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Adjustable Mortgages – A wrong option for commoners is perfect for US Billionaire Mark Zuckerberg!

Ajustable Mortgages - Best Rates For High Net Worth Borrowers

Ajustable Mortgages – Best Rates For High Net Worth Borrowers

According to the recent news reported by Bloomberg, Mark Zuckerberg successfully managed to refinance his mortgage with First Republic Bank in the U.S earlier this year. The Facebook founder refinanced a $5.95 Million (USD) mortgage on his home with a term of 30-years adjustable-rate loan, starting at 1.05% rate.

It is definitely a perk for Billionaire Zuckerberg, as he scored an adjustable-rate loan that started with a 1.05% rate in May.

This year the lending rate has reached a record low. The borrowing cost is comparatively lower for big shots like Zuckerberg. According to the latest report from the US Labor Department, it estimates a 1.7% inflation rate till May 2013. Although it is considered to be a modest rate, it can still pinch pockets as the US dollar is losing value much faster.

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Home Ownership Down As PRS Numbers Continue To Rise

Home Ownership Down As PRS Numbers Continue To Rise

Census Reveals Change In UK Property Ownership

The level of home ownership in England & Wales has dropped, as the number of PRS properties increase, according to data obtained from the 2011 census results.

Results of the 2011 census, published on Wednesday 5th December 2012 have underlined the falling levels of property ownership in the UK.

Many more people are choosing to live in private rented sector (PRS) properties rather than have the responsibilities and financial headaches of property owners, according to the data supplied by the Office for National Statistics (ONS).

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Falling UK property prices are preventing millions of property investors and private home owners from obtaining cheaper mortgages from lenders as surveyors knock thousands off property prices during valuation appraisals.

A down-valuation by a surveyor acting on behalf of a mortgage lender can potentially wipe out thousands of pounds worth of equity at remortgage, leaving property owners flat broke and desperate.

When property investors decide to release equity or even switch lenders for a better mortgage deal, the bank or building society arranges a surveyor to give a new valuation on the property to check it’s worth enough to borrow against.

But UK residential property prices have fallen at a rapid pace over the last 3 years, slumping by 2.6% in the last 12 months, according to Nationwide’s residential house price index.

In some parts of the UK, such as the North-East, the property valuation slump has hammered property values by nearly 10% over the past year.

These down valuations by surveyors on behalf of lenders do little for the perceived equity in properties, creating problems for anyone trying to re- mortgage with very little equity left in the property.

For example – A couple took out a £180,000 residential mortgage on a £200,000 property with a 10% deposit in 2010.
Attempting to remortgage, the surveyor informs the lender that the property now only values £185,000 and £175,000 is still outstanding on the mortgage after two years.
The equity was 10% at purchase but now stands at just 5%.

The reduced equity in the property means that the couple would be pushed towards more expensive home loans, or face transferring to their lender’s Standard Variable Rate (SVR), which could be much higher than a fixed or variable rate mortgage deal.

Adding to property owners worries are the increasingly tight lending criteria set by mortgage lenders, making it harder for the average man in the street to secure a good mortgage deal.

Property valuations tend to be extra cautious in a slow property market, similar to how the UK property market is behaving, and occasionally property vendors can be overly optimistic about the true value of their properties.

Many property buyers, especially investors, will always question whether the property valuation is accurate, and will then set out to see what can be done about it.

Some mortgage lenders sometimes use automated or drive-by valuations to determine property prices in certain areas, property purchasers are advised to find comparable properties within the same area and direct the surveyor to consider those similar properties before reaching a valuation appraisal.

Property investors often choose to cite properties sold in the same geographical area at higher prices in an attempt to secure higher mortgage lending. Information can be sought from local estate agents for recent sale prices and this can be used as supporting evidence.

Once a good mortgage deal ends, borrowers are forced on to the mortgage lender’s more expensive SVR, unless they can switch to another deal or to another mortgage lender.

Halifax, Bank of Ireland, the Co-operative and Yorkshire and Clydesdale banks have all raised their SVRs to between 3.99% and 4.95%. West Bromwich Building Society charges 5.84%, almost 12 times the Bank of England (BoE) base rate.

Buy-To-Let landlords, property investors and home owners are advised to search for the best mortgage deal available, whatever the amount of deposit required, as there are hopes that the Government’s new Funding For Lending scheme, designed to boost mortgage lending to households and businesses, will mean cheaper mortgages for all across the UK.

Over the longer term, making improvements to the property may help increase its value and boost the chances of getting a good mortgage deal. Alternatively, property owners can always try to switch to another mortgage lender in the hope that the valuation will be higher, provided that they can meet the lenders strict criteria, but there are no guarantees.

More Struggling UK Home Owners Are Becoming Live In Landlords

Increase In Live-In Landlord Numbers

More home owners are becoming live-in landlords by putting their spare rooms to use and bringing in additional rental income.
The number of UK home-owners that are choosing to rent out a spare room in their own homes has increased by 19% during the last six months according to 2 of the UK’s leading house sharing websites.

The house sharing website Easyroommate claim that in February this year, the number of live-in landlords, (home-owners trying to let out spare rooms), has increased to 34% of the total number of users currently searching for housemates.

The website also reports a 5% increase of live-in landlords between January and February this year

A similar picture is also painted by who reported a peak in lodger registration numbers in early January, resulting in almost 6,000 UK residential property owners renting out spare rooms by the end of the month.

Average flat share rental asking prices across the UK have also remained consistently at £368 for the last three months, following a marked increase in rents towards the end of 2011

January was a record month for new lodger numbers, up 15% on the previous record month last August. New lodger numbers in January were also up 83% on December 2011 and 22% higher than January 2010.

EasyRoomMate Director Jonathan Moore said: “With the vast number of home owners looking to boost their incomes during the recession, a growing number are waking up to the income trapped in their spare rooms. This is also compounded by the vast majority of people reluctant to downsize due to the loss of equity in their homes.”

With many home owners with grown up families and large properties struggling to keep on top of their mortgage payments, utility bills and accumulating personal debts, renting out a spare room on a short or long term basis has proved an easy way to earn extra income and keep mortgage payments covered.

However live in landlords are urged not to cut corners when accepting new tenants living in their homes. Legal 4 Landlords advise all landlords to at least thoroughly tenant reference all prospective applicants, so that they know more about the person moving into their homes.

SpareRoom puts the average UK room rent at £398 per month, with London bucking the trend with rents ranging between £542 and £677 (GBP) per month.

Spareroom Director Matt Hutchinson, said: “It’s not surprising that the lodger population is expanding so rapidly as home owners look for ways to boost their incomes. With the Government’s Rent a Room scheme allowing people to earn the first £4,250 (GBP) per year without declaring any tax on the income, it is still one of the easiest ways for struggling home owners to earn some extra cash. For some people, the monthly income from a lodger will be the difference between losing their home and keeping it. In parts of the country such as London, where demand for rented accommodation is soaring, live-in landlords are helping to ease the pressure on the rental market by providing an additional supply of rooms to meet increasing tenant demand.”

The Land Registry has waived its fees for landlords who want an extra security function in a bid to counteract increasing property fraud.

From 1st February 2012, UK landlords will no longer have to pay for restrictions to be entered on their residential rental properties deeds at the Land Registry.

The restriction is designed to help prevent property fraud by requiring that a competent solicitor or property conveyancer must certify that they are satisfied that the person selling or mortgaging the property is the rightful and true owner of the property.

Home owner occupiers will have to continue paying a small fee for the charge, but the new exemption extends to buy-to-let investors and others not living in the property they wish to protect, including elderly people in long-term care or people who have moved out of their home after a relationship breakdown.

Landlords are at a proven higher risk of property fraud than homeowner-occupiers, and there have been cases where tenants have passed themselves off as the owner of the property and attempted to sell it or raise money on it via a mortgage.

See additional “Spotlight” articles about Property Fraud

By law the Land Registry must compensate the rightful owners of a registered property if there is sufficient evidence of a property fraud.

In 2010, 30 of the 71 claims paid out by the Land Registry for fraud and forgery were by non-family members.

Of these, 23 involved properties with an absent owner and amounted to £2 Million (GBP) out of the total £7.3 Million (GBP) compensation paid.

Landlords are urged to take up the land registry safeguard and also to take extra action to prevent ID and property fraud:

  • Use the Post Office’s mail redirection service if you have lived in the property yourself and are now renting it out. Use the service for at least a year.
  • Be extremely careful about details you give out on social networking sites like Facebook. Do not give out personal information such as date of birth.
  • Ensure that all your properties are registered with the Land Registry.
  • Ensure that all your contact details are updated and correct, so that the Land Registry can get hold of you if it wants to query anything.
  • Utilise the Land Registry facility to have three addresses on the register. Email addresses, as well as physical addresses, can be included.
  • Finally, use the free facility described above to enter a restriction on your property, requiring your solicitor to certify that the person attempting to sell or mortgage the property is the owner.

Chief Land Registrar, Malcolm Dawson, said: “It is important to let home owners know what simple steps they can take to protect their property, one of which is now the ability for those at greatest risk to have a free restriction entered which might prevent their property from being targeted by fraudsters and stolen unawares. We have introduced a range of additional safeguards in the last four years and we also work closely with other organisations to do all we can to tackle fraud and identify and take corrective action when it has happened. But home owners must also be vigilant and play their own part in protecting their properties against fraud.”

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Owning your own home in England will become an unreachable target for Millions of UK citizens over the next decade.

Tighter mortgage criteria from recession-bruised banks, particularly for First Time Buyers means that home ownership is set to fall to its lowest point since the 1980’s.

The gloomy housing forecasts were made this week in a report by Oxford Economics for the National Housing Federation.

The Federation represents England’s housing associations

The report stated that home ownership is expected to decline most sharply in areas where house prices and deposit requirements are likely to rise in the medium term, such as London, the South West and the West Midlands. However the report also predicts that home ownership levels will remain stable in the North East and Yorkshire and Humber.

The rate of home ownership in England had previously peaked at 72.5% back in 2001 but the new report claims that the proportion of people living in owner-occupied homes will decline from 67% in 2011 to 64% in only 10 years time.

UK home ownership has declined as a result of higher property prices and tighter and more stringent mortgage lending criteria, despite the fact that mortgage interest rates are extremely low, following efforts by the Bank of England (BoE) to prop up the struggling UK economy.

The reality for many is the difficulty getting a mortgage in the first place. The study found that banks are incredibly cautious about first-time buyers. Whilst some lending conditions have eased for people who already own property, First-Time Buyers (FTB’s) have to put down up to 30% of the property price, as a deposit, compared to only 15% before the recession hit in 2007. FTB’s are also only able to borrow about 2.8 times their income, compared with the peak of 3.2 times prior to the credit crunch.

The National Housing Federation have been lobbying the UK government to invest more in affordable housing for a number of years, Chief Executive of the NHF, David Orr, said
“Home ownership is increasingly becoming the preserve of the wealthy and, in parts of the country like London, the very wealthy”.

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