Selling For Sale By Owner? Will you be needing a mortgage? Looking to a home privately? Read on for further mortgage guidance.
Many governments have recently cut their interest rates to stimulate their economy to help borrowers achieve their real estate dreams.
Borrowers are now in a great position to secure ideal rates for their mortgages. The Bank of Canda for example has set its prime rate at 0.25% through to next year - the equivalent of 2.25%, the lowest rate Canada has ever seen.
The banks are currently offering extremely competitive rates, so what are the ways of finding the best deals?
Comparing Mortgages
Recent surveys suggest that most mortgage clients are not shopping around for comparables: more than 3/4 of customers who are up for renewal stay with current lenders. If you take the time to have a look around the market, you could save yourself thousands. Remember, small differences in percentages on your mortgage can stack up to huge savings over time.
You can also choose to go to a mortgage broker, as well as banks. Mortgage brokers offer specialist advice. Try asking friends for recommendations. The may be able to save you time and money. You can compare the products they suggest with the ones you find yourself. Over 40% of new mortgages last year were created through mortgage brokers.
Which mortgage - a Variable or Fixed rate?
With interest rates at an all time low, you may well be tempted with a fixed rate mortgage. As the name suggests, the fixed rate mortgage rate you pay will remain the same over the coarse of the contract. If you choose a variable rate mortgage, your monthly payments will vary in line with the banks prime rate. While interest rates are low, many mortgage seekers will be opting for the low fixed rates. In reality, the choices are up to you - some people will rather have the secuirity of a fixed rate, whilst other would rather have variable rates, which may in fact come down further with time.
Length of Terms
Not to be confused with the length of the mortgage (which usually runs from 15 to 25 years) the length of term refers to the length of the intial agreement period. This will typically run from 6 months to 5 years, and is the intial agreement for the interest rate of repayment. Usually at the end of this term, you will be able to negotiate a new interest rate, or shop around for a better deal. Right now, because of the low interest rates banks are offering better terms for short term products, but you can check with specialists for the best deals. They can help you draw up some variations for different packages.
Your Credit Record
You should also take into careful consideration your credit score. Do you know what yours is? In the U.S. you can now aquire your credit score free of charge. In the U.K there is a nominal fee. It’s important to know how you are rated by the credit companies, as this will affect the products that are available to you. The better your score, the more likely you will be offered one of the better mortgage deals. The better your score, the less you will have to offer as a downpayment, the lower your score the more you will be expected to produce as security. If you can find out an average score for your country of residence it’s helpful - it is at that point and above that you can aquire the better mortgage products.
How Do I Get a Good Credit Score?
The most popular ways to start building a good credit score is to apply for a credit card, and start using it regularly. The best thing to do is to use it for small amounts regularly, and pay off the debt quickly. You then build a record of reliability and trustworthiness with your lender. This all counts towards a good record. It’s very important to pay on time, at least the minimal amount, as any late payements will adversely affect to record. An even better way is to pay off the full amount every month. Just use the card for your regular purchases, and keep a sharp eye on the credit card - it can add up quicker than you expect.
Make sure the debt on the card is always low. You don’t want to be maxing it out every month. Spending around 30% of the amount available is a good level to go for, that way you don’t look as if you really need the money - always good.
Credit Record
Remember that applying for credit can in itself can damage your credit record. It seems strange, but if you apply for too much credit, this can damage your credit! If you apply in a short period for a number of bank accounts, credit cards, or different mortgage products then this will be a problem for you and your lenders - if you seem desparate for credit, this will disqualify you from many lenders.
Every time you apply for a mortgage, you may be asked if its ok for the lender to check your credit history. This will be noted on your credit history. Make sure you are aware of how many searches are being done on your behalf. Mortgage brokers generally will just perform one credit check, and use these results to find you a selection of products.
The credit score process can be very tricky to master, especially if you have ‘bad credit’: meaning you have defaulted on previous loans or debts. You can usually restore and rebuild your scores, with patience and time. Normally repaying old debts is a good start, though it can be notoriously difficult to approach and repay old debts with coporations and companies. You can call Experian or Equifax for more details on your credit score, and how to examine in more depth your credit history.
For more details on for guidance on For Sale By Owner, click here.
The trouble is in the UK the swap rates are rising and most lenders are now increasing their fixed rate deals and some are being shelved. A mortgagee has to be convinced the base rate will climb sharply before taking one of these. Trackers seem a much more attractive deal.