Archive for March, 2008
Reverse Mortgages Enable Retiring Homeowners
It’s a creepy thought. Over the nest 40 years, the proportion of Australia ’s population aged 65 years and over will almost multiply. With continual expansion in the cost of healthcare and actual living expenses, and a decreased ability to rely on government assitance, many Baby Boomers are dreading a need to make important downgrades in their lifestyles to fund retirement.
The popularity of reverse mortgages is set to rise, as our population ages. An obstacle to the take up of reverse mortgages is a strong mentality among retirees to want to leave as much as possible to their children.
The downside? The interest on the financial loan can be up to 1 to 2 percent higher than ordinary home debt rates and is gradually added on to the loan over time. But the suitable news is that the financial debt doesn’t have to be paid back until the real estate is sold. In most cases, however, kids of retirees would rather see their mum and dad tap into their assets to maintain a high principle of living and general satisfaction than leave a significant fortune to them.
To take some of the pressure level off ageing shoulders, economic institutions are continually exploring products specifically tailored to help retirees. Meet the Reverse Mortgage.
So how does it work? Just as the name says, a reverse mortgage works similarly to a standard mortgage, only it’s the lender who pays the homeowner instead of the other way around. The bank or lender will lend a percentage (somewhere between 30 and 50 percent depending on the retiree’s age) of the expense of retiree’s home as a lump sum, or regular revenues to supplement savings or a pension.
Also known as ‘Spending the Kids Inheritance’ or ‘SKI-ing’, reverse mortgages enable retiring homeowners to release equity in their homes to fund a model of living that would be otherwise out of reach. Using a reverse mortgage is the best solution for retirees to strike into their homes, usually one of their biggest assets, for cash.
“When you work all of your life, you get to retirement and you want to savour what time you’ve got left,” one retiree said.
Major Price Declines in Case Shiller Housing Price Index
The majority of bubble markets are experiencing large prices declines. In general price declines continue to accelerate. Hat tip to HousingPanic. Indeed, Money Magazine reports that:
Residential real estate has posted another record decline.
The S&P Case/Shiller Home Price index of 20 key markets, released Tuesday, shows that home prices plunged 10.7% in the 12 months ending January. That marks their lowest level since the index launched in 2000.
Of those 20 metro areas, 16 reported record annual declines. Ten of those cities posted double digit declines through the 12 months that ended in January. The survey’s 10-city index fell 11.4% year-over-year, its steepest decline since its inception in 1987.
Las Vegas and Miami reported the weakest markets in January, with each city posting an annual decline of 19.3%. Phoenix was the second worst with a decline
of 18.2%.
The Washington, DC area an average housing unit is down 10.9% from January 2007 to January 2008. I’m sure Lance will say that his desirable rowhouse hasn’t decline that much during that time period. He probably is correct. However, in general, prices are declining precipitously in the outer suburbs and certain condo developments , strongly in the inner suburbs, and slowly in desirable neighborhoods in DC.
Prices will fall further in the Washington, DC area. Despite the paid spinners at the NAR who think this is around the bottom .
A real estate agent that I have worked with, just said that “sales are up 3% in the area and we are really seeing the market make a change. Prices will continue to be high in our area, and I’m not sure that will ever change. ”
Home Loans – A Basic Introduction
During the recent span of years, it has been observed that the demand of home loans has increased. The main reason being, the availability of loans in market has increased too. Home loans are now a days available in the market at pretty low and attractive rates.
Home loans are recent craze in the loan market now days. The reason being the fact that, home constitute out as the largest asset that usually people have. While purchasing a home, the person has to invest a very huge amount of money. Some people face trouble, paying out the whole money together for the house, while some can’t even afford to invest money for the home of their choice. Home loans, this way have turned out to be a boon for people, who want to have a home of their choice, but cannot afford it at the moment concerned.
Buyers now days don’t have to think about the source of money for their homes. Home loans have made the life of a lot of buyers very easy. But, the buyers should be careful while opting or going for a home loan. They should first, make a thorough research of the prevailing interest rates in the market, and then opt or go for any home loan. Borrowers can even go for home loans, by undertaking mortgages. In this, the borrowers take a loan after pledging or securing any asset or securities of theirs, against the sum borrowed by them.
While going for a home loan, the individuals should take care of the other various aspects relating to the home loan. An individual before going for a home loan should take care, before deciding the principal amount that he is going to borrow as a home loan. Otherwise the person may end up taking a loan with a higher principal amount and then end up paying more interest for the amount that he had borrowed unnecessarily. The second aspect that the borrower should consider is the interest factor associated with every home loan. Interest is an unwanted burden that comes attached with the home loan. Interest is the extra amount that the borrowers have to pay, for taking the loan from the lender. The borrowers motto should be take a loan which carries the lowest interest rates. For this, the borrower should make a complete research of the prevailing interest rates in the markets so that he does not get cheated by the home loan lenders. Borrowers should also consider the aspect of the term associated with the loan that he has undertaken, otherwise they may end up paying or repaying the loan for 30 to 35 years, just because of the fact that the loans conditions had stated that the principal amount has to be repaid on fixed amount over 30 years installment basis.
Home loans are a boon for people, but they should be careful before opting for a home loan.
Biweekly Mortgage Programs - Are They Worth the Money?
Numerous companies advertise that they can help you pay off your mortgage in a lot less time. These services, which are known by several names, most commonly “mortgage accelerator”, advertise that they can cut nearly 10 years from your thirty year repayment schedule. All you have to do to reap the benefits of their system is to enroll by paying a costly fee. Is an accelerator program worth the expense?
These programs offer what is often caled a biweekly loan . The company will charge a few hundred dollars to apply for their plan, as well as a small fee every two weeks. By signing up, you agree to allow them to take half of your mortgage payment out of your bank account every 14 days. The plans do work, but not because of any monetary magic used by the companies that offer the programs. The plans work because you are paying more money.
There are fifty-two weeks in a year. By withdrawing half of your house payment out of your savings or checking account every two weeks, you are making thirteen full payments per year, instead of the twelve you were making before. By making an extra payment every year, you are paying back your mortgage principal sooner and reducing interest that will be applied to the outstanding balance. This will, over time, take a number of years off of the time it takes to repay your mortgage .
Are these plans worthwhile? They could be, but only if you are rather lazy. It isn’t necessary to enroll in a plan or pay upfront and pay regular fees to utilize this method of repayment. Most any lender will permit you to pay extra money whenever you like. All you must do is note that the extra cash is to be applied to the loan principal. A lot of lenders provide a place on the form that you put in the mail or use on their Website for that express purpose. You may mail in a bit of additional money each month, or you could send in one full additional payment each year. The net effect is just about the same either way.
If you are interested in making extra contributions towards paying off your home loan early, all you need to do is contact your lender and ask what options might be available. You will likely find that any one of a number of free options are available.
Are you Biting your Nails trying to find the perfect New York Mortgage Service?
100% financing, as it names implies, offers complete financing of property. The other option, 80/20, finances your mortgage with two loans. Both loans may be carried by your lender, but sometimes the seller or a second lender is required to carry the 20% mortgage.
100% financing is easier to deal with, but not all lenders will offer this type of home loan . 80/20 financing is more common, but takes some negotiation if the seller is involved.
No Income/No Asset New York Home Mortgage Programs
Limited documentation programs can simplify the home mortgage process and pave the way for a smoother and easier home-buying experience especially for self-employed borrowers. Some of these mortgage programs eliminate the need to verify income information and require limited or no documentation for qualified applicants.
Imperfect Credit Loans
Imperfect Credit Loans allow borrowers with less-than-perfect credit to qualify for competitive interest rates to purchase a home, consolidate debt, or lower monthly payments.
Home Improvement Mortgages/Construction Loans
Home improvement loans are home loans used to finance improvements on your house or property. These loans are used to maintain or increase the value of your home. This can include repairs, a new kitchen, a new bathroom, an extension or general property improvements. Landscape improvements and swimming pools can also in many cases be considered home improvement. Generally, all actions that can be considered to increase the value of the property in such a way that it increases the expected sales value of the home or the property are to be considered home improvements.
Are you sifting through Mortgage Loan offers? This may help
A mortgage loan is different than any other loan, and most mortgage loans are negotiated for a set time period of less than 10 years. They are negotiated for a single interest rate which will remain in place for the entire term of the mortgage loan . You can pay off a loan in full at any time, but you may pay a penalty depending on the mortgage lender.
Most of us are familiar with this kind of loan through the purchase of our vehicles.
With mortgages, the length of the mortgage, the term of the mortgage and the mortgage interest rate are negotiated separately. In this case:
• the ‘amortization’ of the mortgage is the length of time it will take to pay off the mortgage
• the term refers to the time period covered by your current mortgage contract. This is normally the length of time that you are ‘locked in’ to a particular interest rate and payment amount.
• the interest rate can either be fixed or variable.
Amortization
The period of time taken to clear off the mortgage, even as long as 30 years is called the ‘amortization’ period. It indicates the amount of time it will take to pay off the mortgage loan, assuming you make all payments in full and on time.
In general, the shorter your amortization, the less you pay in interest costs over the life of your mortgage. So, if you amortize your mortgage over 15 years instead of 25 you can save thousands of dollars in interest costs.
The only challenge is whether you can afford the larger payments. A shorter amortization will always translate as higher mortgage loan payments - because you are paying off the mortgage loan more quickly.
Term
‘Term’ of the mortgage is the amount of time for the current conditions of the mortgage, including the interest rate (whether locked in or variable) and the mortgage lender.
Mortgage terms can be as short as 6 months, or as long as 10 years. In most cases, the longer the term of the contract, the more it will cost you. Most mortgage lenders will consider a longer term to be higher risk to them - after all, interest rates could go up and that means your mortgage may not be as profitable. So, longer term mortgages will usually come with the highest interest rates.
Also, mortgage lenders want to ensure that you stay with them - after all, they are making money from your business. So, the term covers them in two ways: they insure that they make their money and that their clientele is ’stable’.
Interest
An important aspect of your home mortgage is the interest rate. This rate is negotiated for a period of time - from 6 months to as long as 10 years. This time period is the period over which you will pay the agreed interest rate.
The lower your interest rate, the less you pay in interest costs over the life of the mortgage . This can also save you thousands of dollars.
A final word on interest rates: mortgage lenders ’stack’ the deck in their own favour. Any interest rate they are willing to charge is at a level at which they believe they will make money. This is certainly not a charity business. Now, if you ‘lock in’ your interest rate for 5 years you will likely pay more for your mortgage.
However, if you are willing to accept a bit of risk at your end (particularly if you have a stable job and a good credit history) you are almost always better off with variable rate mortgage. This type of mortgage allows the interest you pay to fluctuate with the market. While this sounds risky, it actually allows you a lot of freedom and almost always saves you money, for two reasons:
• The interest rate charged on variable rate mortgages are usually much less than any ‘locked in’ rate
• If the rates look like they will go up you can generally switch to a ‘locked in’ interest rate at no penalty.
Savings
In most cases, it is best to get the shortest possible amortization coupled with the lowest interest rate possible. This is how you save money on your mortgage in the long term.
However, you have to be careful. The shorter the amortization period, the higher the payment. So, while you save money over the long run because you pay less in interest charges for your loan, you have to be able to afford the payment in the short term.