Millions Rely On Fictional Mortgage Benefit
Around 3.85 million home owners believe that a non existent state benefit will enable them to keep up with mortgage repayments in the event of losing their income.
Almost one in ten home owners wrongly believe that the government will pay their mortgage if they are unable to do so for reasons such as redundancy or illness according to new research.
However the government will not help anyone with mortgage payments for the first nine months of unemployment and after that unemployment assistance is only offered to a select group of people who have mortgages of less than 100000.
A further seven per cent of those surveyed by Lincoln Financial Group were not sure whether government assistance is available and were seemingly unaware that the last Conservative government scrapped state aid in 1995.
Ian Noble head of strategic partnerships at Lincoln Financial Group said that the figures were a warning that million of Britons are enjoying a false sense of financial security believing that the government will provide financial assistance if and when required.
“That is not the case unfortunately. The government is not going to pay for your mortgage if you lose your job and assuming that it will place people in real danger is a large risk as it suggests they have no other mortgage protection plan in place” said Mr. Noble.
Indicative of this perhaps is the news that mortgage repossessions are still continuing to rise dramatically with repossession orders in England and Wales in the first three months of 2006 witnessing a 57 per cent rise.
Adfero Ltd
About the writer:nbsp;nbsp;TML Mortgages Mortgage and Remortgage Solutions.
It Is Time For Mortgage Refinancing Refinansman In Turkey
The interest rates in Turkey have been falling in the last one year and more and more people are interested in refinancing their mortgages. With lower interest rates refinancing mortgage loan can lower down monthly payments significantly. In addition it is possible to change the structure of the mortgage by changing the duration currency and interest rate type. Below we go over advantages of the refinancing and important factors that should be considered in a refinance decision in Turkey.
Lower Interest Rates
In Turkey interest rates have been falling in the last one year. About one year ago in November 2006 the average monthly mortgage interest rates was about 1.8 percent which decreased to 1.6 percent in early 2007 before the mortgage law passed on March 2007 and currently it is about 1.3 percent. Such a sharp decrease in the monthly interest rate clearly makes refinancing a very beneficial decision.
To demonstrate the gains from the refinancing consider a 10year loan of 100000 YTL. A drop of interest rate from 1.6 percent to 1.3 percent reduces your monthly payments by 12 percent from 1880 YTL to 1650 YTL. Over the remaining length of the loan the difference between two loans makes 27543 YTL which is about 27 percent of the original loan.
Fees
In the above example fees are assumed to be zero; however it is very important to know the closing fees lender fees and other third party fees. Since increased costs decrease the benefits received from lower interest rates. However the benefits gained because of the decrease in the interest rates in the last one year would be typically more than the costs incurred from the fees.
For example the basic calculation above assumed that fees for closing the loan and getting the new loan are zero. To be more realistic suppose that the early payment penalty of 2 percent is applied to close the original mortgage. Also assume that an additional 3 percent is paid for the new mortgage. With these fees included in the loan your monthly payment would be 1732 YTL still a 8 percent reduction in the monthly payments compared to the 1880 YTL with the original loan. Over the length of the loan the total gain from the refinance would be 17641 YTL still a significant gain for a loan of 100000 YTL over 10 years.
No Early Payment Penalty if
The mortgage law that passed on March 2007 introduced up to 2 percent early payment fee for fixedrate mortgages if they are paid before the due date. However if you got your mortgage before March 6 2007 you would be exempt from the 2 percent early payment fee. So in the above example without the 2 percent early payment fee your monthly gain would be 1700 YTL and your total gains would be 21602 YTL. Lets also note that early payment fee is only valid for fixedrate mortgages but there is no penalty fee for adjustable rate mortgages.
Refinance in Foreign Currency with Lower Interest Rates
Refinancing can be a chance to change the currency of the loan. In Turkey the interest rates for mortgages borrowed in Turkish Lira YTL are significantly higher than those borrowed in foreign currencies such as Euro US Dollar or Japanese Yen.
On the other hand the risk of borrowing in foreign currency is also high. Earlier financial crises have always ended up with sharp depreciation of the Turkish Lira. For example in 2001 the Turkish Lira depreciated more than 50 percent in only a few days. Given the large current account deficit of Turkey about 7 percent of the GDP and the largest deficit for an emerging country we believe that the probability of Liras depreciation in the next 10 years is also very high. So possibility of such a crisis in the future should be included in the risk analysis. Briefly as a rule of thumb borrowing in foreign currency may be advantageous if your income is in foreign currency or if the length of the loan is only a few years.
What if the interest rates continue to fall?
If you expect the interest rates and inflation to continue to fall in the future the best strategy could be changing the fixedrate mortgage to an adjustablerate mortgage. This way your mortgage interest rates will continue to fall if inflation falls in the future. In addition rerefinancing the fixedrate mortgage would be more costly in the future because of the 2 percent early repayment fee if you want to rerefinance when interest rates get even lower in the future. On the other hand there is no early payment fee for the adjustable rate mortgages.
We should also stress that an economic crisis that result with a depreciation of the Turkish Lira would also increase the inflation. Since inflation is the base index for the adjustable rate mortgages in Turkey your interest rate and monthly payments may increase sharply with adjustable rate mortgages. So we suggest being very careful before switching to an adjustable rate mortgage for long loan terms.
Decreasing the loan term
By refinancing you can change the duration of payment: you may decrease it or extend it. If you refinance with a shorter loan term you can pay off your loan faster and therefore build up equity in your home faster. Especially in Turkey since the interest rates are higher than the ones in developed countries the optimal length of the mortgage is shorter than the developed countries. A mortgage with a loan term longer than 10 years is currently too costly and you may use the refinancing as a chance to reduce the duration. As an example if we go back to our example with 10 years mortgage of 100000 YTL with 2 percent closing and 3 percent opening costs and if we decrease the mortgage length to 9 years from 10 years monthly payment decreases 3 percent to 1815YTL from 1880 YTL and the total gains increase to 29580YTL it was 17641YTL with 10 years refinancing. So it is suggested that you refinance with a shorter loan term if possible.
Extending the loan term
Refinancing is also one of the best ways to acquire funds which may be used with any purpose including the opportunity to pay off other debts. If the duration of the loan is extended a few years somewhat more funds would be available however as stated earlier the interest rates are high in Turkey and therefore gains from extending the length of the loans may not be very high in long term loans. For example going back to our example of 10 years mortgage of 100000 YTL with fees if new duration with refinancing is extended to 11 years the monthly payment decreases to 211 YTL reducing the monthly payment by an additional 65 YTL from 1733 YTL when compared with the 10 year refinancing.
Compare APRs
Remember that a wrong decision in mortgage refinancing can take years to recover from. Before making any decision on refinancing you should compare all lenders in Turkey properly. In comparison make sure that you use the Annual Percentage Rate APR which is the annual rate inclusive of fees on the mortgage. Kredihavuzu.com has all the tools you may need for such a comparison including all the uptodate interest rate and fee information for all the lenders in Turkey.
About the writer: Berk Akman works at KrediHavuzu.com Turkeys leading online mortgage ucuz hesapl konut ev arsa i yeri refinansman kredileri broker dedicated in providing interest rate fee information and various advanced mortgage calculators e.g. refinansman kredi yeniden yapilandirma bul hesapla .
Is There Really Much Difference In The Monthly Cost Of Buying And Renting?
Rising house prices and recent interest rate hikes means that it is now only 5811 cheaper to buy than rent over a 25 year period according to Abbey. The staggering results are different across areas of the UK but Abbey say the difference between buying and renting last year was 24000. So in the last year the combined affect of interest rate rises and house price increases have slashed the gap by 76 per cent!
Bad news for wouldbe first time buyers more proof that the cost of getting on the property ladder is getting more expensive by the month. If you postpone buying a property for 12 months you could be in for a shock!
The annual UK Rent Versus Buy Index from Abbey Mortgages say it is actually cheaper to buy than rent in the UK but as demonstrated above only just and the gap is closing fast.
The research which surveyed the average cost to a buyer who has a mortgage for 25 years compared to the average cost for a person renting across the UK found that the average cost of renting is 443736 while to buy a home over the same period is 437925 a saving of 5811 or 1.3 per cent. Last year the results showed that homeowners were better off than renters by an average of six per cent.
So wheres best to buy? West Scotland is better value to buy rather than rent. This year East Scotland topped the table with a saving for homeowners of 21 per cent. The North South East and East Anglia too all have a saving for homeowners of 10 per cent or more. West Scotland and the South West scrape into this category with 7 and 6 per cent respectively.
Wheres best to rent?
Northern Ireland is the best place to rent with people who buy being 46 per cent worse off than people who rent! This is mainly due to the 50 per cent increase in house prices in the last year alone.
Dont forget after 25 years of renting you should still have another 25 years of living to do so another 25 years of renting!
If you opt for a repayment mortgage over 25 years at least youll own the property after 25 years something to bear in mind!…
About the writer: Simon Duffy writes for the Financial Blog a UK Finance Blog talking about all aspects of personal finance.