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Borrowers Facing Unprecedented Uncertainty Over The Future

[ Posted October 25th, 2009 ]







In many instances




standard variable rate (SVR ) is lower than the rate that had been paid during the initial deal. That’s the reason for many borrowers whose current deal is coming to an end to choose between  taking out a new deal or moving to their lender’s SVR.



Sometimes the mortgages arrangement fee cannot be justified due to the risk of defaulting so it must be due to the risk of interest rates rising.

Asking yourself if you should  insure against mortgage hike? There is only one answer:

Unfortunately there isn’t  any insurance that will protect against a rate increase.

Choosing to move to your lender’s SVR for the time being you should consider setting up a savings account in which the difference between your old and new lower monthly payment could be saved.

This money can be utilised in a future event of a of a sudden rate increase, giving you a buffer,  while you are looking for a new deal.

The only way to ensure that your monthly payment remains the same, regardless of any rate increase, is to move from your current deal onto a fixed-rate deal. But, even financial experts can’t agree on the way ahead.

Borrowers are facing unprecedented uncertainty over the future path of interest rates, which means a tough choice between low-rate tracker mortgages and the security of more costly fixed-rate deals.

Accordinding with L&C the tracker would be the best choice in terms of total repayments over the five years if interest rates rose at a slow, steady pace, but the fix would be better if rates rose sharply.

 Homeowners with low SVRs of 2.5% should also stay put. The  research shows that on any SVR at 4% or higher you could end up paying more than on a five-year fixed rate by the end of the term (in this „steady” scenario) and should consider remortgaging.

Room for improvement in the loan market

[ Posted June 9th, 2009 ]

Plenty of homeowners see some room for improvement in their living space and are queuing up for loans, according to a new survey.

AA Personal Loans says that 25% of homeowners in the UK are going through the borrowing process for work during the recession and the company’s loan business has showed no downturn in applications despite current economic difficulties many people are facing.

Roughly an 12.5% of all loans go towards building a new room on to a home to create extra living space.

Mark Burgess, editor of Estate Agency Times, said: "Understandably, some people might not be keen to take out a personal loan at the moment, but additional bedrooms or reception rooms typically add the most value to a property."

The survey is supported by a Sainsbury’s Home Insurance study that revealed many homeowners are cutting improvement cost by turning their hand to DIY to renovate property.

Most home improvement loans range from £1,000 to £25,000 and cost roughly double the cost of a mortgage.

To find a cheap home improvement loan, consider looking at a comparison site like ours, where you can see a range of different loan options in seconds.

Many lenders – including most high street banks and building societies plus some specialist firms – offer home improvement loans. Like the name suggests, they generally come with a condition that the borrowing must be spent on your property and not on a holiday or other debts.

To make sure you get the best interest rate, make sure you compare like-with-like. For instance, the shorter the period you borrow the money over, the more expensive the loan,l so make sure your quotes are all over the same period or you may think one loan is more expensive or cheaper than another witghout realising the ‘term’ of the loan is different.

You should also consider a robust loan protection insurance to cover sickness, accident and redundancy. Again, an insurance comparison site like ours can find the best rate insurance to meet your needs.

Don’t simply buy the insurance offered by your lender – in many cases this is more expensive that other policies and often excludes much of the cover offered by other providers.

An alternative to a home improvement loan that may prove a cheaper option is a remortgage or further advance on your existing mortgage, so look up the cost comparisons against home improvement loans before making a final decision.

Adding living space to your home should prove an excellent long-term investment, because the more space you have, the higher the price when selling. Just watch out not to ‘over extend’ that can make your property too expensive for the area where it is located.

What to consider when taking out a mortgage

[ Posted March 24th, 2009 ]

If you want the key to your front door by buying your own home, you need to think carefully about what is involved in making probably the biggest personal financial commitment you will ever sign up to.

Why take out a mortgage?

Despite the property market doldrums we’re experiencing now, historically a mortgage has proved to be an excellent investment that has outperformed most other investments year-on-year. The advantage over renting is your mortgage repayment is a personal investment in an asset that is appreciating in value.

Your commitment to a lender

Your responsibilities and obligations are laid out in detail in the terms and conditions your lender sends you together with the mortgage offer. This may vary slightly between lenders, but generally, you are responsible for making mortgage regular mortgage repayments, insuring the property and maintaining the property in a reasonable condition.

Repaying your mortgage

The typical methods of repaying a mortgage are:

Repayment mortgages: This is a monthly payment that is part interest on the loan and a contribution towards reducing the loan, so at the end of your loan term you have repaid the all the interest and the amount you have borrowed

The loan term is of time over which you have to repay the loan, for example 25 years.

Interest only mortgages: You pay the interest on the loan each month, but none of the money you have borrowed. Borrowers need to make some sort of provision for repaying the loan amount at the end of the term, generally through some sort of savings plan.

Don’t forget mortgage rates rise and fall, so you need to include a contingency in your budget for higher repayments.

What happens if I can’t repay my mortgage?

A mortgage is secured against your home. This means if you fail to keep up the repayments, the mortgage lender can repossess the house. This is a last resort measure after you and the lender have tried every other means to sort out any financial problems.

Mortgage protection insurance from a specialist provider is a worth considering as a stopgap if you lose your job or can’t work through sickness or injury.

The government has a scheme to help borrowers in trouble with their mortgage repayments. This covers paying the interest on a mortgage of up to £200,000 and starts 13 weeks after redundancy.

What else should I consider?

You need to think about the mortgage product that suits you best – common products are tracker mortgages that rise and fall with the interest rate and fixed rate mortgages that allow you to pay a fixed monthly payment for a specific term.

How an independent broker can help

Mortgages are complicated and making a wrong choice can cost you a lot of money over the years. A specialist, independent mortgage broker will have an in-depth knowledge of the mortgage market and special relationships with some lenders.

The broker will discuss your options and provide a list of mortgages from different lenders that match your requirements so you can make an informed choice.

 
 
 
 
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