Archive for October, 2007
Mortgage:- Consider All Mortgages And Options Before Committing Yourself.
Mortgage on a property is a very serious commitment one which you should not enter into lightly. The very first point to consider is the product which suits you. Since there are a lot of different products on the market, so choosing the right one is the first hurdle to cross. Below is a list of different mortgages:-
1)Repayment mortgage.. Where your monthly payments include interest on the outstanding money on your mortgage as well as a portion of the capital itself.
2)Interest only mortgages.. Your monthly payments just the interest element on the money that your borrowed.
3)Discounted mortgages.. Interest rate on your borrowing is discounted by an amount for a fixed period of time. For example, discounted for 2 years and then they revert back to the normal variable interest rate.
4)Tracker mortgage… These as the name suggest track the interest rate of the central bank. For example, the borrower agrees to pay 0.65 above the central bank rate as his interest.
5)The much talked about … the endowment mortgage. With this type of mortgage, you buy an insurance policy and use that as cash builder to hopefully pay for your mortgage when it falls due at the end of the full term.
6)One account mortgages.. Where payments can be made as flexible as you want but the interest rate accrues for the holiday periods chosen by you.
The above list is by no means exhaustive. There are other products on the market as well and more in the pipeline each and everyday.
Which mortgage suits you?
Each mortgage option has implications for your monthly outgoing. For example, paying just the interest element on your mortgage may appear to be the cheaper option for your cashflow but at the end of the term you still owe the lender the money which you borrowed to acquire your property. The repayment mortgage on the other hand may well be the best option but your monthly outgoing are likely to be higher.
Because any mortgage will drastically reduce your cost of living, choosing the right mortgage should be your top priority to provide both a home for yourself as well as maintaining a reasonable standard of living.
Finally before you can have any mortgage you need to satisfy the lender of two essential criterion:-
1)Property value… as the lending is secured against the property, the value of the property should be higher or equivalent to the money being borrowed.
2)Your affordability.. Whether you can afford to keep up with the payments hence the reason for tests such as proof of income and previous track record are used to provide for an independent assessment of your ability to service the borrowing.
How To Turn Disadvantages Of A Reverse Mortgage To Your Advantage
When it comes to a reverse mortgage, wise consumers weigh the advantages and disadvantages prior to signing on the dotted line.
Let’s start on a positive note, you could do what most borrowers do and opt for the reverse mortgage line of credit. Just think about how you would then be able to draw on the loan whenever money is required for daily living expenses, medical bills, prescription costs, home repairs, etc. This could really enhance your retirement years including in-home care expenses in later years.
Furthermore, your new found income does not affect regular Social Security payments or Medicare benefits. And lenders cannot foreclose on the loan for the life of the borrower.
Okay, that’s all well and good but how do you turn the major disadvantages of a reverse mortgage into a positive one? It’s all in the perspective. For every negative there is a positive to obtaining this loan.
It’s true a reverse mortgage loan may affect your eligibility for state and federal government assistance programs such as Medicaid but it also gives you an important financial cushion and does not (as mentioned above) affect your regular Social Security payments or Medicare benefits.
You also have no monthly payments to make. Granted, the amount you owe continues to grow larger over time but you also have more cash on hand to enhance the quality of your current lifestyle. Look at it this way, you will now have all the money you need (and want). After all, it’s your money. True, you won’t have the full selling price of your home to leave your loved ones but if they’re financially sound in their own right, do they really need a substantial inheritance?
Furthermore with the new found cash, you could re-invest into other income-generating streams such as stock and option trading. But that would be another story with its own pros and cons.
It all comes down to what’s important to you, what your current financial needs are and if leaving money to heirs is something you feel you need or want to do.
Choosing a Mortgage
Traditional Fixed Rate Mortgage? Adjustable Rate Mortgage? 5/1 ARM? 3/1 ARM? or Option ARM?
What type of mortgage is best for you, a serious matter as the right kind of mortgage choice can save you thousands over the years. With a little effort, you can understand the advantages and disadvantages of various programs. Mortgage payment calculators offered in this site can guide you along.
The following will help you identify your needs:
How long do you plan to stay in this home?
If your plan is to live in the home from 2 –7, then a short term fixed rate loan will be good chice as that type of loan is fixed for a specified period of time from 2 to 7 years after which it turns into an adjustable rate mortgage.
How much risk are you willing to accept?
If needs to know exactly what you will be paying each month for the term of the mortgage, a fixed rate mortgage will be best. A fixed rate loan will have a higher rate. But what if you are not qualified for that payment though you may qualify for the slightly lower 5/1 ARM payment.
What are your income expectations?
Do you anticipate a gradual or dramatic increase in your income over a period of time? This applies to the newly graduate who has only been in the workforce for a short time. If so then an adjustable rate mortgage will be ideal.
How much cash do you have available for upfront costs?
Very often a 1 point mortgage will actually save you money as oppose to the so called no cost mortgage. Check this little fact by comparing payments using mortgage payment calculators.
In addition to the above, you need to make an informed decision about your lender and other details of the offering.
Annual Percentage Rate (ARP).
This most likely is the best way to make an “apples-to-apples” comparison of mortgage programs. The APR reflects the cost of credit on a yearly rate and includes any points and fees in addition to the interest rate.
About Interest Only mortgages.
Interest Only Mortgages are based on a variety on programs, including but not limited to fixed rate, 3/1 ARM, 5/1 ARM and 7/1 ARM. The interest only period of the loan does not normally extend to the full life of the loan but is limited to something like a 10 year period, after which the mortgage converts to a fully amortized version, amortized over the remainder of the life of the loan.
Shopping for an interest only mortgage loan can be tricky, like all new products, lenders take advantage of the average shopper’s ignorance. Be extra careful
Interest Rate.
Find out the rate the lender will commit and how long the lender will guarantee it. Get any commitments in writing. As with any transaction, if it isn’t in writing it doesn’t exist.
How does your mortgage compare?
Once upon a time, people used to organise a mortgage, often through the estate agent who’d sold them the property and generally remained faithful to that building society throughout the term of the mortgage. Back in the 1970’s it was quite usual for couples to save up for their deposit with a particular building society in order to be looked on favourably when the time came to apply for a loan. The only time they’d have cause to change things was if they moved house and then they only tended to arrange a replacement mortgage with the same company.
Things have certainly changed since then. There are a great many more building societies all competing for your business. It has become the norm to switch between building societies on a regular basis in order to gain the best possible rates. It’s very much easier now. Specialist on-line brokers can offer all the help and choice that you need and it’s no longer the mystifying process it used to be.
There are an unbelievable number of mortgages available and flat rate “lifetime” loans are now becoming available at lower rates. Are they really going to save you money in the long term though?
As an example, we have details of a lifetime tracker mortgage from the Woolwich. Based on an interest charge which is guaranteed to remain at 0.19 percentage points over the Bank of England’s base rate, which means a current rate of 4.69 per cent. There is no need to change after two years; the rate will automatically adjust according to bank rate.
Compare this with an offer from the Portman Building Society. They offer a two year discount mortgage. Their rate is 4.19 per cent.
There is no application fee with the Woolwich; neither do they charge legal or valuation fees.
Compare this with the Portman. There is an application fee of £499, a charge for valuation in the region of £300, legal fees of approximately £350 and a deed release fee of £199
If you have a £150,000 mortgage you will save £1500 over two years by using the Portman versus the Woolwich. However, the costs shown above bring this figure down to £152.
At the end of the two years, it will be necessary to re-negotiate another deal as good as, or preferably better than, the current Portman one, as if you don’t move fast, a 6.5 per cent rate kicks in and that will cost you £226 per month more than the Woolwich loan. So watch those dates!
Your loan requirements may be considerably more than £150,000 and in this case you will certainly be far better off by shopping around.
The mortgage market is ever-changing and keeps everyone on their toes in search of the best deals, but on balance it appears that a good on-line broker seems to be the best way to go. Sit back and let them do your homework for you every couple of years. They have a vast amount of experience of the mortgage market and will pull out all the stops to make sure you get the best possible deal.
So, that’s the story. Make the right choice and you’ll all live happily ever after!
Mortgages. HIP’s – who will benefit?
The time is drawing ever nearer when Home Information Packs will be a legal requirement for house sales, initiated and paid for by the seller. With costs variously estimated to be from a low of £500 to a high of £1200 it can be seen that ‘facts’ are somewhat scarce. What is certain however is that from 1st June 2007, the additional funds necessary to provide this pack for any and every house sale attempt will make many potential sellers think twice before committing their property to the market.
Note the words ‘sale attempt’ – failure to sell the house will not result in a refund of these costs. The house inspector will have done his job and been paid, and the government will have taken their cut in the form of VAT, so it will be ‘sorry folks – no money can be returned’. Try again later? Certainly, but in the increased ‘Snakes and Ladders’ format of house sales you have gone back to the beginning and must start the whole process from square one.
The ‘life’ of a pack will be three months (subject to a provision if the house is off the market for sales negotiations); after this period a new up-dated pack will be required. Under these circumstances the speculative sellers who are testing the market will disappear rather than face this new cost; they are likely to decide to stay out of the market. This loss of a seller also means loss of a buyer, and there is concern in some circles that this could reduce labour mobility. Home owners may be reluctant to move to a new job if it means the additional hassle of moving house, with a consequent increase in unemployment.
What of the HIP itself? Does it provide really sound information to alert the buyer to any potential problem areas? The true answer is both positive and negative. On the positive side there is a visual survey (Home Condition Report) but this is not likely to come anywhere near the true structural survey required by a mortgage lender. Defects in the building fabric including damp and decay will be included, as will power installations, insulation and energy efficiency – even potential tree root damage will be mentioned, but some rather more serious situations will not.
The negative aspect will relate to the items which will not be mentioned, such as possible subsidence or land slip, flooding risk, presence of rights of way etc. All this, and still the buyer will have to arrange and pay for whatever additional survey the lender will require. Note that all the third party costs are covered, including the governments cut in the form of VAT (estimated at £111m per annum), with little real benefit to either the buyer or the seller but plenty of additional expenditure.
There is also little room in these regulations for the honest seller. Anyone who is prepared under present legislation to warn potential buyers of possible problems is likely to decide that they are covered by the HIP, and that they do not need to comment on anything. There is no obligation within the HIP for the seller to confirm any of the findings, nor any caveat warning the buyer to be aware of the risks involved in property purchase.
The HIP will be with us and operational in less than 12 months, and history tells us that, no matter how flawed the legislation, governments apparently regard it as a sign of weakness to repeal legislation no matter how unpopular it may be or by how far it fails to meet the original good intentions of its originator.
It all seems to add up to more costs for the home owner, more income for the government, more regulation and less workforce mobility. The mobile home ethos begins to look more attractive!
Bi-Weekly Mortgage Calculator - How Much Will it Save You?
Imagine if there was a way that could help you could reduce the term of your mortgage by up to Five Years? Just think - if you could reduce the term of your mortgage by up to five years earlier, then you could even retire earlier, or enjoy 5 years of better holidays, better cars…
What would you do with this advice- ignore it - and lose the chance to reduce your interest paid to those greedy Banks over a 25 year period - or grab something back for yourself ?
What if all you had to do was to pay half your mortgage bi-weekly (fortnightly to our UK cousins) - and all these benefits would be yours…
Now, doing the math for two weekly commitments might be too much of a hassle for the regular home buyer, but all a fortnightly mortgage is, is actually just your normal mortgage payment cut in half. Every other week, you pay one half of your normal mortgage payment.
Let’s say for instance you have a mortgage interest of 8% on your $100,000 home. By doing a two weekly mortgage on this instead of a 30-year loan, you can estimate with a bi-weekly repayment that the amount of your savings can reach up to $48,000. Plus, you can even make 13 full payments and pay off early on your home, so you can gain by paying less interest overall, and over a shorter term. Using a fortnightly mortgage calculator, you can see that bi-weekly payments will cost you $50 each month.
Interesting Facts: You could reduce your overall interest paid by up to 23% by using two weekly repayments
If you don’t want the hassle of doing this yourself then contact your local broker, or visit some of the sites given on this page.
The Internet is a smorgasbord of mortgage calculators, including bi-weekly mortgage repayment estimation tools. Below is list of websites that feature two-weekly mortgage rate calculators for free use by their consumers.
Reduce-My-Mortgage.com Bi-Weekly Mortgage Rate Calculator
The Reduce-My-Mortgage website offers a bi-weekly mortgage calculator that allows you to enter your personal information so you can start calculating your new mortgage payments. Their bi-weekly repayment calculator also helps you determine how much you can save in both time and money.
The site also features an update corner where fortnightly mortgage buyers are told about recent mortgage news. These news like the home loan errors found out by the CLA (Consumer Loan Advocates) helps the consumer realize the importance of using a bi-weekly repayment calculator. In addition to helping you calculate your savings, this fortnightly mortgage rate calculator may also be used on Automobile, Boat, Student, and Business loans.
Vlender.com Bi-Weekly Mortgage Rate Calculator
Virtual Lender is a Turkish website offering solutions such as bi-weekly mortgage rate calculators for either the individual loan officer or the entire mortgage company. Their calculator helps consumers determine the amount and projected period of loan payments.
1Stop-MortgageCalculator.com Bi-Weekly Mortgage Rate Calculator
This website offers a monthly and two weekly mortgage rate calculator to help you determine your payments. The only thing you need to do with the 1 Stop monthly and two-weekly mortgage repayments is enter the principal loan into the field provided. After that, also type in the interest rate and the loan term into the bi-weekly mortgage rate calculator and find out how much your monthly payment will be. Also, this mortgage estimator will also let you know how much you save if you use bi-weekly payments.
DinkyTown.net Bi-Weekly Mortgage Rate Calculator
The two weekly mortgage estimator of this website will show you the possible savings you can make with your type of mortgage loan. Accelerated bi-weekly mortgage payment is the technique used by this fortnightly mortgage rate calculator in order to determine the amount of savings. Bi-weekly payments usually work in only one way. They can accelerate your mortgage pay off by paying half of your normal monthly payment every two weeks. By the end of each year, you can see using a fortnightly mortgage rate calculator that what you have paid for is equivalent to 13 monthly payments instead of 12. This technique used by this fortnightly mortgage calculator can take several years off your mortgage term and also save you thousands of dollars in interest.
So there you have it. The choice is yours…
You can Do Nothing - and what benefits will you get … NOTHING.
Or you can take easy steps to slash the horrendous amount of interest that you would normally pay over the life of your mortgage, and shorten the term you are paying for it for, and make the poor banks to to be the losers.