SimplyFinance - Interest Only Mortgage

Interest Only Mortgage

2007-07-26T07:00:00Z

What are the disadvantages of an interest only mortgage?

While considering an interest only mortgage, you need to understand that this type of mortgage is meant for only those with the highest credit scores. It is a very risky type of mortgage, and because of this, lenders are very choosy about who they lend to.

Interest only mortgages are usually in place for short terms, and when the term ends your lender may convert your loan to a standard adjustable rate mortgage, and they will add the loan principle back into your payment. This results in significantly higher than average mortgage payments.

When your lender switches your loan from an interest only mortgage to a standard capital and interest loan, monthly payments will increase. If you have plans to start with low monthly payments and to eventually increase the payments in future, you need to understand that the amount of interest you will end up paying will increase.

How can I get best interest only mortgage deal?

Some of the best interest only mortgage deals you can rely on are Endowment, ISA, and Pension.

In Endowment Mortgages, you pay interest on the amount owed to your mortgage lender, while at the same time investing a sum of money with an insurance company in an endowment policy. The interest on your endowment policy grows throughout the term of your mortgage into a sum to pay off your outstanding capital debt at the end of the mortgage period. After paying off your capital, you may be left with an extra lump sum of money to be used as you see fit. However, at the end of the term, there is a possibility that your investment will fall short of the amount needed to pay off your capital debt.

An ISA (Individual Savings Account) is a good option when you want tax benefits as interest on this type of savings account is tax-free. Depending on market conditions, if the plan performs well you could be left with a considerable surplus amount after the mortgage has been repaid. Also, you will have the option to repay your loan early, once enough money has amassed in the account to pay off the capital debt.

A pension plan for an interest only mortgage has potential for greater returns, and it also has built in tax benefits for you. Since it is designed to provide you with income for after you retire, only a part of your total investment is eligible to be tax free.

Which is the best lender for interest only mortgage?

Interest only mortgages are provided by many well known lenders. The best lender for you still depends on your individual financial circumstances.

If you'd like some help finding the best possible interest only mortgage, take a minute to fill out our short questionnaire, and a SimplyFinance representative will contact you shortly to introduce you to a mortgage broker. This broker will search the available interest only mortgage offers to find the best interest only mortgage deal for you.

How to Find a Reputable Mortgage Company

2008-04-18T23:00:00Z

A mortgage company offers many types of mortgages, as well as the assistance you need to buy its products. Safely, any mortgage company now does a significant amount of business online, offering mortgage finders, mortgage calculators, and mortgage advisors or brokers. And increasingly, mortgage companies work solely online.

The process of choosing the right mortgage company can be mind boggling with all of the choices available. You will want to use trusted personal references, cross-checked with resources such as the Financial Services Authority (FSA) or the Council of Mortgage Lenders, to find a reputable mortgage company. On CML’s website, they have a directory of member mortgage companies, which account for “around 98% of UK residential mortgage lending.” The FTSE Group, self-proclaimed “world-leader in the creation and management of… (several financial) indices,… is an independent company owned by The Financial Times and the London Stock Exchange. FTSE does not give financial advice to clients, which allows for the provision of truly objective market information.” According to this information on their website, their analyses could also help in choosing the right mortgage company.

If you are looking for a specific type of mortgage, the pool from which to choose a mortgage company becomes more manageable. Some mortgage companies specialise, for example, in bad credit remortgages, whilst others focus on foreign properties or fixed rate (for a term) mortgages. Knowing what kind of mortgage you are looking for from the start of your search for a mortgage company can save you a fair bit of time.

Once you have chosen a mortgage company, you can expect them to provide you with ample, accurate information on their products, assess your current financial situation in order to find the best deal for you, walk you through the entire process, and manage any follow-up issues that arise. You are paying the mortgage company for its services, so take advantage of them.

Things to Know Before Getting a Mortgage

2007-07-25T23:00:00Z

What should I know before looking for a mortgage quote?

First, calculate your budget. How much you can afford to pay every month? A mortgage quote will be available to you based on your income.

Mortgages quotes are based on 3.25 times the gross income of a single borrower. For joint borrowers, the maximum loan amount is likely to be 3.25 times the first income plus one times the second income, or 2.5 times the joint income.

It is important for you to know what is more important—the interest rate or the closing cost. Both the interest rate and the cost factor (points/rebate) are important. You can bargain for a higher rate with a lower cost or a lower rate with a higher cost.

While looking for a mortgage quote, don’t just look for the lowest interest rate, but compare the terms and conditions of every mortgage policy from every lender that you can.

As there is much competition in the mortgage market, feel free to ask for special incentives. Often times lenders will waive valuation fees or legal fees in order to attract borrowers to their product.

How do I get a mortgage quote?

Mortgage lenders provide quote packages with different names and different interest rates, up-front costs, and fine print terms, all of which are subject to change frequently. Gather as much information as you possibly can in order to help you make the best possible decision on which mortgage quote is right for you.

There are many online sources for mortgage quotes from sites generated by organizations such as savings and loan associations and commercial banks.

When you start to shop for a mortgagee quote, you will find a number of factors may cause interest rates to vary, such as different lenders, the size of the mortgage, and the amount of the down payment.

Your challenge is to match a mortgage quote to your personal financial situation. You need to consider current market conditions, your attitude toward risk, and how long you plan to stay in the house.

What information do I need to have when applying for a mortgage quote?

When applying for a mortgage quote, you should have some basic information such as:

What will the monthly payments be?
Are there any redemption penalties?
What will be the rate type—fixed, capped or discount?
Will there be an arrangement fee?
Is the lender providing any incentives?
Is there tie-in insurance?
Is there a Mortgage Indemnity Guarantee (MIG) premium to pay?
How will interest be charged?
Is the mortgage flexible?

If you'd like assistance finding the best mortgage quote for you, take a second to fill out a short questionnaire, and a SimplyFinance representative will contact you to introduce you to a mortgage broker that will search to find the best mortgage deal for you.

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