My finance infos

Archive for January, 2012

Offset Mortgages Explained

What is an offset mortgages?

Most borrowers have savings. By using these savings to cancel out part of a mortgage whatever amount can greatly help reduce a mortgage. Instead of earning interest on savings the monies are linked to the mortgage. As you are very unlikely to get a higher rate of interest on your savings than your mortgage provider is charging an offset mortgage makes a lot of sense. Savers will also avoid paying tax on the interest their deposits would have earned. As mortgage lenders usually calculate interest daily every pound deposited is been used in the best possible way to reduce the amount borrowed.

Should I consider an offset mortgage?

Definitely! With interest rates at historic lows the likely hood is you are getting next to no interest on your savings at the moment. Worse still you will probably be earning interest at a lower rate than the current inflation rate therefore you money will be losing value! Now is a better time than ever to consider an offset mortgage.

What offset mortgages are available?

There are two types of offset mortgages. The first type is called a current account mortgage CAMs. Your savings account would be linked to the mortgage to form just one account. Customers would see one statement were the balance given would be their mortgage balance minus their savings deducted. For example if you have 5000 in savings and a mortgage of 75000 then your balance would be 70000. As mentioned above the interest is worked out daily with interest payable on this balance.

Additional CAMs allow personal loans and credit cards to be added into the account as well as any other savings.

The huge benefit being mortgage interest rates will be significantly lower than any rate attached to a credit card and most likely any credit card. This in itself will save a homeowner a significant sum in interest payments as well as give the convenience of having just one repayment each month.

There is another type with the difference being that the accounts are kept separate.

Pros and Cons

The main benefit especially at the moment being while interest rates are low is the money being used usefully rather than sitting in a low paying savings account. Lumpsum overpayments are possible without penalties incurred.

Unfortunately the chance of finding an offset mortgage with a market leading rate of interest is very unlikely. It will probably be cheaper to go for a more traditional mortgage unless you have a large amount in your savings account.

About the writer:  Direct Traffic has 2 years experience in the financial service industry and working with mortgage advisers. They enjoy writing on various financial topics.

The Philosophy Of Spending Too Much

The biggest misconception among individuals who think they dont have enough money is that they think they need more money to cover their expenses which will supply them with that ultimate lifestyle they are aiming so hard to achieve. But one common pitfall associated with personal finance will more often than not still leave them dissatisfied even after they have reached that stage where they do get more money. This can be summed in the idea that personal expenses will immediately increases when the cash flow increases. But the real problem or solution lies in actual fact in the personal cash flow management of these individuals.

Looking at the economy one soon wonders how so many people could land themselves in so much trouble in such a short time. On their behalf however one has to take into account that the recent events in the world of global finances was rather unforeseen especially in preceding times like the housing bubble where prices seemed to rise and rise thus making the economy appear stronger. But the bubble burst and the correcting wave has now resulted in so many people facing any measure of bad debt and foreclosures on those homes they cannot afford to pay any more. Again one wonders if the real problem isnt in the mentality and brought on by external influences that drive a nation to buy buy and buy!

In recent financial news the United States has reached a level of inflation not seen for close on two decades. Gas prices have also edged past those marks where many people thought theyd never will and job cuts have risen and are set to rise in the not too distant future. This has lead to many sources of information on personal finance management to question those motives by which people exhibit a lack on cash flow management skills. One of the issues highlighted is that individuals remain unaware of the true value of that which they buy. Take for instance cars television sets and personal computers all of which can be purchased with by paying on a monthly basis but also all of which lose their value at a staggering rate.

The moral conclusion from the current financial debacle which faces consumers directly is that cash flow management is necessary as well as an examination of those things really needed and those things that are merely wanted. Where the first serves to contribute to life in general the second is a ostensible luxury which in reality only serves to drain funds. As such it is important to note that the actual problem lies in those things we allow to influence our lives as opposed to our lives influencing our surroundings.

About the writer:  Mint is a powerful easy and secure Webbased solution. It is the smartest way to manage your finances. For your free money management tool do visit our site.

Borrowing Up Savings Down Spells Trouble For UK Economy

Latest financial industry figures show that UK savings balances are reducing at the same time that borrowing levels are on the increase as millions of Britons struggle to pay their increased mortgage payments and increased utility bills.

The credit crunch is being blamed for people using their savings to pay for luxuries such as summer holidays and that draw on cash reduced the UKs savings balances by 11billion in the third quarter of 2007. However at the same time according to Unbiased a website promoting independent financial advice UK consumers also increased their borrowings by 11.7billion as people took out more loans and increased credit cards usage.

Unbiaseds research examines the relationship between savings and borrowings excluding mortgages and highlights that over the third quarter of 2007 UK consumers borrowed 35p for every pound saved. That represents a significant increase on the figure of 13p borrowed against every pound saved in the previous quarter.

Chief executive of Unbiased David Elms said: “Weve seen a lot of financial markets activity in the third quarter of 2007 which marked the beginning of the Northern Rock crisis. Summer interest rates were still at a relatively high 5.75 and many people will have seen their disposable income reduced as the credit crunch kicked in. Although the drop in savings and the high level of borrowing come as no surprise it is worrying.”

The situation is unlikely to improve in the short term especially during the run up to Christmas when spending is predicted to increase significantly. That Christmas spending has to be funded somehow and many financial experts are expecting it to be by credit card. Indeed experts expect the amount spent on UK credit cards over the past three months to rise sharply not only fuelled by Christmas spending but also by worrying evidence that in the light of the credit crunch many are using their cards to fund daytoday expenditure.

Many Britons have got used to the financial landscape of the last 10 years in which consumer credit has been easily accessible but many expecting to take advantage of new interestfree credit card deals are likely to be disappointed. The credit crunch has bitten and many lenders have drastically tightened their lending criteria leading to record numbers of applicants being turned down for new credit cards.

Unfortunately as many are now finding to their cost it is no longer a case of being able to compare credit cards and transfer your balance interestfree to the one you want. Indeed it is now the credit card companies that are doing the comparisons and cherrypicking their cardholders.

About the writer:  Paul McIndoe is an online freelance journalist and keen hillwalker. He lives in Edinburgh with his two dogs.