Home Loans in the UK

Home Loans in the UK

Owning a home is the most important dream of any person. It is one of the basic necessities of life as stated by Maslow in his ?Theory of Hierarchy of Needs?. People generally desire to have a home which not only gives them shelter, but also should be the expression of their artistic tastes, and an object of pride. Owning a home is a matter of spending of life?s savings. For some- belonging to the high earning group, it is not a problem; but for others arranging finances for their dream home is a very crucial decision, they ever take in their life. To enable people to realise there dream, financial institutions and banks offer home loans to people.

Home loans play a very important role in the lives of UK nationals. Every year there are borrowings worth billions of pounds by the UK nationals for home loans. Now days, home loans have become a necessary part of life as it is not essential that one has the necessary amount of money to finance his immediate requirement for purchasing home. One can avail home loans, after signing a document with a financial institution on a specified amount of money to go with the purchase with that borrowed money. Lenders and financial institutions keep the house or any other residential property as collateral. In the UK, home loans are offered by innumerable financial institutions at various APR. The amount of loan approved usually depends on the income and assets of the borrower and his capacity to pay back the loan.

In the UK, home loans offered are of two types:

Fixed rate home loan

Variable rate home loan

Fixed rate home loans are offered to borrowers at a prefixed rate of interest for a specified time period. In case of upward fluctuations in interest rates in the market, customers enjoy the benefit of not paying any extra sum money on the increased rate of interest. Variable rate home loans, on the other hand are left to the mercy of lenders and government regulations. In case of upward trend, the borrowers have to tighten their budget.

With the ever increasing competition in the market, more and more financial institutions are offering home loans at lower APR along with customer oriented services. All companies claim to be the leading loan and other financial services provider with the best service. In order to tap the growing market companies and lending institutions are coming up with more innovative products to cater to the requirements of all the customers. With the advent of internet, the services offered have become more fast and efficient. Now one can compare the best rate offered in the market at the click of the mouse.

The complications in home owner loans fall when borrower defaults in the payment of the monthly installment. In many cases, it has been seen that lenders start charging more interest rate than the standard rate. Wise borrowers, in such situation, switch over to a new lender for better rate of interest and fee waivers. This is termed as remortgage. Remortgage is a very prudent way of avoiding heavy interest rate. There are innumerable agencies which suggest better remortgage options to the borrowers.

Moreover, with gradual shift from the sellers? market to the buyers? market, the ultimate beneficiary is the customer. Companies even offer value added services to the borrowers to evolve brand loyalty. Companies are even leveraging strength from modern management practices and corporate governance. In the long run, company which offers the best financial solution with the right set of marketing mix will win the race.

For Detail email with the subject Enquiry.

Finance Your Home Business: Six Ways Under Your Nose

There are lots of ways to get additional capital to expand a home-based business. But before you look outside for financing, leaving the decision about your company?s progress and merits to someone else, consider these six ways under your nose to finance your home-based business:

Personal Savings

Savings are easy to tap and involve no paperwork.

The negatives: if you use the money in your business, it eats into your safety reserve and is no longer there for emergencies. It diverts funds from a very low risk investment to a high one.

Whole-Life Insurance

Whole life policies accumulate tax-deferred cash value that you can tap for your business. But the only way you can tap this cash without paying taxes is to borrow against your policy. As long as you keep your policy intact and pay premiums when due, loans remain tax-free.

The negatives: you will be converting a low risk investment into a high one; if you decide to terminate your policy or if you default on repaying your loan, taxes will be due on all cash value accumulated under the policy; if you die before your loan is repaid, any distributions to your beneficiaries will be reduced by the amount of your outstanding loan.

A Loan from Your 401-K Plan

You can borrow up to $ 50,000 of the money you have saved under many 401-K plans. There are no credit checks. Interest is usually a percentage point or two above the prime rate and the interest that you pay back to the plan will be tax-deferred to the plan. Most loans are repayable out of salary deductions over five years.

The negatives: you will have less money invested toward retirement; the dollars used to repay the loan will be after-tax dollars withheld from your paycheck; if you fail to repay the loan, the IRS considers your failure a premature distribution -- you will be charged taxes on the borrowed amount plus you may be assessed a 10% early-withdrawal penalty.

A Home-Equity Loan

These loans do require that you apply and be reasonably credit worthy. You generally can borrow up to 80% or 90% of the equity value of your home. Interest on these loans is generally tax-deductible.

The negatives: you will reduce the equity value of your home by the loan amount; you will be diverting funds from a relatively safe investment to a high risk one; if you default, you put your house at risk of foreclosure. Think very carefully before using this form of financing.

Personal Credit Lines and Credit Cards

They are convenient, versatile forms of financing. You can borrow and re-borrow up to the line limit as needed.

The negatives: you will pay relatively high interest rates-- rates range from 12% to over 18%; the minimum monthly payment on many of these arrangements will repay the outstanding balance within 42 months; it is easy to dig yourself deep into debt using credit lines and credit card debt; high outstanding balances against your line can negatively impact your personal credit rating.

A Margin Loan

You can use margin loans for purposes other than buying additional securities.

Any margin loan will be secured by your equity shares. Rates are often below prime, applying is relatively easy, and these loans have very flexible repayment terms.

Loans are initially limited to 50% of the purchase price of your equity securities. Loan repayments are triggered when the value of your stock falls below the margin limit.

The negatives: Because borrowings are predicated on volatile stock values, a margin loan can be a risky proposition; if you default in repaying, the brokerage firm can sell your securities to satisfy the loan; an untimely sell-off can have a devastating effect on your portfolio and negative tax consequences.

The only safe way to consider a margin loan to finance your home-based business is to limit advances to a relative low ratio of your stock portfolio value ? say, 25% or less.

Most of these financing methods are under your control and don?t require business plans or company financials to qualify. Although each of these methods has risks and disadvantages, so do most external methods of financing. Before proceeding with one of these financing methods, carefully consider the potential benefits, risks and consequences. Whatever you decide, it helps to know the options right under your nose.

Law Practice Finance

How do you finance a growing practice? It is impossible to have a successful practice without good cases and managing good cases to a successful conclusion requires money for working capital. So, how does a growing practice secure the working capital it needs?

Historically, growing practices in need of working capital have had limited financing alternatives. A law practice?s largest and most valuable asset, their case inventory, has been of little value for financial transactions. Most firms find that banks will only lend them rather small amounts, if they will lend at all. Banks simply do not view potential fees from cases as adequate collateral for a loan. They are simply not set up to evaluate this type of collateral. This makes it all but impossible for the smaller firm to finance large cases.

Previously, the only alternative has been to give up a large portion of the fee to a financially stronger co-counsel willing to finance the case.

Attorney Financing With a Non-Lawyer Third PartyThis paradigm has changed with the introduction of asset-based lending to the legal profession. The development of highly specialized litigation finance companies knowledgeable in case and attorney evaluation now make loans available to many practices for which no financing has previously been available. Moreover, their loan-to-value ratios are double or triple those of traditional financial institutions.

Non-traditional lenders are starting to provide loans that more properly reflect the value of a practice?s contingent assets - case inventory. While financial condition of the parties always matters in a capital transaction, even more important are the attorneys? skill, track record and case inventory.

Ethics Issues

Financial transactions with attorneys are shaped by ethics issues. The intrinsic problem is that the non-lawyer entity has an incentive to attempt to maximize its earnings to the detriment of the representation of clients. The attorney must maintain control and independent professional judgment: the non-lawyer entity must have no power or authority to direct or control the activities of the lawyer (RPC Rule 1.7(a); RPC Rule 5.4(c)). (It goes without saying that lawyers may not split legal fees with a non-lawyer entity. RPC Rule 5.4(a))

Various Rules of Professional Conduct require that:

(1) there must no interference with the lawyers independence or professional judgment or with the client-lawyer relationship, and

(2) information relating to representation of a client is protected as required by RPC Rule 1.6.

(3) revealing to a third party any information acquired during the professional relationship with a client (Confidential Material) unless the client gives informed consent.

If these conditions are met, a financial arrangement with a non-lawyer entity is permissible if:

o Repayment is not tied to the results obtained by the lawyer

o The rate of interest charged is absolute and not contingent on the outcome of the litigation.

Since there is no way to achieve this with a non-recourse transaction, the attorney must be responsible for the loan.

Beware of Sham Transactions

There are private lenders that have attempted to avoid the restrictions imposed by the Rules of Professional Conduct by using a law firm as a conduit for its transactions. If the law firm is offering nothing but financing, this transaction is likely to be considered a sham and required to comply with all of the appropriate rules.

Factoring Fees on Settled Cases

It is important to point out that there is a great distinction between a contingent fee on an unresolved case and an account receivable on a settled case. Since the issues have been resolved, the latter presents no conflict (assuming the transaction does not run afoul of 2) above); the receivable can be sold, factored or otherwise financed like any other receivable. Fees can be factored on a recourse or non-recourse basis at very reasonable costs.

The Structure of Today?s Market

Every credit market has a hierarchy and this one is no different. Rates vary from about 5% for the most creditworthy to 60% for the least.

Since case expenses including working capital represent only a small fraction of the value of a case, even the highest rate loans, which are primarily asset based, represent very favorable economics for the growing firm. Consider the following alternatives for a firm that needs $50,000 in financing in order to handle a $500,000 case with a contingency fee of 33% (potential fee of $165,000):

(1) Co-counsel Financing: 50% of the fee equals $82,500;

(2) Working Capital Loan at 60% equals $30,000 per annum. Depending on the case duration (break-even is 33 months)

Prime Borrowers

The largest and most creditworthy firms have always been able to get bank financing at reasonable terms; these have always been credit transactions rather than asset financing. Generally, the bank will take a blanket security interest on all assets of the firm, including case inventory and will usually require the personal guarantees of the principals, as well.

These prime borrowers can use their financial strength to borrow and then turn around and invest the capital in cases brought to them by smaller firms unable to get the financing themselves. The cost of these transactions can be huge since they are based on the results of the case rather than on the amount that is financed.

Non-Prime Borrowers

Just below these prime borrowers is a group of firms that are creditworthy enough to secure a bank line but not at the best terms. The amount of the line is usually insufficient and the rate is well above prime.

These firms can usually obtain significant funds from a non-bank lender at rate of 16% - %20%. A security interest and personal guarantees will be required.

All Others

The vast majority of firms have been limited to the amount of capital they can borrow on their own personal credit.

Footnote 1

RPC Rule 1.7(a), a conflict of interest exists if the representation of one or more of a lawyers clients is materially limited by the lawyers responsibilities to a third party or by a personal interest of the lawyer. This conflict can be waived by the client. However, regardless whether there is no conflict, or there is a conflict that is waived by the client, the lawyer must still insure that (1) there is no interference with the lawyers independence or professional judgment or with the client-lawyer relationship, and (2) that information relating to representation of a client is protected as required by RPC Rule 1.6.

RPC Rule 5.4(a) prohibits a lawyer from sharing legal fees with a non-lawyer entity. RPC Rule 5.4(c) prohibits a lawyer from entering into certain arrangements with a third party that would give the third party the power to direct or regulate the lawyers professional judgment in rendering legal services to a client.

RPC Rule 1.6(a) generally prohibits a lawyer from revealing to a third party any information acquired during the professional relationship with a client (Confidential Material) unless the client gives informed consent.

	©Copyright InsideTheWeb.All Rights Reserved.

	Designed by kohj

Related topics