MORTGAGE ADVICE - COMMERCIAL and RESIDENTIAL - AND INSURANCE ADVICE

Residential Mortgage

Among the various types of bank loans is the Residential Mortgage. A loan secured by real estate which is used for a personal residence. Residential mortgage is typically backed by a residential asset instead of a commercial real property like building structures or land specified to yield revenue.

People forget it is just a loan, not an instant lifestyle ('home owner') or status symbol ('big shot home owner') - and has to be paid back for a very long time, usually until retirement (or beyond these days) - 20, 25 or 30 years.

Obviously it pays to start your mortgage early in life; general inflation can reduce the size of payments, which is why the advice used to be to buy the biggest house you cound afford (this was before big bubbles in prices made that dangerous advice).

Commercial Mortgage

A commercial mortgage is a loan for a piece of land or commercial property, with that as a collateral, same as a residential loan. It is like a regular mortgage on a residence but the difference comes in what is being provided as collateral, and what the building is used for and expected to function as; a commercial building is a business in itself through business rents.

A commercial mortgage is for a business, not an individual, as the risk is usually too high; companies are formed to limit the liabilities (of debt) - hence the term in the UK, 'limited company'.

Bridging loan (or bridge loan)

These are very useful if expensive in interest rates - if you can get one these days. Sorry to keep on saying 'these days' but the mortgage and loans situation is the polar opposite of what it was in 2007 before the recession - or rather, before the banks noticed they had run out of money.

Anyway to continue, if you need to fund a property purchase in a hurry - which does happen if, say, a great bargain comes up, and competition is fierce - then you might need 20,000 UKP or millions of pounds in order to fund it - this could be anything from an old wreck bought at an auction slightly over budget (which has happened to the editor), or to fund a purchase that is a over budget but you have money coming in later on. There are many situations where a bit of extra capital is needed.

Typically the bridging loan will be 1-6 months, as the interest rates are higher than normal. The lenders are qquite happy to keep it going longer, if you keep on paying the higher rate sof interest.

When I have done this type of financing, the people concerned are friendly enough and smooth things though - but then, I never had any trouble paying back in time. People go bust doing this sort of thing so be careful. Better not to need bridging finance in the first place, but needs must.

Above: New building being built - by the sea and beach - insurance guarantees on new builds

Building Insurance

Our home is often the most valuable asset in our life and the contents inside are frequently not only expensive but of high sentimental value. Disasters such as flood and violent storm damage, earthquakes, landslides or robberies, fire damage and loss, are not only traumatic, but by not having insurance we are also open to financial loss. It is a good idea to insure your belongings (the contents) as soon as you can, not put it off until the last minute.

Buildings insurance is required by the mortgage lender otherwise their collateral might go up in smoke. Contents insurance is your concern.

Building insurance is a type of insurance service that covers the cost of any damage that happens to the buildings, either your home (residential) or business (commercial), specified as, installation change, accidental damage (for example by a water leak), subsidence, fire, tornadoes, hurricanes and landslides, and anything else that is in the detailed insurance documents (the 'small print').

Buildings have to be in a fit state to be insurable.

When you take out a home loan to buy your dream house the lender has to have buildings insurance in place before the money is agreed. This is to make certain that if the building was damaged or destroyed your house would be reconstructed.

Even if not legally required, it add to your peace of mind, as if the disaster chanced to occur, just after you bought the house (perhaps even before you had moved in), or indeed anytime later, and you had to rebuild the whole house, the very large sums needed are available. You are not left paying for a home loan on an asset that no longer exists.

Anything you are not able to remove from your home is covered in building insurance. In order to decide both the quantity and the extent of your insurance coverage you need to be considering cost and budget. There are many low cost policies which cover few things so if you need to insure not everything within your home, opt for a low cost service.

The excess (amount you have to pay before the insurance come sinto play, say 250 UKP, means you pay for small repairs and also lose 250 UKP off any large repairs.