Over 200,000 homebuyers in London during 2005 took out an interest-only loan according to the Council of Mortgage Lenders (CML). None of whom had a repayment vehicle in place and of these, 60,900 were first-time buyers.

There are no figures available for the total number of homebuyers with interest-only loans. However, figures for new interest-only house purchase loans have been running at between 10 and 20 per cent for all new first-time buyers over the past 10 years, and roughly the same for other homebuyers.

With more than half of all mortgages now arranged through an intermediary, mortgage brokers could be in the firing line for claims of mis-selling if the homebuyer’s loan reaches maturity and there is not enough cash to pay off the loan.

The CML is keeping close tabs on the situation and has set up a shortfalls working group to look into ways of encouraging consumers to act now to address any shortfall on interest-only mortgages.

“We are suggesting that when a mortgage comes up for review, for example, when it reaches the end of a concessionary rate, then it would be prudent to check on how the borrower intends to repay the loan,” said a spokesperson for the CML.

Using an interest-only mortgage will keep your monthly payments down until you can afford the higher monthly payments of a repayment mortgage.

But because you’re not paying anything off the amount you owe, you will probably end up paying more interest in the long run.

Interest only mortgages are a high-risk strategy that could come back to haunt advisers that set up the arrangement. An increase in interest rates could also hit these clients hard as they would have no fall-back option of reverting to an interest-only mortgage.

Simply enough, to combat the issue clients must be told that if they can not afford to pay for a mortgage, don’t take one out.

Here’s what you need to know. With an interest-only mortgage your monthly payments only cover the interest on the loan and do not actually pay off the loan itself.

If you take this option you will need to make separate arrangements to pay off the loan when the mortgage ends. You can make your arrangements through your lender – but it isn’t compulsory.

If you don’t arrange the funds at the end of the mortgage you may very well lose your home. Essentially, the money you pay to the interest only mortgage goes no where – you may as well rent.

You will have a substantial amount of time (depending on the actual agreement) to save regularly in order to make payments into a savings or investment scheme in order to build up a lump sum to pay off the mortgage when the time comes.

However, the returns offered by banking or building society accounts are usually too low to be used to pay off the amount borrowed.

Instead, it is common to accept some risk in the hope of a higher return by choosing schemes where returns are linked to the stock market. Although the risk is with these stock market linked schemes, there is no guarantee that your money will grow enough to pay off the mortgage in full by the end of the mortgage term.

Another option is to change to a repayment mortgage later. This might be a suitable option if your earnings are low now but are expected to be much higher in future.

Using a lump sum from somewhere else such as an inheritance or selling something such as another property or a business is another option and is also a risky one. You need to be sure that the inheritance will materialize and think about what would happen if your business was to fail.

Selling the property to pay off the loan is probably your last option. This is suitable only if you won’t need to live in the property such as if it is a buy-to-let property or a second home, or you are buying something cheaper.

Whatever plans you make to repay your mortgage, remember to review them from time to time to make sure that they are still on track. In the first place, interest only loans should be a last resort and should always only borrow what you are guaranteed to be able to pay back.

Michael Challiner
http://www.articlesbase.com/mortgage-articles/mortgages-an-interest-only-mortgage-it-could-cost-you-more-46858.html

>http://www.TheDuncanDuo.com

Andrew Duncan of The Duncan Duo Show on 970AM WFLA talks to Nate Davis from Plant City Mortgages about the tampa bay mortgage and real estate market. Nate touches on several misconceptions people have about how mortgage interest rates are calculated for both purchases and refinances. Some important factors for calculating what interest rate you get from a lender include: the type of loan, credit score, down payment, rate lock period, fed rates, purchase or refinance, primary, 2nd or vacation home. Tune in Sundays in Tampa Bay to The Duncan Duo Real Estate Show at 10am on 970AM WFLA.

http://www.plantcitymortgages.com

Duration : 0:7:46

(more…)

Technorati Tags: 970am, andrew duncan, calculation of interest rates, duncan duo show, fed rates, harp, harp 2.0, interest factors, loan prequal, nate davis, plant city mortgages, qualification, re/max, re/max dynamic, Refinance, tampa bay interest rates, tampa interest rates, tampa mortgage rates, wfla

Buying a house is a very big investment in your future. The more money you can put into your home, the more you’re likely to get out of it. But, unless you get a low mortgage rate, you’ll find a whole lot of your monthly payments actually end up going to the bank on interest charges than into your actual home.

The better you are at locking in a low mortgage rate, the quicker you’ll build equity in your home. Getting a low mortgage rate, however, isn’t always easy and it requires some time and patience for many people to earn the type of credit scores that justify a bank giving you a low rate.

The best way to ensure low mortgage rates are offered to you by banks, credit unions or even mortgage companies is to plan ahead for getting a mortgage. This means taking actions months and even years in advance to make yourself and any co-borrowers look like attractive customers for lenders.

But what do banks think is attractive? People with good credit scores, reasonable income and a decent savings for a down payment.

To look the best for a bank to consider low mortgage rates, you’ll want to:

* Keep your credit as clean as possible. This means making payments on loans, credit cards and even utilities on time all the time (or as much as possible). It also means ensuring that you have a good mix of credit – revolving loans, regular loans, such as auto loans, and so on. In addition to making your payments, it’s important not to have too much credit. This means striking a good balance between what you’ve borrowed or can borrow and how much you earn. If you can go to a store and charge up more than you earn in a few years at one sitting, you might have too much credit.

* Income. You don’t have to be a millionaire to get offers of low mortgage rates, but you do need to have adequate income. Don’t go after a home that’s out of your financial reach and expect to get low mortgage rate offers. Keep your sights realistic and you’ll find your chances for low mortgage rates are increased.

* Savings. Even if you put $100 a month away every month for six months, a year, several years, all it takes is a little to show a bank you’re serious about saving. The more you can put away for your down payment on a home, the better. But even if it’s a small amount, a long-term track record of savings looks good and can help your chances of being offered low mortgage rates. Banks like to see a history of savings to prove a person is disciplined and understands the value of savings.

Getting low mortgage rates isn’t impossible – even for people with less than perfect credit. The better you make yourself look to lending agencies, the more likely you are to get these. It might take a few years to establish the kind of credit you’ll need for low mortgage rate offers, but it will be well worth the effort in the end. The less you pay in interest, the more money will go directly toward paying off your home.

Ben Franklin
http://www.articlesbase.com/non-fiction-articles/low-mortgage-rates-can-be-had-87890.html

What I mean by that is I assume there is a formula which banks use to figure out what mortgage rates to offer a customer based on prime rates, customers credit history, size of mortgage, etc…

Does anyone know how this process works and the specific formula/methodology used?

thanks in advance!

Rates are determined by investors in the secondary market.

Most loans are originated for sale to Fannie and Freddie so they rates that anyone can offer depends on what Fannie and Freddie can afford to offer on a program (e.g. 30 year, 15 year, etc.) which in turn is driven by what their investors require for a return/yield on their money.

The link below tells you what Fannies investors are requiring roughly.

http://www.bloomberg.com/apps/quote?ticker=MTGEFNCL%3AIND

Then the Fannie/Freddie have to add a spread to that in order to make any money. The link below would represent a "par" rate based on delivery dates for various Freddie programs:

http://ww3.freddiemac.com/ds1/sell/sffrny.nsf/frmDisplayRNY?OpenForm

Then, a lender either has to charge fees or offer a slightly higher rate in order to make any money.

Today, we were offering 6.875% with closing costs of $350 in our market.

Of course this conversation does not address the delievery fees required by the agency programs based on credit scores, loan to value, transaction type and occupancy. These delivery fees will add to the closing costs or increase the rate or both if the delivery fees cannot be covered by increasing the rate.

Home equity and portfolio programs are priced by individual banks and there is no single methodology or formula. If they are lending there own money, they can price there programs how ever they like.

There is a similar secondary market for government programs, Ginniemae, which operates a lot the same as the secondary market created by Fannie and Freddie. The big difference is that these are owner occupied programs and there are not as many delivery fees as with the Fannie and Freddie programs.

I hope I have helped to illuminate the subject without over complicating things.

www.churchillmortgage.com Churchill Mortgage Weekly Market Update: What Will Interest Rates Do This Week? www.churchillmortgage.com

Duration : 0:4:1

(more…)

Technorati Tags: Churchill Mortgage, Greece, Greek bailout, Interest Rates, Market, mortgage, Mortgage Rates, Update, Weekly

With the economy so low, you may be struggling to keep up with payments and you are worried about your job. This may be a good time to refinance. New York FHA mortgage refinancing is an option that many homeowners want to consider. Interest rates are very low right now, the lowest they have been in the last few years. Lenders are looking harder and faster for new borrowers that are qualified. Refinancing your home loan that is in good standing is relatively easy to do, right now.

Mortgage Refinancing:

New York Mortgage Refinancing is when you apply for a secured loan in order to pay off another different loan secured against the same assets, property etc. If this original loan had a fixed interest rate mortgage which has now declined considerably, then you would like to avail of a new loan at a more favorable interest rate.

When you take up a New York mortgage refinance loan, you pay off the old mortgage and take up a new one. That means you pay similar costs such as discount points, settlement costs and other fees as in your old mortgage. The total cost of a New York mortgage refinance would depend on the interest rate, number of points, and other costs like appraisal and attorney’s fees needed to get a loan.

By refinancing your mortgage when interest rates are lower, you can exchange a higher interest rate for a lower one, which, in turn, will lower your monthly payment.

FHA Mortgage Loans

The FHA is an agency of the Federal government that insures private loans that are issued for new and existing housing as well as loans approved for home repairs.

New York FHA loans are not just for first time buyers and are available to everyone looking to purchase or refinance a home. If refinancing a home the current loan Does NOT have to be an FHA loan.

New York FHA home loan that only requires a minimum of 3% from the borrower and permits 100% of their money needed to close. Our mortgage brokers give you free quotes on New York FHA mortgage.

Home Equity Loan

You’ve built up equity in your home, but how much? And how much can you borrow against it? Nymortgagedepo.com will help you explore different options and compare terms, rates and fees from different lenders.

First Time Home Buyer

There’s so much to think about when buying your first home – from how much you can afford, to what type of property you want and where, to working out how you can fit all those extra appointments you’ll need to make into your busy day. Contacting us is an excellent first step.

Our specialist Mortgage brokers can make it simple for you by:

Helping you choose a suitable home loan, completing all the necessary documentation for you, helping you apply for the First Home Buyer’s Grant if you are eligible.

Feel free to fill out our quick application or call us at 800-717-7658 for more information or Visit:http://www.nymortgagedepo.com

lorainevanwyck
http://www.articlesbase.com/mortgage-articles/get-new-york-mortgage-loans-at-best-rates-689836.html