Posts Tagged ‘Lenders’
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How To Choose The Best Mortgage
A mortgage is a financial investment which involves a large amount of money, and it is important for you to do your research before deciding which company you want to go with. While many mortgage professionals are honest, they are looking for a large commission in helping you obtain a loan, and will often look out for the best interests of their job rather than you. Because of this it is important to take the steps necessary to insure you get the best possible deal.
How Is Your Credit?
The first thing you should do before applying for a mortgage loan is to review your credit report. Errors on your credit history can lead to an increase on the interest rate and cost of the mortgage. This is something you want to avoid. It is also important to understand the terms used in the agreement.
Which Type Of Mortgage?
You should know what type of mortgage you are applying for and how it fits in with your financial goals. Do you want a mortgage with an interest rate which fluctuates, or would you rather have one that is fixed?
Which Mortgage Company?
This is one of the questions you will need to answer when choosing which mortgage company you want to use. You should also know how much money you need to borrow and how much you can afford to pay each month. If there are certain things you don’t understand, you should consult a professional. There are many counseling services which are available to assist you. Like any financial expense which involves large amounts of money, you should shop around to find the best service.
Adding Up All The Costs
Many different companies will have a variety of different closing costs and interest rates. Your goal should be to find the company which offers the best service for the lowest price. Some lenders will try to estimate the cost of the closing, and this is something you don’t want. You want the exact prices, not estimates. If the company can’t give you the exact cost of all the fees up front, it would probably best for you to take your business some place else.
You Can Always Walk Away
It is also important to make sure you aren’t pressured into signing any agreements. Be wary of any lenders who try to get you to borrow more money than you need. If they try to pressure into getting the loan, this generally means they are more concerned with making money than helping you get the best mortgage. Companies like this should be avoided. If you don’t understand certain terms of the agreement, ask that a copy be made of it so that it can be reviewed with a lawyer before choosing to sign it.
Honesty Is The Only Way
Never put false information on your loan application, even if the loan officer urges you to do so. Loan officers who do this should be reported to the FTC. It is also a good idea to avoid purchasing credit insurance which is not necessary. If you feel that you need insurance, contact other companies other than your lender to see what deals they offer. At the closing you should make sure you carefully read the document before signing it. Don’t let anyone rush you into signing it without reading.
If you find that the terms of the agreement have changed, you should have not problem terminating the deal. You don’t want to sign a document which will put you in a financial strain later on. A mortgage is one of the most important parts of your personal finance, and you can’t afford to deal with a unethical lender. Making a mistake when choosing a mortgage can lead to years of financial headaches if you work with a lender who doesn’t have your best interests in mind.
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Home Mortgage Loan Mistakes Most Homebuyers Make
MISTAKE #1: Over shopping your loan
Your credit score is based on the perceived risk associated with extending you credit. Over the years, the credit reporting agencies have determined that a borrower who seeks credit from many different lenders is riskier than others. Therefore, they decrease your credit score each time a lender pulls your credit report.
Each time you call a lender seeking the best possible rate and terms for your home mortgage, he has to pull your credit report. This is factored into your credit score, and a lower score decreases your likelihood of getting the best rate and terms.
While some consumers are ONLY focused on rates, you should seek the guidance of a National Association of Responsible Loan Officers member that is willing to speak with you about your loan options. There are literally hundreds of loan products available and every borrower has a different financial situation and financial goal. We highly recommend having a consultation with your loan officer so they can tailor a program to meet your individual needs instead of focusing exclusively on rates and points. You may likely find a better product than the one you were shopping for.
MISTAKE #2: Trying to hide past financial difficulties
One of the important services a responsible loan officer offers is helping you overcome past financial difficulties that may hinder your ability to have your loan approved. Your loan officer is on your side.
Supply the information that will help your loan officer provide you with the best possible rate and terms and minimize the impact of your past credit history. The fact that you have recovered from past financial problems makes you a better risk than others who havent yet faced challenges. Overcoming past financial difficulty proves that you honor your commitments and dont give up.
MISTAKE #3: Allowing a loan officer to put misleading or untruthful information about your income, expense or cash available for down payments on a loan application in order to get a loan
Providing untruthful information on a loan application is fraud. Mortgage fraud is prosecuted by federal authorities, and they will find out about the fraudulent information. Do not allow yourself to become an accomplice of a loan officers fraudulent loan application.
Even if a loan officer fills in the information for you, if you do not believe the loan application is 100% truthful, you should refuse to sign it until the loan officer corrects the application. While many loan officers try to help borrowers by misstating the facts, the truth is that they are simply getting themselves and their borrowers into a lot of trouble.
MISTAKE #4: Borrowing more than you can repay
All of us understand that we may have to stretch our monthly budgets a bit to afford the homes we want. However, you will put your entire financial health in jeopardy by buying a home you simply cannot afford.
If you buy an expensive home and find you cannot make the monthly payments, you could face a huge loss when you have to sell that home quickly to get out from under your mortgage. Or worse, you could be forced into foreclosure or bankruptcy.
It is much better to be patient, buy a home you can comfortably afford, make payments, build equity and then transition into a larger home after a couple of years. Yes, the larger home will cost more then, but the home you purchased will also have appreciated during that time. Most importantly, you will have built a successful financial foundation that allows you to experience all of your dreams, including that dream home.
MISTAKE #5: Relying on interest rate advertising
Some loan officers use interest rates to get your attention; however, they may actually end up costing you more. Such rates are often derived by using a 30-year mortgage coupled with an accelerated payment plan.
You may decide you like that option, but you cannot directly compare the interest rate on that mortgage to other opportunities. This loan could cost more than other mortgages with seemingly higher interest rates.
It is critical to find a loan officer you can trust to review the options available to you and the best possible rates for your financial situation. Only a responsible loan officer can give you all of your options in an understandable way.
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Good Mortgage Broker vs. Bad Mortgage Broker
According to the NAMB (National Association of Mortgage Brokers), two out of three Americans work with a mortgage broker to purchase a home because of the brokers expertise and wide selection of loan products and lenders. However, with so many so called experts out there, how does one separate the wheat from the chaff? How do you know if a broker is honest? And how do you know they’re an expert or not?
The NAMB says that over 70 percent of brokers are legitimate, that is they have safeguards and policies in place to make sure that they stay on the straight and narrow. So what about the other 30 percent? Well, the whole 30 percent isnt bad, but just as in any classroom, youre going to have those at the top, some in the middle, a few at the bottom, and others who simply dont show for class. Obviously, those at the bottom and the no shows would not be your first choice if you were going into surgery and they were holding the scapel, nor should they be handling your loan when you purchase a home or refinance.
Because of the surge in numbers of mortgage brokers in the past few years, there are plenty of incompetent and dishonest brokers out there. In order to avoid the 30 percentile, I offer the following tips to help you find a mortgage broker that is not only an expert but honest and reputable as well:
1.Dont believe everything you hear. Asking friends or family to recommend a mortgage professional is usually the first place people start. However, how do they know the broker is reputable and trustworthy? Check with your state regulatory offices and licensing bureau once you have some referrals. Better to be safe than sorry.
2.Use an NAMB certified mortgage broker. Brokers certified by the NAMB practice the highest ethical and professional standards in the industry. There is a Find a Broker link on the NAMBs website at www.namb.org.
3.Use an Upfront Mortgage Broker (UMB). These brokers disclose their fees to customers in writing in advance at the customers request. They also disclose the wholesale prices they receive from lenders. For a list of UMBs visit www.mtgprofessor.com.
4.Honesty is the best policy. If a mortgage broker suggests that you lie on your loan application in any way, heshe is most likely in the 30 percentile. Walk away.
5.They need to show you the money. If a mortgage broker doesnt disclose your closing costs in three business days, its probably best to take your business elsewhere.
6.If youre not bleeding, they shouldnt be applying pressure. A mortgage broker who pressures you into anything you are not comfortable with probably failed ethics. No reputable broker will pressure you into anything you dont feel comfortable with.
7.There are no stupid questions. Does the mortgage broker answer all your questions to your satisfaction? Are hisher answers straightforward, honest, and respectful?
8.Do you have a reservation? If you feel comfortable with whom youre working with and feel like they have answered all your questions and put all your reservations to ease, youve probably found a good mortgage broker.
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Glossary of common terms used during the mortgage process.
APR – 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 marksstandards – 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.
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Getting the best mortgage loan with a bad credit
For most people, applying for a mortgage loan to buy a house is one of the biggest and the toughest lifetime financial exercise. It gets even more difficult for those who have had a bad credit history. Even though people with bad credit are at a disadvantage, lenders do recognize their financial problems and needs and offer them mortgage deals that might not be the best but which at least provide them with an opportunity to own a home.
In order to get the best possible mortgage options, a borrower has to impress upon a lender that in spite of a bad past, he is financially responsible. To convince the lender of your credibility, the foremost thing to do before applying for a mortgage loan is to start clearing the red flags that mark your credit report. Begin by reducing your credit card debts as much as possible. Similarly pay off other debts like car loans or auto debts, particularly if they have more than 9 monthly installments left, since auto debts with less than 9 payments are generally excluded from debt calculations.
The next best thing to do is start saving big for a good size down payment on your home. Since you fall in the bad risk category for a lender, the bigger the down payment, the more it assures the lender of being able to recover his cash in the event of a future default. Do remember to include closing costs when saving for your down payment as they can add as much as 3% to the purchase price. Overall, saving more than 20% of the total purchase price should improve your credibility.
The borrower should target and reduce his monthly liabilities to less than 50% of his total income in order to give confidence to the lender about his ability to repay his mortgage loan without any defaults. It is never to late to get into better financial habits, like reducing the use of credit cards and postponing large purchases. At this point of time, it is wise to hold on to your present job and not make any unnecessary jumps. A steady employment of over two years adds to your image as a consistent and stable person.
Lenders will go through your bank statements to figure out your expenses and incomes. Any unusual entry may raise question marks. If a friend or family member gifts you money to help you purchase your house, make sure the lender know it is a gift and not another loan. Reveal all your liquid and cash reserves that you own since lenders judge your paying capacity from them and generally prefer that they have at least two months reserve of the monthly mortgage payments.
Last but not the least, even factors like prompt payment of house rents, phone bills, insurance premiums and other financial bills add to your credit worthiness. Finally, even after you have spruced up your credit image, make sure to approach more than one lender and compare their lending terms and conditions in order to get the best mortgage loan.
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Get a Mortgage With Bad Credit
In the old days if your credit history was less than perfect, the only mortgage you would be offered would be one with extortionate interest rates from a shady broker.
Nowadays, there are more sympathetic lenders who will offer you a bad credit mortgage without charging you sky-high interest charges. And because there are more lenders out there now offering these non-standard mortgages, it has driven the interest rates on them down which is good news!
The term Bad credit can be anything from County Court Judgements (CCJs) on your credit file to something like having missed a mobile phone payment or made a few mortgage payments late.
More and more people now have a bad credit file. Rising inflation and credit companies making it easier for people to borrow means that just because you have a bad credit file, you are not rubbish with money!
So, what can you do to get a mortgage, without being ripped off by greedy lenders?
First of all, if you are considering using a mortgage for debt consolidation, do bear in mind that it will probably cost you more in interest in the long run. And also the debt will be secured against your home, so you must really ensure that it is affordable to you.
And when it comes to choosing a mortgage, do not apply for the first mortgage that you see. TV adverts saying that they can help people with bad credit are all very well but many of them charge as much as a 3% fee to arrange a sub-prime mortgage. So, on a 150,000 mortgage, they get 4,500!
Get independent advice from an independent mortgage specialist as well as doing your own research. Bad credit no longer has the financial stigma it used to, so hold out for the right deal for you.
How the web can help you if you are looking for a bad credit mortgage
If you have a poor credit history, finding a mortgage specifically for people with bad credit can be difficult. And even if you do find a mortgage, how do you know that it is the right one for you?
Using the internet can help. There is tons of information on there relating to bad credit mortgages such as free guides, as well as access to providers of bad credit mortgages.
Going online also allows you to compare multiple providers so that you can look at all the product features and benefits to decide whether it is right for you.
There are also websites that accept online mortgage applications and there are hundreds that offer free and immediate online quotes. This means that you can see how much you can really afford to pay out for a mortgage.
Steps to improve your credit rating
If you have recently applied for credit and have been turned down or you have been offered credit but at higher interest rate than advertised, then this is probably because of your credit rating.
Even if you never miss payments or do not have any debts such as a loan or credit card, you could still have a low credit rating.
This is because you can be penalised if your credit record is empty. Prospective creditors like to see positive entries on your credit fie and if you have no financial history, they are unable to judge how well you manage your credit.
The solution is to develop your credit file by adding positive entries on your record. Running bank and savings accounts as well as paying your mobile phone bills on time are a good start as are well managed credit card and store card accounts.
If you do not have any credit accounts, then gradually apply for them. Dont apply for lots of credit all one go as this will look like you are in financial distress. Instead, get one card at a time with a low credit limit and pay the balance off in full every month. Open up a bank and savings account. And pay your bills on time even the small ones!
Start building a financial history gradually and over time you will find it easier to get credit, and at a better interest rate too.
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Free Mortgage Quotes
Attaining a mortgage quote is obviously helpful for the people who want to refinance their existing house and purchase a new house in the near future. While in the past this involved sitting through a sometimes arduous and always unnerving interview with a banker, the whole process has become simplified, thanks to the efforts of some companies who provide free mortgage quotes online. There are several companies who provide free mortgage quotes online. All you have to do it to fill a simple online form and send. The rest will be done by the companies who will process your information and quickly return the free quote to you as soon as possible. These quotes will enable you to plan your future in a better and efficient manner. You can get extensive information on fixed rate mortgages, variable rate mortgages and other capped mortgages. You will get an in-depth analysis of different options available to you. The free quotes will unravel the mystery that surrounded the different type of mortgages.
Advantage of Free Mortgage Rates
The advantages of free mortgage rates are many. The biggest advantage, of course, is that you can get the mortgage quote free of cost, giving you a good general feel of what the market is bearing. There are no charges, no hard efforts, and no interviews. By simply filling out a form on the website, you can get a number of free quotes from a wide range of lenders. In doing this, you will be better able to look at the bottom line across many loans and in so doing decide which option offers the best solution for you. The world of lending is riddled with hidden contract clauses and indecipherable language. So without proper and careful planning, you can become lost rather quickly.
The fast service provided by the free mortgage quote providers is another advantage. All the mortgage quotes on the web sites are customized. When you answer the questions on the online form and submit it, your answers will be immediately matched with lenders and brokers who meet your exact financing needs. Typically, you will receive the quotes from multiple lenders very quickly and there will be no long waiting.
Disadvantages of Free Mortgage Quotes
Like all other things, free mortgage quotes have both the positive and negative aspects. Sometimes, it becomes difficult to know whether the prices are competitive or not. We have to believe the information we get from the lenders and could do little if these rates are not reasonable. But because lenders receive thousands of leads a day, whereas your local bank may receive only a dozen or so, the online lender may offer unfavorable terms in an effort to sell to only the suckers. That is not to say that all do, however, but merely that you should verify any quotes by attaining at least one quote from a brick and mortar lender.
The quality of the lenders may be another reason to worry. To expand their business, new online lenders may promise terms they can never meet. While users can investigate the history and third party lending appraisals of the company, for the newest lenders it is difficulty to know the quality of their services only after dealing with them.
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Flexible Mortgage UK Mortgages to Specially Suit the Self-employed
Flexible Mortgage UK Mortgages to Specially Suit the Self-employed
While a person drawing a fixed salary every month finds it easy to repay loan in fixed monthly instalments, those with a fluctuating income will find it otherwise. In order to tap the potential of the latter group, which principally consists of self employed people and people whose income is largely contributed by commissions, flexible mortgages have cropped up.
A fluctuating income makes the case of these people inappropriate for regular mortgages because of two reasons. Firstly, lenders would not prefer a borrower with fluctuating income. Secondly, the borrower with such an income structure would himself find it difficult to make timely payments.
Flexible repayments, payment as and when you like, and the option to repay the whole of the loan at the time you want, are some of the qualities that flexible mortgages in the UK are characterised with.
Before you perceive this as the ultimate freedom, let us remind you that not all good things come for free. This aptly holds in case of flexible mortgages. The rate of interest charged on flexible mortgages is higher than the interest charged on the regular mortgages.
In spite of a higher rate of interest, the popularity of flexible mortgages in the UK sees no decline. Until the time an alternative to flexible mortgage comes, self-employed people will continue using it. The advantages of flexible mortgages have overshadowed its drawbacks.
Flexibility of repayments forms one of the most important advantages of flexible mortgages. As against the traditional mortgages where borrowers are required to pay a fixed instalment every month, flexible mortgages are easy on repayment rules. Consequently, in a month when the resources are not enough or when the borrower is incapable to make repayments at the normal rate because of loss, lesser repayments will be required. Similarly, when the borrower is in the capacity to pay more than what is required, he can make an overpayment. Paying less also means paying nothing. This is actually true though hard to believe. Payment holidays form one of the prime attractions of flexible mortgages. During a payment holiday the borrowers gets exemption from making payments altogether. The exemptions will depend on the borrowers regularity in the previous months and if sufficient balance of the loan has been overpaid.
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Flexible Mortgage Guide
In todays ever-changing world, people need more and more flexibility when it comes to borrowing and mortgages. With this in mind, more and more lenders are offering what they term as flexible mortgages. However, the term flexible can mean a lot of different things. If you are unsure about which mortgages are flexible and what the benefits of a flexible mortgage are, then this article might be helpful to you.
What does flexible mean?
Although there are a lot of mortgages that claim to be flexible, there are some things that define a truly flexible mortgage. There are four main characteristics you should look for when determining if a mortgage is flexible. These are:
Being allowed to overpay
Being allowed to underpay
Being able to take payment holidays
Interest is calculated dailyOverpayments
One of the best features of flexible mortgages is the ability to overpay. With traditional fixed repayment mortgages, there is no easy way for you to pay more than your fixed repayment each month. If you have a flexible mortgage, then you will have the ability to pay as much as you can each month. This means that during the good months you can speed up the process of paying your mortgage back. If you regularly overpay then you can save yourself thousands of pounds in interest payments.
Underpayments
Underpayments are another useful feature of flexible mortgages, but they should be used sparingly. If you are unable to make the repayment in a given month, then you can just pay as much as you can, effectively underpaying on your mortgage. Although this is good as it stops you from defaulting, there are penalties involved. The more you underpay, the longer the mortgage will last or the higher your repayments afterwards will be.
Payment holidays
Payment holidays are similar to underpayments, but they let you completely halt payment for a period of time. Although this might sound appealing, there are usually restrictions. Lenders will not let you take a payment holiday unless you have overpaid in the past, and after your holiday you will have to overpay again to get the repayments back on schedule. However, payment holidays are useful for people who are self employed or who want to take a break from work for personal reasons.
Other benefits
Another benefit of flexible mortgages is the ability to borrow back money from your mortgage. If you have overpaid in the past but are now in need of extra cash to fund home improvements or some other purchase, then you can borrow the money back that you have overpaid. Although you will be changing your mortgage terms again, getting a loan at the rate of your mortgage is the lowest personal loan rate you can possibly get.
If having flexibility and the chance to overpay and underpay is important to you, then you should definitely opt for a flexible mortgage.
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