When taking out a mortgage, you will need various types of insurance. For example, to cover your monthly payments - in case you get ill - and home insurance- in case it burns down etc.
Household Insurance
You need to insure the building and your possessions. Your mortgage lender will probably try to get you to take their own policy. Most people used to take these because it was easier, without having to make dozens of calls to find a cheaper option.
Shop around and save yourself thousands by avoiding tie ins and bundling.
Rebuilding costs are not the same as the market value of your home. Often they're less than half - for example they don't include the cost of the land.
Don't underinsure your contents and possesions. Even old furntiure etc will be expensive to replace. Be realistic about the replacement costs. For high value items, antiques etc, get an independent evaluation.
Be wary of "blanket cover" packages which some insurers offer. These are based on the number of rooms. You may end up paying more than necessary. Basically as with all types of insurance: don't underinsure, don't over insure and only get insurance that's relevant to your needs.
Mortgage Payment Protection Insurance
Anyone who has mortgaged - or remortgaged - since 1st October 1995 is now only eligible for state assistance for nine months after becoming unemployed or disabled. Even then any state assistance would be means tested and will only cover the interest payments i.e. not endowment payments or capital repayments.
What you need to cover you is Mortgage Payment Protection Insurance. At the time of writing only one in five mortgage payers has this type of policy - though there are now moves by the government to make them compulsory.
Life Insurance
There are various types of life insurance. However the principle for each variation is the same. In the event of your death your dependents will receive a sum of money in compensation ie as replacement for your earning power. Unless you've got dependents or another good reason to have it, be wary. Life insurance is one of the few remaining ways for IFAs and brokers to make very big commisions.
Life insurance gets more expensive the older you are. You probably want to buy level term assurance. This fixes how much you pay - and how much your beneficiaries will receive.
The benefit is that you won’t be stung for a large premium when you're older. The downside is that the amount your beneficiaries receive will decrease with inflation.
Mortgage Protection Decreasing Term Assurance
This is another type of life insurance. It works by recognizing, that the main purpose of insuring your life is to pay off your mortgage.
Because what you owe decreases with time (ie as you pay your mortgage off) so does the amount of cover provided and so does the premium you have to pay every month. Hence the "decreasing". It's considered to be a cheaper form of cover than straightforward life insurance.
Permanent Health Insurance
This is an insurance policy that will pay you a percentage of your income, often until retirement, should you become unable to work due to ill health - usually regardless of the causes.
Your employer may offer some type of insurance but you would need to check what it is carefully. No matter how much they may love you, it's very unusual to carry on being paid more than 6 months after someone's stopped working because of ill health.
You normally get 50% to 60% of your income from a Permanent Health Insurance pay out and it's inflation proof.
Critical Illness Insurance
This type of insurance pays you a lump sum (i.e. a once off) if you get one of a limited number of illnesses. Critical Illness polices may be demanded and even useful to provide cover for "business protection".
Mortgage Indemnity Insurance
You pay for this but be aware that it only protects the lender if you can't pay back the loan. It's often compulsory particularly if the loan to value ratio of your mortgage is above 95% - which can hit first time buyers hard.
Some mortgage lenders charge it from an 80% loan to value others don't charge it at all - though in these cases it may be hidden and you are paying for it through a higher interest rate.
How to avoid paying Mortgage Indemnity Insurance
Some mortgage lenders don't seem to charge it - but are actually hiding it by making you pay a higher interest rate or some kind of tie in.
Article Source: http://www.superfeature.com
Rich Sunset is an active mortgage professional in the New York Mortgage Business and has provided just the right loan to the right customer for the perfect fit.
Tuesday, October 2, 2007
Sunday, September 30, 2007
Mortgage Saving Tips
Here are our top tips for how to save on your mortgage payments on your house, follow them and you could save $100,000 in interest payments and years off your loan term. Sounds to good to be true well see how easy it is in these money saving tips. Learning how to save on your mortgage can set you up to slice years off your loan. Finding out if you can save on your mortgage payments won't cost you anything, and you will discover whether you have the best loan available for your individual circumstances. Shop for the best mortgage possible with your credit score, when a mortgage company has a small overhead cost to stay in business it means that they will not charge you ridiculous ongoing service fees. Make sure of the fees you mortgage company is charging you up front before signing on a loan.Refinancing your mortgage will save you money if you can get a lower interest rate than what you are currently having. In order to determine how much you can save on your mortgage you need to find out exactly how much you are paying out every month to your existing mortgage provider. To determine your savings simply divide the cost of refinancing your existing mortgage by the amount you will save on your mortgage payment each month. This will give you the saving that you can get by refinancing your mortgage now. Mortgage refinancing is a popular solution for homeowners wanting to lock in lower interest rates and save money over the life of their mortgage. If interest rates stay low, then an ARM (Adjustable Rate Mortgage) can offer you an attractive way to obtain a new mortgage and save you money.Make a lump sum payment or a monthly overpayment to your mortgage if you had the money in savings a fast calculation of the interest saved on the mortgage versus the interest the bank is paying you to have money in your savings account will show you just how much of a saving is possible with this tactic. With a little research it's amazing how much you can save on your mortgage. What you save on your mortgage interest could outweigh the interest you would otherwise have made on your savings. Make sure that your mortgage does not have a penalty for early pay off. The only way to really save money on a mortgage is by making extra repayments so that you are paying above the scheduled repayment timetable which means you are paying principal off not interest. If you currently have a $200,000 mortgage that you received a 6% interest rate over 30 years you will save yourself approximately $45,333.You will be surprised how much faster your loans balance will drop and how much money you will save. Don’t Just Make The Minimum Repayment – If you want to save thousands of dollars in interest over the term of your mortgage work out the maximum monthly payment you can manage and pay that.The truth is the bank is not going to tell you about how to save money on your mortgage as they want to make the interest on the money they have loan you. If they were to help you save money, they would lose money and their profits would stagnate.With a little research it's amazing how much you can save on your mortgage so go ahead a use the mortgage calculators out there and see how much you can save with as little as $50 extra payment per week and I think you are going to be amazed.
Thursday, September 20, 2007
Second Home Mortgage – What will it cost me?
You have found your dream second home and have started the search for a second home mortgage. It’s so exciting, isn’t it? And it’s easy to be starry eyed, rushing into things without considering everything. But you need to do your sums properly. You must make sure you are very clear what the second home mortgage is going to cost you apart from mortgage fees and your monthly payments.
• Deposit. This is the main cost to consider. It’s very rare that a lender will agree a 100% mortgage on a second home, or even 90%. The maximum loan is usually 75-80 percent of the purchase price of the second property. This means that you will need to find at least 20% of the purchase price. In fact, the larger deposit you can provide, the better. It is likely to enable more favourable terms on the mortgage, such as lower interest rates, availability of discount periods etc. One way of doing this is by equity release on your main residence. Even if you don’t have enough equity to fund the whole purchase, it’s a good idea to use equity release to provide as large a deposit as possible.
• Legal costs. When you are arranging a second home mortgage, it’s even more important to use a solicitor than it is when you are buying your main home. There are likely to be all sorts of unknown quantities when you are buying in an unfamiliar area. But make sure you choose a solicitor who specialises in conveyancing, rather than just picking one at random. It is surprising what elementary mistakes some solicitors can make! And don’t forget you will be paying not just the solicitor’s fees but the land registry fees and the search fees in addition.
• Valuation/survey. The lenders of your second home mortgage will arrange a valuation survey and add the cost to your loan. If you’re really strapped for cash, you can make do with this. But it is really advisable to arrange your own as well. The valuation survey won’t necessarily alert you to any serious structural problems – it is just to satisfy the lender that the home has a satisfactory resale value.
• Stamp duty. You won’t escape stamp duty unless the house you are purchasing is going for less than £125,000, which is most unlikely these days. Stamp duty starts at 1% of the purchase price and goes up to 3% if the price is £250,000 or more – this actually comes to quite a lot of money!
• Deposit. This is the main cost to consider. It’s very rare that a lender will agree a 100% mortgage on a second home, or even 90%. The maximum loan is usually 75-80 percent of the purchase price of the second property. This means that you will need to find at least 20% of the purchase price. In fact, the larger deposit you can provide, the better. It is likely to enable more favourable terms on the mortgage, such as lower interest rates, availability of discount periods etc. One way of doing this is by equity release on your main residence. Even if you don’t have enough equity to fund the whole purchase, it’s a good idea to use equity release to provide as large a deposit as possible.
• Legal costs. When you are arranging a second home mortgage, it’s even more important to use a solicitor than it is when you are buying your main home. There are likely to be all sorts of unknown quantities when you are buying in an unfamiliar area. But make sure you choose a solicitor who specialises in conveyancing, rather than just picking one at random. It is surprising what elementary mistakes some solicitors can make! And don’t forget you will be paying not just the solicitor’s fees but the land registry fees and the search fees in addition.
• Valuation/survey. The lenders of your second home mortgage will arrange a valuation survey and add the cost to your loan. If you’re really strapped for cash, you can make do with this. But it is really advisable to arrange your own as well. The valuation survey won’t necessarily alert you to any serious structural problems – it is just to satisfy the lender that the home has a satisfactory resale value.
• Stamp duty. You won’t escape stamp duty unless the house you are purchasing is going for less than £125,000, which is most unlikely these days. Stamp duty starts at 1% of the purchase price and goes up to 3% if the price is £250,000 or more – this actually comes to quite a lot of money!
Subscribe to:
Posts (Atom)
