Mortgage Information

Mainstream banks and building societies are increasingly targeting
high net worth mortgage clients who typically have a large deposit and
so are viewed as lower risk. But are these lenders the best option for
someone seeking a larger than average mortgage? There are still other
options, in particular private banks that can offer competitive rates as
well as a greater degree of flexibility when it comes to the terms of
the loan. Private Banks continue to offer a real alternative to
mainstream banks in a large part due to the flexibility they show when
considering a potential client’s income stream and preferred methods of
repayment. Private banks for their part are particularly focused on
borrowers seeking mortgages of 1 million or more who have a range of
assets that the bank can also bring under their own management.

Some private banks have tightened their lending
criteria for borrowers who do not have other assets that they are
willing or able to transfer to the private bank’s management. Some will
not lend on a mortgage at all if they cannot also take over management
of assets, so-called “dry lending”. Therefore, the private bank route is
not the best option for everyone seeking a million pound plus mortgage
as these institutions view clients from a whole wealth planning
perspective.

What this means for wealthy individuals looking for
a very large mortgage without other assets or without wanting to commit
any of their assets to a private bank, is that they have a reduced
choice of options than they had a year ago when private banks were less
focused on creating a management relationship.

However, it is
still possible for high net worth borrowers to secure a competitive
mortgage from a private bank without transferring cash or other assets.
It is likely that a client will have a property to sell or assets to
realise in the future and some private banks will take these into
account in a longer term view of building their relationship with the
client.

It is unlikely that we will ever see private banks being able to
compete with the extremely low headline rates offered by some mainstream
banks and building societies but what they do offer is a cost effective
and much more flexible alternative for some wealthy borrowers.

So for certain borrowers, private banks can provide competitive interest
rates for large mortgages. A typical private bank mortgage currently
available is likely to be 1.5 to 2 per cent over Libor for a 5 year term
if an individual transfers assets under their management or around 3.5
per cent over Libor if there are no assets to manage.

A leading
London mortgage broker points out that often the ‘best buy’ deals listed
in the national newspapers will have maximum loan limits of 250,000 or
500,000. Sometimes a mainstream lender will be willing to advance a
large mortgage above these limits but some potential borrowers also have
complicated income streams such as offshore income, bonuses and trusts
so will find that, even then, they will not meet a mainstream bank’s
lending criteria.

The term mortgage is associated with finance and real estate
activities. Basically mortgage disclosure process is to provide up to
date information about the on goings mortgage activities related with
any real estate. Mortgage Disclosure may be done on demand to concerned
purchaser, seller or any Government sector who deals with any particular
real estate or industry within the very country. The chief objective of
this process is to stay transparent legally and morally in cases of
transactions with real estates.

The loan disclosure information act or MDIA was passed in 2009. This
law is so significant that affect on some ones loan closings. The
process of mortgage disclosures include some steps like

1) GOOD FAITH ESTIMATE:
it includes a list on your closing cost estimate which secures a
mortgage. It is basically a sum of fees to be given to broker, title
company, Government fees lender cost and some other miscellaneous cost.

2) TRUTH IN LENDING:
This is a form for Government record purpose to be filled up with
details of valuables of your loan. This document includes APR, total
interest, total payment, schedule of payment late fees etc.

3) SIGNED DOCUMENTS:
These are purely paper documents which you provide your representative.
Copy of all the documents submitted should be kept by you.

4) APPRAISAL, INSURANCE, and TITLE:
Appraisal is the document of valuation of the property generated by any
bank. Insurance agent is called upon when bank formality is complete
and to keep your property safe from any damage with adequate
reimbursement on damage. The title company will ensure that property
under mortgage is free from debts and property can be transferred with
the Lending institutions as the Mortgagee on requirement

5)UNDERWRITING:
On completion of paper works the mortgage broker or lender will submit
the same to underwriting department of lending authority. If there are
need of further clarification underwriting department, lender or broker
will request specific details from you

6) CLOSING:
After all the processes are satisfactorily done, the file will be
placed for “cleared To close”. At this stage HUD-1 statement will be
produced and if you are stratified enough with the settlement closing
will take place. An Escrow Agent, able enough to satisfy your quires,
will conduct the closing at closing you will sign several documents,
with the most common being the mortgagee.

A second mortgage is the process of getting another loan in addition to
your original mortgage. Before entering into the second mortgage,
homeowners should carefully understand the merits and demerits of taking
a second mortgage and should also carefully analyze the different
available options.

Types of second mortgages:

There are two main types of secondary mortgage available: home equity
loans and home equity lines of credit. With home equity loans, the
lender will give you the lump sum of amount all at once and you repay it
at regular intervals over a particular time period. With home equity
loans, the interest rates are fixed.

Home equity lines of credit
are like a credit card, you can spend the money as you need it. In this
type of loan the interest rates are adjustable.

There are few
restrictions available on the second mortgage. Most people are using
this type of loan for the purpose of home repair and maintenance or for
other big expenditures. It is not a good idea to buy this loan for
something insignificant such as for new clothes or for a vacation,
because you are risking your home in the process.

Merits:

Second mortgage is having huge advantage, because it may give you a
large sum of amount that you can spend it when in need. Also, interest
rates are low and the interest paid on this mortgage is tax deductible.

Demerits:

The major drawback of a second mortgage is that the loan is secured by
your home. So, you may lose your home if you don’t do the proper
repayment. Also, you may have to pay the minimal fees (3 to 5% of your
total loan amount) to obtain it.

How much money a borrower can get?

The amount of money you can get will vary on a number of things such as
your credit score and the loan to value ratio (LVR). Most lenders won’t
provide you more than 70 to 80 % of the LVR of your first and second
mortgages combined.

Where to get a second mortgage?

You
are not having the chance to get your second mortgage with the lender
who gave you the original mortgage. You can find a second mortgage with
any other lender. Since the lender in the second position takes on more
risk, not every lender offers this type of mortgage; it will vary from
individual lender’s risk tolerance.

Robin Hood was famous for robbing the rich to give to the poor and
you could be forgiven for thinking that today the very wealthy were
attempting the reverse that situation when it comes to securing the best
mortgage deals. It appears that there is one set of rules for some and a
different set of rules for others, with wealthier borrowers now being
exempt from certain legislation and criteria imposed on mainstream
borrowers. However taking a ‘one size fits all’ approach to lending
really benefits no-one and the main point of regulation is to protect
the best interests of each individual client.

The Mortgage Market Review focuses on “Treating
Customers Fairly” and trying to hard wire a more conservative, but
common sense, approach to all areas of lending. However, some of the
changes are indeed a bonus for high net worth borrowers.

Firstly, entrepreneurs (business people borrowing against their homes)
will enjoy far more flexible criteria and even be able to ‘opt out’ of
standard affordability checks providing they can offer a credible
business plan. However, if banks remain unwilling to lend then more
traditional alternative funding routes typically used by entrepreneurs
may still be the quickest and simplest option.

Secondly, High
Net Worth (HNW) individuals, which are typically classed as those
earning upwards of 300,000 per year in the UK or those that have a net
asset base of 3,000,000 or more, can also enjoy a greater degree of
flexibility and be able to opt out of standard criteria tests when
borrowing a mortgage. The exemption for High Net Worth (HNW) borrowers
from stringent affordability criteria provides lenders with the
opportunity to be flexible when regular checks are not relevant for
certain categories of clients. Many HNW clients have a high level of
complexity with regards their income and assets. Many have irregular
income but their personal or family wealth is so vast that a standard
affordability check are effectively pointless as the risk to the bank or
other lending institutions is minuscule.

All things considered, the Mortgage Market Review willingness to show a
reasonable degree of flexibility for high net worth individuals must
surely be welcomed by all; both by the borrowers themselves but also by
the lenders, which have been freed from irrelevant legislation in
certain circumstances.

Obviously no one wants to see a return to
the days of the overly-easy credit available with minimal checks,
before the global financial crisis. This was one of the main reasons for
the economic predicament in which we now find ourselves embroiled in
the UK, Europe and the USA. But sensible lending does not have to mean
that checking the credit worthiness of a large mortgage borrower can be
done effectively by purely a box ticking exercise and disregarding
anyone who does not fit a particular profile; some common sense must
always be brought into the equation. This is good news for high net
worth mortgage borrowers as a whole and finally a common sense approach
has developed in the mortgage market that has been lacking for too long.

Lenders would be forced to review their mortgage operations and
interest rates could rise. That’s the view of leading experts in the
event that the Scottish electorate vote for independence in the
referendum in September 2014.

A Treasury report has questioned whether Scottish
banks could fund a successful financial compensation scheme while
lenders have confessed that they would have to review their position in
the Scottish mortgage market in the event of a ‘yes’ vote. Keep reading
to find out more.

Lenders would be forced to review their mortgage business in the event of Scottish independence

The Scottish Government intends to hold a referendum of the Scottish
electorate on the issue of independence from the United Kingdom on
Thursday 18 September, 2014. Independence is supported by the Scottish
National Party and Scots will be asked to vote on whether Scotland
should become an independent country.

In the event of a ‘yes’
vote, Money Marketing reports that lenders’would be forced to review
their mortgage operations in Scotland.’ Building Societies Association
head of mortgage policy Paul Broadhead says lenders will have to review
their position if the electorate choose to leave the UK.

He said
that they would need to know what the legal structure will be and what
currency they will use. If it’s not part of the UK they would also need
to know if it will be part of the FCA regulatory regime. If not, then
lenders, who now are obliged to comply with the FCA rules will have to
review their position. It doesn’t mean they will pull out or the
mortgage market but they will have to reassess the risks.

A
‘yes’ vote may also lead to more expensive mortgages north of the
border. The Council of Mortgage Lenders believe that when lenders have
to deal with different legal and regulatory systems then lending becomes
more difficult and more expensive for the borrower.

Could Scottish independence make your mortgage more expensive?

A recent Treasury report argued that a vote in favour of Scottish
independence could see the cost of high value mortgages in Scotland
rise.

In the event of a ‘yes’ vote, Scotland would be forced
under European law to have a separate financial regulatory system and
its own deposits guarantee fund, to compensate savers in the event of
the failure of a financial institution.

The Treasury report has
called into question whether an independent Scotland could set up a
financial compensation scheme that was sufficiently well backed. And,
without this, the Treasury believes that there could be a loss of
confidence in Scottish banks, resulting in customers making fewer
deposits to fund mortgages.

John Swinney, the Scottish finance
secretary, dismissed such claims, saying that the UK government are
using this paper to make implausible claims about what will happen to
mortgage rates, when the reality is that many countries around Europe,
including those of similar size to Scotland, have substantially cheaper
mortgage rates than the UK.

Islay Robinson, CEO of London
mortgage adviser Enness Private Clients, said: “A lack of confidence in
Scottish banks would mean that they may have to offer better savings
rate to attract deposits or fund their mortgages through greater use of
the wholesale markets. This could certainly push up the price of large
mortgages in an independent Scotland.”