Today we have a guest post from Crystal L. Crystal works for Gladstone Brookes, a UK based PPI claims company. They have already claimed back over £128 million for consumers and continue to accept enquiries. They have years of experience, having specialised in the issue since long before its high profile break into the news in recent years. In addition to their work on PPI, they support a number of charitable activities.
Avoiding Mortgage Myths
With so many myths floating around, taking out a mortgage on your property can be scary. Particularly with such large sums of money involved, and the news that even less people are getting approved than usual. It is important to know which claims are fact and which are merely fiction.
Fixed mortgages
Many people believe that a ‘30 year fixed mortgage’ is the safest and most reliable form available. In reality, adjustable rate mortgages (ARMs) make up a third of all home loans that are taken out and for many people, are a much more suitable option. Long term fixed mortgages are only really of use to people who intend to stay in their home for the rest of their life, such as a couple who are planning to settle upon retirement. The majority of people live in a house for just nine years, with first time buyers spending even less time on average in their home. For these people, committing to a mortgage that lasts thirty years is certainly not necessary.
Accepting insurance
For a while, many people were being sold certain kinds of insurance on their mortgages, having been told it was compulsory. Worse yet, many of the policies failed to provide adequate cover, even if the recipient were to attempt to utilize it. This is of course referring to the recent PPI scandal.
Payment Protection Insurance was mis-sold by numerous different banks. It is designed to protect people who borrow money should they become unable to work by continuing to meet their monthly payments. For those who want it, it can be a useful layer of protection but consumers are not required to purchase PPI should they not desire to. Luckily for those who succumbed to the power of the myth, banks have been reprimanded for their action and customers can claim their money back.
Paying your mortgage off
You may have heard that it is best to pay off your mortgage as soon as possible but this is not a necessity. Most people who want to speed up payment are acting out of fear or a desire to finish work and enter their retirement debt free; but for some, taking your time and paying manageable amounts can be the ideal solution.
Down Payments
Rumours surrounding initial down payments suggest most mortgages require at least 10% to be paid immediately, while others suggest as much as 20%. In fact, this is a myth and most lenders have plans that allow down payments as low as 5%, while some even offer a zero down policy for those who are unable to pay large lump sums.
Bad credit history
A popular myth suggests people with a poor credit rating will be unable to take out a mortgage. This is not true and many lenders are actually increasing the number of ‘risky’ mortgages they are willing to provide. ‘Subprime’ is a term for people who have a poor credit history and to compensate for the higher level of risk they incur for the lender, they will often be required to pay a higher rate of interest. They are not however, banned from taking out a mortgage.
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