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Buying at auction is an increasingly popular way to purchase a property. For the potential buyer, auctions can offer property at bargain prices, and the process is also very quick.
Property for sale by auction can usually be found advertised in the local or national newspapers, on the internet, through estate agents and of course, through the auctioneers themselves.
The main attraction of buying at auction is that you can avoid the conventional drawn out process of house buying. At auction, the process can be condensed into a matter of minutes rather than months and when the hammer falls, you own the property.
Property on offer at auctions will vary from repossessed property to redevelopment projects. With an increasing number of house repossessions in the UK, this is becoming the largest reason for properties ending up in the auctions.
Mortgage lenders will often put up their repossessed properties for sale, usually reducing the "reserve" prices to ensure a quick sale. Local authorities and housing associations use them for similar reasons. In this case the lender is looking to get rid of the property as fast as possible in order to recoup some money and in some cases, cut their losses. Other properties put up for auction will be those with development potential or difficult to sell.
Just like any other auction, a guide price will usually be given for each property, although in most cases the final price will far exceed this amount. Most of the properties will have a reserve price – a minimum price at which the seller is prepared to accept. If the reserve price is not met during the bidding then the property will not be sold. In this case it is common for interested parties to approach the vender and attempt to negotiate after the auction.
The main point to remember when buying at auction is that, once a winning bid is accepted, a 10% deposit is paid and contracts are exchanged on the day of the auction. This means that careful financial planning must be made before the day of the auction to ensure that a 10 deposit is available for payment on the day, and the remaining 90% is available within 28 days after.
The buyer will need to complete a survey, arrange the relevant legal searches and have a mortgage offer in place in order to exchange contracts on the day.
Tips for buying property at auction:
- Contact the relevant auction house or estate agents to request a catalogue. Often these will be prepared a few weeks in advance giving the potential buyer time to arrange the finance needed, amongst other things. It is also possible to subscribe to catalogue mailing lists.
- Once you have identified a property either in the newspaper or in the catalogue, arrange a viewing of the lot(s) through the relevant parties.
- Research the property thoroughly including talking to estate agents and local neighbours.
- Carry out all relevant searches, including the land registry and property searches.
- It is always advisable to obtain legal or professional advice. It is necessary to read the conditions of the purchase and question any aspect that you are not sure about.
- As previously mentioned, finance arrangements must be in place before the day of the auction. This will include the 10% deposit available on the day and the remaining 90% usually no later than 28 days after. It is advisable to agree a decision in principle with the lender for the required loan amount. The 10% deposit is usually non refundable if finance cannot be secured thereafter.
- Don't get emotionally involved. Set yourself a budget and stick to it, be prepared to let go.
It must be understood that purchasing a property at auction is a legally binding commitment and carries the same legal implications as a signed contract by private treaty. A proposed bid at auction will require a substantial outlay on the valuation and legal fees without any guarantee of a successful bid. In this way there is a large element of speculation and it can often be easy to become carried away at auction and buy a property that cannot be afforded.
Property for sale by auction can usually be found advertised in the local or national newspapers, on the internet, through estate agents and of course, through the auctioneers themselves.
The main attraction of buying at auction is that you can avoid the conventional drawn out process of house buying. At auction, the process can be condensed into a matter of minutes rather than months and when the hammer falls, you own the property.
Property on offer at auctions will vary from repossessed property to redevelopment projects. With an increasing number of house repossessions in the UK, this is becoming the largest reason for properties ending up in the auctions.
Mortgage lenders will often put up their repossessed properties for sale, usually reducing the "reserve" prices to ensure a quick sale. Local authorities and housing associations use them for similar reasons. In this case the lender is looking to get rid of the property as fast as possible in order to recoup some money and in some cases, cut their losses. Other properties put up for auction will be those with development potential or difficult to sell.
Just like any other auction, a guide price will usually be given for each property, although in most cases the final price will far exceed this amount. Most of the properties will have a reserve price – a minimum price at which the seller is prepared to accept. If the reserve price is not met during the bidding then the property will not be sold. In this case it is common for interested parties to approach the vender and attempt to negotiate after the auction.
The main point to remember when buying at auction is that, once a winning bid is accepted, a 10% deposit is paid and contracts are exchanged on the day of the auction. This means that careful financial planning must be made before the day of the auction to ensure that a 10 deposit is available for payment on the day, and the remaining 90% is available within 28 days after.
The buyer will need to complete a survey, arrange the relevant legal searches and have a mortgage offer in place in order to exchange contracts on the day.
Tips for buying property at auction:
- Contact the relevant auction house or estate agents to request a catalogue. Often these will be prepared a few weeks in advance giving the potential buyer time to arrange the finance needed, amongst other things. It is also possible to subscribe to catalogue mailing lists.
- Once you have identified a property either in the newspaper or in the catalogue, arrange a viewing of the lot(s) through the relevant parties.
- Research the property thoroughly including talking to estate agents and local neighbours.
- Carry out all relevant searches, including the land registry and property searches.
- It is always advisable to obtain legal or professional advice. It is necessary to read the conditions of the purchase and question any aspect that you are not sure about.
- As previously mentioned, finance arrangements must be in place before the day of the auction. This will include the 10% deposit available on the day and the remaining 90% usually no later than 28 days after. It is advisable to agree a decision in principle with the lender for the required loan amount. The 10% deposit is usually non refundable if finance cannot be secured thereafter.
- Don't get emotionally involved. Set yourself a budget and stick to it, be prepared to let go.
It must be understood that purchasing a property at auction is a legally binding commitment and carries the same legal implications as a signed contract by private treaty. A proposed bid at auction will require a substantial outlay on the valuation and legal fees without any guarantee of a successful bid. In this way there is a large element of speculation and it can often be easy to become carried away at auction and buy a property that cannot be afforded.
Wednesday, 29 November 2006
Secured loans - The most appropriate solution
In the past many mortgage intermediaries have been reluctant to get involved with secured loan or second charge (as they are sometimes known) applications. It could also be said that this is still the case in today’s market, however things are changing and there are a number of reasons for this.
With the Financial Services Authority and the increased regulation that has subsequently come about, mortgage brokers are beginning to realise that there are many occasions when a second charge/secured loan provides a more appropriate funding solution to a remortgage.
A remortgage has long been viewed as providing a relatively cheap way of raising finance. The rates obtainable on a mortgage are of course far less than those on unsecured finance. However there are times where it is not advisable to remortgage in pursuit of capital raising.
There are many occasions when a second charge/secured loan provides a more appropriate funding solution to a remortgage. The most obvious example is where a borrower has a large redemption penalty on their existing mortgage. Early redemption penalties take various forms and of course each lender’s terms and conditions will differ. Some fixed rate mortgages carry penalties of up to 7% of the outstanding mortgage balance if redeemed within the fixed rate period. Some will even carry an ‘overhang’ penalty after the tie in penalty comes to an end, although this is not too common these days.
An important consideration to bear in mind is that of the overall cost of the loan. The APR is tool that can be used when comparing different products as it will take into account associated fees and charges. The remortgage process carries many different fees including valuation and administration fees, lender arrangement fees, legal fees, and in many cases, broker fees, discharge fees, title insurance and telegraphic transfer fees. Secured loans will carry very few of these fees outlined and will usually only be subject to the lender’s arrangement fee and a broker fee, although the latter will not always apply.
In order to assess the most advantageous financial solution, the total cost of borrowing must be compared between both options. It must be stressed that each case should always be assessed on its own merits in order to work out the most appropriate financial solution.
For borrowers with a blemished credit record, if their original mortgage was taken out before running into credit problems, the chances are that raising additional finance through a remortgage would mean paying a higher interest rate on the entire amount of their borrowings. (i.e the WHOLE mortgage) By using a secured loan in this case, they can still benefit from the prime rate of interest on their mortgage whilst only being charged a higher non-conforming rate on the new secured loan – the additional finance.
While the overall cost of borrowing is a major consideration, other factors should also be considered. Speed is an important factor that is often overlooked when assessing the remortgage versus secured loan comparison. It is however, just as valid in a compliance context as overall cost.
Typically secured loans can complete in under 21 days, some in as little as 10 days. This is usually dependent on whether the subject loan has a cooling off period attached. When a client needs to obtain additional finance quickly, then the usual concerns that govern suitability need to be tempered by the time frame in which the client needs their funds. Provided they are aware of the facts, then if speed is the primary issue, a secured loan will win every time over remortgage or further advance.
In the past many mortgage intermediaries have been reluctant to get involved with secured loan or second charge (as they are sometimes known) applications. It could also be said that this is still the case in today’s market, however things are changing and there are a number of reasons for this.
With the Financial Services Authority and the increased regulation that has subsequently come about, mortgage brokers are beginning to realise that there are many occasions when a second charge/secured loan provides a more appropriate funding solution to a remortgage.
A remortgage has long been viewed as providing a relatively cheap way of raising finance. The rates obtainable on a mortgage are of course far less than those on unsecured finance. However there are times where it is not advisable to remortgage in pursuit of capital raising.
There are many occasions when a second charge/secured loan provides a more appropriate funding solution to a remortgage. The most obvious example is where a borrower has a large redemption penalty on their existing mortgage. Early redemption penalties take various forms and of course each lender’s terms and conditions will differ. Some fixed rate mortgages carry penalties of up to 7% of the outstanding mortgage balance if redeemed within the fixed rate period. Some will even carry an ‘overhang’ penalty after the tie in penalty comes to an end, although this is not too common these days.
An important consideration to bear in mind is that of the overall cost of the loan. The APR is tool that can be used when comparing different products as it will take into account associated fees and charges. The remortgage process carries many different fees including valuation and administration fees, lender arrangement fees, legal fees, and in many cases, broker fees, discharge fees, title insurance and telegraphic transfer fees. Secured loans will carry very few of these fees outlined and will usually only be subject to the lender’s arrangement fee and a broker fee, although the latter will not always apply.
In order to assess the most advantageous financial solution, the total cost of borrowing must be compared between both options. It must be stressed that each case should always be assessed on its own merits in order to work out the most appropriate financial solution.
For borrowers with a blemished credit record, if their original mortgage was taken out before running into credit problems, the chances are that raising additional finance through a remortgage would mean paying a higher interest rate on the entire amount of their borrowings. (i.e the WHOLE mortgage) By using a secured loan in this case, they can still benefit from the prime rate of interest on their mortgage whilst only being charged a higher non-conforming rate on the new secured loan – the additional finance.
While the overall cost of borrowing is a major consideration, other factors should also be considered. Speed is an important factor that is often overlooked when assessing the remortgage versus secured loan comparison. It is however, just as valid in a compliance context as overall cost.
Typically secured loans can complete in under 21 days, some in as little as 10 days. This is usually dependent on whether the subject loan has a cooling off period attached. When a client needs to obtain additional finance quickly, then the usual concerns that govern suitability need to be tempered by the time frame in which the client needs their funds. Provided they are aware of the facts, then if speed is the primary issue, a secured loan will win every time over remortgage or further advance.
To Apply for a Secured Loan click here >>>
Monday, 27 November 2006
Applying for Secured Loans
When shopping around for secured loans, the first thing to look at is the APR. This is an essential tool in comparing different secured loan products.
The APR is a measure of the cost you will pay for the credit expressed as an annual percentage rate. It does not show the total amount payable, it is designed only as a value for money indicator. It takes into account all the charges made under the agreement, interest, fees etc. It enables you to compare the cost of borrowing between different types of credit products, hire purchase, credit sale, secured loans etc. If a trader is advertising the cost of a credit product it must also quote an APR in the advertisement. It is of course usually a bit higher than the interest rate that you are quoted as it will include the other fees.
The internet is a great place to look for the most competitive secured loan rates. Many finance brokers are able to search from a range of different lenders to find the most suitable product. Although many of these companies will approach the same or similar lenders when looking for the best rates, their broker fees may differ hugely. For this reason it is a very good idea to approach more than one company in pursuit of a secured loan quotation.
Loans can be obtained for almost any purpose with the most popular reasons for taking out a secured loan being the consolidation of existing debts and the carrying out of home improvements. The loan sizes available will range from £3,000 to £100,000 with most lenders. The amount available to each individual will differ subject to income & the equity in the property. There are certain schemes available that will lender over and above the value of your property up to 125%. Again these schemes will be subject to status.
There are terms ranging from 5 to 30 years. It is important to consider very carefully the term over which you spread the monthly payments of your secured loan.
The most important thing to remember is that the longer the term of the loan, the more interest you will pay back over the entirety of the term. This of course will also result in longer the term of the loan, the lower the monthly payments will be.
Why Take out a Secured Loan?
Secured lending is a way of raising additional finance by way of in most cases, offering your property to the lender as security. Secured lending can offer a fast and easy way of obtaining additional finance for almost any purpose.
Q. But why take out a secured loan when there are unsecured loan deals available where you are not putting your property at risk if you fail to keep up the repayments?
A. Firstly, the interest rates associated with secured loans tend to be lower than on comparable unsecured loans as there is security by way of the property offered to the lender. Also for the very same reason it may be easier for someone with a poor credit history to obtain a secured loan.
A secured loan will usually offer a more flexible repayment period than that of an unsecured loan. Terms for secured lending will range from 5 to 30 years depending on the lender. For the most part this will result in a lower monthly payment by spreading the repayments over a longer period of time. The disadvantage to this method however is that the borrower will end up paying more interest over the term of the loan.
Q. Why take out a secured loan when you can remortgage for a more competitive rate of interest?
A. There are many occasions where secured loans provide a more appropriate funding solution to a remortgage. The most common situation is where a borrower is locked into their existing mortgage which is subject to an early repayment charge if they redeem the balance. This charge will differ from lender to lender, however it is usually calculated as a percentage of the balance.
The remortgage process carries many different fees including valuation and administration fees, higher lending charges and in many cases, discharge fees, title insurance and telegraphic transfer fees. Secured loans carry NONE of these fees.
For borrowers with a tarnished credit record, if their original mortgage was taken out before running into credit problems, the chances are that raising additional finance through a remortgage would mean paying a higher interest rate on ALL their borrowings. (i.e the WHOLE mortgage) By using a secured loan in this instance, they can still enjoy the prime rate on their mortgage whilst only being charged a higher non-conforming rate on the new secured loan – the additional finance.
Each case must be assessed in its own merits as there are of course other factors to consider.
How do Secured Loans work?
Secured loans or second charges (as they are sometimes known) are a way of raising finance by releasing the equity in your home. Secured lending can offer a fast and easy way of obtaining additional finance for almost any purpose. The loan is secured by a legal charge on your property which then means that if you fail to repay the loan, the lending institution will simply seek repossession of your property.
Secured loans are generally in a range from £3,000 to about £50,000, but can go as high as £100,000 depending on your situation, need and circumstances.
By obtaining a secured loan may enable the borrower to save a significant amount on monthly expenses by either extending the term of the loan, or paying off one loan with another that has a lower APR (Annual Percentage Rate). Secured loan interest rates are typically variable and follow the UK base rates, but can also differ significantly between lenders, so shopping around and comparing rates and terms is essential.
Secured lending falls into two categories; Regulated & Non Regulated.At the time of writing, loans sizes of £25,000 and under are regulated by the consumer credit act which is overseen by the office of fair trading. Loan sizes over £25,000 are not regulated. The main difference between the two loan types is that when applying for a regulated loan (£25,000 and under) the customer will receive a cooling off period over which time consideration is given as to whether to proceed with the credit agreement. Over this period, the company may not contact you although you may contact them. Unregulated loans do not have this compulsory cooling off period.
The process of completing an application is quick and straightforward. In most cases customers will provide payslips and P60s as proof of income, or alternatively a self declaration of income is permitted for the self employed if there is difficulty proving income. A valuation is also carried out in most cases on behalf of the lender to ensure that there is good security to lend. Often the existing mortgage lender will be contacted to confirm the conduct of mortgage repayments over the preceding 12 months.
At the back end of the application, the lender will register their charge with the land registry.It is a grave misconception to believe that as long as the main mortgage repayments are kept up to date your property will be safe. A second charge lender can & will repossess your property if you do not repay the loan.
When shopping around for secured loans, the first thing to look at is the APR. This is an essential tool in comparing different secured loan products.
The APR is a measure of the cost you will pay for the credit expressed as an annual percentage rate. It does not show the total amount payable, it is designed only as a value for money indicator. It takes into account all the charges made under the agreement, interest, fees etc. It enables you to compare the cost of borrowing between different types of credit products, hire purchase, credit sale, secured loans etc. If a trader is advertising the cost of a credit product it must also quote an APR in the advertisement. It is of course usually a bit higher than the interest rate that you are quoted as it will include the other fees.
The internet is a great place to look for the most competitive secured loan rates. Many finance brokers are able to search from a range of different lenders to find the most suitable product. Although many of these companies will approach the same or similar lenders when looking for the best rates, their broker fees may differ hugely. For this reason it is a very good idea to approach more than one company in pursuit of a secured loan quotation.
Loans can be obtained for almost any purpose with the most popular reasons for taking out a secured loan being the consolidation of existing debts and the carrying out of home improvements. The loan sizes available will range from £3,000 to £100,000 with most lenders. The amount available to each individual will differ subject to income & the equity in the property. There are certain schemes available that will lender over and above the value of your property up to 125%. Again these schemes will be subject to status.
There are terms ranging from 5 to 30 years. It is important to consider very carefully the term over which you spread the monthly payments of your secured loan.
The most important thing to remember is that the longer the term of the loan, the more interest you will pay back over the entirety of the term. This of course will also result in longer the term of the loan, the lower the monthly payments will be.
Why Take out a Secured Loan?
Secured lending is a way of raising additional finance by way of in most cases, offering your property to the lender as security. Secured lending can offer a fast and easy way of obtaining additional finance for almost any purpose.
Q. But why take out a secured loan when there are unsecured loan deals available where you are not putting your property at risk if you fail to keep up the repayments?
A. Firstly, the interest rates associated with secured loans tend to be lower than on comparable unsecured loans as there is security by way of the property offered to the lender. Also for the very same reason it may be easier for someone with a poor credit history to obtain a secured loan.
A secured loan will usually offer a more flexible repayment period than that of an unsecured loan. Terms for secured lending will range from 5 to 30 years depending on the lender. For the most part this will result in a lower monthly payment by spreading the repayments over a longer period of time. The disadvantage to this method however is that the borrower will end up paying more interest over the term of the loan.
Q. Why take out a secured loan when you can remortgage for a more competitive rate of interest?
A. There are many occasions where secured loans provide a more appropriate funding solution to a remortgage. The most common situation is where a borrower is locked into their existing mortgage which is subject to an early repayment charge if they redeem the balance. This charge will differ from lender to lender, however it is usually calculated as a percentage of the balance.
The remortgage process carries many different fees including valuation and administration fees, higher lending charges and in many cases, discharge fees, title insurance and telegraphic transfer fees. Secured loans carry NONE of these fees.
For borrowers with a tarnished credit record, if their original mortgage was taken out before running into credit problems, the chances are that raising additional finance through a remortgage would mean paying a higher interest rate on ALL their borrowings. (i.e the WHOLE mortgage) By using a secured loan in this instance, they can still enjoy the prime rate on their mortgage whilst only being charged a higher non-conforming rate on the new secured loan – the additional finance.
Each case must be assessed in its own merits as there are of course other factors to consider.
How do Secured Loans work?
Secured loans or second charges (as they are sometimes known) are a way of raising finance by releasing the equity in your home. Secured lending can offer a fast and easy way of obtaining additional finance for almost any purpose. The loan is secured by a legal charge on your property which then means that if you fail to repay the loan, the lending institution will simply seek repossession of your property.
Secured loans are generally in a range from £3,000 to about £50,000, but can go as high as £100,000 depending on your situation, need and circumstances.
By obtaining a secured loan may enable the borrower to save a significant amount on monthly expenses by either extending the term of the loan, or paying off one loan with another that has a lower APR (Annual Percentage Rate). Secured loan interest rates are typically variable and follow the UK base rates, but can also differ significantly between lenders, so shopping around and comparing rates and terms is essential.
Secured lending falls into two categories; Regulated & Non Regulated.At the time of writing, loans sizes of £25,000 and under are regulated by the consumer credit act which is overseen by the office of fair trading. Loan sizes over £25,000 are not regulated. The main difference between the two loan types is that when applying for a regulated loan (£25,000 and under) the customer will receive a cooling off period over which time consideration is given as to whether to proceed with the credit agreement. Over this period, the company may not contact you although you may contact them. Unregulated loans do not have this compulsory cooling off period.
The process of completing an application is quick and straightforward. In most cases customers will provide payslips and P60s as proof of income, or alternatively a self declaration of income is permitted for the self employed if there is difficulty proving income. A valuation is also carried out in most cases on behalf of the lender to ensure that there is good security to lend. Often the existing mortgage lender will be contacted to confirm the conduct of mortgage repayments over the preceding 12 months.
At the back end of the application, the lender will register their charge with the land registry.It is a grave misconception to believe that as long as the main mortgage repayments are kept up to date your property will be safe. A second charge lender can & will repossess your property if you do not repay the loan.
To Apply for a Secured Loan click here >>>
Sunday, 26 November 2006
Insurance can at times be somewhat of a minefield for many people; with so many different products available, choosing the right one and making sure that we are properly covered can be a challenge. Although this may be the case, it is also an essential part of our everyday living.
Buildings insurance
Your home is likely to be your most valuable possession so it is important to ensure that adequate buildings insurance cover is set in place.
Buildings insurance covers the structure of the building plus anything you would normally leave behind when you move. This will include things like patios, drives, fences, walls and permanent fixtures like kitchens and bathrooms. Accidental damage caused by fire, storms, or burst pipes, for example will also be covered.
Having buildings insurance cover in place is not if fact a legal requirement although nearly every mortgage lender will insist that cover is taken out as they look to protect what is their asset too, albeit temporarily.
Many lenders will offer a block building insurance policy arrangement. The cover provided and premium rate are agreed between the lender and insurer, but instead of issuing each borrower with an individual policy number a master policy is set up, with both the lender and insurer having copies. These premiums are not always the most competitive in price so it is advisable to shop around for quotes also.
The amount that each property will need to be insured for will of course vary. The valuer will provide a figure for the re-instatement value of the property, ie the cost of rebuilding in the event of total destruction. There is no specific link between this figure and that for the valuation for mortgage purposes, or the price that the purchaser has agreed to pay.
Contents Insurance
Contents insurance offers cover on the household goods and possessions inside your property and will often include the garden too if applicable. In other words, contents can be defined as everything that you would normally take with you when you move. The lender will not insist that you take out a contents insurance policy however in many cases it is advisable. Not doing so could see you unable to replace your belongings in the event of disasters such as fire, flooding or burglary.
Many policies offer cover on a ‘new for old’ basis which means should anything happen to your possessions such as the TV or washing machine; you should be able to replace the damaged goods for a new model.
Mortgage Payment Protection Insurance (MPPI)
Mortgage Payment Protection insurance (MPPI) is also known as accident, sickness and unemployment (ASU) insurance and, as the name suggests, it covers your mortgage repayments if you have an accident, fall ill or lose your job. Most policies will provide cover for a period of 12 months. Your policy should cover the full amount of your mortgage and linked expenses such as other insurance policies and pension plans.
Many providers of payment protection insurance will offer modular coverage. For example, you can choose unemployment only option if job loss is your main concern or an accident & sickness only module depending on what you feel is more important to you.
You won’t be able to claim money against your policy immediately after you make a claim. Typically, you have to wait three or four months - what is known as the deferral period – before you begin to receive insurance payouts. Often however, for an additional charge, some insurers will provide back-to-day-one cover that covers you from the first day you make a claim. Payment is made 30 days after you made your claim and you need to have been off work for at least a month. In addition most policies have an excess period – usually 30,60 or more days – that is excluded from the payout should you make a claim.
Life Insurance
Life cover pays out a lump sum when you die, or earlier if you are diagnosed with a terminal illness. This lump sum payment may be used to pay off an outstanding mortgage or simply passed on as part of an inheritance.
There are two types of life insurance: Level term and decreasing term.
Level term insurance will often run alongside an interest only mortgage. It lasts for a set period and pays out the set amount you chose at the outset in case of death during the term.
Decreasing term insurance often run alongside a capital repayment mortgage. It offers a smaller payout year on year as the outstanding mortgage debt falls.
With both types of insurance there are many factors that the provider will take into account when calculating the premium. These factors will include; your age, weight, whether you a smoker or non a smoker and your medical history amongst other things.
A Five Point Plan when taking out insurance :
1. By speaking to a specialist adviser before you buy insurance could pay off. Ensure that you adviser is able to offer a range of policies from a variety of different providers.
2. Shop around for mortgage payment protection insurance (MPPI). Don’t just agree to take out the policy offered by your lender without doing some research of your own. Policies offered by the lenders are not always the most competitive in the marketplace.
3. Don’t forget to budget for your monthly insurance payments. For MPPI & Life insurance, the younger & healthier you are, the lower your costs, however payments can still easily add up to over £50 per month.
4. Never forget to find out what your excess is, or how much you need to pay before your insurance will pay out. Many policies have exclusions so don’t forget to find out what these are too.
5. Many people fail to adjust their insurance policies accordingly when their circumstances change. If you insurance policies are not reflecting your current commitments then you could find that you and your dependents are underinsured.
Buildings insurance
Your home is likely to be your most valuable possession so it is important to ensure that adequate buildings insurance cover is set in place.
Buildings insurance covers the structure of the building plus anything you would normally leave behind when you move. This will include things like patios, drives, fences, walls and permanent fixtures like kitchens and bathrooms. Accidental damage caused by fire, storms, or burst pipes, for example will also be covered.
Having buildings insurance cover in place is not if fact a legal requirement although nearly every mortgage lender will insist that cover is taken out as they look to protect what is their asset too, albeit temporarily.
Many lenders will offer a block building insurance policy arrangement. The cover provided and premium rate are agreed between the lender and insurer, but instead of issuing each borrower with an individual policy number a master policy is set up, with both the lender and insurer having copies. These premiums are not always the most competitive in price so it is advisable to shop around for quotes also.
The amount that each property will need to be insured for will of course vary. The valuer will provide a figure for the re-instatement value of the property, ie the cost of rebuilding in the event of total destruction. There is no specific link between this figure and that for the valuation for mortgage purposes, or the price that the purchaser has agreed to pay.
Contents Insurance
Contents insurance offers cover on the household goods and possessions inside your property and will often include the garden too if applicable. In other words, contents can be defined as everything that you would normally take with you when you move. The lender will not insist that you take out a contents insurance policy however in many cases it is advisable. Not doing so could see you unable to replace your belongings in the event of disasters such as fire, flooding or burglary.
Many policies offer cover on a ‘new for old’ basis which means should anything happen to your possessions such as the TV or washing machine; you should be able to replace the damaged goods for a new model.
Mortgage Payment Protection Insurance (MPPI)
Mortgage Payment Protection insurance (MPPI) is also known as accident, sickness and unemployment (ASU) insurance and, as the name suggests, it covers your mortgage repayments if you have an accident, fall ill or lose your job. Most policies will provide cover for a period of 12 months. Your policy should cover the full amount of your mortgage and linked expenses such as other insurance policies and pension plans.
Many providers of payment protection insurance will offer modular coverage. For example, you can choose unemployment only option if job loss is your main concern or an accident & sickness only module depending on what you feel is more important to you.
You won’t be able to claim money against your policy immediately after you make a claim. Typically, you have to wait three or four months - what is known as the deferral period – before you begin to receive insurance payouts. Often however, for an additional charge, some insurers will provide back-to-day-one cover that covers you from the first day you make a claim. Payment is made 30 days after you made your claim and you need to have been off work for at least a month. In addition most policies have an excess period – usually 30,60 or more days – that is excluded from the payout should you make a claim.
Life Insurance
Life cover pays out a lump sum when you die, or earlier if you are diagnosed with a terminal illness. This lump sum payment may be used to pay off an outstanding mortgage or simply passed on as part of an inheritance.
There are two types of life insurance: Level term and decreasing term.
Level term insurance will often run alongside an interest only mortgage. It lasts for a set period and pays out the set amount you chose at the outset in case of death during the term.
Decreasing term insurance often run alongside a capital repayment mortgage. It offers a smaller payout year on year as the outstanding mortgage debt falls.
With both types of insurance there are many factors that the provider will take into account when calculating the premium. These factors will include; your age, weight, whether you a smoker or non a smoker and your medical history amongst other things.
A Five Point Plan when taking out insurance :
1. By speaking to a specialist adviser before you buy insurance could pay off. Ensure that you adviser is able to offer a range of policies from a variety of different providers.
2. Shop around for mortgage payment protection insurance (MPPI). Don’t just agree to take out the policy offered by your lender without doing some research of your own. Policies offered by the lenders are not always the most competitive in the marketplace.
3. Don’t forget to budget for your monthly insurance payments. For MPPI & Life insurance, the younger & healthier you are, the lower your costs, however payments can still easily add up to over £50 per month.
4. Never forget to find out what your excess is, or how much you need to pay before your insurance will pay out. Many policies have exclusions so don’t forget to find out what these are too.
5. Many people fail to adjust their insurance policies accordingly when their circumstances change. If you insurance policies are not reflecting your current commitments then you could find that you and your dependents are underinsured.
Saturday, 25 November 2006
When it comes to finance, and in particular buying property, Muslims are faced with a religious dilemma. Under Sharia Islamic law, making money from money, such as charging interest is not permitted. This is because one party would gain at the expense of another without regard to the value of goods traded – a concept that conflicts with the Islamic principle of equality.
Wealth should be generated only through legitimate trade and investment in assets. Investment in companies involved with alcohol, gambling, tobacco and pornography is strictly off limits The overriding principle of Islamic finance is that all forms of interest are forbidden, however, Sharia law does allow the sharing of risk and profit.
Sharia, or Muslim mortgages have been developed to allow Muslims to raise the finance to buy property without compromising religious principles. There are currently two types of arrangement available:
Ljara
With the Ljara method, the bank buys the client’s chosen property. The bank or building society then sells on the property to the client for the same price under a ‘promise to purchase’ agreement. The arrangement for repayment may be spread over a term of up to 25 years. The client will occupy the property under a lease during the repayment term whilst making a capital repayment and combined rent for the lease. The bank is still the registered owner of the property during the repayment term. At the end of the repayment term the property is transferred to the client.Under Sharia law, the rent payment is seen as a fair price for using the property and therefore with the Ljara method, there is no conflict of principle.
Murabaha
With the murabaha method, the bank buys the property at an agreed price and then sells it immediately to the client for a higher price. The price is dependent on the repayment term, which can be up to 15 years. The deposit takes the form of an initial payment, typically around 20%of the property value. The client then makes fixed monthly payments to the bank during the agreed term. One difference to the Ljara method is that as the property is transferred to the client initially, it then becomes registered in his name rather than that of the banks. The Murabaha tends to be less popular than the Ljara as it is more expensive and less flexible in the terms of its early repayment. With respect to Sharia compliant investment; the customer and bank share the risk of any investment on agreed terms, and divide any profits between them.
The main categories within Islamic finance are: Ljara, Ijara-wa-iqtina, Mudaraba, Murabaha and Musharaka. As already mentioned the Ljara method is a leasing agreement whereby the bank buys an item for a customer and then leases it back over a specific period. Ijara-wa-Iqtina is a similar arrangement to that of the Ljara, except that the customer is able to buy the item at the end of the contract. Mudaraba offers specialist investment by a financial expert in which the bank and the customer shares any profits. As already mentioned, the Murabaha method is a form of credit which enables customers to make a purchase without having to take out an interest bearing loan. The bank buys an item and then sells it on to the customer on a deferred basis. Musharaka is an investment partnership in which profit sharing terms are agreed in advance, and losses are pegged to the amount invested. Nearly all the traditional banking services are now available in the high street banks in a Sharia compliant format .
Wealth should be generated only through legitimate trade and investment in assets. Investment in companies involved with alcohol, gambling, tobacco and pornography is strictly off limits The overriding principle of Islamic finance is that all forms of interest are forbidden, however, Sharia law does allow the sharing of risk and profit.
Sharia, or Muslim mortgages have been developed to allow Muslims to raise the finance to buy property without compromising religious principles. There are currently two types of arrangement available:
Ljara
With the Ljara method, the bank buys the client’s chosen property. The bank or building society then sells on the property to the client for the same price under a ‘promise to purchase’ agreement. The arrangement for repayment may be spread over a term of up to 25 years. The client will occupy the property under a lease during the repayment term whilst making a capital repayment and combined rent for the lease. The bank is still the registered owner of the property during the repayment term. At the end of the repayment term the property is transferred to the client.Under Sharia law, the rent payment is seen as a fair price for using the property and therefore with the Ljara method, there is no conflict of principle.
Murabaha
With the murabaha method, the bank buys the property at an agreed price and then sells it immediately to the client for a higher price. The price is dependent on the repayment term, which can be up to 15 years. The deposit takes the form of an initial payment, typically around 20%of the property value. The client then makes fixed monthly payments to the bank during the agreed term. One difference to the Ljara method is that as the property is transferred to the client initially, it then becomes registered in his name rather than that of the banks. The Murabaha tends to be less popular than the Ljara as it is more expensive and less flexible in the terms of its early repayment. With respect to Sharia compliant investment; the customer and bank share the risk of any investment on agreed terms, and divide any profits between them.
The main categories within Islamic finance are: Ljara, Ijara-wa-iqtina, Mudaraba, Murabaha and Musharaka. As already mentioned the Ljara method is a leasing agreement whereby the bank buys an item for a customer and then leases it back over a specific period. Ijara-wa-Iqtina is a similar arrangement to that of the Ljara, except that the customer is able to buy the item at the end of the contract. Mudaraba offers specialist investment by a financial expert in which the bank and the customer shares any profits. As already mentioned, the Murabaha method is a form of credit which enables customers to make a purchase without having to take out an interest bearing loan. The bank buys an item and then sells it on to the customer on a deferred basis. Musharaka is an investment partnership in which profit sharing terms are agreed in advance, and losses are pegged to the amount invested. Nearly all the traditional banking services are now available in the high street banks in a Sharia compliant format .
Friday, 24 November 2006
Even with the emergence of the property ‘self sell’ websites on the internet, the majority of vendors and buyers in the residential property market still use the services of Estate Agents.
Dealing with Estate agents can at times be an intimidating experience, especially for first time buyers. To make things less daunting it is important to be familiar with the role of the estate agent and the terminology that is used in the house buying process.
Two words that are often heard in the house buying process are ‘Gazumping and Gazundering’.
Gazumping is the situation where, having formally accepted an offer on a property, the seller accepts a better offer elsewhere. Despite this being a frustrating, and potentially expensive experience, the practice is perfectly legal in England, Wales and Northern Ireland and often happens in a buoyant market.
In Scotland however, a sale is considered legally binding from the point an offer is accepted.
Many people blame estate agents for the practice of gazumping, feeling that once an offer has been made they should not entertain others. Estate agents are however obliged to obtain the best price for the seller and they have a legal duty to pass on any other offers received, unless specifically told not to by the seller.
Gazundering is the situation where, having had an offer accepted, the potential buyer finds a reason for reducing the offer. In some cases this will be down to factors identified in a survey. In other cases it takes place for no other reason than to reduce the price.
As with gazumping, this practice is not illegal.
Estate agents usually advertise properties through local press advertising. These properties can also be found on the company’s website. Prospective buyers will usually make appointments in which to view the property.
Generally estate agents will guide the vendor on the progress and the interest shown in the property. If the demand is high for the particular type and area of the property, then the seller will of course be more likely to obtain the price sought, or even obtain a higher one. If demand is ‘flat’ then the estate agent may recommend advertising at a lower price.
Once a provisional offer is made, the estate agent will liaise with the seller’s solicitor to secure the formal sale.
The estate agent is usually paid on a commission only basis. This will usually be expressed a percentage of the sale price. This is usually 1.5% to 3%. Some estate agents will charge the vendor a flat selling fee and in some cases a fee is charged whether a sale is obtained or not.
Estate agents must state either the exact amount you will be charged, or when this is not possible, provide details about how the costs will be worked out or give an estimate.
Dealing with Estate agents can at times be an intimidating experience, especially for first time buyers. To make things less daunting it is important to be familiar with the role of the estate agent and the terminology that is used in the house buying process.
Two words that are often heard in the house buying process are ‘Gazumping and Gazundering’.
Gazumping is the situation where, having formally accepted an offer on a property, the seller accepts a better offer elsewhere. Despite this being a frustrating, and potentially expensive experience, the practice is perfectly legal in England, Wales and Northern Ireland and often happens in a buoyant market.
In Scotland however, a sale is considered legally binding from the point an offer is accepted.
Many people blame estate agents for the practice of gazumping, feeling that once an offer has been made they should not entertain others. Estate agents are however obliged to obtain the best price for the seller and they have a legal duty to pass on any other offers received, unless specifically told not to by the seller.
Gazundering is the situation where, having had an offer accepted, the potential buyer finds a reason for reducing the offer. In some cases this will be down to factors identified in a survey. In other cases it takes place for no other reason than to reduce the price.
As with gazumping, this practice is not illegal.
Estate agents usually advertise properties through local press advertising. These properties can also be found on the company’s website. Prospective buyers will usually make appointments in which to view the property.
Generally estate agents will guide the vendor on the progress and the interest shown in the property. If the demand is high for the particular type and area of the property, then the seller will of course be more likely to obtain the price sought, or even obtain a higher one. If demand is ‘flat’ then the estate agent may recommend advertising at a lower price.
Once a provisional offer is made, the estate agent will liaise with the seller’s solicitor to secure the formal sale.
The estate agent is usually paid on a commission only basis. This will usually be expressed a percentage of the sale price. This is usually 1.5% to 3%. Some estate agents will charge the vendor a flat selling fee and in some cases a fee is charged whether a sale is obtained or not.
Estate agents must state either the exact amount you will be charged, or when this is not possible, provide details about how the costs will be worked out or give an estimate.
Thursday, 23 November 2006
Previous Posts
- Government Housing Initiatives
- Buy To Let Mortgages
- Assisting A Borrower In Arrears
- Why A Low Rate Mortgage May Not Be All That It See...
- Secured Loans: What Are They?
- How To Avoid A Repossession Order Turning Into An ...
- What You Need To Know About Early Repayment Charge...
- Benefits Of Debt Consolidation
- Selecting A Commercial Property
- Bad Credit Remortgages Explored
