Feb 09
adminCheap Mortgages
Reverse Mortgages – Get The Money You Need – Part 1 Of 4
Reverse Mortgages are loans that allow you to borrow back the equity in your home. Just as you once paid the bank, the bank now pays you. Isn’t that a nice change?
If you are 62 years of age or older, they are a way to borrow against the equity in your home (the value of your home minus any mortgage debt you now have) to provide you with tax-free income. Seniors struggling because of falling retirement account balances and increases in the cost of medical care are looking for new sources of cash to maintain their standard of living.
The amount you can borrow depends on your age, the value of your home and interest rates.
Fortunately, you continue to own and live in the home for the life of the loan. There are no loan payments until you sell the house, die or move out for a period of a year or longer.
You can get the money as a line of credit, a monthly payment, a lump sum, or a combination of all of these. A monthly payment is a guaranteed of income for as long as you live in your residence, whereas; a lump sum could be used as you wish, such as to purchase an annuity that could provide you with a life long income. With a line of credit, you don’t have to pay interest on money you haven’t withdrawn and your money will earn interest while it’s waiting to be used by you.
A Reverse Mortgage might be worth considering if:
-You plan to stay in your home.
-You want to enhance your lifestyle and enjoy your golden years.
-You want funds for major expenses such as medical bills, or for major home repairs.
-You need additional income to live on and your only significant asset is your home.
-You want the peace-of-mind that comes from knowing your financial needs are taken care of.
-You own your home free and clear, or you have a small first mortgage.
-You don’t plan to leave your home to your heirs.
What are some of the potential advantages of Reverse Mortgages?
-It can help you maintain your financial independence or improve your quality of life.
-You can stay in your home and keep title to the property.
-The money you receive is tax-free and is not usually considered income.
-You make no payments until the loan ends or the house is sold.
-Your income is not a consideration in obtaining the loan since there are no payments until the loan ends.
-You cannot owe more than the value of the home at the end of the loan.
If you’re a senior, I hope you can see the benefits of taking advantage of this income source, if you need it.
This is a four part series, one each week right here, same location. In Part 2 next week, we’ll explore much more, including the drawbacks of a reverse mortgage and what types are available.
Jan 12
adminCheap Mortgages
Interest rates can affect the type of mortgage you choose and dictate when its wise to make a change. Here are a few of the factors that can be affected by a swing in interest rates:
Choosing a mortgage
When interest rates are rising, a fixed-rate mortgage is usually a good choice, since it locks in the current rate and protects you from the higher rates to come. When rates are falling, an adjustable-rate mortgage (ARM) becomes more attractive, as its interest rate changes periodically (usually every one, three, or five years), allowing you to benefit from the new, lower rates.
Some people choose an ARM even when rates are rising. This is because the interest rate on an ARM is substantially lower — as much as two percentage points lower than that of a 30-year fixed-rate mortgage. That means youll pay less until mortgage rates have increased a full two percentage points. After that, youll pay more than a fixed rate.
There are also hybrid ARMs, which have a fixed rate for a certain time period — typically three to 10 years — and then become adjustable. (A 51 ARM, for example, has a fixed rate for five years, after which the interest rate is adjusted annually.) Hybrid ARMs can be the right choice if rates are likely to rise in the short-term but then flatten or fall. However, these long-term trends can be difficult to predict.
Refinancing
A change in the interest rate trend can make it worthwhile to switch to a different type of mortgage. When rates are falling, you can save money by moving from a fixed-rate to an adjustable-rate mortgage, so you can benefit from the lower rates. If interest rates appear set for a sustained rise, switching from an ARM to a fixed-rate mortgage can lock in a lower rate and protect you from higher payments. However, you should make sure that any closing costs dont offset the benefits of refinancing.
For more information on mortgages and interest rates, visit http:www.lendingtree.comcecyourhomeyourmortgageinterest-rate-trends.asp?
Sep 15
adminCheap Mortgages
Nothing is ever certain in the world of finances, and theres no way of predicting how the market will change in the future. However, if you want to be able to plan your budget precisely, then a fixed rate mortgage might be the right option. The repayments will be fixed for a set period of time usually between the first one and five years of your mortgage, so you can be sure that any rises in the interest rate will not affect you. The term the rate remains fixed can be as long as ten years.
Fixed rate the pros
For those on a tight budget, it can be useful to know exactly what will need to be set aside each month for mortgage repayments. Also, it can be a good move to fix your rate when the economy looks like its about to change and interest rates rise. If, from studying the market, you anticipate that rates are set to rise in the near future, then taking a fixed rate now could mean you will save money over the next few years. Even if the Base Rate set by the Bank of England rises, you will be protected, at least for the term that your payments are fixed.
Fixed rate the cons
If the market changes and interest rates fall, you could lose out on a reduction in rates. Fixed rate mortgages are often set at slightly higher rates than the cheapest deals. Be aware of redemption penalties and clauses that tie you to your mortgage these can last much longer than the fixed rate period and you may find it prohibitively expensive if you want to change lenders or pay off your mortgage.
Thousands of people spend a lot of time studying the economy, and even the financial experts who predict market conditions often get it wrong. Its impossible to foresee how interest rates will change although you may be able to apply common sense to a certain degree, there is no guarantee that a fixed rate mortgage will beat the SVR five years down the line. Ultimately, you have to make the best decision you can based on the situation as it stands.
You should also check to see if the fixed rate mortgage is portable this means that if you want to sell up and move house during the tie-in period, you can transfer the mortgage to your new property without incurring any penalties.
Aug 11
adminCheap Mortgages
Mortgages are secured loans that are given to first time buyers, homeowners and people who have bad credit. Once you are accepted for the loan, you must repay the debt, which will include interest rates. Some refinancing loans have additional fees attached. The secured loans have collateral attached, means that if you fail to make payments, you are subject to foreclosure or repossession. The bank will come and take your home and sell it for the amount you owe.
This is why it is wise to make sure you know what you are getting into if you plan to refinance to consolidate your debts. Some loans permit buyers to repay the loans in 25 years, while others allow 30 repayments. Few of the lenders available on the Internet that offer refinance loans for consolidation of debts are aware that people go through hard times-or at least they don’t deal with people directly enough to actually feel this hardship through talking to them.
On the loans that offer lower interest rates, combine payments for debt consolidation. If you can manage to pay for the loan in the time stipulated, it is likely that you will take less time to pay back the loan amount borrowed. Once you find a lender to refinance your mortgage and combine your bills for debt consolidation, you will receive a loan based on capital and interest.
The Repayment loans for refinancing and consolidation make it easy, since the lenders will combine the interest and repayments into one monthly installment. Still, few lenders will allow you to repay the interest rates only; however, be aware that these types of loans do not combine your payments for consolidation; rather they put you at risk in some instances.
Still, there are several types of loans available that will help you refinance for debt consolidation, so keep an open mind and mull over your choices carefully before you make a final decision.
One of the most important tasks debtors must carry out to achieve in debt consolidation is keeping away from complications. When debtors have bills that are behind merely because they didn’t have the cash to repay the debts, then their stress will build. Some people may go on binge, spending instead of paying their bills, and procrastinating instead of working to restore their credit.
These people may believe that after three, seven or ten years the problem will end, since the credit reports remove any pending debts after seven years and any bankruptcies after ten years. The fact is, the problem doesn’t go away the problems only get bigger. Yes, it is true: after three years, if you manage to payoff a debt, then the debt is removed from your credit report. In addition, yes, it is true if after seven years you failed to make payments the debt is removed in most instances from your credit report.
Furthermore, it is true that in many cases, after ten years, bankruptcy is removed from your credit report. If you have the patience to wait this long, can tolerate the hassling phone calls and letters, and don’t mind worrying about going to court for this long, then by all means procrastinate.
Bills and debt consolidation is optional, however bill and debt reduction is your best bet. You can do this by start paying as much every month on your bills as possible to reduce your debts.
Jul 21
adminCheap Mortgages
Buy to let mortgages: long term investment on the concrete structure.
Buy to let mortgage market was worth 21.8 billion in 2004 and accounted to 38.2 % of commercial market in the same year. The buy to let market has grown more than any market as a whole which is remarkable. Such a strong market spells nothing but benefit to mortgage hopeful. Buy to let mortgage was a constructive effort by The Association of Residential Letting Agents (ARLA) to encourage growth in the private rented sector.
Buy to let mortgage is a specialized product for a special mortgage product. However, there is little difference between this and other mortgage products. If you understand the various details of buy to let mortgage, there is no way that you wont be successful in your attempt. Every buy to let mortgage will undergo the usual mortgage guideline. The lender will check your credit worthiness, value of your property, the amount of down payment before he approves your buy to let mortgage.
Buy to let mortgage have emerged as an increasingly popular mortgage in last few years. They are marked lower interest rates and have added to their attraction. Also rental income is more dependable form of income than other investment forms. The Association of Residential Letting Agents (ARLA) operates a buy to let scheme which is supported by a group of lenders. There are other buy to let mortgage lenders who operate outside the scheme and you dont have to go through any ARLA agent.
A buy to let mortgage lender would ask for your rental details along with your income. There are some mortgage lenders who will allow you to add your rent to the salary, while other will base the buy to let mortgage entirely on the rent. Any previous mortgage will have a say in what you can borrow with buy to let mortgage. Different lenders will have different criteria which apply also for the amount you can borrow. The maximum that you can borrow will be anywhere between 150,000 to 1m per property. Buy to let mortgage can be taken on more than one property with maximum up to 5 properties. But more than one buy to let mortgage would not be possible on the same property.
Buy to let mortgage lenders usually lend 85% of the property value. Buy to let mortgage entails down payment. The down payment varies from 15%-25%. The larger down payment you can avail the better deals. There is a little variation in the rates of buy to let mortgage and other mortgages. The rental income formula varies but usually rental income should be 130%-150% of total monthly repayments.
The interest rates offered for Buy to let mortgage are fixed, variable, capped, tracker, capped, discounted. According to the inclination of the borrower, any interest rate type can be applied for. Always ask for quotes and compare. This will enable you to sort out buy to let mortgage that corresponds with your expectations. Research is fundamental in every loan process including buy to let mortgage.
Buy to let mortgage is a secured loan which means that it is secured on your property. Late repayment will show in your credit report and inability to repay can lead to loss of property. Think before you apply for buy to let mortgage. First check affordability and then apply for buy to let mortgage. Since it is a long term investment, you have to be careful about making payments on time. Since you have rental income, it will enable you to payments during difficult circumstances. You can take deposit form tenants to make prevent making arrears. We good record with buy to let mortgage will open doors for more investment as buy to let.
Before Buy to let make sure which property you are buying and whether it is compatible with the area. The neighbourhood should be such where there is considerable scope for letting it out. Plan out how much you are ready to pay for the property, keeping in mind expenses like down payment, stamp duty, evaluation fee, solicitors fee and other expenditure like remodeling to enable anticipated usage.
A few years ago buy to let mortgage was something which would cost you higher interest rate, larger down payment and expect large penalty for changing mortgage. However, the buy to let orientation has changed considerably. Buy to let mortgage has considerably moulded itself to become more consumer friendly. In such a stable mortgage market, there is great scope for expansion.
Jul 07
adminCheap Mortgages
A balloon mortgage is a loan that is provided for a short period of time for a set amount of money. Balloon mortgages will often involve periodic payments that are made at a fixed interest rate. During this period, the loan may not be amortized. The balance of the loan has to be paid in full at a specific time.
Another feature of balloon mortgages is that they will combine many of the features seen in adjustable rate mortgages and fixed mortgages. The interest rate will remain fixed for a certain period of time, which may be from 5 to 7 years. The payments will be based on an amortization cycle that lasts 30 years. If homeowners can’t pay the balance by the end of the term, the lender will decide how the payments will be made. The sum is usually converted into a fixed rate mortgage.
Advantages?
A balloon mortgage can be good because it offers an interest rate that is much lower than standard 30-year mortgages. If you are buying a larger home, a balloon mortgage can help you. Larger homes tend to have interest rates that are high, and this can make them difficult to pay off if you don’t have a large income. Balloon mortgages can make things easier. They are also good for people who plan on refinancing the home before the term ends.
Despite this, balloon mortgages can be much more complex than standard mortgages. Some homeowners who use them end up running into problems. You will need to make sure you have solid documents before signing up for a balloon mortgage. You will want to make sure you choose the right lender and read all contracts carefully for hidden fees or other terms. Balloon mortgages can be risky for people who don’t understand them.
Extra Charges For Balloon Mortgages
One problem that customers run into with these mortgages is prepayment penalties. These penalties will often be placed on people who choose to pay off the mortgage early. If you refinance your existing mortgage or sell the home, this can lead to prepayment penalties. The problem with these penalties is that they greatly increase the chances that your home could become foreclosed. Mortgages that have balloon payments are highly susceptible to foreclosure.
Pre Payment Penalties
The cost of prepayment penalties can be large. They are usually calculated as a percentage of the total balance owed. This could be as high as 12% and many homeowners have found themselves paying thousands of pounds more than they expected. If you choose to get a balloon mortgage you should make sure there are no prepayment penalties. If you get into a situation where you can’t afford the home, prepayment penalties can keep you from being able to refinance the home in order to get out of debt. These mortgages can be risky, and should only be used by those who fully understand the risks involved.
Short Term Mortgage Long Term Problems
A mortgage is a serious financial endeavor that you should take seriously. They involve large amounts of money that most people simply don’t have on hand. If you get into a situation where you can’t make your payments, you could end up losing your home and your credit could be ruined. Many people have made the mistake of getting involved with balloon mortgage without doing their research. They chose not to read the fine print on the applications. They often end up in situations that can haunt them for the rest of their lives.
While balloon mortgages may have low interest rates at first, you should have a plan to make your monthly payments after the first term ends. This can keep you from defaulting on your payments.
May 05
adminCheap Mortgages
For many borrowers, adjustable rate mortgages are an attractive means of qualifying for a home. Fewer borrowers realize the potential negative amortization problems these loans can create.
Adjustable Rate Mortgages
Adjustable rate mortgages are very popular with home buyers. The popularity arises from the fact the initial interest rate on such loans is typically much less than one finds with fixed rate loans. As a result, home owners can squeeze into homes that they might not otherwise be able to afford with fixed rate mortgages.
The potential risk with adjustable rate mortgages is well known. A borrower runs the risk the interest rates will increase over the years, resulting in financial hardship when month mortgage payment amounts go up. If the rates and payments go up to much, the borrower can run into serious problems trying to make payments and may even lose the home.
To overcome the fear of rising rates, many lenders use caps on rate increases to entice home owners. These caps essentially limit the amount the monthly payment can increase for any fixed time period. For many loans, the period is one year and the rate increase is one percentage point. While this makes borrowers feel more secure, there is one little thing lenders fail to point out.
Negative Amortization
On many adjustable rate mortgages, the caps apply only to the monthly payments due on the loan. The caps do not apply to the actual interest rate being charged on the loan. This situation leads to a financial disaster wherein you are making the monthly payments, but actually seeing the principal of your loan increase. This situation is known as negative amortization and should be avoided at all costs.
Negative amortization is best explained using good old credit cards for an example. If you have credit card debit, and everyone does, you know that making the minimum monthly payment may not make a dent in the total balance. In fact, it may be less than the interest charged for the month. This becomes apparent when you receive the next bill and your balance has increased! Welcome to the world of negative amortization.
On an adjustable mortgage, you need to read the fine print to full understand how any caps apply to your loan. Whatever you do, try to stay away from negative amortization whenever possible.
Mar 31
adminCheap Mortgages
Economists report that as housing prices have skyrocketed over the past several years, the amount of money that households are saving through 401(k) plans and FDIC insured savings accounts has fallen. For many people approaching retirement age that means they may be “equity rich” and “cash poor” at the same time. It is not unusual today to find people living in 1 million homes almost entirely dependent on social security to get by.
A 1994 Advisory Council on Social Security trends and issues concluded that reverse mortgages could provide an additional source of income for seniors although at the time housing prices were not high enough to make this a meaningful source. Well, things have changed.
A reverse mortgage is still a loan with your house as the collateral, but it is entirely different from the kind of mortgage you got when you bought your first house. These are the major differences:
The Lender Pays You
That’s correct. You do not make a monthly payment with a reverse mortgage. The lender pays you, and the loan can be set up so that you can get paid in a lump sum, you can get paid regular monthly amount, or you can get paid at the times and in the amounts you request.
The terms of the loan determine what each of these amounts would be. The primary determining factors are your age, the value of your house, and the prevailing interest rates at the time.
You Continue to Live in Your House
Staying in your house is really the whole purpose of reverse mortgages when you get down to it. The twist is that instead of paying somebody else to live there, you get paid while you continue to live there.
You are actually required by the terms of the loan to continue to live in the house as your principal residence. You can spend any amount of time visiting your children and grandchildren, you can travel for pleasure, and you can continue to spend summers at the lake so long as the house remains your principal residence.
You Retain Ownership of Your House
A reverse mortgage is not a sale. You keep all the rights of ownership that you had before the reverse mortgage loan. You do not need the lender’s permission to paint the house a different color or to remodel. You can put your house on the market and sell it to the highest bidder. You can will it to your children.
If there is a change in ownership, such as by sale or through the death of the last surviving owner, the reverse mortgage will have to be paid off at that time. The lender would be entitled to receive from the proceeds of the sale only the amount you actually received from the lender plus all accrued and unpaid interest to date. Any amount remaining after paying off the reverse mortgage lender would go to you, to your surviving spouse, or to your estate.
The Principal Amount of the Loan Increases With Each Payment
Another way of saying this is that you control the amount that must eventually be paid back by controlling the amount of money you actually get from the lender. A reverse mortgage is still a loan, and the money plus interest has to be paid back at some time, usually from the sale of the house after you and your spouse no longer live there.
Because the principal amount of a reverse mortgage cannot be determined until after you no longer live at the property, neither can the maturity date of the loan. This can a difficult concept to wrap your mind around because it is so different from conventional mortgages.
You Can Never Owe More Than the Value of Your House
This is true for the two reverse mortgage products sponsored by the Federal government (HECM and Home Keepers) although it may not be true for privately created reverse mortgage programs.
The benefit of the Federal programs is that you, your surviving spouse, or your estate, can never owe more than the loan balance or the value of your house, whichever is less. Your reverse mortgage lender cannot require repayment from you, your surviving spouse, or your heirs, or from any asset other than your house.
Mar 24
adminCheap Mortgages
Discussions of mortgages often focus on interest rates, but there is a much more basic decision to make. Should you go with a 30 year mortgage term or a 15 year mortgage term?
30 Year vs. 15 Year Mortgages
Any discussion of mortgages tends to turn on two points. How can you qualify for the most money with the lowest payment? How can you get the lowest interest rate for the mortgage? While these are two important issues, there is an addition one that people fail to consider, resulting in significant wasted money.
The term of a mortgage is extremely critical for a couple of reason. First, it sets the length of the obligation you are undertaking. Second, it defines the amount of interest you are going to pay over the life of the loan. These are huge issues when it comes to building equity.
The longer the loan, the more total interest you are going to pay. The trade off, of course, is you are going to have smaller monthly payments the farther you stretch out the obligation. While this may sound like a good goal when you first get the mortgage, it can backfire on you in the long run.
Most people focus on interest rates as a way to save money on mortgages. This is a valid approach, but playing with the length of the loan is a better way to save money. If you can cut the payments in half by going with a shorter loan, you can save huge amounts on the total interest repaid to a lender.
The decision on the term of the loan is relatively simple, but entirely dependent upon your personal situation. There is no absolutely correct choice. First, you need to determine if you can comfortably afford the higher payments that come with a shorter term loan. In general, a 15 year mortgage will have payments 20 to 25 percent higher than a 30 year loan. Of course, you will pay the loan off faster, to wit, be building equity in the home quicker.
The modern mortgage industry has a variety of different term length products. When applying for a loan, take the time to evaluate the different terms to see if you can find a loan that is perfect for your situation.
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