What is cash-back mortgage?

Whether cash back on transactions are connected with buying a car or household appliance it is widely used as a sales incentive these days. In order to entice first time buyers in a competitive market some large developers even run cash back schemes on the purchase of new homes. Most people recognize Cash Back term and it is not surprising that it can be linked to the selection of a mortgage. The offer of cash back helps to make products stand out against similar offerings and always makes a noticeable splash.

For first time buyers cash back mortgages can be ideal and also for those who have very little money to cover the various costs in obtaining a mortgage. If you have bad credit mortgage cash back mortgages can be good as they allow you to borrow up to 95% of the value of the property with the cash back that you can use for covering the deposit or other costs such as higher loan to value fees, legal fees or stamp duty. After completion of the mortgage most lenders will pay the cash back, however in some cases you can negotiate getting the cash back paid at the same time as the mortgage advance, enabling it to be used as the deposit.

You can get a cash back mortgage by the following ways.

• Cash Back mortgage with SVR – a lenders standard variable rate
• # Cash Back mortgage offered along side another mortgage or bad credit mortgages products

Usually lenders offer the cash-back as a package of benefits and discounts, but pure cash-back mortgages are not uncommon. Besides the cost of legal fees or survey charges mortgage lenders may offer a sum of money. However as a rule these mortgages are attached with redemption penalties. A redemption penalty is a fee for borrower if he switches mortgages to bad credit mortgages before the mortgage has been paid off. This means you could are tied to a mortgage and have to pay interest at the lender’s Standard Variable Rate (SVR).

Advantages of a Cash Back mortgage

• You can use the cash back sum to pay off a credit card debt, for paying home furnishings, or to assist with the initial costs involved in purchasing a home e.g. solicitors fees.

Drawbacks of a Cash Back mortgage

• If you repay mortgage earlier repayment charge may apply for a set period, which can be equal of paying back all of the cash you received.
• You may find that the interest rate payable is not competitive for larger cash back and may be even a variable rate.
• There is usually booking fee payable or an arrangement for a cash back mortgage

Also if you need some extra cash at the start of your mortgage especially with bad credit mortgage, there are several options other than a cash-back mortgage you could consider:

- A discount mortgage that offers a very good initial rate and thus you have low payments at the beginning before it reverts to a standard rate.

- Remortgages that will help you to borrow more cash and improve your house for example, as well as to consolidate credit card and personal loan debts.

- A larger mortgage up to 85% rather than 80%, for instance, and thus you have extra money at the start of the term and need less money for the deposit.

- An unsecured personal loan, it has a higher rate than your mortgage but it won’t have the same early redemption charges.

Cash Back mortgages may not be right for everyone and should be approached with caution. There are other alternatives available if you’re just looking for some extra cash to help you get started in your home. But in some cases cash back mortgage is the right option.

What is bad credit mortgage?

If you are an individual with bad credit and think a mortgage is just out of your reach – it’s not true and actually bad credit is not the end of the world. Nowadays a lot of mortgage seekers fell into bad credit and that’s why the bad credit mortgage was created. You will be pleasantly surprised as you may find many lenders that specialize solely in writing bad credit mortgages. However bear in mind that as you have a poor credit rating you represent a much higher risk for lending. And that’s why for such risk you have to pay more for almost every aspect of your mortgage.

How your credit history can become poor? Credit history is based on information got from sources, including court judgments, bankruptcies and Information provided by financial institutions with which the individuals deal. You will get bad credit rating if you fail to pay off the outstanding debts or other credit payments mortgage arrears, county court judgments (CCJs) or bankruptcy.

Bad credit mortgages can solve two main problems:

1. They provide financial support for you and fulfill personal and business needs;
2. You can improve your credit score with bad credit mortgage (if you repay loan on time).

So, if you take bad credit personal mortgage you can overcome all financial hurdles being faced due to bad credit history.

Before you start application for a bad credit mortgage, you need to know certain information. For getting the best bad credit mortgage it is important to shop around and try to minimize these additional expenses. First, you have to be sure your credit score and report is correct and accurate. If you remove old or closed accounts or remove something that is incorrect from your credit report you can improve your score, it is worth the effort even if it’s a little bit. Then, you’ll need t organize information on your income together with deposit slips, pay stubs and the like. Bad credit mortgage loans are given basing on your proof of steady income. At the end of process, you will get strict repayment guidelines. The most important is to make the payments in time and in full. Don’t make even worse your bad credit situation and don’t get in over your head. However, even if you can’t pay in time, still you have a way out – people with such problems can apply for remortgages and take out a different mortgage on the same property.

Before you apply for bad credit mortgage, be sure that you know all these tips:

1. Don’t borrow in the first place and too big amounts
2. Be prepared that interest rates may go up
3. Also be ready that your income may go down
4. Make priorities
5. Fixed rate agreements at some point come to end
6. Get rid of obstacles and millstone
7. Do not even try to sublet without permission
8. Speak to independent brokers, lenders and financial specialists.

Also when considering your options for bad credit mortgages, look out for the following three pitfalls that can sneak up on you:

1. Fees and Penalties –they can also include higher late fees and payment penalties of which you should be aware.
2. Prepayment – Some bad credit mortgage companies have prepayment penalties for mortgage as they need you to stick with their program to ensure they make their allotted, they require a fine for paying off the mortgage too quickly. So, if you refinance too soon you will have a huge loss, that’s why watch out for length and amount of prepayment penalties.
3. Rewards – in opposite, some mortgage companies and banks will even reward you for improved money management. For example, your interest rate may be reduced, if you make a number of payments on time. Such incentive rewards are great for people determined to turn over a new and better credit leaf.

Nowadays, you can own dream home even with bad credit record and besides this bad credit mortgage will allow you to recover credit history. And moreover, it will also give you the option of making monthly payments.

Lenders Rush To Cut Rates

The Bank of England’s latest rate cut on Thursday send mortgage lenders into a frenzy of mortgage rate cuts – great news for borrowers.

On the afternoon of the rate cut nine out of the top ten lenders had said that they would pass on the full rate cut to borrowers. Of the top ten lenders, only Northern Rock did not shift its rates – and that can’t be a great surprise in the bank’s situation.

The banks’ alacrity to cut rates contrasts sharply with the attitude taken after the last BoE rate cut in December. Since that cut many banks and building societies failed to pass on the full cut, and some rates were even raised before the February cut. Some 20% of lenders failed to pass on the full December decrease.

On a mortgage of £150,000 the rate cut of 0.25% will save £24 on monthly repayments.

Mortgage expert from broker John Charcol, Ray Boulger, said: “They have rushed to deflect any criticism.”

Lower mortgages will come as welcome relief to those consumers who benefit, as other bills show little sign of coming down. Fuel, energy and food bills are all likely to push up the rate of inflation in the coming months.

Mike Naylor of the comparison website uSwitch.com said: “The rate cut could still be too little, too late, for some. People are currently paying out 35% of their take-home pay on remortgage repayments, and ten million consumers already feel that their current level of overall debt is unmanageable.”

The mortgage rates cut will unfortunately help only a minority of borrowers, about 20%, who have a mortgage with a variable interest rate. Around half of all homeowners have a fixed-rate loan which will not be affected. Anyone who recently fixed their mortgage at 5.5% or higher will be a loser at this time.

The widely forecast rate cut will also not be good news for savers, who outnumber borrowers by about eight to one.

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Difference between fixed and adjustable rate mortgages

At the time when a person starts looking at mortgages for purchasing his home or for making improvements, among other things that he comes across one most important decision he has to take is to select the type of mortgage most suitable for his needs. Mortgages are basically divided into two categories; fixed rate & adjustable rate mortgages.

To decide which type of mortgage to select can be difficult and as a borrower one needs to carefully judge all the features of both before choosing any one of them. Evaluating all the pros & cons of each type will always be helpful in the long run.

So let us go through some of the basic differences between these two types of mortgage loans.

In fixed rate mortgages the interest rate remains fixed for the full term of the loan while for reverse mortgages, the rate varies at specific time periods during the course of the loan. How the rate change will occur and by how much depends on the terms of the loan. The rate for adjustable rate mortgage can occur every year, every three years & for some mortgages even every three months.

Overall if a person plans to keep the home for 5 or more years then FRMs are more suitable. But if he plans on moving within next 4 years or is confident that his income is going to increase steadily over time & wants to begin with by having lower monthly payments then ARMs are what one should consider taking.

ARMs usually have lower starting interest rates meaning lower payments at first. But one should also keep in mind that interest rates for these types of loans can go up after few years & so too their payments.