Information on Mortgages

Rising prices or falling prices

Building a DIY house

Basic advice on Mortgages

10 questions to ask when property buying

House price surveys

Debt-to-Income Ratios

Understanding how house prices are faring in the local area is essential when it comes to buying or selling a property. A seller can make more money, as they will have a better understanding of how in demand property is and can price it accordingly. For a buyer, it can be the difference between buying into an area on the up or vice versa.

In a booming market the biggest give away is a growing number of estate agencies opening, and hordes of 'For Sale' and 'To Let' boards lining the streets, plenty of advertising of property because the companies know they can get the money back, skyline of scaffolding and cranes is another big clue, as this often means large property developers are moving in to accommodate the influx of new residents. Gentrification Research to see if the area is on the up.

In the wane - The sign of a stagnant market is not always easy to discern. Indecision and stalemate are the big symptoms, as buyers and sellers stick stubbornly to their guns.

Fewer homes will be on the marketed.

Not as much advertising.

Fewer people renting, and fewer property companies.

Rising unemployment

Building a DIY house
The combined cost of land purchase, building materials and labour should be less than buying a pre built property, as you don't have to pay the developer's profits. Self-builds can be worth 30% more than the land and build costs .

Lenders will only offer a mortgage in the first place if they are satisfied with the architect's drawings and any relevant planning permissions

Ways to finance include equity release from an existing property or to take out a mortgage. Most companies that are happy to lend for self-build. Some people choose to buy a caravan and live onsite, although this isn't always practical if you have a family. Mortgage choice

In terms of the specific self-build mortgages on offer, it is usually possible to choose from a selection of fixed and variable rate products and most lenders will offer the exact same interest rates as on their standard mortgages.
Lenders often want the property built within two years

As to how much you can borrow, again the usual rules apply, and this will generally depend on your income - or joint income if applying with someone else - and any other financial commitments you have.

Self-builders should be aware that the maximum loan to value on most self build mortgages is 75% rather than the 95%.

So the borrower must stump a fairly sizeable deposit.

But possibly the biggest difference between self-build mortgages and conventional residential loans is the way in which the loan is transferred to the borrower.

With traditional self-build mortgages, most lenders will release funds in four or five blocks as the build progresses rather than as a single amount in advance.
"Arrears stage payments" are only made once each build work section has been completed.

Fresh approach

There is a small, growing number of providers that lend up to 95% of the cost of the property.

Because this means borrowers do not have to provide a big deposit, many can often remain in their existing home while the new property is being built.

Lenders only offer a mortgage in the if they are satisfied the architect's drawings and relevant planning permissions, and believe the timescales and budgets are realistic. lenders may insist on architect assisted construction and most require builders are insured appropriately to cover issues arissing before, during and after construction. Show enough expertise, some lenders consider allowing you yourself to oversee the project, as long as an architect, or National House Building Council inspector, confirms each stage has been completed to satisfaction.

Basic advice on mortgages

Paying back the capital

Either pay a little at a time as you go repayment mortgage or pay it all off at the end Endowment, Isa and pension mortgages.

Repayment mortgages each monthly payment pays off a little of the debt, with interest on loan.

Endowment Mortgages An endowment policy (investment in shares) to provide life insurance and save funds to repay the loan at end of the term (usually 20-25 years). If a share investment performs badly, it could face a shortfall.

Individual Savings Account (Isa) mortgages These work on the same theme as endowments, but use an Individual Savings Account as loan repayment method. Once again watch oput for poor investment, and the risk factor.

Pension mortgages - Very risky and similar to ISA and endowment mortgages, but work on the basis that pensions (both private and company) provide tax-free cash on retirement. At the end of the mortgage term the loan is paid out of your tax-free lump sum. They are not often used as it can be risky linking pensions to other investments.

Variable rates - Pay going rate on your loan. The mortgage rate changes every time interest rates change or, as in most cases, the overall effect of any interest rate changes is calculated once a year and payments are altered accordingly.

Fixed rates - Risky. The interest rate is fixed for the period agreed - often two to five years.

Capped rates - These are fixed, but if rates fall you pay the lower rate.

Cash back deals - lenders offer money back if you take a product.

Discounted rates - borrower is offered a discount off the lender's variable rate.

The government suggests buyers should ask these 10 questions before agreeing a mortgage with a lender.

1 How much can I afford to borrow?
This deals with such questions as "What will the cost be each month?" and "What fees will I have to pay?"

2 How can I tell which mortgage rate is best for myself?

3 What is the best type of mortgage for me?

This deals with how to understand the jargon, such as "What do fixed rate, variable rate, discounted or low-start, and flexible mean?" and "Will this mortgage suit my circumstances now and in the future?"

4 How should I repay it?
"Why are you trying to sell me an endowment policy, or a pension or an Isa?", "Why is it best for my circumstances?" and "What commission are you being paid?"

5 Can I make lump sum payments to reduce the size of the loan?

6 Are there any redemption penalties?

7 Does this mortgage come with compulsory insurance?

8 What other charges will I have to pay?

9 What happens if I can't pay?

10 What about the small print?

Land Registry

Every three months, considered the most authoritative.

All property sales in England and Wales have to be logged with the Land Registry.

Proceeds of all transactions are added up, and divided by total number of sales .

Registry can provide an accurate picture of prices down to postcode level.

A similar survey is produced in Scotland, known as the Register of Scotland.

Government price survey

government has its own monthly house price index.

lending information from about fifty lenders, which is collected through the Survey of Mortgage Lenders.

It will only appear two months in arrears.

Nationwide and Halifax

Perhaps the best known snapshots of the property market are provided by Britain's two biggest mortgage lenders, Nationwide and Halifax.

Both surveys cover the entire UK, rather than just England and Wales.

Royal Institution of Chartered Surveyors (RICS)

reflects confidence in the property market rather than what is actually happening to house prices.

Three hundred surveyors and estate agents in England & Wales asked if they feel prices are falling or rising.

Respondents are also quizzed on a host of other related issues.

RICS survey is the first to show any sea change in the market.

Debt-to-Income Ratios

To determine a maximum mortgage amount, lenders use guidelines called debt to income ratios. The % of your monthly gross income before taxes that is used to pay your monthly debts. Because there are two calculations, there is a "front" ratio and a "back" ratio and they are generally written in the following format: 33/38.

The front ratio is the % of monthly gross income (before taxes) used to pay housing costs, including principal, interest, taxes, insurance, mortgage insurance (when applicable) and homeowners association fees (when applicable). The back ratio is the same thing, only it also includes your monthly consumer debt. Consumer debt can be car payments, credit card debt, installment loans, and similar related expenses. Auto or life insurance is not considered a debt.

Links

http://money.cnn.com/real_estate/index.html CNN Money secyion on property

http://www.realestateabc.com/loanguide/ Information on mortages

http://www.hud.gov/ USA department of housing