November 2010 Archives
Job loss is a grim specter for a mortgage holder. For most of us, that mortgage payment is at the top of the monthly bill payment list. You can talk almost any creditor into short term relief and even long term restructuring the phone company, your car loan(s), credit card companies; they deal with delinquent payment plans daily. Mortgage companies get nervous much more quickly, but most are willing to consider at least one skipped payment if your unemployment is for a short period.
Mortgage Insurance?
You may not remember this in the flurry of documents and signing sessions that accompanied your home purchase, but you may well have an insurance policy that protects your lender against mortgage default. If you have a loan that is more than 80% of the homes value when purchased, you probably are also paying for mortgage insurance. Its incorporated into that list of particulars you pay on every month: principal, interest, taxes, homeowners insurance and mortgage insurance. Its meant to protect the lender; see what protection it provides for you.
Talk to your Lender
It is important to talk to your mortgage lender. Job upheaval is sufficiently commonplace in this country that many mortgage holders have become flexible about restructuring loans, as long as you are prompt in informing them and honest about your job prospects.
A typical restructuring will allow for lesser payments until your income is reestablished, at which point the bank will again restructure to get you back on schedule. Keep in mind that prospective new employers are almost as likely to check your credit rating as prospective lenders.
Before you enter into discussions with your lender on this prospect, decide what you can afford. Dont be grateful for whatever is offered, and agree to a financing plan that you cant meet. Tell your lender that your maximum temporary mortgage payment has to be 60% of the norm, not the 75% they are proposing. If you lose the house, it costs them money too.
Bankruptcy The Poison Pill
The long term answer to keeping your home while unemployed is filing for bankruptcy. The unattractive fallout from exercising this option is known to most of us, although the hard and fast rules have changed somewhat. What used to be seven years of no credit at all has become credit card eligibility after two years. Depending on the circumstances of your bankruptcy, you may be eligible for high risk auto loans and other debt within two to three years after bankruptcy. That assumes, of course, that you have regained employment status and are once again making mortgage payments. Also, bankruptcy has become so common that the Federal Government is on the verge of making it a much less attractive option for consumers.
Near Term Borrowing
With near-term unemployment and an unclear future, many people have put mortgage payments on their credit cards until the limits on those cards are reached. It may blow holes in your credit rating, but it will keep you current on the mortgage and stave off bankruptcy. You can attempt to obtain a home equity loan to fill the hole in your monthly budget, but those are much harder to come by when youre unemployed. If there are others in the household who are employed, the home equity loan may be a viable option.
Continue reading Keeping your Home Despite a Job Loss
Interest-Only Or 50 Year Mortgages – Do They Really Make Sense?
With hotspots like Las Vegas, much of California and Florida still enjoying a good real estate market, many banks and mortgage companies are now spreading out payments over 50 years to make them more affordable. Prior to these 50-year mortgages, interest-only mortgages were promoted and sold as the way to go. The real question here is which is better?
Lets first digress on what an interest-only mortgage is. Interest-only home loans or mortgages arent as a general rule permanently interest-only. The bank or mortgage company will normally offer the borrower 2 to 5 years at interest-only; after that they must start paying off the principle. During this time, the principle has grown. A great many borrowers may find themselves unable to pay the higher payments that come at the end of this interest-only period. In this case, interest-only loans are similar to ARMs, and have similar default and foreclosure rates (higher than for regular fixed mortgages where the payment stays the same throughout).
The 50-year mortgage simply spreads your payments out over a longer time period and greatly increases the amount of interest you will payback; this also tends to reduce your build-up of equity. Alex Diaz Jr., Vice President of Statewide Bancorp in Rancho Cucamonga, stated that the 50-year mortgage has particular appeal in California because prices are higher than the rest of the country. The 30-year fixed mortgage is great, but with gas prices so high, people we’re dealing with are concerned about making prices work, and the 50-year mortgage is something they’re starting to consider.” The real estate market has grown by leaps and bounds in California with the average home selling in excess of $300,000.
The 50-year mortgage was designed to do three things. First, it makes it much easier for someone to buy a home in these high price areas. Second, it can help buffer and insulate the borrower against a housing bubble or possible localized deflation. Third, it keeps the selling prices high. However, many so-called real estate experts will tell you that the interest-only loan does the same thing, but does it? The main problem with the interest-only loan is that it does not insulate or offer any protection for the borrower from increasing principle, negative equity (which can happen should there be a drop in housing prices), and, of course, those increasing payments when the term you agreed is over.
Keeping this in mind, plus the fact that there is only a very minor difference in initial payments (payments over the interest-only period), clearly the 50-year mortgage should be a better way to go.
If your budget allows, a good tactic to use is to make bi-monthly payments which will reduce the interest and term of the loan saving you many thousands of dollars. There are many lenders out there now offering this option to their borrowers. As they say, the real money in real estate is made from buying low and selling high.
The problem is that in most of these hot communities, the selling price often ends up being much higher than the asking price, plus houses do not stay on the market for very long at all. So, buying low is normally out of the question. Just try finding a bargain foreclosure or HUD homes for sale in California, it’s a little like trying to find gold in the old days. In these hot communities, the real money is made by buying and holding for a number of years allowing for the yearly increases and returns on additions and upgrades. Money can be made for sure, but with a uncertain future. It is really best to have a payment program set in stone always use a fixed term and rate mortgage. You can still sell in five years or less, make money, and have the added comfort of a fixed payment.
Have an opinion or a question you would like me to answer, then write me! http://www.CarlHampton.com
Continue reading Interest-Only Or 50 Year Mortgages – Do They Really Make
These days, as people scramble for new and more creative ways to finance buying a home, the interest only mortgage is becoming more common and well known. An interest only mortgage is one in which you have the option of paying only the interest (or just the interest and a portion of the principal) each month in the early years of the mortgage loan. Interest only periods may be applied to adjustable rate mortgages, or 30 year fixed rate mortgages, depending on the lender.
In a traditional mortgage, each month your mortgage payment is divided in two parts – one part is paid on the interest charge, the other on the principal of the loan. The main feature of an interest only mortgage loan is that during a specified initial period of time – usually three, five, seven or ten years – you may choose to make a payment of the interest portion of the loan only. The option is flexible. One month you may choose to make an interest only payment, another you may choose to make an interest-plus-part-of-the-principal mortgage payment, or a full, standard monthly mortgage payment. Needless to say, an interest-only payment will be significantly less than a traditional mortgage payment.
The flexibility of an interest-only mortgage allows you to adjust your mortgage cost on a month by month basis, giving you more control over your monthly cash flow. In any given month during the interest-only period, you have the flexibility to pay as much or as little on your mortgage as you can.
Interest only mortgages aren’t right for everyone. While you have the option of paying interest only each month during the early years, the principal repayment on your mortgage loan is accumulating. At the end of your interest only period, your mortgage payment will take a dramatic jump. Financial experts recommend interest only mortgages for specific types of borrowers: those whose income is supplemented by large commissions or bonuses throughout the year, those who can reasonably expect to be making considerably more income in a few years than they are now, and those borrowers who actually WILL invest the difference between their interest-only payment and their full mortgage payment in profitable investments.
The power of an interest-only loan, according to most experts, is that you can ‘afford to buy more house’. Because you’ll have the choice during the early years of paying only the interest each month, you can effectively afford the monthly payments on a house that’s as much as 30% more expensive than you could with an amortizing (typical) mortgage payment.
You also, however, have the choice each month of paying the interest plus as much on the principal as you wish. If you’re a salesman, for instance, whose standard income is supplemented quarterly and semi-annually by large commissions or bonuses, you could pay interest-only during lean months, saving yourself up to $350 in those months. In the months that you get a large commission though, you could choose to pay down several thousand dollars on the principal.
An interest only mortgage also makes sense if you have a solid investment plan. If a typical mortgage payment would be $900 monthly, and your interest-only payment for the month is $625, then the best financial strategy according to many financial experts is to invest the remaining $275 in a solid, money-making stocks program.
Interest only loans are not for everyone, but they can be a valuable financial tool that can help you control your spending and give your investment power some added oomph. Don’t rush blindly into an interest only mortgage, but do speak to a financial expert or loan officer about whether an interest only loan may be right for you.
Continue reading Interest Only Mortgages
How to Lower Home Equity Interest and Gather Equity Loan Information
The interest rate changes from lender to lender with home equity loans. Largely, each lender remains within the interest guidances setup by the loan officers. Home equity loans are to some extent a cash in advance loan, on account of many lenders will furnish with the loan no closing costs, fees, or other upfront expenses. Many loans call for the borrower to pay origination fees, arrangement fees, title costs and closing costs, though the home equity loans frequently want nothing down.
Numerous home equity loans begin with interest rates approximately 6.675%. Many lenders as well charge lower interest rates, but for the most part, the borrower wont acknowledge the difference until he goes over the decrease of his monthly statements.
Saying it another way, home equity loans provide great monthly installments, running from 150 and more, the borrower with this low payment, is not going to find interest on the loan till he reexamines his statement and sees the principal is going down like a turtle.
After many years, homeowners frequently take out an additional loan to repay the equity loan. The procedure becomes costly over time, because each loan taken out starts the principal at the start again. Every year your home is at risk of receding equity; nonetheless, equity loans seldom see negative equity. If negative equity exists, it can run to complications when going for a separate loan.
Home equity is a handy way to get your hands on easy cash, it takes careful thought to arrive at the right choice. For example, if you do not use a comparison of a number of lenders rates, you may detect later on that you were able to get a better deal at another place. When looking at a loan, remember security is the principle concern. Also look at the risks, capital, interest, penalties, and other points relating to equity loans.
Gather Equity Loan Information
Many loans of all kinds often have restricted amounts for borrowing. Many lenders figure your earnings whenever applying for loans. The lender will look at several details, including repayments, acceptance, and so on ahead of offering you a loan. Some lenders broker the loans by going 3.25 times the gross salary of a borrower.
The lender will also weigh the equity, signifying that the lender will regulate the amount he is wishing to loan you in contract with the equity of the home. That is a kind of promise that the property will stay uniform with the loan amount. The lenders will include assorted costs. It depends on the price of the home bought, but for the most part, you will pay a portion of the total balance of the property value.
They will also figure in surveyor fees, title, arrangement fees, legal charges and other charges when looking at a loan. The agreement fees are administration costs that will enhance the lenders salaries. Premiums, add on fees, and paid coverage guarantee the home will also be bonded to the loan.
They will also require you to pay many different fees upfront if you are awarded the loan. There are means to fend off some of these expenses, by reading about equity loans on the internet could give you a wealth of data to assist you in saving money. Different loans are accessible online and the equity loans have a wealth of data to direct you to low rates and low mortgage payments.
Also, make sure that you have examined and noted the similarities or differences of a significant amount of loan rates and fees before you really accept a lenders offer.
Continue reading How to Lower Home Equity Interest and Gather Equity Loan
Once you have decided to protect your family’s future by purchasing mortgage protection coverage, the next thing you will have to do is find the best mortgage protection insurance policy for your needs. There are many different mortgage protection choices, with widely varying premiums and benefits. Before you select a mortgage protection policy, be sure to thoroughly research each option available to you.
Mortgage Protection Available From Lender
Many banks and other mortgage lenders offer home loan protection policies to their customers. When you are purchasing or refinancing your home, it is likely that the lender who handles your loan will provide you with information about policies available through his or her company.
Many times, homeowners decide to purchase policies available through their lender without researching other options. In some cases, they do not even realize that there are other mortgage protection choices available to them. It is a fact that many insurance companies offer various types of mortgage protection coverage. If you go with the fist policy that is presented to you, you may find yourself paying too much for what might not be the best available coverage.
Do not automatically eliminate the coverage that your lender offers from consideration. It is possible that the mortgage protection available through your lender really is the best choice for you. However, you have no way of making an educated decision without first researching various mortgage protection coverage options. Before choosing a policy, find out how much they cost, how funds are disbursed to beneficiaries, how stable the underwriter is, and any other relevant details.
Mortgage Protection from Primary Insurance Company
Before you can investigate additional mortgage protection options, you’ll need to find out which companies offer these types of policies. You may want to start your research by asking the agent who is handling your homeowner’s policy if his or her company provides mortgage protection coverage. If such coverage is available, you may be able to save a significant amount of money on both your mortgage insurance and homeowner’s policies via multiple policy discounts.
Even if your primary insurance agency does not offer policies specifically designated as mortgage protection coverage, it is very likely that they do offer term life insurance coverage. Many people opt for a term life policy rather than one designated for mortgage expenses only. Those who choose term life coverage feel it is important to allow their families the ability to make choices about how the policies proceeds are utilized, based on their financial situation and needs following a loved one’s death.
With a traditional term life insurance policy, the designated beneficiaries will receive a lump sum payment following a qualifying event, per the conditions specified in the coverage agreement. This money can be used to take care of the outstanding mortgage, as well as for other essential expenses. With an actual mortgage protection policy, the beneficiaries are not able to exercise discretion regarding how the money is utilized. With a true mortgage protection plan, the outstanding mortgage loan will paid in full following the death of the insured party, but funds are not available for any other expenses.
Additional Resources for Mortgage Protection Coverage
There are a number of national and international companies that specialize in mortgage protection and term life insurance policies. These organizations often offer the best rates, because they deal primarily or solely in these types of policies. Many companies that concentrate on providing customers with the best rates on quality mortgage protection and term life insurance coverage primarily market themselves via the Internet. You can often find them on your own through a search engine, or with the help of a free online insurance quote service.
Selecting the Best Mortgage Protection Coverage
Selecting the best mortgage insurance coverage can be very confusing. Be sure that you conduct thorough research before making a choice. Premium costs and coverage options are not the only important considerations. The reason for purchasing mortgage insurance is to make sure that your family will not face foreclosure following the death of a loved one. This means that it is important to focus on situation with which your family will have to cope in the event of your death, or that of another member of the household, when making your choice regarding the best mortgage protection option.
When deciding what type of policy is best, and which carrier to choose, you need to think about factors such as the outstanding balance on your mortgage, the minimum monthly payment, the earning potential of other members of your household, how income and expenses will change following the death of a family member, and the other types of insurance coverage that you and your family already have.
Continue reading How to Find the Best Mortgage Protection