The Finance Blog

You only have to look on the foot of any mortgage lender or mortgage broker's website to see a written warning stated in bold that 'your home may be repossessed if you do not keep up repayments on your mortgage'. That of course is the nature of a mortgage and secured finance in general

Missing a payment on a mortgage or secured loan is a very big problem for both a borrower and lender. From a borrower's point of view if the missed payments are left to accumulate then they run the risk of having their home repossessed. From a lender's point of view, they potentially run the risk of not being able to re-coup all monies owed from the borrower if in the worst case scenario; the property is not sold for its full market value at auction after being repossessed and there is a shortfall remaining subsequently. Both parties will generally wish to avoid court action at all costs unless the situation is left to worsen to the point of no return as perceived by the lender.

In every situation where a payment is missed on a mortgage or secured loan, the best advice that any mortgage professional will give the borrower would be to contact the lender at the earliest possible stage. In some situations where the borrower is unable to work due to an accident, sickness or unemployment; a protection policy will be in place to be claimed upon to cover the mortgage payments where the individual has arranged one previously. However, where there is no such insurance policy in place then the borrower will need to make an arrangement with the lender to clear off the arrears.

By contacting the lender, they may be able to assist you in a number of different ways. These solutions may include simply setting in place a repayment plan over a set period of time in order to clear the balance of the arrears. This may be applied by simply increasing the borrower's monthly mortgage payment over a period of six months for example. This option is will tend to only be used where the borrower has the financial capability to make these increased payments. Another idea may be to switch the mortgage from Capital Repayment to an Interest only one for a temporary period of time. This may ease immediate cash flow issues for the individual however again; this solution would only be available of course to those paying their mortgage on a Capital Repayment basis.

Many mortgage products today allow for payment holidays to be taken which could also be used in these situations where money is tight. A term extension may be appropriate where the borrower is paying the mortgage on a Capital Repayment basis. The lender may even decide to capitalize the arrears into the mortgage. Any measure that is suggested will very much be worked out on a case by case basis as each borrower's situation will differ from another.

  

Tuesday, 29 July 2008

Borrowers who are intent on finding the most competitive fixed rate mortgage would do well to watch out for excessive arrangement fees being added to the loan. Many eye-catching fixed rate mortgages will often have attached astronomical fees that are not quite so attractive on second glance.

Many brokers within the industry claim that some mortgage deals that on first glance appear to be the most competitive on the market could actually work out more expensive when compared to loans carrying higher interest rates but lower arrangement fees.

It is common for a mortgage lender to calculate their arrangement fee as a percentage of the loan advance - given the level of many mortgages in the United Kingdom today; this can of course result in huge fees being applied. Up to 3.5% may be applied as an arrangement fee at the top end for the chance to fix a low rate of interest for a number of years.

In the current economic client it is true to say that these are uncertain times for mortgage payers in light of the four interest rate rises in less than a year. The cost of borrowing has soared on both sides of the fence - lenders and borrowers alike. This week it was reported that the Bank of England's Monetary Policy Committee decided not to raise interest rates by only the narrowest of margins this month giving rise to speculation of imminent increases. This speculation has only helped to drive up the swap rates on the market – the rates of interest that predetermine fixed-rate prices - which in turning is forcing many lenders to withdraw much of their old range products.

Cast your mind back only two years ago where you would be able to secure a fixed rate mortgage for as little as 4.39 per cent. Nowadays however, many borrowers would expect to arrange a rate in excess of 5.5 per cent.

Since the start of this month, many of the major High Street lenders such as Northern Rock and Halifax have already withdrawn many of their best fixed rate deals. Within the industry it is widely regarded that if swap rates continue to rise, it will not be long before the demise of the sub-6 per cent mortgage unless you are prepared to pay a large arrangement fee.

When looking for the most competitive fixed rate deals, care must also be taken in respect to applicable 'Overhang' penalties. Another way for a lender to offset the cost of a competitive fixed rate of interest is by ensuring that the borrower pays the standard variable rate of interest for a predetermined period of time, or charging an early repayment charge for moving the mortgage before this period ends.

  

Saturday, 26 July 2008

A secured loan is in essence a loan that is secured against a property or asset - For most people this usually means their own home or investment property. A mortgage is perhaps the most common form of secured loan that most of us take out at some stage in our life. Mortgages and secured loans enable us to realise our dream of home ownership which would be out of the grasp of most people should such a transaction require a full upfront payment.

In the case of homeownership; the sheer size of the loan needed to purchase the property would in most cases would make it a too greater risk for the lender should there be no re-course to recover their money in the event of borrower default. The re-course in this case would of course mean property repossession. By the very nature a secured loan means that most individuals will take any reasonable measure to ensure that the payments are kept up on time and in full - Anxious of the repercussions that would occur if they were not.

The term 'secured loan' when used in the mortgage industry however refers to a second charge homeowner loan. Second charge relates to the way that the legal charge is registered against the property - This is usually second to that of a first mortgage.

Secured loans are usually arranged for those borrowers seeking extra finance who are tied into their current mortgage with a substantial early repayment fee to pay should they switch lenders. Secured loans may also be arranged for those homeowners who are looking for additional capital in a shorter timeframe than it would take to complete a remortgage application.

Of course not all borrowers have the same attitude towards debt repayment. This subsequently means that lenders assess each application on an individual basis keen to ensure that where there is a higher risk of lending to certain individuals, that they adjust the interest rates accordingly. Secured loans can be arranged for nearly every type of borrower from those with a perfect credit record to those with a poor one.

The rates of interest applicable to secured loans depend largely on your current situation. Generally these rates of interest will be slightly higher than those offered by first mortgages lenders. This difference is due to the fact that in the event of property repossession, the second charge mortgage lender would in effect, have to queue up behind the main mortgage lender and hope that there are enough monies left over to clear the balance of the loan outstanding.

  

Wednesday, 23 July 2008

There is no doubt that keeping up the monthly repayments on various debts coupled with the price of modern living can be a very difficult task. When it comes to debt repayment on a mortgage or secured loan however; not everyone prioritises these repayments over every other form of debt. This can of course have serious consequences - the worst case scenario being property repossession.

Falling into mortgage or secured loan arrears can be caused by many different factors - In the majority of cases this can happen due to a relationship breakdown, accident, sickness or unemployment. Another common factor of course is as previously mentioned - having high levels of consumer debts and outgoings. This can have a snowball effect in the way that one or two missed payments on a credit card or store card can make its way down to the more important commitments such as the mortgage or secured loan (where applicable). For the majority of individuals, the monthly mortgage repayment represents the largest single outgoing. For this reason, there is a very real temptation to free up the money allocated to pay the mortgage in order to alleviate other more seemingly pressing commitments.

Even when the circumstances seem at their most dire, many borrowers may be surprised to discover the many different courses of action that may be taken to stop the problem from escalating and ultimately; preventing repossession of the property. The majority of these options may be open to you at the discretion of the lender such as; term extension, capitalisation, payment holidays and payment plans.

Another option to consider is that of a remortgage. Where you have available equity within your property and an ability to satisfy affordability criteria, a remortgage can offer one of the most effective ways to combat the problem of repossession.

Even with a possession order, it is still possible to save your home. In most cases, where a possession order is granted to the lender by the courts, the homeowner is given 28 days to make arrangements to vacate the property in question. It is in fact possible to prevent any imminent eviction by way of repaying back the debt to the lender, inclusive of any arrears and charges. Even if a property has been repossessed by the lender, the amount owed may still be paid back immediately prior to the property being sold.

Without taking decisive action in these situations, repossession is not just a threat that faces the borrower but a very real possibility. Even with children, a court is not likely to make such exceptions very often.

In the initial stages of mortgage arrears there is a temptation for many to bury their heads in the sand. This mentality will include ignoring phone calls and emails, not opening the post and so on. This is not widely regarded as a sensible approach to such situations. Losing a property to repossession is a devastating experience and one in which can be avoided in most situations - regardless of the underlying reasons behind the mortgage arrears. It is important to obtain professional help at the earliest opportunity. As little as a just a couple of missed payments can be enough for a mortgage company to start repossession proceedings.

  

Thursday, 17 July 2008

An Early Repayment Charge (ERC) is also known within the industry as a redemption penalty, or redemption charge. It is a common condition of many fixed rate, discounted and capped rate mortgage products that an early repayment charge will be applied in the event of redeeming the mortgage before the tie-in period finishes. This tie-in period will of course differ from one mortgage product to another - generally speaking, the tie in period will last for as long as your fixed, discounted or capped rate.

Another charge that you may have heard of is an overhang penalty - This is not very common in todays market however it can be applied even after your fixed rate period has come to an end. The best time to find out about these different charges is at the start of any mortgage or loan application. In respect to mortgages, all fees and charges are highlighted in the Key Facts Illustration (KFI) which will be issued to you before the start of the application.

Many fixed term unsecured and second charge loans will apply an early repayment charge throughout the duration of the loan term. Again the charge applied will differ from one lender to another and will usually be calculated as one months interest, or a number of months worth of interest.

The early repayment charge will often have a large bearing on a borrowers selection of mortgage. If an individual is looking to move house within any given tie-in period, it is important to ensure before embarking on the mortgage application that the product is portable, or the early repayment charge applicable is kept to a minimum. In every case it is important to do your research and enquire at the start of any mortgage or loan application about any early repayment charges applicable.

If you are considering paying off a mortgage or loan before the end of its term or tie in period, you must be aware at the outset that this action could prove extremely costly. Many mortgage lenders will calculate their early repayment charges on a percentage of the outstanding loan amount. Many sub-prime mortgage lenders may calculate this as high as 6% of the outstanding balance!

  

Tuesday, 8 July 2008

There are countless people in today's society who suffer from the burden of having excessive bills and debts. Credit Card and Store Card spending is perhaps the biggest contributor to consumer debt in the United Kingdom today. This is largely due to the fact that they are usually very easy to obtain. Many also carry very large credit limits.

Many Credit Card companies have for a long time advertised their services to prospective customers in relation to transferring their existing credit card balances. This would usually carry a special offer term at which time the borrower would not pay any interest on their outstanding balance - This could be anywhere up to one year and even beyond that time in some cases.

Up until a few years ago, many credit card borrowers were able to do this without incurring any fees whatsoever. However the credit card companies have become wise in recent years to the practice of transferring the outstanding balance every time the interest free period comes to an end. Today, many of the major credit card companies now impose a fee for transferring a credit card balance - This usually equates to a percentage and can be in excess of 3%.

Debt consolidation is viewed by many as simply delaying a problem until a later stage. Certainly that may be the case when transferring credit card balances. However in the case of a debt consolidation remortgage, the financial savings on offer can be huge which can also equate to substantial stress relief and peace of mind.

Debt consolidating by way of a remortgage is something that requires much thought and consideration. Although the monthly savings on offer can often be substantial, this form of debt consolidation will usually mean spreading your monthly repayments over a longer period of time which obviously means that you will end up paying back the debt for longer. By using the equity in your home to pay off the unsecured debts will also mean that they then also become secured against your property. Provided that you are aware of both these factors and are happy about the risks involved should you fail to keep up with the increased repayments; it is then that you should contact a professional mortgage advisor in order to obtain further information and assistance.

Unfortunately the hard truth is that debts do not just disappear if you are struggling to meet the repayments. There are of course other forms of action to be taken and anything that you decide upon should be thought about thoroughly. Unsecured debts take many forms including that of hire purchase agreements, bank loans, unsecured personal loans, credit cards and store cards. The buy now and pay later culture is one that needs to be changed within society however at this point in time there seems to be little rest bite for our desire of spending!

  

Sunday, 6 July 2008

Commercial property is advertised through many different channels, largely in the same way as residential property. As a potential buyer you can search for commercial properties via:

• The internet
• Trade magazines and newspapers
• Specialist auctions
• Local and National Press
• Specialist Estate Agents
  

There are many factors that must be considered before embarking on such a potentially large financial commitment. Any kind of mistake could prove to be very costly in the long run. When researching the commercial property market, it is important to consider the following factors:

The ideal type of property for your business - Compromises will always be necessary in business to a certain extent however your selected commercial premises should be suitable for business purposes.

Does the property offer adequate space, both at the present time and in the foreseeable future? For many businesses, expansion is often a natural progression rather than a conscious one. Many companies purchase a business premises to suit the immediate need without considering the impact of rapid expansion in the future.

Will the business be able to function from the selected premises? On occasions, certain properties may be subject to certain restrictions in respect to the type of business they can accommodate. Will you need to obtain planning permission and if so, how likely is it to be granted?

Location - This is a make or break factor for some businesses. Is the business going to be solely reliant on passing trade? Does the location need to be central or an out-of-town site? Will the preferred location be easily accessible for staff to travel to work? Is the area well served by public transport?

Expenses and running costs - Local Authority charges and business rates will differ from one area to another. High charges and running costs will not only put a strain on the company's finances but could also make future saleability more troublesome.

Facilities - Are there adequate parking spaces available for staff? Is there a kitchen facility for staff? If improvements need to be made, can this be done within a reasonable budget?

Once you are confident that you have found a suitable property for your business then it might be a good time to make an offer. Where a mortgage is required to purchase the commercial property, a written offer in principle from the lender should be in place before an offer is made.

A conditional offer will usually be made after a comparison has been made with a similar property and the price is established as appropriate. Any offer will be subject to a number of conditions such as a full buildings survey and planning permission granted where appropriate.

  

Friday, 4 July 2008