Second mortgages are an increasingly popular way for homeowners to raise finance by using the equity in their property. Second mortgages are also known as “home equity loans” and “secured loans.”

Essentially, second mortgages are loans secured against properties on which there are already first mortgages from different lenders. As an alternative to second mortgages, applicants could receive a further advance on their first mortgages instead.

Second mortgages are used extensively throughout the UK by homeowners who wish to release equity from their homes in order to fund activities such as home improvements, debt consolidation, purchasing a new car, or funding a holiday.

Lenders are willing to approve second mortgages for almost any purpose so long as the combined loan-to-value ratio of the first and second mortgages does not exceed their allowable upper limit.

Basically, home owners who have equity in their properties can secure second mortgages against them in addition to the first mortgages. The funds from the second mortgages will be deposited into the borrowers’ bank accounts which can then be used for any purpose.

It is important to note that second mortgages are usually secured against the borrowers’ homes. Taking out second mortgages could therefore lead to home repossession if the borrowers do not keep up with their repayments.

Secured loans normally have a shorter term than first mortgages and also attract higher interest rates due to the perceived increased risk by lenders. Therefore the monthly repayments on second mortgages can seem excessive when compared to first mortgages.

If the repayments on second mortgages seem too high, borrowers should instead consider releasing equity be increasing the balance of their first mortgages. Because the interest rate will probably be lower, and the term of the first mortgage longer, the increase in the monthly repayment should be less than for the monthly repayments on second mortgages of the same amount.

If applicants would prefer to not put their homes at risk they may wish to consider applying for unsecured loans instead. Unsecured loans, or personal loans, are not secured against the equity in the borrowers’ homes and therefore do not put their properties at risk.

It should be noted that unsecured loans usually come with higher interest rates than second mortgages.

If borrowers are in any doubt with whether or not to use second mortgages to raise funds, they should consult with an independent mortgage adviser.

By: Michael Sterios

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Even though we are currently in a buyer’s market, many land owners are looking to sell it to potential buyers. Before an individual can sell it, they must know how much to value their own property in order to attract potential buyers. Most individuals appraise property before they sell it.

Valuing commercial property is very important for an investor. If an individual values it at a price that is too high, then it can prevent the sale from taking place. If a piece of a property is valued too low then the seller will lose out on a potential profit. The best way to evaluate commercial land is by an appraisal.

There are many ways of appraising and deciding commercial property market value for a piece of property. Many owners will usually pay for one or two appraisers and compare each individual’s evaluations. Most professionals appraise a piece of land by developing an opinion of the value of property. An appraisal of a land occurs because no two properties are identical and the value of all of them differs based on location. Because estimating a property’s value does not always utilize a market-based pricing mechanism, an expert appraisal of the real estate is needed.

Usually appraisals are performed by a licensed appraiser. Many times the appraiser bases his or her opinion on market assessment and “the Highest and Best use of real property.” An appraisal is most often reported on a standardized report form. If the appraisal is for a complex piece of property with many unusual characteristics, the appraiser will typically report their findings in a narrative report.

An appraiser will determine a cost approach, a sales comparison or salary-based approach when assessing your property. The cost approach suggests that the value of the property is equal to adding up the value of the land minus any needed improvements. This approach is usually used on newer structures and less on older structures. The sales comparison approach evaluates the price per unit area of land similar to other appraisal amounts of similar properties in the marketplace. This approach is the most objective of the three approaches and allows the appraiser very little wiggle room. The salary-based approach is used to value commercial and investment properties, because it evaluates an income stream.

Since these techniques vary greatly amongst each other, the technique used will depend on what type of asset you have. For example, appraisals of investment property such as skyscrapers may be subject to the income approach, whereas retail or office buildings may be subjected to the sales comparison approach. An apartment building may be more subjected to the sales comparison. Before you sell your property, make sure you appraise it with an expert.

By: Andrew Stratton

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Kansieo.com

Real estate is one of the best investments of all time. Land is in limited supply while population growth is growing at an exponential rate. Additionally, resources like timber are also being depleted forcing home material prices upward. A home is a tangible asset people will always need. This fact, has kept real estate prices relatively stable over the years. In addition, its illiquid nature keeps the prices from moving wildly. Market changes happen slowly over a series of months and years.

Why Real Estate?

Real estate has produced more millionaires than any other investment vehicle. For one reason, more people have invested in real estate than anything else because they need a place to live. Real estate is a wonderful investment vehicle. Here are some of the reasons it is such a good investment.

Leverage

You might ask yourself, “What is better, the stock market or real estate.” The stock market will give you the best returns. However, where will you get the money to put in the stock market? Nobody will give you a 200k loan to invest in the stock market. With real estate, you only have to put up a small amount of the total investment. The only requirement is that you have relatively good credit. I think of it like this. The bank needs to lend money and a responsible person to look after the investment. And because real estate is a pretty safe investment they are willing to lend. Some pretty ordinary people own several homes that add up to millions of dollars. All they really needed to do was show the bank they are responsible through credit and have a reasonable income.

Tax Advantages

Real estate has many tax advantages. On your own home, you can deduct interest paid to lower your adjusted gross income. On rental properties, you can deduct expenses, repairs, management, points paid on loans and many other items. Consult your tax advisor. Is there any other investment that will let you deduct items for tax purposes? Is there any stock or bond that helps lower your adjusted gross income? The bottom line here is that Uncle Sam wants to encourage real estate investment. Real estate brings in a lot of tax dollars and helps poor people have a place to live. Imagine what would happen if nobody built apartments or had rental homes for those with poor credit or low income. People really need real estate and the government recognizes this.

How To Choose A Home That Will Appreciate

It’s a difficult question; to say the least. However, there are several factors to look at. Typically, new developments in the slightly upper middle class range will have the largest home appreciation. You will know a development like this because it will look a little nicer than most of what you see around town. The kitchens might have an upgrade like granite countertops or the yards may be slightly larger than average, for the area. When you go there, you will feel like the area is somewhat unique and luxurious. Slightly above average new homes are sought after by a lot of people and still affordable; barely.

Price Appreciation Areas

There are always lists to look at. Forbes and Moodys always put out real estate lists that are fun to look at. The main factor is supply and demand. Demographically, where will there be a lot of job creation? And, where are houses selling quickly? The time it takes for houses, on average, to sell will tell you whether the market is hot or not. Ask your local realtor, “What are the average days on market for a house to sell?” Hot markets will take only a few days. Slow markets may take around six months. Areas with the highest reputation will have the largest appreciation. Talk to your local Realtor about the most attractive areas of the city. If you can’t afford a lot, get something small, like a condo, in a good area. You will have much better luck than with a large home in a bad area. Once your home appreciates, you can sell it and move up to something better.

Interest Rates And Home Prices

If rates are low, more buyers can afford higher priced homes. In reverse, if rates are high, not many buyers can afford an expensive house. The interest relationship affects, in a big way, the pool of buyers. Recently, the last five years, or so, negative amortization loans have become quite popular. There has also been a huge increase in interest only mortgages. Countrywide Mortgage, the largest mortgage servicer in the country led the way. They came out with these new products; negative amortization and interest only. What this did is increase the amount of purchasing power for buyers. When purchasing power went up, houses went up to account for the higher purchasing power. The reason is that there are not enough nice homes to go around. Builders could pretty much ask and get whatever people can afford. The winners of this debacle were builders, real estate agents, mortgage brokers, and local governments (more property taxes through appreciation). Unfortunately, lenders like Fannie Mae and Freddie Mac are losers because so many people can’t make their payments. It’s what the subprime mess is all about. It’s actually a good correction in the market. These companies, in effect, jacked up real estate prices and got people into homes they can’t afford. The market correction will be a good wake up call that they should be more responsible to consumers. To summarize, high rates will lower home prices and lower rates will raise home prices.

By: Kristy Snow

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Kansieo.com