The activity in the states continues to rise. Numerous states are considering legislation to curb the foreclosure crisis. Nothing of course can stop it at this point, but the states seem to feel that increased regulation of mortgage companies will at least help the situation. Mortgage Licensing is one of the hotly debated topics in the states. Consumer groups feel that there should be increased licensing, education, and bonding requirements for the mortgage companies and their employees. Many people think that too many requirements may increase the difficulty of a borrower to find the right loan for the right price as mortgage companies have to spend more money to comply with these requirements. Let’s take a look at the recent regulatory activity as it relates to mortgage licensing.

Washington Mortgage Lender Licensing

Washington has changed their requirements for mortgage lenders. Many will now need to be licensed under the Consumer Loan License. What activities can a licensed mortgage broker engage in under the Mortgage Broker Practices Act (MBPA) without triggering the license requirements of the Consumer Loan Act (CLA)? As a licensed mortgage broker you may act in these capacities: Broker – assisting borrowers, or holding yourself out as able to assist borrowers, in obtaining a residential mortgage loan. Loans close in the name of the lender.

Table Fund  Table-funding” means a settlement at which a mortgage loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds. The mortgage broker originates the loan and closes the loan in its own name with funds provided contemporaneously by a lender to whom the closed loan is assigned.

Non-delegated Correspondent – You close loans in your name with funds provided by a lender through a line of credit. The lender provides the underwriting criteria the borrower must meet and makes the final underwriting decision.

Masachussetts Loan Originator Licensing

Any natural person who: (a) is employed by or associated with one (1) and not more than 1 mortgage lender or mortgage broker licensee regulated by the Division; and (b) negotiates, solicits, arranges, provides or accepts residential mortgage loan applications on real property located in Massachusetts, or assists consumers in completing such applications. Sole proprietors licensed as mortgage brokers or mortgage lenders by the Division, as well as owners, officers and directors or entities licensed as mortgage lenders or mortgage brokers, are required to be licensed as mortgage loan originators in Massachusetts if they meet the definition above. Applications must be submitted to Massachusetts through NMLS before The requirement for applicants to have completed a residential mortgage lending course does not apply to any individual who was working for a licensed Mortgage Lender or Mortgage Broker prior. Individuals who have changed employers since November 30th are also not required to complete a course prior to becoming licensed. Please note that any individual who meets these dates of employment standards and who does not file a license application with the Division of Banks prior to must complete a residential mortgage lending course prior to becoming licensed.

Applications must be submitted to Massachusetts through NMLS before. Prior to becoming licensed, all applicants must complete a residential mortgage lending course that has been approved by the Division of Banks. However, applicants may submit their application filings to Massachusetts through NMLS prior to completing a course. Individuals who are presently working as loan originators may continue to operate after June 30th only if they have submitted a mortgage loan originator license application to Massachusetts through NMLS. Beginning July 1st, any individual who does not have a license application pending with the Division of Banks may not continue to originate loans in Massachusetts. Any individual who submits an application before July 1st will have to complete a residential mortgage lending course. If such an applicant fails to complete a course prior his/her mortgage loan originator license application will be terminated.

For information regarding the educational requirements for Mortgage Loan Originator license applicants, please see Regulatory Bulletin 5.1-105. The Division of Banks currently accepting applications for the approval of Mortgage Loan Originator educational courses.

Oklahoma Amends the Education Requirements for Mortgage Brokers and Mortgage Loan Originators

Effective new applicants for a mortgage broker license in Oklahoma will be required to have completed 20 hours of approved education during the three years immediately preceding the date of application, and new applicants for a mortgage loan originator license will be required to have completed 16 hours of approved education during the three years immediately preceding the date of application.

Tennessee Amends Mortgage Licensing Requirements

Effective applicants for a license as a mortgage lender, mortgage loan broker, mortgage loan servicer, or mortgage loan originator will be required to complete an educational training course. Criminal background checks will also be required for mortgage lender, mortgage loan broker, mortgage loan servicer, or mortgage loan originator applicants, and for registered mortgage loan originators seeking to continue registration.

Minnesota Adds Commercial Loans to Definition of Residential Loans

the definition of “residential mortgage loan” under the Residential Mortgage Originator and Servicer Licensing Act (the “Act”) will expand to include commercial loans secured by 1-4 family residential real estate. The bill also expands the definition of “residential real estate” to include non-owner-occupied property, and extends certain record-retention requirements from 26 to 60 months.

Colorado Adopts Emergency Rule Making Initial and Continuing Education Mandatory for Mortgage Brokers

all mortgage broker applicants must complete the 40 hours of licensing education and pass the two-part exam prior to applying for a mortgage broker license. All mortgage brokers who currently maintain a Colorado mortgage broker’s license must complete 40 hours of licensing education and pass the two-part licensing exam.

Illinois Anti-Predatory Lending Database Registration for Mortgage Brokers and Loan Officers

Illinois began registration of mortgage brokers and loan officers on the Anti-Predatory Lending Database. The Anti-Predatory Lending Database Program, pursuant to will become operational . In order to record any mortgage against Cook County property, a Certificate of Compliance or Certificate of Exemption must be attached to the mortgage. Property located outside of Cook County is not subject to the act. A mortgage broker or loan originator that takes a loan application will be required to enter certain information into the database. The database will first determine whether the property is exempt. If it is not exempt, the database will then determine if it will be necessary for the borrower(s) to obtain counseling. If counseling is not required, the loan may proceed to closing. If counseling is required, the borrower(s) will be notified and given a list of all participating counseling agencies. The act aims to reduce predatory lending practices by assisting the borrower in understanding the terms and conditions of the loan for which he or she has applied. The act does not prohibit any type of loan.

Connecticut Eliminates Secondary Lenders and Brokers Act

new legislation essentially does away with the Secondary Mortgage Lenders, Brokers and Originators Act by consolidating all regulation of mortgage lenders and brokers under one act. The bond amount for lender and broker licensees will also increase and the mortgage license application procedures and requirements will be modified.

Iowa Amends Code Chapters Administered By Division of Banking

new legislation establishes initial education and examination requirements for persons subject to registration under the Mortgage Bankers and Brokers Act. the required surety bond amounts will increase and the annual license and registration expiration dates will change from for mortgage banker and broker licensees.

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Mortgage lead companies are responsible for generating mortgage leads and providing them to mortgage selling companies. Leads are nothing but queries from people who wish to obtain mortgages. Mortgage selling companies are always on the lookout for good leads from mortgage lead companies.

Mortgage lead companies have different means of operation. They may operate either through telemarketing (call centers) or through websites. Leads that they provide may be exclusive or non-exclusive. Exclusive leads are those meant for only a single company, while non-exclusive leads may be repeatedly sold to a number of companies. Of course, the former cost more. Leads must also be fresh, i.e., they must be newly introduced into the market of mortgages.

Telemarketing mortgage lead companies have a success ratio of 8 to 10%, which means for every 100 leads they provide, 8 to 10 have a chance of closing successfully. Call centers rely on personally calling people from a particular list, which they may have obtained from a cell phone company. When they find a person interested in acquiring a mortgage, they record their contact details and information on credit history, mortgage requirements, etc. These are then forwarded to the mortgage company, who follow up on the case.

Mortgage lead companies working out of call centers charge anywhere between $35 to $65 per lead sold, irrespective of whether it closes or not. If working on an hourly basis, then they may charge $25 per hour. Outsourced business to Asian call centers may cost much less. Mortgage companies are contracted with call centers throughout the world and they get leads once a week, typically on Mondays. There may be an average of 25 leads per week. Some call centers also provide a hot-transfer service, in which the call of a potential mortgage buyer is directly forwarded to an official in the mortgage company.

Websites working in the mortgage-lead generation business are also tremendously busy portals. These have their own mortgage calculators, which pre-qualify mortgage queries. According to this, people are made to fill online application forms, which are then sold to mortgage companies. Mortgage lead generation websites are contracted with particular mortgage companies, just like call centers.

Lead generation websites may charge on a monthly or annual basis. The charges depend on the nature of the website. However, there is widespread skepticism among mortgage companies regarding lead generation websites. A large number of them are sham websites and provide fabricated lists.

Mortgage lead companies are the backbone of the mortgage selling business. Every mortgage company is affiliated with several lead generation companies so that its staff can be free to do documentation work on the mortgages and not take the trouble of marketing.

Mortgage companies rely on mortgage insurance to protect themselves from defaulting mortgage borrowers. If a mortgage buyer does not make the payments, then the insurance company pays to the mortgage company. Mortgage companies buy their insurance from insurance providers and pay premiums on the same. These premiums are then passed on to the buyers of the mortgage. Buyers may have to pay for the premiums on an annual, monthly or single-time basis. The insurance payments are added to the monthly payments of the mortgages. Mortgage insurance policies are also called Private Mortgage Insurance or Lender’s Mortgage Insurance.

Generally, mortgage companies need to be insured for all mortgages that are above 80% of the total property value. If the mortgage buyer makes a down payment of at least 20% of the mortgage value, then the company may not require an insurance policy. But typically, mortgage buyers cannot afford to pay 20% of the down payment, and hence most mortgage companies require insurance, and these insurance premiums increase the monthly payments of the borrowers.

Thus, the mortgage lenders get to choose their insurance providers, but the borrowers of the mortgage are obliged to pay the premiums. This is where the controversy against mortgage insurance begins. But paying a mortgage premium allows the mortgage buyer to be able to buy the house sooner. This also increases the cost of the house and enables the person to upgrade to a more expensive house sooner than expected.

Sometimes the added cost to the borrower due to the payment of insurance dues to the company is added in the monthly payment itself. In such cases, the payment is called as a capitalized payment. Capitalization provides some benefits to the borrower, as the entire payment then becomes tax-deductible.

Mortgage insurance must follow the guidelines of the Federal Housing Administration (FHA). Both government and private financial institutions can provide mortgage insurance. The premiums payable on mortgage insurance depend on the purpose for which the borrower is buying the mortgage. In general, mortgage premiums on housing are higher than for other purposes.

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If you have an FHA loan, your mortgage insurance may be an option for bringing payments current. Contact your lender to learn if you are eligible for a payment from this fund. You will need to learn about the prevailing requirements in your state. It is also very important that you are able to resume regular, timely payments once your mortgage payment has been brought current. It can be very worrisome when you’re a mortgage payment behind. If you don’t have an FHA loan you still have options available to help you navigate this financial crisis.

Speak to the Mortgage Provider

Make a meeting to speak to someone in control of your mortgage account. Don’t discuss it over the telephone. They are more likely to be sympathetic to your situation if you are dealing with them face to face. Explain the circumstances of how you became one payment behind with your mortgage. Go prepared, taking with you written details of your income and regular outgoing payments. Tell them how much extra you can afford to pay and ask if it is possible to add an extra amount to your current mortgage payment until the arrears is caught up. Your mortgage provider shouldn’t really want to be taking the roof from over your head for one missed payment, and so ought to be willing to come to some agreement with you as a one off arrangement.

Credit Card

Is it possible – and necessary – to make this payment via a credit card? Think carefully about doing this. It may get you out of immediate danger with your mortgage provider, but at what cost long-term with the added interest rates? The last thing you want to do is create a bigger financial mess. If you have little credit, and the repayment would not make you much worse off whilst you pay back the amount, then this is something you might like to consider in order to protect your home.

Refinance Your Home

This may seem a little drastic for only being one payment behind with your mortgage, but if you have equity in your property, refinancing your home may help your household finances by offering you the opportunity to consolidate your debts as well as making the arrears disappear. This is one way to use your collateral to help you get out of debt, but it’s one you need to explore carefully before signing any papers.

For example, by refinancing your home, are you taking any risks with respect to ownership of your property? Are there any extra clauses on the proposed new contract that don’t exist on the original one? What are the implications as regards to interest rates? It could be that this actually works in your favor, and your new mortgage will be subject to a lower interest rate than your existing one. is an informational source to look at should you require more tips on refinancing.

You also need to know what additional charges you will incur by refinancing your home. For example, what legal fees will be required, and are you liable for them? What about the valuation fee for getting someone out to value your property? This is an important thing to consider because you may find that your property doesn’t have enough equity to make refinancing it worthwhile in the current economy, but you will still need to pay the valuation fee, which will weaken your current cash flow further.

When refinancing your home make sure you shop around and find out what deals the different mortgage providers are offering. There are many who will offer good deals to first time buyers, but they offset this by having higher rates for refinancers. On the other hand, there are mortgage providers who will advertise themselves as the people who can show you how to get out of debt by refinancing your home, and will give special deals that reduce interest rates on the first year or so you are repaying the new mortgage. Yet other providers may offer you a free package to transfer your mortgage to their company – this could include the valuation and any legal fees you will need to explore exactly what this includes and whether there is any cost hidden that’s not included in their package.

Then you’d need to see if that package is worth more than the money you’d save by using a mortgage provider who gives you a lower rate on your mortgage interest for a limited period – and the ones offering reduced mortgage interest, you need to find out what will happen when the rates are raised at the end of the “honeymoon” period, are they raised to a higher than normal rate to compensate for the financial break you had at the outset? Always keep in mind why it is you’re actually refinancing your home, debt elimination and consolidation, and even though you will end up with a better financial picture now, you need to make sure that this remains so until the mortgage is repaid.

Another thing you need to enquire about when first approaching any mortgage provider about refinancing is whether or not they will accept your current credit standing. If you have any outstanding debt with your current mortgage provider, this may go against you as the companies you are now approaching will more than likely request a reference from them. If you have been always on time with your payments prior to this current situation arising, then it’s possible that they might bend their rules because of the circumstances under which the arrears occurred. However, if you have had problems in the past, it will go against you and might result in them turning down your request to refinance with their company. Any other debt problems you have currently, or in the past, could also score against you so make sure you are completely honest at the initial meeting as this could save a lot of time in the long run.

Other Options

With only one mortgage payment in arrears you should be able to manage to get financially stable on one of the above options. However, if your situation requires more additional finances, and you need to free up more capital, it could be that you need to consider selling your home and either buying one that won’t have such a high mortgage, or renting one. For a person who currently owns their home, renting never seems an attractive prospect, but there are places where you can rent to own the property. This may be an alternative to renting which you could consider.

Finally

The most important thing to do is to sort this out immediately you realize there’s a problem. Your home is something you need to protect, and any arrears on the mortgage can have devastating consequences unless you are proactive in resolving it. Take stock of your financial situation, consider your options, and then take the one that will help you get back on your feet again.

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How mortgage lenders, brokers, and agents have created a solution?

With the above in mind, it has made mortgage lenders, brokers, and agents to come in together and work in a way where they are able to offer the mortgage outsourcing services. So this is how it goes – The brokers get the professional who is in need of a mortgage; arranges at a fee how they will get money from a lender who might be a banker or a private organization, which is ready to give out their money. This in turn is used to clear the mortgage and help the professionals get the service they require. Mortgage outsourcing services are the way to go in order to grow your business.

Why mortgage outsourcing companies are preferred?

Mortgage outsourcing services are chosen by modern professionals and consumers. It saves them the hassle of going through the complex processes in acquiring the ideal mortgage for their businesses. Those who offer these services are finding that their client base is growing. Companies now offer their services via websites, which increases client numbers, as they are able to serve people from all over the world.

All data is stored at one place for quick referral

Mortgage outsourcing minimizes risk because all documents and processes involving the mortgage are kept at a central place enabling a business to have access to many mortgage providers without having to duplicate documents and place them in other locations Mortgage outsourcing companies make sure that their databases are kept up to date so that their clients have access to accurate information. Clients are also able to access vital information in the comfort of their offices or homes. At the end of the day, the client saves on the cost of looking in many different places for mortgages, financial services and other services that entails a mortgage acquisition. This act of outsourcing mortgage services and consolidating them in a central place has really saved businesses a lot in terms of time and resources.

Let’s face it, in order for businesses and professionals to succeed in acquiring mortgages, it is wise to liaise with agents who are providing mortgage outsourcing services in order to make their work easier. Not only does the company’s data get organized it can be looked up at when needed without wasting time. Traditional handling of process results in wastage of time, energy and efforts.

Just when we thought mis-sold Payment Protection Insurance (PPI) was enough, there seems to be a new kid on the block, mis-sold mortgages.

Since the big bang of the 1990’s brokers and sub-prime lenders spring up everywhere pushing mortgage and secured loan products to those people with less than perfect credit. These products tended to carry higher interest rates, higher charges and also paid large commissions to the salesman – great for them, not good for the consumer!

The Financial Services Authority now has broker sold mortgages in their signs and claims management companies are hot on their tails for the big thing.

However, if like many people you have a mortgage, it is important you understand the various regulations laid down by the Financial Services Authority to check whether you have been mis-sold, as simply being upset at your interest-only endowment not paying out enough to cover your shortfall is not enough grounds on its own.

In short, a mortgage is said to be mis-sold if it was not sold in the right manner. This could be because you received a product that was not suitable or you received the wrong advice from the lender. This is the starting point for the Financial Services Authority who are now allowing people to make claims in certain areas. The following are guidelines to enable to determine whether you have a mis-sold mortgage.

Reasons Why Mortgages are Mis-sold

There are various reasons why mortgages are usually mis-sold. In most cases, brokers or lenders will mis-sell a mortgage in order to make more money without considering the customers circumstances. In many cases, brokers only had access to certain lenders products offer limited mortgage products. There are known as “tied brokers”. This is a good indication that they were not best in the market and were therefore unable to offer you the right mortgage that suited your circumstances

How Tell That Your Mortgage Was Mis-sold

There are many ways you can tell if your mortgage was mis-sold or not. Here are some of the major reasons that may indicate a mis-sold mortgage:

– If you were or are unable to meet your mortgage payments and your adviser did not carry out checks as to your affordability.

-You were or are still paying for your mortgage after retirement and there are no systems in place to keep up the repayments.

– You started with a fixed term product and you were never informed about an increase in repayments after the fixed term ended.

– Where you are re-mortgaged to clear existing debts, but you were unaware about repaying more interest than you originally needed to.

-You were sold a subprime mortgage and you had no previous credit problems.

-The sales advisor recommended a certain mortgage without checking your financial circumstances or you never needed such as sub-prime mortgage with a higher interest rate.

One of the major reasons mis-sold mortgages came about was due to many brokers and lenders do not assess their customers circumstances well. This leads to poor advice which consequently results to poor mortgages being offered and leaving customers in poor financial situation.

Are You Entitled To a Compensation?

If you find yourself having problems paying your mortgage, did not get the best deal or you feel that your broker did not abide with the Financial Services Authority laws, then you may file a claim. If you win, you should receive compensation equal to the equivalent of what you have paid, against what you would have paid if you had the correct advice in the first place.

How To Make Your Claim

In order to file your claim, you will have to consult a reputable claim management company to apply a Subject Access Request (SAR). This allows them to obtain all the documentation relating to you mortgage. After receiving the documents, the company will then submit a complaint to your lender or broker. Times can vary from weeks to months, on average about 20 weeks should be expected. In some instances the mortgage broker may reject the claim. However, if it is established that the claim was wrongly rejected, the claims company will take the claim directly to the Financial Services Authority. The process may take a further 6-12 months.

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Most people would. After all, isn’t it “The Canadian Dream” to own your own home – and own it outright with no mortgage payment or lien encumbering the deed to your property? Can you imagine how much more money you would have if you weren’t required to send a check to the bank every month for that big, fat mortgage payment to keep a roof over your head?

Imagine the sense of liberation you will have after 25 long years (300 months!) of monthly mortgage payments! It would feel as if a thousand pound weight just rolled off your shoulders All your money and the house will finally be yours! You would be loaded – filthy rich, indeed! A mortgage is a debt and debt is a bad thing! Right? Of course you would pay off your mortgage – it’s the smartest thing to do, right? It is crucial that you understand what is really happening here. You need to figure out why you are doing what you are doing! Your burning desire to satisfy your mortgage is not about economics or finance – it’s about emotion.

You “love” the idea of owning your own home. You “hate” having to pay your mortgage payment. If you are like most, you may even “fear” your mortgage. Your drive to pay off your mortgage early is fueled by emotion, not by good financial sense A mortgage is a financial tool, not an emotional state of mind, so why are you making decisions regarding your mortgage based upon emotion? And why do you feel the way you do about your mortgage? Could it be that your perception of mortgages is a learned perception, influenced by your parents and grandparents?

Think about this – just about everything you have ever learned about money, you learned from Mom and Dad. When you told them that you were planning to buy your first home, they said, “Better make a big down payment, and keep that mortgage payment low! You better pay extra to pay it of just as soon as you can! You don’t want to be a slave to that mortgage for the next 30 years! You don’t know what you are getting yourself into!” This is precisely what my parents said to me.

My parents were wrong!

Because, as a result of their advice, I lost thousands of dollars by paying extra toward my mortgage in order to “beat” the interest and pay off my loan early. We were taught that mortgages are “bad”, require us to work extra hard to pay them off early, or that we should avoid them completely if at all possible. But what they never told us is why they felt this way about mortgages! It is important that you first understand their perspective in order to clearly understand why their financial advice is bad for you.

Let’s take a look at mortgages through the eyes of our parents and grandparents.

Back in the 1920s, homes typically cost around $5,000. That sounds like pocket change until you consider that the average annual household income in 1925 was only $1,434. Just like today, very few could afford to purchase their homes outright, so they borrowed money from the banks to buy their homes.

Times have changed drastically and so have lending laws. Back then, banks had the right to demand full repayment of mortgage loans at any given time. If you failed to repay your loan when it was called due, the bank had the right to seize your property, force you out of your home and sell it to satisfy the debt.

On October 29, 1929, when the US stock market crashed, millions of investors lost huge sums of money. To make matters worse, the money they lost was not theirs to begin with – it was borrowed money. Back in the ’20s, investors commonly purchased stock with money borrowed from stockbrokers, from what was called a “margin account.” Under laws and rules in effect at that time, you could purchase $100 worth of stock for a payment of just $10 to your broker; your broker would then put up the other $90.

When the Crash hit, 30% of the value of everyone’s stock portfolios was sheered right off the top. A typical brokerage account previously worth $100 was now worth only $70. The investor was left holding the bag, having borrowed $90 to buy the stock! The Crash led to a “margin call” where the broker
would demand that the investor come up with more cash because his account had exceeded the “margin limits.”

If the investor couldn’t cough up the cash, the broker would begin selling off the investor’s stocks until enough cash was generated to meet the margin call. This is the last thing an investor wanted the broker to do! Stocks were already down in value 30% – this was the worst time to sell! To avoid having his stocks sold, the investor would go to his bank and withdraw enough cash to meet the broker’s margin call. The investor had to move fast, because under stock exchange rules, margin calls were required to be fulfilled within 24 hours (nothing like a little pressure, eh?) In the days following the Crash of ’29, swarms of investors went to banks to make cash withdraws. Within a very short period of time, the banks’ cash supplies were depleted.

When the banks ran out of cash, word spread like wildfire and panic set in. Bank depositors stampeded the banks, demanding their money, but the banks were unable to meet their demands because the cash supply had completely dried up. To get more cash, banks started calling their loans due. They sent word to their borrowers demanding they satisfy the full balances owing on their loans immediately. The homeowners didn’t have the cash, so the banks foreclosed on the homeowners’ properties, forcing millions of families from their homes and into the streets.

The banks’ plan of raising cash by calling mortgage notes due backfired. Nobody had the money to buy the homes repossessed by the banks, so the banks were essentially left holding worthless real estate. Unable to meet the demands for cash by their depositors, US banks began closing their doors, many of them to never open again.

The Crash caused a domino effect – investors couldn’t meet margin calls, brokers couldn’t find buyers for the stocks and with no one willing to buy, brokers had to continuously drop the stocks’ prices.

More than half of US banks failed. Tens of millions of Americans lost their jobs as companies declared bankruptcy. Millions were rendered homeless. Thousands committed suicide. This domino effect of financial catastrophe spilled over countries boarders and virtually no one was immune to the havoc that ensued. Who weathered the Crash of ’29 without feeling the fury of its devastating impact? Those who owned their homes free from a mortgage. These few fortunate individuals were immune from the banks’ collapse. With no loans to repay, they succeeded in keeping their homes. They may have had no work and little food to eat, but they kept a roof over their families’ heads as their neighbors went broke and were forced into homelessness.

My grandparents lived through the Depression, and were raised with the Depression mind set that mortgages were a bad thing. This belief was passed down to my parents, who then passed it along to me. And yet, a small group of Americans (the wealthy!) insist on carrying home mortgages even when they can afford not to. Why would they voluntarily place themselves at such risk? Don’t they know what they are doing? The truth may surprise you.

They wealthy know exactly what they are doing.

These people are among America’s elite: the wealthiest 1% of the population. Not only do they know what they are doing, they understand why they are doing it. The wealthy understand things about how money works which most of the middle class do not. America took her hard knocks in the ’30s and learned her lessons well. Both the US and Canada have never seen such financial devastation as happened in the ’30s. However, it cannot happen again because of the safeguards for consumers that have long since been put into place by both Canadian and US governments This is not to say that a Depression cannot occur again – but that a Depression like the 1930s cannot occur again. Should financial disaster strike, the causes will be significantly different.

Let’s consider some of the safeguards for consumers today:

1. Banks are no longer able to cancel your mortgage. This means that if you have a mortgage, you are no longer at risk that the bank will suddenly mandate that you pay the loan in full or take your home. If you are current on your loan payments each month, no bank can force you to pay off the entire remaining balance upon demand.

2. Consumers can no longer buy stocks with only 10% down. The maximum margin limit is 50%. It is zero for speculative investments (such as internet stocks.)

3. The Canadian Deposit Insurance Corporation. CDIC is a Canadian Federal Crown Corporation, created in 1967. Before this, consumers were unprotected in the event their bank went bust – this is no longer the case. Today, consumer accounts up to $100,000 are protected, providing consumers with security they did not have in the ’30s. Since the birth of the CDIC, no one has lost their life savings due to bank failure because they are now protected by insurance.

There have been 43 financial institution failures since it was formed. The last was in 1996 when Calgary-based Security Home Mortgage Corporation closed its doors. About 2,600 Canadians had deposited $42 million in the firm. All but $10,000 of the deposits were insured and CDIC paid back all insured deposits within three weeks of Security Home Mortgage’s closure.

4. The major lesson that governments learned after the stock market crash of 1929 is that the best way to prevent economical disaster is to grant banks all the cash they need, rather than withhold currency like the US government did in 1929. Back then, the government believed that flooding the banks with cash would result in inflation. Instead, the government created the worst depression in history. Hard lesson learned, but learned all the same.

5. Competition in the mortgage industry has dramatically increased. If Bank “A” won’t provide you with the loan you seek, odds are in your favor that Bank “B” will. Additionally, new, innovative loan programs now exist, which make mortgages more affordable and flexible than ever before, significantly reducing the likelihood of consumer default.

For those of you who are still hell bent on getting rid of your mortgage, let’s paint the most extreme picture of financial disaster.

If something so cataclysmic happened to our world – whatever that may be, our financial markets would ultimately crumble. And by markets I mean all markets – real estate, stock and bond markets, etc. If that happened, the real estate that we owned would be worthless. The mortgage market would be in tatters. (No one would be coming to collect on the mortgage because nothing would have value anymore and everyone would be out of work). The GICs in our friendly bank would be worthless because the financial institutions and/or governments “guaranteeing” them would not be around. In fact, there would be looting and pillaging in all urban centers here and abroad as everyone tried to get food! “The law of the jungle” would be the order of the day.

Now if this sounds as extreme and far fetched to you as it does to me, our reality will continue on as has for the past hundreds of years. We will continue to dream and work to accomplish those dreams. We will look for love and love and be loved. In fact, we will live and die…and the cycle will repeat itself again and again and again However, what we do during our brief stay on this earth will have a profound effect on us and those we love and have in our lives. We have the ability to dream big dreams and make those dreams into our realities. Or we can dream and never quite seem to get a grasp on the brass ring to achieve the good life. The choice is ours. We have the intelligence, we have the knowledge all we must now do is act.

So what is the point of all this?

Well, those who tell you to pay off your mortgage are basing their beliefs and advice upon their fears! They fear that having a mortgage might cause them to lose the roof over their heads.

These fears were well justified – fifty years ago. Today, however, these fears are largely unfounded. You will note, I said largely – but not entirely. Still remaining are additional aspects of mortgage loans we haven’t discussed yet. Two of them are Do you worry that you might not be able to make your mortgage payment each month? Is your job in jeopardy due to corporate downsizing and the instability of today’s job market? This can be a very real problem because the bank can foreclose on your home in the event that mortgage payments are not made on time.

If you were suddenly to lose your job, you may not be able to make your house payment and you could potentially lose your home. Wouldn’t it then make sense to eliminate your mortgage Believe it or not, the answer is NO

Even though on the surface it does not make sense, the truth is that the less money you have, and the more worried you are about the possibility of losing your job, the more important it is that you keep a big mortgage on your home! I realize that this sounds absurd, but it is true, and it is imperative to your own financial health that you understand this point as gospel truth.

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Knowing how much house one can afford is a critical question for prospective homeowners. Many interested buyers have no idea what size home mortgage they qualify for, so they end up trying to take out the largest loan a broker or lender will approve. This approach to acquiring a home mortgage is not necessarily the wisest option. A trusted mortgage company will go beyond the formula of simply determining someone’s basic eligibility and actually take into consideration the security of the homeowner’s financial future. It is important for prospective homeowners to employ a reliable and trustworthy mortgage broker that will explain how home mortgage eligibility is determined and lock in the best possible mortgage rates.

When assessing whether an individual qualifies for a home mortgage many things are taken into consideration. Typically, a monthly mortgage payment should remain under 45 percent of one’s gross income. Some mortgage companies will approve loans ranging from 45 to 55 percent of the individual’s gross income if they have a good credit history. However, it is critical that homeowners understand that they will actually be making their home mortgage payments out of their net income. Other expenses, such as taxes, car payments, credit cards and other loan payments must be considered when deciding what size home mortgage is truly affordable.

The debt-to-income ratio is another factor that is taken into consideration when determining eligibility. Brokers like to see that the debt-to-income ratio does not surpass 45% of gross income. A mortgage broker can help homeowners calculate where they stand financially in order to determine what is the most feasible loan option. Mortgage companies are just like any other business; they have to make money to survive. In order to make money they charge interest on the amount they lend. A reputable mortgage broker will provide fair and competitive interest rates and work to secure a home mortgage that positions their client toward financial stability and retirement.

Many individuals cringe at the thought of their credit score, and yes, a broker will look at an individuals credit history; whether the borrower has credit cards maxed out, bankruptcy, late payments, extreme monthly payments, or collections. Each of these factors is important when determining home mortgage eligibility, but there are many options available for those with a less than excellent credit history. Loan programs are available for individuals with a wide range of credit histories and financial situations.

Before even beginning to search for a new home, a vacation home, or an investment property, an honest mortgage company should be consulted. They can help buyers understand their financial situation and just how much house they can afford. By seeking the guidance and advice of a mortgage broker, a prospective buyer can secure a home mortgage that is tailored specifically to their financial situation. Purchasing a home is a large investment and the importance of locking in the right home mortgage from a trusted mortgage company cannot be overstated. Additionally, the house-hunting process should be exciting and enjoyable! Being well prepared, educated and working with the right mortgage broker will ensure the best investment is made.

Anything can happen in the future. Not only can a dream job be secured, but a current job can be lost. If the latter occurs, then meeting current debt obligations can be very difficult, and a mortgage can become practically impossible to pay. Thankfully, mortgages can be made affordable again, with lower mortgage refinance rates reducing repayments significantly.

Refinancing home loans is one of the most effective ways to deal with mounting financial pressure emanating specifically from a mortgage debt. While the deal was affordable when it was initially agreed, fluctuations in the economy may have changed things dramatically. So, striking up a new and more affordable deal becomes necessary.

Thankfully, there is little trouble in finding mortgage refinancing schemes with most mortgage providers offering the option. In fact, your own mortgage provider is probably the best port of call. And, so long as the rate charged is good, then saving money and lowering financial stress are both guaranteed.

What Does Refinancing Mean?

As the name suggests, a refinancing deal effectively changes the terms of a financial agreement in an attempt to make it more affordable. When it comes to mortgages, the only way to ensure that this is the outcome is to have lower mortgage refinance rates than those charged in the original mortgage agreement.

Refinancing home loans effectively means buying out the remaining balance with a second mortgage that boasts a lower interest rate. Lowering the interest is always good news for borrowers. While perhaps just $50 or $100 may be saved on the size of a mortgage repayment, over the lifetime of the mortgage, it can translate to tens of thousands of dollars.

For example, on a good mortgage refinancing scheme, if the mortgage balance is $165,000 after 5 years of a 30-year term and monthly payments of around $580, a refinancing loan of $165,000 is used to buy out the balance. The repayments over 30 years then fall to $460.

Key Benefits to Choosing a Refinancing Loan

There are several benefits available to those mortgage holders that opt to secure lower mortgage refinance rates. The lower repayments means there is extra cash available for other bills and expenses, so borrowers find themselves in a very strong financial position over just a few months.

Another key benefit is that, because refinancing home loans means paying off the original mortgage, the credit score of the borrower is improved greatly. It does not matter that a loan was used to clear it, the fact is the mortgage was paid off in full. A high credit score means lower interest rates in future loan deals.

However, it is important to keep in mind that even with a good mortgage refinancing scheme, the term of the refinancing loan will extend the debt to the original term at least. So, a 30-year mortgage with 10 years paid up, reverts to a 30-year term when the refinancing deal is done. The interest paid is, therefore, much higher over time.

Securing The Best Rates

Finding the best mortgage refinancing rates is not too difficult, but it is important to know where to find the right refinancing loan. The current mortgage providers are the best place to start, with their interests served by having the original mortgage paid off in full. Also, getting a lower rate is more likely here.

However, the Internet is also a great resource, with comparison sites providing the fastest identification method for the lowest rates out there. Keep in mind though that refinancing home loans are a major investment, so accurate information is essential to find the right deal.

And, of course, as with all deals done over the Internet, check out the reputation of the likely lenders before signing up to a mortgage refinancing scheme. So, consult the Better Business Bureau website or the Verify1st site first.

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What is a Commercial Mortgage?

A commercial mortgage is similar in principle to a residential mortgage except it is used to purchase a property or to raise capital for commercial purposes rather than domestic purposes. As with residential mortgages, the lender retains rights to the property until the loan is repaid in full.

What would you use a commercial mortgage for?

The types of property that people might purchase using a commercial mortgage could be anything from hotels, restaurants, shops and takeaways to office buildings, factories, warehouses and farms. Sometimes people might buy the business and property at the same time if the two are intrinsically linked, such as a hotel or restaurant. When properties are purchased to be used as business premises, the mortgage is known as a commercial owner-occupier mortgage.

Alternatively, a commercial mortgage could be used for refinancing. People might want to unlock capital from their existing business property to expand or improve their premises or facilities, or to raise cash for any other business purpose. There are many other uses for a commercial mortgage, such as buy-to-let mortgages, where people purchase a property (perhaps residential) as an investment and let it out, or commercial development mortgages, where people purchase a property to develop it and sell it on for a profit.

Why purchase premises rather than rent?

Taking on a commercial mortgage is a major leap for your business and must be carefully considered before entering into the commitment.
However, it can be an excellent investment and owning the business premises that you occupy can bring many advantages to your business  In most circumstances the proceeds of the loan are not considered to be taxable income and the interest payments are tax-deductible. You’ll have a clear repayment plan, with terms and rates tailored to suit your needs. (See below for more details on this.) This means that you can manage your cash flow more easily. Mortgage repayments can be cheaper than rent. Any property purchase is an investment. Your asset could appreciate a great deal in value. thereby increasing your capital. You have the potential to make money by subletting. For example, you might have space in your property that you don’t currently need.and could make money on it by letting it out to another business until you need it to expand your own business.

Why use a commercial mortgage to raise capital?

If you already own business property and need cash for your business for any reason, unlocking the capital in your property by refinancing or remortgaging is an effective solution. Think of it as a loan that could be used for any business purpose – not just expanding or improving your premises. There are many benefits in doing this Commercial mortgages can be easier to obtain than business loans, especially for small businesses, as the property provides security to the lender. Unlike many business loans, which tend to have a short repayment term, commercial mortgages cover a long period – anything from 15 to 25 years, depending on the lender and the financial circumstances of your business. In most circumstances, the proceeds of the loan are not considered to be taxable income and the interest payments are tax-deductible.

A commercial mortgage to raise capital for your business:

1. Refinance your current commercial mortgage to include the loan amount that you wish to borrow.

2. Release the equity that has accumulated in your current property,
i.e. the current value of the property minus any outstanding mortgages
or debts tied to it.

What are the costs and repayment options for commercial mortgages?

Repayment plans tend to be similar to residential mortgages. The main options are either fixed-rate or variable-rate repayment mortgages or interest-only/endowment mortgages. Unlike residential mortgages, however, the interest rates for commercial mortgages tend to be higher as business lending is perceived as more of a risk. The rates will vary depending on the circumstances of your business, but generally speaking, the higher the risk, the higher the interest rate. For the same reason repayment terms also tend to be shorter than residential mortgages – typically 15-20 years. It’s likely that you’ll also need to raise a deposit, as most lenders won’t provide 100% loan-to-value mortgages – i.e. they won’t provide a mortgage for the full purchase amount and will expect a down payment from you as a form of security (typically 20-30% of the purchase price, although some lenders accept as little as 5%, but with a higher interest rate for repayment). Other expenses to consider are the setup costs involved in arranging a
commercial mortgage, such as legal charges, surveys and broker fees.

In terms of responsibility for repaying the mortgage

this depends on the type of business. If you’re a sole trader the responsibility will lie with you and you may also be personally liable should you default on the repayments – meaning that you could lose personal assets as well as the commercial property that is mortgaged. If you’re in a partnership, the responsibility and liability apply to all partners. If it’s a limited company, the responsibility and liability belong to the business, although personal security may be required to approve the mortgage depending on the profitability of the business.

How do you obtain a commercial mortgage?

When applying for a commercial mortgage, you’ll need to do your homework and build a strong business case to demonstrate your company’s ability to repay the mortgage. Be prepared to undergo a thorough examination of your finances, including business history of your company financial statements, profit and loss accounts, balance sheets, past and current cash flow, all certified by an accountant future projections for your company: long-term business plan, intended use of the property, earnings potential, projected cash flow personal finances: the financial histories of yourself and all other key stakeholders in the business, such as creditworthiness and past earnings All of these factors will determine the lender’s perceived degree of risk in lending you the money, which will, in turn, determine the term and interest rate of the loan that they are willing to give you. The obvious first step to many people applying for a commercial mortgage is to approach their bank or business lender, with whom they already have an established relationship. However, for this very reason it’s unlikely that you’ll receive a competitive deal.

The best way to get a commercial mortgage is to use the services of a specialist independent mortgage broker, who can help you get a good package to suit your needs whatever your circumstances. Even if your credit isn’t great, it doesn’t mean that you won’t qualify for a commercial mortgage. Having a broker to represent you will really

strengthen your case

They have access to a wide range of lenders and understand their criteria for lending, as well as your specific needs. They can therefore undertake a targeted search, increasing your chances of finding a suitable loan. In fact, the broker may even be able to obtain several different options from various interested lenders, which provides the scope to negotiate a fantastic deal for you. Money isn’t all that you’ll save. Imagine if you tried to apply to several lenders yourself – think of the time taken to complete all the applications, and the time wasted in applying to unsuitable lenders. The independent advice and specialist knowledge that a broker provides are invaluable.

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Why the Bank Will Not Modify Your Mortgage

We cannot understand the present unless we understand the past. To understand today’s banking and real estate crisis you have to go back to the last banking crisis. The savings and loan crisis of the late 1980s resulted in a new banking paradigm. Under the old paradigm almost all banks were “full service banks.” In other words all real estate lending functions were handled in-house. By the time the crisis was over with the typical bank had been transformed beyond recognition. Banks went from being full service institutions to limited service institutions that had farmed out to others many banking functions that had hitherto been regarded as being important core functions.

However,none of these dramatic changes were visible to the typical bank customer. It looked like the same old bank to them.

This transformation was part of a much broader transformation that was taking America by storm. This new business philosophy held that every business had a core competency and that the way to maximize your profits was to concentrate on your core, high profit skills and to farm out to other institutions your low profit, non-competency functions. It was taken for granted that the activities that were earning you the greatest profits were your core competencies and that anything that was low profit was a low competency skill that was bested farmed out to others. The flaw in this system was that in times of crisis you no longer had the in-house skills to cope with the crisis because the skills had been farmed out to others.

It has to be admitted that in normal times the new paradigm delivered on its promise of lowering costs and increasing profits. This is why today when you make a call to complain about a product or service you end up talking to a speaker who lives in Calcutta, India.

The Old Bank Model

In-house staff real estate appraisers

In-house mortgage originators

In-house servicing of mortgage payments

In-house warehousing of mortgages

The New Bank Model

No in-house staff appraisers

Very limited amount of in-house mortgage originating

No in-house mortgage servicing

Almost no warehousing of mortgages (mortgages were sold off rather than kept)

Under the old banking model when a mortgage got into trouble the bank had all the expertise needed to solve the problem in-house. Under the new banking model not only was the bank clueless but it was enshrouded in total darkness as well.

Under the old system when a mortgage problem arose the bank knew exactly what to do. Under the new system it sits around and sucks its thumb. Under the old system the first thing the bank would do was send out one of its in-house staff appraisers to do a complete inspection of the home and a complete professional appraisal. Under the new system they call up a real estate broker and ask for a BPO, a broker’s price opinion. No doubt you are wondering why they don’t hire an appraiser? The answer the bank will give you is that they are way too smart to pay the $275-$350 a complete appraisal would cost. This standard appraisal also includes a complete interior and exterior inspection of the property.

A BPO they craftily inform you will only cost them about $75. That’s because the broker never leaves the office. He spends fifteen minutes scanning comparable sale listings on the MLS system. Eyeballs what seems to him to be an appropriate number and another fifteen minutes writing up the one or two page BPO. As the bankers will proudly tell you they are way too smart to get the job done right. Guessing is so much cheaper.

I speak with an insiders knowledge on this point. You see I was one of the in-house appraisers that were thrown out on the streets like a dog.

Let’s step back in time and continue our analysis. In the old days when a client asked for a mortgage The in-house appraiser and loan officer would carefully scrutinize the deal. Due diligence was taken seriously because the mortgage was going to be warehoused by the bank until maturity and not sold off. If the mortgage blew up the bank took the loss. In this case the appraiser and the loan officer give the deal a thumbs down. The appraised value is below the sale price and there are problems with the buyer’s earnings and credit. The bank turns the deal down.

A month later, an independent mortgage broker shows up at the bank with the same deal. Only this time as if by magic the appraised value hits the purchase price and the earnings and credit problems have disappeared from the mortgage application. Now you know why the banks fired all their staff appraisers and most of their in-house loan officers. Prior to this time the banks originated about 90% of all mortgages. By the bull market peak independent mortgage brokers originated over 70% of all mortgages.

Of course, if the banker has a brain in his poor,stupid head he has suspicions. However his hot, little hands are now holding an appraisal done by a licensed appraiser and a mortgage application that has been done by a licensed mortgage broker. The bank accepts the deal but there is no way he is going to warehouse this mortgage or the ever growing number of dubious mortgages that the bank is accepting from outside mortgage brokers. These mortgages are going to be pooled and securitized into various types of mortgage-backed securities (MBS and CDO) as quickly as possible.

Let’s now return to the present. The bank now realizes that the outside appraisal was dubious and the mortgage application was even more dubious. It has probably sold off the mortgage servicing rights and kept the mortgage or it may have sold the mortgage and kept the mortgage servicing rights. Do not underestimate the importance of mortgage servicing rights. This is what gives you control of the mortgage. Others may own the mortgage but the mortgage servicers control the mortgage. There are about 8,500 banks in this country. The vast majority of which do not service their own loans. The 27 largest mortgage servicers dominate the service industry.

You now know why the banks are responding so poorly to urgent requests to modify mortgages even when it is in their overwhelming interest to do so. It is the common assumption that the reason why banks will not help out their clients is because they are just being mean or greedy. The reality is that in today’s brutal real estate market it is almost never in the bank’s interest to foreclose. Yet, the foreclosures continue because they are on automatic pilot. It is often the case today that the mortgage servicers start and often finish foreclosure proceedings without prior approval from the bank.

You see mortgage servicers are paid for foreclosing on the mortgages that they are servicing but until a recent change in federal regulations, they were never paid to modify a mortgage.

You now know why the banks and troubled mortgage payers are in such trouble. The reason why banks appear to be wandering around in a stupor, is because they are in a stupor. To a shocking extent they have lost control of the ability to manage this crisis. They are in trouble because they are as blind and dumb as a fence post. The expertize that they once had is gone with the wind.

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Mortgage insurance calculators are used to calculate different aspects relating to mortgage insurance. They can calculate the length of time for which a person will have to keep making insurance payments on his or her mortgage. This period is displayed in a number of months.

Mortgage companies secure their sold mortgages by taking an insurance policy on them. The premiums of this insurance policy are passed on to the people who have bought the mortgage, and are bundled into their monthly payments. The insurance premiums may not run for the entire duration of the mortgage. Mortgage insurance calculators help to determine how long the mortgagor will have to continue insurance payments on the mortgage.

This calculation is actually a very simple task. There are six important figures that are required to be inputted into the calculator – the current property value, the value of the property at the time of taking the mortgage, the current interest rate, the current balance amount, the monthly payment and the expected appreciation rate of the property.

A person has to pay insurance on the mortgage until the time the value of the remaining mortgage reaches 78% of the current property value. Each month a payment is made, a portion of it goes toward the principal value of the mortgage. Hence, the mortgage value falls down month after month. Once the residual mortgage value is below 78%, the mortgagor is no longer liable to pay any insurance premiums on it. Alternatively, there are no insurance premium payments to be made after the mortgage balance falls below 80% of the appreciated property value.

Buyers of mortgages may waive insurance premiums in lieu of higher interest rates on their mortgages. But more often than not, this is a tricky decision to make – whether to go for higher interest rates or to settle for paying mortgage premiums. There are special mortgage insurance calculators that can help buyers of mortgages decide this aspect. Such calculators can help to compare the total interest costs over the mortgages and the total portion of payments done towards mortgage insurance premiums.

Free mortgage insurance calculators are available online. Several mortgage-related websites feature simple, easy-to-run programs which can help buyers decide insurance aspects of their mortgages.

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Banking Group Launches New Mortgage Scheme

First-time buyers are finding themselves in a predicament with falling house prices as the housing market becomes more affordable. Expert opinion is they are being squeezed out of home ownership by the very large deposit they are required to have in order to secure their first mortgage. Saving up to £25,000 for a deposit takes a lot of effort and you need to have the commitment to save that much money each month for a deposit. Lloyds Banking Group was recently rescued by taxpayer’s money when the government stepped in after they acquired the ill-fated HBOS (Halifax and the Bank of Scotland). Today they have released an innovative mortgage product aimed at first-time buyers looking to get on the property market.

Now is a good time for first-time buyers to buy their first home. It is a ‘buyers market’ and buyers can negotiate some great deals with sellers that are eager to sell. Property prices now stand at 2004 prices which make them excellent value and the fall in house prices is possibly nearing the bottom. The best time to buy a home is when the market is nearing the bottom of a falling market before house price stabilise and then start to rise which they will do one day in the near future.

This new product from is a good deal for adults who are fortunate to have parents that are able help them purchase a new home. This is a niche mortgage product and unfortunately is not suitable for buyers where their parents are unable to help them financially. This will limit the number of people this mortgage will be available to help. The mortgage market remains an unfair battle ground as lenders battle to find more ingenuous ways to lend money without risk to their balance sheets.

They are offering a very attractive mortgage deal for first-time buyers and an exceptionally low mortgage rate for a 95% mortgage; you would expect these interest rates for a 75% mortgage scheme.

Here is their lending criteria to secure a first-time buyers 95% mortgage:

1. Mortgage for 95% of the property value
2. A 5% deposit required
3. Parents or guarantors will need to deposit 20% of the purchase price of the home into a Lloyds Savings Account for the next 3 ½ years. They have not announced the interest rate for their saving account yet. There will be a legal charge over the money deposited a savings account and the deposit is locked away for 3 ½ years.
4. Income required is between 2 ½ times income to 5 times income. It is dependent on the type of job, time in employment, other financial commitments, whether or not you are a customer already, etc.
5. A £99 activation fee and a valuation fee based on the house price is required to start the application process.
6. This mortgage is portable which means that you can move from one home to another without any penalty.
7. There is no ‘Higher Lending Fees’ which is normally added to a mortgage over 75% loan-to-value.
8. There is a Penalty fee of 3% of the outstanding mortgage for the first two years and then a 2% fees for the third year if you were to sell the house and repay the mortgage early.

9. This product allows up to 10% overpayments each year and after the first twelve months you are allowed to under pay the mortgage if required by any overpayments previously made.
10. The interest rate is fixed from 4.39% to 4.89% for the next three years depending on the product fee you pay.
o 4.39% has a product fee of £995 which can be added to the mortgage.
o 4.49% has a product fee of £495 which can be added to the mortgage
o 4.89% has no product fee

This scheme works like this:

The house is valued at £100,000; the first-time buyer finds a 5% deposit of £5,000 plus valuation fees, solicitors’ fees, search fees and other disbursement fees. The parents or guarantors agree to deposit 20% or £20,000 into Bank Savings Account for the next 3 1/2 years minimum. After the three and a half years if the value of the mortgage has dropped to below 90% of the value of the home purchased then the parents or guarantors are free to move their money.

Their commitment to the legal charge placed over their savings money ends to the mortgage lender. The parents will remain tied into the mortgage until the value of the mortgage has dropped to below 90%. So parents could be tied in for a long time if house prices continue falling and the housing market does not recover soon.

If you take a repayment mortgage over 25 years for £95,000, after three years you would have paid back around 6% of the capital borrowed. So after three years your mortgage balance would be £89,300 and your parents would then be released from their legal commitment to the mortgage.

This is a great opportunity for first-time buyers to take advantage of in the current climate. First-time buyers are essential to the housing market returning to normality. Other products offered in the past required the parents, guarantors and grandparents to provide a legal charge over their own home and this placed them at total risk of losing their home as well.

Always take ask to speak to a Mortgage Adviser before committing to a new mortgage and ask as many questions as you need to in order to fully understand your new mortgage product. Mortgage Brokers who use the ‘whole of the mortgage market’ are the best. They will be able to provide you with the best mortgage for your circumstance from the whole of the mortgage market. Furthermore, they will be able to provide you with full ‘Advice and Recommendation for your new mortgage.

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