Home Loan

Are you still renting your place? Mortgage rates are so low nowadays so you should seriously consider buying your own house. Instead of throwing away your money by renting an apartment or condo, why not make an investment for your own place.

You are probably wondering how you can afford a mortgage. So here are some few tips that will help you to determine if you can afford a mortgage and if this is the best option for you.

Do You Have Enough Cash ?

The first thing you should do if you want to buy a house is to determine how much cash you have right now. This includes your money in the bank and other equivalents that you can quickly convert to cash.

You have to understand that when you buy a house, you need to make a down payment for the property. The usually down payment could be between 5 percent and 25 percent. Aside from the down payment, you also need to pay the closing costs. So if you do not have enough cash for these, then it might be too difficult for you to start owning a house.

Identify Your Current Level of Income and Expenses

You have to establish your current income level today. When getting a mortgage, you have to convince the lender that your income will remain the same or increase in the near future.

After this, you have to calculate your total expenses every month. You should make an itemized list of your monthly expenses for food, transportation, clothing, utilities, and other items. Deduct the monthly expenses against your monthly income. If there is nothing left, then your chance of getting a mortgage is slim.

Consider Your Debts

An important part of your planning is to determine how much you owe right now. If you are saddled with credit card debts and have outstanding loans, then the banks could turn down your application for mortgage.

Mortgage lenders and banks have limits on how much you can get for financing. It should be no more than 40 percent of your income. If you already have plenty of debts, then your income may not be able to pay for the monthly mortgage.
These are the factors you have to consider to determine if you can afford a mortgage. It is true that you can not do anything when it comes to your monthly income. However, you can get a second job if you want to increase your income level.

You can also put more money in your savings account to prepare for the down payment. Another positive step is to reduce your monthly spending so you can increase your savings. Then you have to begin paying off your debts so you can get fresh credit.

These steps are necessary if you want to buy your own house. Once you improve your financial status, then you should start looking for a suitable property that you can afford. If you are in a better financial situation, you will be able to purchase your own house without trouble.

Many fixed rate mortgages are charging much higher mortgage fees these days. Lenders are taking no chances with borrowers. They want low-risk mortgage customers who can pay large fees to offset any risk that they will move on or fall into arrears.

What you should do is to consider not taking out a mortgage on a fixed rate. Check out the total cost of deals, including fees, when working out what suits you. Discounted variable rates and tracker deals are looking more tempting than ever. The average two-year variable rate stands at 6.66% - cheaper than fixed rates.

Secondly you could consider what is known as a drop-lock mortgage, which starts out on a variable rate with the option to move into a fixed deal at any time without penalty.

Thirdly, you could fix for a longer period and forget about the credit crunch for a while. If you are going to pay a whopping great fee you can minimize its impact by having your rate secure for five years for example. Average five year fixed rates are currently 6.66%, 0.02% lower than two-year rates.

Finally look for the most competitive mortgage deals and get in there quickly. There are still some great offers around

What is an offset mortgage? It’s more flexible than a conventional mortgage and could also help to pay off your debt more quickly.

How it works is that you set up a savings account with your mortgage lender and the savings account is linked to your mortgage account. As a result, your savings don't earn interest; but are used to reduce the mortgage balance.

This is attractive for three reasons:

1. Mortgage interest rates tend to be higher than savings rates, so your savings are generating a higher return for you.

2. You have flexibility. Your savings can be used to reduce your mortgage for a while but can be switched if they're needed somewhere else.

3. Offset mortgages offer tempting tax advantages.

So if you had a £100,000 mortgage with £10,000 in the savings account, you would accrue interest only on the £90,000 portion. And you won't pay any tax on the reduced mortgage interest that you pay.

Here is an example: £10,000 in an account paying 5% AER would earn £500 in gross interest over a year - £400 for a lower rate taxpayer and £300 for a higher rate. Over 10 years a lower rate taxpayer would make £4802 and a higher rate £3,439.
At the same time, a £100,000, 10-year mortgage at 6% would accrue £33,224 in interest. By using that £10,000 to offset the loan (and effectively make it £90,000) you would accrue £19,902 in interest, £13,322 less.

There are basic rules to determine how much a person can borrow on a mortgage ­ but they are not engraved in stone and depend on many different aspects of your mortgage. We advise you to contact a reputable and experienced mortgage broker or consultant; this will prove to be the best way to see how much you can really borrow and to learn more about the subject of the mortgage.

Basically, you can borrow between 4.5 and 5 times your income. The amount you can borrow on the mortgage depends on whether you are buying on your own or with someone else. All mortgage applications are subject to standard terms and conditions and repayment capacity.

As a first time buyer you can borrow up to 100% of the value of the property. This reduces the amount of savings you will need ­ helping you to get your foot on the property ladder.

Remember that money is always tightest just after you’ve moved into your new home. Once you’ve covered the legal fees, the stamp duty and valuation costs, you might find your finances a little stretched. Make sure that you have access to spare money.

An FHA home loan is a mortgage offered by the U.S. Federal Housing Administration. These mortgages are designed to help anyone buy a home, whether a first-time buyer or someone buying an additional home. The FHA also offers refinancing plans that can help owners save money over what they’re currently paying. If you still have a lot of time left on your mortgage, and you wish it could be less expensive, consider applying for an FHA refinancing plan. If you get turned down by regular lenders for your a bad credit loan, FHA loan is probably your best option.

Many people have mortgages that are disadvantageous. Mortgages that were purchased many years ago have unattractive interest rates, because market interest rates have fallen significantly over the past several years. If the term of your mortgage is going to expire in the next few years, it probably doesn’t make sense to worry about this too much. But, in contrast, if you still have years to pay it off, you should consider refinancing as a way to reduce the interest rate and, consequently, your monthly premium payments.

If you originally took out your mortgage from a bank or another traditional lending institution, you can probably get a lower interest rate through FHA refinancing. And, since the rates are coming from a U.S. government agency, you can rest assured that you won’t fall for a nefarious scam. Many other mortgage refinancing options might have so much legalese that you won’t be sure whether you can understand or trust them. But with FHA, at least you know it’s a federally sponsored program that probably isn’t out to trick you and does treat cautiously as other lender if you are applying for a bad credit home loan.

Many people choose to refinance their mortgage because they need to start saving more money for other things, such as their children’s college education or a better retirement fund. If this describes you, then find out whether refinancing with FHA could help you free up some extra cash each month. Although interest rates vary, the FHA tends to offer rates of approximately six percent. If this seems lower than your current interest rate, then find out all that you can about getting an FHA refinancing plan.

Whether or not an FHA mortgage will save you money depends on the term of your current mortgage, and the interest rate that is used to calculate your current monthly premiums. Refinancing through the FHA isn’t a good option for everyone, so consider it carefully in light of your personal and financial circumstances. You might just find that you can save a considerable amount of money!