Questions to Ask About Interest Only Mortgages

Interest Only Mortgages for Harrow Home Buyers

Interest Only Mortgage is a very good, but a tricky product. For people who want to remain in a house for a long time and the house value appreciates over time, this product is good for them. However, this product could be misleading since you pay a very small amount for the first 1, 2, 3 or up to 10 years!

Interest only mortgage is available in two varieties. The variable rate and the fixed rate varieties. However, variable rate varieties are the most common in the market. When compared to the traditional types which require principal and interest repayment, Interest only mortgage is cheaper to pay for what the borrower is required to pay monthly is only the interest.

Variable rate mortgage Harrow

Variable rate mortgage Harrow – image by vorakorn

You should be prepared to repay a higher amount spread over a long period. For instance, if you have taken the interest only mortgage package to repay in 3 years, you will be paying the interest in 3 years. After which you will start repaying the principal with the adjusted interest. When computed over time, you will have paid much more compared to the traditional mortgage but at a slower rate.

The interest only mortgages normally allow for repayment of interest to offset the interest amount during the first few years of the mortgage. This is risky for lenders and that is why this plan has higher interest.  If the asset is unlikely to depreciate, it is a very good way to buy.

If the housing market drops, interest only mortgages can turn ugly and very bad financially. This forces the borrowers to repay an amount that is higher compared to the actual value of the house. Therefore, refinancing the asset into a fixed rate mortgage is almost impossible.

It is vital to have in mind the nature of Interest only mortgages. A lot of caution should be taken when dealing with Interest Only mortgages. Although it gives you the fastest means to acquire your first time house, misusing this lending product could lead you to financial problems.

In conclusion, with the right financial management over time, an Interest only mortgage has the potential to save you a lot of money. It gives you the flexibility to acquire an asset and repay the loan at an affordable flexible rate. Using this type of mortgage plan, you can easily manage both your loan and your assets. Before you settle for an Interest Only Mortgage, it is very important to consider the relationship between the interest to be paid, the base interest and the overall payment so as to make right decisions. However, this plan is generally good for people who want to get their first house, but having low incomes currently but are committed to a good budget control.

For more information it is a good idea to talk to a Harrow mortgage broker about Interest only mortgages. You can get more details here.

Comparing Fixed Rated Mortgages in Harrow

Some Benefits of Fixed Rated Mortgages in Harrow

If you are planning to stay in your home for a few more years and would like your mortgage payments to remain at the same rate, then you should consider getting a fixed rate mortgage in Harrow.  There are fixed rate mortgages available for a year to five or even 20 years in some cases. Over the term of the fixed mortgage you can be assured that your monthly payments will not go up.  When your interest rate is low, it is especially advantageous.  It allows you to lock the current rate in for your loan’s entire duration, whether that happens to be 30, or five years, so it safeguards you from future interest rate increases.

Fixed rate mortgage Harrow

Fixed rate mortgage Harrow

There are a couple of things you need to consider when deciding on which type of fixed rate mortgage to choose.  A long term mortgage (liked a fixed rate 5 or 10 year mortgage) will have lower monthly payments than a 1 or 2 year mortgage.  However, it will have a higher interest rate, which you will be locked into for the entire term of your loan.  At times, interest rates might decrease, but you will be stuck with paying a higher interest rate that you locked into.

With a 15 year or 10 year mortgage rate you could also ending paying a higher interest rate than the current rate.  However, there is less of a chance for that to happen with a shorter-term loan.  Fixed rate shorter term mortgages also come with lower interest rates compared to a 30 year fixed rate mortgage.  In addition, it will take less time for you to build some equity up on your house, since with every monthly payment you pay off more of the principal.  However, your monthly payment has to be higher for you to be able to do this compared to long term mortgage payments.

Learning More About Long-term Fixed Rate Mortgages

In some suburbs, housing prices are hitting record highs, putting many people’s dreams of owning their own homes out of reach.  Interest rates are also rising, which could turn some people’s dreams into nightmares.  For this reason, some mortgage lenders are introducing longer term loans such as 20 and 30 year fixed rate mortgages in Harrow so that more potential home buyer needs can be met.

These new mortgage options make is possible for more potential buyers to be able to afford to purchase a home by spreading out the monthly mortgage payments over a longer time period to make them lower, and thus more affordable.  It isn’t hard to understand how the monthly payments can be lower if you compare a 1 year mortgage with 12 monthly payments versus a 10 year mortgage with 120 payments on a home.  The mortgage payments on the 10 year loan will be much lower.

However, while the repayments will be lower, over the life of the mortgage, the total interest paid for the lifetime of the loan will be higher than the amount paid on a shorter home loan.  However, you will still build up home equity since your payments pay for both interest and principal.  That is why for home-buyers in Harrow fixed mortgages are attractive options compared to payment-option and interest-only adjustable-rate mortgage, which over the long term can be more costly since no or very little principal gets paid off.

To get mortgage advice on long-term fixed rate mortgages in Harrow, click here.

Key Facts About Harrow Mortgage Rates

Mortgage Rates and How They Affect House Buyers in Harrow

A mortgage is a loan used to facilitate the purchase of a piece of property which itself serves as collateral for the obligation. For most people, a personal residence represents a major investment and one they will likely make just a few times over their lives. Now that home prices are on the rise and loan rates are dropping, lots of folks are looking to get mortgages in order to purchase property. To secure your property talk to a Harrow mortgage broker.

Mortgage broker Harrow

Mortgage advice Harrow

A mortgage rate determines the amount of interest that will need to be paid in addition to the principal amount of a home loan. These rates tend to change frequently and are not constant. Lower rates equate to more affordable payments each month, and they ultimately produce lower overall purchase costs. Two primary types of mortgages are widely available, namely Fixed Rate Mortgages (referred to as FRMs) and their contrasting counterpart, Variable Rate Mortgages (VRMs).

An FRM is a home loan with an interest rate that will not change at any time during the term of the loan. Such mortgages are made for terms of 1year up to 5 or sometimes 10 years. In contrast, an VRM will have an interest rate that fluctuates over the loan term. This can be advantageous when rates are expected to drop, and these loans are useful for those with shorter-term plans for the purchased property. VRMs generally bear lower interest rates than FRMs, something which appeals to many, but they come with more risk. A mortgage with a fixed interest rate is much more secure and carries lower risk.

Prevailing mortgage rates go up and down based on a defined economic index. The bond market for mortgages operates via securitisation, something which facilitates the generation of new loans by making credit available at lower rates.

There are numerous online sources for learning about current mortgage loan rates. Just about every mortgage company offers up-to-date information about rates. In addition, lender websites often include user-friendly mortgage interest and payment calculators to help prospective borrowers get a feel for their potential monthly repayment obligations. Many also provide access to loan advisors who are ready to consult with prospective borrowers via the Internet or over the telephone.

However, given the vast range of mortgage products that are available in the market, it is extremely complicated and very time consuming for the average person to trawl through the different products to find the best suited for their own particular needs. Can you imagine assessing the repayments and different variations for 200 or more different mortgage loans? It might seem a good idea therefore to go to a bank or lender to get their advice. However, the problem with this approach is that they can only recommend their own mortgage loan products. Clearly they will not suggest a competitor who might have a better deal for you.

So the best option is to go and see a Harrow mortgage broker. They not only have access to many more mortgage products but they are also independent. And since they are not tied to any particular mortgage lender they can give you the best, unbiased mortgage advice in Harrow to help you make the most cost effective choice for your finance package to buy your new home.

Mortgage brokers can be very helpful when it comes to researching current interest rates and loan terms. Any decent broker will have a software tool to make the assessment process quick and easy. They will also show you the repayments you will have to make. and prepare the mortgage application documentation to forward to the lender for  consideration.

A further benefit of dealing with a broker is that they can often negotiate a better deal with the mortgage company. This is because the broker will be recommending a much higher volume of lending to that provider than any single individual. The lender will want to win the business and therefore be more flexible with the mortgage broker.  This can lead to significant savings over the life of the mortgage.

So to get the best mortgage deal for you, contact a Harrow mortgage broker. You can get more details here.

Strategies For Variable Mortgage Rates In Harrow

Variable Rate Mortgages for Harrow Property Buyers

In recent years, there has been a steady increase in new homeowners implementing variable rate mortgages. As interest rates continue to grow, you will need to understand and implement a modern strategy for interest rates.

Variable Rate Mortgages (VRMs)

VRMs are considered somewhat of a risk or gamble for home buyers. With this type of mortgage rate, you get lowered interest rates and smaller initial payments. You are, however, gambling that these rates will not rise as time passes. Fortunately, you come out on top if the rates do not increase. If the rates do not stay low, you must explore different options to prevent being tied to high interest rate loans. These loans can easily cause financial problems as you face a higher payment on your monthly mortgage.Variable rate mortgages Harrow

Over the past three to four years, VRMs have historically very low, attractive interest rates. A lot of homeowners took advantage of these rates to purchase homes that they could not otherwise afford. These low rates came as a consequence of the Global Financial Crisis as central banks around the world drove down their prevailing rate. All financial companies and loan providers dropped their rates too. For borrowers, the rates have stayed at these low levels so people are enjoying some very advantageous mortgage rates.

How to Avoid Increasing Rates

It is not likely that interest rates will stay at these low levels for a long time into the future. The chances of rates rising are much higher than of interest levels declining any further.  So to avoid increasing interest rates on a variable rate mortgage, you have two primary solutions to choose from.

Firstly, you will want to consider quickly converting to a fixed mortgage rate (FRM). FRMs have also stayed notably low over the last few years or so. If you switch to a fixed rate mortgage, you can stabilise your budget and finances. This is possible because your payment is a set amount per month. If for some reason these rates drop at a later date, you have the option of switching back to a VRM.

Some homeowners will unfortunately have to deal with the truth, and that is that they took a loss on interest rate gambles. This will generally happen when homeowners realise they are unable to make the mandatory monthly payments so they get a fixed rate loan. If you find yourself in this position, it is necessary to sell your house and downsize to another property. For the most part, it is best to act quickly so your equity will not be lost. You can avoid additional losses if you make changes now. This does sound tragic to many homeowners, but it is not. While you are required to downsize, you will not lose your equity if you sell in a timely fashion.

Even if you have not addressed it, interest rates are indeed likely to rise. Now is the best time to come to terms with your variable rate mortgage, so you are not faced with financial stress. Talk to a local mortgage broker about a Harrow variable rate mortgage.

Harrow variable rate mortgages

Harrow Offset Mortgage Deals

Offset mortgages deals in Harrow

In the recent times, choosing the best offset mortgage deal could be very challenging. The vast amount of information and different offers that you easily get on the internet and/ the streets in most cases leave more confused than before. It becomes very difficult to judge clearly which is genuine and deal best suits you.

Offset mortgage Harrow

Offset mortgage Harrow

Meaning of offset mortgage.

Offset mortgage is a type of mortgage that allows for quicker repay than most common mortgages. This is made possible by linking your savings account with the mortgage balance account. The interest that is earned from the savings account is used to repay your mortgage. Depending on your savings amount and paying rate, it is allowed to underpay, overpay and/or sometimes take payment holidays.

This difficulty in finding the interest rate of different mortgage providers makes it hard to do comparison and analyse which is the best deal. However, it is important to look at offset mortgage as a whole before making your decisions to settle on the mortgage deal that you can take. This is because offset mortgages come in many different forms and sizes and it is best that you choose one that best satisfies your needs. According to the Council of Mortgage Leaders, about 170,000 offset mortgages worth £23.9 billion were sold in 2006 alone.

Although they account for a small percentage of the market- only about 7%, offset mortgage deals are much better choices for households seeking for a good mortgage deal. There are many benefits that offset mortgage offers you. This includes: tax benefits, yearly savings and payment flexibility. However, with this great deal, most people still go for the traditional mortgage plans not because they do not know some other type of mortgage exist, but since they are more comfortable with what they know and fear the unknown.

Independent Mortgage brokers.

To avoid all the confusion in choosing the best deal, it is important if you seek the help and advice of a trained person like a mortgage broker in Harrow will be of much assistance to you. Like all other financial services, Offset mortgages are regulated by an independent body.

Like all other financial services, an independent body that regulates Offset mortgages in the UK is called the Financial Services Association. This body seeks to improve business in the sector by applying all the effective business principles to a firm. For instance, principle 6 ensures that customers are treated fairly, principle 7 ensures that reliable and non-misleading information is provided to the customer. Therefore, finding an independent personnel with knowledge in this area will help you secure the best deal.

A research done by CML indicated that most of the offset mortgages were sold through brokers. Compared to about 45% in April 2005, the mortgage sold through intermediaries rose to about 60% last year.

Types of Offset mortgages.

In the UK, the first offset mortgage type was introduced in 1997. Since then, the number of offset mortgage lenders has increased significantly. Presently, there are about 250 different mortgage products available in the market. One example is the buy-to-let offset mortgage which allows the owners to let the facility and use the rent to pay the mortgage loan. The offset mortgages have been customized to fit many work groups, including the self-employed, first-time buyers, commission based employees and those with irregular income.

In the past, offset mortgages were often associated only with higher earning older people. However, due to market expansion, young first-time homebuyers can now find suitable mortgage plans for them. There are many plans which include the ‘family offset’ in which friends or family can use their savings to offset the mortgage debt.

You can get more insight into offset mortgages in Harrow by going here.