Home buying is one of the most important decisions an individual or a couple can make. It is quite possibly the largest purchase an individual or family will ever make, thus, it is important to approach the funding of the purchase with great caution. Determining the type of mortgage that is right for you can be tricky. It starts with the basic knowledge of the different types of loans out there, including FHA Loans, VA Loans, Rural Housing Loans, and many other types of loans.
Two very important and frequently used types of loans are FHA Loans and VA Loans. FHA loans are considered a government mortgage and are insured by the Federal Housing Administration. These loans mandate that the buyer put at least three percent of the sales price down as a down payment. VA loans are reserved to those individuals who have met specific time requirements in the military. There is typically on down payment and loans may equate 100 percent of the value of the property.
Rural Housing Loans are also an option for families and persons living in small towns and rural areas and have low to moderate incomes. There is one hundred percent financing with a thirty year term. In addition to the Rural Housing Loans, there are also Affordable Housing Program Loans and Housing Finance Agency Programs for home buyers to choose from.
The final major type of loan available to home buyers is the conventional loan. This loan is not insured by the government, but rather insurance companies. The loan allows up to ninety percent of the purchase price to be financed. Conventional loans can be either fixed-rate loans or adjustable rate mortgage. In a fixed rate mortgage, the interest rate of the loan is maintained over the length of payment, hence the title. Adjustable rate mortgages may start off with a lower rate, but as interest rates rise, so to will your monthly payments rise. The ARM mortgage is often used in situations where income is low at first but is expected to go up.
Do not pay a good deal attention to who is originating the loan or where the lender is. Do not put too a good deal esteem on your current banking relationship, either. Betting odds are your loan might be traded once or twice across its term.
The basic principles
There are two introductory fashions mortgage lenders invoice you for utilizing their finances by the interest prices you pay for every month over the lifespan of the loan, and by points. Equate mortgages by their yearly percentage rates, which include the price of points and other fees.
Bankers sell a broad mixed bag of mortgages, but when you get down to it there are just two assortments.
Fixed-rate mortgages seal in your interest rate for the lifetime of the loan. Your total monthly sum of principal and interest stays invariant, but the part of every sum allocated to principal grows.
Adjustable-rate mortgages typically start lower than their fixed-rate acquaintances but their interest rates can go up or drop in the period of the full term of the loan.
What is ideal loan for you?
Resolving which mortgage is most beneficial takes a close look at your current circumstances, future net income and fiscal goals.
Keep your needs in the forefront. Do you intend to stick for several years? Then incurring the best interest rate on a fixed-rate mortgage is in all likelihood your most dependable bet. Paying 7.5% rather than 8% on a $150,000, 30-year fixed rate mortgage may economise you a sizeable amount every month.
Then again say you plan to put the home up for sale in three to five years. Then points, closing prices, and the ability to pay for off the mortgage without penalty) are more important than getting the absolute lowest available rate.
For most home buyers, the choices are these:
Will your down payment be small or large?
Do you want a long-full term or shorter-term loan?
Do you want a fixed-rate or adjustable-rate mortgage?
Will you pay points for the lowest-rate mortgage or might you shop for a loan with few or no points and therefore a higher rate?
You sit down to look at your credit report for the first time. If you’re scores are 750 or above, congratulations! You have excellent credit; stop worrying. If you’re scores are not above 750, no problem—a journey of a thousand steps begins with the first one. Take solace in the fact that the national average score is around 676 according to the Gallup Organization. If you’re scores are below 400, 500, or 600, there’s definitely room for improvement and only one way to go—up!
If the numbers I’ve mentioned don’t make any sense to you or you have no idea what they mean, don’t fret—I’ll explain. Credit scores range from 300 to 850. All three of the credit bureaus—Equifax, Experian, and Transunion—offer FICO credit scores using a complex mathematical formula developed by Fair, Isaac and Company, but they each give the scores a different name: At Equifax, the FICO is known as the Beacon credit score; at TransUnion, it’s called Empirica; and at Experian, it’s called the Experian/Fair, Isaac Risk Model.
Credit scores are determined by several factors: the number and type of accounts you have, your bill-paying history, late payments, collections, outstanding debt, and the age of your accounts. The credit scoring system for each of the bureaus awards points for each “factor” and the total number—your credit score—is an indicator of how likely you are to repay a loan.
Here are a few quick tips to help improve your credit scores:
• Pay your bills on time, especially your mortgage payment.
• Try to keep your outstanding debt low; don’t max out your credit cards.
• Generally, the longer the credit history, the better the score.
• Don’t apply for too many credit cards or accounts at one time.
• Try not to have too many credit cards, having two to three is ideal.
If you’re credit scores are above 750 you have excellent credit and will able to get the best interest rates and terms available. As your credit scores drop, the interest rate you’ll receive for a home loan will rise: this is known as tiered pricing. The more of a risk the lender takes on you, the higher your interest rate will be. In addition, all lenders have their own break points between tiers. What this means is that one lender may raise the interest rate if a score drops below 700, while another lender won’t give a higher rate until the score drops below 690.
In summation, you should do everything in your power to maintain good credit scores, and be sure to shop around and do your homework when looking for a home loan because all lenders are not created equal, and not all lenders look at credit scores equally. Knowing that you have good credit scores is a start. Knowing what kinds of interest rates you can get with your credit scores is the next step.
The time has come to buy a house. Questions buzz around in your head like a swarm of angry bees: “How much can I borrow? How much do I have to put down? How much will my payments be?” Well, let me suggest starting with the “How much can I borrow?” question.
There are many factors you need to take into consideration when purchasing a home. First and foremost, ask yourself what size monthly payment you can afford. When determining how large a mortgage you can afford, be sure to factor in all your current expenses such as car payments, credit card bills, student loans, utilities, and the like.
You may also want to factor in how much you spend on things like entertainment, eating out, and traveling. You don't want to add a mortgage payment and say goodbye to your social life. Instead, you want to make sure that you're not overextending yourself financially so you can enjoy a good quality of life.
At the present time, most lenders will allow for a whopping debt-to-income ratio of 45% - 50%. Your debt-to-income ratio is the sum of your mortgage payment and any other credit card or loan payments, divided by your monthly gross income. Lenders use this ratio to help determine your credit worthiness. All of your revolving debts along with your mortgage payment divided by your monthly gross income should not exceed the 36% - 45% debt-to-income ratio.
Here’s a quick formula to help you figure out how much you can afford to put toward your monthly house payment:
--Multiply your gross monthly income by 0.45
--Subtract your non-mortgage debt payments from the result
--What's left is your allowable mortgage payment
So, if we have a couple with a combined monthly gross income of $5000 and they pay $700 a month toward two auto loans and one credit card, they would qualify for a monthly payment of $1550.
In case you don’t know, not all of your monthly housing payment goes toward your principal and interest. A portion must go toward homeowner's insurance and property taxes. I mention this because on most mortgage calculators that’ll you use, you’ll need to enter these figures to get an accurate idea of what your real monthly mortgage payment will look like, and you’ll need the numbers to figure out how much of a house you can afford.
Property taxes are typically a percentage of your home's assessed value. To calculate property taxes, local jurisdictions generally multiply the tax rate by a home's assessed value. For example, if you pay 0.5% in property taxes of the assessed value, a home assessed at $250,000 would have a yearly property tax bill of $1,250. In order to find out the tax rate, you will need to contact your county tax assessor, or a local mortgage broker or bank may be able to assist you. As for the homeowner’s insurance, your best bet is talking to a local broker or bank to get a general idea of what it is for your area. Mortgage calculators will ask you for a percentage rate sometimes and others will ask for a yearly figure. It can be confusing for a new buyer; so don't be afraid to seek a little assistance.
Figuring out how much you can afford to put toward your monthly house payment is a start. Now, you want to know how much house you can afford. There are mortgage calculators galore that will help you do this, but, as I mentioned above, they will require you to enter real estate taxes, homeowner’s insurance, and interest rates.
Once you know how much you can comfortably spend a month toward a home, and you’ve gathered your tax and insurance rates, you only need an idea of what kind of interest rate you’ll get. You can probably kill three birds with one stone by trying to get rates for the taxes, insurance, and interest rate in one phone call. Once you have an idea of what your interest rate may be, you can plug in all your numbers on any of the numerous mortgage calculators on the internet to get a good idea of what you think you can afford.
Afterwards, if you like, you can call a local bank or broker and get pre-qualified to see if you’re numbers were in the ballpark. If your figures are similar, congratulations on a job well done. If your results are different, take the time to figure out why and don’t be afraid to ask questions. Remember, buying a house is one of the biggest financial decisions of your life. You owe it to yourself to be as thorough as you can. By taking the initiative to read this article, you're already ahead of the learning curve. Keep up the good work, and happy house hunting.
They're spreading like wildfire--interest-only mortgages appear to be the panacea for rising home prices and the incomes that can’t quite catch up. You can buy "more house" and have a low mortgage payment and a big tax deduction. Who wouldn’t want one, right?
Well, a large number of consumers are getting into these loans when they shouldn’t. Interest-only mortgages work well for some individuals and are dangerous for most others, yet the number of interest-only loans is rising rapidly.
Take a look at San Diego. In 2004 almost half of the mortgages required interest-only payments in the first few years according to a study done by LoanPerformance, a San Francisco--based real estate information service. Could this have something to do with the housing market? You bet it does. Are home prices rising faster than salaries and incomes? They sure are. So how is one supposed to afford a house in such an expensive housing market? You guessed it--an interest-only loan.
Interest only-loans were originally aimed at more sophisticated investors who wanted to leverage their income by re-directing what would have been the principal portion of their payment to higher yielding investments that exceed the rate of their home appreciation. These types of investors typically have more assets and financial discipline than most and therefore aren't as likely to get in as much trouble with such a loan.
Today, interest-only loans are being utilized by borrowers who are trying to leverage debt. What they are doing is getting more debt for their buck; they're borrowing more money but keeping their payments low (initially) in order to compete with other buyers in sellers’ markets. Here are some of the potential dangers that face such borrowers:
• If the principal balance isn't being reduced, than no equity is being built, and if home prices are stagnant during the interest-only period and the borrower needs to sell, he'll need to be able to pay sales costs out of whatever equity there is in the house, if there is any. Remember, mortgage amortization is in the borrower’s control, appreciation is not.
• If there’s a downturn in home prices, the borrower could end up “upside down,” meaning the mortgage balance on the property could end up being greater than the property’s market value. In this case, the borrower would be responsible for sales costs and the remaining mortgage balance which could lead to foreclosure.
Interest-only mortgages make sense for borrowers:
• who have seasonal incomes or earn commissions and/or bonuses and have a desire to pay on the principal when it’s convenient.
• who are upwardly mobile and expect to earn more in a few years and want to buy “more house” early on rather than later.
• who intend on investing their cash flow in higher yielding investments or paying down high-priced debt.
Make sure you know what you’re getting into with an interest-only loan. Consult with your mortgage broker or lender to know what the possible repercussions could be, and be sure you’re getting the loan for the right reasons. Eventually, you want to own your home, and it’s better to be planning on that sooner than later.
According to the NAMB (National Association of Mortgage Brokers), two out of three Americans work with a mortgage broker to purchase a home because of the broker’s expertise and wide selection of loan products and lenders. However, with so many so called “experts” out there, how does one separate the wheat from the chaff? How do you know if a broker is honest? And how do you know they're an “expert” or not?
The NAMB says that over 70 percent of brokers are legitimate, that is they have safeguards and policies in place to make sure that they stay on the straight and narrow. So what about the other 30 percent? Well, the whole 30 percent isn’t bad, but just as in any classroom, you’re going to have those at the top, some in the middle, a few at the bottom, and others who simply don’t show for class. Obviously, those at the bottom and the no shows would not be your first choice if you were going into surgery and they were holding the scapel, nor should they be handling your loan when you purchase a home or refinance.
Because of the surge in numbers of mortgage brokers in the past few years, there are plenty of incompetent and dishonest brokers out there. In order to avoid the 30 percentile, I offer the following tips to help you find a mortgage broker that is not only an expert but honest and reputable as well:
Don’t believe everything you hear. Asking friends or family to recommend a mortgage professional is usually the first place people start. However, how do they know the broker is reputable and trustworthy? Check with your state regulatory offices and licensing bureau once you have some referrals. Better to be safe than sorry.
Use an NAMB certified mortgage broker. Brokers certified by the NAMB practice the highest ethical and professional standards in the industry. There is a “Find a Broker” link on the NAMB’s website at www.namb.org.
Use an Upfront Mortgage Broker (UMB). These brokers disclose their fees to customers in writing in advance at the customer’s request. They also disclose the wholesale prices they receive from lenders. For a list of UMBs visit www.mtgprofessor.com.
Honesty is the best policy. If a mortgage broker suggests that you lie on your loan application in any way, he/she is most likely in the 30 percentile. Walk away.
They need to show you the money. If a mortgage broker doesn’t disclose your closing costs in three business days, it’s probably best to take your business elsewhere.
If you’re not bleeding, they shouldn’t be applying pressure. A mortgage broker who pressures you into anything you are not comfortable with probably failed ethics. No reputable broker will pressure you into anything you don’t feel comfortable with.
There are no stupid questions. Does the mortgage broker answer all your questions to your satisfaction? Are his/her answers straightforward, honest, and respectful?
Do you have a reservation? If you feel comfortable with whom you’re working with and feel like they have answered all your questions and put all your reservations to ease, you’ve probably found a good mortgage broker.
Getting a small commercial mortgage maybe easier than you think. It doesn’t involve SBA and you don’t even have to prove your income. In fact, your credit doesn’t have to be immaculate.
On the way to the chiropractor you notice there’s a real estate for sale sign on a small unit apartment building. When you arrive there is a new for sale sign at the chiropractor’s office building. On the way home you stop at a small market with living quarters upstairs and notice it is for sale. If you wanted to invest in any one of these it may seem complicated but it is not be necessarily.
These properties may qualify for lending that does not require income verification or high credit scores. There are programs available that have funds for smaller loan amounts $100,000 to $1,000,000. These programs will allow you to state your income. In other words- you do not have to produce your tax returns and qualify on them. Your credit score will determine the approval, rate & terms of the mortgage.
The property will be the major factor in the loan. The down payment may be very reasonable depending on the program parameters. For someone who already owns a small commercial property getting money to payoff a balloon or getting cash back is allowable.
This is a lot simpler than a bank loan. The banks generally want to entertain loans in the amount of $1,000.000 & over. Banks will want to have continuous ongoing income proven by tax returns & current operating statements. The down payment requirement can be stricter.
Other types of properties that may qualify are mobile home parks, self-storage or bed & breakfast. There should be a number of eligible properties in your area.
If buying a small commercial property is something you always wanted to do now may be the time to do it. Rates are still good. Money is available. Your dream may be at hand.
If you have just bought or are considering buying a new home, then you will also need to plan the process of moving home. While there are many things that you have to remember, planning them in advance will make the whole move easier and less traumatic. So it is a good idea that, as soon as you know the completion date for your move, that you start planning.
There are certain things that take quite a bit of time and should be arranged at least a month in advance. You will want to inform your landlord or any flatmates, if you have any, of the date that you are leaving. This can mean the difference between getting your deposit back or not, if you are renting, so it’s a good idea to let everyone know your plans as soon as you know them yourself.
You should probably also inform the gas and electricity companies of your knew property that you are the new owner. By doing this, it can avoid mix-ups later on. This would also include calling your telephone company and arranging to have your phone number transferred.
You can start packing up your things or getting boxes together. There are some things like books and photos that can be packed in advance and will save you hassle later on when the move gets closer. You may want to book some time of work, especially if you don’t think you’re going to be able to arrange the move in a weekend. Another good idea is to have a clearout and get rid of some old things that have been gathering dust. In fact, moving is the perfect chance to get rid of some of the belongings that accumulate over the years.
As the move gets closer you should book the removal company and arrange for transit insurance if you decide you need it. You can tell the post office to redirect your mail and you can also notify the local authority of the change in address for council tax purposes.
You should make sure that all your utility bills are paid up by the date of the move. You don’t want the new owners to be hounding you for unpaid bills once you’ve moved and now is the time to make sure they are accurate. If you have services like milk deliveries, newspaper deliveries and the like you should have these cancelled.
Before you leave, make sure all doors and windows are locked and appliances and utilities are turned off.
It is important that you understand the basic difference between being “pre-qualified” or “pre-approved” by a mortgage lender as you are looking for a home to purchase. A pre-qualification is not the same as pre-approval. The buyer, seller, and agents involved in the transaction need have the same agreement regarding the buyer’s ability to close the purchase.
Your realtor will want you to talk with a mortgage company as soon as possible. The reason is that the realtor needs to know the top price range you can afford and housing expense you are comfortable with. It also helps your realtor when presenting an offer to the seller’s agent to show that you have taken steps to approval. It may very well help persuade the seller to accept your offer. In many housing markets the pre-qualification or pre-approval letter is accepted as part of the purchase presentation to the seller’s agent.
. When you are speaking with a loan officer to be pre-qualified you are giving information about your financial condition. The loan officer will also ask questions regarding your credit. There may even be a credit bureau drawn to see where you stand. Then the loan officer will give you an opinion of how much you can afford based on the information you have told that person. This is not a commitment to make the loan! You should be given a letter that states the pre-qualified mortgage amount and type of loan. It should state further that loan approval could be issued after the information you gave is verified & formally underwritten.
When you receive a pre-approval it has more weight than a pre-qualification. The pre-approval letter will give the maximum loan amount with the specific details of the total mortgage. It should have only conditions such as clear title report, underwritten appraisal, general closing conditions and no negative change in your status as a buyer.
If you are serious about buying a home, and you are satisfied with the mortgage company, you should get as solid a pre-approval as you can. You don’t want any surprises along the way.
There are people that think that a realtor is not necessary to represent them in purchasing a home. The power of the Internet allows someone to visit various homes for sale from the comfort of a desktop in the den. Many homes listed have virtual tours that give a real feel of the home. But there is more to buying a home. You should consider working with a realtor that you pick.
The realtor who has listed the property works for the seller not the buyer. This is because the seller will be paying the commission to the realtor upon the sale of the home. When you retain your own realtor to help find a home the agent works with you but for the seller. It comes back to who is paying the commission. Still the buyer’s agent will try to meet your goals.
If it allowed by state law, some realtors will want you to sign a buyer’s agreement. This document basically states that you will retain the agent exclusively to find a home. In consideration for this the agent’s duties will be spelled out. The reason the agent might want this is that there is a lot of time and effort that goes into finding you a home. This will bind you at least in good faith to stick with the one that is helping you. It would be up to you if you want to sign the document.
So with that in mind, you need to take certain steps so that you can find and work with a realtor that will locate for you the home you want and need. You should talk to several realtors, including any that may have been referred by friends or relatives. Make a list beforehand of what you want. You should have a wish list of neighborhood, type of house, square footage and lot size. Nearness to schools, churches, medical facilities and major shopping malls may play a part in your decision.
The realtor should be able to assess your needs and fit you with a group of homes to consider. The realtor should be meeting your goals by only showing you homes that you can afford and want. An important part of this process is for you to get pre-approved by a lender in the beginning. This will allow the realtor to focus on homes you can afford. It will give the realtor strength in presenting an offer to the seller’s agent when the time comes. If there is more than one offer going on at the same time it shows you are ready to close.
There may be rejection of your offer or a counter offer made by the seller. These should be carefully explained to you at the time by your realtor. Any counter needs to take into consideration whether you can perform what is asked, You will consider whether it is worth it to get the home or move on to looking for another opportunity.
Once you have an accepted sales agreement the realtor will assist in providing closing arrangements, entry for the appraiser and ongoing communication with all parties involved until funding. A realtor who is honest, knows the business and is someone who you can get along with will be a real asset for you in completing your home transaction.
If you have a mortgage and are not struggling with the increasing cost of petrol … you are in the minority. And if you aren’t struggling now, how will you fare when the flow on effect of high petrol costs starts to increase the cost of living across the board. For many Australians the question of how to cover all their bills and maintain a decent standard of living for their families will soon become a pressing one.
As you struggle with this challenge, you may discover that your mortgage is actually the solution.
In recent months, oil prices have skyrocketed to $65 a barrel. This has resulted in the price of petrol rising above $1.30 a litre. This increase has been blamed on the recent hurricanes in the Gulf of Mexico and the resulting production delays.
Already this is beginning to bite the budgets of Australian families. In a BRW report, McDonalds chief executive Peter Bush revealed that McDonalds sales growth had dropped 5 % in just weeks. He attributes this sudden decline to Australians tightening their belts to afford the extra $30 to $40 a week to fill the family car. The same article cited a recent NRMA survey, which stated that 25% of NSW and ACT motorists have cut their spending on food and groceries as a result of the petrol hike.
Petrol prices have risen 30% this year; the cost of petrol being a major expense for most Australian families. In a media release from the University of Newcastle, Dr. Abbas Valadkhani said, “You don’t necessarily have to use a lot of petrol to be affected by the price rise.”
Apart from the direct effect we have already experienced, we will soon begin to suffer the flow on effects of the petrol hike. The cost of milk has already increased and a range of other industries such as transport, storage, forestry, fishing, agriculture and meat and all dairy products will have their costs increase due to the rising price of petrol. It is only a matter of time before these costs are passed on to us. If you think about it, there are few goods and services in the economy that don’t have fuel costs somewhere in their production and distribution chain.
Well, that’s the bad news. The good news is that many experts believe that this spike in petrol prices is temporary. It is a result of diminished production, due to natural disasters. Eventually, the damage will be repaired, supply will return to normal levels and the price will drop. However, that could be six months or a year from now and until then you need to keep paying for the petrol, pay your bills, pay for Christmas (only ten weeks away!) and pay your mortgage.
But are you paying the right mortgage? Are you using your mortgage to its fullest potential? With interest rates so low and the cost of living experiencing an unexpected and temporary spike, a logical means of maintaining your lifestyle, during this time, is to use your mortgage to offset this temporary fluctuation.
This may be the time to either take advantage of your home loans features, or change to a more flexible mortgage. For example, you can switch to a loan that has a redraw facility. This allows you to draw back extra payments you have made and use them to help you through this particularly stressful time.
If rising costs are getting on top of you, perhaps refinancing is the solution. You can roll all your debts into your home loan; car payments, credit cards etc., consolidating your debt and reducing your regular repayments, leaving more cash each week to combat this sudden increase in expenses. Instead of running up the credit cards, refinancing your home loan may be the most cost-effective and cheapest way to raise that extra money to help you through the next turbulent 6-12 months.
Using a mortgage-offset feature is another way to have that extra cash handy, but still minimise your interest. Let’s say you refinance and leave yourself $10,000 to help pay the bills for the next few months. If your loan is $100,000 and you have $10,000 in the offset account, the interest on your loan is only calculated on $90,000.
The current petrol crisis will eventually pass, but in the interim, why struggle to care for yourself and your family when the solution to your short term budget problems is sitting right there … in your home?
Everyone is familiar with a mortgage, an industry term for a loan given to allow an individual to purchase a home. If a mortgage is a loan taken on the value of your home and the promise to pay a monthly rate in the future, a remortgage is attaining a mortgage on your home or property after you have already attained one.
Types of Remortgages
Remortgages come in a variety of arrangements and structures. The most common is a Standard Variable Rate (SVR). A Standard Variable Rate is a remortgage where the interest floats upon the market rate. Even under this variable rate, however, the first few months are typically fixed below market to entice you to take on the loan.
The other major type of remortgage is a Fixed Rate Mortgage. Fixed Rate Mortgages differ from SVR’s insofar as the interest rate is determined and remains flat from the beginning. This type of loan is more dependable, insofar as you know exactly what your payments will be from start to finish, but it is more risky in that you may end up paying too much if rates fall (or too little if they rise). As a result of this increased risk, banks typically charge a slightly higher rate for fixed rate remortgages.
There are also a wide variety of intermediary remortgaging options. Lending options like capped rate, tracker, and droplock loans are all variations on remortgages which blend some aspects of variable rate and fixed rate mortgages.
Reasons to Remortgage
Remortgages are in many ways identical to a mortgage. It involves you presenting your financial situation, your need, and the collateral (your property) to a lender. Borrowers must convey a strong case for why their loan is a good risk for the lender. But unlike mortgages, where almost always the sole reason for the loan is to enable you to purchase a home, the reasons for taking a remortgage are quite varied.
Saving Money
The primary reason why individuals remortgage is to take advantage of lowering interest rates. Many mortgage holders can attain lower interest rates either because the prevailing interest rate has falling across the lending industry, their personal credit and financial situation has improved (meaning that lenders can now have more confidence in them), or because the equity they have placed in their home has reduced the total exposure of the loan and made the loan less risky for investors.
Raising Money
The second major reason why people remortgage their property is to raise significant amounts of cash quickly. The most popular method of doing this is through cash out refinancing. This essentially means attaining a new loan for the full amount of your home. You can then use the money that you attain through this loan to pay off the remaining portion of your existing home loan and pocketing the difference.
Improving your Home
Another reason why people engage in remortgages is to free up some cash for another venture. This typically involves taking out a smaller loan against the value of your home, in effect a second mortgage, which will give you money to improve your home.
Consolidate your Debts
The final major reason for remortgaging is to consolidate debts. Often borrowers have accumulated debts from a variety of different sources, home mortgage, credit cards, car loans, etc. These loans can be difficult to keep up with and many often carry high or varying interest rates. As a result many individuals find significant savings as well as increased convenience in compiling all of these loans into a single remortgage loan.
Getting a house of your own is a lifetime achievement and a home mortgage helps you in achieving this milestone much earlier than it would otherwise have been possible. In fact, the first home mortgage is also filled with a lot of emotion. A home mortgage is really something that makes dreams come true.
So let us start with understanding what a home mortgage actually is?
A home mortgage is something that allows you to buy a house even if you do not have enough money to pay for it right away. This is made possible by borrowing money from someone and paying it back in monthly installments. The person who lends you money is called the home mortgage lender. The home mortgage lender lends you money for a specific period (up to 30 years) during which you are expected to pay back the money in monthly installments. There are certain terms and conditions associated with the home mortgage agreement and these terms and conditions govern the home mortgage throughout its tenure. Among others, the most important thing is the interest rate that the home mortgage lender charges you. Interest charges are the means through which the mortgage lenders earns on this financial transaction called home mortgage. Most home mortgage lenders offer various home mortgage schemes/options. The most important variation in these schemes is in terms of the interest rate and the calculations related to it. In fact, most home mortgage options are named after the type of interest rate used for that option. Broadly speaking, there are two types of home mortgage interest rates - FRM (fixed rate mortgage) and ARM (adjustable rate mortgage). For FRM, the interest rate is fixed for the entire tenure of the home mortgage loan. For ARM, as the name suggests the home mortgage rate changes or adjusts throughout the tenure of the home mortgage. This change or adjustment of mortgage rates is based on a pre-selected financial index like treasury security (and on the terms and conditions agreed between you and the mortgage lender). That is how mortgage works.
No matter what type of home mortgage you go for, you always need to pay back the entire home mortgage loan (with interest) to the mortgage lender. Failing to pay back the mortgage lender can result in foreclosure on your home and the mortgage lender can even auction it off to recover the remaining debt.
Therefore, home mortgage is a wonderful means of getting into your dream home much earlier in your life. Without this concept, you would have to wait for a long time for getting into that dream home. Really, a home mortgage is one of the best concepts from the world of finance.
With the concept of vanity, many people are now despising the fact that whatever is beautiful are the only ones that are accepted in the community. Hence, they uphold the rights of equality and contend that life will never be balance without the negatives live side by side with the positives.
Same thing goes with people who have bad credit. The problem with most people is that they look down on people who have bad credits as if they are the meanest and the most unworthy person here on earth.
For this reason, many people, institutions, agencies, businesses, and other ventures to give these people who have bad credits a second chance to live their life to the fullest.
Today, many people who have bad credits are now enjoying the benefits that most people who have good credit standing are enjoying.
In fact, when it comes to owning a home, which is one of the necessities of human survival, people who have bad credits can get a loan for them to be able to obtain a home mortgage.
However, like any financial decisions, people with bad credits who seek to find any possible home mortgages, must try to saturate the market in order to arrive at the best deal available. This is because most lenders may approve a home mortgage application of a person who has bad credits, but may impose higher interest rates, big monthly payments, shorter term, and stricter regulations.
In most cases, people with bad credit work hand-in-hand with a sub prime lender. It refers to those who offer lending options to people who do not have good credit standing. They are the ones who are willing to take risk when everybody seems too hesitant to do so.
However, before you decide on getting a bad credit loan mortgage for your home from these sub prime lenders, there are certain guidelines that you may use in order to arrive at the best rate. Here is how:
1. Bad credit loans mortgages usually offer higher rates
In many instances, lenders who give bad credit loans or home mortgages may provide higher interest rates. However, their rates may still vary from one company to another. Therefore, it is necessary that the debtor should analyze the deal before they arrive at a conclusion.
2. Shop around and compare
If many lenders have high interest rates, the best thing that you can do is to obtain a bad credit loan mortgage with the lowest among those that are available in the market.
You can only identify the item by shopping and comparing rates and benefits. Try it. You will be on your way to your bad credit loan mortgage.
3. Know the rules
In this kind of game, you should know how to play by the rules. Because if you do not, chances are, you may lose.
Hence, be very careful about rules and terms of the lender concerning your bad credit loan mortgage.
The problem with most people is that they neglect this piece of document, in which they do not just realize how important it is to know whatever was stipulated therein.
4. Be wary of fees, rates, and charges
You should know the rules that go with these three variables.
What usually happens is that a person is buried deep in debt not because of the principal loan amount but because of the accumulated interest rate charges and fees. Therefore, it is best that you have known the exact rules in order to avoid getting charged with late penalties.
5. Know your situation
Even if you have bad credit, but you know that you can afford to make bigger monthly payments to have lower interest rates, it would be better. This will make your repayment for the loan easier and faster.
This goes to show that the result and consequences of getting a bad credit loan mortgage are all dependent on the kind of situation that you have right now.
6. Have a budget and stick to it
The problem with most people who have bad credits is that they get so overwhelmed with the fact that they get a bad credit loan mortgage that they tend to neglect to have a budget for the item that they want to purchase, say, a home. In addition, even if they have a budget, they tend not to conform to it.
Therefore, it is important to stick to your budget in order not get into trouble in case things get out of hand.
7. Research! Research! Research!
It is the best thing that you can do. In fact, it is the most important thing that one should do especially if it involves financial decision-making.
Whether you have bad credit or not, the fact that it is your money that you use in order to pay those monthly financial obligations, it is important to know all the important details about a loan.
Otherwise, you will just end up losing everything.
You may have become used to the monthly house payment that you make. But for many of us refinancing our homes is a great way to save money, lower the house payment, and unlock some of the equity already built change such as refinancing in the house.
What exactly does it mean to refinance your mortgage? When you refinance you are replacing your current loan with a new loan from another or the same institution. Refinancing could mean switching banks or other financial institutions, or you may even be able to take a new deal from your current lender. In fact, this is recommended if your credit history has a few pock marks. The lender knows your history and will be able to help you out, where as another lender may look badly upon bad credit.
Where to start? To begin, you need to determine whether or not you will actually be better off by moving your mortgage. You need to look around and see if there are deals out there better than your own. Try out an online refinance calculator or refinancing calculator. These calculators have limits, but they give a vague idea of what your month to month will look like. Back your findings up with some substantial advice. Speak to family and friends and locate a mortgage broker who is right for you. According to the Mortgage Bankers Association, the “rule of thumb” is to only get a new mortgage that is at least two interest percentage points below the amount of interest that you currently pay.
Here is a bit of advice. The first piece of advice when you are considering changing your mortgage is to get good advice. Talk to a mortgage broker about the best road for you to take. This is their job; they know what they are talking about. Talk to others who have refinanced their homes. Also, you will want to shop around for the best rate. Check the interest rates in each and every mortgage plan you investigate. Ask for comparables. See where individuals in similar circumstances as you have gone with these companies.
Ask these companies to paint a picture of where you can be in the next five to ten years if you choose to refinance with them. You only want to refinance you can get a better interest rate. Also, consider how long you are actually going to be in your home. The Mortgage Bankers Association claims that the month to month savings may not add up if you are only planning on staying in your home for a year or two. Consider the future closely before going through with a dramatic financial.
Millions of people are taking advantage of the current opportunity to refinance the mortgage on their homes. Rising home prices combined with falling interest rates have motivated people to convert their accumulated home equity into expendable funds. This frequently works to their immediate advantage, giving them a considerably lower interest rate and lower monthly mortgage payments.
Homeowners can choose either to spend or save the portion of their incomes that are no longer being spent on mortgage payments.
When Should You Refinance?
In some cases, when refinancing, it helps to borrow more than is needed to pay off the earlier mortgage. This gives you the equity from your home, plus extra funds to cover the transaction costs of refinancing. People use the funds for a variety of purposes: to make home improvements, to repay older debts, or to buy goods, services or assets they couldn't otherwise afford.
How much can you save by refinancing? This depends on several factors relating to your present mortgage situation. If your new interest rate is low, it can result in substantial savings, perhaps even thousands of dollars. And when rates rise, having refinanced from a variable rate loan to a conventional loan, you can stand to gain substantially.
Some Benefits Of Refinancing
Refinance a home mortgage is a big decision and should be approached with careful consideration of the potential costs and benefits. Clearly, when interest rates on mortgages fall below the rate on your existing loan, it's time to consider refinancing. This is the time to evaluate your potential after-tax savings from lower monthly payments, and compare it with the after-tax expenses of refinancing. These expenses include mortgage fees or points, application fees and appraisal fees. As the loan is repaid, the savings from your lower interest payments begin to accumulate. The savings due to refinancing must be discounted at the present rate and compared with the transaction or closing costs.
If you're considering refinancing your home, you need to evaluate your current interest rate. If your new interest rate would be more than 5/8% lower than your current interest rate, it is well worth refinancing. But if you want to keep your closing costs as low as possible, see that your new interest rate is at least 1% lower.
Why Refinance?
Most people who refinance do so to save money, but there are other reasons to do so. If you refinance your existing loan at a lower rate of interest, you can end up with a lower monthly mortgage payment. This can save you funds in the long run.
Debt Consolidation
In many cases, you can clear all your outstanding debts and replace them with just one low-cost monthly outlay. Refinancing your home to consolidate your debts (such as a credit card balance or a student loan) can save you money in the short run and the long run, because you'll be paying on a low-interest loan rather than a high-interest one.
Tax Advantages
If you have lower interest rates, it means smaller interest deductions on Schedule A. You are allowed to deduct interest on a debt of up to $1 million incurred to buy your primary residence and one more home. Also deductible is the interest on up to $100,000 of home equity loans for these two residences. If you refinance a mortgage, the interest on this loan is deductible to the limit of old mortgage plus $100,000.
The interest charges you pay up-front, or points, are really interest that's pre-paid and must therefore be deducted proportionately during the tenure unless you have purchased or improved your existing principal property.
If you have bought investment real estate or a vacation home, you can deduct points proportionately over the loan term. If you have refinanced a mortgage on which you already had been reducing points proportionately, you could be eligible for a tax bonus. Now you can subtract any part of the points for the mortgage already paid off that you had not yet deducted since the year of refinancing.
The precise moment to refinance a home is complicated to figure out. However, it is undeniable that such a moment will arrive, probably several times over the course of a 30 year mortgage. Just be prepared to act when the time comes.
Credit inquiries impact credit scores negatively because statistical studies show that multiple inquiries are associated with high risk of default.
Distressed borrowers often contact many lenders hoping to find one who will approve them. On the other hand, multiple inquiries can also result from applicants shopping for the best deal.
To avoid penalizing loan “shoppers,” credit ratings ignore inquiries that occur within 30 days of a score date.
Suppose, for example, I shop a lender on June 30 and the lender has my credit scored that day.
Even if I had shopped 50 other lenders in June and they had all checked my credit, none of those inquiries would affect my credit score on June 30.
Inquiries from May and back 11 months would, however, be counted on June 30.
To avoid biasing the credit score from earlier shopping episodes, the scorers treat all inquiries that occur within any 14-day period as a single inquiry.
If you shopped 50 lenders during June 1-14, they would count as one inquiry. If you spread them over June 1-28, they would count as two inquiries.
You will damage your credit if you spread your loan shopping over many months.
But, because the market can change from day to day, it makes little sense to do this in any case.
Circumstances can cause a consumer to shop, drop out of the market, and return later when conditions are more favorable.
You minimize the adverse effect by concentrating each shopping episode within 14 days or less.
When you have bad credit and are trying to get a mortgage loan, there are some important aspects that can make the process hassle free. Today’s consumer is now empowered to get the best type of loan for their financial situation because of online Internet access and the many websites that cater to the needs of people with bad credit.
What Is A Bad Credit Mortgage Loan?
A bad credit mortgage loan is a loan based on the equity in your home. This loan can help you in lowering your overall interest payments and monthly payments, and also in consolidating all your debts. A bad credit mortgage loan is very helpful in repairing your credit.
By taking out a bad credit mortgage loan, you can make all the payments that you can afford. The most popular options for bad credit mortgage loans are cash out mortgage refinance, and a home equity loan. Both these options would allow you to rely on the equity that you have paid on your home, and use its value to come out of all your debt troubles.
With the help of a debt consolidation bad credit mortgage loan, you can move all your credit card payments with a high rate of interest into one lower interest payment. This would not only simplify the payment of your bills and lower your monthly payments, but it would also improve your poor credit situation. Eventually, you would notice an increase in your credit score.
In order to convince the lenders to provide you with a bad credit mortgage loan, you have to increase your down payment and cash reserves. The lower your credit score, the larger is the down payment required on the bad credit mortgage loan. A credit score of 580 requires a down payment of about 5%. Higher cash reserves would convince the lender that you would be able to cope up with the payments in case of any emergency.
Bad credit mortgage loans can also be taken through online mortgage brokers. However, you must thoroughly check the rates in the loan market before choosing any one lender so as to get the loan on favorable terms.
How Can I Find The Perfect Bad Credit Mortgage Company?
If you have a bad credit score, then you need to choose the best bad credit mortgage company if you want to get a mortgage loan. Since a mortgage is a very large investment, you need to choose the best company.
The most important factor to be considered is the interest rate. Thus you need to choose the bad credit mortgage company that provides you the most favorable rate of interest. You must also check that there are no hidden fees included in the plans of the bad credit mortgage companies that offer very low rates of interest. Thus, you need to understand all the terms of the rate of interest.
Another thing to check is the quality of the service provided by the bad credit mortgage company. You should not choose a company that offers extremely low rates of interest, but provides a horrible service. Instead, you should choose a bad credit mortgage company that offers a slightly higher rate of interest, but also cares for your needs and formulates its policies according to your interests.
Building societies are very efficient bad credit mortgage companies. They offer very favorable rates of interest, and also provide expert advice. High street banks are also a good option for a bad credit mortgage company because they have a greater coverage due to a number of branches. Though they may charge a higher rate of interest than the building societies, their introductory offers for mortgage deals are very favorable.
There are also the specialized bad credit mortgage companies that provide mortgages to people in special circumstances--i.e. when the people are not offered a mortgage by their building society or high street bank. This includes the people with a bad credit history.
If you can't find a favorable bad credit mortgage anywhere else, you may want to consult one of these companies.
With simple online access you can do a search on “bad credit mortgage” and have several sites that can help with your financial situation. A little research and time spent educating yourself can help you get your financial situation back in order.
Today’s consumers are empowered with high speed online Internet access. Finding a bad credit home loan is much easier than it used to be.
It's a myth that only those with good credit can get home loans. You can get home loans with bad credit, too. There are many companies both online and offline who specialize in these kind of loans. However, the better the credit report, the lower is the interest rate on the home loan.
These points will be important when applying for a home loan with bad credit. All homes have to be appraised by an appraiser, who will ensure whether the property is enough to cover the loan amount.
The bad credit home loan consists of two parts. The first part is the down payment and the second part is the monthly payments. This follows a point system. A point is 1% of the loan amount. If you are charged 1 point on $200,000 loan, you have to pay $2000. If you are charged 4 points, then you have to pay $8,000 and so on.
Interest rates changed periodically are dependent upon the US and the global economy. It pays to shop around for rates. Lenders may offer lower interest rates and more points or less points and a higher rate of interest. More points and a lesser rate of interest would mean that your initial down payment will be high. And the interest payments will be much less or vice versa.
The term for the interest payments can also differ from company to company. It can be for 10, 15, 20 or 30 years also. There are adjustable interest rates available. These increase or decrease with the general interest rate prevalent in the market. However there are caps in place, so that the rate doesn't fluctuate violently.
There are loans available for those who wish to construct a house and not purchase one. In that case payments can be made according to work progress of the house. After the house has been completed, it can be converted into a traditional mortgage loan.
To get a bad credit home mortgage loan, you can apply online for the pre-approved loans. By applying for these loans, you can know your budget and can find out how much you can borrow, instead of focusing on whether the bad credit home mortgage loan would be approved or not.
Finally, a very important thing to keep in mind while applying for a bad credit home mortgage loan is that you must fill out the application form correctly. Before submitting the application, you must make sure that all the information provided by you is correct and is spelled correctly. If while processing, your information cannot be matched, then it may lead to a delay in the approval of the application, or sometimes, even in the rejection of the application for your bad credit home mortgage loan.
With a some research, education and time spent looking into the best way to get a home loan with bad credit, it can be well worth your while. You can save yourself a lot of hassle, time and money in the process.
Many people believe that if they have a bad credit score, then they cannot get a home loan. However, this is not true, since bad credit home loans are readily available. If you have bad credit and you apply for a home loan, then more emphasis is placed on the down payment required on the bad credit home loan.
The down payments on the bad credit home loans usually range from 3% to 5%. If you do not have enough money to pay the down payment, then you can borrow it from a friend or a relative. However, before doing that, you must check with your bad credit home loan lending company, because some companies do not allow this. Once you finance your home, you should be able to get a second and a third mortgage, and then you can repay your friend or relative.
If you do not want to borrow money to pay the down payment of your bad credit home loan, then an alternative is to look for a down payment assistance program. These programs legalize down payments, which otherwise are usually illegal.
To easily convince the lenders to provide you with a bad credit home loan, you must try and improve your credit rating. To do this, you must make sure that you pay all your bills on time, and buy a major credit card, if you do not have one. Also, you must keep a check on your credit score and credit report.
In deciding whether or not to provide you a bad credit home loan, the lending companies focus on a number of factors such as loan-to-value ratio, monthly income, and debt-to-income ratio. However, there is always a scope of negotiation, and thus you should not hesitate in negotiating for more favorable terms on the bad credit home loan.
How to Do Bad Credit Refinance
You may have heard that people with bad credit can't get anything financed. Well that's a myth because there are many companies that will offer you refinancing and loans no matter what your credit rating looks like. Therefore how to do bad credit refinance is not a problem. But how can one tell if they have bad credit? The major indicators of whether or not you have bad credit are the following:
*If you have a FICO score of 620 or lower *In the past 12 months you have had two or more 30-day delinquencies *Or in the past 12 months, you have had a 60-day delinquency *If there has been a foreclosure or a charge off against you in the past 12 months *If you have filed for bankruptcy in the past 60 months or have been declared as bankrupt *If you're debt-to-income ratio is 50% higher (simply stated your income can't cover the debt expenses)
It's best to know your credit scores before you make a decision how to do bad credit refinance any other loan. The other areas to look for are the loan amount that you are seeking, credit reputation that you have (that is your credit score and your history), and the collateral that you willing to put up (roughly the amount that equal to your loan amount), and of course the ability that you can pay back the debt. Therefore lenders always prefer lower score borrowers than those with higher scores.
Look for lenders who process loans in-house rather than outsourcing for credit refinance. This saves time as well as money. Also, look for experienced loan counselors who can give you the best advice. Some companies will also offer you the facility to check for the status of your loan online 24/7. Shop around for rates and various terms and conditions. The longer you shop, the better chance you will have of finding your ideal refinance package.
With online Internet access you can easily shop and compare companies who are very competitive to earn your business. Today's consumer are now empowered because of the many websites that are availble to get a bad credit home loan or a bad credit refinance.
There are many good reasons to refinance your current mortgage, or get a second mortgage and pull equity out of your home. Here are just a few.
1. Adding structural additions or improvements to your home. 2. Get a lower mortgage rate and reduce interest costs. 3. Obtaining funds for investment 4. College tuition for your children. 5. Paying off other debt, such as credit cards, in order to reduce your total monthly outlay.
Consider The Following
When selecting a Home Improvement Loan consider all of the following: 1. Minimum & Maximum loan limits. 2. Terms (The shorter the term the lower the overall finance charge/higher monthly payment, longer the term the less the monthly payment/the greater the overall finance charge). 3. Loan type's: Home Equity, HELOC's, FHA 203K, Cash Out Refinance, Secured Consumer loans such as Retail Installment Obligation (RIO's), and Unsecured RIO (loan terms from 12 months). 4. Interest Rate and loan costs. For example: A no closing cost HELOC at prime or prime plus 1/2 may be tax deductible, and may be used to draw upon for FUTURE Home improvement projects with no "out of pocket" loan charges.
Improving your home can increase its value. Investing wisely can help create a larger net worth. Both could pay off in retirement benefits for you. Be careful. Don't risk the security of your home on frivolous spending.
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Mortgage industry is playing an important role today to meet the people's needs. The industry is constantly engaged in making changes and bringing new ways to assist people in some of their most important personal and financial decisions. The industry is involved in making changes to suit people's requirements keeping in mind their financial conditions. Along with conventional fixed rate products mixtures of typical adjustable rate mortgage products, interest-only and payment option type ARMs, high LTV financing and FHA products have been introduced. This expansion and variety in the products is intended to help larger number of people to qualify for the home ownership. There is a fair competition among the lenders to provide customers with the best rates staying within the boundaries of State law. Customer satisfaction is paid maximum importance today. This trend has helped the borrowers belonging to all levels as the positive affect is now reaching people on a wider range. People have got the opportunity to take advantage of a wide range of products available in the current market. This has raised the buying process with a greater mass being able to participate in the program. But with this positive feature there has been a recent trend of increase in the number of fraud cases in the industry which is a growing problem in the industry today.
According to the National Mortgage Complaint Center, the number of fraud cases in the mortgage has increased over the recent years. Mortgage companies have been using false documents and getting them signed by borrowers. Many of them have even charged high interest rates and borrowers have been making such high interest payments due to lack of awareness on recent market trends.
It is found out that an average homeowner in the United States has to pay $1250 more in industry. Sub-prime mortgage are offered to high risk borrowers who may have been rejected by other lenders. In recent years this industry has seen a considerable growth with a lot of consumers getting qualified for this loan. Consumers who face difficulty with the credit market are generally availing this loan. But, this growth has simultaneously given rise to predatory lending affecting the most vulnerable lenders. This kind of abusive lending is generally directed to the lower income and minority borrowers. Generally the elderly homeowners with reduced incomes become the target of these sub-prime home equity lenders as they often have considerable amount of equity in their homes. The most harmful practice begins with a loan based on the rather than on borrower's ability to repay. These borrowers often fail to repay and the lenders acquire the borrower's home equity and ultimately the borrower loses his home through foreclosure or by signing a deed to the lender in lieu of the foreclosure. There are some other kind of abusive practices which are illegal under various federal or state laws.
Considering the growing rate of predatory lending in the mortgage industry, the National Mortgage Complaint Center has decided to have an audit service for protecting homeowners from abusive lending practices. But borrowers should also be aware of such unlawful activities and keep themselves away from such lenders.
Borrowers should consider some preventive measures to protect themselves from predatory lenders. They should not go by the rates that lenders often advertise. These rates are in fact, much lower than the actual fees charged by such lenders. The lenders advertise such low rates just to lure consumers so that they can approach them for loans.
Borrowers should demand a written copy of the fees that they keep paying to the lender on a monthly basis. This is because lenders often provide an estimate of fees at closing and later they charge higher fees pretending that they have forgotten to include these charges. But keeping the proofs of such documents will help borrowers in case of any discrepancies in the mortgage process.
If there is a rise in rate in the market during the time period between the application and closing, the lenders charge higher rate to borrowers. On the other hand if the rate falls downwards, the lenders try to ignore it and the borrowers are deprived of the advantage of the lower rate. So, the borrowers should monitor the market during this period.
The borrowers should try to keep a track of all the documents involved during the process and ask for proper clarifications wherever they have a doubt. Going this way will minimize the problems of being cheated by the mortgage companies to some extent. The borrowers should try to consult an Attorney or a professional known to the borrower and get the documents verified by them.
APR - This stands for Annual Percentage Rate. It enables you to compare the full cost of the mortgage. Rather than just being an interest rate, it includes up front and ongoing costs of taking out a mortgage. The formula for calculating APR is set by Government Regulations and therefore enables direct comparison of the cost of mortgages.
Capital and Interest Mortgage - This is when part of your monthly payment contributes to paying off the outstanding mortgage in addition to paying the interest on the mortgage. The payments are structured so that at the end of the term, your mortgage will have been completely paid off. For this reason this type of mortgage is also called a Repayment Mortgage.
Capped Rate - This is a mortgage where the lender agrees that the interest charged will never exceed a specific percentage. This deal lasts for a set period of years. After the set period, the rate usually reverts to the lenders standard variable rate. During the capped period, the interest charges can move up and down with the lenders interest rate - but cannot exceed the capped rate.
Cashback - An amount, either fixed or a percentage of a mortgage, which you can opt to receive when you complete your mortgage. The lender may well claw back this money through a higher interest rate.
CAT marks/standards - CAT stands for Fair Charges, Easy Access and decent Terms. They were created by the Government in an attempt to provide consumers with simple, clear financial products with straightforward, easy to understand terms. A CAT mortgage will have no arrangement fees, no redemption fees and will have interest calculated daily. It will also have a minimum loan of just £5000, offer you repayment flexibility and the mortgage should be portable should you move home. Finally, you will not have to buy the lender's insurance products and there will be no penalties should you find yourself in arrears but can subsequently catch up.
Completion - This is end of the house buying process, when the funds are transferred and the keys are handed over. Happy moving!
Contract - A contract is a binding agreement between the buyer and seller. In the context of house buying, after the contract is signed by both the buyer and the seller it is then 'exchanged' between the respective solicitors for a set completion date. At that point, the contract is legally binding on both parties.
Conveyancing - This is the legal process in which property is bought and sold. You can do it yourself or hire a solicitor or specialised conveyancer to perform the tasks for you. The buying of a freehold is much less complicated than the buying of a leasehold.
Discounted Rate - This is where the lender makes a guaranteed reduction off the standard variable rate for an agreed period of time. After the discounted period ends, the mortgage usually moves to the lenders' standard variable rate. Watch out for redemption penalties that overhang the initial discount period.
Early Redemption Charges - Redemption is when the borrower pays off the capital and the interest on the mortgage and thus owns the property outright. Early redemption fees are the charges incurred for paying off the mortgage early, either to buy the house outright, move or re-mortgage. Always ask about early redemption charges before you agree a mortgage.
Endowment - Endowments are life assurance policies with an investment element designed to pay off the outstanding capital on an interest-only mortgage. There are a few types of endowments, such as 'with profits', 'unitised with profits' and 'unit-linked'. In the 1980s, these were sold by salesman who seemly suggested that these policies were "guaranteed" to pay off the mortgage at the end of the term. However, the investment returns on these policies have fallen to below what was previously considered to be the norm. Consequently, many policies are not worth what was originally forecast and may not fully repay the money borrowed at the end of the mortgages' term.
Equity - In housing terminology, equity is the difference between the value of the property and the money owed on the property. So if the property is valued at £200,000 and you owe £150,000 on the mortgage, you have equity of £50,000. If you sold at that moment, you would receive £50,000. Should the value of the home be less than the mortgage outstanding then you have negative equity.
Freehold - Owning the freehold means that you own the total rights to the property and the land on which it is built.
HLC - This is the Higher Lending Charge (it was previously known as a Mortgage Indemnity Guarantee). It is levied by around three quarters of all lenders on clients who cannot afford to put down a deposit of 10% of the price of the property. In practice it is a type of insurance aimed at protecting the lender should you default on your mortgage when the value of your home is less than the capital you borrowed. The insurance only provides cover for the lender, not you, and typically costs £1,500.
Homebuyers Report - A property survey aimed at providing more information than a mortgage valuation but less information than a full structural survey. It will help the borrower to decide whether to purchase and help the lender to decide how much to lend.
Interest Only Mortgage - This is a mortgage where your monthly repayments only pay the interest on the mortgage. Therefore, at the end of the mortgage you still have to repay the full sum you borrowed. You are advised to have a separate investment vehicle into which you make payments aimed at building up a fund capable of paying off the mortgage capital at the end of the term. Typical investments include ISA's, a pension or an endowment policy.
IFAs - Stands for Independent Financial Advisor. These advisors are regulated by the Financial Services Authority. To be classified as "independent" they have to be able to offer you the full range of products from all financial product providers. They are not entitled to describe themselves as "independent" if they can only offer products from a restricted panel of financial companies. A Financial Advisor can be one man band or work for very large companies. Before they make any recommendation, an IFA must carry out a detailed fact find so they fully understand your financial circumstances. They can then make their recommendations to suit your personal circumstances.
ISA - An ISA is an Individual Savings Account, which is a tax-free method of owning shares, building up a cash savings account or a life assurance policy. You can use an ISA to build up a capital sum to repay an interest only mortgage.
Leasehold - If your property is leasehold, ownership of the property reverts to the Freeholder at a set date. Many houses were originally sold on 999 year leases which means that 999 years after the initial date of the Leasehold, ownership of the property reverts to the Freeholder. Building in multiple occupation such as apartments, are always sold on a leasehold and usually have a much shorter leasehold period - 100 and 125 years is quite common. Often, with a block of apartments, the apartment owners individually own the leaseholds whilst a management company, in which they hold shares, owns the freehold. These days, however, leaseholders who live in the property have the legal right to buy their freehold under terms laid down by UK law.
Life Insurance - This can also be called Term Insurance or, when specifically linked to proprty purchase, as Mortgage Protection Insurance. It is designed to pay a tax free lump sum in the event of your death to enable your mortgage to be repaid in full. There are a number of variants such as Level Term Life Insurance and Decreasing Term Life Insurance. At the outset you take out insurance for the full sum you have borrowed from your mortgage lender and for the same number of years as you have agreed on your mortgage. These insurance policies do not have any investment or surrender value. The premiums are based on a number of factors - the main ones being the amount of cover you need, your age, health and how many years you want to be insured for.
Lock-In Period - This is the minimum period you have agreed to stay with the lender. Depending on the deal, it could be as low as six months up to the whole of the term. Should you wish to repay the mortgage or remortgage during the lock-in period, you will invariably have to pay redemption penalties. Always make sure you know how long you are locked in for with your mortgage.
LTV - Literally means Loan to Value. This is a measurement of the mortgage amount against the value of the property or the price that you are actually paying. A £157,500 mortgage on a property for which you paid £175,000 would be a LTV of 90%. Lenders tend to charge a Mortgage Indemnity Premium on mortgages with a loan to value of anything about 75%. Some don't so ask about this.
MIG - This has now changed its name to HLC. See above.
Mortgage - A mortgage is a long-term loan taken out in order to buy a property with repayment secured on that property. So if you don't keep to the repayment terms, the lender can repossess the property, sell it and retain the money they are owed. Any balance is then paid to you. If the property is sold for less than you owe your lender, you still remain liable to repay the shortfall.
Mortgage Advisor - On October 31st 2004 the selling of mortgages in the UK came under the remit of the City watchdog, The Financial Services Authority (FSA). As from that date any person providing mortgage advice had to be registered with the FSA and abide by its rules of conduct, methods of operating and training programmes etc. The objective has been to improve life for the consumer by offering better protection, clear information and access to redress for poor advice.
Negative Equity - Negative equity is when the value of your home is less than the amount that you owe on your mortgage plus any other loans secured against it. It can happen very easily if you take out a 100% mortgage or if property prices fall. (Also see Higher Lending Charge)
Portable - This is a measure of how easy it is to move a mortgage from one property to another should a property move be required. This is vital if you are moving during your lock-in-period and wish to avoid redemption penalties.
Repayment Mortgage - This is the same as a Capital and Interest mortgage - see above.
Searches - During the conveyancing process, the buyer has to be sure that the seller has title to the property and identify any matters may affect the prospective owners ownership of the property. For example, whether the property is affected by any proposed road building, whether there are preservation orders affecting the property, is it a listed building and has it been built in accordance with planning conditions and building regulations. Searches will also show whether there are mines under or close by the property. This information is obtained by the person undertaking the conveyancing from HM Land Registry and the relevant Local Authority. These investigations are collectively known as "Searches".
Self-Certification - Should you have difficulty in providing documentation that "proves" your income to a prospective mortgage lender, you may need a self-certification mortgage. In essence you personally certify what your full income is. If you receive high bonuses, or work seasonally or on commission, or are self-employed this may be your best option. You declare your income plus some evidence that your declaration is reasonable. Ideally lenders want to see as much guaranteed income as possible. To compensate the lender for the increased risk they are taking on a self-certified mortgage, they will charge you a higher rate interest, typically 1% over their standard variable rate.
Stamp Duty Land Tax (commonly known simply as Stamp Duty) - You pay Stamp Duty Land Tax on property like houses, flats, other buildings and land. If the purchase price is £120,000 or less, you don't pay any Stamp Duty Land Tax. If the price is more than £120,000, you pay between one and four per cent of the whole purchase price, on a sliding scale.
Upto £120,000 - No duty payable
£120,001 to £250,000 - 1% duty payable* £250,001 to £500,000 - 3% duty payable £500,001 and over - 4% duty payable
*If you're buying a property an area designated by the government as 'disadvantaged', you don't pay any Stamp Duty Land Tax if the purchase price is £150,000 or less.
Did you know? Stamp Duty was originally introduced by William of Orange when he was King of England.
Structural Survey - The most thorough report you can get on the condition of the property you are considering to buy. The surveyor will look in detail at the inside and outside of the property and will tell you if the property is structurally sound. All major and minor defects in the building will also be listed and should tell you what maintenance work may be needed either now or in the future. You should make sure the scope of the survey is agreed in writing before you commission it. Should the survey identify problems, use them to negotiate a reduction in the price before you exchange contracts.
Variable Rate - This is when the interest rate you pay on your mortgage can go up or down depending on changes to the lender's standard variable rate. If you have a variable rate mortgage your monthly mortgage payments will change whenever the lender changes the interest rate.
Valuation - This is where a valuer appointed by your proposed lender, visits the property in order to estimate its current value. This value is then used by the lender as a basis for its security and to calculate its Loan to Value Ratio. The borrower never sees the valuation. With some mortgage deals the lender absorbs the cost of the valuation but in many cases the borrower has to pay upfront.
Attaining a mortgage quote is obviously helpful for the people who want to refinance their existing house and purchase a new house in the near future. While in the past this involved sitting through a sometimes arduous and always unnerving interview with a banker, the whole process has become simplified, thanks to the efforts of some companies who provide free mortgage quotes online. There are several companies who provide free mortgage quotes online. All you have to do it to fill a simple online form and send. The rest will be done by the companies who will process your information and quickly return the free quote to you as soon as possible. These quotes will enable you to plan your future in a better and efficient manner. You can get extensive information on fixed rate mortgages, variable rate mortgages and other capped mortgages. You will get an in-depth analysis of different options available to you. The free quotes will unravel the mystery that surrounded the different type of mortgages.
Advantage of Free Mortgage Rates
The advantages of free mortgage rates are many. The biggest advantage, of course, is that you can get the mortgage quote free of cost, giving you a good general feel of what the market is bearing. There are no charges, no hard efforts, and no interviews. By simply filling out a form on the website, you can get a number of free quotes from a wide range of lenders. In doing this, you will be better able to look at the bottom line across many loans and in so doing decide which option offers the best solution for you. The world of lending is riddled with hidden contract clauses and indecipherable language. So without proper and careful planning, you can become lost rather quickly.
The fast service provided by the free mortgage quote providers is another advantage. All the mortgage quotes on the web sites are customized. When you answer the questions on the online form and submit it, your answers will be immediately matched with lenders and brokers who meet your exact financing needs. Typically, you will receive the quotes from multiple lenders very quickly and there will be no long waiting.
Disadvantages of Free Mortgage Quotes
Like all other things, free mortgage quotes have both the positive and negative aspects. Sometimes, it becomes difficult to know whether the prices are competitive or not. We have to believe the information we get from the lenders and could do little if these rates are not reasonable. But because lenders receive thousands of leads a day, whereas your local bank may receive only a dozen or so, the online lender may offer unfavorable terms in an effort to sell to only the suckers. That is not to say that all do, however, but merely that you should verify any quotes by attaining at least one quote from a brick and mortar lender.
The quality of the lenders may be another reason to worry. To expand their business, new online lenders may promise terms they can never meet. While users can investigate the history and third party lending appraisals of the company, for the newest lenders it is difficulty to know the quality of their services only after dealing with them.
Florida is a lovely place to have a house in; unfortunately the real estate prices are rather forbidding for most. And for someone with a bad credit past, it gets tougher. However, if Florida real estate has is in your dreams, you can still get a mortgage loan, even with a bad credit if you know how to look for it.
Before we get into shopping for the best mortgage rates, let us understand how the credit score of a borrower determines the scope of his search. Most lenders will willingly lend to a person with ‘A’ credit score but someone with a ‘C’ or a ‘D’ grade won’t get so lucky.
Fortunately, recent entries into the Florida lending industry have led the industry into being more liberal when approving loans. For instance, if there are more than 4 late mortgage payments in a period of 12 months, it calls for a B score, however if these delays have a plausible explanation the lender may excuse the default and consider a score of A.
There are companies who specialize in giving loans to high-risk borrowers and they are known as Sub-Prime lenders. Even though loans from the Sub-Prime source continue to dominate the high-risk borrowers segment, the government-sponsored agency, Fannie Mae too is beginning to acknowledge the potential in this category. With the availability of more options, a borrower with bad credit can afford to get choosy and not jump at the first approval he gets for the fear of not getting another chance.
The Internet is a good place to look for multiple mortgage options and even for specifically Florida Mortgage Loans, without the borrower having to reveal his credit status. One may even go to a mortgage broker in order to locate the best quotes, but they can be expensive. Ask for reference from friends and colleagues for a good mortgage lender, since a recommendation is always assuring.
Once you narrow down your choice, here is a checklist that you must go through.
1. First analyze your financial status, if you find you have come out of your past credit blues and can commit more you can consider an Adjustable Rate Mortgage (ARM). An ARM allows for a lower rate of interest in the initial years with an option to refinance at a lower, fixed rate after the first couple of years. However, if you find yourself financially burdened, a fixed rate payment would be more appropriate. Search, negotiate and settle for a rate of interest and for terms and conditions that suit your financial status.
2. Find out how much penalties are imposed for pre-payment. Heavy penalties will take away the advantage of any timely payments that you may be able to make and that may get you a refinance on better terms in the next few months.
3. Most Sub-Prime lenders exploit the vulnerability of high-risk borrowers and slap on high closing costs at the end of the loan. There are more lenders out there willing to do business than one would have you believe and a little negotiation can always add to some cost shaving.
4. Avoid paying any upfront or processing fees; the only fee acceptable should the one you pay for your credit application.
5. Ensure that everything goes on paper in writing, from the rate of interest, to the closing costs to the pre-payment penalties and that nothing comes as a surprise after you have signed the contract.
For most people, applying for a mortgage loan to buy a house is one of the biggest and the toughest lifetime financial exercise. It gets even more difficult for those who have had a bad credit history. Even though people with bad credit are at a disadvantage, lenders do recognize their financial problems and needs and offer them mortgage deals that might not be the best but which at least provide them with an opportunity to own a home.
In order to get the best possible mortgage options, a borrower has to impress upon a lender that in spite of a bad past, he is financially responsible. To convince the lender of your credibility, the foremost thing to do before applying for a mortgage loan is to start clearing the red flags that mark your credit report. Begin by reducing your credit card debts as much as possible. Similarly pay off other debts like car loans or auto debts, particularly if they have more than 9 monthly installments left, since auto debts with less than 9 payments are generally excluded from debt calculations.
The next best thing to do is start saving big for a good size down payment on your home. Since you fall in the bad risk category for a lender, the bigger the down payment, the more it assures the lender of being able to recover his cash in the event of a future default. Do remember to include closing costs when saving for your down payment as they can add as much as 3% to the purchase price. Overall, saving more than 20% of the total purchase price should improve your credibility.
The borrower should target and reduce his monthly liabilities to less than 50% of his total income in order to give confidence to the lender about his ability to repay his mortgage loan without any defaults. It is never to late to get into better financial habits, like reducing the use of credit cards and postponing large purchases. At this point of time, it is wise to hold on to your present job and not make any unnecessary jumps. A steady employment of over two years adds to your image as a consistent and stable person.
Lenders will go through your bank statements to figure out your expenses and incomes. Any unusual entry may raise question marks. If a friend or family member gifts you money to help you purchase your house, make sure the lender know it is a gift and not another loan. Reveal all your liquid and cash reserves that you own since lenders judge your paying capacity from them and generally prefer that they have at least two month’s reserve of the monthly mortgage payments.
Last but not the least, even factors like prompt payment of house rents, phone bills, insurance premiums and other financial bills add to your credit worthiness. Finally, even after you have spruced up your credit image, make sure to approach more than one lender and compare their lending terms and conditions in order to get the best mortgage loan.
While shopping online for online mortgage quote can be great in terms of saving time and convenience, it won’t necessarily get you the best deals available. What you save depends to a great extent on the way you negotiate with lenders for the online mortgage quote. Like with any negotiation, you get the upper hand when you are knowledgeable about how the industry works.
One of the main precautions to take on when looking for online mortgage quotes is to ensure that the brokers you deal with represent several different lending institutes and therefore can offer you a good variety of options. Beware of brokers who are merely lender agents in disguise. If a broker represents only one bank or lender, there is a great likelihood that you will not be offered the online mortgage quote that is most suitable for your needs.
In devising consumer protection laws for online mortgage quotes and increasing convenience, states have ultimately ended up having an adverse impact on competition, apart from making online mortgage costs higher than necessary.
Explaining The Costs Most states do not require online mortgage businesses to have a brick and mortar presence. However about one third of all states make this a mandatory requirement. Due to this, the expenses increase. Laws of this nature have prevented mortgage brokers from being exclusively online and offering much lower rates.
It is mostly the existing brick and mortar mortgage brokers who are the blame for the laws in a bid to minimize competition. The laws have also led to a multi-state licensing system due to which national mortgage firms with a presence in all states get an unfair online advantage over the competition. These companies don’t have to put in money into costly infrastructure apart from enjoying lower transaction costs and can therefore offer lower rates to consumers.
The Bottom Line The reality is that the online companies who face compulsion to bear the costs of renting offices, employing a workforce and infrastructure and equipment which they would otherwise not require, choose to avoid doing business in that particular state altogether.
The end result is that it is the consumer who is eventually at a disadvantage. Their options are limited further for sources of capital and the competition among lenders is also less intense.
Gone are the days when money could be fetched either by mere mortgaging or financing something. Now it is time to get money via an amalgam of the two i.e. Mortgage Refinance. Mortgage refinance is a smart idea to have a good credit sum and repay it in an easy fashion. In simple terms a refinanced mortgage is one where a borrower repays a previous loan by taking a new one. The main motive behind refinance mortgage is to get a lower interest rate, lowering their payments or to take cash out of their home equity. So basically in mortgage refinance refers to taking a secured loan to replace the existing loan that is secured via some assets of yours.
Let us first delve into the factors that instigate a refinanced mortgage. There are several reasons that instigate people to opt for refinance. For instance
(a) Mortgage refinance reduces the interest rate on your mortgage. It not only minimizes your EMIs or monthly installments but also brings down the total amount that you need to repay.
(b) Another wonderful feature of mortgage refinance is the reduction in the tenure of the loan, which is immensely effective in saving lot many bucks.
(c) Mortgage refinance is a smart idea to consolidate or fuse the amount you need to repay.
(d) Mortgages refinance serves you with the most essential thing i.e. cash in hand. You can draw on an equity built up in the house to acquire cash amount for several purposes such as your daughter’s marriage, child education etc.
(e) If you want to have an adjustable-rate mortgage i.e. ARM and a fixed-rate loan in order to ensure you regarding the mortgage payment, mortgage refinance is a brilliant idea.
However there are other things to be taken into consideration. First and foremost mortgage refinancing can be recommended if the present rate on your mortgage is at least 2 percentage points higher than the existing market rate. Second you need to know that for how long you propose to stay in the house. Third you need to know that according to many sources given the costs of refinancing, it takes at least three years to realize completely the savings made from a relatively lower interest rate. Finally in order to go for mortgage refinance is to enlist complete expenditure of refinance and calculate your monthly installments. Knowing this will enable you to decide whether you should opt for refinance or not.
Well before going for a mortgage refinance you can also ask yourself questions ponder over questions such as- by how much will your existing monthly installment be lowered, what will be the financing cost that you will have to pay, how much will you owe in the house and for how much was the initial payment for the house made etc. Once after going through the various factors and conditions you feel it is appropriate to go for a mortgage refinance (which is true with most of the cases) then the first step is to consult a good real estate agent, mortgage lender as well as an attorney and other legal practitioners. Searching online is even an excellent option.