However, there are many drawbacks associated with becoming involved in such a scheme. The firms are usually unregulated and former homeowners are finding themselves in worse financial shape than they once were as a result of companies looking to cash in on the misfortunes of others.

The basics of sale and rent back schemes is that a company will purchase your home for a price that is well below the actual value of the home – often as much as 20% to 30% less. The company pays all the fees associated with the sale and then rents the home back to you at a monthly payment that is typically lower than your mortgage payment. Thus you can use the cash obtained from the sale to pay off other outstanding debts. Some companies even offer to pay the actual cost of the home at some point in the future.

The fact is that you are losing money on this sale because you are selling your home for thousands of pounds less than what its actual value. However, many homeowners who find themselves in financial difficulty and who are facing the prospect of foreclosure find that this is an easier route to take than losing their home or having to file for bankruptcy.

The enticing argument that sale and rent back companies use is that by selling your home on the open market and paying all the associated fees out of the profits, you realize only about 85% of the value of your home from the sale.

They take all the work out of the sale for you and make it easier for you to sell, which is what makes the deal attractive to homeowners anxious to make some money from the sale of their home. The firms also offer discretion in that no For Sale sign is posted on your property and your neighbours never know that the ownership has changed hands.

The monthly payment you would likely have to pay in rent when you take part in a sale and rent back scheme is the same amount as the new owner has to pay as the mortgage payment. This may actually be higher than what you were previously paying on your mortgage.

The need to obtain cash in a limited amount of time enables these companies to negotiate a lower price with the owner so that the firm obtains your property at a very low price. There is no security in the lease terms that the company puts in place so that you could find yourself in a six-month or one-year lease that will leave you worse off than you were before the sale.

While companies say that they will give you the best possible price, Hometrack, a UK property information group reports that for homeowners who sell their homes on their own “the average sale in England and Wales in May was at 95.7% of asking price, while the region with the lowest average sales to asking price percentage was Wales at 94%.”

When you sell your home on your own, agents will include a 5% reduction in the asking price, whereas the agents doing the valuation for a sale and rent back company will simply use the market value of the home. When you consider that the price you receive from the firm is about 15% or 20% lower than that, you are losing a considerable amount of money by taking part in such a scheme.

The best choice of action to take when you are forced to sell your home through a sale and rent back option is to simply and sell and move rather than exercising your option to rent your home from the firm.

You should schedule an appointment with your mortgage lender to discuss your options for repayment before you take such action because the lender may be able to offer you other options that enable you to retain ownership of your home and avoid foreclosure. Contrary to popular opinion lenders do not like to repossess your home and will help you work through your debt problems if at all possible.

The companies involved in sale and rent back schemes are looking to make money on the backs of those who can least afford it. By buying your property at a bargain price and renting it back to you for the monthly mortgage payment, they are in a position to sell your home at a much higher price when the market starts to recover. While it is an option, you should carefully consider all your options before resorting to this solution.

An Overview of Sale and Rent Back Plans is a post from: The Thrifty Scot

Although the base interest rate has been slashed by the Bank of England many banks have failed to pass on the rate cuts, which means some borrowers may still be paying a fortune on their mortgage. Lenders have started demanding ridiculous deposit levels such as 20 or 25 percent minimum, whereas previously borrowers could easily get away with a 5 percent deposit and in many cases with no deposit at all.

The housing market has also suffered hugely over the past year. Property prices peaked in around October of last year, and since this time prices have been falling month on month after a ten year boom. With the bubble finally burst homeowners have seen their equity levels plummet, and whilst non-homeowners may have thought that the fall in house prices would finally allow them to get their foot on the property ladder, the lack of mortgage availability has put the kibosh on this.

Property sales levels have suffered hugely during this time, and many homeowners that were hoping to sell their properties have found that they have either had to drop the asking price lower than they would have liked or have found that the property has been left stagnating on the market with little to no interest from buyers. Would be buyers have been put off buying for a couple of reasons, including the lack of finance available from lenders and the threat of falling into negative equity due to ongoing house price falls.

This combination has resulted in a very bleak year for the housing market and there is much trepidation about what 2009 will bring when it comes to the housing sector, with a number of industry groups and professionals making predictions with regards to property sales and house prices over the coming year. However, in such a difficult and turbulent climate some major lenders and groups have decided not to even bother making predictions and forecasts, which reflects the volatility of the housing market at present.

The Royal Institute of Chartered Surveyors is one of the agencies that has made a forecast with regards to house prices and property sales for 2009. Officials from RICS have predicted that over the course of 2009 house prices will fall by a further 10 percent, having already fallen by over 15 percent since the peak in 2007. The institute has also predicted that the sale of properties will increase by 10 percent, which is good news considering that earlier this year property sales levels fell to record lows with estate agents selling an average of less than one property per week each. However, whether or not property sales do rise by this level will be dependant partly on whether the government is able to increase liquidity in the mortgage markets further in order to get things moving again.

Tow major lenders that have become well known for their yearly forecasts on house prices, which are widely followed, have decided that they will not be making any forecast this year. The Halifax recently stated that it felt that making a prediction or forecast on house prices would be inappropriate this year given the impending takeover by Lloyds TSB. The Nationwide said that it felt that the market was too volatile and difficult to make a prediction on house prices. This opinion has also been mirrored by the Council of Mortgage Lenders, which has also decided that it will not be making any forecast.

The Treasury has predicted that 2009 will see house prices decrease by a further 9.2 percent, and industry officials have said that this could result in many people decided to hold out until the second half of next year before looking at getting a property, as property values will have fallen further by then and may be closer to getting back on the path to recovery. Again, this will be dependant on the state of the mortgage lending sector and whether liquidity has increased and mortgage lending conditions have eased.

There are mixed predictions with regards to how long the housing slump will actually last, with some officials predicting that it will bottom out around the middle of next year and start to make a recovery, and others claiming that it is likely to continue well into 2010.

Predictions for the housing market in 2009 is a post from: The Thrifty Scot

A great deal has changed in the mortgage market over the past couple of years, and whilst mortgages were relatively easy to come by a couple of years ago, even if you had little or no deposit to put down, these days it can be far more difficult to get a mortgage loan, and even if you can get a mortgage you may find that you have to put down far more by way of a deposit than you may have had to in the past, with lenders demanding ridiculous deposit levels such as 25 percent or even 40 percent of the property value.

Also, whilst lenders were previously clamouring to give out mortgage loans, these days they are severely restricting the number of mortgages that they are offering, and have become far more stringent about who they will lend to, which has in turn resulted in a restriction on the choice of mortgage loans that many consumers can enjoy. Whilst many of the best deals now require borrowers to put down a deposit of at least 40 percent, there are deals on offer where a reasonable rate of interest can be enjoyed for a lower deposit of around 20-25 percent of the property value. However, there are fewer and fewer lenders offering deals on mortgages with deposits of just 10 percent or more, so those with little to no deposit, such as first time buyers, may struggle to get an affordable mortgage.

The recent drops in interest rates mean that some people may find that their mortgage needs have altered, and the type of mortgage that will best suit their needs has changed. Over the past couple of years many people decided to opt for a fixed rate mortgage and this was because the base interest rate had been rising, and many wanted to increase financial stability by ensuring that they made the same fixed repayment on their mortgage each month, so that they could budget more easily and would not have to worry about further interest rate rises and repayment increases.

In the past the fixed rate mortgage has therefore provided an effective tool for those that cannot risk their mortgage repayments fluctuating, and in particular could not cope with rising repayments stemming from the series of base rate rises in 2006 and 2007. However, many of those that took out fixed rate mortgage deals a couple of years ago may now find that the deals are due to come to an end, and many industry officials have said that many of these people could find themselves better off by switching to their lenders’ standard variable rate when the fixed rate deal comes to an end.

The reason for switching to the lender’s standard variable rate mortgage is that the falling interest rates means that some of the rates now being offered on variable rate mortgages by lenders have recently come down by a significant level, and whilst this type of mortgage has never really been touted as the best option by financial advisors, the fall in interest rates has resulted in a chance of opinion in many cases, with the base rate having hit record lows.

However, this said many people may still find that they enjoy more peace of mind by taking on a fixed rate mortgage deal, as they can then be certain of what their repayments will be each month until the fixed rate terms comes to an end. However, whilst some people may find that this financial stability suits them many may fail to enjoy the financial benefits in the event that the base interest rate does continue to fall over the course of this year, as it is expected to do.

Of course, there are other mortgage choices available that could be considered, such as base rate tracker mortgages and offset mortgages, and some may decide to opt for an interest only mortgage to save money on their monthly repayments in the current financial climate. However, with interest rates at such lows and the mortgage market so restricted it is important to do your research and seek financial advice from an expert before taking the plunge.

Deciding on the best type of mortgage for you is a post from: The Thrifty Scot

You may simply want to know what your home is worth in comparison with other homes on your street that are for sale. You may want to see if there are areas where you can increase the value of your home without spending a lot of money and therefore make a larger profit if you decide to sell.

When you are intending to sell and purchase a new home, you need to know the true value of your home for two reasons. The first is that you have a good idea of the price at which you should put it for sale. Sellers usually price their home high with the knowledge that they will have to come down in price through the selling negotiations. You need to know that you can get an amount higher than what you owe on your mortgage so that you can walk away from the sale with a profit.

The second reason for knowing the true value of your home is to help you determine the price range of homes in which you can look when you want to buy another house, especially if you want to upgrade. The amount of your income is one of the factors lenders use in determining how much money you can borrow in a mortgage. Another important criteria is your credit history.

If you can walk away from the sale of your home with a sizeable profit, this will give you the money you need to make a higher than usual down payment and allow you to purchase a more expensive home than you would otherwise be able to afford.

Some homeowners use estate agents to provide them with a valuation of their home. It is important to know that the true value you receive from one agent may not be the same as that of another because of their need to make a sale and the types of property they are involved in selling.

Just as experts recommend you get at least three quotes when you are purchasing home insurance, you should request three valuations of your home from the agents of three different real estate companies. This will give you a good idea of what your home is worth.

When you take the valuations offered by different estate agents, you will be able to make a better decision on the price at which you can sell your home. One valuation only may not be accurate reflection of the amount of money you could realize from the sale.

Then when you contact a second agent, there may be a large discrepancy in the figure you are quoted. By having a third or even fourth valuation, you will have a more precise idea of where you stand on the real estate market and your chances of making a quick sale based on the price you decide to charge.

When obtaining valuations on your property from different estate agents, you should never make the mistake of telling each one that you are looking for a second opinion on the true value of your home. The first thing each agent will want to know is the amount the previous one(s) gave you and this agent will not bother with doing an accurate assessment.

Instead you can be assured that the valuation will be very close to the others you have received. You do need to make sure you are receiving an unbiased valuation based on your home itself and the prices at which homes in your area similar to yours have sold for in recent months.

There are also property websites with up-to-date information about recent UK house sales that may be of benefit to you in obtaining the true value of your home. When you browse these sites, you can see photos of houses for sale and read the descriptions of the homes and the locations.

This will help give you an approximate value to work with and to have in mind when you ask for expert valuations. In this way, you can check on the validity of the true value prices that you receive from the various estate agencies you use.

Home buyers want the lowest possible price and sellers want the highest possible price.  This is why buyers do negotiate the price and try to bring it down lower, no matter how low you already set the price of your home.

If you want to get the true value of your home on the market, one thing you can do is set the selling price higher than this, knowing that you can drop down the price to what you are willing to accept in the final sale.

The Benefit of Knowing the True Value of Your Home is a post from: The Thrifty Scot

Whilst falling house prices would traditionally come as good news for buyers, particularly first time buyers, the current climate has resulted in many people still being unable – or unwilling – to purchase property.

One of the reasons for this is that mortgage lending has been very restricted since the onset of the global credit crunch, which means that many people are unable to get the finance that they need to buy a property. Another reason is that many are unwilling to take the plunge and buy a property at a time when house prices are still falling.

However, there is one group that could potentially benefit from the fall in house prices, and in particular the huge discounts that are available on repossessed properties that are going under the hammer at auction. Investors who have some capital to invest in property can now enjoy some excellent deals on auction properties, with homes being sold at around 25 percent less than they were this time last year.

Those that do not have the ready cash to invest may still experience problems, as many lenders seem to be turning away investors looking for mortgages at the moment, but the cash rich could make a killing on property purchases at auction. However, if you are planning to invest in a property at auction you should bear in mind a few things that could help you to make the right choices.

If you are new to buying property at auction then don’t just jump in at the deep end – remember, this is likely to be a very important and long term investment so you need to get it right. Attend a few auctions just as a spectator to get a feel for how they work, and if you know someone that has already purchased property at auctions then all the better, as you can draw on their experience and expertise. Attending a few auctions will enable you to get an idea of how property auctions work and how the bidding process works, which could help to save you from making some very costly mistakes.

Once you are ready to start bidding for properties at auction make sure you have an idea of which properties you are interested in. Research the areas that the properties are in and check whether there are local amenities and facilities within easy reach. If you intend to rent the property out this could make all the difference to your success when it comes to getting tenants easily.

You need to think about what sort of group or person you will be renting the property out to as well in order to determine its suitability. For example, many people decide to rent out to students, and if this is your plan you should ensure that the property you are purchasing is close to a university or college. The local facilities and amenities should be geared towards the type of tenant you plan to let to, so make sure that you property you are going to bid on fits in with your needs in terms of who you will be aiming to let the property to.

Another good idea is to go and take a look at the property before the auction – simply relying on the catalogue description of properties can prove to be a mistake, as you will be bidding on something that you know practically nothing about. If you can take a builder or similar professional along with you to see the property then all the better, as you will be able to determine what the worth of the property is and you can make a more informed decision with regards to what your maximum budget will be.

Also, always get a survey done on the property before you start bidding – this is a very important step. One industry expert states: “You will lose your survey fees if your bid is not successful, but a survey is essential. Some mortgage schemes offer a free basic valuation; however, this most basic of surveys may not be adequate, particularly if the property is old or in a poor state of repair. Just because you may be getting a bargain, don’t cut corners on areas such as survey and searches. Treat it as a traditional purchase and make sure it is a bargain, not something you may regret.”

When you are finally ready to start bidding make sure that you have your determined head on, as you will need to exercise lots of willpower. In some auction rooms the bidding can go on for ages, and many buyers have found themselves exceeding their maximum budget by thousands of pounds because there is another party in the room that keeps pushing it higher. You need to set yourself a maximum limit based on what you have seen of the property and make sure that you stick to it, otherwise you could end up paying more than the property is worth.

Buying a property at auction is a post from: The Thrifty Scot

Those homeowners locked in at last year’s rates cannot take advantage of this lower rate in their current mortgage agreement. One way in which you can save money is to remortgage your home at the lower interest rates and lock in the mortgage for a further term so that you enjoy the low rates of interest when they start to rise in the future.

However, you do have to be careful and try to get the most competitive deal that you can. If you remain in your current mortgage, you could be paying away thousands of pounds in interest that you could use for other expenses or to pay down the outstanding balance sooner. You can make arrangements with your current lender or look for a lender with more agreeable terms. A lower interest rate means lower monthly payments, but you can also choose to keep the same amount of payment and pay more money on the mortgage each month.

In order to get the best deal when you remortgage, you have to search for the right mortgage product for your needs. Lenders in the UK are not approving as many mortgages as they once were due to the credit crunch, but there are still lenders out there that can offer you a more affordable deal. One of the main factors in determining the amount of your monthly payments is the interest rate charged by the various lenders. Most charge a percentage higher than the base rate set by the Bank of England. Start your search with your current lender by inquiring about the lower rates and the remortgaging process. If you have an excellent credit rating and have been making your payments on time, you will likely qualify for the best rates the lender can offer.

Search online to find what interest rates different lenders have listed on their sites. You can request a free remortgage quote without having to submit a loan application. This will give you a good idea of how much you will be able to save if you switch to another lender. The process of switching to another lender is a painless one, but there are other aspects of this process that you need to be aware of.

The amount of deposit that lenders require has risen along with a decrease in interest rates. You may have to make a down payment on the new mortgage if you decide to switch lenders. It is important to know how much this deposit is and whether you can afford this lump sum payment. In some cases, the higher deposit will not enable you to save money on lower monthly payments.

The process of remortgaging also involves having an appraisal of your home to ensure it is worth the amount of the mortgage. Chances are it is worth more, but real estate prices have taken a dramatic decrease in recent months as well. You will have to pay for this, either upfront or have it added to the new mortgage. You also need to check on the arrangement fees associated with remortgaging, which have doubled in some cases during the past year. The documentation has to go through a solicitor and this will add to the cost of borrowing, which is something else you have to consider.

Depending on the length of time you have your existing mortgage, your current lender will likely charge a penalty for breaking the term of the loan. You have to contact your lender to find out what this fee is. It may be too high for you to manage at this time and will void any savings you realize with lower interest rates. Added to the cost of the deposit, it may actually cost you more to remortgage than it does to keep your mortgage as it is. The repayment options the new lender offers should also be a consideration. They may be more agreeable to your pocketbook in a longer term and lower payments in spite of the higher costs associated with the initial remortgage over the long term.

For most homeowners, staying with their current lender for their remortgage is a viable option. Since you already have established credit at this financial institution, it is unlikely the lender will require a deposit for the remortgage. When you are staying with the same lender, the fees may also be waived. In this way you can get a lower rate of interest on your loan and extend the term giving you much lower payments.

Remortgage Your Home and Save Money is a post from: The Thrifty Scot

Your credit rating will also have an effect on the amount of interest. Those with an excellent credit record will get a lower interest rate than those with a less than perfect score. There are also different types of mortgage products you can choose from and each of these has different rates of interest associated with them. It pays to shop around for a mortgage so that you can get the most affordable and most competitive deal available.

Although you can’t do much about the interest rates themselves, there are things you can do to help you save money by not having to pay as much interest on the loan. One of these is to make the highest possible deposit that you can afford. If you can make a deposit of at least 20% of the amount of money you wish to borrow, you will get a significantly lower rate of interest on the loan than you will if you borrow the full amount of the price of the home.

The rate of interest that you pay each month is a percentage of your outstanding balance. When you first start paying on the mortgage, very little of your payment will go towards this balance and the bulk of the payment will go in interest. The lower the amount you have to borrow, the less interest you pay each month.

Check the repayment options of the lender. Some lenders will allow you to make higher payments each month, while others will allow you to make a lump sum payment on your mortgage once a year. If you are permitted to make higher monthly payments whenever you wish, an extra £50 each month may not seem like much but it can go a long way towards paying down the outstanding balance. If you are only permitted to make one higher payment a year, then you can save a little money each month so that at the end of the year, you have an amount of money to pay directly on the balance of the mortgage. You will see the difference in the interest you pay in the following month.

The length of term you choose for your mortgage will also have an impact on the amount of interest you pay overall. Although you may have higher payments by choosing a shorter term, you will save money in the long term. This is because you are paying off more of the balance each month and so the amount of interest is less each month.

Choosing a longer term for paying off your mortgage means you have a lower payment each month, but the amount of interest you pay over the life of the mortgage is a staggering amount. Use the free calculator provided on the sites of just about all lenders to see how much interest you would pay on the amount you want to borrow over various terms, just to get an idea of the savings you could realize in a shorter term.

When you take out a mortgage you have the option of making monthly payments or bi-weekly payments. Although making payments every two weeks does mean you make an extra monthly payment each year, the effect that this repayment option has on paying off the mortgage sooner and saving money on interest is worth the extra amount. When you make a payment in the middle of the month, you pay interest on the balance.

The amount the goes towards paying the balance, however small it may be, will decrease the balance on which interest is charged at the end of the month. This enables you to save money and become mortgage free much sooner. The difference between choosing a mortgage with a monthly payment over a term of 25 years can be cut down to 19 years simply by choosing bi-weekly payments. Thus you save six years of interest in such an option.

All mortgages have arrangement fees associated with them. Lenders will allow you to add these fees to the mortgage, which means they are added to the total balance on which you pay interest and payments. If at all possible, try to pay these fees yourself and avoid having them added to your loan. This will help save you money in the interest you pay on the extra amount, which could take you years to pay off because it essentially means that you owe more money on the mortgage than just the cost of the home.

How to Save on the Interest You Pay on Your Mortgage is a post from: The Thrifty Scot

Buying a property for the first time can be daunting and confusing at the best of times, but in the current climate when so much has changed in the world of housing and mortgages it can be an even more difficult and stressful experience. Being well prepared and arming yourself with relevant knowledge can therefore go a long way towards making this a smoother and manageable process.

As many people will know getting a mortgage in the current climate is far more difficult than it has been for many years, and therefore you need to consider whether you will be eligible to get a mortgage at all before you start wasting your time looking around for the right mortgage. For example, if you do not have any deposit of if you have damaged credit then there is a good chance that you will not be able to get your hands on an affordable mortgage – or in some cases any mortgage at all.

Affordability is another point that you need to consider, and with so many changes having taken place in the mortgage sector you need to familiarise yourself with what to expect. The mortgage that were once highly popular with first time buyers, such as 125 percent and 100 percent mortgages, have disappeared from the shelves amongst the chaos of the global credit crunch, and the average first time buyer these days is expected to be able to find a sizeable sum of money to meet upfront payments in order to get a mortgage.

In fact, you will be hard pressed in the present climate to find a mortgage that required just a 5 or even 10 percent deposit, as most lenders now are covering their backs and reducing risk by asking for a far larger deposit even from first time buyers, who previously could have got away with paying no deposit at all or even borrowing more than the value of the property they were buying.

In fact, the average first time buyer is likely to have to find thousands of pounds in order to cope with upfront costs, such as paying for legal services, paying mortgage arrangement fees, and paying a hefty deposit on the loan.

This can run in to tens of thousands of pounds depending on the size of the mortgage, so you need to ensure that you are able to get your hands on the necessary funds. If you are only able to get a small deposit together, which is the norm for most first time buyers with little in the way of savings and no previous property from which to take equity, then you will most likely end up with a mortgage that has a high rate of interest attached, which means far higher monthly repayments.

On the subject of monthly repayments, you also need to make sure that the monthly repayment that comes with the mortgage that you want to apply for is comfortably affordable. Repossession levels have soared over recent months, with more and more homeowners struggling to make repayments on their mortgage loan.

In order to minimise the risk of becoming a victim of repossession you should ensure that you can manage the repayments on the mortgage loan comfortably, bearing in mind that you will also need to budget for things like bills, council tax, food, home insurance, and other costs.

You will also need to determine the type of mortgage that you want, and this can prove difficult in the current climate. On the one hand, interest rates have plummeted recently and are set to continue falling according to many industry officials, which means that you could fare better with a variable rate mortgage. However, on the other hand if you want to enjoy the peace of mind and stability of having the same repayments every month without any fluctuation then you may prefer to go for a fixed rate deal.

Before you take the plunge and apply for a mortgage make sure that you do your research thoroughly and compare different deals from a range of lenders. Interest rates have come down considerably over the past couple of months, and whilst some lenders have passed on the full rate cut others have decided not to pass on the full cut, making it even more important to browse and compare mortgages in order to get the most competitive and suitable deal. If necessary, speak to an independent financial advisor in order to get some advice on the type of mortgage that may best suit your needs based on your income and circumstances.

Things that first time buyers need to consider is a post from: The Thrifty Scot

There are different forms of mortgages to choose from and the ordinary UK homeowner may not be aware of the possibilities that do exist. The current economic climate also makes it more difficult than ever to find a lender that will approve a mortgage for you, especially if you have had financial difficulties in the past. Finding the right lender for your needs can be very time consuming. Usually you do have to apply for a mortgage before you find out whether or not you will be approved and if you are turned down, this will affect your credit rating in a negative way.

One of the best ways of obtaining the most affordable terms in a mortgage is to use a mortgage broker. A broker is not a lender but is an impartial intermediary who will work with both you and the lender. He/She has access to a wide network of lenders that deal with mortgages for your individual situation. The broker you choose will also explain the mortgage system to you and work with you in deciding which type of mortgage you should look for.

Instead of having to contact several lenders to find out whether or not you meet their requirements for a mortgage, the broker will know exactly which lenders to contact. A broker takes your financial information and puts your mortgage needs out to several lenders. When the broker receives the results of the repayment terms, including the rate of interest, then you can decide which one of the offers to take. If none of them appeal to you, you are not under any obligation to accept any of the offers. Once you do find an affordable offer, it is then that you actually apply for the mortgage and start dealing with the lender, rather than the broker.

When you choose a mortgage broker to help you find a mortgage, you do not have to pay the broker yourself. The lender takes care of this and pays a fee based on the amount of money that you borrow. In a way, the lender pays the broker for bringing the business to them.

If you have a less than perfect credit rating, you probably know already that your regular bank will not approve a mortgage for you or will only do so at a high rate of interest. When you discuss your financial situation with a broker, this professional will search through the network of lenders to find one or more that does approve mortgages for people in your situation. The lender through whom you obtain the mortgage could actually be one in another part of the country and one that you probably have never heard of.

The mistake the many people make when looking for a mortgage is that they apply for a mortgage with several lenders on their own. This can have a disastrous effect on your credit rating because the more often you apply for a loan, the lower your credit score becomes. As lenders check your rating and see that you have already applied elsewhere, this will result in them turning you down. When you use a broker, you are not applying to all the different lenders the broker uses. The broker offers your mortgage and you don’t actually submit an application to the lender until you get results that this lender will likely approve the loan for you.

Mortgage brokers are very knowledgeable about the mortgage industry. Even if you want a home equity loan, these professionals will help you get the best possible deal. Although you can find many lenders online where you can browse the sites, use the free calculators and determine the interest rate, you can save yourself all the time you spend searching by using one person who can provide you with the help you need. You simply provide your information and let the broker do the searching for you.

Once you take this route to finding a mortgage, it will take time for the broker to gather the results from the lender that he/she contacts. You can be sure that these are all reputable lenders with whom the broker has dealt in the past. Once the results from the lenders are in, the broker will contact you and go over each of the offers with you, presenting you with the pros and cons of each one so that you can make the best decision. The broker will not only help you get the money you need to purchase the home you want, but at the most competitive deal.

How You Can Benefit From Using a Mortgage Broker is a post from: The Thrifty Scot

However, it is important to develop a budget in which you list all your sources of income, after taxes and deduct your expenses from this amount. Even when you do deduct expenses for groceries, clothing, leisure pursuits and allow for incidentals, it is likely you will have some spare money, even though it may be a small amount. So what do you do with this spare money – pay down your mortgage or invest it?

Of course it is essential that you make sure all your debts are paid so you will likely want to pay off any small bills you may have, such as credit cards. Even if you do have a company pension plan, you do have to realize that this amount will likely not be enough to give you the income you are used to receiving while you are working.

Most mortgages are for periods of 25 years or more so if you wait that long before you start putting something way fro your retirement years, you may actually be very close to retiring before you have any substantial amount of money to invest.

Saving money for the future should be part of your overall financial plan in which you count this amount as a normal expense. Then you are assured of having a retirement income. Most mortgage companies allow you to make a lump sum payment once a year to pay down the principal so you could take a portion of what you save in one year to use in this manner.

To help you decide what to do, you should really understand your mortgage. A simple tool like a mortgage calculator will help you determine how much money you can save by paying down your balance by cutting years off the mortgage.

You may have plans to sell your home when you retire and use the profit to fund your retirement plans. However, you do have to take some things into consideration, such as where you plan to live and what the cost of housing will be at this point in your future. You will also need to have a considerable amount of equity built up in your home because the prices of homes decrease with age.

While you continue to make your mortgage payments each month, you know that eventually you will have it paid off and that you will own your home, you should consider putting any spare money into a pension plan. The reasons for this are many, but do include the fact that most homeowners move several times in their lifetime, so you could say that you may always have a mortgage – even after you retire.

Other benefits of putting your money into a pension plan include the tax benefits you receive. For each £1,000 you invest in a pension plan, you get a basic tax relief of £250. If you pay a higher rate of income tax, you can claim an additional £250 on your income tax return, thus giving you a higher refund, which you can then re-invest. Your mortgage payment is fixed each month and as you pay down the balance the amount of interest you pay each month decreases. Thus, in the final years of the mortgage more of your payment will be going towards paying off the balance. Therefore, you will not save a lot of money by paying down the mortgage.

And, if you are paying at a low rate of interest, you won’t save much money in this way either. According to one industry official, Philip Stone, you would need to be paying at least “9% interest on your mortgage” to come out on top by paying down your mortgage rather than pay it into a pension plan. He says that “your mortgage rate was 5%, a £1,000 payment after 25 years would be worth £1,389 off the loan but the same amount into a pension would be worth £727 more (£2,116) for lower rate payers and £977 more for higher rate payers (£2,336) – the bottom line being, the cheaper the debt, the less it pays to reduce it.”

The longer you have the money invested in a pension plan, the more money you will have in the fund because it has more time to grow. There are instances, though, when it would be beneficial for you to invest any extra money into your mortgage, but this will only be profitable if you have substantial equity built up in your home at the present time.

Should You Put Your Spare Money Towards Your Mortgage or Your Retirement? is a post from: The Thrifty Scot