Capped Mortgages Overview

Capped rate mortgages have variable interest rates that will not rise above a certain upper limit. The interest rate can rise or fall during the term of the mortgage, however it will not rise above the capped upper limit.

Interest on capped rate mortgages is usually charged at the lender’s Standard Variable Rate (SVR) and any changes to this rate will affect the amount of monthly repayments due.

The lender’s SVR normally rises and falls roughly in line with changes to the Bank of England Base Rate (BoEBR). The base rate is assessed each month by the Bank of England’s Monetary Policy Committee (MPC) and any changes to the rate are reflected in lenders’ SVRs shortly afterwards.

While capped rate mortgages have variable interest rates, unlike other variable rate products, capped rate mortgages offer the borrower some protection against interest rate rises with the “cap”.

The capped rate is an agreed upper limit that the SVR cannot exceed during the term of the mortgage, therefore any rises in the lender’s SVR below the cap will be passed on to the borrower, while any rises above the cap will not.

Conversely, any falls in the lender’s SVR below the cap will be passed on to the borrower, therefore reducing the amount of monthly repayments due. The borrower will therefore be protected against rises in interest rates above a certain point, but will benefit from any falls in interest rates.

Because of this, capped rate mortgages are ideal for borrowers who are expecting interest rates to rise and become popular during times of steadily rising interest rates. By taking out capped rate mortgages during periods of historically low interest rates, borrowers can secure themselves against excessive future increases in interest rates while still benefiting from any reductions in rates.

Capped rate mortgages may also have an associated “collar” below which the borrower’s rate cannot fall. These products are known as cap and collar mortgages. Any reduction in the SVR below the collar will not be passed on to the borrower.

It is important to note that most lenders charge an arrangement fee for their capped rate mortgages and the SVR attached to these products are usually slightly higher than for discounted mortgages.

UKMortgageSource provides up-to-date information on Capped Mortgages


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Current Account Mortgage Information

A current account mortgage is a type of flexible mortgage product that combines several financial products into one single account.

As with any other mortgage product, a current account mortgage will be secured against the borrower’s home. Current account mortgages are not usually secured against investment properties.

The main difference between a current account mortgage and a standard mortgage product is that the current account mortgage will act as both the borrower’s home loan and current account.

Current account mortgages are often referred to as a “line of credit”.

The borrower will normally be required to have their salary or wage paid directly into the current account mortgage and will be allowed to withdraw money from the line of credit as required – within a pre-determined upper limit.

In addition to combining the mortgage with a current account, it can also be combined with credit cards, personal loans, and cheque book facilities in order to streamline the borrower’s overall banking facilities into one product.

As well as helping to streamline the borrower’s banking facilities, a current account mortgage can offer flexible features that standard mortgage products do not, which can further assist the borrower with managing their personal finances.

Because a current account mortgage is a type of flexible mortgage it can offer features such as overpayments, underpayments, drawdown of overpayments previously made, additional borrowing facilities, no (or low) redemption penalties.

In addition to flexibility, a current account mortgage can help the borrower save interest and pay off their home sooner. This is due to a combination of factors such as earnings being paid directly into the mortgage, daily interest rate calculations, and no high interest loans (e.g. credit cards) to pay off simultaneously.

A current account mortgage can, therefore, provide a borrower with many features for organising their personal finances and paying off their mortgage as soon as possible.

However, despite the benefits, it is important for the borrower to remain disciplined because excessive withdrawals will increase the overall cost and term of the mortgage and negate the benefits offered.

Because of this, careful consideration should be given before applying for a current account mortgage. Professional advice may be sought from an independent mortgage adviser.

UKMortgageSource provides up-to-date Current Account Mortgage information

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Is It A Good Idea To Pay Points On A Mortgage?

When you go to closing on a mortgage, you have a number of options available to you. One of these is to pay points so that the interest rate can be reduced. Here is what you need to know to help you determine if you should pay points on your mortgage.

A mortgage point is equal to 1% of the total cost of the mortgage. So, if you are getting a mortgage for $150,000, then it will cost you $1,500 per point. For each 1% of interest, there are 8 points. In other words, it will take 8 points to bring down the interest rate one full percent. Each point paid will reduce the interest percentage by 0.125%. Usually, you can see some savings if you bring it down even one point.

Paying points at closing can reduce your interest and bring you savings, but not everyone can benefit from it. Generally, you would need to stay in your house for a number of years - it really will not help if you are not going to stay long.

The reason for this can be seen in the following example. This will show you how to determine how long it will take to break even. If you buy a house for $100,000 at 7.5% interest, then you would be paying around $700 per month. If you spend $1,000 to buy one point, this will reduce your interest to $7.375%, and now you will have a payment of about $691. The difference in your payments is now around $9. By taking the $1,000 that you paid, and dividing it by your amount saved ($1,000 / $9), that will give you an answer of 111, which is the number of months you need to live there in order to break even.

In the above example, you would need to live in that house for 9 years and three months to break even. This is why it is necessary that you want to live in your home for a while before you begin to realize any savings.

If you plan on staying for a shorter time period, then you may want to reduce your costs other ways. This can be done through paying a larger down payment, making sure your total indebtedness is low and your credit score high, or by simply paying more each month. In order to know which approach would be more beneficial, be sure to go online and find some good mortgage calculators to help you find out.

Also, when you go to get your mortgage, get a number of quotes from different lenders and find out which one offers the best deal. All you need to do is to compare them carefully in terms of interest rates, fees, total cost, and what options you have. Before long, you will find that choosing the best of the offers will enable you to save possibly thousands of dollars over the lifetime of the mortgage.

Joe Kenny writes for the Loans Store, offering buy to let mortgages, or view the latest mortgages at Nations Finance. For US residents try Mortgage loans from Rebuild.org

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How to Apply Online for a Mortgage Loan

The Internet has transformed many aspects of the real estate and mortgage loan industries. These days, you can take virtual tours of homes, track property listings online, and even apply online for a mortgage loan.

Consumer empowerment is always a good thing. But there are certain things you need to know before you apply online for a home mortgage loan. By researching the online loan process before venturing into it, you will be better prepared to take the right steps toward success.

Applying for a Mortgage Loan Online
It's important to note that the mortgage application process varies from one borrower to the next. Your process, for example, will be influenced by the amount you're trying to borrow, your credit history, your debt-to-income ratio and other factors. With that said, here's how the basic process works when you apply online for a mortgage / home loan.

1. Review your credit report.
2. Determine your mortgage budget.
3. Make a list of online lenders.
4. Provide basic information at first.
5. Compare the interest rates offered.
6. Compare other elements of the loan.
7. Get everything in writing!

1. Review Your Credit Report
When applying for a mortgage loan, this should always be one of the first steps you take. You can be sure that mortgage lenders will review your credit report and credit score (two different things) with a fine-tooth comb, so it makes sense for you to review these things first. Make sure your credit report doesn't have any errors or discrepancies. If it does, submit a correction request to the company with the erroneous report -- either Equifax, TransUnion or Experian.

2. Determine Your Mortgage Budget
Before you apply online for a mortgage / home loan, you need to know how much of a mortgage loan you can afford. Don't rely on the lender to tell you where your budget lies. You need to determine that for yourself. When a mortgage lender approves or disapproves a loan, they do so based on credit scores, risk factors, and other data-driven elements. They do not consider how the loan will affect your quality of life ... so that's your job. Use an online mortgage calculator to reduce a hypothetical sales price down to its monthly payments. This will help you determine where your mortgage "comfort zone" lies.

3. Make a List of Online Mortgage Lenders
Once you've completed the self-assessment process outlined above, you are ready to create a list of lenders that offer online mortgage application. These companies can be loosely categorized in one of two ways -- they will either be (A) traditional mortgage lenders with an online application tool, or (B) a web-based lender who specializes in the online mortgage process. Examples of the latter include E-Loan, Ditech and Quicken Loans.

As a rule of thumb, stick with the online mortgage lenders who have been around a while, and those who have a strong reputation (like the three mentioned above). This is primarily for information security purposes. Empowered by the anonymity of the Internet, some unethical "lenders" seek to take advantage of consumers through their online application tools. This can lead to identity theft, among other things.

Before you apply online for a home mortgage loan, always make sure you are using a trusted, well-known mortgage company. It's also a good idea to look for a VeriSign or e-Trust logo / link on their site. This will give you even more comfort by knowing the website has been reviewed by a company specializing in online security.

4. Only Provide Basic Information at First
Most online mortgage lenders will only ask you for some preliminary information regarding your income, debt, etc. They do this so for basic screening purposes -- they want to make sure you're somewhat qualified for a mortgage loan before taking the time to review a full application.

This is good for you too. By providing only basic information up front, you can find out if the lender is even willing to work with you. In this way, you can avoid filling out a full mortgage application for a company who cannot help you. This will also limit the number of credit inquires made by lenders. If you have too many credit inquires (by frequently applying online for a mortgage, for example), it can send a red flag to other lenders that you're having trouble being approved.

5. Compare Interest Rates Offered to You
The interest rate is one of the key elements that determines the mortgage amount you'll pay each month. So it should also be a key decision-making factor when you apply online for a mortgage / home loan. Many times, online lenders can offer better interest rates than traditional "bricks-and-mortar" lenders. Companies like E-Loan and Ditech have become extremely efficient at the online mortgage process. This obviously limits face-to-face time, paperwork, and other factors that can increase the lender's overhead.

The world of online mortgages is a highly competitive one. If you have decent credit and are generally a good candidate for a mortgage, online lenders will try to offer you the lowest rate and best terms possible, in order to get your business. Keep this mind when applying online for a mortgage.

6. Compare Other Elements of the Mortgage
Interest is only one part of the mortgage picture. So when comparing online lenders, be sure to ask about closing costs, prepayment penalties, and other aspects of the "fine print." For an excellent article on comparing mortgage lenders, click here.

7. Get Everything in Writing
When you apply online for a home loan, it's absolutely critical that you get everything in writing. This is good financial practice in general, but it's especially important with large financial transactions such as mortgage loans. For example, if a lender promises you a certain interest rate based on your qualification and credit score, ask them where it says that in writing.

Lenders are required to provide you with this information within a day or two of your mortgage application. This is a basic requirement of the Real Estate Settlement Procedures Act, or RESPA.

Conclusion
We hope you have enjoyed this guide to online mortgage loans. Elsewhere on this website, you can learn more about the types of mortgage loans, information about your credit report, and other topics related to home buying and mortgages.

* You may republish this article online if you retain the author's byline and the active hyperlinks below. Copyright 2007, Brandon Cornett.

About the Author
Brandon Cornett publishes a network of websites related to home buying and mortgages. The latest website in this network offers tips on how to refinance a mortgage online. Learn more at http://www.mortgage-refinance-advice.com

African American Homeowners Best and Worst Times To Refinance

The refinancing boom is still going strong in many areas of the country. But a question keeps coming up more often. And that question is when is the best time to refinance?

After all, there is usually always a best and worst time to do most activities. A time when it's most rewarding to act and a time when conditions limit your advantages at best, or at worst involves greater risk and loss.

In this article I'll discuss the conditions or circumstances that will alert you to the best and worst times to refinance.

However, don't just stop there. To get the most accurate picture do your own investigation and research for your specific situation.

Everyone has there own unique circumstance. That's why you should consult with a qualified financial adviser with experience in helping people in your specific financial state.

Take the following suggestions as guidelines or road maps to take action or to hold off until a more advantageous time.

First, I'll cover the best time to refinance:

Best Time To Refinance

• If you are staying in your current home for less than two more years, it is not advisable to refinance your home mortgage.

• If you have an Adjustable Rate Mortgage you may want to refinance into a Fixed Rate Mortgage. This could help to lower your costs, stabilize payments and decrease risk.

• An obvious time to refinance your loan might be when you have an adjustable-rate mortgage (commonly known as an ARM) and the current rates are low.

• If you could make a larger payment now and want to pay off your mortgage sooner, it's possible to refinance for a shorter-term mortgage. But don't do this without first finding out if you could pay off your existing mortgage just as quickly and cheaply.

• It's important to know if your current mortgage has any prepayment penalties so you can make an informed decision.

• If interest rates have just begun dropping it is a sure sign the housing boom will soon be underway. Mortgages will become easier to obtain and at lower rates, which means buyers can more easily qualify for loans.

• If you can save at least 1.5 % interest rate on your loan.

Worst Time To Refinance

• If you're staying in your current home for less than two more years, it is not advisable to refinance your home mortgage.

• Relying exclusively on promotional material you receive in the mail. Also, do not accept a loan from a telephone solicitation -- without first checking out that potential lender.

• If you don't plan to stay in your home for at least 2 years. In typical cases, the month to-month savings won't compensate for closing cost and other refinancing charges unless you stay in your home for at least two more years.

• If you can't save at least 1.5% interest rate on your loan.

• Trading a fixed rate for an adjustable rate when rates are going up.

By following these guidelines you'll avoid acting when you should wait. In addition, you'll take action in time to get the best refinancing opportunities.

Roy Primm Founder and Publisher of BlackHomeOwnerNews.com the largest source of information for black homeowners. Subscribe to free newsletter and receive the latest home value increasing tips, free government grants benefiting homeowners. Get free ebook 99 Ways To Live Better On Less Money at ...ShoppersCoach.com

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