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Mortgage Basics

A mortgage is a loan taken out to buy property or land. Most run for 25 years but the term can be shorter or longer. The loan is ‘secured’ against the value of your home until it’s paid off. If you can’t keep up your repayments the lender can repossess (take back) your home and sell it so they get their money back. Working out what you can afford Don’t stretch yourself if you think you’ll struggle to keep up repayments. Also, think about the running costs of owning a home such as household bills, council tax, insurance and maintenance. Lenders will want to see proof of your income and certain expenditure, and if you have any debts. They may ask for information about household bills, child maintenance and personal expenses. Lenders want proof that you will be able to keep up repayments if interest rates rise. They may refuse to offer you a mortgage if they don’t think you’ll be able to afford it. You can apply for a mortgage directly from a bank. You can also use a mortgage broker or independent financial adviser (IFA) who can compare different mortgages on the market, as well as mortgages which are not offered directly to customers. Comparison Websites Comparison websites are a good starting point for anyone trying to find a mortgage tailored to their needs. You will be asked a range of questions about the type of mortgage you want, if it is appropriate for you and how long your mortgage should last. Depending on your answers, the lender or mortgage broker will be able to recommend a mortgage that meets your needs and circumstances. Your deposit When buying a property, you will need to pay a deposit. This is a chunk of money that goes towards the cost of the property you’re buying. The more deposit you have, the lower your interest rate could be. When talking about mortgages, you might hear people mentioning “Loan to Value” or LTV. This may sound complicated, but it’s simply the amount of your home you own outright, compared to the amount that is secured against a mortgage. How does a mortgage work? The money you borrow is called the capital and the lender then charges you interest on it till it is repaid. The type of mortgage you are able to apply for will depend on whether you want to repay interest only or interest and capital. Repayment mortgage With repayment mortgages you pay the interest and part of the capital off every month. At the end of the term, typically 25 years, you should manage to have paid it all off and own your home. Mortgages are at an all time low. But is this the best time to get a mortgage? Mortgage rates defy prediction: Is now a good time to buy a home? When the Federal Reserve raised interest rates in December, people who had been flirting with buying a home worried they might have waited too long. But worries about rising mortgage rates have been unwarranted. Since the Fed’s rate increase, rates on 30-year mortgages have dropped below 4 percent, and many mortgage experts expect them to stay below 4.25 percent this year. “If the stock market drops another 300 to 400 points some day, mortgage rates might go down another eighth of a percent,” said Ken Perlmutter, president of Perl Mortgage of Chicago. He thinks the dip will be short-lived, and rates are about as low as they will go. He’s not expecting a return to the 3.5 percent that happened while the U.S. economy was recovering from the 2008 recession, but he’s also not anticipating much increase. Lately, concerns about the global economy and the plunge in the stock market have driven rates on 30-year mortgages below 3.8 percent nationally, said Zillow economist Svenja Gudell. That’s about a quarter of a percent under where they were when the Federal Reserve raised interest rates and analysts were warning homebuyers that rising mortgage rates were likely. Personally we think today is a great time to buy a home. But the decidion, as always, is yours to make. Continue reading this article from The Albuquerque Journal

Big banks continue retreat from


Online banking seems to be taking over the mortgage industry. Wall Street banks are backing away from mortgages as nonbank lenders emerge. JBig banks are lending less to homebuyers, or they're making less on loans — and sometimes, it's a combination of both. Some are making less on home loans, in part owed to the Fed and its yearslong zero interest rate policy. But the trend also coincides with a rise in nonbank lenders, like Quicken Loans, that have been gobbling up market share in mortgages in recent years. "The mortgage market is coming off the highs it realized in 2012," said Erik Oja, S&P Capital IQ banking analyst. "A lot of it is expected, in terms of origination." JPMorgan Chase reported net income of $266 million in its mortgage banking division, a 21 percent drop when it announced fourth-quarter earnings last week. The bank also posted a quarterly drop of 25 percent in mortgage originations, which were down 2 percent year over year as well. "A lot of operational complexity to complying" with servicing regulations led to "origination volumes [being] a little lower than we would have otherwise seen," JPMorgan CFO Marianne Lake said on the company's earnings call. The nice thing about online mortgages is you can check bank rates to get a good deal.
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