Thursday, February 26, 2009

Check Those Loan Figures Before You Sign!

The phrase “economic downturn” is touching the lives of more and more people every week. Families who were oblivious to the downturn 12 months ago now have to face the grim reality of financial crisis.

After being used to years of not worrying too much about your debts, after all at the rate your property is rising, there’s nothing to worry about, we’re all coming down to earth with a very big bump.

People who were full of confidence on the jobs front, too, are realising that perhaps they’re not quite as safe as they’d thought or hoped.

Debt Advice centres are reporting an unprecedented increase – in some areas, an increase of 500 per cent in calls in people seeking help with their problems, even on the “ right side of town” – one such centre reports that just 135 clients on their files average at just under 40,000 pounds per client – totalling 5.1 million pounds in total.

Many fixed rate mortgages have now ended, meaning many thousands of families are having to budget for much higher monthly mortgage repayments, as well as increased utility bills, petrol or diesel and food costs. The end result for many is that their overall debt can add up to as much as three times their annual income

Given these figures, it is not surprising that lenders want to keep their “clean” clients, those who have a good, solid payment history. These are the clients who should still be able to find a good deal on a fixed rate mortgage. If you have enough equity in your property (basically, your property is worth more than you wish to borrow against it) or a decent deposit to bring to the negotiating table, then the deals are still out there.

Don’t assume that a less than perfect history means you won’t get a mortgage, but you may have to pay a higher rate to get the kind of deal you seek.

Whatever your circumstances, prepare yourself by shopping around (use the internet or contact an Independent mortgage broker) to check fees. If the last time you tried this exercise was when you took out your previous mortgage, then you may be shocked to find that a 2 year fixed deal fee can now be just under 1500 pounds (up to 50 per cent more than a year ago) and a 3 year deal fee just over 1130 pounds (an increase of almost 100 per cent in a year).

Always take these into account – your broker may offer to add them on to the mortgage - think of the real cost over the term of the mortgage.

As always, the advice is shop around – clients who are a good credit risk should still be able to get a couple of mortgage options from a decent broker.

Most importantly – keep your payments realistic – factor in future living costs and keep your mortgage at a level you can afford should your circumstances change in the future, and with luck, you will ride out this downturn without needing debt management advice!

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