Advantages of an offset mortgage

Mortgages can be difficult to understand, not least because there are so many different types. A property owner might, for example, take out a fixed-rate mortgage over five or ten years. Another might choose a variable-rate mortgage for a longer period of time, while some buyers opt for interest-only mortgages.

One type that almost always causes confusion initially is the offset mortgage, which is actually one of the least complicated types of mortgage available to property buyers in the UK.

What Is It?

An offset mortgage is simply a type of mortgage that offsets the savings of the mortgagor (this is the borrower and not the mortgagee, which is the bank or finance company that supplies the mortgage) against the debt or cost of the mortgage. This results in reduced interest payments.

A mortgage that offsets savings works in a simple way. It uses the sum of all savings (including cash held in a current account) to reduce the total mortgage debt. This has the effect of lowering the monthly interest payments.

If, for example, the mortgagor has £30,000 in savings and £5,000 in a current account, he or she can offset a total of £35,000 against the mortgage, the cost of which would reduce by exactly this amount. Instead of paying interest on a £305,000 loan, the mortgagor would pay interest on a mortgage of £270,000 (less his total savings).

This type of mortgage is obviously useful for saving money, but mortgagors need to calculate the relative savings very carefully to ensure that they are actually saving money. If the £30,000 in savings is subject to an exceptionally high rate of interest, the borrower might not want to offset this against a mortgage that is subject to relatively low rates of interest.

In the majority of cases, however, offsetting savings against a mortgage provides the property owner with a convenient way to reduce monthly outgoings. During times of economic uncertainty, this can be a sensible move.

Benefits

The most obvious benefit of taking out this type of mortgage is that the mortgagor can reduce his or her monthly expenditure by reducing the interest paid on a mortgage. There are several other advantages, some of which may be less apparent.

If the mortgagor is no longer receiving interest on his or her savings, there will no longer be any need to pay tax on them. Reducing the tax burden on savings can be significant, especially if they are subject to the highest rate of tax.

Furthermore, interest rates on savings have been low for many years in the UK, whereas mortgage interest rates are relatively high. Substituting a small gain for a sizeable saving is clearly advantageous.

Another advantage of this type of mortgage is that the total debt is paid off sooner than would be the case if a normal mortgage were taken out instead. Clearing a mortgage as soon as possible is the most sensible way forward for property owners. For more information please visit Moneysupermarket.com

Selling your home: 5 top tips

If you are looking to sell your home and are not having much success, there are a number of strategies that can be followed in order to get that quick sale, without losing money in the process. Some people consider remortgages before selling and this can create problems and can become costly, especially as there are often fees involved.

Here are a number of tips you can try to help sell your home quickly and painlessly.

1.  Make sure that the asking price is the correct one

If the price is too high then people will be put off buying any house. Similarly, if the asking price is too low, they may be put off, or they may try to knock the price down further, leaving you with a far smaller amount of money than you had originally planned to receive for the property.

The price of a home needs to be set just right and this can be achieved by checking out a number of valuations from different estate agents. The correct price is normally somewhere in the middle of the valuations that you receive.

2. Don’t get involved with chains if you can help it

The longer a chain, the more likely a sale will fall through, often through no fault of your own or that of the person looking to buy your home. If you have no other option than to sell to those involved in a chain, consider renting the property out until all the relevant sales have been completed, this will give you an extra income that can be put towards items that may be needed for your new home.

Place the income that you receive into an easy access online savings account, as the interest rates can be higher than with regular savings accounts, and the money should be able to be accessed as and when it is required.

3. Attract the right buyer

People who are looking to buy their first home will have an idea of what they are looking for and simply making sure that the home is kept tidy could swing the deal for them. Try to attract a first time buyer, as if they feel that the house is the one for them, they are more likely to raid their savings accounts to be able to stump up the deposit for the property, as well as being keen to move in at the earliest opportunity.

4. Keep on top of the situation

You should make sure that the estate agents you choose to work on your behalf continue to heavily market the property, as well as replying to any correspondence from solicitors as quickly as possible to ensure that the prospective sale is pushed through. People looking to buy a property will want to view the home more than once and it is a good idea to make viewings as accessible to them as possible.

5. Keep the home in a good condition until the sale goes through

Although some people can see past a mess, or other work that needs doing in a home, it is best to make sure that the home is kept clean and that any fixtures and fittings are securely fitted. The same is true of the garden, which should be kept tidy and well maintained. Windows should be regularly cleaned and the house should always be well lit when people are viewing the property.

Following these simple tips should help with a quicker sale and if that happens then you could be moving into your new home sooner than you think.

The Importance of Really Ensuring that Your Mortgage Remains Intact

So, you’ve moved into your home, bought new furniture, and even walked around the house to make sure that any and all repairs are being accounted for. At this point, you might think that your work is done on the house and there’s nothing else to do. However, don’t think that way for too long, because there’s always something else to be done with a house. Even on a freshly built home there are concerns that need to be addressed. You will do well to really think about your home as a solid unit, and that includes thinking about the mortgage.

While it’s true that no one really wants to think about the mortgage, there are a few reasons why you will want to make sure that you do everything you can to really keep your mortgage intact. First and foremost, a mortgage is a contract between you and the bank. While some people try to romanticize it by bringing in the joys of owning your own home into it, the reality is that you must make sure that you can really handle your mortgage. Even if things are great now, you never know the way the future will shift to bring in problems for you and your family. As morbid as it sounds, you could pass away next week and your family would have to suddenly figure out when the mortgage is due. Some mortgages even have clauses that state if one spouse dies, the mortgage is automatically found in default — even if the surviving spouse is able to pay it!

This is why you must take steps to ensure that your mortgage really remains intact. The first thing you have to do is read your mortgage in full, including looking up what you would have to do if you ever had to make payment arrangements on your mortgage. Owning a home is a big responsibility, and that’s why you have to take it seriously. When you know that you will need to fulfill the terms of your contract no matter what, there are a few things that you can do immediately.

You must make sure that you think about getting life insurance, as well as mortgage insurance. It might sound odd to get separate mortgage insurance, but there are some benefits. For starters, you will rest easy knowing that your surviving family will get the house paid for and own it for the rest of their lives. That’s worth the premiums that you would pay for mortgage insurance, so why not push forward and take care of it as soon as possible? In the age of the Internet, you might not be surprised to find that you will be able to go look for mortgage insurance quotes online. This is the fastest way to make sure that your family has the coverage that they need in order to really get things done.

Overall, there are so many different points to keep in mind when it comes to your mortgage, but a little planning definitely goes a long way!

How Much House Can You Really Afford

Do you know how much house you can afford? Chances are good that the number that you have in your head and the number that you can realistically afford are two very different numbers. Indeed, we all want a dream house that includes everything we want. However, the reality is that with the way home prices are, you will need to learn how to compromise eventually. No one ever gets all the features and details that they want into their first home, which means that you will have to leave some things off in order to get a home in your price range.

Finding out how much house you can really afford is a matter of looking at your finances from every angle and really knowing what you have to work with. It’s better to make sure that you will have no problems at all getting a house for you and your family. Go and look at exactly how much you have saved, how much you have coming in, and most importantly, how much you have going out each and every month. You will want to make sure that you have enough money for the mortgage note as well as savings for home repairs that have to be done right away. A repair-free home doesn’t exist — you will have repairs eventually, which is why it’s important to really make sure that you will have no trouble at all getting the home that you really want.

You can use a wide number of different home loan calculators on the market to make sure that you can afford the house that you ultimately have your eye on. If you are going through a mortgage broker for the best mortgage deals, you will want to use a calculator from them as well, just to make sure that all of your tools are on the same page.

However, there’s no substitute for good old fashioned common sense. If you know that you will not be able to handle the house note on a certain property, you will need to back away and leave that property for someone else. There’s no such thing as the perfect home — we all make every house a home in the best way that we know how. Overall, if you stop and calculate how much house you can really afford, you will have no problem really making the most out of your new home!

Giving Yourself the Best Financial Portrait In Order To Get a Great Mortgage

It is said that when you really want to get to know a person, you must look at their picture. A picture will tell you everything you need to know, even when people will not tell you through their own words. A financial portrait acts much the same way — when you apply for your first home mortgage, lenders will need to have a financial portrait of you in order to make the best decision when it comes to whether or not to approve you for a home loan.  There’s no reason to be upset with the lenders for this — they have to make sure that they are giving everyone the best mortgage terms possible, which in turn means weeding out people that would not repay the loan properly.

Can you clean up your financial image before you apply for a mortgage? Absolutely — you just have to know what to do first. In a nutshell, you will want to make sure that you clean up the unpaid sections of your financial history. This means setting up payment arrangements for bills, as well as having money saved up. You will need to most likely make a down payment that’s much larger than someone that has a better credit rating. This is just standard practice — when your credit situation is less than stellar, you will still need to make sure that you have plenty of other factors that will work in your favor. For example, you may have solid employment that can really speak for you. Remember that lenders are focusing on your ability to repay. So if you have a great job with a good salary, a lender may still approve you for the loan.

If you really want to increase your chances of getting a mortgage, you can always go to a mortgage broker that specializes in working with people that have certain credit problems. This can be the best route after you’ve been turned away by more traditional mortgage brokers. You will still need to read the fine print, so don’t think that you can skip over any steps just because you’ve moved on to a new mortgage broker.

Overall, giving yourself the best financial portrait possible before you apply for a mortgage isn’t difficult at all. With the information in this guide, you should have no problem getting the house of your dreams in virtually no time at all!

Which Mortgage is Best

A mortgage is something which some people do not think too much about. They are so desperate to make sure that they get the house they want that they may just go with the first mortgage deal they are offered. However, a mortgage is a very long term loan and therefore will cost a lot of money. It is likely that you will pay the asking price of your house three times over before you have paid off the mortgage because the interest costs are so high. Therefore it is important to choose the right one.

There are two main choices with mortgages, an interest only and a repayment. The repayment mortgage charges you a fixed amount each month which pays off some of the debt as well as some interest on top which will normally vary depending on the base rate. The interest only mortgage will just demand you pay back the interest on the loan and you will be expected to invest money elsewhere in order to accumulate the lump sum to pay off the balance at the end of the term of the loan.

The choice between these is important. If you are not self disciplined and unlikely to be able to keep investing to pay off the loan then it is probably best to go with a repayment mortgage. Then you have no choice but to pay it back. An interest only mortgage is more flexible and means that you can invest as much or as little as you like and where you like. You can opt for it to be arranged that you pay it off early too and this can save you a lot of money in interest payments.

Interest rates on mortgages can vary a lot. Some are fixed for a certain time period and then become variable and some are always variable. Some track the base rate and others do not. It is a good idea to familiarise yourself with all of the options so that you know which will be the best for you. It is hard to predict interest rates and work out whether a fixed rate will work out for the best or not but it will mean that you know exactly how much you will be paying per month for a while.

It is worth remembering that although you may be tied in with some mortgages, other you are not and so if you do see a better rate elsewhere you can always change. There may be an administration fee associated with this but as long as you factor this in to your calculations, you will be able to work out whether it is financially better for you to change.

With so many mortgages around and so many options, choosing which is the best mortgage is something which needs to be done at the particular time that you need one. It depends on your own situation as to which one will suit your needs.