Matt Villano is a freelance writer and editor who contributes regularly to The New York Times, San Francisco Chronicle, Sunset, Coastal Living and TravelChannel.com. He recently mortgaged his first house in Healdsburg, Calif. More about this author. Close Window Matt Villano

Matt Villano is a freelance writer and editor who contributes regularly to The New York Times, San Francisco Chronicle, Sunset, Coastal Living and TravelChannel.com. He recently mortgaged his first house in Healdsburg, Calif.

Meet the Frosts. They’re in over their heads.

Thirty-somethings Charlie and his wife Charlene (not their real names), live in Portland, Ore. Together, they pull in around $90,000. However, between mortgage payments, student loans, and daily living expenses, the Frosts are paying out roughly $6,000 a month—and that’s not including their astronomical utility bills (sometimes as much as $500 a month) and day-to-day credit card expenses that can total another $1,500 per month. Add it all up and you can see that even though the Frosts make a good living, they’re living it in the red.

And they’re not alone.

In a society built on borrowing, debt has become as American as baseball and apple pie. For most of us, there are two kinds of debt: mortgage loans, which most of us pay monthly, and non-mortgage debt, which includes credit cards, car loans, and just about everything else.

Considering that each of these loans has a separate interest rate, the more debt we incur, the more interest we must pay. The more interest we pay, however, the harder it is to pay bills in full.

In an effort to get on top of this cycle of debt, many Americans try to consolidate their number of creditors. By lumping payments together, it’s considered much easier to handle disparate payments each month. Still, it is no panacea — one false step or missed deadline can actually make matters much, much worse for borrowers trying to get out from under their mountains of debt.

The safest way to consolidate debt is with a loan from a family member who charges fixed interest and won’t penalize for lateness. Barring this, however, another form of debt consolidation is for borrowers to take advantage of promotional Annual Percentage Rate (APR) deals from credit card companies.

These deals offer percentage rates as low as 2.9 percent for a fixed period of time. The downside: one late payment can send the APR through the stratosphere to a default rate that’s usually at least 20 percent—and the new minimum monthly installment requirements might be higher than the individual monthly payments.

Another popular method of debt consolidation is to take out a personal loan from a bank. These loans usually range in size from $3,000 to $10,000, and are given at fixed interest rates for a fixed amount of time. The downside: Personal loans are unsecured and can have higher interest rates than secured loans.

Increasingly, borrowers are consolidating loans another way: by refinancing a mortgage. Refinancing is essentially paying off your existing mortgage and taking out a new one. The process, which is available only to certain homeowners, enables borrowers to draw cash on the equity they have accumulated in a house.

While this may make good strategic sense, in reality, it can be somewhat challenging to put into practice. First, depending on where you live, it may be difficult to refinance if the recent housing slump damaged your home’s equity. Second, by consolidating debt through refinancing, you are taking shorter term unsecured debt and securing it with long-term debt using your house as collateral. Most financial experts say it’s rarely wise to secure your unsecured debt this way. Considering what you could lose if you fail to make your payments, you may be putting too much at risk.

Perhaps the safest way to consolidate debt is with the help of a credit counselor. These experts work with creditors to lower interest rates and establish payment-reduction strategies for borrowers who are feeling the crunch. You might have to pay a monthly service fee, but these services have proven that they can help borrowers eliminate debt—sometimes in as little as three years.

For a list of accredited credit counselors, contact the Association of Independent Consumer Credit Counseling Agencies

Mortgage-in-Principle

Many lenders can agree a mortgage even before you find the right property through a mortgage-in-principle certificate.
You are not obliged to take up the offer with the lender and it doesn’t guarantee that you get the loan, but it can bring credibility with the sellers and give you extra confidence for bargaining. It may also speed up your eventual mortgage application, as most of the checks will have been already carried out.

A pre-arranged loan can also help you discover how much you can actually borrow, and alert you to any problems with your credit rating - these can be sorted before you find your property.

How to arrange a mortgage

You will need bank statements and payslips for the past 3 months and your last P60, unless you are applying for a Self Certification (self-cert) Mortgage.
It usually takes about three weeks from the application to the formal offer being made by the mortgage lender. This can vary depending on personal circumstances.
As a general rule, mortgage repayments shouldn’t exceed a third of your disposable income.

100 per cent loans are available but there is the potential for negative equity, and they tend to attract higher rates. A better option can be a loan that offers 90 per cent with the possibility of further unsecured advances.
Some lenders allow you to split your loan and have half on a variable rate and the other half on a fixed rate.
Mortgages offering additional benefits, such as free legal work or conveyancing are a bonus.

Watch out for early redemption fees - check what fees are payable if you decide to repay the mortage early.

Mortgage Glossery

Mortgage Rates

SVR - Standard Variable Rate - the normal rate when no special discounts apply, changes according to market conditions.

Fixed - the rate is fixed for a defined period of time. A fixed-rate mortgage is less attractive if you expect interest rates to fall as you could be stuck with an uncompetitive rate.

Discount - the rate fluctuates with the base interest rate, but at a lower discounted level for a set period. Make sure you also budget for the possibility of a rise in rates.

Capped - the rate may fall, but can only rise to a fixed limit.

Tracker - the rate reflects the changes made by the Bank of England. It can be for only a few years or for the duration of the mortgage.

Mortgage Plans

Repayment Mortgage(also called Capital and Interest Mortgage) - you repay the interest on the loan and a proportion of the capital (the original amount you borrowed) monthly. This ensures that whatever term you decided on, you are guaranteed to have repaid the entire loan by that date, provided the repayments are made in full and on time. Initially most of your payments will be interest, but towards the end of the mortgage term most of your repayments will be capital.

Endowment Mortgage - this plan combines investment and life insurance and are designed to pay off your mortgage at the end of the term, or in the event of your death. These mortgages are not as popular as they used to be because investment returns have fallen in recent years, and some people have been left with not enough to pay off the mortgage debt.

Interest only Mortgage - you only pay the interest on the mortgage loan and have to pay the original amount borrowed at the end of the term. These mortgages usually run alongside an investment plan, like an ISA or endowment policy. With endowment and ISA investment there is no guarantee that they will repay your loan in full at the end of term.

Flexible Mortgage - enables you to pay off the loan more quickly without penalties, and you can use your mortgage as a reserve if needed.

If you are self-employed, a seasonal worker or have credit problems then there are other mortgage choices that may suit your circumstances:

Self-certification Mortgage - you do not have to prove your income or supply documentation, such as wage slips. Business accounts which reflect the lowest income possible in order to minimise tax can unfortunately affect the need of the borrower to raise cash based on what they actually earn. A self cert mortgage allows you to borrow on your self declared earnings.

Non-status Mortgage - helpful if you have had credit problems, no credit status or have suffered Bankruptcy.

The Carlyle Fund is managed by The Carlyle Group, which claims some of the biggest names in politics serving in the present or past tense as employees, directors, investors, or advisers. The Fund announced this week that it had failed to meet margins calls on its $21.7 billion portfolio. A margin call occurs when a lender fears that underlying collateral is no longer sufficient to ensure the safety of a loan and calls for the borrower to either provide additional collateral or pay down the loan.

A margin call is a like a snowball rolling down hill. Once a call is triggered it takes a disproportionate contribution to shore up the loan because for every dollar of collateral that is liquidated to pay down the loan there is one dollar less to securitize the rest.
For example, suppose a lender holds $5 worth of stock as collateral for an $11 loan requiring 50% collateral - $.050 less than he holds. He calls in the margin and sells $1 in stock, reducing the loan to $10 but cutting the collateral to $4, only enough to support an $8 loan. It is indeed a slippery slope.Carlyle Capital said it had received additional margin calls and default notices Thursday from banks that help finance its portfolio of residential mortgage-backed securities and that it was unable to meet the calls from four banks

Friday the second shoe fell as lenders began to liquidate the securities underlying the Groups loans. Trading of shares in the listed mortgage-bond fund was suspended. The stock closed Thursday down almost 60 percent to $5 on the Amsterdam market where it is primarily listed.

Carlyle Capital said Friday it is in continued discussions with its lenders about its financing situation, but warned shareholders that the additional margin calls and increased collateral requirements to keep funding in place could quickly deplete its liquidity and impair its capital.

According to The Wall Street Journal, Carlyle Capital is well beyond the 50% requirement for margin support, leveraging its $670 million equity 32 times to finance a $21.7 billion portfolio of residential mortgage-backed securities issued by U.S. housing agencies Freddie Mac and Fannie Mae.

Carlyle Capital was initially launched as a private fund in 2006 but it is its parent company that is much more interesting.

According to its website, “The Carlyle Group, headquartered in Washington D.C., was established in 1987 as a “private global investment firm that originates, structures and acts as lead equity investor in management-led buyouts, strategic minority equity investments, equity private placements, consolidations and buildups, and growth capital financings.”

Among the major players that have, over the years, been closely associated with the Group are former Secretary of State James Baker, III; former Defense Secretary Caspar Weinberger; billionaire George Soros; members of the bin Laden family and, most notably, Carlyle Group Director George H. W. Bush.

The second company, Thornburg Mortgage, Inc also announced this week that it was facing default as it failed to meet “a substantial number” of new calls it was facing. Officers said that the Santa Fe, New Mexico company was trying to sell securities, offer debt, or raise capital but many analysts were speculating that the company might have no choice but to file bankruptcy.

Thornburg specializes in so-called “jumbo mortgages” those above the $417,000 conventional lending limit of Freddie Mac and Fannie Mae. The company has suffered as investors have shied away from such loans in recent months.

The economy is obviously weakening hourly with more companies releasing bad earnings, a weak consumer, and a weak housing market.

Combine this with the somewhat exuberant and emotional sell-off yesterday and MBSs have a weapon with which to fight inflation today. Unfortunately, the inflation news is not good for bonds in the long run, but it is encouraging to see them holding their ground despite such a forceful blow.

In breaking news, as this is being written (and before major news outlets will get you this info), Consumer Confidence Numbers were just released at a five year low! This should help mortgage rates for the rest of the morning.

Stay Tuned!

Being able to acquire a loan for your business, education, etc. is an advantage that people in other parts of the world may not have at their disposal. Here in the UK we have the distinct advantage of being a country that is financially secure. No matter how bleak the economy looks we are supported by a strong social system. We are able to aquire loans when necessary.

Various kinds of loans exist today in UK. However, there are several requirements that need to be fulfilled prior to having a loan approved. LoansnMortgages.co.uk has attempted to provide UK citizens as well as citizens of other parts of the world with primary information on UK loans and UK mortgages that will be helpful in establishing a basic knowledge of their financial transactions.

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To make the best mortgage decisions, you must be able to compare offers on all terms, beyond just the payment amount or interest rate. Mortgageloan.com can guide you through this process. You can learn about mortgages by reading articles and experimenting with mortgage calculators. Then you can compare rates and locate suitable New York mortgage brokers.