Hot Tips For Getting The Best Mortgage Loans

A mortgage loan is one of the most basic types of loans you can get from a bank, and meets one of the most basic of human needs, namely shelter. To this end, it is not quite as demanding as getting loans geared towards other things, especially luxury items. Still, because of the sheer amount of money involved in getting a housing loan, you should do your homework first before applying for a mortgage loan to keep yourself from biting off more than you can chew. Here are a few tips to remember when considering a mortgage loan.

Shop for the House Before Applying for the Loan – like with most loans, it’s best to get an idea of what you want before applying for the loan itself. That way, when you actually present your case to the one approving your loan, you can give more solid evidence of what you’re intending to do with the money you’re borrowing. To this end, though, you should shop within your means. Only consider houses that are within your budget, and situated within neighborhoods that are within your financial capacity as well. While mortgage loans are also available for people who are intending to finance the actual building of a house from the ground up, it’s easier to get a loan when you shop for a house that’s FSBO (For Sale By Owner).

Keep your Credit History and Financial Capacity in Mind – this will be a major consideration of the person approving your mortgage loan. Bad credit history ratings or unemployment are sure fire snags that will weigh heavily against your favor when applying for a mortgage loan. Make sure that you are financially stable and can back up the loan you’re going for, with enough income to cover the interest rate as well as the monthly balance of the mortgage given it’s deadline to finish paying it.

Use a Mortgage Loan Calculator and Consider Different Loan Packages – not all loans for mortgage are created equal. Some banks offer higher interest rates than others, and there are those that offer longer terms of payment for larger initial downpayments. Still others allow for additional payments on the mortgage aside from the monthly due and interest, and these additional payments are applied directly towards lessening the overall sum of the loan’s principal. With all the different packages available, choose one that you can work well with, and to help you with your calculations download a mortgage loan calculator program from the internet. This is an invaluable tool for keeping track of your mortgage.

Consider Using an Escrow – escrow accounts work in the favor of the lending institution; as such, getting one helps improve your odds of getting a base mortgage loan approved. An escrow account is essentially a separate account that you open that handles the taxes and insurance payments on your house for you. This favors the lender somewhat because escrow accounts are tied up with your mortgage, meaning the lender gets an additional bank account in your name. However, the advantage of an escrow account for the lendee is that it acts as a buffer for the additional payments that he or she would normally have to worry about aside from mortgage. With an escrow account, all payments are sent to the lender, and they take care of the paperwork and housing related bills for you.

Consider Investment Property Financing – if, and only if, you’re getting a mortgage loan to buy a house NOT to live in, but rather as an investment to resell later, you can apply for Investment Property Financing. The mortgage loan you get from this treats the property you’re buying as a commodity that you will eventually be reselling. The mortgage terms for this are different and a bit more lenient than that of a regular housing loan. Still, even if you intend to live in the house you’re buying, if you know that it’s going to be a temporary residence that you’ll be reselling in a decade or less, you should still be able to work it as an Investment Property loan rather than a straight Housing Loan.

Get Mortgage Protection Insurance – finally, be sure to get mortgage protection insurance. This will increase the monthly payments you have to make, but it has quite a few advantages. For example, if you happen to have only one primary breadwinner in the house that suddenly becomes unemployed, if the insurance policy ties in to that breadwinner as the sole person responsible for the mortgage payments, the insurance company will be liable to pay off the remainder of the mortgage off on your behalf. Tying a mortgage protection insurance plan into an escrow account helps keep things tidy, and while you may wind up paying a bit more monthly this way, the benefits far outweigh the extra cost.

How To Find The Best Mortgage Rates? Some Must Know Tips

Well, if you are planning to buy a house with the help of mortgage loans, then you should always try to select the perfect mortgage plan which is well enhanced with a low mortgage rate. Well, I would like to tell you that the mortgage rates have increased from the last few months. It is quite difficult to look out for the perfect mortgage plan which is well enhanced with a low mortgage rate. Well, if you are looking out for the best possible mortgage cost, then you should consider some of the major aspects.

Acquiring the mortgage plan with wrong rates could really prove out to be your worst mistake. You should always try to select a perfect mortgage plan that can simply prove out to be very much beneficial to you. You should always consider your financial situation before selecting the perfect mortgage plan for yourself. It is also a fact that there is no magic formula required for selecting the perfect mortgage plan. Well, if you are not aware, then I would like to bring this to your notice that mortgage loans are of mainly two types. They are fixed rate mortgages and adjustable rate mortgages.

1. Fixed Rate Mortgages

Fixed rate mortgage plans are gaining a lot of popularity in the market. Most of the home owners try to select the fixed rate mortgages so that they can easily improve their financial condition. In fixed rate mortgages, the monthly payments and the mortgage amount remains the same throughout the loan period. It is really the best method because you remain familiar with the amount that you have to pay. Fixed rate mortgages are mainly meant for 15, 20 or 40 years.

2. Adjustable Mortgage Rates

Well, I would like to tell you that in case of adjustable mortgage cost, you may have to select a perfect adjustable mortgage rate loan according to your financial condition. The mortgage rates keep on changing according to the financial condition of the investment market. It simply means that you can also enjoy the lower mortgage amount.

Well, I would like to tell you that adjustable mortgage cost are very much convenient in the long run. If you want to acquire the mortgage rate for a short time period, then you can simply select the fixed rate mortgages. This is also the best method through which you can protect yourself from paying extra money. So, if you want to acquire low mortgage amount, then you should read this article of mine. Below mentioned are some of the major tips through which you can acquire the low rate mortgage for your self.

1. Comparison between Various Lenders

If you want to acquire the best mortgage rate for yourself, then you should compare the rates of various lenders. You can also shop for your mortgage because this can simply help you in acquiring the perfect deal for your mortgage plan. If you want, you can also obtain the quotes of various mortgage lenders. You can easily compare the quotes of various lenders and then you can simply select the perfect plan that can match with your financial needs and requirements.

2. Keep Your Credit Great

Well, if you want to acquire the best mortgage cost for yourself, then you can simply keep your credit looking great. It is really the best method through which you can acquire the best rate for your mortgage plans. If you are well enhanced with a good credit score, then you will face no problem in acquiring the good rates for your mortgages.

3. Investigate About the Hidden Fees

You should always investigate about the hidden fees of the lender because most of the mortgage lenders discover hidden fees which the borrower has to pay. So, before you select a perfect mortgage plan for yourself, you should always try to investigate about the hidden fees. You can also enquire about the hidden terms and conditions.

4. Always Try Negotiating

Negotiating is really the best way through which you can acquire best results for yourself. You can simply obtain positive results related to your mortgage plans with the help of negotiating. You can simply negotiate with the lenders.

So, these are some of the efficient ways through which you can acquire the best mortgage rate for yourself.

Fixed, Tracker Or Discount – Which Mortgage Rate is Best?

The choice of whether a fixed rate, variable, discounted, capped or tracker rate mortgage is more appropriate to your needs, will take careful consideration. The article that follows provides a breakdown of the individual rates with their advantages and disadvantages as based on your attitude to risk, not all types of mortgage will be suitable.

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

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

Fixed Rate Mortgages

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

Advantages

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

Disadvantages

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

Discount Rate Mortgages

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

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

Advantages

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

Disadvantages

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

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

Tracker Rate Mortgages

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

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

Advantages

A tracker rate guarantees to follow the Bank of England base rate for however long the tracker rate is set up for. This means a tracker rate mortgage payment reduces in line with reductions to the base rate by the Bank of England.

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

Disadvantages

The mortgage payment will go up if the Bank of England increases the base rate. As with most other types of mortgage, early redemption penalties will apply for some or all of the tracker rate period and are typically 5% of the loan or six months interest.

Variable Rate Mortgages

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

Advantages

The main advantage of being on the lenders Standard Variable Rate (SVR) is that there will be no early repayment charge for redeeming the loan in full. When there is uncertainty about rate movements in the financial markets, this can provide a degree of certainty and flexibility. For those wishing to fix their mortgage rate, an SVR with no early repayment charge can provide the breathing space required to just wait and see before committing.

Historically not all lenders have chosen to pass on through their standard variable rates, reductions made by the Bank of England. This situation is changing and those with SVR mortgages benefit from a reduced payment.

Disadvantages

Generally the SVR will be a higher rate of interest and so your mortgage payment will be greater than if you were on a tracker rate, fixed rate or discounted rate mortgage product. Additionally and in comparison to other types of mortgage, a higher monthly payment can result when lenders do not pass on any or all of a reduction in the Bank of England base rate which has not been uncommon in the past.

Capped Rate Mortgages

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

Advantages

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

Disadvantages

Because a capped rate offers the best of both worlds to the borrower, the capped rate is usually uncompetitive as lenders need to price in the risk of rate reductions, leaving those such as first time buyers or those stretching their affordability, exposed to a higher rate than would be available with a fixed rate. This means that competitive capped rates are seldom available with UK lenders who prefer to offer fixed rates instead.