Mortgage Provider

Credit Crunch: What Does It Mean For UK Mortgages?

There has been a real turnaround in the financial markets since the start of 2008. The fallout from the subprime mortgage problem in the USA is being felt on this side of the Atlantic. But what does this mean for you if you're trying to get a mortgage to buy your first home or trying to remortgage?

The basic fact is that there is less money available in the money markets for lenders to use. This means that they have less access to funds to provide for mortgages. This has led to many of the more attractive mortgage products disappearing from the market. There are now less than half as many mortgage products available as there was 12 months ago.

Many of the products to have disappeared include those in the subprime market which were available to people that had a poor credit record. There are also less buy to let products and you are likely to have to find a bigger deposit to fund an investment property. 90% buy to mortgages have gone and 85% deals are becoming more rare. If you are investing in property, you will now have to do your figures even more carefully than ever.

Earlier this year saw the end of mortgages where you could borrow more than the property's value. This included 125% mortgages offered by the likes of Northern Rock. Another milestone has just passed (early April). The last 100% mortgage has just been pulled by the Abbey. This means that first time buyers will now have to find at least a 5% deposit to get on the property ladder, or get parental support.

Industry experts predict that this may not be the end of mortgage products being withdrawn. It may be necessary to find a 10% deposit in future.

With the best mortgage products being constantly withdrawn by lenders, there is the very real chance that the housing market will suffer a slowdown. Even people who just want to remortgage to a better deal are not immune as the most attractive offers are similarly being pulled off the market.


Author: Paul Elms

First-Time Buyers Advised To Wait Out The Mortgage Mess

First time buyers are being urged to wait out the mortgage mess. The markets should settle down before customers consider getting a mortgage, experts say.

100% mortgages are no longer an option and a number of banks, including The Co-op Bank and First Direct are choosing to temporarily suspend availability of their home loans. Claire Frances of Moneysupermarket .com says: “Consumers looking for a mortgage are facing less choice and higher rates. The Bank of England has warned that the situation is likely to get worse before it gets better and that the squeeze on mortgages is likely to continue for the next few months at least.”

Large mortgage providers such as Halifax, Abbey and Nationwide have all increased rates on their mortgages. The result of these higher rates is that the deals no longer look competitive and it is as though the banks are pricing themselves out of the market. The reason that banks might want to deter custom at this turbulent time is because many banks are trying to control their bad assets and they cannot afford to take on any more debt.

Louise Cuming is the head of mortgage services at moneysupermarket.com, and she has said: "It's getting very difficult out there because as leading rates are pulled, the lenders offering the next best deals know that their products will be propelled into the best buy tables and that this will result in a huge influx of applications - if they don't want, or can't cope, with that level of business they too are having to re-price their mortgage products.”

While some banks are seemingly trying to deflect custom, Alliance and Leicester seem to be trying to attract it. Today news broke that they have launched a number of new mortgages and buy-to-let deals. Speaking to Introducer Today, the head of mortgages at Alliance & Leicester, Richard Taylor said: "This new range of mortgage products continue to present a good choice of residential and buy-to-let products with customers being offered a choice of rates, product fees and the term they would like their mortgage to run."

How long Alliance and Leicester can offer their new deals in this economic climate remains to be seen. Alliance and Leicester are also one of a many banks which now require a minimum deposit of 10% on all their deals. Other banks which need at least a 10% deposit include, Britannia and Cheltenham and Gloucester.

Moneysupermarket’s Claire Frances says: “The number of mortgage products available has plummeted from around 15,500 last July to around 5,300 now. And with many lenders pricing their products at uncompetitive levels, the few deals that are keenly priced are attracting huge swathes of money and consequently aren't staying around for long.”

Negative equity is also tipped to be a serious problem for existing home owners as house prices are falling and are likely to have fallen by as much as 5.8 % by the end of the year. But the relief which falling house prices has the potential for offering first-time buyers is overshadowed by the low likelihood of them getting a good mortgage deal before the year is out.


Author: Sarah Othman

A Self-Help Guide on UK Credit Cards

Different credit cards have different features. Shopping around could make you find a credit card that may have a low interest rate, or have some other attractive feature that you like. However, the problem with the card would be that it is not of your country. Even so, there are ways and means to acquire such foreign cards. For American citizens, it is easy to acquire British credit cards. This article tells how to go about getting a UK credit card.

Your search must begin online as usual. Find a list of all the UK credit cards that do their businesses in the US also. These websites would also list the rates of these cards. A comparison of the rates is in order. Do not go just by the interest rates. Check also the late payment fees, annual fees and all other fees that are applicable to the cards. Once you have zeroed in on the card you want, you must make the application through the net. This would initiate the process of getting your first UK credit card.

Though the features of UK cards may be different from the cards available in your country, the basic rules all remain the same. The credit cards provide you with the plastic convenience, i.e. you no longer need to carry cash every time you go shopping. Just as US credit cards, UK credit cards are also usable in almost everyplace that allows credit cards. People in UK owe hundreds of millions in credit card debts. Due to this, the major UK credit card companies are expanding their businesses beyond their national frontiers in order to boost their businesses.

Applying for a UK credit card is no big deal. It is almost as easy as making the payments with the card. But when the bill comes at the end of the month, that’s another story altogether. UK credit cards look different from US credit cards. These bills will have separate terms and terminologies. So you would need to have a glossary to understand all the terms. This would be available in the information booklet that came with the card. Be wise and read all the charges that could be levied, so that the bill does not turn out to be beyond your expectations.

There are many UK credit cards available for American citizens. So take time and find out all you can about the different cards available. You will find that some of the cards suit your requirements better than the others. Try to find a card with zero percent interest rate and with features like balance transfers or bonus points on purchases.

People all over the world are spending a staggering sum of half a million pounds every minute using UK credit cards. A rough calculation would indicate that the transactions with UK credit cards goes up to tens of billions of dollars every year. Considering this big amount, one can easily see how popular UK credit cards are all over the world. But the question is, are all of the UK credit cards so good? Let us examine some of the most popular credit cards from the UK.

(1) Marbles Credit Cards

Marbles has several wonderful features that have made it immensely popular with card used. Top on the list is the 52 day stipulation of interest-free credit, zero percent on balance transfers for the first six months of using the card and a low APR of 14.9%. Other striking features of the card are the choice of deciding how the card will look like. Online management of the account is provided. And to top it all, the Marbles Card is billed as the safest and securest card of the whole world.

(2) Virgin Credit Cards

Virgin Credit Cards also provide zero percent on balance transfers, but they have a higher APR of 15.9%. But these cards also have no annual fees, so they may be well within the budget of people who pay only the minimum balances month after month. Virgin has a 24 hour helpline and it is a qualifying card for several attractive discount and free memberships over the net.

(3) Egg Credit Cards

The Egg Card provides free purchases in transit protection for items. While traveling this card is a great plus-point. The cardholder can make almost the entire payment of the fare using these cards and get a personal travel accident insurance also. This makes it the best card for frequent travelers. Apart from the attractive travel offers, the Egg Cards also provide 10% discounts on home and travel insurance policies, provided the payments are made with the card.

(4) GM Platinum Cards

GM Platinum is another card with a low APR of 14.9%. Along with this, they have zero balance transfer rates and are interest-free for the first five months of their purchase. Like most other cards, the GM Platinum Cards also provide easy online management of the accounts.

All UK cards are therefore ideal for American citizens in one way or the other. There are also some added benefits. When the first purchase is made with a UK card, the cardholder would get a hundred free rebate points. This makes the UK cards more tempting than US cards.

Going through all the pros and cons of the UK credit cards and knowing the major providing companies, now you can make a decision on which UK card to apply for.



Author: AdamHeist

Smart credit card Christmas shopping!

Only a matter of days until Christmas! Now is the time to decide which credit card to use for your Christmas shopping. A little research and action taken now could save you money come January.

Capital One cash back & travel insurance credit card – pays 4% cash back on all purchases for the first three months. Enough time to earn the maximum cash back on all your Christmas shopping! You will also receive FREE annual family travel insurance if you pay for a holiday on the card, so if you’re planning a Christmas break this could be the card for you.

Transferring your balance?

If you’re still feeling the pinch of recent interest rate rises and need to switch your debt to another 0 per cent card here are some of the best around today;

Barclaycard offers 0 per cent on balance transfers for 14 months with a 2.5% fee of the amount transferred. 14.9% Typical APR.

Virgin has 0 per cent on offer for 15 months but their balance transfer fee is 2.98% of the amount transferred. 15.9% Typical APR.

Halifax One Special is again a fantastic offering of 0 per cent on balance transfers for 12 months, Typical APR is 15.9%. However this has a 3% balance transfer fee.

If you’re able to pay off your balance every month then cash back cards are probably the easiest way to get something back for all your spending.

Thinking of a loan?

If you have something more extravagant in mind this Christmas then a personal loan could be the ideal way to make your Christmas dreams come true!

Unsecured personal loans can be used for any purpose you like from financing a car, dream holiday or home improvements to just splashing out on the latest LCD TV or games console for your kids.

Unsecured loans are usually available from £500 to £15,000 and are not like secured loans which use your house as security on the loan should you default on payments. An unsecured personal loan will also be a far cheaper option than a typical finance offer from retailers.

If you already have credit card debt an unsecured loan could also be an ideal solution if you want to consolidate all the debt into one easily manageable monthly payment.

Instead of receiving monthly statements from all your creditors and having to ensure payments are sent to these creditors you could take out an unsecured loan large enough to pay off all the outstanding credit card debts. This way you only make one payment to the unsecured loan provider every month and more often than not personal loans have much lower APRs than credit cards.



Author: SimonDuffy

The Subprime Slowdown Lowdown

Unless you are living in a cave, you have most likely heard something about "Sub-Prime" or "Subprime" mortgages and how they are responsible for the tightened lending policies that we are seeing today. Most homeowners feel that what is going on in the home mortgage lending markets today does not affect them if they are not considered a "subprime" borrower. Unfortunately, this is simply not the case.

So, what is a subprime borrower? The line has been blurred over the past 5 or 6 years between borrower types when it comes to home mortgage loans. It used to be that there were "A paper", "Stated Income" and "Alt-A" borrowers. "A paper" borrowers typically have FICO scores above 700 and are paid on a salaried, W2 basis. Stated income borrowers may have great FICO scores as well, but they do not get a W2, they earn their money via 1099s or other "undocumented" ways.

This means that banks and lenders have to use alternative methods to verify that the income the person is stating makes sense. Then there is "Alt-A". "Alt-A" borrowers fall outside of the "A paper" borrower box for one reason or another. They have funky income, credit is a little low, short time working at their current job, etc. This was the "subprime" borrower 10 years ago.

As the US dollar began its steady decline in value, foreign money began to flow into the United States looking for "relatively" cheap US investments. Many foreign investors felt that the US dollar would rebound and that it was a good time to buy things here on the cheap. These foreign dollars helped to make the cost of borrowing money much lower and more importantly, opened the door to borrowers that were never able to buy a home before.

This new class of borrower was dubbed, "subprime." These were borrowers with credit below the 620-680 mark, typically stated income, little to no down payment, and with debt-to-income ratios above 40% typically. These were borrowers that no bank would give a loan to 5 years earlier, but with the abundance of money seeking a home in the US, investment vehicles were put together on Wall Street that gave these people access to 100% financing and more.

Many new types of loan programs were created to help these people get into homes and put these dollars to work. After all, an investment banker only gets paid when he puts deals together. With the influx of new borrowers into the real estate market, prices soared as demand went through the roof. 20% down payments were no longer required by for any type of borrower.

While subprime borrowers used these high-leverage loans to purchase and refinance their homes, other borrowers did as well. Many used Option ARM or Negative Amortization loans to buy a bigger house than they could really afford. These loans typically have a low start or pay rate of anywhere from 1% to 3% (amortized) and offer 3 to 4 payment "options" a month. Many times, borrowers were allowed to qualify for the loans based on these pay rates rather than a typical fully amortized payment or interest only payment.

Traditional A paper and Alt-A borrowers began to use these loans as well, moving up into bigger and bigger homes and pulling out some of the paper equity they had built up. Unfortunately, many people used this paper equity cash as disposable income, living well beyond their means.

Today we are seeing the effects of all of the over extension of credit the average American consumer has asked for. Almost all of these non-traditional loan programs have been eliminated as they make little to no sense from a lender's perspective, especially when the market is not appreciating. This is where the average consumer may be surprised in the coming months.

Many borrowers believe that Option ARM and 100% financing loans are always available. When they go back to their banks or mortgage broker many of these people will be in for a rude awakening only to find out that they will most likely be required to have a fully amortized payment, they will not be allowed to pull cash out and in many cases they will simply not qualify for the loan they are seeking.

The current money crunch is not limited to subprime borrowers. All homeowners should talk to their financial professionals today to assess their current and short-term financial goals and needs to make sure that there won't be any surprises around the corner.


Author: jasongolod

UK House Prices Still Rising

Despite widespread feeling that house prices were, at last, slowing, new figures released by the country’s biggest mortgage lender Halifax, suggest that house prices, are in fact, still rising on the back of a strong economy and shortage of homes for sale. Prices rose by 1% in March taking the average house price to £194,362.

All parts of the UK have seen an increase in house prices most notably Northern Ireland, once the second cheapest place to live in the UK, have seen house prices rise by 76% since the beginning of 2005, making it now one of the most expensive places to buy property in the UK.

With prices creeping above the reach of many first time buyers some lenders have reacted by offering a previously unprecedented forty or even fifty-year mortgages, commenting that the twenty-five year standard was no longer relevant and that many first-time buyers who are in their twenties would not be retiring until they were in their early seventies. They also claim these mortgages offer greater flexibility, although some would also add, greater interest payments.

This development comes after Abbey announced that it would offer some customers five times their annual salary rather than the usual three or four. With now over a decade of booming house prices these developments in mortgage lending offer some hope to first time buyers eager to get on the much vaunted property ladder.

It may also come as a relief to the parents of first time buyers who have been assisting their children with deposits and even helping with mortgage repayments and in some cases re-mortgaging their own properties to help their children on to the property ladder. Halifax and Nationwide note that there are emerging signs that finally house prices may start to slow at the end of the year.


Author: JamesQuinton

The Advantages And Disadvantages Of Secured Loans

When it comes to personal finance one area that many struggle to fully understand is secured loans. Despite thousands of secured loans being taken out in the UK every year many people are not totally aware of the risks they are taking on.

Many guides throughout the internet scan over the main points than the finance is secured against your property and that people failing to keep up with repayments face the danger or repossession. While these are two very valid points that are certainly worth people knowing by themselves they don’t provide enough information for people to truly appreciate what they are getting into.

To add some meat to the bones here are further details on the advantages and disadvantages of taking out a secured loan from a UK lender.

Advantages of Secured Loans:

- Your monthly repayments can be lowered by spreading them over a longer period of time (be aware that while this can be advantageous in the short term it could mean you actually repay more in total interest over a longer period).

- If you decide to take out a secured loan rather than remortgage you can avoid the potential problem of losing any special rates currently enjoyed on your existing mortgage deal.

- Changing your mortgage to raise extra funds could mean facing large early repayment charges, taking out a secured loan help to avoid this.

- A secured loan can be used for any purpose as long as it is legal, raising extra funds via a remortgage may have usage restrictions

Disadvantages of Secured Loans:

- The interest rates on secured loans will be higher than for a mortgage; this reflects the risk involved on the lender’s behalf, even though you, the borrower, have provided security against the capital. Another reason is the lender only has what is called a “second charge” on your property.

- If you’re planning to use your secured loan to purchase a new vehicle or “white good” i.e. a washing machine you may well be left with the debt long after the usefulness of your purchases has expired.

- The upfront costs such as valuation fees and arrangement fees will increase your expenditure.

- Paying off your secured loan each month may leave you short of cash to meet other bills. The temptation to borrow more to meet these demands presents the very real risk of falling into a debt spiral. With the national UK debt well past £1trillion many UK homeowners currently experience such difficulties.

When considering the possibility of taking out a secured loan it is important to weigh up both the pros and cons to make sure you reach the right decision. If there is any doubt in your mind the best course of action is to speak with an independent financial advisor to discuss your options.
If you feel this form of borrowing is right for you make sure you get the best deal possible, compare UK secured loans online to scour the market for the best offers currently available.


Author: Marcus Henry

A beginners' Guide to mortgage UK

The decision to mortgage house does not in any way show that you are not emotionally attached to your house. On the other hand, it was your concern for the house that restrained you from selling it. As compared to the sale of house, mortgage is a much better option. You continue holding the house and living there for as many years as you want.

The only problem however is that the loan provider has kept lien on home to himself, and keeps using it as a stick to exhibit what can be the consequences of being irregular on the mortgage repayments. In the worst of circumstances, when the borrower has not repaid the mortgage, the loan provider has the right to repossess home.

What can the borrower do in such circumstances? There is not much to do once the loan provider has made up his mind to repossess home. Recovering home from the loan provider in such cases will be much more costly.

A more effective solution to the problem would be to go by the rules. Continue paying as much has been decided between you and the loan provider, and try to be disciplined in repayments.
This isn't as difficult a solution as most of us will think. The following illustration would make things clearer.

For a person who earns a monthly income of ₤100, it will be difficult to pay ₤30 at a time. However, when he is required to pay ₤1 over a period of 30 months, it will be relatively easier. The monthly installment method of repaying mortgages uses the same concept. The borrower will be required to pay a monthly installment every month. This goes towards amortising the mortgage balance over the specified term.

There are other methods for paying off the mortgage too. Among the alternative methods, interest only mortgage repayment is the most important. An interest only mortgage repayment method allows borrower to pay only interest on the mortgage. Thus, at the end of the term the balance remaining unpaid is the amount actually taken. How the balance of the mortgage will be repaid at the end of the term will further categorise mortgages into pension mortgage and endowment mortgage.

Pension mortgage employs the pension for disbursing the unpaid mortgage balance. Normally 25% of the pension is available tax-free to every borrower. Pension is the result of contribution of the employer and the employees over the work life of the borrower. Thus, utilizing pension for repaying mortgage will not be much burdensome to the borrower.

Endowment method of paying off mortgages will utilize the amount saved by borrower in an endowment policy over a period. Since, the endowment policy will be invested in shares and stocks; there are chances of the endowment fund growing profitably. Similarly, there are chances of the endowment fund not faring properly and resulting in loss to the borrower.

Mortgages are commonly classified into three, depending on the borrower and the purpose for which it is being used. A first time buyer mortgage is for the borrowers who are buying house for the first time. Mortgage terms may differ for this kind of borrowers in order to incorporate the relative weakness of their finances. These borrowers become eligible for discounted rates of interest.

Another classification of mortgages is buy to let mortgage. Buy to let mortgage, as the name suggests will be for borrowers who already have a home and they want to use the new home for letting out on hire. A distinct feature of this type of mortgage is that the borrower will pay monthly installment through the rental received.

Finally, there are council right to buy mortgages. Council right to buy mortgage are for the people who have been living as council tenants. They have got an opportunity to buy the council home. Because of the lack of personal resources, they use the council right to buy mortgage.
Because of the home serving as collateral, interest rate is at an all time low on mortgages.

Always seek a mortgage from prestigious loan providers in the UK. The quality of the mortgage deals arranged by them is excellent. Also, there is no fear of several additions to the mortgage in the form of extra fees.

We have always stressed on the need for good decision making on mortgages. Good decision making ensures that mortgage is safely repaid and the worst fear of losing home on repossession never comes true.



Author: Ann Gibson

Choosing the Right Mortgage

If you are like most people you always want to have a look at your options, well why not make it the same when you are getting a mortgage ? Ask for 3-5 mortgage quotes. See what the difference is in the quotes and what different mortgage lenders are willing to offer you. Make sure that the lender does not pull you credit report, bring him a paper credit report that you print out to your lenders.

Understand what your credit report says. And don't order your credit report online. Most people order their credit report on the internet, sometimes they even get their free report. What they don't realize is that by doing this, they worsen their credit history because when your credit score is pulled more than once, your score will lower. And it will be pulled more than once if you pull it and then the mortgage company pulls it again. Instead what you should do is order your credit report through the credit bureaus by calling their 1-800 numbers. Be careful, because they will try to tell you to obtain in on the internet, be patient, stay on the line and ask for a written copy. Just bring a paper copy of your credit report. This is what will actually be pulled up by the mortgage company.

Consider using a mortgage broker. Sure you will have to pay an additional fee, but in many instances that fee will be worth it when you get the right type of mortgage loan. A mortgage broker will help find you several loan options to choose from. You can then choose the option that best suits your needs.

When you go to a mortgage broker or a bank make sure that the bank or mortgage broker does not sell you a higher interest rate than what you qualify for. Many banks will pay a broker to sell his customer a higher mortgage rate. This is called Yied Spread Premium or YSP. So if you qualify for a 6% interest loan but your broker or bank is selling you a loan with an interest rat of 6.5% then the bank is making more money. Look for a line on your documents one that's says YSP. If it is positive that means that you are not getting the lowest interest rate you qualify for.
How do You Avoid This?

Be upfront with your broker or banker, and negotiate. If you negotiated the price of your home, you can definitely negotiate your mortgage. Every fee on the mortgage is negotiable. The only thing you cannot negotiate on are the taxes, the filing and the insurance fees. Before deciding, get a copy of your good faith estimate, take it home and start investigating all the fees the bank or broker is trying to collect. Explain to him, what you have found out. You will soon learn that he changes things pretty fast. When you use a broker tell him that you are willing to pay up to a half point in origination fees, but that you don't expect to pay an back end fees. He will understand what you are talking about.

Finally read your closing documents very carefully. In fact you should ask an attorney to be present. better save than sorry. It is better to spend a few hundred dollars to consult an attorney now, and not find out later that you are spending thousands of dollars paying what you should not have to. Many brokers and banks feel somewhat uncomfortable and too time consuming. Generally speaking and in most cases the attorney does not find anything wrong with the closing arrangements. But you know the principles of Murphy's law. Something may go wrong if you don't do things the right way.

In this type of arrangement it is not wise to penny pinch. In fact be sure to always have a home inspection done. If you don't do things you will regret it. It is always best to have spent a few hundred dollars up front. But what you want to avoid is having something BIG go wrong halfway down the loan.


Author: Jim Donaldson

Mortgage Bankers are hurting….Help is here

Everyday I get calls from good people from the mortgage business and they tell me they are starving. There are way too many loan officers for the amount of new home purchases and re-finances going on right now in this market. Just yesterday, I spoke to Michael from Scottsdale Arizona, a man used to making $250,000 a year in the mortgage industry just resigned from his job yesterday. Scottsdale is the upscale neighborhood just outside of Phoenix Az. And the entire hot Phoenix real estate market has cooled off to a stand still. So what are all these good people going to do now? Most of them will be go out and get sales jobs in another industry and start all over.

The problem with starting all over is that they have no clients, no prospects and no income. Also, Do you know what happens to other industries when the real estate and mortgage industries crash? Usually other businesses slow down too. This creates a problem for the mortgage broker starting all over again. He or she will be starting all over again in a declining market.What do you do? One thing you can do is look for a company that thriving in a down market. They are few and far between, but they are out there. There is an industry that thrives when others are slowing down. They are marketing companies that help other businesses market their products.

When a decline in business occurs, businesses have to spend more money in marketing and advertising just to try to maintain. It has been this way for the past 30 years and it will continue to be this way for the next 30 years. I am fortunate enough to work for one of these growing companies in the marketing arena and the company is having its best year ever!


Author: boneylikes

Home insurance – The debate

Each and every year in the UK we needlessly throw vast amounts of money quite literally down the drain. It is estimated currently that we Brits waste £600 million each and every year on insurance products we could have gotten much cheaper. Does this come down to laziness or lack of trying, you ask?

I must admit to opting for the first quote I have come across on more than one occasion, so on my part I can say that it definitely can come down to laziness. In the case of home insurance it seems that it may be an altogether different scenario. Many people are mislead at the time of purchasing a mortgage into thinking that it is mandatory to purchase their policy through the mortgage provider. This is simply not the case, although they are quite within their rights to insist you have buildings contents cover in place before they release funds into your bank account.

In a survey carried out by the Post Office it was revealed that 1 in 25 people believe it is mandatory to purchase house insurance from their mortgage provider. Of those surveyed 2 out of 3 people; a staggering 66%, said it was simply easier to take insurance out with their mortgage provider. Your mortgage provider can insist that you have buildings cover in place but don’t usually insist on contents cover, you could find you take out a policy with them for this one aspect when you could have found a combined policy much cheaper by looking elsewhere. It is common practice for providers to charge a fee of around £25 to change your house insurance over to a different company should you find a better deal.

Shopping around could save you on average up to £170 on your building and contents cover. This is certainly the case with all types of insurance, for instance allowing your tour operator to package your policy could hugely inflate the price. This can also be seen with car insurance whereby many simply pay whatever renewal fee their current insurers ask for. Shopping around can literally save you hundreds and I cannot recommend it enough.


Author: Chris Rowlands

Buy-to-let Commercial Mortgages

Caution vital for 100% Buy-to-let Commercial Mortgages

An increasing number of 100% business mortgages are being provided to commercial premises landlords, and industry specialists are concerned that this will lead to a growing number of repossessions.

Many business loan lenders are exclusively relying on credit status reports to underwrite 100% commercial mortgages, but these reports do not necessarily provide the true picture on the financial management capability of the applicant.

A wrongly evaluated commercial mortgage case often leads to business premise landlords using their entire rental income to cover the mortgage repayment. It's often advised that landlords retain 15-20% of the property LTV for emergencies.

Incomes take into account the uncertainty both about those incomes and about future interest rates. House prices are also volatile and uncertain. Businesses are aware of the degree of volatility in all these factors. In the end though we do not know what the future will be like, it is intrinsically uncertain, but they are aware of the type and degree of that uncertainty, and of how uncertainties about inflation, interest rates, house values and future incomes interact with one another.

Inflation volatility creates real capital risk; business Commercial Mortgages borrowers do not know what the real cost of mortgage repayments will be even if the nominal value of payments can be known when a permanently fixed-rate mortgage is taken. If inflation is uncertain, the real interest rate on a fixed nominal rate mortgage will be uncertain as well. Inflation is becoming increasingly variable the bank of England put up interest rates which affects Variable Commercial Mortgages above anything. A average 0.25% increases places between 17 - 24 on the average £100,000 Mortgage

It is also assumed that long-term fixed-rate mortgages are, on average, more expensive thanshorter-term, more variable Commercial Mortgages. What this implies is that the interest rate on a longer term fixed-rate mortgage is, usually, above the average of the short-term rates that a household will pay on a more variable mortgage over its life (assumed to be 30 - 35 years).

Many experts are calling for certain criteria to be satisfied before a 100% mortgage is considered (e.g. size of property portfolio, experience of investor)


Author: Robert Palmer