Nearly every type of business needs a premise from which to operate - In the case of a small business it may be possible to work from home however as most things do eventually grow and expand, it may be necessary to obtain larger working facilities.
The majority of businesses will require their own premises and are generally faced with the option of either renting or buying. The obvious choice for many would be to buy, finance allowing however there are advantages and disadvantages to both sides.
Advantages Of Buying
Retention of ownership - most businesses will need to take out a loan in order to purchase property. In the case of taking out a mortgage, the business is able to raise the capital without resorting to selling a share in the company, either to an interested party or by way of issuing shares. In this case the original owners will have retention of both ownership and control. The mortgage lender will have the right to charge interest on the loan amount outstanding however it will have no interest to a share in the business or its profits. The lender has an interest solely in the property and is only permitted to call in the loan in the event of borrower default.
Taxation - Businesses are permitted to make mortgage interest payments with pre-tax money that is deductible for tax purposes as expenses.
Cost and cash flow management - A commercial mortgage allows a business access to finance that would not usually be available. They can offer a degree of flexibility in designing a repayment scheme to suit the needs of the business, which may include fixing the repayments for a set period of time. Mortgage repayments tend to work out lower than rental payments and the borrower in this case will know what the payments will be in advance - this fixed payment can often aid the business with cash flow and managing costs. Businesses that rent a premise can be exposed to market conditions which could result in payment fluctuations on review.
Security of tenure - Businesses and individuals that rent have very few guarantees beyond the end of the current agreement.
Asset appreciation - This of course is by no means guaranteed however property has long been viewed by many as a very sound investment. The business or individual will have an asset which can potentially grow in value, just like residential property - this could subsequently increase the value of the business.
Financial flexibility - Taking out a loan by way of a mortgage to buy a business premises can free up money held in the business for other purposes. Borrowing money outside of a mortgage could prove to be more costly. It may also be possible to remortgage in order to raise finance in the future by using the available equity.
Retirement - Many people decide to hold property in a pension plan which can offer a tax-efficient way of buying the premises and boosting pension benefits.
Disadvantages Of Buying
Financial difficulty - Like any other mortgage, the mortgage lender will hold a legal charge over the property. Nearly all businesses meet financial difficulties at some stage which could potentially result in mortgage payments being missed. In the event of default the lender may take steps to repossess the property - if this happens then it would leave the business with nowhere to operate from.
Relocation - In the event a business needs to relocate, it is relatively easy to terminate a rental agreement. In the case of an owner occupier, the process is of course far more complex.
Flexibility - A business that rents has a far greater amount of flexibility that a business that is tied to a mortgage. Buying would only make sense if the business is confident over its future which encompasses two main factors - relocation & business expansion.
Drain on Capital - When it comes to getting a deposit, this can mean a huge drain on the business capital as this is usually taken from the profits or reserves.
Maintenance and upkeep - The owner of a property has management responsibilities that a tenant would not usually have - maintenance and upkeep of a property is a constant process and can prove to be very expensive.
Article Source: http://EzineArticles.com/?expert=James_Copper
Following on from our previous articles, (Adverse Credit Mortgage- Know your stuff parts 1,2 & 3) which explained what a bad credit mortgage is, how bad credit may come about and how lenders may view your bad credit and the impact bad credit can have on a mortgage application, we are now going to look at how the ‘credit crunch’ has effected bad credit mortgage products, whilst this is very complicated (I promise to keep it as jargon free and none technical as possible) we are going to look at an overview of how the credit crunch has effected the actual criteria of mortgage products in the sub prime market, what do we mean?
Well to start with the lending criteria for mortgage products has become more stringent
For example
Lets say a mortgage product 12 months ago would allow you to borrow 90% of the purchase price and allow 1 missed mortgage payment, a total of £5,000 CCJ’s and would not take defaults into account, a comparable mortgage product today which would allow the same adverse credit would probably restrict you to 85% of the property value, which means you need extra deposit, this also means less risk for the lender.
This has primarily come about due he difficulties lenders face raising capital for mortgage funds (a direct result of the global ‘credit crunch’), the majority of lenders raise mortgage funds from the wholesale money markets at the LIBOR rate (London Inter Bank Offered Rate), LIBOR is the rate of interest banks lend money to each other, LIBOR is effected by global markets and obviously, the more it costs a lending institution to raise funds, the more it will cost you to purchase which can effectively price the product out of the market, the lenders need to protect themselves and not open themselves up for mortgage products to fail is a pretty good way of doing just that, so they have tended to steer clear of high risk products (such as 100% or 95% mortgages) another way lenders protect themselves is to tighten up the lending criteria so they get, for want of a better word, a better class of bad credit clients or clients who are less of a risk, they also reduce the loan to value available, decrease their equity stake in a property (85% loan opposed to a 90% loan) there are other factors but we are not going to get technical remember.
Lenders which have not been hit quite so hard tend be ones that do not rely on funds from the wholesale money markets, this is typically called ‘balance sheet lending’ which means they use their own funds and lend their own money, they work of their own ‘balance sheet’ to determine what funds they have for mortgage purposes, speaking in very general terms, the more funds they have available on their books, the better and more diverse the mortgage products will be as they have more to speculate (that’s it for money markets and balance sheets, we are trying to keep this jargon free).
To sum up, the UK mortgage market has seen a lot of changes recently and the sub prime or bad credit market has been hit hard - but the question is - do you think you should bother applying for a mortgage with bad credit? If you ask me I would have to say yes, there are still some good products out there and interest rates should be a little more stable in 2008 which is good news for everyone, and in many respects the tightening criteria just means mortgages that are approved are a more “solid” investment for both the lender and the borrower so everyone benefits.
I hope these articles have helped you understand a little more about the processes of apply for a mortgage with bad credit and the effects bad credit has on the mortgage products available and how that might effect what is available to you. The bottom line is no two circumstances are different and there are literally thousands of products available and as the old saying goes, if you don’t ask you don’t get so if you seriously want to know if you can get a mortgage or remortgage for that matter just make sure you speak to someone who knows the market, what’s the worst they can say
Financial help clients with bad, poor and adverse credit obtain mortgages, remortages and secured loans throughout the UK. With years of experience and a wealth of knowledge in the sub prime market,Financial pride themselves on having specialist knowledge and offering straight forward advice that works. They can be found at http://remortgagelondon.info/
Article Source: http://EzineArticles.com/?expert=Carl_Baker
1. Save money by paying less interest.
Your mortgage is probably your largest debt, so you want to get the Best interest rate possible. Interest rates may have gone down since you first purchased your home. You may have improved your credit rating. You may have improved you income enough to qualify for a lower interest rate. A lower interest rate reduces your monthly payment amount. It can also be used to shorten the term of your loan.
2. Get cash for home improvements, university fees, or other needs.
Need cash for home improvements, to start or expand a business, or to pay off credit card, car, or other non-deductible loans? If your home has increased in value, you can use a re mortgage to get extra cash.
You could increase your loan amount, giving you cash that you can use any way you want. And since your interest rate is lower, your monthly payments often stay the same – or may even drop, depending on how much cash you get out.
3. Consolidate high-interest debts into a new home loan.
Credit card debt, car loans, bank loans – if you have high-interest debts, you can consolidate them into your mortgage payment when you re mortgage. The advantage of consolidating your debts into your home mortgage is that not only are your interest payments lower, but they are also tax deductible.
4. Adjust your mortgage term.
When you re mortgage your home, you can take the opportunity to change your mortgage term. Maybe you originally took out a 15-year mortgage, but want to re mortgage to a longer loan term so you can have more cash each month. Or maybe you want to reduce your mortgage term from 30 years to 15 or even 10 years, and get your mortgage paid off more quickly.
5. Change your type of mortgage.
One of the biggest reasons for re mortgaging is to switch from a fixed-rate loan to a variable-rate loan or to switch from a variable-rate loan to a fixed-rate. (With a fixed-rate loan, your mortgage payments are always the same, while with a variable one, they vary over time.)
If you plan to stay in your home for five years or less, you can save money by re mortgaging to a variable-rate loan, because interest rates usually start out lower for these loans. On the other hand, if you already have a variable-rate loan and the interest is higher than the current fixed-loan rate, it can save money to re mortgage with a fixed-loan rate.
6. Eliminate private mortgage insurance.
Are you paying money every month for private mortgage insurance to cover your mortgage payments should you become redundant, have health problems, or are otherwise unable to make your mortgage payments?
The sooner your mortgage is paid off, the sooner you can save that money. Re mortgaging to a shorter term means you get your mortgage paid off sooner and can drop your private mortgage insurance.
Article Source: http://EzineArticles.com/?expert=T._O’_Donnell
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