Finance

Banks

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Banks

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The mortgage industry and Banks are going to change forever and we can only hope this will be a good thing. In the US 100 Mortgage companies have disappeared over the last year or so.

With Banks dropping interest rates many people who fixed at the height of the rates are being quoted around $20,000 per year per $500,000 mortgage to get out of their loans. In the UK some Lenders will no longer provide a variable rate on Investment Property. The mortgage can only be taken at a fixed rate. There is talk of a global bank or global currency so who knows what the future holds in that regard.

If you are looking to refinance or to take out a new mortgage good mortgage Brokers or Bankers can help. Also take the following into consideration when looking at the Lenders.
Financial Considerations

  1. Does the Bank have a large deposit base of cash from their customers. (this means they are more likely to be able to continue to keep interest rates low.)
  2. If the Banks offers a discount off the standard rate is it for the life of the loan or just 1-2 years and then reverts to a higher rate. (In most cases the smaller discounts for the life of the loan are much better)
  3. What are the costs to get out of the mortgage in the 1st few years if you sell or move (some Banks charge a flat fee and others a percentage of the loan that can be up to 2%)
  4. For investment properties are you more concerned with saving money and therefore happy to have all your properties with one Bank. Or are you more concerned with risk management and therefore have property with a variety of Lenders.

Hopefully the laws in the US may change around the sub prime mortgage market so that this crash in property prices can never happen again. This practice of having a mortgage effectively secured against a property and not the person has ended in financial suicide for the Lenders. In other countries the mortgage is always tied to the person in some way. So that the person not the banks are responsible for not being able to pay the mortgage. Therefore halving of property prices just does not happen on a mass scale like this.

Despite the 1st Home owner grants and dropping interest rates around the world mortgage finance has become much more difficult to obtain. In Australia the four biggest Banks are in the top 8 in the world. 105% mortgages were available in April last year, and around 6 Lenders financed 100% home loans. This has rapidly changed so that 105% mortgages no longer exist, 100% home loans are down to 1-2 lenders and the major Lenders are at 90-95% LVR mortgages. Low doc home loans in most cases went from 80% finance to 60% finance making a huge impact on developers and the self employed.

It is important to do your research and choose good Banks. There is a lot to consider when looking at lending and Interest Rates

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