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When Mortgages Go Bad

By admin Filed in Great Mortgage Deals April 21st, 2011 @ 11:42 am

Mortgages can and some do go bad. Its not uncommon for people to take out mortgages beyond their able repayment status, or those whom take out mortgages that borderline their outgoings, So what happens when mortgages go bad? and how do we deal with it?

There are different circumstances for a mortgage to turn into your worst nightmare, such as

1) Mortgage puts a servere strain on your outgoings If you find more then 85% of your outgoings are purely on your mortgage then you are a victim to a stretched income. If you took your mortgage out at an attractive rate, you may have come to the end of your deal, thus putting you in liability for a higher repayment amount with any elevated rises in the mortgage interest rate. When taking out a mortgage, you should always bare in mind changes of circumstance aswell as how much you have remaining a month for other essential items.

2) Interest rate rise puts your income out the window If you struggled to meet your mortgage repayments because of elevating interest rates, then it may be time to remortgage or to consider various other options. Pushing your income to its limits when you first apply for a mortgage is a bad idea, as after 2-3 years your rates can rise, your deal could come to an end, aswell as the Bank of england interest rate rises.

3) Unforseen circumstances can leave you in a disabling state of mind If you have been hit by unforseen circumstances and are not covered by payment protection insurance or any other form of repayment protection, then you may be bearing the brunt of the bore, unforseen circumstances can include injury by accident, illness or unemployment.

So that gift wrapped mortgage at 5% may have changed significantly since you first took it out, and as many people still do, you should always look at what you can afford on a mortgage in a realistic fashion. That extra lump of interest on your mortgage could make the difference between a good reliable payer to someone in arrears mounting up bad credit.

Mortgages are not always what they seem, it is vital to read any small print before proceeding with any form of mortgage application. There may be hidden interest charges and penalties to compensate a lower interest rate, so that 5.29% rate you saw in the high street window may be laced with charges exceeding 2000 – 5000 which is compensating for a slightly higher rate in order to look more attractive.

Good mortgages can turn bad, prepare yourself and save for rainy days and your mortgage can stay in your good books, rather then arrears.

Variable Rate Mortgages Setting The Standard

By admin Filed in Great Mortgage Deals April 14th, 2011 @ 11:42 am

Heres the first mortgage term you should learn Standard Variable Rate, or SVR. This is the interest rate you will be paying on the total amount you are borrowing. It is usually expressed as a percentage, and is different from an APR (Annual Percentage Rate). An APR includes all costs associated with the loan, such as interest, fees, any compulsory insurances etc.

While interest rates can vary quite widely across the board, all lenders will have a Standard Variable Rate. Its the default rate for their mortgages, and can provide a good indication of whether they are offering good deals. Comparing different lenders SVRs is one way to get an idea of who has lower rates generally though there will be exceptions to this rule.

This rate fluctuates, going up or down according to the economy and the lender. The biggest factor that effects SVRs is the Base Rate set by the Bank of England. In recent years this has been kept relatively low, and mortgage interest rates have been particularly good for borrowers. However, this could change and you should bear in mind that rates could go up in the future.

Many mortgages start off with special introductory rates, and then revert to the SVR after a set period. These include capped and collared mortgages. There are also fixed rate and interest only mortgages available, which are covered in more detail further on in the guide. When considering mortgages with special introductory rates, you should also take into account what the SVR is likely to be once your initial period is over. Many mortgages come with the condition that you stick with the same one for several years, even after the special offer period is over. There will often be penalties if you want to change mortgage within this tied period.

Interest calculation, interest charging

Be aware that there is a difference between interest calculation and interest charging. Some mortgages calculate interest daily, which works out as fairer for the borrower as your overall balance is reducing every month, and therefore the interest will be reducing too (even by a tiny fraction, every little helps!). Other lenders calculate interest monthly or annually, although annual calculation should be avoided if at all possible, as you will be paying the same interest for a whole year despite your balance having been reduced by your repayments. You should also ensure that your interest is charge in arrears, rather than in advance.

Understanding Points in Home Mortgages

By admin Filed in Great Mortgage Deals April 7th, 2011 @ 11:42 am

If you are in the market for a mortgage to buy a house you’ve no doubt heard the term “points” being thrown about. No, they aren’t talking about the score from last night’s NFL game; they are actually talking about a fee that is paid to the lender of the mortgage you are taking out to buy your home. Points can have impact on your mortgage, both positive and negative, so being informed about how they can help and hurt you is crucial when determining if a mortgage loan is the right fit for you.

In the simplest form, points are a onetime fee that is paid to a lender and are used to secure a loan below the current market interest rate. Each point represents 1% of the mortgage amount. So if you have a mortgage for 150,000 then one point would be equal to 1,500. A seller would pay points on a loan to reduce the interest rate of the loan which could potentially save them much more than the points cost up front over the life of the loan.
Points are not always paid for by the buyer; they can sometimes be paid by the seller as well. A seller would typically pay for points when they are in a rush to sell the property or have been having a hard time finding buyers for the property. In this case it is used as an incentive to get the buyer to move on the property.

There are times when it may not be in your best interest to purchase points. A rather simple way of doing this is to determine the payback period, or length of time it takes you to pay back the points you purchased up front. First, determine your monthly payment amount without points, and then with points. If you are paying 900 without points and 800 with points, your monthly savings is 100. Now take the total cost of the points, say 2 points on a 150,000 mortgage which would be 3,000, and divide the cost by the monthly savings. 3000100 = 30 months. It will take you 30 months to realize your savings of 100 per month. For a 30 year loan, it would make a lot of financial sense to purchase the 2 points up front if you can afford them.

Where you have to be careful with points is when you don’t plan to be in your current home long enough to reach the payoff. You also have to keep in mind that the cost for points is above and beyond your down payment on the house you want to purchase as well. It can add significant up-front costs, which is why it is a wise move only if you plan on occupying the house for a long period of time and have significant cash up front to be able to afford it.

One final note about points – they are tax deductible as they are considered prepaid interest. They are deductible by the buyer, even if the seller pays for them. Points are deductible fully in the year they are paid for a new purchase, and over the life of a loan for a refinance.

Understanding Points in Home Mortgages

By admin Filed in Great Mortgage Deals March 31st, 2011 @ 11:42 am

If you are in the market for a mortgage to buy a house you’ve no doubt heard the term “points” being thrown about. No, they aren’t talking about the score from last night’s NFL game; they are actually talking about a fee that is paid to the lender of the mortgage you are taking out to buy your home. Points can have impact on your mortgage, both positive and negative, so being informed about how they can help and hurt you is crucial when determining if a mortgage loan is the right fit for you.

In the simplest form, points are a onetime fee that is paid to a lender and are used to secure a loan below the current market interest rate. Each point represents 1% of the mortgage amount. So if you have a mortgage for 150,000 then one point would be equal to 1,500. A seller would pay points on a loan to reduce the interest rate of the loan which could potentially save them much more than the points cost up front over the life of the loan.
Points are not always paid for by the buyer; they can sometimes be paid by the seller as well. A seller would typically pay for points when they are in a rush to sell the property or have been having a hard time finding buyers for the property. In this case it is used as an incentive to get the buyer to move on the property.

There are times when it may not be in your best interest to purchase points. A rather simple way of doing this is to determine the payback period, or length of time it takes you to pay back the points you purchased up front. First, determine your monthly payment amount without points, and then with points. If you are paying 900 without points and 800 with points, your monthly savings is 100. Now take the total cost of the points, say 2 points on a 150,000 mortgage which would be 3,000, and divide the cost by the monthly savings. 3000100 = 30 months. It will take you 30 months to realize your savings of 100 per month. For a 30 year loan, it would make a lot of financial sense to purchase the 2 points up front if you can afford them.

Where you have to be careful with points is when you don’t plan to be in your current home long enough to reach the payoff. You also have to keep in mind that the cost for points is above and beyond your down payment on the house you want to purchase as well. It can add significant up-front costs, which is why it is a wise move only if you plan on occupying the house for a long period of time and have significant cash up front to be able to afford it.

One final note about points – they are tax deductible as they are considered prepaid interest. They are deductible by the buyer, even if the seller pays for them. Points are deductible fully in the year they are paid for a new purchase, and over the life of a loan for a refinance.

Understanding Points in Home Mortgages

By admin Filed in Great Mortgage Deals March 24th, 2011 @ 11:42 am

If you are in the market for a mortgage to buy a house you’ve no doubt heard the term “points” being thrown about. No, they aren’t talking about the score from last night’s NFL game; they are actually talking about a fee that is paid to the lender of the mortgage you are taking out to buy your home. Points can have impact on your mortgage, both positive and negative, so being informed about how they can help and hurt you is crucial when determining if a mortgage loan is the right fit for you.

In the simplest form, points are a onetime fee that is paid to a lender and are used to secure a loan below the current market interest rate. Each point represents 1% of the mortgage amount. So if you have a mortgage for 150,000 then one point would be equal to 1,500. A seller would pay points on a loan to reduce the interest rate of the loan which could potentially save them much more than the points cost up front over the life of the loan.
Points are not always paid for by the buyer; they can sometimes be paid by the seller as well. A seller would typically pay for points when they are in a rush to sell the property or have been having a hard time finding buyers for the property. In this case it is used as an incentive to get the buyer to move on the property.

There are times when it may not be in your best interest to purchase points. A rather simple way of doing this is to determine the payback period, or length of time it takes you to pay back the points you purchased up front. First, determine your monthly payment amount without points, and then with points. If you are paying 900 without points and 800 with points, your monthly savings is 100. Now take the total cost of the points, say 2 points on a 150,000 mortgage which would be 3,000, and divide the cost by the monthly savings. 3000100 = 30 months. It will take you 30 months to realize your savings of 100 per month. For a 30 year loan, it would make a lot of financial sense to purchase the 2 points up front if you can afford them.

Where you have to be careful with points is when you don’t plan to be in your current home long enough to reach the payoff. You also have to keep in mind that the cost for points is above and beyond your down payment on the house you want to purchase as well. It can add significant up-front costs, which is why it is a wise move only if you plan on occupying the house for a long period of time and have significant cash up front to be able to afford it.

One final note about points – they are tax deductible as they are considered prepaid interest. They are deductible by the buyer, even if the seller pays for them. Points are deductible fully in the year they are paid for a new purchase, and over the life of a loan for a refinance.

UK Mortgages – Need To Know Information

By admin Filed in Great Mortgage Deals March 17th, 2011 @ 11:42 am

Whatever stage of the mortgage game youre at, unless you happen to be a qualified financial advisor, solicitor and broker all rolled into one, youll need professional help to find and arrange your loan. This guide presents some basic information on mortgages, but youll need to take specialist advice for your individual circumstances.

Having a general awareness of the processes involved and an idea of whats available to you should help you to make the right decision when you choose your mortgage.

You should be aware, too, of the difference between information and advice. Anyone can give information, and a survey of the web will offer literally thousands of pages about mortgages. Be aware of the legal aspects of mortgages and finances any agreements should be in writing, and you should check all documents carefully before signing. Verbal agreements and information should always be backed up by written copies. Below are some useful starting points for you to explore. Good luck!

Information

The web offers any amount of information on mortgages check that the pages are recent as rules and offers change constantly. Good sources of official information are:

The Financial Services Authority includes a guide to money, mortgages and debt, plus details of regulatory bodies and ombudsmen www.fsa.gov.uk

Direct Gov general information on finances and benefits
www.direct.gov.uk

Inland Revenue check the tax rules that apply to you
www.hmrc.gov.uk

Advice

Anyone offering you advice should be a qualified professional. They should be registered with an appropriate independent regulatory body, and you can ask to see copies of their qualifications. Theres a lot of free advice out there, that should help you without obligation, and its worth taking advantage of.

Independent Financial Advisors

Find an advisor at www.impartial.co.uk and a mortgage specialist at www.unbiased.co.uk

Solicitors

Often family or friends will recommend a solicitor, otherwise look for one that specialises in conveyancing and house buying. Check www.lawsociety.org for professionals in England and Wales, and www.lawscot.org.uk for Scotland.

If you have a query or complaint

The FSA are now the body that regulates financial professionals and lenders the Financial Ombudsman can investigate complaints or disputes and usually resolve them. Contact the professional or lender first they should have a complaints procedure. If you are still not satisfied, you can ask the ombudsman to consider your case: www.financial-ombudsman.org.uk
.
(The websites of the respective law societies of England & Wales and Scotland are the place to find out how to make a complaint about a solicitor or firm, see above.)

Types of Mortgages Available

By admin Filed in Great Mortgage Deals March 10th, 2011 @ 11:42 am

Types of Loans

What types of loans are available to me? There are many different types of mortgage offered to consumers. Some of the most popular mortgage broker are the FHA Home Loan (Federal Housing Administration) and the VA Loan . Because the FHA mortgage and VA mortgage are guaranteed by the government, borrowers are able to make a smaller down payment, and take advantage of more relaxed credit and asset requirements than traditional conventional loans.. Details about the major types of loans, including FHA mortgage and VA mortgages, follow.

Conventional loans generally are considered loans with loan amounts at or under the maximum loan amount available for purchase by Freddie Mac or Mannie Mae.

Fannie Mae is the common name of the Federal National Mortgage Association. Fannie Mae is a congressional chartered, shareholder-owned company that buys mortgages from lenders and resells them as securities on the secondary home mortgage market. Before approving you, Fannie Mae looks at a number of factors including credit ratings, debt ratio, and employment history.

Freddie Mac Freddie Mac is the common name for the Federal Home Loan Mortgage Corporation. The 2006 maximum loan amount for both Fannie Mae Mortgage and Freddie Mac company is 417,000. Freddie Mac does not issue mortgages directly, rather, they buy mortgages from lenders and resell them as securities on the secondary mortgage market. Before approving you, Freddie Mac looks at a number of different factors including credit ratings, debt ratio, and employment history.

Government guaranteed loans. FHA, VA loans.
An FHA mortgage (Federal Housing Administration) has some advantages over conventional mortgage. Since FHA Mortgage are insured by the government, they generally have more lenient qualification and requirements, lower down-payment requirements, and they may be assumable. The maximum mortgage amount for an FHA mortgage varies depending on the city where you live. As your mortgage broker on what these maximum amounts are for your specific city. FHA loans are very popular with first time buyers. They also make great sense if you are buying a multi family property to live in and want to get maximum financing. Mortgage insurance on an FHA loan is the same no matter what loan to value your loan is, something that is not the case with a conventional loan. High LTV’s pay a far greater insurance payment.

A VA (Veterans Affairs) mortgage carries many of the same advantages as an FHA home mortgage. However, to qualify for this mortgage, you must be a qualifying veteran, the unmarried widow of a veteran, or an active-duty serviceman. Talk with your mortgage broker on maximum loan limits, required down payments (if any) and what your funding fee will be. VA loans do not have a mortgage insurance payment, instead borrowers pay a one time fee for their “insurance” What percent of the loan amount varies, currently it will not exceed 4%. These are different than origination or discount points.

Non-Conforming Jumbo mortgage are loans where the loan amount is greater than the conforming loan limit. 359,650 currently for a single family. So if you need to borrow 500,000 to purchase your new home, it will be a jumbo loan. Jumbo loans typically have interest rates slightly higher than conforming loans, about 12 percent higher. If you will be borrowing this much money you should ask your broker if you could split up your loan into a 1st. and a 2nd. mortgage to avoid needing a jumbo loan and avoid the increase interest cost.

A mortgage broker can help you find the best rate and product to fit your situation. Ask them about what are your options.

Types of Mortgages

By admin Filed in Great Mortgage Deals March 3rd, 2011 @ 11:42 am

A mortgage is a loan that must be taken out by all homebuyers. The mortgage is provided by a bank or other lending institution and gives the homebuyer the money needed to purchase the home. The mortgage then needs to be paid back by the borrower in monthly payments with interest on the loan. The term of a mortgage is generally anywhere between fifteen to thirty years.

When taking out a mortgage, the homebuyer first needs to decide what type of mortgage is right for them, as there are many. This is the biggest decision to make when getting a mortgage and the answer will be different for everybody considering that everyone has different financial needs and goals. The options for mortgages are: interest only loans, adjustable rate mortgages (ARMs), pay option ARM loans, balloons, fixed rate loans, extendable balloons, conventional loans, and FHA loans. These are just a few types of mortgages that are available.

A fixed rate mortgage provides for the most security. A fixed rate mortgage is a mortgage that will have the same interest rate for the entire life of the loan. This is often a good choice for a lot of people as they will always know what their interest rate and payments will be. Fixed rate mortgages may not be the best option however if the homebuyer knows that they will only be living in the home for a few years.

An ARM loan has a variable interest rate. They will often have a smaller up front payment and smaller monthly payments, due to a lower interest rate. The interest rate for these types of loans are decided on using an interest index and a predetermined margin. ARMs can be the best choice for homebuyers if the homebuyer knows that they will not be living in the home for more than three or four years. Because there is no way to predict what the interest rates will be, these types of loans do not provide as much security as a fixed rate mortgage.

Interest only mortgages only cover the costs of the interest on the loan. This is the option most used by real estate investors who will not be living in the home. These loans provide for a lot of flexibility as the monthly payments only cover the interest due.

A Pay Option ARM has a variable rate and allows the homeowner four options for payment every month. These options are interest only, minimum payment, 30-year fully amortizing payment, or 15-year fully amortizing payment. These loans will be best suited to those who are self-employed as they can adjust their payments depending on how much income they earned that month. Pay Option ARMs can quickly collect negative amortization, making the amount of the loan increase rather than decrease and so, these types of mortgages need to be very carefully considered before an agreement is entered into.

FHA loans are suitable for first-time homebuyers or those who have no or bad credit. These mortgages tend to have very good interest rates as the federal government insures the loan for the lenders.

Understanding the different types of mortgages and the homeowners individual needs is critical when deciding on what type of mortgage is the right one for any given situation.

The Truth About Reverse Mortgages

By admin Filed in Great Mortgage Deals February 24th, 2011 @ 11:42 am

As an older American you can turn to “reverse” mortgages to seek money to pay off your current mortgage, finance a major home improvement, supplement your retirement income, or to pay for those unexpected health care expenses. These type loans can allow you to convert part of the equity in your homes into cash – without having to sell your homes, move out OR take on any additional monthly debt.

In a “regular” mortgage, you make monthly payments to the lender. However, with a “reverse” mortgage, you, the homeowner, receive money FROM the lender and, generally, you don’t have to pay it back for as long as you live in your home. Instead, the loan is repaid when you die, you sell your home or you no longer live in it as your principal residence. Reverse mortgages are ideal for homeowners who have high value in their homes but are lacking in available cash, or income! It allows you to stay in your home and still meet your financial obligations! In many cases, these type mortgages can increase the quality of your live from the extra income you otherwise wouldn’t have had!

To qualify, for most reverse mortgages, you must be at least 62 and live in your home. The proceeds of the reverse mortgage are typically tax-free, but check with your accountant, or CPA, to be safe. In addition, the typical reverse mortgage has no income restrictions whatsoever .

The Three Basic Types of Reverse Mortgages are:

- Single – purpose reverse mortgages which are offered by some state and local government agencies and certain nonprofit organization’s

- Federally – insured reverse mortgages, which are known as Home Equity Conversion Mortgages (HECMs), and are backed by the U. S. Department of Housing and Urban Development (HUD) .

- Proprietary reverse mortgages, which are private loans that are backed by the companies that have developed them.

Single purpose reverse mortgages usually have very low costs. But they have limited availability and can only be used for a single purpose – which is specified by the government or nonprofit lender making the loan. An example would be to pay for home repairs, home improvements or for property taxes. To qualify for these loans you have to currently be in the low to moderate income brackets – in most cases.

HECMs, and proprietary reverse mortgages, tend to be more costly than other type home loans. The upfront costs can, sometimes, be very steep. They are generally most expensive if you only stay in your home for a short period of time – say less than 3 years. They are, however, widely available and have no income or medical requirements. They also can be used for any purpose you desire.

You must meet with a counselor from an independent, government approved housing counseling agency, before you can apply for an HECM . The counselor is required to explain the loan’s costs, financial implications, and all of the alternatives. As an example, counselors or supposed to tell you about other government, or nonprofit programs, for which you may qualify. The Counselors must also inform you of any single-purpose, or proprietary reverse mortgages, that are available within your geographic area. The amount of money you can borrow with a HECM, or proprietary reverse mortgage, depends on several factors. These are:
- Your age
- The type of reverse mortgage you select
- The current appraised value of your home
- The current interest rates
- Where your home is located.

In theory:
- The older you are and
- The more valuable your home is and
- The less you owe on it
- The more money you can actually get.

The HECM mortgage gives you choices in how the loan proceeds are paid to you. These are:
1) The option to select a fixed monthly cash advance for a specific period or for as long as you live in your home.
2) The option of a line of credit allowing you to draw on the loan proceeds at any time in amounts that you have chosen.
3) The option to get a combination of monthly payments PLUS a line of credit.
4) HECM’s generally provide larger loan advances, at lower total costs, than proprietary reverse mortgage loans.

However, owners of higher – valued homes can probably get larger loan advances from a proprietary reverse mortgage. This is only true if you have a higher appraised value and a smaller mortgage balance. If that is the case, you may likely qualify for greater funds with a proprietary reverse mortgage.

NOTE The location, of your neighborhood, is only one part of the determination of appraised value.

Loan Feature’s

Reverse mortgage loan advances are not taxable and, generally, will not affect your Social Security or Medicare benefits. You still retain the title to your home and you do not have to make any monthly payments. The loan must be repaid when the last surviving borrower has died, or sells the home, or no longer lives in the home as a principal residence. In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable. This keeps you from losing your home if you have to have extended medical care for several months at a time!

If you are interested in a federally-insured HECM, understand that ALL HECM lenders must follow HUD rules and guidelines . Many of the loan costs, including the interest rate, will be the same no matter which lender you select. Some of these costs are:
- The origination fee
- Closing costs and
- Servicing fees will vary among lenders.

If you live in a higher – valued home you probably will be able to borrow more from a proprietary reverse mortgage than from an HECM . Although it also, generally, costs more to borrow the money! The best way to see key differences between a HECM and a proprietary loan is with a detailed side-by-side comparison of the future costs and there benefits. Most HECM counselors, and lenders, can easily provide you with this very important information.

No matter which type of reverse mortgage you are considering, be certain you understand all the conditions that could make the loan become due and payable. Ask your counselor, or your lender, to explain the Total Annual Loan Cost (TALC) rates. These show you the projected annual average cost of a reverse mortgage which also includes all the itemized costs.

The Facts About Second Mortgages

By admin Filed in Great Mortgage Deals February 17th, 2011 @ 11:42 am

Your home: It’s probably your biggest asset. Having a home to back you up when you need a loan is one of the greatest advantages of home ownership. In recent years, there has been a major increase in the amount of people looking to use their homes as a way to get access to extra money when they need it most. One of the best ways to do this is through a second mortgage.

A second mortgage is exactly what it says it is – a loan made in addition to your first mortgage, and it’s based on the amount of equity you have built into your home. Many people use them to fund home renovations, to pay off credit cards, or to put a child through college. Since you’ve already been through the process once, the underwriting required to get a second mortgage is much simpler than it was the first time around, and the cost of the transactions involved will be significantly lower. This usually makes up for the fact that interest rates on the second mortgage are a bit higher than they were on the first one.

On a second mortgage, you will borrow a fixed sum of money against your home equity, and pay it back over a specified amount of time. The amount you borrow will be combined with the amount you still owe on your first mortgage.

It all sounds pretty simple. There are just a few things to keep in mind. First of all, don’t take out a second mortgage on your home unless you’ve built up a fair amount of equity in the property already- that is, made payments on the original mortgage balance for a good amount of time. You may still be able to get a second mortgage if you don’t have much equity, but your rates will be so much higher, and the amount you can borrow so much lower, that it will essentially be a waste of your time and money. This is one of those things that is worth waiting for.

Also, look into the other options of borrowing against the equity of your home, including a home equity loan and a home equity line of credit. All of these options allow you to borrow against your equity, but there are slight variations among them that mean one of the three may be the best option for you. It will depend, for the most part, on your particular financial standing, the amount of money you need to borrow, and the amount of home equity you currently have.

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