Interest Only Mortgages

Interest only mortgages have become more and more popular in the past few years – probably as a result of the rise in house prices. With this type of loan, you pay off only the interest, so that your monthly repayments are lower than they would be with a capital repayment mortgage.

At the same time, you invest money in a separate savings scheme, and at the end of the term (usually 25 years), use the investment from the separate scheme to pay off the capital cost of your house.

This is a popular choice for people who would struggle to meet the mortgage repayments every month, or those who are confident that their investments will provide enough to cover the capital payment at the end of the term. The danger is that if your investment plan does not perform well, you may be left without enough to buy your house after the 25 years are up – a time when most people are facing retirement.

There are three main ways to invest alongside an interest only mortgage, be aware that none of these are guaranteed to provide the capital at the end of the term.

Endowment Policies
Probably the most common investment for alongside an interest only mortgage. There are various different types of endowment policy, which involve your money being invested in the stock market. Some pay bonuses annually, and you can receive a one-off lump sum at the end of the term. Endowment policies have built-in life insurance.

PEPs and ISAs
Individual savings accounts (ISAs) replaced Personal Equity Plans (PEPs) a few years ago. ISAs are flexible investments with tax benefits – investors are exempt from paying income and capital gains tax on their ISA. They can consist of cash, stocks, shares and insurance. At the time of writing there are limits on the amount you can invest, but these are set to be abolished soon

Pensions
A portion of your pension fund would be used to pay the capital of your mortgage at the end of the term – which can be up to 40 years. This too is a tax efficient investment, winning you tax relief on the contributions. One pitfall of this type of investment is that you will have to use a significant part of your pension – a lump sum – to pay off the capital, which could leave you with a significantly reduced income when you retire.

Note that you may also be required to take out a separate life insurance policy along with your investments and mortgage.

Mortgage Refinance 101

Mortgage refinance is probably the biggest burden felt by most house owning families. We would be examining the issue of mortgage refinance in detail for this week. Read on to find out the basics of mortgage refinance as you learn to understand the complexities of mortgage, mortgage interest rates and mortgage amortization schedule.

Paying for your mortgage monthly is a big burden. This is because mortgage fees are exorbitant. You will need to refinance your mortgage if you have your home loan and you are giving your best to pay your mortgage. Maybe you have plenty of high interest rate debts like credit card debts which can give some relief in making things a lot easier.

Paying your loan with your present lender is called mortgage refinance. There are reasons why people are doing it. Changing the type of the loan is one among these reasons. If you have your home loan and your house have a higher value, you may take advantage of it by doing a mortgage refinance. Basically, you need to consolidate your debts for you to get a lower refinance. Mortgage refinance can be your most viable solution.

In the first place mortgage refinance is different from application for mortgage. In applying for mortgage, you will need to accomplish your financial records and earn details as well as reports for your credits. You will need to have a list of all your debts and assets as well as verify your employment and produce financial accounts. You also need to have a copy of your bank accounts and statements. If you own a house, you need to show a copy of the land title to prove you are worthy of the risk.

You will need to have a detailed list of your current monthly mortgage fees as well as your mortgage balance. It is also necessary to show your property tax and the status of your insurance. You need to give all the needed information of your previous lender so your new lender can coordinate with him for your mortgage refinance.

You will still need to pay the money needed, as it involves a lot of fees to take out your previous mortgage. You will need to pay the fees for the following:

• discount points
• legal service fees
• appraisal costs
• prepayment penalties
• title insurance fees
• loan origination fee
• title search
• application fee

To make your mortgage refinance a lot easier, you need to pay all these fees. Then you add all these fees to your new loan balance. To make sure that your negotiation will be successful, you need to ask about the possibilities of availing huge discounts on the aforementioned payments.