Archive for March, 2006
What can I afford?
Can I Afford to Buy a House?Be Sure to Include in All the Costs
Ken Go (888)822-5363
Potential buyers sometimes forget to factor in the property taxes, homeowners insurance and the possibility of depreciation, as well as the costs associated with closing the transaction, moving, purchasing major appliances, and home, landscape and pool maintenance, not to mention furnishings and design accessories once you move in.
The days of calling up the landlord to fix your problems come to an abrupt halt when you’re a homeowner. You’ll be responsible for everything from malfunctioning appliances to leaky faucets to broken heating and air conditioning units and everything in between. And if you buy an older home, you’ll probably eventually encounter costly repairs, such as replacing the roof or windows.
To determine whether you can afford to buy a home, you should do the following:
1. Determine the property value of homes that interest you. The property value is determined by comparing the prices of homes recently sold of similar size in the same neighborhood. Your real estate agent will be able to provide this information to you.
2. Review different mortgage loan types and compare their required down payment amounts to the money you have available. Make sure you will have a payment that is affordable for a duration of three to five years, include that taxes and insurance. Don’t cheat yourself with the low rates or the negative amortization loans that is available.
3. Get a letter to guaranteed your closing costs, including points , taxes, recording, inspections, prepaid loan interest, title insurance and financing costs from your mortgage lender or a real estate professional. These will generally add up to between 2 and 3 percent of the property value. You’ll receive an estimate of these costs from your lender after you apply for a mortgage but request for a guaranteed rate and fees.
4. Add the down payment requirements and the closing costs together to determine the amount of money you’ll need right off the bat. But you’re not done yet.
5. Think about the actual move. Will you hire a moving company or rent a truck? Either way will cost you. The more stuff you have, the more it will cost.
6. Property taxes. Many lenders will require an impound account in which monthly payments for property tax (and often insurance) are paid together with the monthly mortgage payment. You can figure your average annual tax rate will be about 1.25 percent of the purchase price of your home. For new homes, ask about Mello Roos ( Its an act that allows county, city or special district to finance public facilities and services thru homeowners).
7. Next, budget for maintenance and repairs.
8. If you have other income that will come in to help you pay the mortgages, make sure they are on going to be at least two to three years guaranteed and you should have an alternative plan if that fails.
Once you crunch the numbers and find you come up a bit short, investigate ways to reduce your debts or creatively increase your income—it can come from a variety of sources.
My advise to new homeowners: Make sure you can afford the payments and don’t cheat yourselves with short term loans or negative amortization loans that will get you in trouble.
For existing homeowners that are having problems paying: Don’t refinance only to be able to keep your head above water for a few months, if you cant really pay the mortgage sell your house and repurchase later when you can afford it then.
And of course, you’ll want to weigh perhaps the biggest benefit of all—having a place to call your own. Call me anytime for any inquiries: Ken go (888)822-5363 or write: kennethgo@verizon.net
costs incurred in the uk mortgage process
Costs that may be incurred in the Mortgage process
By Nigel Uglow
Please note this comprehensive list applies only to costs directly related to the Mortgage. They do not include Solicitors fees, Estate Agents fees and Stamp duty which will be covered in future articles.
Valuation Fee
Payable at application stage. This will cover the cost of the valuation on the security property and is carried out for the purposes of the Lender. The amount would vary depending on the estimated value of the property and the company carrying out the valuation. The valuation fee is non refundable once the valuation has been conducted but would normally be refundable in the event of prior cancellation
Application Fee
Payable at application stage this can sometimes be another name for the valuation fee but in most cases would be an additional charge for processing the mortgage application. In some instances the application fee can be an amount to cover both the valuation fee and processing charge. The cost represented by the valuation fee is non refundable once the valuation has been conducted but would normally be refundable in the event of prior cancellation. The cost represented by the processing charge would normally be non refundable in any event.
Reservation Fee
Payable at application stage and normally non refundable. This fee is to reserve funds on a Mortgage product whose terms may be considered advantageous and normally where funds are limited and may only be available for a short period. The advantages of the Mortgage product can be any number of factors relating to the mortgage terms and conditions but would normally include a competitive interest rate.
Survey Fee
Payable at application stage this is normally carried out for the purposes of the borrower and at the expense of the borrower. This would be in addition to the valuation and is a more detailed inspection of the property. The extent of the inspection is determined by the type of survey requested and can vary from the full structural inspection to partial inspection restricted to specific areas of concern.
Arrangement / Completion Fee
This administration fee charged by the Lender is paid by the borrower on completion and will normally be added to the Mortgage advance. The Lenders terms dictate if this can be included in the Mortgage advance. This fee amount varies between both Lenders and Mortgage products.
Brokerage / Intermediary Fee
This arrangement fee is payable where the borrower is using a third party to assist in arranging the Mortgage. This would normally be payable subject to satisfactory completion of the Mortgage. This can be paid in advance but would normally be payable on completion.
Higher Lending Charge
Payable at completion this is an indemnity fee charged by the Lender for the purposes of the Lender and paid by the borrower. This can be payable where the mortgage advance exceeds the normal loan to value parameters of the Lender. It is calculated as a percentage of that part of the mortgage advance over and above those parameters. The Lenders terms dictate if this can be included in the Mortgage advance.
Early Repayment Charge
Payable on partial or full redemption of the Mortgage. The Early Repayment Charge may or may not be payable depending on the Lender and Mortgage product. When payable the method of calculation can be expressed in several ways.
Redemption Administration Fee
Payable on redemption of the Mortgage. This fee to cover administration costs when the Mortgage is repaid varies between Lenders.
Deeds Production Fee
Payable on redemption of the Mortgage. This fee to cover the administration cost of recovering the Deeds for the borrower varies between Lenders.
Own Buildings Insurance Fee
Payable on completion. This fee applies where the borrower arranges their own Buildings Insurance and covers the extra administration costs that result.
You may freely reprint this article provided the following author’s biography (including the live URL link) remains intact: About The Author
Nigel Uglow is the founder of Flagstone Finance Ltd who help applicants find the best available Mortgages via the http://www.flagstonefinance.co.uk/ website
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Should I combine my first and second mortgage into one loan?
“I have an 6.75% first mortgage with a balance of $360,000, and a 10% second mortgage with a balance of $90,000. The second mortgage brought our total mortgage debt at the value of the property at that time, which is why the rate is so high. Our house has since appreciated about 10-15% in value, and I’m sure I can profit by refinancing. My question is, should I refinance the second only or should I refinance both, and if I refinance both should I take out two new mortgages or should I consolidate the first and second into a new first? It is all too confusing.”
It is confusing. The best choice depends on a number of factors including:
Rates and points available on new loans. Critically important are the terms of new loans to refinance, relative to the terms on the existing loans. This will depend on what has happened to mortgage interest rates, the value of your property, and your credit rating since you signed for the original loans. When you have two mortgages, you must obtain price quotes on a new first for the amount of the balance on the existing first, and on a new second for the amount of the balance on the existing second. You also need a quote on a new first for the amount of the balance on both existing loans.
How long you expect to be in your house. Refinancing typically involves immediate costs to obtain future benefits — the longer you have the mortgages, the larger the refinancing benefit.
Current value of your house. Appreciation in the value of your house may make it possible to refinance the first mortgage without purchasing mortgage insurance. If large enough, appreciation could allow you to roll both loans into one without paying mortgage insurance.
Remaining term on existing loans. The shorter the remaining term on your existing loans, the smaller the refinancing benefit. With a shorter remaining term, you pay off the existing loan faster, which reduces the cost of the higher rate on that loan.
Term on new loans. The shorter the term on your new loan(s), the larger the benefit from refinancing. While shorter terms increase the cost of monthly payments, this is more than offset by the more rapid pay down of the loan balance.
Your income tax bracket. The tax savings on interest payments usually reduce the net benefits of refinancing. The higher your tax bracket, the smaller the benefit of an interest rate reduction on a new mortgage. However, if the remaining term on the existing loan is short, expect the reverse — the refinance benefit can be larger for a high tax bracket borrower. Complexities such as these make refinancing two mortgages perplexing.
If you could consolidate both of the existing loans into a single new first mortgage at 5.875% and one point, the savings over 6 years would be even greater — $7187. Every case is different but we can help you analyst your situation and determine how much you would save by refinancing or not.
Please feel free to call me at (888) 822-5363 or write to Kennethgo@verizon.net or visit my website: 1stinnovative.com.