If you are looking to find and obtain a 90% Mortgage in the current UK Mortgage Market, you ought to first understand what 90% Mortgages are in order that you can consider the general benefits versus the general negative aspects.
First of all a definition. The term "90% Mortgages" describes any mortgage deal which is available up to a maximum loan to value of 90%. Put simply, the mortgage loan amount offered by the mortgage company is up to 90% of the total value (or purchase price) of your property. The additional 10% will be covered by a deposit if you're purchasing, or by existing "equity" (margin) within the property if you're remortgaging.
The main benefit of a 90% Mortgage is that you are covering a large proportion of the properties value with a mortgage loan - and therefore you do not need to raise as much deposit. In the case of a remortgage, again you are able to borrow a greater proportion of the properties value which may be an important requirement in your particular circumstances.
Having said that, the advantages may also act as negatives. The less deposit you put down against a property, or the higher the loan to value ratio, the more exposed you are to falling into "negative equity".
"Negative Equity" is where the mortgage secured against your property exceeds the value of the property. In other words, if you wished to sell the property the sale price would not cover the mortgage - and you would need to find additional funds to release the charge(s) over your property and complete the sale. If you are unable to find the additional funds you will not be able to sell your property - and will effectively be a prisoner in your own home. "Negative Equity" should be a particular concern for both buyers and lenders in an uncertain property market, such as we are experiencing now in the United Kingdom.
Because higher loan to value mortgages are considered a higher lending risk by mortgage lenders, the deals offered are far less attractive than equivalent deals at lower loan to values. The interest rates are a fairly significant margin higher at the moment, and associated fees often greater. Therefore, if you are able to raise a larger deposit, not only will you be at less risk of "Negative Equity", but you will also be much more likely to secure a far more favorable deal.
Showing posts with label refinancing. Show all posts
Showing posts with label refinancing. Show all posts
Wednesday, June 1, 2011
Monday, May 30, 2011
Thinking About Refinancing Your Mortgage?
Probably the most optimal time to get a refinance on your mortgage is when you can improve your mortgage terms and lower your cost of borrowing. If you are not improving the terms of your mortgage and you are not actually lowering the cost of borrowing, then it's not a good idea to refinance.
There are a number of ways that you can use to better your existing mortgage terms. So, if whatever you choose to do with your mortgage when you refinance could depend mainly on what you aim to accomplish with this activity. These are some things that people can do to improve their mortgage:
Get rid of PMI. By the time you owe less than eighty percent on the value of your home, the private mortgage insurance fees that you pay will no longer be in effect. If you can show that the value of your home has become greater than the 80% mark during your refinance, you can save money on the PMI which you have to pay monthly. In the long run, all costs considered, people will end up paying 12% for private mortgage insurance instead of paying off a similar rate on their loan.
Cutting down the time for payoffs. Your payoff period is normally part of the mortgage that you signed off on. Currently, the most common terms of a mortgage is either the fifteen year or thirty year term mortgage. However, you can significantly lower the cost of interest payments if you opt for a shorter term. In the long run, you save more money on payments even if your monthly expenses increase.
Decrease the monthly payment. Be careful about this because having lower monthly payments doesn't mean you will get a better deal. It is definitely an option to lower the cost of your monthly payments if you can't afford it. In the long run it helps your credit score and keeps you save from foreclosure. However, longer mortgage payments mean that you may pay more in total. If you can lower your payment costs but keep the same terms, then this is definitely good for you.
There are a number of ways that you can use to better your existing mortgage terms. So, if whatever you choose to do with your mortgage when you refinance could depend mainly on what you aim to accomplish with this activity. These are some things that people can do to improve their mortgage:
Get rid of PMI. By the time you owe less than eighty percent on the value of your home, the private mortgage insurance fees that you pay will no longer be in effect. If you can show that the value of your home has become greater than the 80% mark during your refinance, you can save money on the PMI which you have to pay monthly. In the long run, all costs considered, people will end up paying 12% for private mortgage insurance instead of paying off a similar rate on their loan.
Cutting down the time for payoffs. Your payoff period is normally part of the mortgage that you signed off on. Currently, the most common terms of a mortgage is either the fifteen year or thirty year term mortgage. However, you can significantly lower the cost of interest payments if you opt for a shorter term. In the long run, you save more money on payments even if your monthly expenses increase.
Decrease the monthly payment. Be careful about this because having lower monthly payments doesn't mean you will get a better deal. It is definitely an option to lower the cost of your monthly payments if you can't afford it. In the long run it helps your credit score and keeps you save from foreclosure. However, longer mortgage payments mean that you may pay more in total. If you can lower your payment costs but keep the same terms, then this is definitely good for you.
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