hard work. Like all good things it won’t come easily. Lowest rates for mortgage in UK won’t be served on a platter. No way. If you had enjoyed doing homework in school, looking for lowest interest rate won’t be a problem. Look around, study research, read and you will find mortgage rates not only lowest but surpassing your own mortgage rate arithmetic.

If finding the right loan was easy, Aileen Woul would not have been writing articles. Read her articles to take advantage of her expertise for your advantage.He works for mortgage web site cheapest mortgage uk.To find a cheapest mortgage,adverse credit mortgage,residential mortgage that best suits your need please visit http://www.cheapestmortgageuk.co.uk

Michael Challiner asked:


PR – This stands for Annual Percentage Rate. It enables you to compare the full cost of the mortgage. Rather than just being an interest rate, it includes up front and ongoing costs of taking out a mortgage. The formula for calculating APR is set by Government Regulations and therefore enables direct comparison of the cost of mortgages.

Capital and Interest Mortgage – This is when part of your monthly payment contributes to paying off the outstanding mortgage in addition to paying the interest on the mortgage. The payments are structured so that at the end of the term, your mortgage will have been completely paid off. For this reason this type of mortgage is also called a Repayment Mortgage.

Capped Rate – This is a mortgage where the lender agrees that the interest charged will never exceed a specific percentage. This deal lasts for a set period of years. After the set period, the rate usually reverts to the lenders standard variable rate. During the capped period, the interest charges can move up and down with the lenders interest rate – but cannot exceed the capped rate.

Cashback – An amount, either fixed or a percentage of a mortgage, which you can opt to receive when you complete your mortgage. The lender may well claw back this money through a higher interest rate.

CAT marks/standards – CAT stands for Fair Charges, Easy Access and decent Terms. They were created by the Government in an attempt to provide consumers with simple, clear financial products with straightforward, easy to understand terms. A CAT mortgage will have no arrangement fees, no redemption fees and will have interest calculated daily. It will also have a minimum loan of just £5000, offer you repayment flexibility and the mortgage should be portable should you move home. Finally, you will not have to buy the lender’s insurance products and there will be no penalties should you find yourself in arrears but can subsequently catch up.

Completion – This is end of the house buying process, when the funds are transferred and the keys are handed over. Happy moving!

Contract – A contract is a binding agreement between the buyer and seller. In the context of house buying, after the contract is signed by both the buyer and the seller it is then ‘exchanged’ between the respective solicitors for a set completion date. At that point, the contract is legally binding on both parties.

Conveyancing – This is the legal process in which property is bought and sold. You can do it yourself or hire a solicitor or specialised conveyancer to perform the tasks for you. The buying of a freehold is much less complicated than the buying of a leasehold.

Discounted Rate – This is where the lender makes a guaranteed reduction off the standard variable rate for an agreed period of time. After the discounted period ends, the mortgage usually moves to the lenders’ standard variable rate. Watch out for redemption penalties that overhang the initial discount period.

Early Redemption Charges – Redemption is when the borrower pays off the capital and the interest on the mortgage and thus owns the property outright. Early redemption fees are the charges incurred for paying off the mortgage early, either to buy the house outright, move or re-mortgage. Always ask about early redemption charges before you agree a mortgage.

Endowment – Endowments are life assurance policies with an investment element designed to pay off the outstanding capital on an interest-only mortgage. There are a few types of endowments, such as ‘with profits’, ‘unitised with profits’ and ‘unit-linked’. In the 1980s, these were sold by salesman who seemly suggested that these policies were “guaranteed” to pay off the mortgage at the end of the term. However, the investment returns on these policies have fallen to below what was previously considered to be the norm. Consequently, many policies are not worth what was originally forecast and may not fully repay the money borrowed at the end of the mortgages’ term.

Equity – In housing terminology, equity is the difference between the value of the property and the money owed on the property. So if the property is valued at £200,000 and you owe £150,000 on the mortgage, you have equity of £50,000. If you sold at that moment, you would receive £50,000. Should the value of the home be less than the mortgage outstanding then you have negative equity.

Freehold – Owning the freehold means that you own the total rights to the property and the land on which it is built.

HLC – This is the Higher Lending Charge (it was previously known as a Mortgage Indemnity Guarantee). It is levied by around three quarters of all lenders on clients who cannot afford to put down a deposit of 10% of the price of the property. In practice it is a type of insurance aimed at protecting the lender should you default on your mortgage when the value of your home is less than the capital you borrowed. The insurance only provides cover for the lender, not you, and typically costs £1,500.

Homebuyers Report – A property survey aimed at providing more information than a mortgage valuation but less information than a full structural survey. It will help the borrower to decide whether to purchase and help the lender to decide how much to lend.

Interest Only Mortgage – This is a mortgage where your monthly repayments only pay the interest on the mortgage. Therefore, at the end of the mortgage you still have to repay the full sum you borrowed. You are advised to have a separate investment vehicle into which you make payments aimed at building up a fund capable of paying off the mortgage capital at the end of the term. Typical investments include ISA’s, a pension or an endowment policy.

IFAs – Stands for Independent Financial Advisor. These advisors are regulated by the Financial Services Authority. To be classified as “independent” they have to be able to offer you the full range of products from all financial product providers. They are not entitled to describe themselves as “independent” if they can only offer products from a restricted panel of financial companies. A Financial Advisor can be one man band or work for very large companies. Before they make any recommendation, an IFA must carry out a detailed fact find so they fully understand your financial circumstances. They can then make their recommendations to suit your personal circumstances.

ISA – An ISA is an Individual Savings Account, which is a tax-free method of owning shares, building up a cash savings account or a life assurance policy. You can use an ISA to build up a capital sum to repay an interest only mortgage.

Leasehold – If your property is leasehold, ownership of the property reverts to the Freeholder at a set date. Many houses were originally sold on 999 year leases which means that 999 years after the initial date of the Leasehold, ownership of the property reverts to the Freeholder. Building in multiple occupation such as apartments, are always sold on a leasehold and usually have a much shorter leasehold period – 100 and 125 years is quite common. Often, with a block of apartments, the apartment owners individually own the leaseholds whilst a management company, in which they hold shares, owns the freehold. These days, however, leaseholders who live in the property have the legal right to buy their freehold under terms laid down by UK law.

Life Insurance – This can also be called Term Insurance or, when specifically linked to proprty purchase, as Mortgage Protection Insurance. It is designed to pay a tax free lump sum in the event of your death to enable your mortgage to be repaid in full. There are a number of variants such as Level Term Life Insurance and Decreasing Term Life Insurance. At the outset you take out insurance for the full sum you have borrowed from your mortgage lender and for the same number of years as you have agreed on your mortgage. These insurance policies do not have any investment or surrender value. The premiums are based on a number of factors – the main ones being the amount of cover you need, your age, health and how many years you want to be insured for.

Lock-In Period – This is the minimum period you have agreed to stay with the lender. Depending on the deal, it could be as low as six months up to the whole of the term. Should you wish to repay the mortgage or remortgage during the lock-in period, you will invariably have to pay redemption penalties. Always make sure you know how long you are locked in for with your mortgage.

LTV – Literally means Loan to Value. This is a measurement of the mortgage amount against the value of the property or the price that you are actually paying. A £157,500 mortgage on a property for which you paid £175,000 would be a LTV of 90%. Lenders tend to charge a Mortgage Indemnity Premium on mortgages with a loan to value of anything about 75%. Some don’t so ask about this.

MIG – This has now changed its name to HLC. See above.

Mortgage – A mortgage is a long-term loan taken out in order to buy a property with repayment secured on that property. So if you don’t keep to the repayment terms, the lender can repossess the property, sell it and retain the money they are owed. Any balance is then paid to you. If the property is sold for less than you owe your lender, you still remain liable to repay the shortfall.

Mortgage Advisor - On October 31st 2004 the selling of mortgages in the UK came under the remit of the City watchdog, The Financial Services Authority (FSA). As from that date any person providing mortgage advice had to be registered with the FSA and abide by its rules of conduct, methods of operating and training programmes etc. The objective has been to improve life for the consumer by offering better protection, clear information and access to redress for poor advice.

Negative Equity – Negative equity is when the value of your home is less than the amount that you owe on your mortgage plus any other loans secured against it. It can happen very easily if you take out a 100% mortgage or if property prices fall. (Also see Higher Lending Charge)

Portable – This is a measure of how easy it is to move a mortgage from one property to another should a property move be required. This is vital if you are moving during your lock-in-period and wish to avoid redemption penalties.

Repayment Mortgage - This is the same as a Capital and Interest mortgage – see above.

Searches – During the conveyancing process, the buyer has to be sure that the seller has title to the property and identify any matters may affect the prospective owners ownership of the property. For example, whether the property is affected by any proposed road building, whether there are preservation orders affecting the property, is it a listed building and has it been built in accordance with planning conditions and building regulations. Searches will also show whether there are mines under or close by the property. This information is obtained by the person undertaking the conveyancing from HM Land Registry and the relevant Local Authority. These investigations are collectively known as “Searches”.

Self-Certification – Should you have difficulty in providing documentation that “proves” your income to a prospective mortgage lender, you may need a self-certification mortgage. In essence you personally certify what your full income is. If you receive high bonuses, or work seasonally or on commission, or are self-employed this may be your best option. You declare your income plus some evidence that your declaration is reasonable. Ideally lenders want to see as much guaranteed income as possible. To compensate the lender for the increased risk they are taking on a self-certified mortgage, they will charge you a higher rate interest, typically 1% over their standard variable rate.

Stamp Duty Land Tax (commonly known simply as Stamp Duty) – You pay Stamp Duty Land Tax on property like houses, flats, other buildings and land. If the purchase price is £120,000 or less, you don’t pay any Stamp Duty Land Tax. If the price is more than £120,000, you pay between one and four per cent of the whole purchase price, on a sliding scale.

Upto £120,000 – No duty payable

£120,001 to £250,000 – 1% duty payable*
£250,001 to £500,000 – 3% duty payable
£500,001 and over – 4% duty payable

*If you’re buying a property an area designated by the government as ‘disadvantaged’, you don’t pay any Stamp Duty Land Tax if the purchase price is £150,000 or less.

Did you know? Stamp Duty was originally introduced by William of Orange when he was King of England.

Structural Survey – The most thorough report you can get on the condition of the property you are considering to buy. The surveyor will look in detail at the inside and outside of the property and will tell you if the property is structurally sound. All major and minor defects in the building will also be listed and should tell you what maintenance work may be needed either now or in the future. You should make sure the scope of the survey is agreed in writing before you commission it. Should the survey identify problems, use them to negotiate a reduction in the price before you exchange contracts.

Variable Rate – This is when the interest rate you pay on your mortgage can go up or down depending on changes to the lender’s standard variable rate. If you have a variable rate mortgage your monthly mortgage payments will change whenever the lender changes the interest rate.

Valuation – This is where a valuer appointed by your proposed lender, visits the property in order to estimate its current value. This value is then used by the lender as a basis for its security and to calculate its Loan to Value Ratio. The borrower never sees the valuation. With some mortgage deals the lender absorbs the cost of the valuation but in many cases the borrower has to pay upfront.

Jerry Figueroa Lee asked:


Buying a home and arranging a mortgage is said to be one of the most stressful experiences we can have in live, yet it doesn’t need to be. No matter whether you are a First Time Buyer or moving home, the step by step guide that follows will help ensure that your mortgage application runs smoothly.

Step 1 – Contact an independent mortgage adviser

Buying a home can be one of the most exciting experiences as well as one of the most daunting. With thousands of fixed, tracker, discount and variable rate mortgage products in the market, and so many different factors to take into consideration, how do you now which is the best mortgage product to meet your needs both now and in the future. Making a mistake can proof to be costly and so seeking professional independent mortgage advice is one of the most important steps you can take.

An independent mortgage adviser will complete a detailed fact find of your current circumstances and future expectations, and will analyse what mortgage products are available based on your income, age, credit history and attitude to risk. This analysis will highlight the most suitable products for which Key Facts illustrations will be provided.

Independent mortgage advice need not cost a fortune either. In most cases a broker fee will be good value for money, and will often be offset by the exclusive rates normally available via brokers. In a growing number of cases, Independent Mortgage Advice is provided free of charge with the mortgage adviser being paid for the introduction by the lender on completion of the mortgage.

Step 2 – Mortgage Promise or Initial Agreement in Principle

Once you have selected the best mortgage deal for your requirements, it is well worth applying for the lenders initial agreement in principle, also known as a mortgage promise. This is something that can be arranged on-line or over the phone by your mortgage adviser, with the lenders acceptance decision being available within minutes of submission. The initial agreement in principle will produce a certificate of confirmation that can be shown to prospective sellers to reassure them that mortgage finance is agreed, and that you are serious about buying.

A mortgage agreement in principle can always be arranged prior to knowing what property you will be purchasing or even before you have decided on the best type of mortgage product. The certificate will normally remain valid for 3 months, and speed up the process later when you make a formal application.

Applying for an initial mortgage agreement from several lenders is absolutely fine, but unless you expect the lender to have a problem in agreeing to the mortgage amount required, you are best advised to restrict the number of credit checks that you authorize to be carried out, as too many credit checks in a short period of time can adversely affect your eventual credit score.

What if your initial application is refused?

Agreements in principle are often declined and in most cases for one of the following reasons.

- An adverse credit history has been picked up when the lender has undertaken their credit checks and credit scoring.

- The lenders lending criteria has not been met such as being too young or too old, not in employment for long enough.

When these circumstances arise your mortgage adviser is ideally placed to discuss matters with the lender, and where no resolution can be found, to advise you of other lenders and their products where the criteria does fit.

Step 3 – Complete the mortgage application

Once you have received notification that your mortgage is agreed in principle, the full application can then be submitted. To submit the full application, full details about your circumstances will be required by the lender. These details will include the details of the property, how much you want to borrow and where the rest of the money (your deposit) is coming from. Accurate and honest information provided at this stage when completing the form, can help tremendously towards the avoidance of delays in the application process later on.

There are many benefits of using a mortgage advisers services when submitting the full mortgage application, with the main benefit being that the adviser will have years of experience of the individual lenders underwriting practices, and can advise you of the best way to package and submit the application.

Bear in mind that exclusive mortgage rates, which can not be obtained direct from the lender are often available through an Independent Mortgage Adviser.

As well as completing the application form, some documentation will be required to back up the details given. Exactly what, will depend on the type of mortgage applied for and the lender involved. In the case of a self certification mortgage, the documents required can be as little as proof of your identity and proof of residence.

Typically when borrowing 75% – 90% of the property value, the lender will require the following:

- Pay slips (often for the last three months)

- P60

- If self employed copies of two or three years accounts will be required.

- Bank details for the Direct Debit mandate.

- Proof of identity such as a passport.

- Proof of address such as a recent utilities bill. or bank statement.

- Proof of the last 12 months mortgage payments or a tenancy reference if renting.

Where documentation is required in support of the application, any delay in providing it will delay the lender issuing the mortgage offer. Dealing with an independent mortgage adviser ensures that you will be informed about any documentary requirements quicker than if dealing direct with the lenders.

Step 4 – Instruction of the property valuation

Once the mortgage application is submitted and agreed, the lender will instruct a valuer to inspect the property. The cost of the valuation is born by you unless the mortgage you are applying for includes an incentive such as a free valuation fee.

The mortgage valuation allows the lender to confirm the value of the property and agree to the lending required. In addition to the basic valuation for mortgage purposes, you can ask the lender to carry out a more detailed survey of the property (which is advisable) such as a homebuyer’s report.

The homebuyer report is in a standard format and is designed specifically as an economical survey and an effective way to minimize risk. The homebuyer report ensures that any defects or problems that could effect the value of the property, are picked up highlighting any that are urgent. As part of the Homebuyer’s report an integrated valuation for mortgage purposes is included, unlike a structural survey.

Step 5 – Instruct a Solicitor

It’s the solicitor’s job to review the Home Information Pack (HIP) which includes an Energy Performance Certificate, an index of contents, a sale statement, evidence of title, searches and leasehold documents, when you are buying.As well as negotiating and exchanging contracts the solicitor’s job is also to receive funds from the lender for transfer to the sellers solicitor as well as updating the title deeds. Once contracts have been signed and returned the solicitor will agree a date for completion. On the day of completion, funds will be exchanged between solicitors at which point keys can be collected to your new home.

If using an independent mortgage adviser, check to see if a fixed legal fee package is available, as this can often save time and money, and can result in using a solicitor where the adviser has some leverage to make things happen quickly.

Jerry Figueroa Lee asked:


The first two considerations you have when arranging a mortgage are what type of mortgage rate is required along with how the mortgage will be repaid. The following article looks at the different mortgage rate options such as fixed rates, discounted rates, capped, variable and tracker rates, along with the main advantages and disadvantages for each option.

When considering which type of mortgage product is suitable for your needs, it pays to consider your attitude to risk, as those with a cautious attitude to risk may find a fixed or capped rate more appropriate, whereas those with a more adventurous attitude to risk may find a tracker rate that fluctuates up and down more appealing.

Following is a description of the different mortgage rate options along with a summary of the main advantages and disadvantages for each option.

Fixed Rate Mortgages

With a fixed rate mortgage you can lock into a fixed repayment cost that will not fluctuate up or down with movements in the Bank of England base rate, or the lenders Standard Variable Rate. The most popular fixed rate mortgages are 2, 3 and 5 year fixed rates, but fixed rates of between 10 years and 30 years are now more common at reasonable rates. As a general rule of thumb, the longer the fixed rate period the higher the interest rate. This is also applicable when considering the percentage loan to value, where borrowing below 75% of the property value will attract a lower fixed rate in comparison to an 85% or 90% loan to value which will attract a higher fixed rate percentage.

Advantages

Having the peace of mind that your mortgage payment will not rise with increases in the base rate. This makes budgeting easier for the fixed rate period selected, and can be advantageous to first time buyers or those stretching themselves to the maximum affordable payment.

Disadvantages

The monthly repayment will remain the same even when the economic environment sees the Bank of England and lenders reducing their base rates. In these circumstances where the fixed rate ends up costing more, remembering why the initial decision was made to select a fixed rate, can be helpful.

Discount Rate Mortgages

With a discount rate mortgage, you are offered a percentage off of the lenders Standard Variable Rate (SVR). This takes the form of a reduction in the normal variable interest rate by say, 1.5% for a year or two. The common mistake of those considering a discount rate, is to assume the higher the percentage discount offered, the better the deal. The key bit of information missing however, is what the lenders SVR is, as this will dictate the actual pay rate after the discount is applied.

As with a fixed rate, the longer the discount rate period the smaller the discount offered, and the higher the rate. Shorter periods such as 2 years will attract the highest levels of discount. In addition when considering the amount to be borrowed, the increased risk to the lender of providing a 90% loan will be reflected in the pay rate, with lower borrowing amounts attracting more competitive rates.

Advantages

Should the lender reduce their standard variable rate your interest rate and monthly payment will also reduce.

Disadvantages

When the lender or Bank of England increases their base rate, your mortgage payment will also increase. However in some circumstances lenders do not always pass on the full amount of a Bank of England base rate reduction.

Affordability of the mortgage at the end of the discount rate period should be considered at outset. There are no guarantees that follow on rates will be available, and so you should make certain that you are able to afford the monthly payment at the lenders standard variable applicable upon expiry of the discount rate period. Allowing for an increase in interest rates above the SVR would be prudent to avoid a ‘Payment shock’.

Tracker Rate Mortgages

Tracker rate mortgages guarantee to follow the Bank of England base rate when it moves up or down. Tracker rates are expressed as a percentage above or below the Bank of England base rate such at +0.5% over BOE base rate for 2 years.

The most popular tracker rate mortgages have been 2 and 3 year products, but there is now an increasing demand for lifetime tracker rates as borrowers are starting to realise that the Bank of England base rate has been reasonable competitive, and having a mortgage product linked to it could be beneficial in the long term.

Advantages

A tracker rate guarantees to follow the Bank of England base rate for however long the tracker rate is set up for. This means that as soon as the Bank of England cuts rates, a tracker rate mortgage guarantees to reflect the new lower rate and repayment.

The overall cost calculation of a Lifetime tracker rate can be significantly lower than taking shorter term mortgage products with the ongoing costs of remortgaging such as valuation fees, legal fee and lender arrangement fees. Lifetime tracker rates often have no early repayment penalty restrictions.

Disadvantages

The mortgage payment will go up if the Bank of England increases the base rate. Early repayment charges are likely to be applicable during the benefit period, and as with other types of mortgage rate are likely to be 6 months interest or 3% – 5% of the loan.

Variable Rate Mortgages

Variable rate mortgages are more commonly known as the lenders Standard Variable Rate (SVR), and are the rate that you come onto after the expiry of a fixed, discounted, tracker or capped rate mortgage. A variable rate is similar to a tracker rate in as much as the lender will base their SVR on the Bank of England base rate plus a loading of between say 2.5% and 3.5%. That is where the similarity ends however.

Advantages

The main advantage of being on the lenders Standard Variable Rate (SVR) is that there will be no early repayment charge for redeeming the loan in full. This provides a certain amount of flexibility when there is uncertainty in the market about where rates are moving. For those wishing to fix their mortgage rate, an SVR with no early repayment charge can provide the breathing space required to just wait and see before committing.

Whilst not always the case lenders do tend to pass on reductions in the Bank of England base rate through their SVR, and so those on the SVR will benefit from a reduction in the mortgage payment.

Disadvantages

Generally the SVR will be a higher rate of interest and so your mortgage payment will be greater than if you were on a tracker rate, fixed rate or discounted rate mortgage product. In addition, as has been seen in the past, some lenders do not pass on any or all of a reduction in the Bank of England base rate which results in a higher monthly payment in comparison to other mortgage options.

Capped Rate Mortgages

The capped rate is a variable rate mortgage which has a fixed limit to how far the interest rate can increase (the cap), and provides the option to know the maximum level of mortgage payment from outset. Capped rate mortgages offer the best of both worlds for those with a cautious attitude to risk, but who still wish to benefit from interest rate reductions. For example if the cap is set at 6% and the banks rates go below this rate, then your repayments will go down to reflect the reduction, with the guarantee that should rates go above the 6%, your payments will remain based on the maximum 6% because of the cap.

Advantages

If the Bank of England base rate falls resulting in a fall in the lenders standard variable rate below the level of the capped rate, then your monthly repayment will reduce. For many this provides the peace of mind and certainty for ease of budgeting offered by a know maximum monthly payment.

Disadvantages

Because a capped rate offers the best of both worlds to the borrower, the capped rate is usually uncompetitive as lenders need to price in the risk of rate reductions, leaving those such as first time buyers or those stretching their affordability, exposed to a higher rate than would be available with a fixed rate. This means that UK lenders generally don’t offer capped rate mortgages with any sort of competitive rate, preferring to market fixed rates instead.

Andrew Black Mortgages asked:


There are lots of things to consider when switching your mortgage from one company to another. Usually people switch their mortgages in order to get a better interest rate, so money is typically of utmost importance in these situations. For this reason, ensure that you are reading all of the fine print regarding the fees associated with the mortgages. Check to see if an appraisal of your home is required before the new company will consider offering you a mortgage. If this is necessary, ensure that you find out whether you or the bank will be responsible for the cost of this appraisal. If the bank says that they will cover the cost of the appraisal ensure that you ask if this will still be the case if you decide not to switch your mortgage to them.

Closing costs are another fee to make sure that you look for and ask about when switching your mortgage. Make sure that you ask if there will be closing costs associated with switching your mortgage, and if so, make sure that you find out how much the closing costs will be. Do not settle for estimates in these cases because the bank can always change the figure of an estimate and you can end up paying much more than you had ever anticipated. Ensure that all fees that are associated with switching your mortgage to the new company are in writing and on company letterhead to avoid a, “He said, she said,” debate when it comes time to switch the mortgage.

Before completing the process of switching your mortgage ensure that you have carefully read the loan paperwork and fully understand the interest rates. If you do not fully understand the interest rates and payment schedule ask for a copy of the paperwork to review at your leisure at home and seek advice and guidance. Never ever sign something that you do not fully understand. Switching your mortgage to another company can save you a lot of your hard-earned money, but make sure that you look well in advance of leaping!

Remortgaging will allow you to search for a lower rate in today’s competitive market. I Debt consolidation via remortgaging is a great option as remortgaging loans are usually lower than debt loans. Equity remortgaging can allow you to take, in certain circumstances, up to 100% of your home value.

That money can be used for home improvements or even to have extra funds for any need that you have. Make sure that your new lender explains to you the benefits of the remortgage deal that you choose. Remortgaging will allow you to save on your interest rate so that your monthly payments are lower. You should also ask how long your new rate would be in effect, and what your new monthly payments will be. It is a fairly quick process, and you can be usually be remortgaged within a week or less in some instances.

Mortgage Comparison Site The Mortgage Finders helps people get mortgage quotes and mortgage advice that is right for them. If you are considering a re-mortgage or changing your mortgage provider completely then The Mortgage Finders can help you find the best mortgage quote.

Simply visit http://www.the-mortgage-finders.co.uk complete the simple 3 step form and a fully qualified FSA approved Mortgage broker will contact you with the options available to you.

The Mortgage Finders is a UK based Mortgage Comparison and Mortgage Broker website – visit http://www.the-mortgage-finders.co.uk for more information

Jerry Figueroa Lee asked:


When comparing mortgages there are various factors to be taken into consideration. This article covers the following mortgage specific considerations, with more to follow in part two onwards.

- Total Cost Calculation

- Overall APR

- Arrangement fees

- Portability

- Early Repayment Charge

- Term of mortgage / Age of borrower

Total Cost Calculation

For many the major consideration when taking out a mortgage is how much the monthly payment will be. This is understandable as most people know what their level of income is and how much they can reasonable afford to pay in financing a mortgage. Unfortunately, it is this assumption that can cost you dearly. All too often those applying for a mortgage look only at the interest rate and the monthly payment, making the judgement that the lower the rate and monthly payment the better the mortgage.

In most cases the opposite is true because of total overall cost. Total cost refers to the overall cost of both the monthly payment plus any combined fees for the arrangement of the mortgage, such as a lenders arrangement fee or booking fee, a valuation fee, solicitors fee etc, and based on a specific period in years.

An example based on an interest only mortgage of £100,000

A £100,000 2 year fixed rate mortgage at a mortgage rate of 4.85% with a £499 lender arrangement fee and a £300 valuation fee has a total cost of £ 10,499 over 2 years

A £100,000 2 year fixed rate mortgage at a mortgage rate of 4.59% with a £1499 lender arrangement fee and a £300 valuation fee has a total cost of £ 10,979 over 2 years

In the example above, had the lower rate been taken, then the monthly payment would have been £21.66 per month less, but the net overall total cost would have been £480 more over a 2 year period, after the addition of the higher arrangement fee. This may not seem a huge difference over two years, but if the same decision were taken every two or three years over a typical 25 year mortgage term, the cost in additional interest would come to more than £10,000 pounds. In addition, as no capital is repaid with an interest only mortgage, the outstanding balance at the end of the term would also include the lenders arrangement fees that were added to the loan bringing the balance up to around £112,000.

Overall APR

Annual Percentage Rate (APR) is the total cost of borrowing which depends on the nominal rate of interest and on whether interest is charged annually, monthly, quarterly, daily or on some other basis. Comparison of the APRs of different providers is a facility for providing a direct and fair comparison of costs since the method of calculation is laid down in the Consumer Credit Act 1974. It is possible to compare the total amount payable by the end of the mortgage term. These are important comparisons if you are concerned about the total cost of the loan as well as the monthly outlay.

A word of caution however. The APR reflects the comparison of cost over the full mortgage term. If however the mortgage is changed after say a three year fixed rate period, the APR is not a good rate to use for comparison, and you would be better to look at the ‘Total Cost Calculation’ of the mortgage product as detailed in the section above.

Arrangement fees

An arrangement fee is generally payable to the lender to reserve the mortgage funds and is common amongst all lenders. The size of an arrangement fee can vary from a couple of hundred pounds up to one percent or more of the mortgage value, which can be a sizeable sum.

Many lenders now offer lower interest rates offset by a higher arrangement fee. Don’t be misled by the attractive rate as the overall cost often works out to be more than a slightly higher interest rate with a lower arrangement fee.

You should look very carefully at any conditions associated with the arrangement fee, as in some instances the arrangement fee will be payable on or before completion, although generally the option to add the arrangement fee to the loan is available.

Some lenders expect you to pay the arrangement fee when you submit your mortgage application (and may be reluctant to refund it if you decide not to proceed with their mortgage offer). For those lenders that allow the arrangement fee to be added to the loan, you will end up paying more interest over the term of the loan.

Portability

How often do you envisage moving house in the future? Having the facility to transfer the mortgage to a new property if regular moves are predicted, may be advantageous. For example, lets say you have taken a five year fixed rate mortgage which has an early repayment charge during the five year fixed rate period, but you then have to relocate due to work commitments. Being able to ‘Port’ (transfer) the mortgage to a new property means you can transfer the mortgage without incurring the lenders early repayment penalty charge.

Early Repayment Charge

When a loan is redeemed, there may be an early repayment charge levied by the lender depending on the type of mortgage you wish to take. Fixed, discounted and tracker mortgage rates usually charge a penalty of between 3% and 5% of the original loan amount if the loan is redeemed at any time during the fixed, discounted or tracker rate term.

Nowadays, it is common practice to waive any early repayment charge when an existing loan is transferred to the borrower’s new property, especially where a fixed rate mortgage is involved. This provides continuity to the borrower, and helps retain the business and existing client for the lender.

Term of mortgage / Age of borrower

Whichever method of repayment is selected for your mortgage, the shorter the term, the more expensive will be the monthly cost. If total peace of mind is required then a standard capital repayment mortgage should be selected. This is the only type of mortgage that guarantees that the mortgage will be paid in full if all mortgage payments are made.

When choosing either a Pension, ISA backed mortgage, contributions look more attractive over longer terms as the tax incentives have a compounding effect on the investment returns in the fund and will, therefore, generally become more competitive. There are no guarantees however, and fund values can go down as well as up. When considering a pension mortgages your age and the term of the mortgage are particularly important considerations as pensions are unable to provide any capital to repay the loan until at least age 50. For instance a first time buyer aged 22 would end up with a term of at least 28 years if the pension option was chosen.

Donna Elizabeth Lewczuk asked:


a residential mortgage in today’s market can seem like a daunting task. The borrower can be faced with a myriad of choices. Each lending institution presents their respective claims to the enquiring borrower in an attempt to entice them to use their residential mortgage product. Each one assures the borrower that their product is the best residential mortgage that they can get.

This is not always the case. Terms for residential mortgages can vary widely between lending institutions, even for those with bad or less than perfect credit. There is also often latitude in interest rates for residential mortgages, depending again upon the lending institution and what terms the borrower is looking for.

Here are some of the considerations for borrowers looking for a residential mortgage: A loan for no more than 80% of the appraised value or purchase price of the property (whichever is less) is a conventional residential mortgage. The remaining 20% required for a purchase is referred to as the down payment and comes from your own resources. If you have to borrow more than 80% of the money you need, you’ll be applying for what is called a high-ratio residential mortgage. If you are self-employed or don’t have verifiable income, most traditional lending institutions won’t go over 75% on a conventional residential mortgage.

If high ratio, the residential mortgage must then be insured by the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada (Genworth), or AIG. The fee that the insurer will charge for this insurance will depend on the amount you are borrowing and the percentage of your own down payment. Whethor or not you are self-employed and have verifiable income or if you have a bad credit history will also determine the amount the insurer will charge. Typical fees range from 1.00% to 7% of the principal amount of your residential mortgage.

With a fixed-rate residential mortgage, your interest rate will not change throughout the entire term of your mortgage. The benefit of this is that you’ll always know exactly how much your payments will be and how much of your mortgage will be paid off at the end of your term. With a variable-rate residential mortgage, your rate will be set in relation to the prime rate at the beginning of each month. The interest rate may vary from month to month (although your payment remains the same). Historically, variable-rate residential mortgages have tended to cost less than fixed-rate residential mortgages when interest rates are fairly stable. You can potentially pay off your residential mortgage faster with a variable rate residential mortgage.

The term of a residential mortgage is the length of the current mortgage agreement. A residential mortgage typically has a term of six months to 10 years. Usually, the shorter the term, the lower the interest rate. Two years or less equals a short-term mortgage. Three years or more is usually a long term mortgage. Short-term mortgages are appropriate for buyers who believe interest rates will drop at renewal time. Long-term mortgages are suitable when current rates are reasonable and borrowers want the security of budgeting for the future. The key to choosing between short and long terms is to feel comfortable with your mortgage payments.

After a term expires, the balance of the principal owing on the mortgage can be repaid, or a new mortgage agreement can be established at the then-current interest rates. Open mortgages can be paid off at any time without penalty and are usually negotiated for a very short term. Homeowners who are planning to sell in the near future or those who want the flexibility to make large, lump-sum payments before maturity will find this type of residential mortgage helpful. Closed mortgages are commitments for specific terms. If you pay off the mortgage balance before the maturity date, you will pay a penalty for breaking the term. The good news is, refinancing a residential mortgage for a lower rate or more attractive terms can often offset any penalty incurred by breaking the term.

Residential mortgages are available through banks, mortgage companies and private lenders. Mortgage rates vary widely. Traditional banks offer some very low rates. However, due to their restrictive lending criteria, they are prevented from providing residential mortgages in many instances. Previous bankruptcy, bruised credit (bad or less than perfect credit), or even owning multiple properties can make it difficult or even impossible to obtain residential mortgages through traditional banks.

Hard money residential mortgages are available through private lenders. Unlike traditional banks, private lenders have more flexible lending criteria. Also known as hard money lenders, private residential mortgage companies focus more on a clear method of repayment and the current value of a property rather than looking exclusively on your personal financial package, which may indicate bad credit.

Private lenders are often able to fund a residential mortgage if there is a clear picture of how the loan will be paid back. When determining whether to fund a residential mortgage, private lenders will often look at the ratio of income to expenses. Unless a borrower has repeated defaults and bankruptcies, private lenders are not as concerned if the borrower has bad or less than perfect credit.

When applying for a residential mortgage, be prepared to provide your residential mortgage company, be it a bank or a hard money private residential mortgage lender, with the following:

- A completed standard residential mortgage loan application, which includes a personal balance sheet

- A description of the use of proceeds of the residential mortgage you are seeking (strictly refinance, debt consolidation, home improvements, etc.)

- A description of the property

- The current value/purchase price of the property

- An estimate of the property’s value after improvements, if any

- For a hard money loan, provide an exit strategy for the residential mortgage

- Will you refinance this mortgage with a traditional bank after making improvements or alterations to the existing property or some other scenario?

Owners considering a residential mortgage refinance will find many unique loan programs. Specialists of commercial and residential mortgage refinancing offer some of the best loan options available, most of which your local bank simply does not have. Refinancing your residential mortgage is not an act exclusively reserved for the time your residential mortgage matures. There are some great reasons for refinancing your residential mortgage prior to this. If you have selected a private hard money lender who is a good match for your loan scenario, you will be able to speak directly with the decision makers, avoiding the ‘run around’ that so many hard money borrowers fall prey to. You are told that your loan is going through, only to hear the next day that the lender has elected not to take on your hard money loan and now your loan is on another desk in yet another private lender’s office – or worse, on the desk of another broker who may know a broker who knows a lender who may want to fund your loan. Sometimes, the choice of direct lender is based more on the commission the broker will get than on your best interests.

By working with a private hard money lender, you can avoid the ‘run-around’ and may be able to close more rapidly. After all, no one knows your situation like you do, no one can explain any extenuating circumstances better than you can, and no one is as committed to your hard money loan as you are.

The advantage of working with a mortgage broker is also clear: a seasoned, well-informed, honest mortgage broker will have the knowledge of and direct access to the private hard money lenders in Ontario, Canada, and the United States. A mortgage broker will know where your loan has the best fit. A good mortgage broker will help you ‘package’ your loan to your best advantage, helping you determine how much to expect based on the equity in your property, how soon you need to close the deal, and more. A good mortgage broker will be able to assist you through the lengthy application process and submit your loan request to the best privatelenders for your situation. More often than not, working with a mortgage broker will save time. By representing you and presenting your loan request to the best private lenders, it often makes the transaction run more smoothly and take less time than if you were to take on this task yourself. This often saves you time and trouble in the long run and be well worth the cost of using a mortgage broker.

1st American Mortgage asked:


How to Find Honest Advice About Colorado Mortgages

It’s safe to say there are many places to find a deal for a Denver mortgage or Colorado mortgages these days. But the mortgage crisis has made things a little more complex. It’s not just about finding the best deal, but finding someone to work with who will give you honest advice and help you get into a mortgage that you can afford. But are there experts out there you can give you that sort of Colorado mortgage advice? Is there someone who will get you into the best Denver mortgage product, while still remaining ethical? The answer is yes.

Watch Out When Colorado Mortgage Experts Offer The World

One of the problems that got so many people into a mortgage mess is that their Denver mortgage expert or Colorado mortgage expert made them an offer that would fix all of their problems. These mortgage experts put customers into deals that just didn’t work out and now people are liable to lose their homes. If you want to get into the right mortgage product now, then you need to look for someone who will look at the Colorado home loans available and tell you the ones you can’t have.

Sounds strange, doesn’t it? But that’s the way you can tell a Denver mortgage lender with credibility from one who is more unethical.

In the recent past, when it seemed like everyone was buying a home, too many Colorado mortgage professionals weren’t being honest with their clients and the result was bad loans that have turned into foreclosures. The lenders involved weren’t looking out for their clients, instead they were just interested in getting them started on a loan which may have been low at first, but now has turned into trouble. Instead, a mortgage pro has to look at what will happen to a customer now and in the future.

How do Ethical Denver Mortgage Professionals Work?

In the midst of this crisis, ethical Denver mortgage professionals are working hard to gain back the reputation lost by bad lenders. Unfortunately, the names of everyone working in the business were hurt by the people who worked on bad loans. It will take hard (and ethical) work to repair that.

If you are a potential customer, then you need to be looking out for the professionals who are out there, coming up Colorado mortgages while fighting to be ethical. They have good products that will help a homeowner and they are working in that person’s best interest. Seek out the Colorado mortgage experts who are client-focused and who have been in business for a long time thanks to that philosophy. You want an expert whose business focuses on:

• Selling reasonably priced Denver mortgage products

• Finding many good options in Colorado mortgages for customers that will last throughout the years

• Making sure the clients remain credit-worthy homeowners

• Putting customer service first, so their business grows thanks to referred and repeat customers

The mortgage crisis may have knocked some bad mortgage providers out of the business, but that doesn’t mean there aren’t still traps for customers. They need to keep looking for reliable home loan experts. The key is the kind of Denver mortgage advice you get and whether it’s honest enough to really tell you what kind of program you can get into. If an offer is too good to be true, it probably is.

This article is written by J.B. of 1st American Mortgage and Loan, LLC, a Colorado mortgage lender who offers access to information on obtaining a Colorado mortgage loan as well as other information on loans in Colorado online mortgage quotes, and rates through his website TrueMortgageQuote.com http://www.truemortgagequote.com).

Tristan Hunt asked:


1% Mortgage Refinance loans, you’ve probably seen 100 different advertisements, but how is it possible? There is really only one big secret to 1% mortgages: 1% minimum payments are below the interest payable on the loan. Once we’ve addressed this feature, most of the other facets of 1% mortgages are relatively logical. 1% mortgages, which now come in dozens of varieties with start rates from below 1% (some even starting at 0% for a few months after refinance) up to 4% or more, offer astonishingly low payments. Some of them offer fixed rates for 30 or even 40 years, some of them are adjustable from the day you take them out, all of these are basically “1% mortgages” and are extremely popular amongst homeowners today. 1% mortgages and their offspring are being used for debt consolidation, cash flow management, investments, and for tax purposes, and they are being used a lot.

A full 40% of home loans originated in 2005 and 2006 are estimated to be from the 1% mortgage family, with multiple payment options. By its proponents, the success of the 1% mortgage has been hailed as a new era of affordability and flexibility, of an extremely sharp financial tool once available only to the very rich now available to every family in the country. Its opponents tend to think that the 1% mortgage is a bit too sharp for the average homeowner to handle, they fear “Average Joes” could conceivably cut themselves. Despite their division, one thing is certain, the popularity of the 1% mortgage is driven by the relentless pursuit of the American dream. There are more homeowners in the United States today than in any other period in history, and many of those who own homes have only been able to accomplish home ownership, which was once a lifelong achievement, in their early 20’s and 30’s, largely because of the extended availability of these 1% mortgages to normal borrowers.

How much less expensive is a 1% mortgage payment option versus the comparable 30 Year Fixed traditional principal and interest payment?

For a $500,000.00 Mortgage:

1% Minimum Payment: $1200.00

Normal Loan Payment: $3000.00

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Cash Flow / Savings: $1800.00

It’s easy to see why the 1% mortgage refinance is so heavily marketed as a way to cut your mortgage payment in half. In the above example, the 1% mortgage minimum payment option is 60% less than a typical, traditional principal & interest loan payment. 1% mortgage minimum payments are usually 50% lower than even the highly lauded Interest Only payment mortgages, and most loans in the 1% mortgage family include the ability to pay more than just 1% if need be.

So How Does it Work?

In fact, 1% mortgages are more than just the 1% start rate. They have a fully indexed rate as well, which is the true amount of interest due each month. When making a 1% mortgage minimum payment, the borrower is not paying all of the interest due, which is seen by some as a good thing and some as a bad thing. Let’s examine some of the commonly perceived benefits and caveats of 1% mortgages:

Commonly Perceived Benefits of the 1% Mortgage Family:

1. Extremely Low Monthly Minimum Payment: As we’ve seen in our example, the minimum payment option is less than half of the typical traditional mortgage payment.

2. Flexibility to Control Your Own Money: Unlike a traditional mortgage, which requires a payment to principal each month, 1% mortgages allow borrowers to take the power into their own hands to make principal payments when they want to, e.g after a bonus or a particularly good year.

3. Separate Cash Flow from Equity: While many personal finance pundits laud the benefits of building home equity, the reality is that investing home equity yields a 0% return on investment on a month to month basis. In the above example, paying the traditional principal and interest payment forces the borrower to invest $1800 more each month in their home, money which is locked up entirely in the equity of the home. Home Equity is illiquid, meaning all this money locked in equity cannot be accessed unless the home is sold or refinanced. The bank won’t cut a check each month for the borrower’s home equity in a traditional loan. With a 1% mortgage minimum payment, that $1800 difference in payments is money in the borrower’s pocket, to invest or spend at their discretion. By deferring interest using a 1% mortgage, the borrower has full access to money that normally would be locked up until they sold the property. That $1800 per month adds up to over $100,000.00 in cash over 5 years on a 1% mortgage, and it’s available every time your paycheck does not get used up paying a huge traditional mortgage payment each month.

4. Maximize Debt Consolidation: Using a 1% mortgage refinance to pay off all of your other creditors, such as credit card companies and high interest rate lenders, means that you can save even more money than with a 1% mortgage refinance alone. Since you aren’t throwing high interest money at your creditors each month, the cash which you save by making the 1% mortgage payment actually goes into your pocket, your savings, your investments, or wherever you need it most. That’s ultimate control. Let’s say that in our $500,000 1% mortgage example above, we rolled in $30,000 of credit card and other high interest debt that have a monthly minimum payment requirement of $1,000. By using a 1% mortgage refinance to pay off those debts, total monthly savings using the earlier example would be over $2800 per month, $1000 from the debt consolidation plus $1800 from the difference between the traditional loan payment at 6% and the 1% mortgage minimum payment.

5. Turn Equity into a Tax Deduction: First, the 1% mortgage payment is 100% interest and therefore should be 100% tax deductible in most cases. Secondly, One of the most attractive benefits of 1% mortgages is the additional tax deduction available on deferred interest. What this means is that borrowers can realize a tax deduction on interest they did not have to lay out the cash for, and choose the time at which this deduction is realized, which can be a huge savings upon liquidity or refinance. For real estate investors, this is a huge advantage as it can often wash out the capital gains consequences of selling a property. Disclaimer: We do not dispense tax advice, and you should consider consulting a CPA.

6. Easy Qualification: Normally, to qualify for low payment mortgages, borrowers are required to have exceptional credit. However, 1% mortgage refinance loans are routinely available to borrowers with credit scores as low as 620, and if they are borrowing less than 80% of the value of their home, scores can even be in the 500s provided there are no late mortgage payments reported on their credit file. The borrower’s income can be stated, and sometimes no income or employment documentation is required at all.

7. Enhanced Protection from Foreclosure: Because the minimum payment option is so low, the cash savings each month so high, and the loan is so flexible, the 1% mortgage family offers homeowners a low minimum payment option which they have a much higher likelihood of paying should they suffer an interruption of income or become disabled.

8. Biweekly Payments: A popular way to maximize the benefits of the 1% mortgage refinance is to elect to make biweekly payments (which are available on select 1% mortgages). This optimizes the loan to coincide with most borrower’s payment cycles and reduces any possible negative effects of deferring interest.

Commonly Perceived Caveats of the 1% Mortgage Family:

1. Artificially Low Payments: Because the minimum payments are so low compared to traditional mortgages, many pundits fear that people who would normally not qualify for home ownership can now own a home. The fear is that new or “low income” homeowners could “get in over their heads” by buying more house than they can truly afford. Ultimately, it is up to the borrower to decide how much they can afford.

2. Deferred Interest: Often referred to as negative amortization, this concern is commonly cited by journalists as a “negative” because the loan balance may increase over time if the minimum payment is always selected. However, this perspective does ignore the advantages of dramatically increased cash flow in the borrower’s pocket each month and the tax benefits of deferring interest. Of course, the borrower can choose for themselves whether they want to spend their money paying interest to the bank or if they would rather put the difference into their own pockets.

3. Depreciation: If the value of the borrower’s home falls dramatically, and other factors force the borrower to sell the home while the value is low, the borrower may wind up owing more than the home is worth. This is a valid risk over short periods of time for all types of mortgages, not just 1% mortgages. Even a traditional principal and interest mortgage does not pay off enough principal over the first 5 years of its life to offset a dramatic short term decline in home values. The risk of property values declining is a real risk of owning property, period. However, history tells us that residential real estate appreciates consistently over any given ten year period in the past 50 years.

4. Too Easy To Qualify: This may not seem to be a disadvantage to most borrowers looking to purchase or refinance a home, but there are those who believe that borrowers should be forced to document significantly more income and assets to qualify for these types of loans. A lot of this sentiment is an outgrowth of antiquated conceptions of 1% mortgages as a “Rich Man’s Mortgage”, which used to require significant net worth to obtain, and some of it is attributable to equally antiquated “one size fits all” notions about mortgages. Your perspective will likely depend on whether or not you are in a position to provide extensive documentation of your income and assets in support of your loan application.

Many of the criticisms of 1% mortgages revolve around the adjustable rate variety of these mortgages, which like all adjustable rate mortgages go up and down with the rest of the market. However, in most 1% mortgages, the minimum payment stays fixed and can go up or down only 7.5% per year. So if your payment in Year 1 is $1000.00 , in Year 2 it can go no higher than $1075.00. Because the rate on the loan can change more or less than the minimum payment, which is extremely low, the loan can result in the deferral of interest if only the minimum payment is made. Many of the amortization issues which are seen by critics of 1% Mortgages as their key detractor have been recently resolved by the introduction of fixed rate minimum payment loans to the 1% mortgage family.

Fixed rate 1% mortgage variations, the latest additions to the 1% mortgage family, have fixed interest rates from 3 to 30 years or more. The minimum payment option is generally available for the first 5, 10, 15 or in some cases 20 years of the mortgage, at which point the 1% mortgage payment recasts or readjusts to the interest only payment or the full principal & interest payment. During the fixed period, the loan payment and interest rates of fixed 1% mortgages are utterly predictable and can be defined down to the penny. Many borrowers who would prefer a fixed rate can benefit significantly from the 30 year fixed 1% mortgage, which actually carries a minimum payment of 1.95% and a fixed rates in the 6% to 7% range for 30 years.

While there are those in the journalism community who believe that 1% mortgages have too much power for your average homeowner, ultimately the decision is in the homeowner’s hands. Make a high payment to the bank each month, or put the money in their pockets. And homeowners seem evenly divided, as refinances into loans from the 1% mortgage category are projected to represent over 50% of all refinances in 2007. Traditional mortgages are not a one size fits all solution, and neither are 1% mortgages, but with low minimum payment options, excellent debt consolidation capabilities, significant cash flow and tax advantages made possible by deferring interest, and flexibility to control your finances or insulate yourself from interruptions in income or disability, 1% mortgages continue to post significant growth across the country. Whether or not a 1% mortgage refinance is right for you should be determined by performing a detailed analysis of your personal financial situation with a home loan professional who has extensive experience with 1% mortgage products. As always, we welcome your calls and emails.

1st American Mortgage asked:


Ask Denver mortgage loan providers what would-be borrowers want to know and the answer is simple. Those who are shopping for mortgage loans in Denver want to know what their rate would be for a Denver mortgage.

But for the average mortgage lender, the answer is hard to come up with at a moment’s notice. There are no two borrowers who are exactly alike, so no two Denver mortgages would be exactly alike. There are many factors in the Denver mortgage quote equation, like:

• The type of properties for needed Denver mortgages

• The applicant’s credit score for Denver mortgages

• The future plans of a borrower applying for a Denver mortgage

• Whether the Denver mortgage loan quote is needed

for a first home or subsequent home

•The size of a mortgage loan and whether the Denver property will need a jumbo loan (more than $417,000)

• Other debt obligations of the applicant for Denver mortgage loan

• Applicants income for Denver mortgage loan quote

With these factors, a mortgage lender in Denver will find the best product for mortgage loans in Denver. To get the best rate for the borrower looking for a Denver mortgage quote, the mortgage lender in Denver will look at all of their products to see how they can best obtain the Denver mortgage loan quote and which of the Denver mortgages they have available will be most affordable for a customer.

Getting Beyond the Denver Mortgage Quote Rate

In addition to the mortgage loan rates in Denver, there are other factors that can impact the affordability and final amounts owed for Denver mortgages. These need to be carefully considered. Some mortgage lenders in Denver will offer good, low rates for Denver mortgages but have high fees and closing costs that makes up for the difference. Denver is not immune to such dealings in Denver mortgages. Be sure to ask about closing costs and other fees for Denver mortgages early in the process. These kinds of mortgage lenders in Denver want a borrower to get to the “point of no return” before they realize how high the true cost of the lower Denver mortgage quote can be.

How to Assess a Good Mortgage Lender in Denver

What a borrower should aim for is the best mortgage loan in Denver with the best total package including reasonable rates, closing costs, and frees, along with excellent customer service from the lender. A borrower should expect a mortgage lender in Denver to provide good service that is helpful, informative and, most importantly, professional in providing a Denver mortgage loan quote. A borrower should be able to ask questions they want about the Denver mortgage, product, the borrower’s Denver mortgage quote, or any other nformation about options and terms. When a borrower asks, they should get a professional and detailed answer. A borrower should never leave a conversation about the Denver mortgage loan quote wondering to what they are agreeing or feeling disrespected. If they do feel that way, then they should go elsewhere for a mortgage loan in Denver.