Posts Tagged ‘Mortgages’
June 16th, 2010 | 
Author: If your mortgage deal is no longer competitive, it may be time to switch. However, choosing the wrong mortgage could cost you thousands of pounds a year. Here are the most important things to consider when planning to switch mortgages.
Compare mortgages
Your bank may advise you to take on one of their mortgages. Before doing so, make sure you compare all kinds of mortgages and consider taking a mortgage with a different provider – there may well be better mortgage deals elsewhere.
Consider the pros and cons of different types of mortgage
Particularly if you are taking on a long-term mortgage, you need to consider whether interest rates are likely to rise or fall. For low or falling interest rates, you could be better off with a tracker mortgage. If you think rates will rise, it may be better to go with a fixed rate mortgage.
Calculate monthly outgoings
You will need to make monthly payments on your mortgage. Consider what these will be and whether you can really afford them on a long-term basis. Also take into account the possibility of losing your job or of a steep rise in interest rates – either of which could cause your mortgage to become unaffordable. Remember, if you do not keep up your monthly instalments, your mortgage provider will have the right to repossess your home.
Consider additional features
Think about your personal circumstances in relation to other features offered with some mortgages. For example, if you regularly receive bonus payments or windfalls of some kind, it may benefit you to have an overpayment option with your mortgage deal. This will allow you to pay in lump sums on top of your monthly payments, meaning you could potentially pay off your mortgage more quickly.
Talk to your current provider
While you don’t need to remain loyal to your current lender, it can be useful to talk through options with them. Some mortgage lenders have special deals available only to current customers which you might be able to take advantage of. Once you have done this, always compare mortgage deals with different lenders before taking the plunge.
Look out for hidden fees
Given that you are remortgaging to save money, it’s vital to make sure that other costs like set-up fees will not cancel out your savings. The same applies to exit fees and redemption penalties applied by your current lender. Take all costs into account before switching.
Read the small print
When you switch mortgages you will probably be presented with a mountain of paperwork. It’s important to understand all of those terms and conditions before you sign up, so take time to read through and take it all in. If there is anything you don’t understand, don’t be afraid to ask questions until you do.
Make a note of when your chosen mortgage deal ends
Once you have switched mortgage deals, you need to be aware of when your latest mortgage deal is going to end, and remember to compare mortgages again once this has happened. The cheapest mortgage deals usually last around two to three years, so be prepared!
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Refused credit mortgages set to “grow and grow”
14/08/2006 16:25:00
The sub-prime and near-prime mortgage market is tipped to grow and grow following new research.
A survey commissioned by Alliance & Leicester indicates greater demand for refused credit mortgages could be forthcoming, with four in five brokers expecting the market to grow.
The top reasons for borrowers to seek out a sub-prime or near-prime market are defaulting on debts or credit cards payments or simply having a bad credit rating, the research found.
Figures indicate that Britons are increasingly struggling to manager existing debts, suggesting that the potential market for sub-prime mortgages could swell.
Around two lenders in five report that the typical sub-prime customer is likely to be struggling financially, with many on a low income.
More than 85 per cent of brokers also report that customers are now realising that a sub or near prime mortgage can help rebuild a poor credit score.
Mehrdad Yousefi, head of intermediary mortgages at Alliance & Leicester, said: This market is becoming increasingly competitive with more lenders offering these specialised mortgages.
It is encouraging to see that brokers say their clients know the value of these type of mortgages and that it is a good way of getting potential buyers on the housing ladder while enabling them to repair their credit history by maintaining regular payments on their financial commitments.
Datamonitor estimates that 9.1 million people were refused credit by mainstream lenders in 2005, further indicative of potential growth in the refused credit mortgage market.
Personal debt has already crossed the £1 trillion barrier and the rising insolvency rate suggests that borrowers are struggling to cope, indicating a growing demand for refused-credit mortgages in the future.
As traditional lenders were tightening their criteria, the refused credit market could prove ever more attractive and other high street lenders were also likely to start catering for those with a ’slightly lower credit profile’.
As more lenders capitalise on this growing market, the increased competition could see better deals for mortgage holders.
A specialist banking group has reported that some of its wealthier clients are seeking different kinds of mortgage loans. Investec has seen many of its high net worth clients looking into its multi-currency mortgage.
This is a risky product but it allows for a certain amount of flexibility, the loan is secured against a UK property but can be denominated in a range of varying currencies, such a Sterling, US Dollars, Euros, Swiss Francs and Japanese Yen. Borrowers can benefit from the lower interest rates, thus reducing the outstanding sum on the mortgage by switching the funds between difference currencies as the values of each rise and fall.
The turbulent market 2008 has seen so far may be the perfect time for investors to choose their mortgages very carefully, options such as this allow borrowers to keep their money safer than it may be tied into the UK property market. This is good news for advisers, brokers and mortgage lead companies who are likely to see money continuing to go into mortgages if a wider range of mortgage options are available.
HSBC recently launched a multi-currency mortgage called 766, it gives customers access to three month fixed term deposits offering rates of interest in Sterling, US Dollars and Euros.
HSBC’s deal pays 7% on deposits in Sterling and 6% each on US Dollars and Euros, the offer is currently available until the end of March, and to take it up customers need to open a Premier Bank account with the company and have £60,000.
Having a Premier Bank account with HSBC will get you a dedicated relationship manager who will deal with any questions or problems, it will also give you exclusive access to 250 Premier centres around the world and access to your accounts at any time of the day or night.
The 766 account will also provide fee-free international money transfers over the internet and financial guidance on tax, property, investments and pensions.
Alexander Associated Group (AAG) has said that investors would be wise to look into multi-currency mortgages to avoid the damaging effects of the falling UK property market. The financial management company believes that multi-currency loans can reduce mortgage debts by 5% per year, although single currency mortgages can prove beneficial in some cases.
Similarly to all investments, these deals should be looked at from a long-term perspective. AAG’s CEO, David Alexander said: “You would hope over a period of 25 years that you would clear your whole mortgage if you’re managing it via a multi-currency mortgage.
”It’s just like any other type of fund: it’s a currency fund, and you need a currency manager to move it from one currency to another, to where he perceives the likelihood of sterling strengthening against the other currency.
”What you have to do is understand that it’s a long-term, not short-term investment – just as a mortgage is a long-term debt. And over the long term you should always do very well,” Mr Alexander finished by saying.
Consumers must however be aware that there are serious risks involved in investing the large sums required into multi-currency mortgages as the level of return seen is reliant on the interest rates in different countries, which no one can predict, especially in today’s uncertain market.
Mortgage specialist, James Cotton, who works for London & Country, said: “There is a danger in getting a foreign currency mortgage for interest rate purpose reasons only. If you look at US interest rates, they are currently above UK Base Rates and stand at 5.29 per cent, whereas in 2001 they where cheap as chips at 1 per cent. However, the main risk comes from having a different currency mortgage to that of your income as there is an exchange rate risk. Luckily for people holding mortgages in US dollars, the currency has recently depreciated against the sterling.”