| Archive for 'Financial Issues and Solutions' |
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| Sub-prime mortgage brokers in the dock |
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 Posted on Wednesday, December 12, 2007 |
Why a quick sale may be better than a sub-prime mortgage? Today the citizen's advice bureau reports mortgage lenders willingness to sell mortgages which are 'Set to Fail' and lead to repossession. We have talked about the fact before that people have to be careful when taking on sub-prime mortgages. When you are in financial difficulty the mortgage companies increase the interest rates and charges, whilst the mortgage brokers charge large fees which get added to the mortgage amount so that it is not fully transparent that you end up owing more money that you did before.
One problem that the Citizen's Advice Bureau highlights is that people inappropriately trust mortgage broker's advice - as do, in our opinion people rashly trust estate agents advice too readily without questioning the agent's motives. For example, the reason estate agents and mortgage advisors advise against selling your house quickly to a professional property trader is that they stand to lose out in the short term. People have to remember that estate agents and mortgage advisors do not have their best interest at heart. As property traders we always advise people to take independent advice before making decisions on selling their property or taking out a mortgage and advise them not to be rushed into making a decision.
When people are in financial difficulties and are struggling to pay their mortgage, there is a large emotional attachment to staying in a property. However, people need to look as coldly as possible at whether they can truly afford to stay in the particular property - or whether they would be better to 'downsize'. Trying to stay in a property that cannot be afforded will only lead to larger problems further down the line. If you re-mortgage, as a sub-prime borrower, then you will be faced with higher interest rates, which may mean you have escaped eviction from one borrower, but will be evicted, with even higher debts by your sub-prime lender than if you had sold when the initial problems started.
We also note that selling your house on a sell and rent back scheme will not be beneficial for all situations and you can still end up with a rental payment that is too expensive and end up being evicted quickly if you cannot keep up payments. Both options can end up in you losing money, having a bad credit rating and having to move home anyway - so thorough evaluation of your financial situation is key before making such decisions.
Our other advice is that when looking at a sell and rent back option, home owners should look to work with a professional company as they are more likely to consider your situation and be clear with you what the financial implication of a deal is and whether you will be able to afford the on-going rental payments. The more professional the firm in this industry, the more concerned they are about maintaining the quality of their brand and hence do not want to be in the situation of evicting people. One-man bands do not have these concerns and hence are more likely to let you enter into a deal where they know you are likely to end up being evicted soon.
Therefore, consider re-mortgaging very carefully if you are struggling to make mortgage payments, and if looking at sale and rent back, look for professional companies who provide sale and rent back. |
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