Adjustable Rate Mortgage - Free Mortgage Advice

Adjustable rate mortgages are not the best proposition for all prospective home buyers, but for those who are aware of the implications, they may be well suited to meeting their requirements. An extract from an informative article about these types of mortgages is reproduced below:

"Sometimes people are surprised, by the relatively low interest rate, advertised for adjustable rate mortgages.

Adjustable rate mortgage loans frequently have low rates applicable in the short term. However, they are subject to fluctuation as market rates change, because of which they may move upwards or downwards.

Variations in market rates mean that it can be difficult to accurately assess your outgoings, with an adjustable rate mortgage. Some types have limits, beyond which the interest rate cannot increase, but this may be for a specified term after which market rates apply.

It is essential that those who sign up for an adjustable rate mortgage, are aware of their obligations, and choose the right type suited to their personal circumstances. Because they can be risky, and somewhat indeterminate, it is necessary to be sure that you can afford to cover possible interest rate changes."

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Mortgage Repayment Reduction Plan

The US government recently announced a scheme, that is essentially a mortgage repayment reduction plan, that will make it easier for many people to be able to afford to repay their mortgages.

The scheme will make it possible, for those who qualify, to considerably reduce their mortgage repayments. It is aimed at people who have little or no equity in their homes, and who are at least 90 days in arrears, but it only applies to loans guaranteed or owned by Fannie Mae and Freddie Mac, or other participating loan companies.

Critics of the scheme, suggest that it is likely to encourage people to get behind with their payments deliberately, so that they can qualify for advantageous terms. Others suggest that those who have ensured that they can afford their mortgages are being lumbered with tax hikes to assist those who have not been so prudent. However, it is not really that straightforward, and even President Elect, Barack Obama, has suggested that millions of Americans have been victims of predatory lending.

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Successful applicants will be able to get their mortgage repayments, including significant related expenses, reduced to 38% of their gross income. This could be achieved by reducing the interest rate, or by extending the loan period up to 40 years, or by reducing the principal against which the loan interest is charged. In the latter case the amount by which the principal had been decreased would be added back when the property was resold or refinanced.

Reduced interest rates would be available for a period of five years at rates down to, but not below 3%, after which they would revert back to market rates. On expiry of the term agreed under the scheme, there would no adjustment, to claw back the difference between the concessionary and market rates.

Obviously this is not a plan that will help everybody, but many people, who it could assist in staying in their homes, will welcome it. They would be well advised to seek full information regarding the scheme from their lender or government sources.

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There has already been a lot of hardship associated with the credit crunch, but it seems that the government is more than willing to play its part in alleviating financial problems, for homeowners.


Subprime Mortgages

The mortgage business in the USA is quite different to that operating in the UK. For example, in the US 100% of mortgage interest payments are tax deductible. Furthermore second and third mortgages qualify for the same benefits, meaning that mortgages of one sort or another are a very favorable way of borrowing money.

Such advantageous terms do not apply to consumer goods, including motorcars that for many people are the second most expensive purchase after their house. Therefore, before the incidence of subprime mortgage lending, there were many poorer people, without homes of their own, who had to pay higher interest rates for anything they purchased on credit.

Along came sub prime mortgage lending and an unprecedented borrowing spree, usually secured against rising house prices. It was all very well while house prices kept on rising, and lenders and borrowers were having a whale of a time. It seemed that times were too good for anybody to even contemplate that the bubble could ever burst.

Burst it did and house prices went into reverse. There were just a few professionals who saw the downturn as a correction rather that a decline, simply because a totally unregulated market had almost gone berserk and was defying gravity. Eventually it came down to earth with a bang, and we are all suffering the consequences. The unthinkable happened, and banks and mortgage companies began to fail, including some that were household names who had been considered to be almost invincible.

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The domino effect didn't just affect the US economy but had major repercussions all over the world. Other countries had jumped on the bandwagon, some more than others but the global effect has only narrowly avoided catastrophe.

Many countries are now joining together in an endeavor to make the best of a bad thing. It has been made more difficult by happening at the latter stages of a presidential campaign. President Elect Obama has successfully sought high office at a very difficult time. The world will be watching and wishing him well.

Better Deal For Mortgage Borrowers

It has been announced that mortgage brokers and lenders in New York have been instructed to give house buyers better information, concerning loan terms and conditions. Guidelines issued by the Department of Housing and Urban Development require loan sources to provide reliable estimates of closing costs.

It has been difficult for prospective buyers to properly assess cost, for comparison with what is available elsewhere, in the mortgage market. There have been a flood of foreclosures many of which are reckoned to be associated with over zealous lending policies, and many people have not had a clear understanding of their liabilities.

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In future prospective buyers will be given closing costs estimates, so that they will be clear about their obligations, and be equipped to shop around for the best deals. It is thought that in some instances the new system could save borrowers hundreds of dollars.

Although the guidelines do not provide for penalties against banks who do not comply with the new procedures, borrowers would be in a stronger position to sue should the need arise. The new arrangements cannot cover every eventuality but they are welcome, as they have come at a time when many borrowers have been hit by unforeseen circumstances, and they are the first changes of this sort for thirty years.

Mortgages - UK Banks Respond To Criticism

HBOS, the UK's biggest mortgage lender, along with other major sources, has agreed to pass on the full benefit of the Bank of England's 1.5% cut in interest rates. They had been under tremendous pressure to do so from Alistair Darling, the British Chancellor.

The high street banks have come under fierce criticism, from the popular Press, for not responding more quickly to recent cuts. However, they have now taken action within a day of the latest unexpected cut. There are many who hold bankers responsible for the international credit crunch, and it is undeniable that they have played a part. As the banking fiasco resulted in a taxpayer bailout, many of whom have mortgages, there was a head of steam building up for interest rate cuts, and it was essential that the bankers start to play ball.

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It seems that the executives of the major banks attended a breakfast meeting, and were left in no doubt of the UK government's expectations. As UK taxpayers, through their government, are now major shareholders in the banks, there were some who were demanding that a stronger line be taken to protect their interests, including interest rate adjustments in favor of mortgages and businesses.

Although the banks agreement to pass on the recent interest rate cut in full is welcome, there are many who consider that they should have responded to the requirement, without what amounted to a public outcry. There has been a lack of confidence in the banking sector, with banks being reluctant to lend to each other. That situation was in danger of spreading, and creating some sort of stalemate whereby no funds were available for normal banking functions. The Chancellor has shown that he is prepared to get tough, if the need arises, but it may be that in the face of so much media criticism, loan sources will act more responsibly in future.


Mortgage Relief Expected As UK Slashes Interest Rates

In a surprising move the Bank of England has reduced interest rates to a fifty-year low. They slashed 1.5% off the rate, which means that at 3%, it is the lowest it has been since 1955.

The Bank of England may have acted in sufficient time, to boost the economy in the seven weeks leading up to Christmas. However, high street banks have not been very swift, in passing on more favorable rates to business or domestic borrowers in the past, including those with mortgages. It the interest rate cut was passed on to mortgage borrowers in full, it could reduce their repayments by approximately £90 a month per £100,000 borrowed.

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Of course, the changes will only affect repayment levels of variable rate mortgages, mortgage relief expected as UK slashes interest ratebut where applicable they will be a welcome seasonal relief. At a time when there has been so much doom and gloom with rising prices, and threats of redundancy, this seems likely to be a step in the right direction.

This latest move by the Bank of England might be considered a risky undertaking, because of inflationary pressures. The pound has been worryingly devalued against the dollar, as London has become less attractive to international investors, seeking the best return. That trend may now be set to continue; although the upside is that it makes the USA a more favorable market for British exporters.

Interest rate cuts of .25% have been the norm until recently. Now that the Bank of England is acting more boldly, it is to be hoped that these shock tactics help to bring about the start of a recovery. It is worth noting that at the same time as the latest 1.5% UK cut in interest rates, the European Central Bank has announced a cut of just .5%, and it will be interesting to see how the money markets perform over the next few days.


Mortgage Holiday In Spain!

In a dramatic move, the Spanish Government has announced that it is to offer a repayment holiday to the unemployed, and to some pensioners. Their Prime Minister said the scheme could affect as many as half a million people, who should appreciate that their government is ready to help in this positive way. It remains to be seen whether other European countries will embark on a similar course, but it seems sure that some will introduce comparable facilities.

Under the Spanish scheme, those who become unemployed, along with some pensioners who have families to support, will be allowed to defer up to one half of their mortgage repayments, for a period of up to two years. It seems that the government will guarantee payments under the scheme, to ensure that lenders do not lose out. The maximum mortgage to qualify under the scheme will be €170,000.

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Spain has enjoyed a decade of growth in the construction industry, which is closely related to tourism requirements. Unfortunately the industry is suffering as the worldwide building bubble burst. However, with the credit crunch threatening to get worse before it gets better, the moratorium will be seen as a welcome measure. In common with the rest of Europe mortgage lending has fallen significantly, and any stimulus the government can offer will be welcome.

It must be said that the Spanish government has regulated its financial sector better than some other European countries. Therefore, the situation is not as bad as it could have been, but as the downturn continues it is possible that one of the first things people will cut down on is holidays. That could have a serious affect on tourism, and it is difficult to forecast when international circumstances will improve.


Mortgage Christmas Box

There is optimism about interest rates being slashed to bring Christmas cheer to millions of mortgage borrowers.

The European Central Bank is under global pressure to reduce its rates and it seems that when it does the Bank of England will follow suit. In the US, where people have an election to think about as well, rates have already been cut. Whether any changes will be sufficient to boost ailing property markets is questionable, but lower rates would also be welcomed by shops and other traders who have been having a lean time. With recession being just around the corner, any stimulus to the economy would help business and customers alike.

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Mortgage loan providers are not always as quick or as willing to pass on lower interest benefits to customers. They are understandably wary but there are many who will consider that more caution should have been exercised before the credit crunch hit them. It is always easy to be wise after the event, but it seems that most banks went into free fall, after the free for all, when just about anybody could have as much as they desired!

Some people seem to forget that with any loan there is a payback time, and that there is no such thing as a free lunch, with the possible exception of bonuses for bankers who threw caution to the wind. The after-burn has been both dramatic and catastrophic, with total meltdown only being avoided by government intervention.

Anyway, Christmas is coming, the bankers have gotten fat, and a little bit of mortgage help, may save passing round the hat!


Mortgages Market Remains Tight

Despite Alistair Darling's instructions, and the UK governments refinancing of major banks, mortgages are relatively hard to get. This does nothing to restore confidence in the housing market, and house prices continue to drop.

Prospective buyers are finding it hard to obtain mortgages compared to the situation prevailing only a few short months ago. There are various schemes afoot to assist would be house buyers, but it may be that many entering the market for the first time, are waiting to see how far prices will fall before they commit. There are still favourable schemes available, including the advance of 95% of a property's value, and a multiple of four times joint earnings, but the market remains sluggish.

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The UK government has stated, that they don't intend to directly manage the banks they have assisted, with billions of pounds of taxpayer's money. However, it is difficult to see how that squares with conditions they imposed when agreeing to the massive bailouts. It seems that there will be government representation at boardroom level, so presumably the banks are expected to ease borrowing restrictions to house buyers, and small businesses.

Many sellers are reluctant to admit that the value of their property has fallen. They are unrealistically asking what the value was before the credit crunch, or simply waiting until the situation improves. So the hesitancy of lenders to deal with anybody other than rock solid borrowers, coupled with sellers and buyers intentions continues to depress the mortgage market.

Although it is tough for many people to get the mortgage they want or could have secured a short time ago, the situation is by no means impossible. For those whose requirement is to obtain a mortgage now, the best advice is to shop around. Different mortgage lenders have different plans, and they might well find something to meet specific requirements. House builders are also feeling the pinch, and they are offering various schemes, including help with deposits, and even agreements to make up any difference should the price of their new builds diminish in the shorter term.

The domestic housing market is exactly that, and not the way to instant riches, as it may have previously appeared to be. However, it plays a major part in the UK economy, and it may pay first time buyers in particular to find out what incentives, if any, the government is offering that may assist them in buying a home of their own.