Mortgage Loan Modification in Alabama

Mortgage Loan Modification in Alabama (Emergency Regulation)

As the result of numerous requests for clarification, the State Banking Department hereby issues the following Emergency Regulation 2009-1A. This supersedes Emergency Regulation 2009-1 issued on April 14, 2009.

The Superintendent of Banks of the State of Alabama Banking Department hereby finds an emergency situation exists requiring the promulgation of an emergency regulation to protect the public welfare from abuses incident to the modification or renegotiation of consumer loans secured by residential real property. In the present distressed financial and economic condition of the nation, many lenders and borrowers are finding it in their best interest to modify the terms of outstanding consumer mortgage loans. As a result, there has been an explosive growth in the number of companies and other persons offering consumer mortgage loan modification services on behalf of borrowers. Generally, a consumer mortgage loan modification is a change in one or more of the terms of a consumer's residential mortgage loan, allowing the consumer mortgage loan to be reinstated, such as changing the interest rate, reducing the principal, and/or changing the monthly payments. At present, there are no regulations regarding the fees to be charged for such consumer mortgage loan modification services. The lack of such regulation opens the door to abusive practices which may worsen rather than improve a consumer's position. Consequently, to prevent such abuses, pursuant to the authority granted under Section 5-19-21(b)(3) and Section 5-25-13(b)(3) of the Code of Alabama, the following regulation is adopted to authorize a fee for consumer real estate mortgage loan modification services under Section 5-19-4(f)(6), not to exceed $500.00, effective immediately:

Bureau of Loans - Emergency Regulation 2009-1A

Any person engaged in the business of providing consumer mortgage loan modification services for loans secured by residential real property located in the State of Alabama, for compensation, is required to be licensed under Chapter 19 or Chapter 25 of Title 5 of the Code of Alabama unless otherwise exempt from licensing under Chapter 19 and Chapter 25, as applicable. Any consumer mortgage loan modification service provider licensed under the Mortgage Brokers Licensing Act or Alabama Consumer Credit Act is allowed to charge and collect a fee of not more than $500.00 for consumer mortgage loan modification services. No part of this fee may be paid to the mortgagee or person related to the mortgagee. No fee charged by a loan modification service provider greater than $500.00 is permitted or considered bona fide and reasonable under Section 5-19-4(f). Attorneys acting in the capacity of attorney for the borrower and not attorney for the mortgage loan modification service provider are not subject to this regulation. Mortgagees on loans that are being modified are not engaged in the business of providing consumer mortgage loan modification services under this regulation.

Please note this version of Emergency Regulation 2009-1 supersedes the version issued April 14, 2009. This regulation shall expire at the end of 120 days or when superseded by the adoption of the same or a substantially similar regulation following the procedures set forth in Sections 5-19-21(b)(1), 5-19-21(b)(2), and/or 5-25-13(b)(l), 5-25-13(b)(2) whichever shall first occur.

Next post: When Refinancing a Mortgage Doesn't Help

Home
.

Books (Excerpt): Home Rich - Increasing the Value of the Biggest Investment of Your Life by Gerri Willis

Books (Excerpt): Home Rich - Increasing the Value of the Biggest Investment of Your Life by Gerri Willis

Buy the book: Home Rich

1. The Rules

When greg was transferred to Washington, D.C., his wife, Stacey, knew immediately she wanted to move to Fairfax County, Virginia. Her family had lived in the area for years and the commute into Washington was a breeze. Unfortunately, the couple had to start their search right in the middle of the spring buyers’ frenzy and were competing with other families eager to get into a new home before the school year started. Soon after their search began, they discovered a neighborhood that boasted a pool and tennis club that residents automatically belonged to. And, days later, the couple walked into an open house for a cozy ranch with skylights and new carpeting in every room. The only downside was a strange mildewy odor—but the sellers assured them they had taken care of the problem. The pressure to move quickly was high. Seven other couples at the open house were eager to buy. Greg and Stacey decided they would have to put together a strong offer quickly to compete. They bid the asking price of $669,000. Stacey even wrote a thank-you note to the owners to improve the chances of their bid being accepted. The price tag was a little more than they had anticipated spending, but the two agreed they could afford their prize if they kept their spending on extras to a minimum. They won the bidding war, but just a month after they moved in, they discovered that the mildewy odor was a symptom of a much bigger water problem: water soaked the basement carpet. They gutted the room down to its studs and installed a new drainage system, as well as a new carpet, wainscoting, and furniture. But that was only a prelude to the problems created a year later by a massiverainstorm.

“At five o’clock on a Sunday morning I heard water running,” Stacey recalls. “I went downstairs, and it was like a levee had broken—there was water coming through the wall, up from under the floorboards, everything.” Greg and Stacey worked like a bucket brigade emptying the house of water. More renovations ensued.

In the first two years of owning the house, they had to replace several skylights, fix leaky soffits, and excavate the backyard to install French drains. The price tag—a total of nearly $36,000—was sizeable and unexpected. Because the two were stretching to buy the house in the first place, they had little room in their budget to finance the repairs. Greg tapped his retirement fund to pay for the biggest repairs, but the problems left the family strapped. Had the two been in less of a rush and hired an inspector, they would have been spared the setback.

Compare their situation with that of Ted and Barbara. At the time the two decided they had outgrown their Queens, New York, condo, the market couldn’t have been more hostile to buyers. Prices were on the rise in Westchester County, where they had decided to move. Attractive homes were drawing multiple bids and bidding wars. If ever there were a time for buyers to hold up and wait, this was it. But the couple came up with a strategy that allowed them to find a home that fit their needs yet didn’t break their budget.

They started by investigating neighborhoods. They quickly ruled out the most expensive ones, such as Scarsdale and Bronxville, where competition was the most heated and the potential for overbidding high. And they knew they didn’t want to move too far away from their jobs—Ted worked in Queens, while Barbara worked in Manhattan. When Ted’s boss suggested they check out his commuter town, Sleepy Hollow, they liked what they saw. Prices in the town were high but not stratospheric. When they found a quaint bungalow with some maintenance issues, they pounced. Exterior paint was peeling and interior hardwood floors had been badly damaged by renters. The kitchen hadn’t been updated in years. Rhododendrons had been allowed to grow nearly to the eaves, and the overall appearance from the outside caused many potential buyers to drive past without even seeing the interior. After confirming the house had no structural issues, the two decided to buy—driven mostly by the idea that the house was well priced for the neighborhood at $475,000. Because the two were able to purchase the house at such an attractive price, they could spend money on upgrades. They had the cramped kitchen stripped out and updated with roomy oak cabinets and stainless-steel appliances. They repainted the house, warming up rooms with rich colors to replace the faded creams and whites. The floors were refinished. The exterior was painted a sophisticated gray-green and the shrubs trimmed or removed altogether. Within a few short months of buying, the house was transformed. “We were enthusiastically welcomed by our neighbors,” said Ted. “Most commented they really had never been able to see just how beautiful the house was beneath all those overgrown shrubs. One neighbor even said she would have bought the house long ago had she known what was hidden beneath. That’s a great feeling.”

After the two had completed the transformation of their home, they set their sights on a real eyesore house in the neighborhood to buy, fix up, and sell—an investment they never would have been able to even consider had they not bought so advantageously in the first place.

Greg and Stacey’s failure to investigate the musty odors they smelled during their initial visit ultimately cost them tens of thousands of dollars, stealing any money they might have used for upgrades, while Ted and Barbara’s careful investment will likely reap strong returns. Most of the pair’s gains will come from sweat equity, but it’s no small part of the equation that they also simply bought right, hedging their risks by buying well within their budget and carefully choosing both their neighborhood and their house.

Over the years, Americans have discovered that home ownership is one of the most reliable methods for building wealth in this country. You may have seen this firsthand in your own family. Did your grandparents retire on the proceeds of selling their house? Did Mom and Dad finance a second home or your education by tapping their home equity? A consumer survey regularly conducted by the Federal Reserve reveals that the biggest nest egg owned by people entering their retirement years isn’t a 401(k) or IRA, it’s their house. And it’s little wonder that our homes are the single most valuable thing we own. A mortgage is an enforced savings plan. Unlike investing in your 401(k), for example, you can’t stop paying your mortgage because there’s another, more pressing bill on hand. But it’s not just the consistency with which we pay for our homes that ultimately makes them an attractive investment.

Home values have increased an average of 6.6 percent each year since 1968, according to the National Association of Realtors. That’s less than the returns on stocks and bonds during the same period. But to make a true comparison, you need to take into account all the financial benefits you get from home ownership. The mortgage interest deduction is the fattest tax break most households enjoy. Plus, Uncle Sam also lets you exclude as much as $500,000 in gains when you sell. The point isn’t that you shouldn’t invest in stocks or bonds—you should be well diversified, and that means investing in all three: stocks, bonds, and real estate—but you need to think of your home not just as the place you live but as an investment you can use to your advantage.

To be sure, real estate can experience negative price appreciation. Prices can and do go down as well as up. Still, housing returns over the long haul compare favorably with anything else you’re likely to put your money into, plus there is also a unique advantage to investing in real estate: personal control. For most of us, mutual fund managers or brokers decide when to buy and sell our stock and bond investments, but with real estate, you decide when to get into a market or leave it. Likewise, you decide when to make upgrades to your home and how much to spend. You determine how much money goes into maintenance. It’s these decisions that will make the difference between a poor investment and a great one.

We live differently than our parents did—we move more often, we don’t buy and hold for decades. For that reason, we have to be much savvier, whether we are buyers or sellers. The stakes in managing your investment intelligently are higher than ever because people stay in their homes an average of just nine years, according to the American Housing Survey for the United States: 2005. In other words, these days homes are more of a medium-term investment than a long-term one. That means if you make a mistake, time isn’t on your side. Covering up mistakes becomes difficult because you won’t have thirty years of appreciation to make up for a misstep. What’s more, the homes you’re likely to encounter when you buy may have few, if any, of the features on your wish list. The average home in this country was built thirty years ago, and its architects could hardly anticipate our desires for open floor plans and light-filled rooms, or the fact that many of our homes now accommodate multiple generations. This book will show you how to make smart decisions about your home, from buying it to living in it, changing it, and selling it. Home Rich presents a plan you can follow whether the market is rising relentlessly or falling fast. In the end, if you follow the rules of this book and manage your investment wisely, your home will become the best investment you ever make.

To use this book effectively, you can either follow its advice through the entire process of home ownership or dip into it when you need help. It helps, though, to make the right choices from the beginning. Nothing is more important to becoming home rich than choosing the right home to buy in the first place. Price, of course, is critical. Pay too much and you may never get back even your original investment. The condition of the house matters greatly, too. Pick a house with problems and you may be forced to blow your entire renovation budget on repairs you never anticipated. In Chapters 2 through 8, you’ll learn the steps to picking the right house: understanding how much house you can afford, choosing a real estate agent to work with, researching the neighborhoods, zeroing in on the best property, and negotiating for that house. And, most important, you’ll learn the importance of thinking of a house as an investment even as you shop for a home, getting beyond your initial, emotional reaction to a property to think about deeper issues, such as its broad appeal, the investments that are likely to pay off, and the health of the neighborhood.

Buying right is important, but it’s not the only step in transforming your home into the best investment it can be. The mortgage you choose and the financing that you use at every turn to upgrade and maintain your home are critical. The lending options these days are various and confusing. Thirty-year fixed-rate mortgages are old hat. Bankers have devised all kinds of products to fit every imaginable consumer need. In this book you’ll see detailed analysis of mortgages from conventional thirty-year fixed-rate loans to some of the industry’s wackier innovations that you’ll want to steer clear of, such as interest-only and nothing-down loans. Some of these newer loan products have fallen out of favor but could resurface again to tempt borrowers. In Chapter 9, you’ll learn how to navigate this complicated area and when to seek professional advice. Plus, you’ll learn how to calculate your equity—what you actually own—and the best ways to grow that investment.

Few of us can afford to buy the home of our dreams. In fact, it can even be difficult just to find a home that works well for our needs. Modifying your home to suit the needs of your family and potential buyers down the road is up to you. We start in Chapter 16 with a discussion of the projects that really pay off and how you can decide which is right for you. From there, you’ll learn about small upgrades that make a difference. In Chapter 18, you learn about hiring contractors and what to expect from them. Next, you’ll focus on what makes for successful home improvements, the range of design options, and where you can save when accomplishing the most popular upgrades. We’ll consider in detail improvements to kitchens and baths for any wallet.

One investment that appeals to buyers more than ever these days is upgrades that reduce your energy bill. In Chapter 13, I’ll take you on a tour of the improvements, from insulation to solar panels, that are most likely to make a difference where you live. You’ll also learn about other popular green solutions, such as products that produce no or low emissions and architectural salvage.

If it’s the exterior of your home you’re concerned about, turn to Chapter 14 to find out about landscaping and garden improvements that can enhance any home’s appeal. Whether you live in an urban area with a tiny lot or a sprawling suburban neighborhood, we’ll look at solutions that can make your property stand out from the rest. You’ll also find a buyer’s guide to shrubs and trees for your part of the country. Once again, our focus will be on upgrades with broad appeal that will add to your home’s value.

Even if you buy the best-built house in the neighborhood, your investment will still suffer if you don’t manage the house over time. Taking care of a home’s systems is no easy prospect, but a well-maintained home is something home buyers can sniff out in only a few minutes. Turn to Chapter 15 for details.

Eventually you’ll want to sell your castle, and when that time arrives, you’ll want to do it with an eye to maximizing your investment gain. Chapters 20 through 23 will guide you through the decision-making process that will get you the best return for your biggest investment. When should you sell on your own? How much should you invest in fixing up the place before putting your home on the market? In Chapter 22, you’ll learn the best strategies for selling your biggest asset at the best price.

As you read along, you’ll find step-by-step advice on how to make the decisions that will make your home a solid investment. What you won’t find is advice for people who want to flip homes—buy and sell them quickly—for a quick gain. That’s because this book is no get-rich-quick manual. In fact, I believe that building real wealth results from carefully monitoring and investing in your home over time. You can start by understanding a few essential rules.

Next post: Endowment mortgage

Home
.

The Flexible Mortgages

The Flexible Mortgages
by Richard David

The Flexible Mortgages take many shapes and forms, with borrowers choosing from a host of exciting features and methods of rate control. People have reacted to rising house prices and interest rates with the search for greater control over their financial lives.

Flexible mortgages can help restore some of that control because their very flexibility makes it easy for people to manage their money in the way that suits them best.Although you tend to pay slightly higher interest rates for flexible mortgages; the benefits make this product the best mortgage choice for some.

A flexible mortgage offers the possibility of altering your monthly payments in line with your circumstances without penalty. For example, you may wish to pay off the mortgage quicker. You can do this by making occasional over payments. You could also make underpayments or even take a 'payment holiday' or draw down cash if the circumstances arise.

Flexible mortgages put you in charge of your finances, and offer the potential to save a huge amount of money if used properly. They can be ideal for anyone with a fluctuating income, such as the self-employed. A flexible mortgage is designed to give you more control over your finances with varying degrees of flexibility - you should be able to overpay, borrow back over payments, underpay and take payment holidays when you make a payment, plus as soon as you make a mortgage payment you start paying interest on a smaller loan amount.

Flexible mortgages are not always offered at the lowest interest rates. You may have to pay a slight premium for maximum flexibility. Borrowers can also look into standard mortgages with flexible features, as these might also be a good option. An offset mortgage broker like the offset mortgage centre will be able to give professional advice. It's important to realize that not all flexible mortgages offer the same amount of flexibility.

The minimum features that you should be offered are the ability to overpay or underpay, borrow back your over payments, take a payment holiday, benefit from daily interest calculation, not be tied in by extended early repayment charges. Flexible mortgages take the form of many different types of products, with fixed rate flexible mortgages, discount flexible mortgages and tracker flexible mortgages all on offer. It's important to know exactly what the mortgage lender is offering and to take care to work out whether it will be worth your paying extra for these features.

Sub-Prime Mortgages

Sub-Prime Mortgages
by Jane Smith

This guidance defined for the first time the criteria used to decide whether a potential borrower will be classified as "prime" or "sub-prime." It states that at least one of these issues will characterize a borrower as sub-prime when the person applies for a loan:

• Low credit score
  
• Bad credit history, including
  
• collection accounts
  
• repossessions
  
• late payments of invoices
  
• bankruptcy
  
• debts that have been written off as uncollectable, called "charge-offs"
  
• high ratio of debt to income
  
• decreased ability to pay off the loan
  

Further, the document describes these attributes of the sub-prime borrower:

• has a Fair Isaac Corporation (FICO) credit score of less than 660;
  
• has collection activity, liens, charge-offs, or judgments within the past two years;
  
• within the past year, has had two late payments;
  
• within the past two years, has made a payment that was more than 60 days late;
  
• has a ratio of debt to income of at least 50%;
  
• has declared bankruptcy in the past five years;
  
• has been assigned a score by another credit rating service that would equate to a FICO score of 660.
  

All lenders use these standards to identify sub-prime borrowers. Bear in mind that even if you have a FICO score that is better than 660, you will still be considered a sub-prime borrower if you possess a single one of the attributes listed above.

Expanded Guidance offers a clear definition of lending practices to be considered "predatory." The agencies in no way insinuate that predatory lending practices characterize all sub-prime lenders. In fact, it is their belief that benefits for both the borrower and the lender come from using sub-prime loans that are administered properly. Nonetheless, the public should be made aware that predatory lending practices do exist, and that borrowing at sub-prime may leave them vulnerable to such practices. In predatory lending, the exchange between borrower and lender is very unequal: the lender gets the borrower's money and the borrower gets not much of anything.

Most predatory lending practices fall into three categories.

• Many car loans and housing mortgages are made based on assets pledged by the borrower as collateral, rather than on the borrower's actual ability to fulfill the debt.
  
• "Loan flipping" occurs when a lender coerces or talks a borrower into refinancing a mortgage, at no advantage to the homeowner, but at great advantage to the lender, who may collect sizable fees for the transaction.
  
• Failing to reveal to the borrower all the hidden fees and costs of a loan, and concealing information or providing fraudulent information to the borrower.
  
• Very often, these practices are perpetrated on vulnerable borrowers, like the elderly, minority homeowners, or low-income families. In many cases, these people would actually have qualified for a mortgage at prime rates; but they are at a disadvantage because of their lack of knowledge.
  

If you are thinking of borrowing at sub-prime for a mortgage, you should familiarize yourself with the 2001 Expanded Guidance for Sub-prime Lending. It is available on the Internet, and is definitely worthwhile reading. It laid a fine foundation for further definition of the responsibilities of sub-prime lenders and the needs and rights of sub-prime borrowers.

Mortgage: Fixed Rate or Not?

Mortgage: Fixed Rate or Not?
by Adam Ferguson

Many folks across the USA are starting to realize why the interest rates on their home mortgages were lower if they took an ARM loan. The answer is simple. A loan that is fixed for a short period of time (ARM loan) has a much higher level of risk. This means a lower interest rate and lower monthly payments for those willing to take that risk. Many homeowners are now scrambling to find some way to keep their home as these low rates have now adjusted and are no longer low fixed interest rates. These consumers took an adjustable rate mortgage that may have been fixed for as short as one month and as long as 10 years. The risk is not simply related to what future interest rates will be; the risk is whether you will be able to refinance your mortgage at a future date. Many Americans are now starting to understand that risk, which they never even considered.

Self-employed homeowners are now finding out that a stated income loan is basically no longer available. Here is a quick example of a scenario for someone that is currently in a stated income ARM. A small business owner may have taken out an adjustable rate mortgage (ARM) and made all of their payments on time for the lower interest rate 7 year fixed period of their loan. This borrower now wants to refinance and can no longer get a loan without providing income documentation and/or qualifying under a full doc scenario. Ouch! This homeowner is now left to make payments on a loan that may have gone from 6.5% to 9.5% or higher. This loan may keep adjusting every 6 months or 1 year and may go as high as 12.5%. The change in payment is dramatic, thus affecting the entire economy for obvious reasons. Does this homeowner now sell their home? Do they ride it out? Do they change the way their income is documented and start paying themselves W-2's so that they can refinance in 2 years? These are tough questions and the answer will be different for everyone. These however are questions that could have been avoided.

Fixed rate mortgages are an ever stable and ever predictable product. It is a lesson that we can learn from our parents or even grandparents. The older generations were slow to act, fiscally conservative, and opted for things that they completely understood, things that did not have unknown future outcomes. The new generations of Americans dabbled in some slightly higher risk endeavors. I think and hope that we as a nation have grabbed the hot stove, and hopefully learned some tough financial lessons. The dot com bubble, Enron, the real estate bubble, all could have been avoided if we understood and listened to the lessons of history and the lessons of older generations.

There is plenty of blame to go around. The bottom line is very simple. Capitalist economies provide products that people will buy. If people do not like a product it goes away. The same applies to mortgages. There was a want for many mortgage products that held a high level of risk for both the consumer as well as the company providing them. Capitalism proves itself again as these loans become less available and guidelines get tougher. Products that prove themselves over time, have demand, and can make a company money will prevail. The fixed loan is the original mortgage in the United States for good reason. It has withstood recessions, booms, and it is still the safe, sensible, and I would argue "right" way to mortgage a loan. Fixed rate or no rate at all is the new calling for homeowners and new home buyers across the USA.

Mortgages: Fixed Mortgage Rate

Mortgages: Fixed Mortgage Rate
by Harley Rolland

Your mortgage loan has a significant role to play in your financial life. You might be already confused whether to go for fixed mortgage rate or adjustable mortgage rate. Well-wishers might also add to your confusion, when they advice you to go with fixed mortgage rate saying that it entails lower risk than a variable rate. Why is this so? Read on to know why it is considered the best mortgage rate.

• Advantages & Disadvantages:
  

In this program, the rate of interest remains fixed throughout the loan's term. The monthly repayments are also not affected by inflation. In comparison, the adjustable mortgage loan has an adjustable rate or interest that rises or lowers with the fluctuations in the economy.

Here is how you benefit if you choose a fixed mortgage rate:

• Interest rate of this program gives you the peace of mind to plan your repayment.
  
• As your monthly payment does not change, you can use your funds more effectively.
  
• If you take a program when the market offers high competition, you might even get offered the 'golden' chance of getting a fixed rate that is lower than adjustable rate (note that the fixed rate is always taken as higher than adjustable rate).
  
• Fixed loans are the best for salaried people on a tight budget. A fixed-rate mortgage is also a better option than an adjustable loan for young people and first-time buyers.
  

Like there are two sides to a coin, there are two sides to a fixed mortgage loan too. Yes, I am referring to its drawbacks. You should be aware of these as well:

• The interest rate of fixed loans is higher than that of the adjustable mortgage loan.
  
• The fixed loan's interest rate is fixed for about 2-3 years and then reviewed as per the market. So, your loan is also subject to changes in the future (and chances are high that the interest rate will only increase!).
  
• Another thing is that if you plan to switch your mortgage company, you will need to pay a higher fee to implement new loan as well as pay off the old loan.
  

Finally, to make the right choice, seek professional help. A financial advisor will be able to help you make the right choice as per your lifestyle, income and needs.

Glossary: Mortgage Terms

Glossary: Mortgage Terms
by Jon James

Additional Security Fee
An Additional Security Fee (Mortgage Indemnity Guarantee policy) is the fee taken to get an insurance policy that will cover your lender so that if you default on payments, he will not suffer any loss. You have to pay the Additional Security Fee and the premium along with your mortgage advance. Although you are paying the premium, remember that this policy is for the protection of your lender and not for you.

Administration Fee
The administration fee is the amount charged by your lender to start working on the documentation part of your mortgage application. It includes the home valuation fee as well. The administration fee will not be refunded even if your valuation is not done or if your application has been rejected.

Adverse Credit
Adverse credit occurs when you have a history of bad credit, bankruptcy, CCJ's, or loan arrears. Adverse credit can also be called as bad credit, poor credit, or it can be said that you have a low credit score.

Agricultural Restriction
An agricultural restriction is a rule which will restrict you from holding a property if your occupation is in any way related to agriculture.

Annual Percentage Rate
The Annual Percentage Rate is the rate at which you borrow money from lender. It includes all the initial fees and ongoing costs that you will pay throughout the mortgage term. As the name suggests, annual percentage rate, or APR, is the cost of a mortgage quoted in a yearly rate. The annual percentage rate is a good way to compare the offers from different lenders based on the annual cost of each loan.

Apportionment
Apportionment, or sharing out, is a facility that allows you to divide the responsibility for utilities, property taxes, etc. with the buyer or the seller of the property when you are either selling or buying the property.

Arrears
Arrears happen when you default on your mortgage payment or any other type of debt payment. If you have arrears on the record of your current mortgage, you will face problems when you want to look at remortgaging or getting a new mortgage.

Arrangement Fee
An arrangement fee is the amount you have to pay your lender to access particular mortgage deals. While searching for a fixed rate, cash back, or discounted rate mortgage, you will pay this fee at the time that you submit your application, it must be added to the loan upon completion of the term, or it will be deducted from the loan on completion.

Assignment
An assignment is the document transferring the lease of the property or rights of ownership from a seller to a buyer. It may be an endowment policy to the building society in connection with a mortgage.

ASU
ASU is Accident, Sickness, and Unemployment insurance which covers your mortgage payments in case of an accident, a sickness, or involuntary unemployment.

Auction
An auction is the public sale of a property to the person who quotes highest bid. The highest bidder has to sign a binding contract that ensures that he do all valuations, searches, etc. before the sale of the property.

Authority to Inspect the Register
An authority to inspect the register document is a document fro the legal or registered owner of a property allowing the solicitor of the purchaser to get information concerning the property.

Banker's Draft
A banker's draft is a way to make a payment. In appearance, it is the same as a cheque, but in effect it is a cash payment. The money is given to the bank, and they issue a cheque that is certified to be good for the given amount.

Base Rate Tracker
Base rate tracker is a type of mortgage in which the interest rate is variable, but it is set at a premium (above) the Bank of England Base Rate for a period or for the full term of the mortgage. The best part about this type of mortgage is that it has little or no redemption penalty. This means that by making overpayments, you will be able to save money on interest by paying off your mortgage earlier than the agreed upon date on the initial mortgage contract.

Booking Fee
A booking fee or arrangement fee is charged when applying for a fixed or a capped rate loan. Booking fees are normally non-refundable if charged upfront, but sometimes the booking fee is added to your final mortgage payment.

Bridging Loan
A bridging loan is useful when you want to purchase a property, but your ability to do so is contingent upon the sale of your old property. This is a very short term loan that is paid off as soon as your old property sells. Speak with a loan advisor before taking out a bridging loan to be sure it's the best option for you.

Broker's Fee
A broker's fee is paid to your debt advisor or other intermediary that assists you in finding the best mortgage or loan deal for your circumstances. BSAThe BSA, or the Building Societies Association, is a group that works in the interest of member societies.

Building Societies Commission
The Building Societies Commission is a regulatory organization for Building Societies. This commission reports to the Treasury Ministers.

Building Society
A Building Society is a mutual organization that gives you money to buy or remortgage residential properties. This money comes from individual investors who are paid interest on their funds. A portion of building society funds is also raised through commercial money markets.

Buy-to-Let
When you purchase a property for the sole purpose of renting it out, you can apply for a buy-to-let mortgage. The payments for this type of mortgage are calculated based on your projected rental income instead of your personal income.

Capital and Interest
Your monthly mortgage payments consist of two parts: the interest and the capital. The interest payment is a payment on the interest balance of your loan. The capital payment is a payment on the amount that you borrowed.

Capital Raising
Capital raising generally means remortgaging for a higher amount than you need to pay off your existing mortgage in order to use the excess money for other personal financial uses.

Capped Rate
A capped interest rate is an interest rate that will not exceed the standard variable interest rate for a set period of time (from 1-5 years) that is decided by you and your lender. If the standard variable rate falls below your capped rate, your interest rate will decrease accordingly.

Cash Back
Cash back is the amount you receive when you take out a mortgage, the amount may be fixed or a percentage of your mortgage amount.

CCJ
CCJ stands for County Court Judgment. This is a decision reached by a county court against you when you have defaulted on your debt payments. If you clear the debt in question in a set amount of time, a satisfactory note will be put on your credit report to signify that the debt is taken care of.

Centralized Lender
A centralized lender is a mortgage lender that does not rely on a branch network for distribution. "Centralized lending" is now provided by several building societies. These societies operate separately from their branch networks, and they rely exclusively on mortgages from intermediary sources.

Charge
A charge is any interest on a mortgage to which a freehold or leasehold property can be held.

Charge Certificate
A charge certificate is a certificate issued by HM Land Registry to you with your name as the registered title for a given property. This certificate contains details of restrictions, mortgages, and other interests. It has three different parts: a charges register, a property register, and a proprietorship register. If there is no mortgage on the property, it is called a Land Certificate, and it is issued to the registered proprietor.

Chattels
Chattels are moveable items in your house such as furniture or your personal possessions.Chief RentChief rent is paid by the owner of a freehold property. This is the same as the ground rent that is paid by a leaseholder.

CML
Council of Mortgage Lenders

Completion
Completion is a term that explains that you have become the owner of your house after finishing the formalities of the sale and the purchase of the property.

Conditional Insurance
When you take out a fixed or discounted rate mortgage, your lender may try to persuade you to take out an insurance policy that will cover any missed payments due to an illness, an accident, or unemployment.

Contract
A contract is a legally binding sale agreement. There are two identical copies signed by both the buyer and the seller, and each party keeps a copy for their records. Once both parties have signed the contract, they are committed to the terms of the agreement.

Conveyance
A conveyance is the deed by which a freehold, unregistered title is transferred. The deed is called an assignment if your property is unregistered or leasehold. If the property is registered, the deed is called a transfer.

Conveyancing
Conveyancing is the legal process by which the buying and the selling of a property take place.

Covenant
A covenant is an assurance given in a deed.Credit ScoringCredit scoring is the procedure by which a lender evaluates your paying capacity before offering a loan or mortgage.

Credit Search
A credit search is done by a lender and a credit bureau to search your records for CCJs and other indicators of bad credit.

Debt Consolidation
Debt consolidation is the process by which you take out a loan or mortgage in order to pay off a number of high interest debts. By doing this, you will only need to make one payment each month, and you will save significantly on interest charges.

Deed
A deed is a legal document that denotes the owner of a given property. You can transfer a title to both freehold and leasehold with a deed.DepositA deposit is the amount of money you put down toward buying a property.

Disbursements
Disbursements are any amount you pay to solicitors against land registry fees, searches, faxes etc.

Discounted Rate
Discounted rates are used to attract new borrowers to lenders by setting the interest rate below the standard variable rate for a guaranteed period of time. If you repay the entire discounted rate mortgage within the first few years, your lender may charge you early redemption penalties.

Early Redemption Penalty
An early redemption penalty is charged by your lender if you do a part or full payment of your mortgage amount before the completion of your mortgage term. These penalties will also be charged if you decide to remortgage and move your mortgage to a new lender. Early redemption penalties mainly apply to fixed rate, discounted rate, and cash back mortgages.

Easement
Easement is the right held by one property owner to make use of the land of another for a limited purpose, like a right of passage.

Endowment Mortgage
An endowment mortgage is an interest only mortgage supported by an endowment policy. During the term of the mortgage you will pay only interest to the lender, and your premiums are alternately paid into an endowment policy which will mature over the term of your mortgage. The endowment policy is designed to pay off your mortgage as well as act as life insurance. However, you cannot depend on this amount to be sufficient to pay all of your debt.

Endowment
There are different types of endowments, but here an endowment is a life insurance policy that will pay off your interest only mortgage.EquityEquity is the amount of value in your home. It is the value of your home less the amount left to be repaid on your mortgage.

Equity Release
Equity release is a means of releasing money from the value of your home either in a lump sum or in monthly installments. This money may be used for home improvements, debt consolidation, or other large expenses.

Exchange of Contracts
Exchange of contracts occurs when the buyer and the seller of a property sign and swap the contracts which detail the property, the price, the date, and the terms of the arrangement. When the contracts are signed, they become legally binding, and legal action can be taken against anyone who breaks the contract.

Existing Liabilities
Existing liabilities are all financial commitments outside of your mortgage. Existing liabilities may include bank loans, credit card debt, maintenance payments, etc.

First Time Buyers (FTB or FTP)
A first time buyer is one who has never owned property before.

Fixed Rate
A fixed rate is when you pay a fixed amount of interest on a loan for a fixed period of time. Lenders provide fixed rate loans for short periods of time (three-six months) all the way up to 25 years. Early redemption penalties apply if you pay off the mortgage before the end of the fixed rate term. Flexible SchemeA flexible scheme is a new way of calculating mortgage interest charges. Lenders calculate interest on a daily basis instead of on an annual basis. The new interest rates will only affect the remaining balance of the mortgage. By making regular overpayments, you can repay the loan faster thereby saving a lot on interest charges.

Fixture
A fixture is an item attached to your property, and therefore it is legally part of the property.

Freehold
Freehold means that you have ownership of a property for an indefinite period of time. This is in contrast to leasehold which means that the property is only under your control for a limited period of time.

Further Advance
A further advance is an add-on loan to your existing mortgage from your existing lender. The money from a further advance may be used for home improvements, to purchase a freehold property, or for personal purposes such as debt consolidation.

Guarantor
A guarantor is a person who guarantees the lender that the borrower is eligible for a loan or mortgage. If the borrower fails to make payments, the guarantor will make them.

Gazumping
Gazumping occurs when a seller agrees to sell a property to one person, and they proceed to decline that offer in favor of a higher one.

Ground Rent
Ground rent is the amount which a leaseholder needs to pay to the freeholder each year.

Home Buyer's Report
A home buyer's report is made by a lender after a mortgage valuation has been done and before the full survey takes place in order to give the borrower a complete understanding of the property they are thinking of buying.

Income Multipliers
An income multiplier is a type of calculation that a lender will use to calculate the amount a borrower can receive. The most common income multiplier is three times a single income or two and a half times joint income. The lender will choose the one that yields the higher figure. Lenders are more flexible if your LTV ratio is low.

Income Protection Insurance
With income protection insurance, your monthly payments will be covered in the case of illness, accident, or unemployment.

Intermediary
An intermediary is a mediator who finds the best mortgage for you, and they also arrange the mortgage for you on your behalf.

Land Registry Fee
A land registry fee is paid when you want to register your ownership of a property or when you want to change the registered title of a property.LeaseholdUnlike freehold in which a property is owned, leasehold is when a property is owned, but the land that it's built on is not owned by the leaseholder. Their control of the property is only for a set number of years.

Licensed Conveyancer
A licensed conveyancer is like a solicitor in that they specialize in the legalities of buying and selling property.

Local Authority Search
A local authority search is made by the solicitor of the people that plan to buy your property. They check to make sure there are no planned developments on the property such as roads or buildings. They will check for any planning permissions or enforcement notices posted on your property.

LTV
LTV, or loan to value, is the percentage derived from dividing the value of your property by the amount of your mortgage. A low LTV is much less risky for lenders than a 100% LTV.

Loan Consolidation
Loan consolidation happens when a loan is taken out to repay another loan with a higher interest rate or to repay a number of high interest debts. Loan consolidation is often achieved through remortgaging.

MIG
A MIG, or mortgage indemnity guarantee, is insurance one takes out to cover their lender in the case that their property is repossessed, and the lender is unable to get their money back. A MIG is paid for upon completion of a mortgage.

MIRAS
MIRAS, or mortgage interest relief at source, was a tax relief given to those with mortgages, but this relief was abolished by the government in April of 2000.MortgageA mortgage is a loan that allows someone to buy a property. The property itself is the security for the loan.

Mortgagee
The mortgagee is the company or organization that finances your mortgage.

Mortgagor
The mortgagor is the person taking out the mortgage to buy a property.

MPPI
MPPI, or mortgage payment protection insurance, is insurance one takes out in the case of an accident, an illness, or involuntary unemployment that would render them incapable of making their monthly mortgage payment.

MRP
MRP, or mortgage repayment protection, is insurance taken out through your lender during the term of your loan.

Negative Equity
Negative equity occurs when the money you owe to your mortgage lender is greater than the value of your property. People find themselves in negative equity situations when they take out 100% LTV mortgages.

Overpayment
Overpayment happens when you pay more than the regular monthly payment on your mortgage so that the mortgage is repaid before the end of the mortgage term. With overpayments, you can save money on interest, but you may also be charged an early redemption penalty.Payment HolidayA payment holiday is a period during which you make no mortgagee payments. This is normally available with flexible mortgages only.

PEP
A PEP, or personal equity plan, allows you to own shares or unit trusts without paying any taxes.

Personal Pension
A personal pension provides for your financial needs after retirement. You make structured payments into your pension savings during your working years. Often, some of this money may be taken out to pay off your mortgage liabilities.

Portability
Portability is a term used to describe a mortgage that can be transferred between properties when you move from one house to another.

Redemption
Redemption is when you pay off your mortgage, when you remortgage, or when you move to a new house.

Remittance Fee
A remittance fee is charged by a lender for sending the amount of a mortgage to your solicitor.RemortgageA remortgage is a loan taken out from a new lender or a loan renegotiated with your existing lender to pay off your existing mortgage. This is done to decrease the interest rate you're paying or to raise extra capital.

Repayment Mortgages
A repayment mortgage is when part of your monthly payment goes toward the interest and another part of the payment goes toward the principal. This is also known as a capital and interest mortgage. If payments are made regularly, the entire sum of the loan will be repaid by the end of the term.

Retention
Retention is the amount that your lender keeps pending until certain conditions of your mortgage are met.

Repossession
Repossession is a legal process by which your mortgaged property comes under the control of your lender due to incomplete repayment. Your property may then be sold at public auction.

Right to Buy
Right to buy means that you are legally able to purchase the property at a discounted rate if you've been a tenant for a long enough period of time.

Sealing Fee
A sealing fee is an amount charged by your lender when you repay your mortgage.

Self Certification of Income
Self certification of income means that you confirm how much you earn, and the lender does not need proof of your income from a third party. Self certification is useful for self employed people or contract workers.

Shared Ownership
Shared ownership is a scheme devised by housing associations that requires you to pay mortgage payments on the part of a property that you own while you also make monthly rent payments on the portion of the property owned by the building association.

Solicitors
Solicitors are the people who give legal advice and carry out all the legal work for mortgage and remortgage transactions.Stamp Duty Stamp duty is a tax paid to the government on the purchase of a property.

SVR
The SVR, or standard variable rate, is the lender's own base rate. It is subject to change at any time depending on the lender. The SVR will fluctuate based on the Bank of England Base Rate.

Structural Survey
A structural survey is the thorough inspection of a property carried out by a professional surveyor.

Tenure
Tenure means the type of rights a person has over a property or the land it stands on. Tenure could be freehold or leasehold, for example.

Term
The term of a mortgage is the number of years over which you plan to pay your mortgage off.

Tie-in Period
A tie-in period is an amount of time for which you are bound to a lender. Tie-in periods often exist with special mortgage deals like fixed, capped, or discounted rates. If you move your mortgage to a different lender during this period, you are subject to an early redemption fee.

Title Deeds
A title deed is a legal document that validates the ownership of your property. A title deed proves your true and legal right to your property.

Transfer Deed
A transfer deed is a legal deed used for transferring the ownership of your property to a buyer.

Unencumbered
The term unencumbered means that you own your property outright with no mortgages or loans against it.

Valuation
A property valuation is a survey conducted on a property by a qualified surveyor in order to assess the value of the property. This valuation is done on behalf of your lender so that they are able to confirm the value of your property.

Variable Rate
A variable rate means that your interest rate may change from month to month thereby causing your payments to fluctuate monthly.

Vendor
A vendor is the person from whom you purchase a property.

High Ratio Mortgages

High Ratio Mortgages
by Mary Anne Murphy

Do you know what the definition of a high ratio mortgage is?

High ratio mortgages are when you get a loan that covers more than 80% of the value of the property you have mortgaged, in other words the loan value to the home value ratio is higher. When you buy your home, the ideal situation for loans, and for banks, is for you to put down a 25% down payment. However, most people are not able to do this because the cost of homes has gone up considerably from the past.

So, if you are not able to put down 25 percent you can still buy your home with the high ratio mortgages. With this type of high mortgage loan you will be able to put a down payment of 5 percent on the purchase price or in some cases even zero percent down. This will allow you to buy the home you want without you having to break the bank and put yourself into huge debt to come up with the 25 percent.

So how do the high ratio mortgages work? When you get a conventional mortgage the lender will insure the loan themselves because this means less risk for them. Lenders will want to make sure that if you default on your mortgage and the bank needs to force the sale of your home, that there will be enough equity in the property for the bank to get their money back. With the high rate mortgage loans you will have to get default insurance through a third party. The insurance is the key to the high ratio mortgage loans. If you don't have it then you won't be able to find any major lenders that will let you put a down payment of less than 25 percent. The reason for this is because the insurance will protect the lender's interests. Mortgage insurance companies will cover any deficit for the lender if there is not enough equity in your home if you default on the mortgage.

The purchase of mortgage insurance will add to the cost of buying a home but instead of paying for this upfront, most lenders will work the cost of your mortgage insurance into the mortgage payments. It is a good idea to speak to your mortgage broker for all of the details.

Now that you know how it works you need to know who can qualify for a high mortgage loan. The answer is that anyone that is qualified to buy a home can qualify for the high ratio mortgages. Obviously, there will be other factors that are included to determine if you qualify but this is something you will have to figure out with a mortgage lender. Some of the things that will be taken into consideration are how much you make, home much debt you have and so on.

So, if you want to buy a home and you need to do the high ratio mortgages than you will want to talk to a lender to find out what you need to do. Buying a home with high mortgage loans is definitely the way to go if you can't put down the 25 percent down payment. So get started today, learn more information about these mortgages and talk to a lender.

Mortgage: How mortgages work

Mortgage: How mortgages work

A mortgage is "the pledging of property to a creditor as security for the payment of a debt." In plain terms, it is the legal contract that says if you don't pay the loan back (along with all of the fees and interest that are included with it), then the lender can have your house.

• You take out a loan based on how much you can afford and the value of the property, for a length of time agreed between you and the lender
  

• You are charged interest on the loan, usually based on the Bank of England base rate, which is reviewed monthly
  

• You pay the mortgage back in one of two ways, repayment or interest-only
  

• You can choose different deals for your interest rate, such as fixed or discounted
  

• If you've had financial problems in the past and are finding it difficult to get a mortgage, the Council of Mortgage Lenders (CML) has a leaflet that may help.

California Reverse Mortgage

California Reverse Mortgage
by Simon Lowa

All of us are looking for financial security at the end of the day and hence, we take various steps to insure our future through different forms of investments. A house is perhaps the single, largest investment which an individual will usually make during his lifetime. A substantial amount of financial resources are invested to not just buy a house but also to make it livable and maintain it thereafter. When an individual is in active service with a regular salary or income coming in at the end of each month, it is possible to maintain a house and a certain standard of living. The problem, however, arises when you have retired from regular service and the inflow of a regular salary has stopped. At times like this, a need for financial resources may arise at any point of time and it is then that your house will prove to be a sound investment. A California reverse mortgage, therefore, is the best form of a special category of home loans for any retired, senior citizen residing in California and having a property to his name.

A California reverse mortgage allows the home owner to convert the equity on his house into cash and this amount can be paid to the borrower in a number of ways, be it a lump sum payment or monthly installments. The payment on the California reverse mortgage on your home can also act as a supplement to your funds and social security provisions, if you so desire. In fact, this is one of the most feasible forms of home loans as it does not require any form of repayment on the mortgage for as long as you use the mortgaged property as your primary residence. Also, any of the fees or charges associated with the reverse mortgage plan can be easily financed as they are included as part of the loan.

The payment made to the borrower for a California reverse mortgage is not taxable, as it is just a borrowing shown against your home and since you have already paid for your home when you purchased it, you need have to make any further payments for it. All that the borrower needs to pay towards the mortgaged property are the property taxes, maintenance costs and hazard insurance for the property. The amount of mortgage loan on your house will only become due and payable once you have passed away or have ceased to use the mortgaged property as your primary residence. If the spouse of the borrower is also a legal co-owner of the mortgaged property, then the benefits of such mortgage will also extend to the spouse. The spouse can; therefore, continue to reside on the property till they pass away or decide to move on.

In the event that you decide to sell off the property, which you have placed for a California reverse mortgage, the balance amount of the loan on the property will become due and payable. The borrower can only claim such portion of the sale proceeds from the house, which is over and above the loan balance due. The biggest advantage of the reverse mortgage scheme is that as the house itself stands for the loan, there will never be a debt on the borrower or his heirs and hence more and more retired American citizens, who are homeowners, are opting for this form of house loan and therein, lay the popularity of the reverse mortgage plan. So, if you too have led an independent and financially secure life so far and hope to spend the last days of your life in an equally comfortable and financially independent manner, then the scheme of putting up your house for a reverse mortgage loan is just perfect for you.

Having Trouble Paying Your Mortgage?

Having Trouble Paying Your Mortgage?
by Joseph Kenny

Taking out a mortgage or a debt consolidation loan, should not be taken lightly. If you rent a home, you are a tenant, if you do not pay your rent., the landlord can evict you. If you own your own home, the company who holds the mortgage or loan can also evict you if you fail to make the payments. The big difference is of course that if you rent, and you are evicted you just have to find another place to rent.

If you are a homeowner, the consequences can be far more severe. You could loose your deposit that you originally put down on the house. As well as the lot of the equity that you have built up and a large part of any improvements like a new kitchen or extension that you have paid for.

Once you start down the repossession road with a mortgage holder that has a lien on your home. It can be incredibly difficult and expensive to avoid an impending repossession order. The best way to deal with this kind of circumstance is to not get yourself into that position in the first place. You need to stick to your agreement with the when the as best as you possibly can.

When taking out a mortgage or a debt consolidation loan you must seriously consider if you can afford the monthly repayments. You must not only consider if you can afford the payments now, but also, if the payments go up because of interest rate rises, will you still be able to pay what is owed each month?

A good mortgage broker will be able to calculate how much you will have to pay if the mortgage interest rate goes up by a certain amount. It is very important that you don't assume the mortgage payment will always be the same, in these difficult financial times. It is quite possible for your mortgage payments to increase considerably.

For example, if your income were £1000 per month, and you took out a mortgage that cost £500 per month. You will probably struggle to make those payments. When you took out your mortgage you wisely decided that £300 per month was what you could afford. Nevertheless, what happens if interest rates increase over two years, and raise your mortgage payments to £400 a month. Can you still make that payment comfortably? Or will it prove too much to handle? This is what can happen with mortgage payments, that is why you need your broker to calculate what the mortgage could possibly go up too, that way you can decide still be able for your monthly payments.

If you get into difficulties do not bury in your head in the sand, you must take action as soon as you feel you are getting into difficulty. There are some options available that could get you out of difficulty. You may consider changing your home loan to a different type of mortgage that may be more suitable for your changed circumstances.

An interest only mortgage can be a great to help you out for a long period of time. Perhaps several years, while your circumstances change. Interest only mortgages are considerably less expensive per month than regular mortgages.

Of course, you are not paying off any of the money that you owe, on the other hand, you are holding on to your home and everything that you put into it financially and otherwise. A few years from now the rates may go down and you may have a promotion at work that allows you to again convert back to a regular type of mortgage.

Another option is to take out a pension mortgage; this is similar to an interest only mortgage. Except when the mortgage reaches its end, the amount that is still owed can be paid off using part of your pension contributions. You should keep in mind that your employer probably contributes a significant amount to your pension, so will be in effect, helping to pay off your mortgage.

A very similar interest-free mortgage system is the endowment mortgage. Like the pension mortgage, you pay only interest on your mortgage, then at the end of the mortgage term. Your endowment, life insurance will pay off the money that is still owed the mortgage company.

These can be good options should you find yourself in financial difficulties and are having problems paying any kind of monthly mortgage. However, as stated earlier you must not wait until the bailiffs are knocking at the door. As soon as you think, you are having problems contact a qualified online broker, who can help you with quality advice as to the best way to deal with your mortgage problems.

+ Endowment Mortgage

Mortgages and Remortgages

Mortgages and Remortgages
by Andy Silk

If you're using a mortgage to buy your home but are not sure which one will suit your needs best, read this handy guide to mortgage types in the UK. Taking out a mortgage has never been easier.

Variable Rate Mortgages: the lender's mortgage interest rate may go up or down during the life of the mortgage. This usually happens (though not exclusively) soon after a Bank of England interest rate change. Most people consider that opting for a variable interest rate mortgage is best done when interest rates in general are likely to go down. They can then take advantage of these lower rates when they occur. It's a bit of a gamble but if they are right, it could really work in their favour.

Fixed Rate Mortgages: the lender will set the APR (Annual Percentage Rate) for the mortgage over a given period of time, usually 2, 3, 5, or 10 years as an example. The APR for the mortgage may be higher than with a variable rate mortgage but will remain at this 'fixed mortgage rate' level, even if the Bank of England raises interest rates during the term of the mortgage agreement. Effectively, you could be said to be gambling that interest rates are going to go up, above the level of your fixed rate mortgage interest rate. If this happens, your mortgage repayments will be less than with a variable rate mortgage.

Tracker Mortgages: have a lot in common with variable interest rate mortgages in that the APR of the mortgage can go up or down over the term. The key difference between a tracker mortgage and a variable interest rate mortgage is that the lender will set a margin of interest to be maintained above the Bank of England base lending rate. So, as the Bank of England, in line with monetary policy, raises or lowers the base lending rate of interest, so the tracker mortgage interest rate will follow. Over the lifetime of the mortgage, it could be said that the borrower will neither be better off nor worse off because of interest rate fluctuations.

Repayment Mortgages: you will be required to pay a proportion of the capital element of the mortgage (how much you originally borrowed) together with a proportion of the interest that will have accrued on the capital element, with each monthly repayment. In recent years, repayment mortgages have become highly popular over the previous favourite - endowment mortgages. This is because, unlike endowment mortgages, as long as you keep up your monthly repayments, you are guaranteed to pay the mortgage off at the end of the agreed term. Monthly repayments may possibly be a little more expensive but many borrowers say that at least, they have peace of mind.

Interest Only Mortgages: very common amongst borrowers who are looking to secure a second property. The reason being, with an interest only mortgage, the borrower will only be required to make monthly repayments based on the interest element of the mortgage. The lender will require the capital element to be repaid at the end of the term of the mortgage. Again, as with variable rate mortgages, this could be regarded as being a little bit of a gamble because the borrower is hoping that the property will be worth at least as much at the end of the term of the mortgage, as it was at the beginning, allowing it to be sold and the capital element of the mortgage to be paid off. Any capital gain on the property (although possibly subject to tax) is yours. It could be argued that experience tells us that property prices rarely go down in the long term, but it can never be guaranteed.

Capped Mortgages: a combination of the fixed rate mortgage and the variable interest rate mortgage. A cap or ceiling is fixed for a set period of time. During this period, if interest rates in general rise, above the capped interest rate, the borrower will not pay anything above the capped level. Correspondingly, if interest rates fall, then the rate of interest charged by the lender, will also fall so it could be argued that the borrower gets the best of both worlds. It could also be said that a capped rate is like having a set of brakes on your mortgage, but beware, the lender is also likely to charge a redemption penalty on this type of mortgage, making it less portable than some of the other options available.

Discounted Rate Mortgages: here, the lender may offer a reduced level of interest to be charged over a set period at the start of the mortgage term. Many first time buyers or people who expect their salaries to rise considerably during the discounted rate period opt for this type of mortgage but it should be noted that the reduced rate period will come to an end and when it does, the monthly mortgage repayments to the lender may rise sharply. The lender may also charge a slightly higher rate of interest compared with other types of mortgage over the rest of the term of the loan in order to recoup the monies that they have foregone during the discounted rate period. There's no such thing as a free lunch!

Offset Mortgages: an interesting newcomer to the UK mortgage market, although still comparatively rare in terms of choice and availability. The mortgage is linked to the borrower's current account. Every month, the minimum mortgage repayment is paid to the lender but where there is a surplus of cash in the account after other uses and debts have been paid, this is also paid to the lender. Over the months and years, the borrower can potentially pay off their mortgage much quicker and have accrued much less interest than with other types of mortgage provided that a reasonable surplus is maintained in the current account.

So, to sum up, the UK mortgage market has many types of mortgage; any or all of which may be open to the potential borrower, dependent on their circumstances. If you're looking to take out a mortgage, remember that whilst your broker will take care of the vast majority of the work on your behalf, it may still take around 3 months to complete as there is an enormous amount of work that goes on behind the scenes with solicitors and searches, valuations etc. At least now you're armed with all of tehinformation you need on each type of mortgage available to you.

Mortgage: What is a Self-Certification Mortgage?

Mortgage: What is a Self-Certification Mortgage?
by Bill Stone

A self-certification mortgage is a mortgage designed for people who are unable to provide proof of income. This type of mortgage was originally designed for the self employed who historically experienced difficulty obtaining a loan with 'high street' lenders due to not having audited accounts available.

If you are unable to show your earnings due to being self-employed, a seasonal wage earner, or anyone with irregular earnings such as a contract worker or commission-based employee, or in salaried employment with a supplementary source of income, an unsalaried company director, or varying other reasons - a self-certification mortgage could be the best option for you.

• Certify Earnings
  

It allows borrowers to certify their own earnings without having to supply documentation, such as payslips. You declare what your income is but generally you do not need to provide any proof. You can apply if you are employed or self employed. It can also be suitable for professionals who often start on a low salary, but whose incomes can rise rapidly. It has also found favour with salespeople and other workers who receive a high proportion of their income as commission or bonus. Even though you may have achieved high earnings this way for years, commission or bonus may still not be considered in calculations by high street lenders.

A self-certification mortgage is suitable for applicants whose income is not easily verifiable, like the self-employed or those that receive commissions. If you're self-employed, a contractor, have irregular income or multiple jobs, you are probably one of many who know you can afford a mortgage but have difficulty proving your income. They are also quite good for people just starting out in a new career with good steady income and a fair amount of deposit behind them.

It is ideal for self employed people who perhaps have not been in business for the required three years or cannot produce accounts for a three year period but can demonstrate usually through an accountant's reference that they can meet the mortgage payments.

When applying for this type of mortgage you will be required to state your expected annual earnings. The mortgage will be offered on the basis of your likely income rather than you having to provide any documentary evidence.

• Deposit
  

A self-certification mortgage used to require a higher deposit of up to 25%, but now some lenders can offer up to 90% loan to value. Lenders will usually lend up to three and a half times declared income or two and three quarter times joint income. However, with a deposit of 25% or more a self-certification mortgage can usually offer up to five times your declared earnings.

It caries a higher rate than standard mortgages because statistics show most businesses fail within the first two years of trading. So if you were to be left with heavy debt there is a possibility you could lose your home. However, some mortgages are better than others, and, if cash flow is a problem, it's worth checking out those that offer payment holidays and the facility to pay more when you can.

Fortunately there are a number of competitive self-certification mortgage products available, depending on your circumstances and individual requirements. They are now supported by an ever increasing number of mortgage lenders, including mainstream as well as specialist lenders. Interest rates charged are now far more attractive.

It has become increasingly popular in recent years. However, you should always remember that you will be asked your income on the application. Just because you are in a self certification situation, you should only put down your actual income. To do anything else would not only be fraud, but could also mean that you are unable to afford your mortgage repayments, especially if mortgage rates rise in the future.

Mortgage: Tips to Pay off Your Mortgage Faster

Mortgage: Tips to Pay off Your Mortgage Faster
by Dr. Doug Willen

Many people today are unhappy with their mortgage. When we purchased our home, we talked ourselves into the idea that paying down our mortgage would get easier as the years went by. We rationalized that, in a few years we would be making more money, and even though our current mortgage payment was a stretch... It would get easier as time went by.

However, this isn't always the case.

Some of us did make more money, but our expenses went up, too.

Some people have a variable rate, and your rate, and monthly payment may now be higher than when you first started to pay on your current mortgage.

Some people may even have a negative amortization loan. Commonly called a Neg Am, which means you pay less than your scheduled interest-only payment, and your principal actually grows each month.

This is the exact type of mortgage that my wife and I selected a few years ago, and it looked so "flexible" at the time. Ours was called an "Option Arm", meaning you could pay one of 4 options of mortgage payments. Option one was less than interest only. Option two is interest only. Option three is a full principal and interest payment based on 30 year payoff. Option 4 is a full principal and interest payment based on a 15 year payoff. At the time, we could only afford option one, which means we would be going down the financial drain, at a rapid rate.

We, like so many others, base our budget, on option one. And now our principal has literally grown, by over $25,000 in the last few years. With the home values down in our area, we will be upside down in our house if we don't do something to correct it. It makes me sick just to think about it.

So...What are the solutions?

Well the easiest solution is to simply pay more money each month towards your principal. This works.

But the problem is... "Where does the extra money come from?"... Do you have it lying around? How much more can you send in each month, and how many months in a row, can you keep that pace? But if you could send it in, you would be out of your mortgage many moons faster!

Another good idea is the Bi-Weekly plan. Bi-weekly, is simply paying your existing payment, in two chunks, twice per month, instead of once. For example, if your mortgage payment was $1000. Sending in $500 twice per month is an effective strategy, for paying off your mortgage faster. It has the potential to knock off, 5-7 years on a brand new 30 year mortgage. I never figured out, why less than 2% of Americans take advantage of this technique.

Another tip is to refinance at a lower interest rate. We may actually be seeing lower interest rates on the horizon. We've seen a drop in the beginning of 2008 already. Be careful, to really do your homework, and shop around. Compare all the hidden costs, too. Some lenders offer a better rate, buy you pay a higher closing cost. So, really crunch the numbers, and make sure it's a good deal, before you sign.

Mortgage Loans: Loan After Bankruptcy

Mortgage Loans: Loan After Bankruptcy
by Mary Wise

Filing for bankruptcy can be a very stressful process. Not only does it mean that you are up to your neck deep in debt, but also that you have no means of repaying it, at least any time soon. After the bankruptcy is discharged, you will be debt free, but it will have left a huge stain on your credit report that will stay there for at least 10 years. It does not sound good, now does it?

The main concern people have after going through bankruptcy is whether they will be able to get finance in the near future or not. This is not an easy question at all, as some other things have to be taken into consideration, such as monthly income, possession of assets to pledge as security, etc. As a general rule, it will be hard to obtain finance after bankruptcy, but it is completely feasible. There are no reasons to believe you will not be eligible for a loan.

When It Comes To Mortgage Loans

You are thinking of buying a property, a home of your own. It does sound wonderful, you cannot wait to be able to see your kids running around the spacious back yard after a succulent barbecue. But there is only one issue... your bankruptcy file has just been discharged. As unlikely as this will appear, you will still be able to obtain the finance you need provided that you meet some requirements.

Mortgage Loan After Bankruptcy Requirements For Approval

This is no exact science, some lender might or might not follow the same rules. I will mention here the most common qualification requirements for anyone who is thinking of applying for a mortgage loan after going through bankruptcy.

• 1. A couple of years of good credit history
  

This is not a must, but some lenders might feel more reassured and more willing to finance your dream if they see that after filing, you began making timely payments on all your bills. This will certainly prove that you have left behind the rough patch that led to you filing for bankruptcy and are ready for a new and fresh start.

• 2. A steady job and salary
  

This is definitely the most important of requirements and the only one which is also a must. The other ones might be negotiable, but not this one. It shows the lender that you have high repayment capabilities, which is essential as this is a high-risk lending procedure.

• 3. Down Payment
  

Most lenders, if not all, require a down payment, at least a small one. Not many lenders are willing to provide 100% finance on a property, but if you are lucky you might be able to find one who will. It is a matter of thorough research and tons of patience, but if your dream house is your ultimate goal, I am sure you are going to do everything in your power to get a good deal on the mortgage loan.

It is not impossible to get a mortgage loan after going through bankruptcy, you just need to let some healing time go by, one year in the least. I hope you all the best, and may you find the right lender and the perfect home loan.