Mar
8
Adjustable Rate Mortgage Holders Prepare for Increase in Interest Rates
Filed Under economy, mortgage, rates | Leave a Comment
Interest rates are on the rise and many home owners who have adjustable rate mortgages may see increases in their forthcoming annual adjustments.
Federal Reserve Chairman Alan Greenspan made it clear in 2004 that the Federal Reserve would be increasing short-term interest rates at a measured pace. With the US Dollar at its weakest point in seven years, oil prices unstable and the evaluation of other economic indicators, the Fed Funds Rate was hiked seven times from 1.0% to 2.75% since June 2004 in an effort to curb inflation. Some economists believe it won’t stop until the Fed Fund Rate hits 4.0%.
Consumers with revolving debt accounts tied to the prime rate have seen the effect through rising interest rate charges, as the prime rate always rides 3% above the current Fed Funds Rate.
Mortgage interest rates are affected indirectly by these changes. An increase in the Fed Funds Rate has an impact on financial markets as a whole, but mortgage rates may go up or down based on the perception investors have of current economic statistics and their reaction to the Federal Reserve’s after-meeting statements.
In general, when economic data indicates we have a slow-down occurring in our economy, investors tend to sell off stocks and reallocate that money to the safe haven of bonds and mortgage-backed securities. The purchase of mortgage-backed securities drives interest rates down. When economic data says there is growth in the economy, the stock market typically rallies and mortgage-backed securities sell off to fuel that stock market rally. This drives mortgage interest rates up.
Our current market reflects the reaction of investors reading between the lines on comments made by the Fed, and mortgage interest rates are going up. This will have an affect on home owners with adjustable rate mortgages (ARMs) tied to indexes that are based on short-term interest rates. This includes the 11th District Cost of Funds, 12-Month Treasury Average (MTA), London Inter Bank Offering Rates (LIBOR) and others.
This doesn’t mean that everyone with an adjustable mortgage is in trouble right away. Some indexes are more volatile than others. COFI moves much slower than other adjustable rate indexes, while the LIBOR fluctuates with more volatility. But remember, when an ARM adjusts, the new interest rate is a sum of the borrower’s fixed margin plus the current rate of the index the mortgage is tied to.
Consumers who foresee paying an interest rate that is significantly higher may want to consider refinancing to take advantage of the stability of a fixed rate mortgage.
This is also a good time for borrowers who started out in an adjustable rate loan due to a poor credit score to transition into a fixed rate loan if they can. Once a track record of making mortgage payments on time and in full has been established, this should have a positive effect on the credit score and there is a good chance the borrower may now qualify for a loan with a lower interest rate.
As with any decision to refinance, it is important to take the terms of the existing loan, the cost of the new loan, and the borrower’s long-term needs into consideration. A qualified mortgage professional should help weigh out the options by providing a clear assessment of available loan programs for the consumer.
Jan
1
Why is my credit bad?
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Your credit maybe considered bad and causing a low score for a number of reasons. While the are numerous reasons for bad credit some of the more common ones are as follows. You have numerous credit cards that are maxed out or close to the credit limit, you have unpaid judgments or collection accounts, you have 30 day lates showing on your payment history. All of these examples can cause severe drops in your credit score.
One area people overlook that can negatively impact their credit report is failing to honor mobile phone contracts. Cell phone companies give away free phones to customers who sign on with their services for a specified period of time, usually one to two years. Terminating subscription to the phone service before the expiration and failing to reimburse the phone carrier for the cost of the free phone is considered breaking the contract. Cell phone companies would then report to the credit bureaus and cause a blemish on the credit history. Such blemishes are not serious, but they nonetheless lower credit scores.
Credit scores generally range from about 350 to 850.
- 800+ = great credit
- 700-799 = good credit
- 600-699 = average credit
- 500-599 = bad credit
- under 500 = hard to get a loan at all
Your credit can be bad for a variety of reasons: Late payments High Account Balances Bankruptcy Collections Charge offs To minimize negative on your factors you will need to pay down balances, make payments on time, dispute incorrect information, and let the passing of time lessen the impact of past bad credit.
To many inquires at one time can affect your credit score.
If you credit score is low because of a high balance on a credit card transfer some of the balance to another card. Try not to open a new card because to do this can also reduce your score.
One reason why your credit may be bad is because of erroneous information reported on your credit report. This can happen to anyone and is actually quite common. This is one reason why you need to check your credit report out at least once per every 12 months. By checking you credit report for free you can keep an eye on your credit and make sure that you take care of any erroneous information when it happens, not when you are trying to apply for a loan and it comes as a surprise to everyone. Utilize your one free annual credit report each year to take a look over your credit to make sure everything looks well. There are many reasons as to why credit report errors can happen so make sure that if errors do happen to you that you rectify the situation immediately.
Maintaining high balances on your credit cards and other revolving debt negatively impacts your credit score. Paying down credit cards balances below the 70%, 50%, and 30% thresholds is a quick way to boost your credit score.
Paying down your credit card balances to around 30% will help your score. If you can, try to keep the balance at that level at all times. If you need to raise your score quickly, and don’t have the money to pay down your balances, you may request that your creditors increase your credit limit. This will in turn lower your balance in comparison to the limit. Only use this technique if you are responsible with your credit. Once your limit is increased, it may be tempting to go on a shopping spree. Know that if you do this, you will be in a much worse situation than when you started. Not only will you have more debt, but you will increase your ratio of balance to limit.
There are several ways to increase your credit. However the fundamental principle is the bills must be paid on time. This doesn’t mean by the due date. For the sake of your credit a payment must NEVER be more then 30 days late. If you are acquiring 30 day lates on your credit then your credit standing will deteriorate quickly. Judgments also hurt your credit even if you pay them.
It is also important to note that a credit score is a snapshot. Although it shows your payment history, length of credit, etc. having inaccurate (negative) information removed from your credit bureau report will immediately reflect an increase in your score.
If you do decide to pay off some of your credit cards, be sure to leave the cards open. The credit bureaus look favorably upon accounts that have been open for a substantial period of time, especially if they are showing a zero balance.
Remember that a credit score amounts to a prediction of how likely it will be that you go 60 days late or more on your mortgage in the next two years. One thing that will really lower this score is if you carry high balances on revolving debt and then start making a few of the payments late. This is the pattern of a consumer who is close to getting in trouble with debt.
Things that may go into a collection or judgment that will hurt you credit are; unpaid medical payments, unpaid utility payments, and unpaid cell phones or cable payments.
Jan
1
A HELOC is a home equity line of credit.
This type of loan is basically a line of credit secured by a second mortgage on a property. You can borrow a much as you need as long as you do not exceed the maximum loan amount. You pay interest on the outstanding loan balance and not the entire line of credit.
A Home Equity Line of Credit is an open ended mortgage, meaning a homeowner can withdraw and repay as often as he likes, up to the available credit limit. A HELOC works much like a credit card account in that respect. It differs from a credit card account in that a credit card account is an unsecured loan, whereas a HELOC is secured by the homeowner’s property.
Usually, whenever you have a mortgage that is above 80% Loan TO Value, then the difference above 80% is usually a HELOC loan. For example, if you need 95% Loan To Value then your 1st mortgage will be at 80% Loan To Value and at a lower rate and the remaining 15% will be considered a 2nd mortgage and be a HELOC.
A HELOC (home equity line of credit) is an excellent financing tool, for some borrowers. A HELOC is essentially a line of credit secured by a mortgage or deed of trust on your home. You only pay interest on the amounts you borrow on the HELOC. If you don’t use any of the line of credit, then you don’t make any monthly payments. You can draw from the HELOC by writing checks issued to you by the lender. Usually a HELOC is considered a second lien on your property.
It’s important to be careful with HELOC’s. As any other type of credit they have a good use but one can end up spending too much with this line of credit. If you are paying off other debts such as credit cards ampersand autos it might make sense to get a standard fixed rate 2nd mortgage where you get the lump sum at closing to pay off all debts and then you pay on that mortgage along with your first until it’s paid off. You won’t have the ability to pull money whenever you think you need it. On the flip side of that, if you have income that comes in large quantities and is sporadic or not stable. This type of loan might be used as a cushion for the times in-between the checks.
A HELOC is a far superior debt device than using a credit card or financing a car/boat/ RV purchase. One of the many advantages to using a HELOC is that the interest expense is tax deductible. Essentially you are saving 25-35% on every interest dollar as it is deducted from your income when you do your year end tax preparations.
Many HELOCS today offer a credit card which can be used at your favorite stores and restaurants.
Usually the rate on the Heloc is the prime rate plus a margin.
A HELOC is traditionally based on the prime rate and a margin is added to reflect the true rate to be paid by the borrower. HELOC’s may offer a initial lower rate (Teaser rate) for a specific time period. When the defined time period has expired the rate will adjust to prime + margin.
HELOC(s) or Home Equity Line(s) of Credit are very popularly used as the “20″ in an “80-20″ or 80/20 piggyback mortgage strategy.
A Home Equity Line of Credit can also be used to purchase the property or as a first lien on the property. The HELOC can be used to payoff or consolidate debt, personal use, or just to have.
A home equity line is a revolving credit line tied to the equity in your home. Most home equity lines use the prime rate as a base for setting interest rates. For example, you hear lenders describe rates as prime + zero or prime + 1. This means the borrower will pay monthly interest according to the Prime Rate (lets use an example prime rate of 5.00%) plus a margin. In this case, prime + zero would equal an interest rate of 5.00%, or in the case of prime + one it would be 6.00%. Additionally, most home equity lines have interest only payments.
Jan
1
Refinance to Lower Your Monthly Expenses
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Refinancing you lower your monthly payments is the number one reason why people refinance.
When most people think of refinancing they are thinking in terms of lowering their rate of interest or their monthly payments. Even as interest rates are rising, refinancing often makes sense for many American households. Even if you have to slightly raise the rate of interest that you are paying, if you can refinance to pay off other high interest debt you will likely see a huge improvement in your monthly cash flow. It is often more beneficial to lower your overall monthly expenses, not just your mortgage payment.
Remember that the interest you pay on your mortgage is tax deductible, where as the interest on your credit cards is not. That is why a slightly higher mortgage interest rate, is not as bad as most consumers may think.
You can lower your monthly expenses by refinancing into an interest only loan. This will help you to save a good amount of money from your monthly mortgage payment alone. If you were to consolidate debt in your refinance and switch to an interest only loan this would save you a lot of money per month and truly maximize your monthly cash flow.
When analyzing the benefits of a refinance you should look at both the short term and long term financial benefits. You should consider the length of time you plan on staying in your current property, how much you will save over time, and how much you will save monthly. A good way to figure how beneficial a refinance can be if you are paying off debt is to figure how long and at what cost it will take to pay off you current debts at the payment levels you are currently making.
Revolving debt interest rates are generally much higher than mortgage rates. In today’s market many credit card companies are raising the minimum payments considerably. This causes hardship in many households. Often times refinancing and paying this type of debt off through the loan can be very beneficial.
Make sure you are certain that the end result will benefit you financially. Instead of refinancing your whole mortgage you may want to take out a second mortgage or HELOC to reduce debt payment amounts.
Jan
1
Home Equity Loan - What You Should Know?
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Asking yourself, “Is a home equity loan right for me?” is the first and most important step to take-Home equity loans have become so popular today because of increasing home values. A home owner can access money for consolidating debt, home improvements, a new car, education or starting a new business. Emotions can take the place of logic when considering a home equity loan. It’s a good idea to sit down and take your time before signing up. Educating yourself will benefit you in the long run.
A home equity line is a revolving credit line tied to the equity in your home. Most home equity lines use the prime rate as a base for setting interest rates. For example, you hear lenders describe rates as prime + zero or prime + 1. This means the borrower will pay monthly interest according to the Prime Rate (lets use an example prime rate of 5.00%) plus a margin. In this case, prime + zero would equal an interest rate of 5.00%, or in the case of prime + one it would be 6.00%. Additionally, most home equity lines have interest only payments.
Unlike other forms of consumer credit such as auto loans or credit cards, the interest on a Home Equity Loan is usually tax-deductible
Asking yourself, “Is a home equity loan right for me?” is the first and most important step to take-Home equity loans have become so popular today because of increasing home values. A home owner can access money for consolidating debt, home improvements, a new car, education or starting a new business. Emotions can take the place of logic when considering a home equity loan. It’s a good idea to sit down and take your time before signing up. Educating yourself will benefit you in the long run. A home equity loan is like having a second mortgage on your home. Suppose your home is worth $200,000, and you have a mortgage against it at $150,000, you will have $50,000 of equity available. Home equity loans allow you to borrow up to 80%, and sometimes more in certain situations, of your homes value. In this situation you could borrow $80,000 as a home equity loan and still have only borrowed 80%.This is why it is so important to take a good look at your situation before making a decision. You can see how easy it could be to get carried away with a home equity loan. The second step should be to get an idea of what your home is worth in today’s real estate market. You can look at what others in your area have sold their home for. A realtor can help you with getting an idea of your homes fair market value. Be sure to get a few quotes because some realtors may be interested in inflating your home value in hopes of earning your business. When you have an approximate figure, you can get an idea of how much equity you have in your home. At this point you should have an estimate of how much money you need to borrow. It’s best if you can avoid borrowing up to the full 80% of your homes value.
This is where some home owners get carried away with their emotions and logic goes out the window. It can be so easy to say, I have $60,000 available and I really only need $40,000 for remodeling my kitchen and bathrooms. Why not borrow $50,000 so I can go on my dream vacation. It’s important to remember that the more you borrow, the higher your payments will be. This is simple logic. But, emotions can take over and you can end up having a tough time paying back the home equity loan, with the risk of losing your home.
A home equity loan is a great way to help you take care of things you would like done or feel you need. If done properly , a home equity loan can be a valuable resource. Educate yourself to find out what is best for your situation. Try not to compare your situation to someone else. Only you know what is best for you. Home equity loans can be a big windfall or a big headache. It really depends upon you taking the time to research your options and choosing the right loan.
Many people tap into their home equity to pay off high interest credit card debt, repair or upgrade their property, or simply free up cash. Several equity loans are tax deductible and can be paid off without or with little prepayment penalty.
The third step is to figure out what type of home equity loan you want. In today’s market, there are two popular types of home equity loans. A line of credit and a closed end loan. With a line of credit, it is just like having a credit card with a large credit limit. Depending upon the bank, you may be required to make minimum monthly payments. Others may only have you make payments if you’re at your credit limit. If you have had problems with high credit limits in the past, this may not be a good idea. It’s best to have discipline with a line of credit and big credit limits. Having a closed end loan is just like your standard home mortgage loan. You borrow the money for a set period of time and make monthly payments until the loan has been paid off.
The fourth step is to figure out how long you want to borrow the money. This is where mortgage calculators can help you. It’s easy to find them online and helps you to avoid having to talk to a loan broker before you are ready. Try different time frames to see what you can and can not afford. Be sure to decide if you’re going to take a line of credit or a closed end loan before you put in your figures. This is an important step to see how much you can afford repaying on a home equity loan. It’s best again to use logic, not emotion in regards to how much you can afford to repay.
A home equity loan is like having a second mortgage on your home. Suppose your home is worth $200,000, and you have a mortgage against it at $150,000, you will have $50,000 of equity available. Home equity loans allow you to borrow up to 80%, and sometimes more in certain situations, of your homes value. In this situation you could borrow $80,000 as a home equity loan and still have only borrowed 80%.This is why it is so important to take a good look at your situation before making a decision. You can see how easy it could be to get carried away with a home equity loan.
The fifth step after choosing the home equity loan you want, is to find a good bank or lender. Shopping online can save you valuable time. Banks and lenders are very competitive for your business online. You can use this to your advantage and save money on fees. Be sure to look over the fine print of your home equity loan contract before signing anything. Read everything, and if you have a questions be sure to have them answered first. Be very clear on everything and take your time
For more info contact me.
Unlike the credit lines offered in the form of credit cards, Home Equity Lines are secured by the property, meaning the lender bank has the home as collateral. When the homeowner fails to meet the obligation of the loan, the home owner can lose the home.
Jan
1
Home Equity Line of Credit
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A HELOC (Home Equity Line of Credit) is a lien on your property in the form of revolving credit secured by the equity in your home.
HELOC’s have a draw period and a repayment period. The draw period is the amount of years that you are allowed to use the credit that is in your account (or draw money out). Your minimum monthly payment is interest only. When you HELOC reaches its repayment period your minimum payment increases to include payment of the principal.
Home Equity Lines of Credit work very similarly to credit cards. You have a maximum credit limit and you can use any amount of the credit line up to that maximum limit. You only pay on what you borrow so if you have a equity line with a 20k limit and you only use 1k of the equity line you only have to make minimal payments on the 1k that has been used. If you have no balance on the equity line there is no payment to make.
Home equity lines of credit are used often for debt consolidation. Paying off high rate credit cards and consolidating them into one low monthly payment helps with monthly cash flow. Usually the rate on the home equity line of credit is lower than credit card rates also.
A Home Equity Line Of Credit is often treated just like a credit card on your credit report. If you “max out” this revolving line your credit scores may drop depending upon your overall credit profile.
Most HELOC loan programs lend up to 95% to 100% of the value of the home. A few banks even lend up to 103%, provided certain conditions are met. As with other loan programs, borrowers must have perfect credit histories and sufficient incomes in order to borrow 100% of the home value.
A Home Equity Line of Credit is typically an adjustable rate product. Additionally, the index used for most HELOC’s is the prime rate. Because the prime rate has seen numerous increases in the last half of 2005 and in early 2006, HELOC’s seem to be losing much of their popularity.
One of the advantages of a Home Equity Line of Credit is that you do not pay interest on the money until you actually need and use it.
Other sites: Mortgage Broker | Reduced Documentation Loans | MIP | What not to do after you apply for a Mortgage | Fixed-rate mortgage | Delinquency| Pay Option Arm Calculator
Jan
1
Delinquency
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Failure of a borrower to make timely mortgage payments under a loan agreement.
Borrowers with a delinquent mortgage will generally have a higher interest rate than those who are not delinquent. Credit scores also play an important factor in this.
Different types of delinquency will affect your score in different ways. A late payment on your mortgage is the most damaging.
Your credit report will reflect these late payments, using the standard symbols listed below, to read the late payment history. i.e.: R2 would show a revolving (credit card) debt, that has been past due more then 30 days. O = Open (entire balance due each month) R = Revolving (amount due can change each month)I = Installment (fixed amount due each month)0 = Approved, but account is too new to rate or not yet used 1 = Paid as agreed 2 = 30 or more days past due 3 = 60 or more days past due 4 = 90 or more days past due 5 = 120 or more days past due or is a collection account7 = Making regular payments under a wage earner plan or other repayment arrangement8 = Repossession9 = Charged off account
Having delinquencies on any loan will decrease your credit score, and will make it more difficult for you to obtain financing for your home.
If you know that your credit report contains delinquencies which are incorrect or are not attributed to you personally, please tell one of our loan specialists about the situation so that we may assist you in removing the delinquencies and qualifying for the loan program you truly deserve.
Your delinquency will have a major impact on your credit scores. The more recent the delinquency, the more your scores will drop.
A delinquency on a mortgage loan will be considered a greater derogatory factor than a delinquency on unsecured credit by a mortgage loan underwriter. For this reason, homeowners would be advised to do everything possible to try and make their mortgage payments on time.
Delinquency is when you fail to make mortgage payments, when they are due. For most mortgages, payments are due on the 1st day of the month. Even though they might not charge a “late fee” right away, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.
Delinquencies are also known as “lates.” On your mortgage they are reflected in days 30, 60, 90, or 120. A 120 day late is also considered foreclosure, in the eyes of any lender.
If you ever get seriously behind in your mortgage payments and feel foreclosure looming be especially wary of companies offering assistance. Often these are scam-artists who swindle thousand’s from unknowing homeowners, sometimes leaving them penniless and homeless.
Most lenders consider a loan to be delinquent when payments on the loan are 30 to 60 days past due.
Most lending banks will overlook delinquencies if the homeowner can satisfactorily explain the cause of the delinquencies and the unlikelihood of recurring. Acceptable causes include divorce, separation, tragedy in the family, loss in the mail caused by relocation, etc. Homeowners are often required to supply supporting documents.
If you find yourself in a situation where you might not be able to make all of you monthly obligations you want to make sure that you make your house payment in time as to not be 30 days late. A 30 day late on your house payment can hinder you from qualifying for a mortgage more so than a 30 day late on a credit card.
There are many lenders that will finance you even if you are delinquent.
Other sites: Mortgage Broker | Conforming Loans | FSBO | Mortgage banker | 1003 The Loan Application | New Credit Card Minimum Payments | AZ Mortgage Source | Delinquency | The Lending Process | Reasons Loan Applications Are Rejected | CCRs | Fixed-rate mortgage | VA | Consolidating Credit Card Debt into Your Mortgage| Pay Option Arm Calculator
Jan
1
Debt Consolidation Refinance
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Many homeowners use the equity in their home to pay down or pay off their revolving credit card debt. This is even more so now that the credit card companies have increased their minimum payment requirements. When considering a refinance to consolidate your higher interest debt such as credit cards you should look at the long term financial benefits. Keep in mind that paying your credit card bills at the minimum monthly payment will take you 20-30 years to completely pay off, assuming you do not add any more debt. The credit card cycle can be never ending which will just drain your bank account of any savings you may have.
Even if your nominal mortgage interest rate goes up because you are borrowing more money through a debt consolidation refinance, you should sit down with your loan officer and review how much lower your total monthly spending on bills becomes before and after the debt consolidation refinance. Homeowners with average levels of credit card debt very often save 50% or more on their total monthly payments after refinancing for debt consolidation, and very often can borrow additional cash out of the closing at a much lower interest rate than any new credit card purchases would allow.
Consolidating credit card debt can accomplish many things. First, it can help increase your credit scores by paying off the credit card debt you are able to show a better ratio of credit card balances compared to your credit card limits. Second, the interest may be tax deductible. Third, this can help to maximize overall cash flow and free up some money for a much needed family vacation, saving for retirement, or paying a child’s education expenses. Consult a mortgage professional to find out what loan type is best for you.
When consolidating credit card debts by refinancing your home mortgage, you new debts are now secured by your home. While it is unlikely to be forced into foreclosure if you default on credit card debts, in the event you should default on your mortgage, you can lose your home.
A debt consolidation refinance is considered a cash out refinance. Depending on the lender you will have the option have taking the cash from escrow and paying yourself, or having escrow paying the debts off for you. If you choose to have escrow pay them, you will need to provide current payoff statements and addresses to send the check.
Choosing the right type of loan for your debt consolidation refinance will take the help of a mortgage broker. The mortgage broker is experienced with helping customers obtain the best loan programs to achieve your desired goals. With the many options that are available, you will want to be sure you are being given all possible solutions to your debt consolidation refinance. You will need to go over all of your financial goals, both current and future with your broker. With the information you give to the broker, they will be able to pinpoint some good programs which will help you reach those goals. Be sure to look at each option and analyze which one works best for your personal needs and comfort levels. Not all loans are created equally, so be sure you understand all the loan programs your broker is offering you.
When considering a debt consolidation refinance you should look at how doing this will benefit you financially over the long term. Asking yourself some simple questions like: Am I consistently making larger payments on my credit cards to reduce the balance? Am I at the limits of my credit cards? How long would it take for me to pay off these cards at my current payment structure? Am I gaining any benefit from these interest rates on my credit cards? What is my current housing payment and debt payment combined? Once you have answers to these simple questions you should be able to have a pretty good idea at how a debt consolidation refinance will help you financially, not only now but also your long term financial outlook.
Other sites: Mortgage Broker | New Credit Card Minimum Payments | MIP | Fixed-rate mortgage | Investor Loans| Pay Option Arm Calculator
Jan
1
Condominium
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Condominium - A form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex; the owner also shares financial responsibility for common areas.
For many first time home buyers, a condominium is an ideal starter home.
An individual condo owner holds title to the condominium unit only, not the land beneath the unit, so condos can be stacked on top of each other.
Despite being similar, town homes or townhouses are not considered condos. They are considered an attached single family residence or a planned unit development.
Condos serve as a great purchases for someone who doesn’t have a large family and doesn’t want the burden of cleaning or the maintenance that a larger home requires.
Condos are classified as high rise, more than five stories, and low rise, less than five stories.
On most condo projects a home owner association has been established to maintain the grounds and common areas.
Condominiums typically require slightly higher homeowners association dues to pay for insurances that are required and up keep of amenities and common areas.
For a mortgage loan secured by a condominium unit to be eligible for delivery to Fannie Mae (FNMA) or Freddie Mac (FHLMC), the condominium project must be approved by FNMA and FHLMC. In order for a condominium development to be accepted, it must meet certain requirements promulgated by Fannie Mae and Freddie Mac. Some of the more important requirements are, the minimum number of units already sold, the number of owner occupied units and units being rented in relation to total number of units in the development, and if any one investor holds title to more than a certain percentage of total units.
Condominium boards often require an interview with a condo buyer to ensure the potential occupants meet their requirements. Some of the condo boards’ criteria are the occupant’s family size and income situation.
The Condominium Market is booming across the United States. Apartments are being converted into condominiums in record numbers and prices continue to rise. This phenomenon is being met with mixed emotions by some. On one hand it reduces rental units available for those not financially capable or interested in home ownership. On the other hand it is argued that Condominiums aid many buyers in getting in on entry level home ownership.
A great way for young adults to get started buying their first home is by using the FHA “Kiddie” Condo Loan Program. This type of mortgage allows a person to co-borrow with a blood relative (e.g. parent, grandparent, sibling, etc.) who helps qualify for the loan using their income or assets. Both borrowers take title to the property and sign for the loan.
One advantage to owning a Condo is not having the requirement for a survey to be done.
Some lenders will consider a mortgage loan secured by a condominium to have more risk than a loan secured by a single family residence. In this case, the lender will charge a slightly higher rate of interest for the condominium loan.
This is an ownership where the owner gets title to a unit, in a multiple dwelling plus a proportionate interest in some of the common areas.
Some financial “gurus” have advised against this because you are turning unsecured debt into secured debt. While this is basically true the fact is that defaulted unsecured debt can be secured against real property very quickly once the debtor is sued for it and a judgment is received.
In order to decide if a debt consolidation is your best action, you should figure what you are paying now and how that will translate in the length of time it will take you to pay off those credit cards. You may find that rolling those debts into your mortgage will save you thousands of dollars in interest payments.
A mortgage agent can help you decide if refinancing credit card debt into a mortgage is your best option. Using financial calculators available, they can compare how long and how much it will cost you to pay off credit card debt using your current monthly payments vs. refinancing the debt into a new mortgage. Very often the monthly and lifetime savings is large.
One major difference between unsecured (e.g. credit card) debts and secured (e.g. mortgage) debt is should a financial disaster arise, such as health issues, or lose a job, and a homeowner defaults on unsecured debts, he can file bankruptcy protection and keep the home, whereas if he defaults on mortgage payments, he would be forced into foreclosure.
If you are planning on selling your home in the near future, you may want to rethink consolidating. You need to make sure that you have enough equity to pay for realtor’s commission and down payment or closing costs on the new home.
If you have gotten buried in a hole with credit card debt it could be a necessity to refinance your home and pay off your credit card debt. It has been known to save thousands of dollars. On the other side of the spectrum, if you only have 5 months left on a credit card bill it is note wise decision to bury that into a mortgage.
You can consolidate your credit card debt through use of your first mortgage or by obtaining a second mortgage or a home equity line of credit, also known as a HELOC. A HELOC works with the same basic principals of a credit card. It is a revolving account that as you pay the equity line down, you have that money available to you to use again. With a second mortgage you simply have a set term (5 years, 10 years, 15 years, etc…) that you will pay on the loan for and when it is paid off you are relinquished of your obligation to this debt and the account closes. All 3 (1st mortgagee, 2nd mortgage or HELOC) are excellent choices for debt consolidation but you and your mortgage broker will need to figure out which one makes the most sense for your particular situation.
Consolidating credit car debt into your mortgage can save a homeowner hundreds and sometimes even thousands of dollars per month by lowering their total monthly obligations. When you consolidate credit cards into your mortgage you also are able to lower your interest rates on those credit cards which essentially saves you a lot of money but you are able to write off the interest on your tax returns from your mortgage and you can not do this with your credit cards.
If you want to use a refinance loan to consolidate some of your debts, you’re going to have to borrow more than the actual amount remaining on the loan that you’re refinancing. This additional amount will be used to pay off those debts that are being consolidated and will affect the monthly payment of your refinanced loan. By doing this, however, you can make your finances and outstanding debts much more manageable and will likely become debt-free much faster.
When deciding to refinance for debt consolidation you might want to consider how long you will have to pay your credit cards if you are only making the monthly minimums. This can take you much longer in most cases than paying on a traditional 30 year fixed mortgage.
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Jan
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40-year mortgage
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A mortgage in which the repayment of principal is done over a 40-year period, rather than the traditional 30-year period, in order to reduce the monthly payments. The rate on a 40-year mortgage can be fixed or adjustable.
While 40-year mortgages increase affordability by reducing the mortgage payment, the reduction is very modest. Furthermore, a small tweaking in the 30-year mortgage would accomplish the same thing, maybe better.
40 year mortgages are increasingly popular with customers who are refinancing their home mortgage as part of a debt consolidation strategy, allowing them to borrow marginally more money, eliminating high revolving debt payments, while still maintaining a payment which is similar to what they were paying before on their 30 year mortgage payment.
40 year mortgages are becoming more popular as homeowners are constantly looking for more affordable ways to own homes.
Other alternatives to the 40 year mortgage are option arms, interest only arms, and interest only fixed mortgages. Ask which one is right for you.
In many cases the 40 year amortized loan will have a better rate than an interest only payment. If the 40 year payment is just slightly higher than the interest only payment, opt for the 40 year payment because you will be paying down some principal.
The 40-Year Mortgage allows for principal reduction but at a significant lower payment to borrower. The difference in payments can be pretty significant. For example, on a $500,000 mortgage financed over 30 years at a fixed rate of 5.875% costs $2957.69 a month. But the monthly principle and interest payment drops $2707.63 on a 40-year schedule. That is over $250 less in your monthly payment.
One of the disadvantages of a 40 year loan is that the homeowner builds equity at a much slower pace. For first-time buyers counting on equity accumulation to eventually move up to another, larger and more expensive home, this slower pace of equity accumulation is a liability and may leave some people sadly disappointed.
The 40-year mortgage is more attractive than interest-only loans because borrowers build equity in their homes, albeit at a sluggish pace, and they are not vulnerable to rising interest rates.
You should ask your mortgage broker whether or not this loan makes sense for your situation. A professional will be able to provide loan programs that he or she thinks are of the most benefit to you. Remember though that this is your mortgage, and you have final say. If you are absolutely sure that a 40 year mortgage is for you, then your broker should be glad to help you get it.
For renters who cannot afford a 30-year mortgage and still want to own their own homes, a 40-year amortization mortgage is often a good solution. In many metropolitan areas, the average rental cost for a single family residence is about the same as the monthly payments of a 40-year amortization mortgage with conforming loan amounts. Renters in these areas can often afford their own homes after all. However slow homeowners with 40-year mortgages build equity, they do contribute to the equity of their own home nonetheless.
If you run the numbers using a mortgage calculator you will be able to see the benefits of home ownership vs. renting and it may make sense to acquire a 40 year amortization loan. It is much better than throwing your money away on rent each and every month.
While fixed-rate mortgages remain attractive by historical standards, borrowers looking to keep their monthly payments down are running out of good choices. Some borrowers may consider products such as option ARMs and interest-only mortgages.
The shinning feature of a 40-year fixed-rate mortgage is that monthly payments are more affordable without taking on the risk of an ARM. This is of particular interest to buyers in high-cost areas. The 40-year fixed mortgage may also appeal to buyers with small down payments. The monthly payments on large loan amounts are accomplished by spreading amortization (the repayment term) by an extra 10 years. However, before you begin to think that this is the greatest loan ever, keep in mind the difference in payments may not be as much as you think. Be sure to have your loan professional run the numbers for you and compare with other loan products.
One twist to the 40 Year mortgage that you may want to watch out for is a 40 year due in 30, What this means is you will have a balloon payment due at the end of 30 years. This is not a bad thing considering most homeowners will most likely refinance before 30 years.