What is the right kind of mortgage for you ?

Copyright 2006 Vincent Wilmot



If you need or want a mortgage, then you can easily get a

mortgage that is not the best one for you. Mortgages are often

missold by sellers claiming to be experts. One day they all push

Endowment mortgages, then Repayment mortgages or Low Start

mortgages or Overpayment mortgages or Fixed Rate mortgages or

Offset mortgages - and each type will also have different

interest rates available.



For any one kind of mortgage, lower interest rates are best of

course. But different kinds of mortgage may best suit different

people, though they may not have the same interest rates. For

some a mortgage is the only way they can afford to buy a

property, but for some a mortgage is profitable cheap money

costing maybe 5% net to free-up other money for investing at a

higher return maybe 10% net.



Good mortgage calculators can help you choose the best mortgage

for you, but many or the mortgage calculators available are

little help.



But first let us look at what kind of mortgage may

best suit you ;



Savings and income small. A normal Repayment mortgage should be

best if you can get one for the property that you want and you

can afford the payments. (Some sellers may help on a deposit or

furnishing, or offer Shared Ownership or Homeown schemes.)

Otherwise, if your income is likely to be rising then a Low

Start mortgage might allow you to buy a better property or to

have lower payments.



As an alternative to a low start mortgage,

a young new graduate might reasonably consider a permanently low

payment endowment mortgage linked to a pension, though at the

end of it gambling whether some net lump sum may be collected or

may be owed.



Savings small and income large. A normal Repayment mortgage

should be best if you can get one for the property that you

want. (Some sellers may help on a deposit or furnishing.) An

Overpayment mortgage will be better if you prefer to pay off

your mortgage early, but an Offset mortgage linked to your

current account could help with that more cheaply.



Savings large and income small. A smaller Repayment mortgage may

be best, but if you can invest your money at a better net return

than the mortgage interest rate that you can get then you should

get the biggest Repayment mortgage that your income can

reasonably afford.



Savings and income large. If you can buy the property you want

without a mortgage, then only get a mortgage if you can invest

your money at a better net return than the mortgage interest

rate that you can get - and in that case get the biggest

Repayment mortgage you can afford.



Initial mortgage payments must be affordable for you, leaving

enough of you income for normal bills and expenses. (If your

income is small then a mortgage taking 30% of your income may be

difficult for you, but if your income is larger then 50% of your

income may not be difficult for you.)



Mortgage payments in later years. The actual money cost of a

normal 'variable' mortgage is fixed for the life of a mortgage

IF interest rates do not change, so that the real cost tends to

fall in later years.



BUT if interest rates rise then the money

cost of your mortgage could rise a lot for a year or two and

make it difficult to keep up payments. Many partly 'insure'

against this by taking a slightly dearer mortgage with the first

few years held at a fixed interest rate. And if sickness or

unemployment might make paying a mortgage difficult, then this

can be insured against.



If you want to buy a property as an investment to rent it out,

then you may need a commercial Buy To Let mortgage needing a

deposit of 15% or more unless you can find a seller offering a

deal that helps with that.



But if you are already a landlord

owning multiple properties, then you may be better suited with a

specialist lending arrangement rather than individual mortgages.

5 Ways to Avoid Foreclosure

Foreclosure on a house is something we never imagine will

happen to us but statistics show that many people do go into

mortgage foreclosure. If you see default payments as a

future issue then it is important to know how to avoid

foreclosure. If the proceedings have already begun, you can

get more tailored information by researching the foreclosure

timeline according to the state in which you reside. However

if the proceedings have not begun and you simply want to stay

ahead of the game then here are some tips to avoid foreclosure.



Investigate lenders...Whenever making a big purchase, do

research. Different lenders will offer different interest

rates. Know what you can afford and especially know

everything the loan entails. Always read and reread the fine

print. The key point to remember is before you commit to

taking a loan and signing the mortgage documents, or deed of

trusts know exactly what you are getting into. Get financial counseling...if you can. If meeting with an accountant is not

a fiscally feasible option, search the internet for tools to help keep your finances in good health.



There are many resources, like the National Association of Foreclosure Prevention Professionals

(NAFPP), agencies who serve to assist and educate you in finances.

The goal is to make payments on time and avoid default payments,

which can lead to foreclosure on your home.





Pay bills on time... Of course that is everyone's intent. Yet, we

are all human and late mortgage payments can happen to anyone.

Between taking care of the family and working 40+ hours it

becomes easy to miss one of the seven monthly dues.



The last

piece of mail you want to receive is a letter from your lender

saying you have defaulted on your home loan. Staying on top of

your finances is essential in avoiding foreclosure. Know exactly

how much you have in the bank, how much is going out to all bills

including credit cards, insurance, etc. Most banks give the

option of online banking which can be extremely helpful.





Get out before the storm hits...Many people who lose there home in

a foreclosure are completely unaware of their defaulted payments

until the foreclosure proceedings are in effect! Again, stay on

top of your finances and if you realize that you have gone in

over your head then find a way out of the mess.



Don't panic.

This does not mean pick up and leave your house. This means

talk to your lender, a local investor, or someone you know who

can help; whether you decide to sell your house, re-finance,

take another loan, etc.





Know your options...When you're behind on two mortgage payments,

it is easy to become overwhelmed and scared. If you foresee

financial struggles, know your options. When facing foreclosure

selling your home, refinancing, and secondary loans are all just

some of your options.



There are online resources which can guide

you in the right path, as well as local investors who solely

dedicate their work to helping people in foreclosure.





In order to maintain financial health and avoid foreclosure,

financial counseling, doing research and knowing your

options are all key elements. When you are financially

struggling, days become restless and it seems like life only

gets harder. Know that you are not alone. There are people in

your same situation and there are people who can help.



Reading

this article has already put you 5 steps ahead of the game.