High Value Mortgages - Using Other Assets As Security

Although the use of non-property assets to assist with land purchases is not new, it is becoming increasingly more popular. In this new era, where equity is king, and cash can sometimes be difficult to realize, offering additional security is a viable alternative for some.

We all have clients that are ‘asset rich and cash poor’ so rather than being a barrier to business, we have sought to innovate and use the private banks more flexible approach to underwriting and wealth management, to gain an advantage for our clients.

Typical assets would be;

• share portfolios,

• cash on deposit (but in locked accounts),

• bonds and stock options where bonuses have been deferred.

• Other property

• Cash not in the UK

We have been asked to consider many asset classes, ranging from gilts, to the more exotic; such as yachts, vintage wine, antiques and paintings. Although this is somewhat rarer it goes to show that banks are willing to negotiate and take a view on what is now acceptable security.

The most frustrating point for us was seeing many deals which had merits but simply weren’t fitting inside the box with high-street lenders. By having direct links to credit committees we have been able to articulate and demonstrate the best points of a case rather than try to go through an automated system.

Although some cash will generally be needed and usually the asset will have to be moved under the lending bank’s management, it allows clients that have a lack of liquidity to access rates and risk profiles that wouldn’t normally be available to those that are highly leveraged.

Tag : mortgage,value mortgage,mortgage rates,mortgage loans

Deciding Between A 15 Or 30 Year Mortgage

It is not complicated to understand that the difference between a 15 and 30 year mortgage is that the payments on the fifteen year loan are designed to pay the loan off faster. Since it is less time, the payments on a 15 year loan will be more than on a 30 year loan.

A 15 year loan will build equity in your home more quickly, because you will be paying the same principle off in a shorter time. Of course, after the 15 year term has ended (or less if you move or refinance in the interim), you have to get a new mortgage and decide once again which is the best choice.

It is a question of individual needs and preferences; some would prefer to keep mortgage payments as low as they can, some would like to build equity as quickly as possible. If it is not a question of what you can afford to pay; is the 15 year mortgage automatically a better idea, or could you do something different with the money? If you chose a 30 year home loan, you certainly have the option to pay additional payments and lower the principal more quickly. You won't get the same benefits as you would if you chose the shorter term in the beginning but you do pay your mortgage down more quickly to build wealth. This is an interesting alternative to many of those who like to maintain the flexibility of lower payments at certain times, or paying more when they can afford to.

If you can afford the higher mortgage, however, you may think other investments may be a better alternative. For example, if you are offered a 30 year home loan at 7% for $100,000 ($665 per month) but the rate on a 15 year mortgage is 6.75%, since the longer mortgage will have a bigger risk premium ($885 per month). You theoretically need to pick an alternative investment for the difference of $220. You can build equity with the shorter term mortgage, however. There are some who believe putting the additional $220 into some stocks would yield a better return, or perhaps an investment in a child's 529 education plan is a more important need. You be the judge.

Many people simply prefer the flexibility given by the 30 year loan over the 15 year loan. If you are disciplined enough to put the funds that are saved into another investment vehicle that makes more sense in your portfolio or your time of life, it may be the right choice. Too many people, however, do not possess this kind of discipline, and the money would be wasted; these kinds of people are better off being forced to build equity by the use of a shorter term loan.

Tag : mortgage,mortgage calculator,mortgage rates,mortgage refinance

Remortgage Watch October 2010

What is the Current Base Rate Outlook?

With the news from over the pond that the Federal Reserve will again look to return to quantitative easing to stimulate their economy, and also recent comments from Adam Posen (MPC member) that he believed the UK needed to engage in Q.E. to avoid a prolonged slump, it seems ever more likely that Bank of England will follow suit.

The anticipation seems to be for this to happen in the first quarter of next year. As a result the markets have pushed their base rate increase forecasts back further still, unto the 3rd or 4th quarter of 2011. It seems the belief is that the actions of our American cousins combined with the upcoming fiscal squeeze from our very own Chancellor next month (with some £83 bn worth of cuts on the agenda), that rates need to stay lower for longer.

What Should You Do Now?

For those with mortgages this is of course good news as we should see rates, and therefore payments to continue to remain low for the foreseeable future. However, it cannot last forever so there needs to be a number of considerations before identifying the right time to re-mortgage. Generally speaking the mortgage market moves 6 months before the base rate moves so the following should be contemplated;

• First house prices have eased off in the last 3 months. Some analysts are predicting further drops so if you are on the cusp of a notable loan-to-value tier (60%, 70% and 75%), be aware that rates move up at each level, but significantly so above 75%. If you have concerns over your house price and the base rate then be aware of these tolerances.

• Second the validity of re-mortgage offers will differ from lender to lender but there are lenders that will keep the offer open for up to 6 months. Given that we can drag the application period for a month or more if necessary, you can secure an offer 6-8 months before you think rates will move.

• If you plan to hold off for a while make sure your credit is AAA. Any small misdemeanor at the moment can mean the best rates aren’t available to you.

• If the economy goes back into recession is your job secure – could you be subject to a pay cut or part time hours, therefore making it more difficult to re-mortgage due to a drop in income? If you have any concerns or work in the public sector, again considering your options now might be frugal.
Where Are Mortgage Interest Rates Going?

Speaking to a number of internal treasury departments within the major banks, the message seems to be that they believe tracker rates are currently as low as they will ever be, and fixed rates aren’t far off with perhaps one more drop of circa 10-20 points. However, there has been a lot of press in the last couple of days that lending will become more difficult again in the next few months due to lender’s fears over a double-dip recession and the ensuing unemployment that that could bring.

With rates starting from 1.99% for 2 year trackers and 2.99% for 2 year fixed rates for those who have at least 25% equity in their homes, it certainly isn’t a bad time to consider your options, especially as most lenders SVR (standard variable rate) are higher. There are also re-mortgage and purchase products available for those with 40% equity in their homes to be had at 2.19%.

Tag : mortgage,mortgage rates,mortgage refinance,bad credit mortgage

Million Pound Mortgages On The High Street - Maximum Mortgage Limits

Finding and arranging a large mortgage used to be easy. Lenders used to fall over themselves to arrange a million pound plus mortgage and many had specialist high value departments who offered a premium application service to their well healed prospects.

Falling house prices, funding issues, bank closures and mergers and the FSA’s proposed guidelines on income requirements and interest only mortgages have left a gap in this market and many people looking for a large mortgage come up against barriers which can turn even the most simple application into a major challenge.

Over the next few weeks, Enness Private Clients will explore each of the issues and give some useful guidance along the way. Topics will include income requirements and self certification, interest only mortgages, property types, buy to let mortgages and offset mortgages

We will however start with:

Maximum Loan Amounts

Funding constraints caused by the drying up of the wholesale credit market and increased capital requirements have left lenders short of money to lend. This has been well documented and government intervention was required to (some say not fully) improve the situation.

As a result, many high street lenders imposed limits on the maximum mortgage they will grant, instead focusing on a higher number of individual mortgages which both spreads risk and improves profitability (Ten £100k mortgages will generate 10 arrangement fees, One £1m mortgage will only generate one arrangement fee. The margin on the loan will be the same).

A quick survey of the high street lenders and their published products shows the limits - Nationwide £1m, Santander £1m, Woolwich £1m, Coventry £1m, Birmingham Midshires £1m. Some of these lenders will exceed their published maximums in some circumstances, but the application will have to be strong, the loan to value below 70% and occasionally there will need to be an existing relationship between the clients and the bank.

A one million pound mortgage is a lot of money and will require an annual family income in excess of £200k - so this is not a problem which affects or is an issue to very many people. There are however more than 132000 properties valued at more than £1m in the UK, an increase of 393% in the last decade (The Independent, 11 July 2001). There is therefore a solid market for these mortgages

So where are these lucky individuals getting their mortgages? This has been a major shift in the market and is the Private Bank who has stepped in to help.

Private banks work on a case by case basis and mortgages over £1m are not an issue if the application supports it. These lenders assess on a case by case basis and the application is often more detailed than a similar one on the high street so the decision to lend is justified. Private Banks are delighted to be collecting so many high valued clients in so much as we have been approached by more than 5 new lenders in the last month who have requested we offer their products to our clients.

The problem for the borrower is that these lenders very rarely advertise (you will never see Coutts at the top of the best buy table in the money section for example!) so access can be difficult. The banks often have minimum entry requirements (such as a minimum asset level) and their criteria is very seldom listed on their website so finding the right one may involve a round of interviews before the client can find one suitable. As a result, the client will almost certainly require the help of a Large Mortgage Broker.

Tag : mortgage,mortgage calculator,mortgage rates,mortgage refinace

3 Benefits Of A Fixed-Rate Mortgage You Won't Like To Pass Up On

Will you be purchasing a home very soon? There are a variety of other ways to finance it in today's market. Most people would probably choose to buy their houses with cash, since it's one of the simplest ways to purchase a house, but this often isn't a realistic option. Mortgages are much more realistic, though. They come in so many different forms that today's home buyer is certain to find one which suits their requirements.

You can consider a fixed-rate mortgage, since it's one of the most popular options from which to choose. This is a mortgage where monthly payments stay static over time. A certain period that generally ranges from 10 to 50 years is how long this mortgage can be repaid. A 30 year amortization period is the most common option.

You will find that among the main advantages to choosing a fixed-rate mortgage is how secure it is. You will find that, as opposed to alternatives such as adjustable-rate mortgage, a fixed-rate mortgage will allow you to pay the same fee each month throughout the loan's term. One of the other alternatives, known as an adjustable-rate mortgage, usually allows for reduced monthly payments at the start that will end up ballooning over time. Ultimately the interest rate will increase, possibly to an amount which is infeasible for the buyer, in spite of the initial payments being lower on adjustable-rate mortgages. Those who choose fixed-rate mortgages will never have to stress about this.

Next, fixed-rate mortgage offer security. Even if the interest rate in the current market rises, the amount you will have to pay from month-to-month on your mortgage will stay the same. You may also make the choice to refinance with a lower interest rate at any time if the interest rate decreases. As a buyer, this ensures that you get the best of all possible circumstances. Other mortgage alternatives will not provide this much security.

Lastly, the flexibility of a fixed-rate mortgage is incomparable. While additional principal payments are never required, buyers can choose to pay extra to reduce the total duration of their loan. Adding only one extra monthly payment a year adjusts a 30 year amortization period down to about 26 years, saving you 4 years off your entire loan. The amortization period decreases to approximately 22 years if you are going to pay half your monthly mortgage bi-weekly.

Fixed-rate mortgages are therefore a safe and sensible option for several house buyers. If you're searching for a mortgage that continues to be secure all through its entire term and offers a considerable amount of guarantee and flexibility a fixed-rate mortgage might just be your best bet.

Tag : mortgage,mortgage rates,mortgage loans

Long-Term Mortgage Rates Hit All Time Low!Long-Term Mortgage Rates Hit All Time Low!

Long-term mortgage rates hit new lows this week, on signs inflation remains in check.

The average rate on a 30-year fixed-rate mortgage in the week ending Oct. 7 was 4.27 percent, down from 4.32 percent last week. A 15-year fixed-rate mortgage fell to an average of 3.72 percent, down from 3.75 percent last week.

Both are the lowest long-term rates have been since Freddie Mac (NYSE: FRE) began keeping track.

“The 12-month growth rate in the core price index for personal consumption, which the Federal Reserve closely tracks, has been drifting lower over the last six months ending in August and suggests inflation is running at a tepid pace at best,” said Freddie Mac chief economist Frank Nothaft. “This allowed mortgage rates to ease to new or near record lows.”

A report this week from the National Association of Realtors showed pending sales of existing homes rose for the second consecutive month in August, up 4.3 percent. The group also revised July’s pending sales figures higher, indicating housing sales continue to recover even without the now expired homebuyer tax credit.

The hopeful news nationally is that this could spur sales after the recent tax credit expiration slump. Austin home sales fell 15 percent year-over-year in August, while sales so far this year have outperformed 2009, the Austin Board of Realtors reported. The Multiple Listing Service data showed total homes sold fell to 1,490 homes in August, while the year-to-date total increased 2 percent from the same eight months in 2009.

4 Steps To Achieving The Largest Mortgage Possible On Your Circumstances.

Many mortgage lenders in the Uk have moved to ‘affordability based lending’ from the traditional ‘income multiple’ Essentially, the lender will subtract your total monthly expenses away from your total monthly income - the amount that is left must be enough to cover the monthly payment according to their calculations.

For many, the maximum mortgage available from a particular lender may be difficult to establish – some lenders have tried to improve certainty by publishing ‘affordability calculators’ on their websites, but to get the right result you need to know what to put in the boxes in the first place.

1 – Credit Commitments

Always declare the exact amount you have outstanding on loans and credit cards (remember HP agreements and car loans), the monthly payment and how long is left to run on your agreement.

The monthly payment on a loan or minimum payment on your credit card (assuming a rate of around 5% of the balance per month) can have a major affect on the affordability calculation. If your loan has less than 6 months to run, or you are able to settle in full some lenders will not include the payment in their calculations

2 – Income - if you are Employed

Being as precise as possible on your income is very important, overstating is never wise and not being accurate is just as bad. Always use the numbers off your payslips, bank statements and your and P60 as this is where the lender will look for evidence of your income.

If there are deductions from your salary other than tax & NI (season ticket loan or a pension) make sure you mention these at the point of application - some lenders may deduct these from your income and some don’t. Being accurate at the outset will reduce the chances of a lower mortgage offer than you expected which could cause problems if you are aiming for your maximum mortgage.

Bonuses, overtime, commissions and second jobs are used at different rates by different lenders. Most will only accept 50% (less for annual bonuses) and there will need to be a track record of usually a couple of years. Again speak to your broker or lender for advice.

3 – Income – if you are self-employed

You may be surprised to hear that self certification and fast track mortgages have become slightly more difficult to find. All this means in reality is that you will have to do a little more work than finding a broker who was stupid enough to make up your income for you!

If you are self-employed lenders will want to see at a minimum your last 2 years tax returns and SA302s (as your accountant if you don’t know what this is.) Typically they will average the last 2 years taxable income and use this figure as the start point on their affordability calculation.

If you are a director of a limited company (or partner in an LLP) the lender will, in most circumstances, use your salary and dividend (or net drawings) not your share of net profit. This distinction is very important (unless you own more than 51% of the shares in which case the rules are different).

Our advice is get your accounts before you apply and read through them. Alternatively, ask your accountant to write down your net profit, salary, dividends or drawings for the last 3 years on one page so you can see them.

If you are self-employed, getting advice from a good broker will make all the difference – many of the lenders we speak too still cannot read a simple set of accounts and some of the better ones will be able to convince a lender to use retained profit or accountant’s tricks in their calculations/

4 – The Mortgage Term

How much you can borrow depends on how much you can pay back per month. Your monthly payment depends on how long you arrange your mortgage over. Lenders (almost) always base their calculations on a repayment basis to your retirement age. Before you apply find a mortgage payment calculator and find out how much your mortgage will be over various terms and find the one which is most suitable to you.

Remember – the longer the term, the more you can borrow. The shorter the term, the less it will cost you in interest. The latter is the most important.

Mortgage Refinancing Points Guidelines

In case you are buying a house, you may be coming into queries concerning points. These are the fees from the interest of mortgage that are disbursed at the front end, to decrease preliminary rates of interest. For most of the time they are frequently appointed as the points of mortgage, the origination fees or points of discount. The lender you have will possibly get you offered the choice to disburse them at closing or not. The lender you have will deliver you an estimation of good faith. By the time you think of that estimation, you may realize that the down payment you possess is bigger in case you disburse closing`s points. Prior to disregarding the choice of disbursing points, consider the circumstance a little more deeper seeing that in the closing, it will cost you more. Continue reading for more information about the mortgage refinancing points.

In the most fundamental explanation probable, disbursing for them is a decree of disbursing later or disbursing now. To the amount of your loan, one point is similar to one percent. Therefore, in case the loan you have is for $200,000, and you were to disburse one point, it would make you disburse $2000. For disbursing points at closing, lenders will frequently decrease the rate of interest of your mortgage. In case you disburse one point, get your lender asked the amount they will decrease the interest that you have.

Making a decision of whether or not you will disburse is uneasy, but it primarily depends upon the length you expect to live in the house. The common rule is that in case you make a plan to live in a house for five years or not, you don`t have to disburse for them. The reasons in this is that this is going to cost you more in points compared to what it could in interest in that short period of time. Interest versus points equal the equation. You have to make certain if disbursing the upfront for them will make you save in interest in the long run. Here, the common rule is that in case you arrange to stay in your house to ten years or more, disbursing points is a move that can save money.

The IRS (Internal Revenue Service) consider points as pre-disbursed interest. So, they are tax deduction, in case you get them disbursed in closing. In reality, you are able of getting them deducted even if the seller disbursed the points that you have. You`re gonna have this deduction claimed for the tax year in which you buy your home. You are able of having the total sum of points disbursed claimed in that return of the year.

Anyway, if, you are having a home refinanced, this deduction has to be amortized in the loan`s term.

Therefore, never give in on the idea of disbursing points in closing. More than that, think of the way their disbursement apply to the situations of yours and whether or not disbursing them, or a drawback, maybe, an advantage.

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