The Finance Blog

A bad credit remortgage is simply a term used to describe a remortgage for a borrower with a poor credit rating. An individual's bad credit rating can relate to a number of different factors including single incidents and an accumulation of different ones - County Court Judgements, Credit Card and Store Card defaults, Mortgage and loan arrears, mortgage default, hire purchase default, an Individual Voluntary Arrangement (Or trust Deed in Scotland), or even a previous bankruptcy.

There are many lenders within the United Kingdom today who will consider lending to those individuals with bad credit. Up until a few years ago, this segment of the market was serviced primarily by specialist, or 'sub-prime' lenders however more recently many of the major banks and building societies have also come on board to provide such mortgages.

The sub prime mortgage industry is still booming despite the recent well documented troubles within the United Kingdom mortgage industry. To many lenders, bad credit remortgages offer a very lucrative business proposition as it is common for the interest rates applied with these types of mortgages to be a great deal higher than their prime counterparts. Up until the middle part of 2007, many people regarded bad credit remortgages as being very easy to obtain - Regardless of how severe a borrowers credit history was. As long as they were able to satisfy the lender's affordability criteria and as long as there was sufficient equity within the property then more likely than not there would be a bad credit remortgage product to service the individual.

However in the wake of the Sub Prime mortgage crisis in the United States and the subsequent 'credit crunch' that has been brought about; many lenders have closed their doors to certain bad credit remortgage products narrowing the amount of bad credit borrowers that are able to obtain them. The focus within the industry today is very much on responsible lending.

All mortgage lending is based on strict set of risk assessment criteria. The general rule of thumb is quite simply that the higher the lending risk involved then the higher the interest rate applicable. Risk does not solely relate to a borrower's credit record however this does play a large part when underwriting an application. Equally important is the security offered for the mortgage - In most cases this will be the borrower's property in question. This relates to many different factors including the location of the property, housing market conditions, whether the property is situated in a high risk flood area, the condition of the property, the future saleability of the property.

  

Saturday, 28 June 2008

With so many different types of investments around today, each with differing levels of risk; it can be difficult when deciding which ones to choose.
On talking to a professional such as a financial adviser it is likely that you will hear names of many different types of investments being banded around without realising what they all mean.

A unit trust is one such investment type which is 'pooled' and created under a trust deed - The trust deed places certain obligations on both the manager of the unit trust and of the trustee.

When an investment is referred to as 'pooled', the meaning arises from the pooling together of investments from a large number of individual investors. A unit trust offers a way of contributing to the fund either via a lump sum, through regular contributions or a combination of the both. Each unit represents a fraction of the funds total assets.

Within the finance industry, a unit trust is referred to as 'open ended' in respect of the unit trust manager being able to create more units in response to demand.

What is the function of the unit trust manager?
A unit trust manager is obliged to buy back units from an investor wishing to sell. They will generate their profits by charging annual management fees and the actual dealing of the units themselves.

The manager is responsible for a number of different functions including:

• The day-to-day managing of the trust fund.


• Offering the units for sale.


• Valuing and fixing the price of the units.


• Purchasing the units back from the unit holder.

What is the function of the trustee?
The trustee will have an important policing role to ensure that the manager complies with the terms of the trust deed, and ultimately to ensure consumer protection. In most cases, the role of the trustee will be carried out by a clearing bank, merchant bank or life company.
The trustee will have the main responsibility of overseeing the unit trust. The trustee's main duties will include:

• Holding and controlling trust assets.


• Collecting and distributing income from trust assets.


• Issuing unit certificates to unit trust investors.


• Approving possible adverts and marketing material.

Types of unit trusts
There is a wide selection of unit trusts, many relating to the nature of their investment objectives. There are however two broad types of unit trusts being 'accumulation and distribution'.

Accumulation unit trusts
An accumulation unit trust can be particularly attractive to many higher rate tax payers who are looking for capital growth rather than income. The objective of this type of trust is simply the pursuit of capital growth. Any income received from the underlying assets is immediately poured back into the fund - resulting in an increased value for each unit.

Distribution unit trusts
This type of unit trust has an altogether different objective - they are primarily geared to produce a high level of capital growth, as well as producing a certain amount of capital growth. The income is then distributed to unit holders as dividends.

  

Tuesday, 17 June 2008