|Mortgage Refinance Information|
Selecting the Right Mortgage for You
A mortgage is a loan you take out to buy a home. This loan covers the "principal" (purchase price of the house minus your down payment) plus the "interest," which is the fee a lender charges you to borrow the money.
There are various types of mortgages, including Fixed-rate, Adjustable-rate, Balloon, VA, FHA, and FmHA. It is important to select the one that is right for you.
With a fixed-rate mortgage, your interest rate stays the same, or "fixed," throughout the term of the loan. Therefore, your mortgage payment stays predictably the same, making it easier to plan your spending each month. However, lenders typically charge a higher interest rate to make up for the lost income that could be gained from a rate increase. Charging a higher interest rate lowers the total amount you can borrow. And though you're protected from rising interest rates, you're also stuck with a certain rate even if the going rates fall.
The most common fixed-rate mortgages are 15-year and 30-year, which refer to the time you have to pay off the loans. The interest rate on a 15-year mortgage is usually lower than a 30-year mortgage, meaning you'll pay less over the life of the loan. But your monthly payments will be higher since you have half the time to pay off the mortgage.
Adjustable-rate mortgages are also called ARMs or adjustables. These mortgages typically start off with a lower "teaser" interest rate that stays fixed for a specified time, and then "adjusts" periodically depending on changes in the market interest rate. The risk to you is that the interest rate-tied to a money market index such as the one-year U.S. Treasury bill or certificates of deposit-will fluctuate, and so will your payment. Your lender can tell you the highest possible monthly payment you would owe if the interest rate hit its max, or cap. You must be sure you can afford it!
A good reason for considering an ARM is if you don't plan to stay in your home for very long; another is if you're sure your income will increase enough to cover the maximum payment possible. And, of course, if interest rates go down, so will your payments. With these loans, the lender is taking less risk since he or she gets to charge you more interest when the rates go up. As a result, you can typically borrow a larger amount, making it possible to buy a home you wouldn't otherwise be able to afford.
An example of an ARM is the 10/1 ARM. This loan has a fixed interest rate (and monthly payment) for the first 10 years, with an annual (that's what the "1" in "10/1" refers to) adjustment to the interest rate for the next 20 years of a 30-year loan. The lower the first number, (for example 7/1 ARM, 3/1 ARM or even 6-month ARM), the lower your initial interest rate. How often rates are adjusted is established at the time you apply for your loan.
Balloon loans have a lower interest rate than a fixed-rate mortgage. The interest rate stays stable for a specified time-such as five, seven or ten years. But when that time is up, you still have to pay off the entire balance of the loan. Borrowers consider balloon loans when they don't qualify for a traditional mortgage, or during periods of high interest rates. The idea is to refinance when the loan balance is due.
VA, FHA and FmHA mortgages
If you have less than 20% of the purchase price to apply to a down payment, you can ask your lender about loans guaranteed by the government organizations below. These mortgages offer competitive interest rates, with little to no money down, such as:
* Veteran's Administration (VA) mortgage: Qualifying veterans can get VA loans with no money down for houses valued at up to $203,000.
* Federal Housing Administration (FHA) mortgage: Designed for people with modest income, these mortgages usually require a down payment of around 3% to 5% of the purchase price and offer competitive interest rates.
* Farmers Home Administration (FmHA) mortgage:. These no-money-down loans are for individuals with limited income who prefer to live in rural communities. Interest can be as low as 1%.
Here are some important questions to ask your lender to help determine which loan is right for you:
? Penalties. Can you pay off the loan early without prepayment penalties?
? Insurance and taxes. What are the provisions for homeowners insurance and property taxes? With some loans, lenders insist you pay these expenses directly to them on a prorated basis, while they hold the money in a separate escrow account. The insurance and tax bills come straight to the lender, who then pays them with your money.
? Loan limitations. Are there limitations on your right to borrow additional money from another source to facilitate your closing?
? Interest rates/mortgage balance. Will your mortgage balance increase if interest rates go up? This is called "negative amortization," and it's as bad as it sounds! It has to do with adjustable-rate mortgages that place limits on the increase in your monthly payment without capping the interest rate. The result is that if interest rates go way up, your payments don't cover all the interest on your loan, and so your mortgage balance increases. Your balance is supposed to amortize-or gradually decrease over time. With negative amortization, the reverse is true!
? Assumable mortgage. Is the mortgage assumable? When you sell your home, can the buyer take over what's left of your loan balance? Most assumable mortgages are adjustable-rate rather than fixed-rate mortgages.
? Second mortgage/home equity loan. Can you borrow additional money against the home with a second mortgage or a home equity loan at a later date?
? Selling limitations. Are there limitations on selling the property without paying off the loan?
? Total cost. What is the total cost of the loan, including service charges, appraisal fees, survey costs, escrow fees, etc.?
? What is a "point"?
Lenders make money on the interest they charge. "Points," (also known as "loan origination fees"), are up-front interest to compensate the lender for processing your mortgage. Each point equals 1% of the loan. For example, if you borrow $200,000, one point would equal $2000. Points are also referred to as "discount points" because usually the more points you pay, the lower the interest rate is, saving you money in the long haul. "Zero-point" loans exist, but the trade-off is you'll pay a higher interest rate, making for higher monthly payments over the life of the loan. Points, like interest rates, are negotiable; try to make them fit your situation.
Do your homework!
Since knowledge about the various options will affect your monthly mortgage payments for the next 30 years, it is important that you do your homework! Then consult your real estate attorney or another trusted source to discuss your options until you feel you can make the best choice for your situation.
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Home Equity Loan vs. 401(K) Loan -- Which Should You Choose
Home Equity Loan vs. 401(K) Loan
Refinance Mortgage Loan ? Tips on Refinancing Your Home Mortgage
Refinancing your home mortgage can come with some great perks. If you do it with no money out of pocket, you can skip one to three mortgage payments. You can save money on your payment or pay off your entire mortgage faster when you have better terms. Here are a few things to pay attention to when you refinance your mortgage loan, to make sure that you don't overlook anything that you might regret, or that can cause you problems later:
Mortgage: For Those Twilight Years
Tracing back, the concept of reverse mortgages began when one good soul, Nelson Haynes of Deering Savings and Loans wanted to help out the widow of his high school football coach. Today that small act has developed into a popular financing option for the senior citizens. With about 6,000 people turning 62 every day, the market is on an upswing.
Sell Your Home and Invest at the Same Time
I continue to see the same For Sale signs in my neighborhood. The houses just aren't selling. If you are considering selling or have a home on the market that is not moving, it's time to think about financing the sale yourself. A good friend of mine bought a new home three months ago, and he has watched his old house sit unsold, while he's struggled paying two mortgages. I finally convinced him to get past his fears and finance the sale of his old home.
Decision Time: Home Equity Loan or Home Equity Line of Credit?
Home equity loans and home equity lines of credit continue to grow in popularity. According to the Consumer Bankers Association, during 2003 combined home equity line and loan portfolios grew 29%, following a torrid 31% growth rate in 2002. With so many people deciding to cash in on their home's equity value, it seems sensible to review the factors that should be weighed in choosing between out a home equity loan (HEL) or a home equity line of credit (HELOC). In this article we outline three principal factors to weigh to make the decision as objective and rational as possible. But first, definitions:
First-time House Buyers: to Buy or Not to Buy; that is the Question
Buying your first house is always a difficult time. There are so many important decisions to make, and problems to be solved, which combine to make it one of the most stressful events that will occur in most people's lives.
5 Ways to Use Your Home Equity Line of Credit
Your home is a source of pride and accomplishment. Did you know that your home can also be an affordable source of income? As your home appreciates and you make your monthly mortgage payments you build what's called equity. You can access this equity at attractive interest rates using a home equity line of credit (HELOC).
Housing Bill - Changes in the Right To Buy Scheme
Presently council tenants are able to purchase their rented property after 2 years of tenancy. However, this is about to change. As of the 18th January 2005, the new Housing Bill becomes law and the current 2 years will change to a period of 5 years. This means, that once the proposals come into force, any new council tenant will have to wait 5 years before having the option of buying their property.
The Truth behind Pension Mortgages
A pension mortgage may seem lucrative at the first sight. However, they seldom are, if the customers who took pension mortgage are to be believed.
Interest-only Equity Loans Create Amazing Power and are Quite Easy to Get
The power of home equity and interest-only payments, provided from most home equity loans is amazing. You can get a home equity loan, with no closing costs and pay as little as $30.00 to $40.00 per month for up to $10,000 in equity cash. These loans are surprisingly easy to get for both residential and investment real estate.
Non-conforming Home Loans vs Conforming Loans
The simple definition of a "non-conforming home loan" is: You have a job and can make the payments. Your credit is used only to determine your interest rate and the loan amount to value of the home ratio. This ratio is referred to as your "LTV" or "Loan To Value". There are many lenders who will lend to borrowers who are in foreclosure or who are currently in a bankruptcy.
What is a Fixed Rate Mortgage?
As the term implies, with a fixed rate mortgage the mortgage rate is fixed for a set period of time, so no matter what movements occur in the lender's standard variable mortgage rate, the borrower's arrangement is fixed and, therefore, so are the monthly fixed rate mortgage payments.
Subprime Mortgage Lenders - Helpful Tips When Getting a Subprime Mortgage Loan
If you have bad credit history, no down payment or difficult to prove income and are looking to get approved for a home mortgage loan, you will probably need to look at subprime mortgage lenders to help you. To see a list of our recommended subprime mortgage lenders you can click on the link below.
Mortgage Debt Elimination
The prospect of mortgage debt elimination is something that many Americans are dealing with today. If you are concerned about your current debt situation, constantly trying to eliminate debt from your life, you are not alone.
Buying A Home? Reasons to Consider Financing Your New Home Loan Online
Financing your new home loan online can save you time and money. With information at your fingertips, you can quickly educate yourself about the loan process and compare mortgage lenders to find the best rates. With 24 hour access to mortgage lenders, you can lower your financing costs from the convenience of your home.
Types of Mortgages
Here is a useful guide to the different types of mortgages that are available.
Self Employed Mortgage Loans - A Survival Guide
When you're self employed you have numerous advantages. As you are a free agent, you will write off every deduction you can on your tax return. You acquire the potential to earn extra income much more so than someone who is employed by someone else. The best part is that you are the gaffer, the boss! On rare occasions, being freelance has some drawbacks. One is when you go to get finance for a property or a large purchase. However, here are some items to know that could help you prepare for the mortgage loan process. A self-employed mortgage loan survival guide, if you will.
Home Loans -- Federal Regulators Warn Lenders to Be More Careful
Federal banking regulators have recently expressed some concern over the housing market as home prices in the United States have risen to record levels. While homes are more unaffordable than ever for many people, the lending market remains strong, mostly because of the introduction of new, ever-more-flexible types of loans. While these newer loan types, such as the interest-only loan, make buying a home easier for some borrowers, they also propose a greater risk to the lender.
Home or Investment Property Equity: Be Sure the Bank Gives You All that You Deserve
Home equity is your own personal money machine. If you want financial freedom, a home equity loan is probably the best way to achieve it. You can pay down credit cards, pay off cars, both at high interest rates, or you can actually use your home equity to invest and build the money into a fortune. The biggest problem people run into with home equity is that they don't have enough of it. Sometimes, the problem may be with your bank and not with your equity.
5 Tips for Savvy Use of Your Home Equity Line of Credit
Tapping your home's equity to pay college expenses, consolidate credit card debt or even to buy a new car or boat is common place. Many economists attribute the additional buying power afforded consumers through home equity debt as a primary reason the nation's economy has been able to emerge from the recent recession. Yet, aside from simply allowing consumers to spendmore, the flexibility and efficiency of a home equity line of credit (HELOC) can provide the financially savvy person with the means to savemoney, make money or simply take advantageof opportune situations he or she might otherwise miss out on. Here are five tips to show you how:
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