Posts Tagged ‘Mortgages’
Mortgages in Ireland
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The amount that can be borrowed from Irish banks and building societies varies from lender to
lender. Lenders have various criteria that borrowers must satisfy when they consider mortgage
applications. As well as the value of the property, other factors taken into account include the
income of the borrower, the type and security of their occupation, their credit history and the
possibility of obtaining a guarantor for the loan.
Even if these qualifying conditions are met, the borrower may still need to pay an up-front deposit before obtaining the mortgage. Borrowers may also have to meet other costs such as legal fees and possibly stamp duty.
There are four basic categories of mortgage available to Irish house buyers currently looking to
purchase a home.
Fixed Rate Mortgage
Variable Rate Mortgage
Discount Rate Mortgage
Offset Mortgage
Fixed Rate Mortgage
As their name suggests, fixed rate mortgages involve monthly repayments that stay constant
throughout the period of the loan. The advantages of a fixed rate mortgage are that if the European Central Bank rate increases, those on fixed rate mortgages will not have to pay more. However, if the rate decreases, borrowers on fixed rate mortgages will not benefit. Fixed rate mortgages allow borrowers to plan ahead, knowing exactly how much to budget for every month. The disadvantage of fixed rate mortgages, as well as losing out on ECB rate reductions, borrowers have to commit to a given repayment period and will be liable to a charge if they switch to another mortgage lender.
Some lenders will not accept additional or lump sum payments on a fixed rate mortgage. In addition, when the fixed rate expires, some banks and building societies automatically transfer the mortgage to a standard variable rate.
Standard Variable Rate Mortgage
A standard variable rate mortgage loan, is a mortgage in which the interest paid by the house buyer is dependent on fluctuations in the ECB base rate. However, banks and building societies are allowed to increase or decrease the rate. The advantages of a standard variable rate mortgage include the fact that borrowers may repay the mortgage early with no early repayment penalties. Also lump sum payments are allowed, so the mortgage can be paid off early, reducing the total interest that would otherwise be due to the lender. The big disadvantage of the variable rate mortgage is that lenders have the power, within certain limits, to change rates whenever they feel it is necessary.
Discount Rate Mortgage
Lenders often provide initial discount on their variable rate mortgage. This reduced rate may only
apply for the first year, after which it reverts to the standard variable rate. The advantages of a
discount rate mortgage are the lower initial repayments.
Offset Mortgage
Offset Mortgages connect mortgage repayments with the borrowers current and savings accounts. Any balance in these accounts is ‘offset’ against the mortgage balance, thus reducing the interest owed on the mortgage. Instead of earning a small interest on savings and current account, house buyers don’t pay interest on the equivalent amount of the mortgage balance. The advantages of an offset mortgage include possible interest payments saving as well as the potential to reduce the mortgage term. It also reduce the amount of Deposit Interest Retention Tax payable. The disadvantage is that no interest is earned on savings and borrowers have to have their current and savings accounts
placed with their mortgage lender.
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There are many different types of mortgages, each with its own advantages and disadvantages, it is very important that you do your research. Understanding these differences will enable you to choose the right mortgage for your financial situation and housing goals. Now what is a mortgage? A mortgage is a loan secured by a property/house and paid in installments over a set period of time. The mortgage secures your promise that the money borrowed will be repaid. For most of us, a mortgage is the largest and most serious financial obligation we ever make.
You can get a mortgage direct from the lender like banks, building societies and specialist mortgage lenders, or you can use a mortgage broker. You can buy based on ‘information’ only or get advice and recommendation on a mortgage that suits your particular needs.
The two main ways to repay your mortgage are ‘repayment’ and ‘interest only’. With a repayment mortgage you make monthly repayments for an agreed period until you’ve paid back the loan and the interest (30 year-fixed rate being a common example). With an interest only mortgage you make monthly repayments for an agreed period but these will only cover the interest on your loan (example 5 year-fixed rate). You’ll normally also have to pay into another savings or investment plan that’ll hopefully pay off the loan at the end of the term.
Now you know what mortgage is, let’s take a moment to understand reverse mortgage. What exactly is a reverse mortgage?
Reverse mortgages are getting to be more and more common these days. Why? Reverse mortgage loan advances are not taxable, and generally don’t affect your Social Security or Medicare benefits. You retain the title to your home, and you don’t have to make monthly repayments. The loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence. Unlike a regular mortgage, the homeowner makes no payments and all interest is added to the lien on the property.
A reversed mortgage is designed specifically for homeowners who are age 62 and older. Through this product, you can receive loan money from your home in the form of a lump sum, regular monthly checks or a line of credit. The money is typically repaid with interest when you sell your house, permanently move away, or pass away.
You may be wondering how you can benefit from getting a reverse mortgage. Many people have found that the money they got from a reverse mortgage benefited them greatly. With a reverse mortgage you continue to get income, and defer repayment, for as long as you live at home – no matter how long that may be. A Reverse Mortgage maybe is exactly what you need!
There are many benefits that a reverse mortgage can give you. However, here are a few of the most significant. You will remain independent, no monthly mortgage payments are required, and you got freedom and flexibility. The money you get from a reverse mortgage is yours to use in any way you choose.
Exciting isn’t? If you don’t know exactly how much you’ll spend or how soon you’ll need it, a line of credit may make sense. Some reverse mortgage lines of credit are “growing” lines of credit meaning you may have more and more money available to you as time goes on. Reverse mortgages have helped hundreds of thousands of homeowners improve their quality of life in retirement. A Reverse Mortgage can help you retire more comfortably. It can provide you with money when you need it most. No Monthly Mortgage Payments, Easy Qualification, Tax-Free Money and No cash needed for closing costs. Can it get any better? If you’d like to find out how much money you qualify for and if you’re eligible, give us a call at (800)630-0650.
Tim Jacobs
Golden Years Mortgage Solutions
Your Money…When You Need It
www.GoldenYearsMortgageSolutions.com
(800)630-0650
tim@goldenyearsmortgagesolutions.com
Tim Jacobs @ Golden Years Mortgage Solutions www.GoldenYearsMortgageSolutions.com (800)630-0650 tim@goldenyearsmortgagesolutions.com Golden Years Mortgage Solutions is a reverse mortgage approved FHA Lender. We’ve helped thousands of senior homeowners solve their financial problems. Our agents and brokers collectively have over 60 years of experience in Reverse Mortgage Loans and general financial services, including managers who are industry pioneers with more than 12 years of reverse mortgage experience. Our dedication to providing financial solutions for seniors is evidenced by the number of referrals that come from our existing clients.
Tim Jacobs @ Golden Years Mortgage Solutions www.GoldenYearsMortgageSolutions.com
If you’re using a mortgage to buy your home but are not sure which one will suit your needs best, read this handy guide to mortgage types in the UK. Taking out a mortgage has never been easier.
Fixed Rate Mortgages – the lender will set the APR (Annual Percentage Rate) for the mortgage over a given period of time, usually 2, 3, 5, or 10 years as an example. The APR for the mortgage may be higher than with a variable rate mortgage but will remain at this ‘fixed mortgage rate’ level, even if the Bank of England raises interest rates during the term of the mortgage agreement. Effectively, you could be said to be gambling that interest rates are going to go up, above the level of your fixed rate mortgage interest rate. If this happens, your mortgage repayments will be less than with a variable rate mortgage.
Variable Rate Mortgages – the lender’s mortgage interest rate may go up or down during the life of the mortgage. This usually happens (though not exclusively) soon after a Bank of England interest rate change. Most people consider that opting for a variable interest rate mortgage is best done when interest rates in general are likely to go down. They can then take advantage of these lower rates when they occur. It’s a bit of a gamble but if they are right, it could really work in their favour.
Tracker Mortgages – have a lot in common with variable interest rate mortgages in that the APR of the mortgage can go up or down over the term. The key difference between a tracker mortgage and a variable interest rate mortgage is that the lender will set a margin of interest to be maintained above the Bank of England base lending rate. So, as the Bank of England, in line with monetary policy, raises or lowers the base lending rate of interest, so the tracker mortgage interest rate will follow. Over the lifetime of the mortgage, it could be said that the borrower will neither be better off nor worse off because of interest rate fluctuations.
Repayment Mortgages – you will be required to pay a proportion of the capital element of the mortgage (how much you originally borrowed) together with a proportion of the interest that will have accrued on the capital element, with each monthly repayment. In recent years, repayment mortgages have become highly popular over the previous favourite – endowment mortgages. This is because, unlike endowment mortgages, as long as you keep up your monthly repayments, you are guaranteed to pay the mortgage off at the end of the agreed term. Monthly repayments may possibly be a little more expensive but many borrowers say that at least, they have peace of mind.
Interest Only Mortgages – very common amongst borrowers who are looking to secure a second property. The reason being, with an interest only mortgage, the borrower will only be required to make monthly repayments based on the interest element of the mortgage. The lender will require the capital element to be repaid at the end of the term of the mortgage. Again, as with variable rate mortgages, this could be regarded as being a little bit of a gamble because the borrower is hoping that the property will be worth at least as much at the end of the term of the mortgage, as it was at the beginning, allowing it to be sold and the capital element of the mortgage to be paid off. Any capital gain on the property (although possibly subject to tax) is yours. It could be argued that experience tells us that property prices rarely go down in the long term, but it can never be guaranteed.
Capped Mortgages – a combination of the fixed rate mortgage and the variable interest rate mortgage. A cap or ceiling is fixed for a set period of time. During this period, if interest rates in general rise, above the capped interest rate, the borrower will not pay anything above the capped level. Correspondingly, if interest rates fall, then the rate of interest charged by the lender, will also fall so it could be argued that the borrower gets the best of both worlds. It could also be said that a capped rate is like having a set of brakes on your mortgage, but beware, the lender is also likely to charge a redemption penalty on this type of mortgage, making it less portable than some of the other options available.
Discounted Rate Mortgages – here, the lender may offer a reduced level of interest to be charged over a set period at the start of the mortgage term. Many first time buyers or people who expect their salaries to rise considerably during the discounted rate period opt for this type of mortgage but it should be noted that the reduced rate period will come to an end and when it does, the monthly mortgage repayments to the lender may rise sharply. The lender may also charge a slightly higher rate of interest compared with other types of mortgage over the rest of the term of the loan in order to recoup the monies that they have foregone during the discounted rate period. There’s no such thing as a free lunch!
Offset Mortgages – an interesting newcomer to the UK mortgage market, although still comparatively rare in terms of choice and availability. The mortgage is linked to the borrower’s current account. Every month, the minimum mortgage repayment is paid to the lender but where there is a surplus of cash in the account after other uses and debts have been paid, this is also paid to the lender. Over the months and years, the borrower can potentially pay off their mortgage much quicker and have accrued much less interest than with other types of mortgage provided that a reasonable surplus is maintained in the current account.
So, to sum up, the UK mortgage market has many types of mortgage; any or all of which may be open to the potential borrower, dependent on their circumstances. If you’re looking to take out a mortgage, remember that whilst your broker will take care of the vast majority of the work on your behalf, it may still take around 3 months to complete as there is an enormous amount of work that goes on behind the scenes with solicitors and searches, valuations etc. At least now you’re armed with all of tehinformation you need on each type of mortgage available to you.
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For more articles by Andy Silk, visit FeelGoodLoans.co.uk, specialists in all types of loans and mortgages for UK homeowners and tenants.