| How to Avoid Home buyer Mistakes (mortgage refinance)
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How to Avoid Home buyer Mistakes
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Home Mortgage Refinancing Risks
If mortgage payments are suddenly higher, the most probable aspect to blame would be the ever-rising mortgage interest rates. The reason is that since 2004 the Federal Reserve Board has raised the fed-funds rate, which influences mortgage interest rates, 17 times. In recent years, many people have taken advantage of near-record-low interest rates while scooping for real estate properties. In order... Read mortgage refinance article
Remortgage Tips
Remortgage Tips
Most of us have all experienced hard times at some stage in our lives and received letters from banks telling us that they are going to charge us £27 for bouncing a cheque or non payment of a direct debit or standing order. Would you like to hit back? Would you like some remortgage tips?
Now is the time to hit back and take some of that money back from them ... Read mortgage refinance article
How to Avoid Home buyer Mistakes
First time homebuyers often have no idea what sort of house payment they can afford. As a result, they often take on more house payment than they can afford and end up in credit trouble. This has happened at record levels over the past few years.
There are two vital things first time homebuyers must consider when deciding how much they can afford to pay for a home. The first and by far the most important factor they should consider is how high a payment they feel comfortable making and can reasonably pay. The second criteria are the debt ratios allowed by their loan program or loan approval. However, if they base their numbers on the lender's allowable debt ratio, the payment first time homebuyers qualify for is often much more than they will be comfortable paying.
If you wish to become a first time homebuyer, the best way to determine how much of a house payment you can be comfortable paying is to draft a simple monthly budget. A detailed budget worksheet is available for free, see signature box below.
1. List your monthly income from all sources. That total is your gross monthly income.
2. Deduct from your gross income any taxes you pay or owe monthly - Federal taxes, state taxes, Social Security taxes, and Medicare taxes. Do not forget to include the monthly amount of any estimated taxes you have to pay. The remainder is your net income. Although this figure will not usually be considered in the lender's debt ratio computation, it is very important in your personal analysis
3. Next list your other monthly expenses, such as savings, utilities, groceries, insurance, car payments, tuition, clothing, entertainment, etc. (If some are payable yearly or quarterly, divide the amounts by 12 or 4 and add that to the monthly expenses.) Do not include current rent or housing payments, since those would no longer be applicable.
4. Subtract the total of your monthly expenses from your net income. The resulting amount is what is left for a house payment.
Of course, you can always adjust your discretionary spending to leave more for a house payment. Just be sure to be realistic if you do that. First time homebuyers often try to bite off more than they can chew. An unrealistic budget can leave you in a financial bind when reality sets in. Do not count $150 a month as enough to feed your family of four. Make sure your numbers make sense for your family and do not leave you with a nice house and no food to eat.
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Best Mortgage Rates
Almost all commercial mortgage loans in the United Kingdom are financed by building societies, credit unions or banks. In effect the state keeps its hands off the property market, resulting in an increase of competition between mortgage companies and the evolution of one of the worlds most innovative mortgage markets. This is of course to the benefit of prospective home buyers in the UK.
It was in 1982 that a significant liberalisation of the property market led to the considerable increase in innovative product packages and diversity of mortgage plans offered by companies competing for a greater market share. For this reason a diverse arrangement of rate packages has arisen, and this is why it is imperative that the home buyer seeks independent mortgage advice when making a decision.
As mentioned above, most mortgage lenders get their financing from building societies, credit unions or banks, which function within the money market. Therefore most mortgage rates find their way to the market's established groove in the form of a variable rate. This can either be the company "standard variable rate" or a "tracker rate" linked to the Bank of England's repo rate. The main variation to this trend is usually found in the form of various incentives aimed at marketing mortgages and thereby enticing new clients. The main rate variations are: fixed rates, capped rates, discount rates, or cash-back opportunities.
Fixed Rates
This option gives a consistent interest rate, fixed for a predetermined time period. It is most viable to opt for this type of package when the fixed rate is set over a period of more than five years. A time period of less than five years usually results in the fixed rate becoming too high in comparison to the market rate.
Capped Rates
Capped rates are very much alike to fixed rates, except they allow for some fluctuation. Basically there is a minimum rate and a maximum rate cap. This means that you will not pay higher than a certain interest rate, but you will not pay lower than a certain rate either. In this type of deal you often find what is referred to as a "collar." The collar is the minimum interest that must be paid each month. The capped rate mortgage deal is commonly offered over the same time frame as the fixed rate deals.
Discount Rates
Discount rate mortgage options refer a set discount margin on the rate paid monthly. For example there may be a 2% discount on the mortgage firm's standard variable rate. It can also be packaged as a discount on the mortgage interest over and above the BoE rate. Various discount rate mortgage plans have differing increases and decreases in discount along the course of the mortgage's repayment. The pattern is usually predetermined.
Cash-back Options
Another mortgage option gives you a percentage of the mortgage as cash in your hand at the outset. This, the cash-back option, allows you to have extra cash available for paying off existing debt, or better yet to refurbish your new property. Most commonly this package comes with a standard variable rate or the usual tracker mortgage rate.
These rate options may seem confusing to the first time mortgage buyer, and many mortgage deals combine the above rate packages, complicating the repayment of your mortgage.
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How to Avoid Home buyer Mistakes
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