Benefits and Needs of Second Mortgage

March 21st, 2016


A second mortgage is the process of getting another loan in addition to
your original mortgage. Before entering into the second mortgage,
homeowners should carefully understand the merits and demerits of taking
a second mortgage and should also carefully analyze the different
available options.

Types of second mortgages:


There are two main types of secondary mortgage available: home equity
loans and home equity lines of credit. With home equity loans, the
lender will give you the lump sum of amount all at once and you repay it
at regular intervals over a particular time period. With home equity
loans, the interest rates are fixed.

Home equity lines of credit
are like a credit card, you can spend the money as you need it. In this
type of loan the interest rates are adjustable.

There are few
restrictions available on the second mortgage. Most people are using
this type of loan for the purpose of home repair and maintenance or for
other big expenditures. It is not a good idea to buy this loan for
something insignificant such as for new clothes or for a vacation,
because you are risking your home in the process.

Merits:


Second mortgage is having huge advantage, because it may give you a
large sum of amount that you can spend it when in need. Also, interest
rates are low and the interest paid on this mortgage is tax deductible.

Demerits:


The major drawback of a second mortgage is that the loan is secured by
your home. So, you may lose your home if you don’t do the proper
repayment. Also, you may have to pay the minimal fees (3 to 5% of your
total loan amount) to obtain it.

How much money a borrower can get?


The amount of money you can get will vary on a number of things such as
your credit score and the loan to value ratio (LVR). Most lenders won’t
provide you more than 70 to 80 % of the LVR of your first and second
mortgages combined.

Where to get a second mortgage?

You
are not having the chance to get your second mortgage with the lender
who gave you the original mortgage. You can find a second mortgage with
any other lender. Since the lender in the second position takes on more
risk, not every lender offers this type of mortgage; it will vary from
individual lender’s risk tolerance.

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Why Do You Need a Mortgage Best Execution Contract

March 17th, 2016

What’s Mortgage Best Execution all about?

Mortgage best execution is a legal binding on both
the borrowers and the lenders. It helps both the sides of the table
during the life span of a particular borrowing. Even, it helps them stay
secure, safe and predictable about their deals. In order to reduce risk
substantially, this particular contract do wonders. This is why you (if
you are dealing with mortgage business) need a mortgage best execution
contract.

Here are the reasons in detail-

#1. Law Governs Financial Deals Better-


Without a contract, you can manage your deal. But, this would be a bit
problematic because people tend to avoid things unless and until there
is some legality associated with it. Be careful and choose this contract
so that you deals are well governed by it.

#2. More Systematic approach-


With this contract, you can go beyond your regular disorganization and
make your deals in a more organized way. There are people who help you
get started at the right time. You have to be very careful at time of
choosing the right solutions for you. The more you learn, the better you
know about mortgage best execution.

#3. Software Solution Makes It Easier-


There is some software solution that helps you get started at the right
time. You will get better once you start talking about your task. If
you want to get started you can do is at the earliest. There are many
things that will help you get exactly what you are trying to do. Be
careful and have the right way. Be careful and have the right way to get
started.

#4. Making the Process Retrievable

By using
software solution, you can make your recording, processing and data
retrieval for future reference. Take a professional’s help and get
started at the earliest. It would be better if you start taking the
right decision at the right time. There are many solutions available
these days. You need to do a research in order to find out the right way
to get started and have the right way. You will get better if you keep
moving along the way.

Mortgage best execution helps you deal in a
safer, more secure and more convenient way. There are many things that
you need to learn at the same time. Do check the availability at the
time of using it and get started soon.

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Criteria For Getting Mortgage Loan

March 11th, 2016

1. Know Your Credit Score

Credit scores and credit activity have a major impact
on mortgage approvals. In addition to higher credit score requirements,
several missed payments, frequent lateness, and other derogatory credit
information can stop mortgage approvals. Pay your bills on time, lower
your debts, and stay on top of your credit report.

2. Save Your Cash


Requirements for getting a mortgage loan often change are ready to
cough up the cash. Walking into a lender’s office with zero cash is a
quick way to get your home loan application rejected. Mortgage lenders
are cautious: Whereas they once approved zero-down mortgage loans, they
now require a down payment.

Down payment minimums vary and
depend on various factors, such as the type of loan and the lender. Each
lender establishes its own criteria for down payments, but on average,
you’ll need at least a 3.5% down payment. Aim for a higher down payment
if you have the means.

3. Pay down Debt and Avoid New Debt


You don’t need a zero balance on your credit cards to qualify for a
mortgage loan. However, the less you owe your creditors, the better. If
you have a high debt ratio because you’re carrying a lot of credit card
debt , the lender can turn down your request or offer a lower mortgage.
This is because your entire monthly debt payments – including the
mortgage – shouldn’t exceed 36% of your gross monthly income. However,
paying down your consumer debt before completing an application lowers
your debt-to-income ratio and can help you acquire a better mortgage
rate.

But even if you’re approved for a mortgage with consumer
debt, it’s important to avoid new debt while going through the mortgage
process. Lenders re-check your credit before closing, and if your credit
report reveals additional or new debts, this can stop the mortgage
closing.


As a rule, avoid any major purchases until after you’ve closed on the
mortgage loan. This can include financing a new car, purchasing home
appliances with your credit card, or cosigning someone’s loan.

5. Get Pre-Approved for a Mortgage


Getting pre-approved for a mortgage loan before looking at houses is
emotionally and financially responsible. On one hand, you know what you
can spend before bidding on properties. And on the other hand, you avoid
falling in love with a house that you can’t afford.

The
pre-approval process is fairly simple: Contact a mortgage lender, submit
your financial and personal information, and wait for a response.
Pre-approvals include everything from how much you can afford, to the
interest rate you’ll pay on the loan. The lender prints a pre-approval
letter for your records, and funds are available as soon as a seller
accepts your bid. Though it’s not always that simple, it can be.

6. Know What You Can Afford


I know from personal experience that lenders do pre-approve applicants
for more than they can afford. After receiving a pre-approval letter
from our lender, my husband and I wondered whether they had read the
right tax returns. We appreciated the lender’s generosity, but
ultimately decided on a home that fit comfortably within our budget.


Don’t let lenders dictate how much you should spend on a mortgage loan.
Lenders determine pre-approval amounts based on your income and credit
report, and they don’t factor in how much you spend on daycare,
insurance, groceries, or fuel. Rather than purchase a more expensive
house because the lender says you can, be smart and keep your housing
expense within your means.

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Mortgage Market Review and Its Impact For Borrowers

March 6th, 2016

Robin Hood was famous for robbing the rich to give to the poor and
you could be forgiven for thinking that today the very wealthy were
attempting the reverse that situation when it comes to securing the best
mortgage deals. It appears that there is one set of rules for some and a
different set of rules for others, with wealthier borrowers now being
exempt from certain legislation and criteria imposed on mainstream
borrowers. However taking a ‘one size fits all’ approach to lending
really benefits no-one and the main point of regulation is to protect
the best interests of each individual client.

The Mortgage Market Review focuses on “Treating
Customers Fairly” and trying to hard wire a more conservative, but
common sense, approach to all areas of lending. However, some of the
changes are indeed a bonus for high net worth borrowers.


Firstly, entrepreneurs (business people borrowing against their homes)
will enjoy far more flexible criteria and even be able to ‘opt out’ of
standard affordability checks providing they can offer a credible
business plan. However, if banks remain unwilling to lend then more
traditional alternative funding routes typically used by entrepreneurs
may still be the quickest and simplest option.

Secondly, High
Net Worth (HNW) individuals, which are typically classed as those
earning upwards of 300,000 per year in the UK or those that have a net
asset base of 3,000,000 or more, can also enjoy a greater degree of
flexibility and be able to opt out of standard criteria tests when
borrowing a mortgage. The exemption for High Net Worth (HNW) borrowers
from stringent affordability criteria provides lenders with the
opportunity to be flexible when regular checks are not relevant for
certain categories of clients. Many HNW clients have a high level of
complexity with regards their income and assets. Many have irregular
income but their personal or family wealth is so vast that a standard
affordability check are effectively pointless as the risk to the bank or
other lending institutions is minuscule.


All things considered, the Mortgage Market Review willingness to show a
reasonable degree of flexibility for high net worth individuals must
surely be welcomed by all; both by the borrowers themselves but also by
the lenders, which have been freed from irrelevant legislation in
certain circumstances.

Obviously no one wants to see a return to
the days of the overly-easy credit available with minimal checks,
before the global financial crisis. This was one of the main reasons for
the economic predicament in which we now find ourselves embroiled in
the UK, Europe and the USA. But sensible lending does not have to mean
that checking the credit worthiness of a large mortgage borrower can be
done effectively by purely a box ticking exercise and disregarding
anyone who does not fit a particular profile; some common sense must
always be brought into the equation. This is good news for high net
worth mortgage borrowers as a whole and finally a common sense approach
has developed in the mortgage market that has been lacking for too long.

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What is the True Cost of Mortgage Advice Fees

March 5th, 2016


Many experts have been demanding that banks and other lending
institutions provide more accurate and clear information on the costs of
their mortgage advice. The current regulations can mean that a bank can
appear to have much lower costs associated with a mortgage loan than,
say, a mortgage broker, who is obliged by law to declare all of their
fees and charges. This puts mortgage brokers at a disadvantage when
trying to secure business as they are bound by different rules regarding
fee disclosure.


And for the consumer it makes it difficult to compare the cost of a
large mortgage between a deal offered through an intermediary such as a
broker and one offered directly by a bank or building society. Anyone
borrowing for a home loan should make sure to obtain all the information
they need to make a true comparison of products; brokers can sometimes
seem expensive when compared to banks but this is not necessarily the
case.

Under the present UK regulations, mortgage brokers are
obliged to provide a Key Facts Illustration, which declaresthe upfront
advice fee and reveals the cost of the fee paid to procure a home loan
i.e. the fee the broker receives from a bank for arranging the home
loanon their behalf. But mortgage advisers at banks and building
societies have to state only minimal information of this kind and the
cost of the financial advice can seem to the customer to be completely
free, when this may not be the case.

Experts would like to see
more transparency from mainstream lenders about the true cost of any
mortgage advice that is offered to a customer because at the moment it
is hidden by the interest rate and by underlying banking costs such as
salaries and bonuses.


This issue could worsen in the coming months because in April 2014 new
rules are coming into force in the UK so that all mortgage product sales
will have to be arranged to include advice. So mortgage advisers will
have to include the full cost of their advice clearly on each Key Facts
Illustration, which may make any differences between the cost of advice
directly from a bank and via a broker seem even greater.

Bank
quotes for home loans typically indicate either no fees or very low fees
so brokers are likely to seem expensive in comparison. It will,
therefore, be more important than ever that mortgage brokers can prove
their worth, particularly to high net worth customers. They will need to
show that their advice is worth the fee and that customers are getting a
better deal from a broker who can advise on a range of products from a
range of lenders rather than just the mainstream lenders.


Clearer cost of sale information on mainstream bank illustrations could
actually be beneficial to the banks in improving efficiency as they
would then, themselves, have a clearer view of the real cost of
providing mortgage advice. If banks had this clearer view of the cost of
providing mortgage advice in terms of salaries, branch costs, bonuses
etc. then they might think it worth selling their mortgage deals through
brokers. Indeed many mainstream lenders are starting to believe that
acquiring large mortgage customers would be less expensive through
intermediaries such as mortgage brokers than it is through their own
high street branches.

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