Mortgages

Questions and Answers

Mortgages?

Q) Hi does anyone know a mortgage lender that will lend against a timber framed house? Why do lenders have a problem with them? went for a mortgage with northern rock and payed out money then got survey back and basically wasted all that money for nothing! Me and my partner have a joint income of around £250000 a year. Northern rock are sadly the only lenders who will give us money the highest they would lend was £118000. Its not a log cabin! just a normal house that uses timber to built its frame.

A) I'm surprised at this, most lenders don't care about this sort of thing. As long as the valuation and survey's OK I don't know why they would do this. There are thousands and thousands of timber frame houses in the UK and I think there would be a lot of worried people if this were the case!

How do percentage rates work on mortgages?

Q) I am looking at mortgages and i don't understand how the percentage rate works. Why do I have to pay double the amount of loan if the percentage rate is 6%?

A) The percentage rate is the percentage you are charged on he outstanding amount of the loan *per year*. If you borrow £100,000 and pay of once per year (to simplify the calculations) you will attract £6,000 of interest. So if you pay £12,000 per year the amount remaining will drop to £94,000. The next years interest at the same interest rate will be £5640 so if you pay £12,000 again the the amount remaining will drop to £87,640. As you see it goes down quite slowly. When you get a morgage the bank will work out how much you can afford at the current interest rate over the period you want to borrow and tell you how much you can borrow to buy a house.

Does anyone know any mortgage brokers that deal with future mortgages?

Q) I am looking to get a mortgage with future mortgages but I have phoned them and they only deal direct with brokers so now I need to find a broker. Or any brokers that could get 100% mortgage for people with bad credit?

A) I know that Manning Staintons deal with Future Mortgages as this is who we have our mortgage with. As far as I know Manning Staintons do provide an independent financial service. It may be worth contacting them!

I want my first home! Where do I start finding out about mortgages and other issues for first time buyers?

Q) My boyfriend and I are thinking of buying our first home, I'm a student, therefore minimal income (until summer 2008), he works, and we know nothing about buying property. We started saving up recently and have a few hundred pounds but from now on we want to start saving more every month until next year, when we want to get a mortgage. I have seen banks offer mortgages with 0% deposit required, should I be wary of these? How about interest only mortgages? There's so many types of mortgages, it's hard to figure out the advantages and disadvantages of all. Apart from a deposit, what other kind of money allowances should we make (I know we should put money aside for stamp duty, furniture and repairs/diy for the new house). Is there anything else we should think about? Any other useful information? Thanks! By the way we do live in England. Someone in another board told me about first time buyers classes that are available, I've had a search on the web and haven't been able to find much in my local area (Buckinghamshire) has anyone else heard of these? Yes, I we fairly young (23 and 24), but my boyfriend and I have been together for 6 years so we have had a while to think about taking this step, it's just the financial side that's the scary bit!

A) OK.. here's my thoughts. First: A mortgage is going to be a 30 year commitment. This means that for the next 30 years you will be committed to working for and paying for a home that will be co-owned by your boyfriend. You haven't made the commitment for marriage.. how can you make the type of long term financial commitment that will affect your credit and financial well being with out a strong commitment (ie marriage) to your partner? I would work this out first. Now.. let's talk about first mortgage. Understand that a 0% down mortgage is financine 100% of the value of your home. This means that from day 1 you will have absolutely no equity in your home. Therefore you will owe more than the home is worth for at least 5 years or more and then after that only have a very small amount of equity. Therefore if you decide to sell the home in less than 10 years you will lose money in the investment unless the real estate market rises a lot in that area. This feeds into the first statement I made above.. let's say you two buy this home (no marriage) then the relationship falls apart and he moves out. If you can't make the mortgage payments and he doesn't provide you with assistance.. you lose the house and both of your credit ratings will be destroyed. Simply because you won't be able to sell the home for what is owed and you won't have the cash to make up the difference. When it comes to a new home purchase here's my formula for success: 1. Have at least 10% for the downpayment. 2. Have the full amount needed for all closing cost. 3. Have enough money available for any needed repairs that will need to be done prior to move in. 4. Have enough money available for any furniture, appliances, etc that you might need when you move. 5. On top of 1 through 4, have at least a month's and a half mortgage payments in a saving account that you can draw on should a problem arrise that affects the financial stablity. 6. Work out a budget prior to buying the home. Include in this budget the mortgage payments, homeowner association dues, increase in utility payments, repairs etc. 7. Request your credit report and credit rating. Resolve any and all problems there that you can to push your credit rating as high as possible. 8. Shop around for a lender with the best terms. 9. Get a pre-approval letter from the lender with your maximum available loan amount. 10. Use a realator unassociated with the seller of the home you are wanting to buy and unassociated with the lender you have selected. Hope this helps and good luck!

Can two people get two separate mortgages to pay for one house?

Q) For example, a house costs £200K. Person 1 gets a mortgage for £90K. Person 2 gets a mortgage for £110K. They pool together these two mortgages to pay the total £200K for the one house. Is this a viable option or do banks insist that only one mortgage can be valid on any one house?

A) Sorry but it can not be done that away. What you would do is a 80/20 mortgage or however you choose to do it. But, lenders want to be in the First Lien Position, with the lesser amount mortgage being in 2nd lien position. Why would you do this anyway, unless you can not qualify for the first montgage. You can do a co-applicant on the loan application, and get a 100 percent loan. With the 100 percent loan you will have MI insurance on anything over 80 percent of the loan amount. Unless you add a .25 to .50 to the rate to not have MI insurance. That is if you go conforming. If you go sub-prime you will not have MI insurance on your loan. Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down. Try to find someone (broker) that will pull your credit one time, and submit your loan application to company's that will go off his credit report. By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). The GFE will tell you the up-front closing cost associated with your loan. The TIL will tell you the terms, rate associated with your loan. This is a estimate only - not the final - but it does help you figure things out.

What will happen with Northern Rock mortgages?

Q) What will happen with Northern Rock loans and mortgages? If they are secured, will the rates still apply? And unsecured loans - what will happen to them?

A)

How do mortgages work in this situation?

Q) If we want to buy a new house, do we approach our current mortgage company and ask for an increase in our loan?? Then do they give you a mortgage promise and we produce that so we know we can realistically put an offer in on another property?

A) You'll need to get a different mortgage. Mortgage companies don't increase a limit like, say, a credit card. You can get "pre-qualified" for a loan but "pre-approved" is better. Once you've given the info to your mortgage company, and they're okay with it, they can give you a letter that shows how much you're pre-approved for.

Are there mortgages available from a UK bank for Australian property?

Q) We have an investment property in Australia that is mortgaged through an Australian bank. After our move to the UK last year, we would like to have this property mortgaged with a bank in the UK. Is this possible?

A) Yes, it is, i'm a Real Estate Agent in Sydney and a lot of our clients properties are mortgaged through Hong Kong Banks etc... many through Rabobank and other non bank lenders as well.

What is the difference in the repossessions process between buy to let and residential mortgages?

Q) I know that buy-to-let lenders will be more willing to repossess, due to the fact that the borrower does not live in the home - but I need further details!

A) You should discuss any (fixable) problems you have making payments with the lender .. If they can see your problems are temporary and you are making efforts to resolve the situation, they may agree to freeze interest or (temporary) reduce payments until eg. you find a new tenant OR sell the house (or some other house) to raise cash & pay off the mortgage If you keep making at least SOME payment (even if not the full amount) they should again be more willing to compromise .. however as a 'rule of thumb' if they see no way out or think you are not making an effort and/or you have missed 3 months in a row they WILL start proceedings to repossess .. If they repossess they will load all their costs onto what you owe and then sell the house at auction for a massive discount (after all, how did YOU buy the house in the first place ?) ... you will then be a LOT worse off than if you had sold privatively, since for one thing, you may never get another buy-to-let Mortgage and for another your other lenders might start getting 'twitchy' ... So very few 'buy-to-let' properties are ever repossessed ... = most owners manage to sell up before it reaches that stage ...

mortgages? What is the simplest way of working out how much a month?

Q) Me & my boyfriend are thinking about buying a place together and i want to know the simplest way of working out how to calculate a mortgage basically to see how much we'd be paying each month.

A) My girlfriend and I bought a flat a year ago, and was in the same boat as you. You will find many websites that gives you mortgages also have a calculator on them. I just did a search and found the following site http://www.mortgages.co.uk/calculator/mortgage_calculator.html Good luck!

mortgages ???

Q) what do i need to know about mortgages? who is the best bank to go with for one? how old do you have to be to get one? whats the longest you can take pay one back? and any thing else you think will help me.

A) You have to be 18 to get one. Everything else is negotiable. Stop by the lending office of your personal bank to discuss it with them.

If Countrywide goes bankrupt, what happens to its mortgages during during the bankruptcy process?

Q) I know that its debts and assets will be sold to other banks. The question is when? Will the sale of its mortgages have to wait until the bankruptcy proceedings are over and it is decided what goes to what bank? If so, what would happen with delinquent mortgages during this time which is sometimes more than a year ? Another example would be New Century Financial which has already started bankruptcy last year in April. What happened with some of their mortgages that became delinquent while the bankruptcy was going on?

A) just because a company goes in to BK doesn't mean they stop doing business. The company will continue to operate (for you) as if nothing has happen.

How to get more than 10 mortgages on investment properties?

Q) We own 10 investments properties and have 10 mortgages (with Bank of America) on each one. The bank is saying that they can do only 10 mortgages per person. How or where can we go over that limit, with reasonable rates and closing cost. Thanks for looking.

A) You can still find a few conforming lenders willing to exceed the 10 property max. It's only going to be lenders willing to hold onto the mortgages as opposed to sell them to Fannie Mae so they're few and far between. You have really 3 options. 1. Look into purchasing in the name of an LLC or escorp or some such. Obviously this would be a commercial deal and they'd start looking at things like DCSR of the property so it may not be the way to go. 2. Look around and find a reputable mortgage broker who does this type of business. Ask them upfront if they have lenders that deal with more than 10 mortgages and compare a few offers. 3. Look into restructuring the mortgages. Depending on your equity situation you may be able to use some of the properties to pay off some of the other mortgage in full. This is typically the most expensive option as every mortgage you refinance to juggle equity has closing costs. It can be done, for this type of loan I'd suggest looking at brokers as they tend to have more programs than any single bank. Even a big bank like BOA only offers a fraction of mortgage products available.

How do house payments and mortgages work?

Q) I have always wondered how house payments and mortgages happen, and how they figure out your monthly house payment. What would I have to do in order to buy/build a home with money?

A) A mortgage is your montly payment for usually either 15 or 30 yrs. The interest is figured in and in most cases your insurance and taxes are paid from your mortgage as well from an escro acct.

How do I sell my rental properties by creating mortgages?

Q) I have 20 rental properties that I would like to sell. They all have mortgages on them. How can I create mortgages for my buyers to try to sell tham and still njoy a monthly cashflow?

A) Sell them using a land contract (sometimes known as owner-financing or contract-for-deed). You don't need to pay off your current mortgage. Essentially the buyers would pay you principal & interest, and you would make them responsible for the taxes & insurance. You'd still have ownership of the house until they paid it in full. You would have monthly income plus you'd earn over 3 times your investment over the life of the loan--unless they refinanced with a conventional mortgage. Rick Lanicek www.primelendingonline.com

How many US auto loans and home mortgages financed by banks are out there?

Q) I'm trying to discover the # of US home mortgages and auto loans financed by banks in the US and the average value of each type of loan. It's for a school project.

A) Go talk to an officer at your local bank. There are many tens of millions of each, but I don't have exact data.

How to shop for mortgages without dings on my credit?

Q) I want to shop for mortgages for a new house without them needing to run my credit every time since having my credit run negatively impacts my credit (why is that anyway?). How should I go about shopping for mortgages to get the best rates, lowest fees and best overeall package?

A) Your best bet is to go to a mortgage broker then. He can pull one credit report and find the best lender for your situation. Just be careful so you don't get ripped off on fees.

How do lenders come up with the interest rates for mortgages?

Q) I want to know how banks set the interest rates for mortgages. All I know is that they move up and down with the fed funds rate and discount rate (Correct me if I am wrong). Does anyone know all factors that play into the rates that lenders come with? Is there a way to calculate or give more or less weight to any one of them? Thank you.

A) That is not to say that when the fed lowers rates the mortgage rates don’t tend to fall slightly but not in unison. The question i think you want to know is why the rate quotes differ so much does. The fact is all mortgage professionals are finding rates from the same pond so to speak. lenders and brokers have rate sheets it shows the rates that would be available to you what most people don’t know....simply put it shows the rate with the borrower paying no points to get a lower rate and then the other which is it shows the lender or broker your rate that would pay him a yield spread! 1/2% of loan amount to as much as 3% of your loan amount And in some cases the borrower has no idea of this! Or it is explained away when you see a high APR by saying the reason is because of the closing costs. Closing costs do move the apr higher but considering the apr is factored over the life of the loan 30 years or whatever your term is. The term is yield spread or back end money. most brokers and lenders even banks split the amount they want to make between the lender fee and yield spread so if a lender wants to make 3% then they show half in the front of 1 1/2 % lender fee. Borrowers should always focus on the rate. It is unfortunate that so many brokers use the raising of rates to make more money and that doing this can cost the borrowers tens if not hundreds of thousands of dollars in added interest. The simple fact is you need to use a loan comparison calculator to show the differences in loan offers. 1/2 % higher rate on a 30 yr fixed with a 250k home loan is 48,750 in additional interest! Remember that the majority of the first 10 years of mortgage payments go toward the interest you owe! HERE IS A CALCULATOR TO SEETHE BIG PICTURE

What does it mean to default on a mortgage? what are subprime mortgages and how do the two relate?

Q) Who are the people that are defaulting on their mortgages? which companies (industries) are involved in this? Additionally does this go on in some regions more than in others? what effects does it have on the economy and our daily lives? what can be done to prevent further morgage defaults and fix the tumbling economy? what shouldve been done earlier for this crisis to never have started? what will happen if this problem isn't fixed in the long run?

A) Defaulting on a mortgage means you do not pay the mortgage for which you are a borrower. Sub-prime mortgages are to borrowers that do not qualify for a "prime" mortgage due to poor credit (this can either be a lack of a credit history or poor credit history). All groups are defaulting on mortgages; however, sub-prime borrowers make up a significant percentage of these, especially those who took out Adjustable Rate Mortgages (ARMs) over the past few years. Many of these mortgages reset earlier this year when rates were higher, resulting in substantial increases in monthly mortgage payments. Often increasing beyond the borrowers' means. This is occurring across the country, but most predominately in places like Florida, Nevada, and California. As for the effect on the economy, this is having a big impact. It is resulting in higher foreclosures, which is resulting in negative pressures on home prices. It has caused a tightening in the mortgage markets, with mortgages currently more difficult to obtain and the more "exotic" type mortgages are nearly impossible, and the markets have been impacted as investors are concerned about bank losses and the availability of money. The impacts are quite numerous, but those are some examples. Underwriting standards need to remain tight. ARMs need to continue to be underwritten based on the borrowers' ability to pay, AFTER pricing adjustements. As for the economy, the Feds will need to continue to balance growth with inflation. This will be difficult due to rising energy costs which are driving up prices, while at the same time placing downward pressure on growth (much like stagflation in the 1970s when growth was slow but inflation was high). The underwriting of mortgages should have been much more strict the whole time. People got too carried away with 100+% finanacing, ARMs, and I/O loans. In the long run, if not fixed, foreclosures will continue to rise and the residential market will bring the economy into a recession. Good luck with the rest of your homework.

What are some stocks that could benefit from the expected boom in reverse mortgages?

Q) Reverse mortgages are expected to boom in coming years as baby boomers look to retire. Anyone know of good stocks to consider to profit from this trend?

A) Nothing that isn't REALLY risky right now with the subprime mess. You need to ask this question again in six months or a year after the whole thing has settled down! There isn't a safe harbor in mortgages until that blows over. A list of public mortgage companies -- http://www.mortgagedaily.com/companies.asp But I think you'd be smoking crack to touch them until subprime worries either blow up or blow over. Another, possibly safer option would be to invest in any of the big players in mortgage derivatives... Bear Stearns, Sachs, etc... But there again, you've got obvious exposure to the fallout from subprime mortgage debt. I think the subprime/foreclosure issue is going to keep reverse mortgage market in limbo for some time. What retiree wants to even consider the possibility of mortgage default and foreclosure which is talked about daily in the news?!? You know the financial-planners are having a field day telling their clients to keep their money safe and secure, preferably in one of our vanilla funds or better yet a annuity life insurance product!