What is the best way to pay off a mortgage?

• Should I pay off my Mortgage Early? - A Look at the benefits of paying off your mortgage early
• Tips to Pay off your mortgage early - Including look at best types of mortgage to use
• How will your mortgage payments be affected by rising interest rates
• How mortgage term affects total cost - Look at total cost of 30,25,20 and 15 year mortgage
• Should I make extra mortgage payments?
• How to avoid defaulting on Mortgage Payments - Advice for those at risk of defaulting
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Why I ignored my own advice and increased my mortgage term to 47 years
- Benefits of extending mortgage term

Related

• Remortgage Quotes
• Top 10 Mortgage Companies
  

Top UK Mortgage Lenders

Given the interest around Northern Rock, many people have been searching for who are the biggest 5 mortgage lenders. From what I can find it is something like this:

• Top 10 Mortgage Companies
• Top 5 Mortgage lenders
  
• Top 10 British Banks
• Top 10 Building Societies
  

Mortgages for Immigrants

The UK is experiencing population growth in the UK, because of rising immigration. Part of the reason is due to the expansion of the European Union into the East. This means workers from Poland, Czech Republic, Bulgaria and Slovakia are now able to move to the UK, to take advantage of higher living standards.

However, on arriving in the UK, immigrants are often shocked at the state of the UK Housing Market. Average house prices, especially in the South East where immigrants tend to live, are far beyond the salary of the average worker. Thus immigrants have great difficulty in getting a mortgage because they face both high house prices, plus the lack of suitable British credit records.

These are some tips for immigrants and foreigners to be able to get a mortgage in the UK.

• Mortgages for Foreigners
• UK Housing Market
  

Average UK Mortgage

Traditionally the average UK mortgage was based on a standard variable interest repayment mortgage. In recent years, financially liberalisation, has encouraged a range of non-conventional mortgages. In particular, the UK has witnessed an increase in the following types of mortgages:

Interest Only Mortgages. This mortgage is aimed at first time buyers, struggling to meet the interest payments on a new mortgage. It is related to the vast increase in house prices (UK house prices have doubled in past 5 years) The obvious disadvantage of interest only mortgages is that at the end of the term the borrower still owes the full amount of the mortgage capital.

Current account Mortgages. Mortgages, such as the One Account enable borrowers to combine their mortgage debt with their current account savings. It is popular because it enables savings to automatically offset the size of your mortgage, and therefore, reduce interest payments. - current account mortgages

Flexible Mortgages. Similar in principle to a a current account mortgage a flexible mortgage enables the borrower to vary the amount he repays. Therefore, he can seek to pay off the mortgage early, or in some months can arrange a payment holiday. This is popular with self employed workers.


Average mortgage Payments

Due to rising house prices, and rising interest rates, the average mortgage payment is increasing as a size of household disposable income. According to the Woolwich, mortgage payments account for 19.9% of average income, the highest since records began. [1]

Average mortgage payments are heavily dependent on the base rate of interest rate. For example, a quarter point rise in the base rate can increase the cost of variable mortgage payment by £25 for a £150,000 mortgage.

For those with interest only mortgages the increase in mortgage payments will be more noticeable.

The recent rise in interest rates has increased demand for fixed rate mortgages.
Average house prices have risen over £200,000[2]

• Different types of mortgages in UK
• Mortgage misery for homeowners - Guardian
• Mortgage market UK
• Average UK House Prices - articles on UK Housing Market
  

Woolwich Lifetime tracker mortgages

Lifetime Tracker mortgage

Remove the hassle of remortgaging with our great value Lifetime Tracker mortgage rate - now with an optional cap to protect you from interest rate rises.

* Borrow 80% of the value of your home
* No early repayment charges so you can make overpayments whenever you want
* Subject to a Mortgage Reserve, you can apply for a payment holiday or make underpayments (interest will be charged during this period)

http://www.barclays.co.uk/mortgages/google.html?WT.srch=1

Guide to Getting Mortgage in UK - Top 10 Tips

Advice and checklist for Getting a Mortgage in UK.

Information includes:

1. How Much Can I borrow?
2. How much deposit do I need?
3. Which mortgage to choose
4. Repayment or interest only?
5. Remortgage in the future?
6. Fixed or variable?
7. Overcoming problems of getting mortgage
8. How long to get a mortgage term for?
9. When is a good time to buy?
10. Choosing a mortgage dealer

• Guide to Getting Mortgage

Mortgage Paid Off !!!! - A good Deed indeed

(guest blogger - John Campbell)

It is a great feeling when you have paid the final instalment on your mortgage.
In 1970 my first mortgage was taken out with mutual Leeds Permanent Building Society 'The Leeds'. After privatisations and take-overs this eventually became the banking business Halifax Bank of Scotland (HBOS). The mortgage was a standard 25 year repayment mortgage and it was renegotiated for the 3 houses we bought using the same mortgage company. No brokers were used but the initial mortgage was 95% of the value so an insurance policy was purchased to protect the building society from negative equity.

During the 30+ years that the various mortgages ran there were no serious problems. Building insurance was taken out via the society and I was not offered any alternative. Over the life of the mortgage I paid a premium for this tied insurance and I wish I had known I could get a more competitive supplier of insurance.

Bringing the story up to date the last monthly payment that cleared the final balance was the best money I have spent. The house was owned ‘free and clear’ . I was not going to leave the deeds at the ‘bank’ for safe keeping. I wanted my hands on my deeds of title.

I was fortunate to get my original deeds and documents of title that traced the development of the land from a farmers field in 19th Century through various ownership transfers until the builder bought the land for development in the 1950's. Super maps were attached with very old boundaries marked and coloured in crayon or ink. This was a piece of history I had paid for along side my purchase of the house. Now with Land registered and transferable with out deeds on the basis of a certificate I do not know what is going to happen to the wealth of personal history tied up in house deeds?

They say ‘never say never’ but I doubt if I ever want another mortgage even though the crazy tax scheme of the moment encourages older people to take on debt to reduce their estate for inheritance tax purposes. If down sizing or right sizing takes place then I hope to have new deeds to look at and covet.

More on Mortgages

How to Reclaim mortgage exit fees

How To claim a refund for your Mortgage Exit Fees.

Mortgage exit fees are the amount of money your bank or building society charge if you remortgage and leave them for a different lender.

Mortgage exit fees should not be confused with early redemption penalties. These fees are charged if you leave your mortgage earlier than the stated time period in your mortgage contract. These are an additional fee to an exit fee.

In recent years the average cost of mortgage exit fees has increased from around £50 to between £200 to £300. Many mortgage lenders argued that their small print justified raising their mortgage fees. Although legally this is correct the FSA ruled that the increase in exit fees should have some justification rather than have been an arbitrary increase. (The real reason is that in an increasingly competitive remortgage market, increasing exit fees were usually a painless way to increase profit margins for the lenders) At the end of February most mortgage lenders such as the Halifax, Nationwide, HSBC, Alliance and Leicester and Northern Rock agreed that they couldn’t justify their mortgage exit fee increases They have said they will be willing to refund customers who have been charged exit fees in recent years. However the onus is on the customer to come forward, don’t wait for mortgage lenders to give it back voluntarily.

Who can Reclaim Mortgage exit fees

Anybody who has remortgaged in the past 2 or 3 years can claim for a refund of the difference between the exit fee on your contract and the exit fee you were charged. For example if your contract says you would be charged £60 but the bank actually charged £200 you can claim a refund on the difference between the two.

It should be quite a simple process to get the money bank. Just write a simple letter to your mortgage dealer. It may be worth ringing their general helpline to ask for best department to write to. In your letter simply state that the exit fee you paid was higher than the initial fee quoted when you first took a mortgage out. Under the recommendation of the FSA the bank is obliged to refund the difference.

Lost Paperwork.

If you can’t find your initial contract it is still worth writing to your bank and asking for a refund. They are likely to cooperate and tell you what the existing charge was. However if they don’t cooperate it may be difficult to force them

Top 10 Mortgage Tips

Advice on getting the best out of your mortgage and help on getting your first mortgage

1. Save a deposit. If you can save or borrow 5% of your house price then most mortgage deals will become much more attractive. Generally 100% mortgages are more expensive and you may also have to pay mortgage indemnity insurance. If it is difficult to save for your first mortgage consider a loan from friend or parents to get you on the mortgage ladder.

Read: top 10 Mortgage Tips

see also: Top 10 UK Mortgage Lenders

Mortgage Exit Fees are you due a refund

Since the Financial Services Authority FSA recently announced that banks must repay customers who get unfairly charged for bank charges. Customers and the FSA are now turning their attention to mortgage lenders who charge exit fees.

In an increasingly competitive mortgage industry exit fees have been used as a way to increase their slim margins. However as a result exit fees are now much higher than there estimated cost. For example the average exit fee is £200 but the cost is more like £60.

Many mortgage customers may be entitled to a refund. If the mortgage lender charged an exit fee higher than that stated in your original contract. You should write to your bank and ask for the difference to be refunded.

It is thought that over 2 million people who took out a remortgage in the past two years. May be entitled to a refund. This is good news for customers and bad news for mortgage lenders who are facing a potential £190m loss.

see also: cost of remortgaging
see also mortgage exit fees

Getting Mortgage Low Income high Deposit

It is possible to get a mortgage on a low income. However it is becoming increasingly difficult to buy a house because house prices are rising faster than the rate of inflation. If your income is low. There are a number of possibilities to help you get a mortgage and get on the propery ladder.

1. A significant Deposit will help. If you have a deposit of over 15% of the house price, banks will be more willing to lend you a loan.

2. Self Certification Mortgage. This is a mortgage for those who have difficulty proving their own income. If you can save up a deposit (or borrow from parents) it sill definitely help in getting a self certification mortgage

3. Consider a Joint Mortgage. This is where you share the cost of buying a house with someone else. see Joint Mortgages

4. Higher Income Multiples Some banks are now willing to lend upto 5 times your salary. Therefore don't be discouraged if traditional banks turn you down.

5. Affordability is important. Many lending institutions look at your monthly income and outgoings. They look at whether you can afford a mortgage. Rather than just looking at traditional income multiples. See How much can I borrow

Mortgages for first time Buyers

See also: problems getting a mortgage at Shelter

Increased Mortgage Costs for First Time Buyers in 2007

First time buyers are finding it increasingly expensive to get their first mortgage. Evidence from the UK Council of mortgage lenders suggests that the average cost of a mortgage for first time buyers is now £115,499. This is over 3.3 times the income of the first time buyer and this income multiple is at an all time high. The increased income multiple reflects the increased willingness of banks to lend a mortgages up to 5 times a persons incomes. (e.g. Abbey National)

The % of income spent on paying mortgage interest payments has increased to 17.9%. It used to be 15.9%. First time mortgage buyers are facing higher costs from

1. Increased interest rates (base rates now at 5.25%) Each quarter point typically adds £16 to a £100,000 mortgage

2. More people are due to pay stamp duty this year than last (due to rising house prices)

3. Increases in utility bills and council tax add to the monthly expenditure

4. Rising house prices increase the amount of deposit needed. A deposit usually needs to be 5% of the house price.

Although house prices have continued to grow; to own a house remains a significant desire for many first time buyers. In order to be able to get on the ladder first time buyers are increasingly looking at unconventional mortgages and getting help from parents e.g. borrowing money for a deposit. Despite the financial difficulties first time buyers still account for 36% of the mortgage market. This is higher than the previous year.

Bradford and Bingley Building society said that the beginning of 2007 had seen a strong performance from the housing market. The rise in interest rates had not deterred many from getting a loan. They suggest the effect of the recent rise in interest rates may be overstated. For example, real interest rates are still low (Interest rate – inflation rate. Fixed rate mortgages had already built in the expected rises, and finally people are simply willing to borrow more. The strongest growth in mortgages has come from non-conventional mortgages such as self –certification mortgages. This suggests people are wishing to borrow more than conventional income multiples. However, overall the resilience of the mortgage lending market, supports evidence that UK house prices will not fall in 2007.



more at independent

Bad Credit Mortgages Cost Increases

Homeowners who have bad credit histories are paying more than even for mortgages. According to Moneyexpert.com the charge for a bad credit mortgage has increased by 14% to a figure of £923. The high charge is justified on the ground of the increased risk associated with lending to people with bad credit histories. However when getting a mortgage quote it is worth looking around because the cost can vary. Some bad credit specialists do offer lower prices. Remortgage Guide

Reducing Burden of Mortgage interest Payments

For most people in the UK mortgage payments represent the biggest section of their disposable income. With rising UK house prices, to get on the property ladder, often involves borrowing as much as the banks are willing. However with the recent rise in base rates homeowners are starting to feel the pinch of mortgage payments more than ever. If you are a homeowner struggling to meet your monthly mortgage payments there are various things that you can consider.

1. Take stock of your financial situation. Look at all your incoming income and outgoing expenditure. Also list all the various debt that you have.

2. Reduce other Expenditures. Look at your monthly outgoings and see what is essential and what could be reduced. For example switching to online payment of electric and gas suppliers can often save money. Maybe you can do without the Sky subscription for awhile.

3. Consider remortgaging. This is probably the most significant way of saving money, especially if you are on your building societies standard variable Rate. There are many mortgage deals which are likely to give you a better deal and reduce your interest payments.

4. 40 or 50 year Mortgages. Many people dislike the idea of having a mortgage for 50 years. They worry whether they will be able to pay when they are retired. Also overall interest payments will be higher. However it is worth remembering that over time a mortgage payment becomes more manageable to pay, because it doesn’t rise with inflation. If you ask someone who has been paying a mortgage for 20 years you would be surprised at how little their monthly payments are. At the end of the day it is better to get a 50 year mortgage than have the house repossess and to end up paying rent (which will rise in line with inflation or more)

5. Interest Only Mortgages. Consider switching to interest only payments. This will reduce your monthly mortgage payments however it is high risk because it assumes you are able to save enough capital through an alternative investment scheme. To pay off the capital debt in the future.

Getting Best Remortgage Quotes

Tips for getting best remortgage quotes in UK

Remortgaging can be one of the best financial decisions you can make potentially saving you £1,000s over the course of your mortgage term. However it is important to make sure you get the best type of mortgage to suit your needs. There are an ever increasing number of mortgages on the market, and some have various features which make them more suitable for some people rather than others.

The good news is that if you are seeking to remortgage financial institutions usually offer a much better rate than to their existing customers. It sounds strange but thats the way the UK mortgage market works.

see types of mortgages in UK

Is adding to your mortgage really reducing your debt?

An increasingly popular option for homeowners is to take advantage of rising house prices and consolidate their various debts into one place. If like many people in the UK you have a situation where your house value exceeds your mortgage you may be able to remortgage. This means you take on a bigger mortgage against the higher value of your house. This money can be used for various purposes, one of the main advantages is that you can reduce it to payoff other debts which may incur a higher rate of interest. Mortgage lending tend to be one of the lowest interest rates because the loan is secured against the value of your house. IF you are borrowing on credit cards you could be paying up to 20%. THerefore paying off this debt and borrowing through your mortgage should reduce your debt repayments, but not your overall debt burden.

However it is worth bearing in mind that your mortgage is likely to be over a 25-30 year period and therefore taking on more debt may actually increase your interest payments in the long term

Self Certification Remortgage Quotes in UK

I have a self certification remortgage currently with Standard Life, currently I am on their Standard Variable Rate which means I should hopefully be able to get a better quote when I start looking soon. The problem is my mortgage captial is still several times higher than proveable income so I will need to probably find a suitable self certification remortgage deal. I hope that after 3 years of paying mortgage payments they will look at affordability rather than just income multiples.

Guide Self Certification remortgage UK

The Never Ending Mortgages...

I came across a new type of mortgage today. "The never ending" or "Perpetual" mortgages. Basically you can just pay interest payments on your mortgage. There is no need to worry about paying off your mortgage because you can leave both your house and your mortgage to your kids!

View: Never Ending Mortgages

This way you don't have to pay any inheritence tax and you can get away with the lowest monthly repayments at least in the short term. Of course a specialist will make the obvious point of how you will end up paying much more interest in the long term, but it has a certain attraction if you were to hold a belief rampant inflation in the UK will reduce the real value of future mortgage payments.

Off topic it remind me of some Tibetan Buddhist's who believe in reincarnation so strongly that they will lend money to be paid back in a future incarnation. The only downside of this is that you can get people coming up to you to say, o by the way do you remember in 1750 when I lent you £50? well now with inflation I guess you owe me about £5000.

Joint Mortgages

Another development of the UK mortgage industry has been an increase in the number of people seeking a joint mortgage. Basically this enables buyers to share the costs of buying a house, helping some to be able to buy their first house.

See advantagage and disadvantages of Joint Mortgages

Mortgages for First Time Buyers

Rising house prices in the UK have made it very difficult for first time buyers in the UK. The ratio of house price to earnings has risen significantly. With average house prices rising to over £100,000 many feel it is hopeless to even try and be able to buy. However despite the inflated house prices it still makes economic sense to try and buy a house if at all possible. The good news is that in recent years the deregulated mortgage industry has become increasingly competitive and flexible in offering different types of mortgages which may enable first time buyers to get onto the property ladder.

Ideas for: first time buyers getting their mortgage

The good news: Banks are lending higher amounts

On a personal note I was very fortunate to have a generous loan from my parent. This enabled me to be able to get a self certification mortgage. The Mortgage payments on a £138,500 mortgage are about £850 a month. In Oxford to rent is about £750 a month so its not much more. I'm hoping in the future inflation and real wages will make this more manageable, but soon I will be looking to find a better mortgage deal.

related links

Real Estate Blogs- A directory of real estate blogs and blog sites of industries affiliated with and serving the real estate industry.

Concerns over growth of Interest Only Mortgages

Recently the number of interest only mortgages have increased to 16% of total mortgages. The FSA is increasinly worried as the calculate that a significant % of people do not have any long term plan to pay back their mortgage capital. For first time buyers the number choosing interest only mortgages has increased to 34%.

Experts argue this could also increase house price volatility. People with interest only mortgages face a proportionally higher increase when interest rates rise.

Interest only mortgages Skyrocket

How effective are interest rates in reducing inflation?

The main instrument of UK monetary policy is the use of interest rates, set by the MPC. The theory is that interest rates are very effective in controlling inflationary pressures. The relative success of meeting the government’s inflation target in the past 7 years suggests that this proves the effectiveness of monetary policy.
In brief raising interest rates helps to reduce Aggregate demand in the economy. When interest rates are raised several things are affected. Firstly those with mortgages have higher monthly payments, this reduces their disposable income and reduces their spending. Secondly there is an increased incentive to save money rather than spend. Thirdly those who have other forms of borrowing will be hit with increased interest repayments, it will also discourage people from buying on credit. Therefore in principal raising interest rates will reduce demand and prevent the economy from overheating. This enables inflationary pressures to be subdued.

However there are various factors which make interest rates less reliable as a means of monetary policy.

1. Firstly there is a long time lag before interest rates have an effect. People with loans will not stop their spending just because of interest rates rise. However in the future it may discourage people from borrowing and investing because of the higher interest rates. It is estimated interest rates can take 18 months to have a full effect. This is why Monetary policy is pre-emptive. The MPC try to predict inflation trends in the future and change interest rates before inflation increases.

2. Related to the last point is the difficulty of predicting future inflation trends. For example accurate information about the current state of the housing market is often difficult to obtain. If statistics about the current state of the housing market are difficult to obtain it shows how difficult it is to predict future statistics like house prices ( a cursory glance at predictions for house prices shows a wide range of forecasts)

3. Interest rates have different effects on different types of consumers. When interest rates rise, those with new large mortgages definitely feel a very painful financial squeezing. Even one quarter of a % can have a big impact on their monthly payments. However it is worth remembering that a large % of the population do not have very high mortgage payments. They have either paid off a large proportion of their mortgage or they are renting. Thus higher interest rates reduce the spending but only of a certain section of the population. Those with large savings may feel better off because they are getting higher interest payments each year.

4. It depends on consumer confidence. Higher interest rates may reduce people’s disposable income however if they are very confident about future income prospects they may not reduce there spending, confidence is a very important factor effecting consumer spending, it can have an unknown effect on UK monetary policy.

5. Higher interest rates have an effect on the £, increasing its value making it more difficult for exporters. Again this is often an unwanted side effect of monetary policy. Therefore monetary policy often has a more than proportionate effect on the manufacturing / export sector.


UK interest rates increase again

UK Monetary Policy

40 Year Mortgages Benefits and disadvantages

A recent analysis of the lending policy of the top 125 mortgage lenders found that approximately 30% were now offering mortgage terms of 40 years of more. Furthermore this trend to longer mortgages is becoming more popular as first time buyers struggle to get on the property ladder.

Long term mortgages of 40 years and more have been criticised by some consumer groups who argue it is likely to increase the debt burden on householders. There are some problems inherent in 40 year mortgages.

1. Buyers will pay much more interest the longer the mortgage term is. This effectively reduces their disposable income over the period of their mortgage.

2. It maybe some people are continuing to have a mortgage into their retirement. Thus there are concerns as to whether people will be able to pay their mortgage payments in retirement.

3. Longer mortgage terms are often synonymous with borrowing far greater amounts. It enables consumers to get mortgages upto 5 or 6 times there salary. This increases their potential debt burden if interest rates were to crash or house prices were to fall. It makes the consequences of negative equity more serious.

4. Longer mortgage terms have enabled more people to keep buying and thus have been inflating house prices above their sustainable level

However despite these criticisms there are certain advantages of 40 year mortgage terms.

1. Without a 40 year mortgage many UK first time buyers would be unable to buy. In the long term buying is a better option than renting. It is true people may have mortgage payments close to retirement, but if they continue to rent rather than buy then they will also have to pay rents.

2. Over a period of 40 years inflation will reduce the real value of mortgage payments, making them easier to pay.

3. Home ownership gives greater stability than renting. If you stay renting then you are always at the mercy of a landlord.

4. If your financial situation improves then in the future you should be able to switch your mortgage to a more flexible system which allows owners the option to pay off the 40 year mortgage early.

It seems that 40 + year mortgages are here to stay. They are a response to the changing climate of the UK housing market and a reflection of increased flexibility. Whilst house prices remain valued at these record levels they will continue to remain an attractive option to UK homeowners

More on 40 Year Mortgages at BBC

Problems in Paying Back Interest Only Mortgages

An interest only mortgage is where people borrow money and pay monthly interest payments on it. They don't make a contribution to paying off the Capital that they owe. The idea is that an interest only mortgage should work alongside another investment scheme which builds up equity to be able to pay off the mortgage in the future. However there is evidence that many people with interest only mortgages are failing to save up money to pay the mortgage back.

Different types of Mortgages

This is from BBC - mortgage news


A significant minority of people with interest-only mortgages do not have "robust plans" to repay them, warns the Financial Services Authority (FSA).

Its report scrutinised the plans of 857 people who had taken out these mortgages and found that 15% had weak or non-existent repayment strategies.

About 24% of all new mortgages are lent on an interest-only basis.

The FSA warned lenders to be very careful when deciding which customers should be granted these mortgages.

"There is nothing wrong with interest-only mortgages," said Clive Briault of the FSA.

"However, consumers must be very clear about how they are going to repay the loans they take out."

One in five people questioned by the FSA said they would struggle with other financial commitments if interest rates rose by just 1% above the current level of 5%.

Mortgage Approvals Likely to keep rising

The housing market looks set for a robust start to the new year after figures yesterday showed a sharp jump in the number of mortgages approved by the main lending banks last month.

The British Bankers' Association said 77,788 people reserved a loan to buy a home in November, up almost 4 per cent on October and more than 9 per cent ahead of last year.

Mortgage approvals tend to point to the movement in house prices several weeks ahead when the money is used to complete the house purchase.

"The strength of mortgage approvals indicates that August's interest rate rise had little immediate cooling effects on the housing market," said Howard Archer, chief UK economist at Global Insight.

The BBA also revised up its initial estimate of underlying new mortgage lending to £6.7bn from what was already a record high of £6.5bn.

David Dooks, head of statistics at the BBA, said: "The high number of loans approved in November, which is not usually a strong month, suggests that the trend in mortgage lending will continue to be robust over the next few months."

The figures support other data depicting a resilient housing market after two interest rate rises this year and with economists expecting higher borrowing costs next year.

- from :Independet

Top Internet Search Terms for Mortgages

• Types of Mortgages
• Remortgage Quotes
• Bad Credit Mortgages
• Self-Certification mortgages
• Unconventional Mortgages
• Fixed Rate Mortgages
• Current Account Mortgages
• Interest Only Mortgages
• Top 100 mortgage Companies

Welcome to Mortgage News. A blog about the UK economy and housing market.

Will be looking at the benefits of trying to get a mortgage for first time buyers Also looking at best types of mortgages. As an economist I will be branching out into the UK economy and how it might effect UK housing market