Mortgage Calculators Blog

Foreclosure Prevention Program of Obama

2009-06-28T12:27:00.003-08:00

The administration of President Barrack Obama released a program called Foreclosure Prevention Program. It stands to help millions of struggling Americans on mortgage. Thereby, they get to keep the homes at times of especially tough economic conditions.

The economic recession claims the loss of millions of jobs. It is one of the major contributing factors. The employers cut the number of employees to save costs. Many companies also went to bankruptcy.

Also, the mortgage rate at one time went high. Consequently, the home owners were unable to pay the monthly mortgage payment. The mortgage calculators are a great tool. It allows the home owners calculate the mortgage payment between the possible lowest and highest interest rate. Hence, the home owners evaluate the affordability.

Many home owners also are paying mortgage more than the value of the home. The market value of the home took a dive due to the economic recession. The home sales had risen. However, it comes with a price. The home values and interest rate went down too. The interest only mortgage is great if the interest rate is going down. Then, the home owner sells the home at a greater price. With the current economic condition, it is difficult to gauge the rise of home market values.

The program costs $75 billion. And, the administration intends to buy $400 billion of Fannie Mae and Freddie Mae ($200 billion each). The program tries to help about 9 million home owners to obtain an affordable mortgage. And, the program takes in effect until the end of 2012. Also, the home owners can adjust the mortgage for only once.

The program aims to lower the mortgage payment of the home owners down to thirty one percent of the gross monthly income. This applies to home owners who defaults the mortgage payments. Usually, the home owners pay monthly or bi-weekly mortgage payments.

There is also a program for home owners who pay mortgage payments without defaults on the payment. The program allows for loan modification. It allows to mortgage refinance to lower cost loans. It applies for home owners with little or without home equity too.

In order to quality, the home owner must have the following.

Acquired the mortgage before January 1, 2009.
Primary mortgage less than $729,500
Fully document income by tax returns and pay stubs
Receives counselling on household debt (credit cards, auto loans, and alimony is over fifty five percent of gross monthly income)
Sign a statement of hardship

As long as the interest rate stays above two percent, the servicers follow the detail plan to lower the total home payments to thirty eight percent. Then, the administration subsidizes the mortgage to lower the total home payments to thirty one percent.

The new interest rate of mortgage refinance stays for five years. After five years, the interest rate goes up by one percent. The rate goes up until the original rate or prevailing mortgage rate at the time of mortgage refinance.

The servicers receive $1,000 for each mortgage refinance. And, the servicers can potentially receive additional bonus if the home owners manage to keep up with the mortgage payments. Secondly, the mortgage investor get one time $1,500 for mortgage refinance of mortgage which is not delinquent yet. Finally, the home owners who keep up with the mortgage payment annually get $1,000 reduction on principal.

The program is excellent. The program benefits the servicers, mortgage investor, and home owners. In the coming weeks, the administration looks to expand the Foreclosure Prevention Program.

Types Of Energy Efficient Mortgage

2007-10-13T10:31:00.000-08:00

The EEM which stands for Energy Efficient Mortgage is a financing to make the home into an energy efficient home. Thereby, the homeowner decreases the expense to own the home. There are three types of energy efficient mortgage.

The three types of energy efficient mortgage are Conventional, Federal Housing Administration, and Veteran Administration Energy Efficient Mortgages. In Conventional Energy Efficient Mortgages, the mortgage lenders who sell mortgage to Fannie Mae and Freddie Mac offer this type of mortgage.

The estimated energy savings for the home increases the buying power of the home buyer. The amount of estimated energy savings will be added on the income of the home buyer. Using the estimated energy savings and improvements, Fannie Mae also adjusts the value of the home.

In Federal Housing Administration Energy Efficient Mortgage, the mortgage lenders can add all the additional cost of energy efficient mortgage improvements on the approved mortgage loan. Provided, the additional cost is less than or equal $4000. Or, the additional cost is less than 5 percent the value of the home or up to maximum of $8000. There is no additional down payment required.

And, the home is site-built or manufactured home. A site-built home is basically constructed on the site or location. Using stock materials, the construction workers erect, frame, and finish on location. However, some materials may be fabricated off-site.

The manufactured home is built in the factory rather than on the site. Then, the manufactured home is taken to the site. The tractor trailers usually transfer the manufactured home thru public highways. The manufactured home is less expensive than site-built home. Oftentimes, the manufactured home is associated with rural areas and trailer parks.

In Veteran Administration Energy Efficient Mortgage, the qualified military personnel, reservists, or veterans can apply for the mortgage loan. The additional cost of energy efficient improvements is between $3000 and $6000. And, the home exists already.

Energy Efficient Mortgage

2007-09-15T20:09:00.000-08:00

The Energy Efficient Mortgage (EEM) allows the borrowers to include the cost to upgrade the home to an energy efficient home. Thereby, the borrower lives comfortably and affordably in a home that uses less energy. And, we do our part to save our environment, natural resources, wildlife, habitat, and planet.

Recently, the cost on home utilities surges very high. The borrowers or consumers look to find a way to pay less on home utilities. The energy efficient home puts extra cash into the pocket of the borrower as the borrower pays less on home utilities.

Buyers are able to live in a better and comfortable home, while the energy efficient homes compensate the cost of high monthly mortgage payment. The potential buyers who are concern to be environment friendly are growing steadily. In the future, the energy saving components of the home will increase the resale value of the home.

For the Seller, the energy efficient home can sell quicker. Due to the spikes in home energy, the demand for energy efficient homes will continue to grow. Thus, the buyer can live more affordably.

The home owners can also remodel the home to upgrade to energy efficient home. So, the home owner starts to enjoy the benefits of paying less on home utilities. Another, the energy saving components is way to increase the resale value of the home.

The HERS report on a home tells how energy efficient is the home. The HERS report is abbreviation of Home Energy Rating Systems Report. The home gets between 1 and 100 points, or 1 and 5 stars. The highest possible score is 100 points or 5 stars. It is worth to consider in buying, selling, and remodeling the home.

Basically, the HERS report contains information on overall rating, recommendations, cost, annual cost, and savings. Also, the report includes the life of energy saving components.

Mortgage Cost Averaging

2007-07-21T09:42:00.000-08:00

The mortgage cost averaging was taken from the principle of dollar cost averaging. It has proven to be more effective way to earn gains from investment than lump sum investing. The same principle can be applied to mortgage.

The borrowers start the panic attack as the mortgage interest rate start to rise. If the interest rate keeps rising, the mortgage payment may be unreachable for the borrower. The borrower takes a risk for foreclosure.

The home property is a huge investment. To focus on the house as an investment takes the pain out of mortgage. The greater the risk leads to greater rewards. Hence, the principle of mortgage cost averaging helps to condition our mind to succeed.

The interest rate of the mortgage is a cycle of seven to ten years. Every seven to ten years, the interest rate reaches the peak of high or low. So, the cost of mortgage varies thru the years.

Traditionally, the dollar cost averaging relates to investment of shares, stocks, and mutual funds. Since the home property is an investment, the principle of dollar cost averaging can be applied to mortgage. The price of the home comes in a huge price tag. Often, the borrower takes a mortgage to purchase a home.

The principle of dollar cost averaging work this way. The investor buys shares, stocks, or mutual fund in a set interval like monthly, or bi-weekly. The price of shares, stocks, or mutual funds may be high or low at some point. Thus, the cost of shares, stocks, or mutual funds averages. Thereby, the investment gains faster.

The first step is to calculate a mortgage. Using the mortgage calculators, you calculate the different mortgage payment for series of interest rate. See what mortgage payment is tolerable. The interest rate of the tolerable mortgage payment tells if you are paying high or low. For example, the interest rate of six percent on 400,000 principal is tolerable for me.

If the interest rate increases so high, the mortgage payment proves to be unbearable. There are available mortgage refinancing options. Talk to your mortgage lenders for more information.

Advantages Of A Reverse Mortgage

2007-07-14T08:41:00.000-08:00

Using reverse mortgage, any sixty two years old or over can convert the home equity into cash. The mortgage lenders give the cash by lump sum payment, several payments, credit line, or combination. Here are the common advantages of reverse mortgage.

Maintain the title and ownership

The borrower keeps the title and ownership of the home. The borrower is still the owner of the home. It is still the responsibility of the borrower to pay for the insurance, maintenance, repairs, and property tax.

Continue to live in the home

The borrower can live in the home as long as the borrower likes. In case the borrower decides to sell or move, the capital gain pays off the reverse mortgage first. The rest of capital gain is for the borrower to keep.

No Mortgage Monthly Payments

In a traditional mortgage, the borrower makes monthly mortgage payments. Unlike the traditional mortgage, the borrower defers the mortgage payment in reverse mortgage. The borrower skips the mortgage payment until the borrower dies, sells, or moves. So, the reverse mortgage is easier to get. The borrower does not need to qualify for monthly mortgage payment.

Tax-free cash

The amount from reverse mortgage is tax-free. Reverse mortgage may provide extra cash, but reverse mortgage is not really an income. The reverse mortgage is a loan in advance. The borrower will repay the loan after the borrower past away, moves permanently, or sells the home.

Non-recourse loans

The mortgage lenders can only ask for repayment as much as the value of the home. If the reverse mortgage exceeds the value of the home, the mortgage lenders can only seek from the proceeds of selling the home. The borrowers get to keep the other assets like cars, boats, investments, and insurance.

Freedom to use the extra money

The amount from reverse mortgage can be used for any expense. The borrower can use the money for home repair, home improvements, travel, and medical. However, the reverse mortgage from some government agency and non-profit organization are for single purpose only. For example, the borrower can only spend to repair the home. If you want freedom and flexibility, your best bet is Federally Insured Reverse Mortgage and Proprietary Reverse Mortgage.

Reverse Mortgage FAQ

2007-07-07T11:37:00.000-08:00

The mortgage is a very scary word. The borrowers need to commit to pay off the mortgage for many years. So, there is a lot of confusion on reverse mortgage. Here are some of the questions and answers.

What is a reverse mortgage?

The senior citizens who are over sixty one years old use the reverse mortgage to get a portion of the home equity. It is tax free, because it is more like loan advance. The borrower only repays when the borrower moves, dies, or sells the home property.

How is reverse mortgage different from traditional mortgage?

The borrower uses the home equity in reverse mortgage. Thereby, the home equity of the borrower decreases. The traditional mortgage is the exact opposite. The borrowers build home equity as the borrowers pay off the mortgage.

Traditionally, the borrower qualifies for the mortgage. The financial institution checks the credit history. If the borrower qualifies, the borrower pays monthly or bi-weekly mortgage payment. In reverse mortgage, the borrower defers mortgage payment as long as the borrower lives in the home.

How much can I claim from reverse mortgage?

The total amount to claim depends on age of borrower, value of home, and interest rate of mortgage. For example, the interest rate is nine percent. If the borrower is sixty five years old, the borrower can claim twenty six percent of the home equity. If the borrower is eighty five years old, the borrower can claim fifty six percent of the home equity.

Where can I use the amount from reverse mortgage?

There are three basic reverse mortgage types. It is single purpose reverse mortgage, home equity conversion mortgage, and propriety reverse mortgage. In single purpose reverse mortgage, the borrower can only use the amount for a specific purpose such as home improvements, and property taxes. In the other reverse mortgage types, the borrower can use the amount into any expenses.

The financial institution pays the reverse mortgage in the form of lump sum payment, periodic payment, credit line, or combination.

What are the requirements for reverse mortgage?

The borrower must be sixty two years or over, live in the home, took reverse mortgage counseling, or pay off most principal. The home qualifies if the home is principal residence, single family residence, one to four units, mobile home, or FHA condominiums. If the home is more than one unit, the borrower must live in one of four units.

What are the affect on my home property?

The borrower maintains the title and ownership of the home. That means the borrower still pays the maintenance, insurance, and property taxes. After the home is sold, the capital gains pay off the amount of reverse mortgage first. If there is any remaining amount, it goes to the heirs of the home property.

Does reverse mortgage affects Social Security and Medicare benefits?

The reverse mortgage is tax free amount. It is more like loan advance. However, the amount is liquid assets. It must maintain below the maximum allowable liquid assets to get the maximum benefit from Social Security and Medicare.

Home Equity Conversion Mortgages

2007-07-01T12:46:00.001-08:00

The Home Equity Conversion Mortgages (HECM) is a type of reverse mortgage which allows seniors to convert the portion of the home equity into cash. The homeowner can stay in the home while the homeowner uses the home equity. With the cash, the homeowner can use the cash into any expenses such as medical, home improvements, and home repairs.

This reverse mortgage type is one of the three basic reverse mortgage types. It is also known as Federally Insured Reverse Mortgage. Hence, Federal Housing Administration (FHA) backs the Home Equity Conversion Mortgages. The FHA works under the US Department of Housing and Urban Development (HUD).

The banks, credit union, mortgage companies, and savings and loan companies can provide the services. FHA must approve the financial institution before the financial institution can offer this type of reverse mortgage.

There are four requirements for homeowner to quality. First, the homeowner must be sixty two years old or over. Second, the home is a principal residence of the homeowner. Third, the homeowner received reverse mortgage counseling. Fourth, the homeowner owns the home. Or, the home is almost paid off.

The reverse mortgage counseling is a free counseling from HUD. The HUD wants the homeowner to know the consequences, and benefits before the homeowner uses the reverse mortgage. For a while, the homeowner pays for the reverse mortgage counseling. Now, the HUD instructed the financial institution to deal with homeowner that dealt with free reverse mortgage counseling only.

There are five requirements for the home to qualify. First, the home is a principal residence. Second, the home can be a single family residence. Third, the home can be one to four units as long as the homeowner occupies one unit. Fourth, the home is manufactured or mobile home. Fifth, the home is FHA condominiums.

The maximum claim amount of reverse mortgage depends on the age, home value, and interest rate. For example, the interest rate is nine percent. The homeowner who is sixty five years old can use twenty six percent of home equity. The homeowner who is seventy five years old can use thirty nine percent of the home equity. The home owner who is eighty five years old can use fifty six percent of the home equity.

The homeowner receives the home equity in the form of monthly payment, credit line, lump sum payment, or combination. The home secures the reverse mortgage. The homeowner do not repay as long as the homeowner lives in the home. The homeowner still owns the home. It is still the responsibility of the homeowner to pay the repairs, maintenance, property tax, and insurance.

Reverse Mortgage Types

2007-06-23T10:18:00.000-08:00

The reverse mortgage helps the seniors over sixty two years old to use the equity of the home to supplement an existing income. Reverse mortgage is loan advance to the home without repayment unless the owner moves, dies, or sells the home.

In the United Kingdom, reverse mortgage is more common as lifetime mortgage. Hence, the owner never needs to repay as long as the owner lives in the home. The reverse mortgage lenders distribute the cash as lump sum, regular payment, credit line, or combinations.

In the United States, the basic types of reverse mortgage are single purpose reverse mortgage, federally insured reverse mortgage, and proprietary reverse mortgage. There may be more types in different countries, but the main idea is very similar.

Single Purpose Reverse Mortgage

The government agencies and non profit organizations offer this type of reverse mortgage. It is generally low costs. Although the government agencies may be local or state, the mortgage is available in a few locations only. The purpose of reverse mortgage is specific such as home repair, home improvements, and property taxes. And, the owner earns low or moderate income.

Federally Insured Reverse Mortgage

The U.S. Department of Housing and Urban Development (HUD) backs this type of reverse mortgage. This type is more commonly known as Home Equity Conversion Mortgages (HECM). The upfront costs are high especially if the owner stays in short period of time. So, this reverse mortgage is costlier than Single Purpose Reverse Mortgage.

It is the opposite of Single Purpose Reverse Mortgage in which the reverse mortgage loan can be used in any purpose. And, the mortgage are widely available anywhere. There are also no income or medical requirements.

Proprietary Reverse Mortgage

The private companies backed or owned this type of reverse mortgage. It is generally the most expensive type of reverse mortgage. However, the owner may get more than other types of reverse mortgage. Generally, it works the same way as the Federally Insured Reverse Mortgage.

Reverse Mortgage

2007-06-16T17:53:00.001-08:00

The reverse mortgage turns the equity of the home into tax free cash. Reverse mortgage is more of a loan advance. While the borrower lives in the home, the borrower does not repay the loan.

Any senior who is sixty two years or older is eligible for the reverse mortgage. The home must have some kind of equity. And, the home is the primary residence of the borrower. Depending on the mortgage lenders, the mortgage lenders may require single unit, condo, or townhouse.

Reverse mortgage differs from home equity loan. The mortgage lenders pay the borrower the lump sum, regular periodic payment, line of credit, or combination. The line of credit allows the borrower to choose how and when to get payment. The repayment of loan only happens in reverse mortgage when borrower permanently moves, dies, or sells.

Let us compare with traditional mortgage to better understand reverse mortgage. Any type of mortgage creates debt. A debt is the difference between amount own and amount owe. Traditionally, the home equity increases and debt decreases. In reverse mortgage, the home equity decreases and debt increases.

At the time of repayment, the mortgage lenders use the home to repay the loan. The home pays off the principal, interest, and closing costs of reverse mortgage. Anything extra goes to the remaining relatives. In case of deficit, the mortgage lenders make up for the deficit.

Since the borrower retains the title of home on reverse mortgage, the borrower remains the owner of the home. The borrower is responsible for the maintenance, property tax, insurance, and utilities.

The mortgage interests in reverse mortgage are not mortgage interest tax deduction. However, the borrower can claim the mortgage interest on current first and second mortgage. Even though the borrower is still paying off the first and second mortgages, the mortgage lenders can allow the borrower to go on reverse mortgage.

The borrower can owe only on how much is the home. The mortgage lenders can only go after the house to pay off the mortgage. The assets and estate of the borrower are safe from the mortgage lenders. This is more commonly known as non-recourse loan.

Advantage Of Lease Purchase

2007-06-10T11:02:00.001-08:00

Lease to own is way to purchase a home thru a lease. The buyer lease the home until the buyer decides to purchase the home. Within the lease agreement, the buyer finally purchases the home.

The buyer can choose between lease purchase or lease options. The buyer will absolutely purchase the home with lease purchase, while the buyer may decide to purchase the home with lease option. Here are list of advantages to the buyer and seller of the home.

Purchase home with bad credit history

The financial institution uses the credit score to see the ability for the buyer to afford the mortgage repayment. Any score above 660 places the buyer on good credit history. Sometimes, the debt gets a little out of hand. And, the buyer goes under bad credit score.

Lease purchase allows the buyer to catch up with the credit score. The duration of lease agreement gives the buyer time to repair bad credit rating. Usually, the lease agreement spans between one and three year. So, the buyer has one to three years to repair bad credit rating.

Locks the home price

The seller and buyer agree on the price of home. When the buyer is ready to make the purchase of the home, the buyer applies for mortgage financing with the agreed price of the home. If the home increases in value, the buyers can resale the home at a higher price.

Equity starts to grow sooner

If the buyer waits to purchase a home, the home may increase in value. The value of the home may increase in such a way that the home is unaffordable to purchase the home. As the buyer locks the home price, the buyer gains home equity right away. By the time of purchase, the home must have increase in value. Thereby, the buyer gains home equity.

Try before the actual purchase

The buyer can give the home a try. The buyer can know any defects for the home while the buyer is on a lease. If the buyer is comfortable with the location, and home, the buyer may go ahead to purchase the home.

None or little mortgage closing costs

The lease includes the lease and premium. The premium is added at the time of purchase. And, the premium is used as credit to purchase the home. The premium may be large enough to pay off the down payment and closing costs to finance the mortgage.

Costs less to maintain

The seller pays for the maintenance of the property while the buyer pays the lease. The seller pays for property tax, insurance, and repairs. After the buyer actually purchases the home, the buyer starts to pay the property tax, insurance, and repairs.

Tax deduction

The seller still owns the home while the buyer still paying the lease. The seller can claim the mortgage interest. The mortgage interest tax deduction is useful way to reduce tax each year. A big portion of the mortgage payment is mortgage interest. The mortgage interest is at the biggest at the start of mortgage. The mortgage interest gets smaller over time.

Lease Options

2007-06-03T10:09:00.001-08:00

The lease options are another form of lease to own or rent to own. The buyer can buy his way to purchase the home. Within the agreed number of lease years, the buyer has the option to purchase the home with the agreed home price.

There are two options for the buyer. That is the lease option or lease purchase. The two options are very similar. The main difference between lease option and lease purchase is that the buyer will definitely purchase the home with lease purchase.

In lease option, the buyer may decline to purchase the home within the agreed number of lease years. Usually, the number of lease years range from one to three years. There are many unforeseen events that make the buyer to decline the purchase of home.

The buyer declines to purchase the home, when the home depreciates in value. That means the agreed home price is higher than the market value. The buyer may want to finance a home with the lower home price. So, the buyer might try to find another home in a lower home price.

The buyer also declines when the interest rate significantly increases. The mortgage payment significantly increases as the mortgage interest rate increases. The mortgage payment may be too high for the buyer to afford.

The buyer also declines when the home fits another type of homeowner. To buy a home are one of the biggest decision in our lifetime. The buyer worries to commit on a large purchase in which the home fits another type of homeowner. The best thing about lease option is the buyer can try before the buyer actually purchases the home.

The seller still owns the home while the buyer leases the home. Naturally, the seller can still use the mortgage interest tax deduction. A part portion of mortgage payment is the mortgage interest which is a substantial and beneficial for the seller.

A loan amortization schedule from loan amortization mortgage calculators shows the amount of interest on each mortgage payment. The mortgage payment can be broken down into principal, and interest.

The buyer finances the home price that is agreed upon on the agreement. The purchase price remains the same as the home depreciates or appreciates in value.

The lease includes the lease and premium. The premium will be credited to purchase the home. That means the equity grows at the start of lease. In the event of decline purchase, the buyer loses the all the paid premium.

Lease To Purchase

2007-05-26T12:07:00.001-08:00

With the lease to purchase, the buyer pays the lease of the home. Within the lease agreement, the buyer purchases the home on the agreed price. Usually, the buyer purchases the home within one to three years. This financing is also called lease to own.

The buyer pays the purchase option fee of one percent to five percent. The purchase option fee will be credited to the purchase price when the buyer actually purchases the home.

On top of the lease, the buyer also pays the premium. The premium which the buyer paid will be credited to the purchase price of the home.

The buyers like the lease option very well. While the real estate market melts down, lease to purchase homes will always be in demand. The buyer needs very little security deposit or down payment.

Even though the buyer has bad credit rating, the buyer can purchase a home with lease to purchase. The lease to purchase can buy time for the buyer to repair bad credit rating. Finally, the buyer will be approved for the mortgage financing.

However, the credit bureau excludes the lease in the credit score calculation. The meaning of credit score is the ability for the buyer to pay the loans and mortgage. The financial institution uses the credit score to qualify the buyer to mortgage financing. In order to repair bad credit rating, the buyer must continue to pay off the credit card and loans.

While the buyer is on the lease, the seller gets to deduct the mortgage interest. Apparently, the mortgage interest tax deduction significantly benefits the seller. The mortgage interest is substantial portion on the mortgage payment.

The lease to purchase locks the price of the home. Thereby, the buyer can build home equity as the home appreciates in value. As the home depreciates in value, the buyer can walk away without purchasing the home. Hence, the buyer loses the purchase option fee, and premium as well.

As the buyer likes the lease to purchase, the real estate agent dislikes the lease to purchase. Because the real estate agent only gets a part of the commission at the start, the real estate agent dislikes the lease to purchase. In the time of real estate market crashes, it is better than nothing.

Many buyers like to try before they purchase. In lease to purchase, the buyer can try the home. If the home is cut to be the dream home, the buyer can complete the sale of the home.

Basically, the buyer loses a smaller amount for unwanted home. Rather than paying huge amount to purchase a home, the buyer only loses the lease, purchase option fee, and premium.

The buyer can grow the home equity faster. In a regular rent, the buyer loses one to three years to build equity. With one to three year in a lease to purchase, the home can appreciates in value. In time, the home and land will appreciate in value. The value may decrease, but it will eventually increase in value.

Private Mortgages

2007-05-19T18:39:00.000-08:00

Basing from strict lending policy, the banks and financial institutions qualify the borrower to fund the mortgage. The borrowers with good credit history will qualify for financing. When the banks and financial institutions reject the financing, the borrowers turn into private mortgages.

Instead of banks and financial institutions, the private individuals, sellers, or investors lend to the borrower for mortgage refinancing. Thus, it is called private mortgages. Sometimes, the private mortgages are also called hard money mortgages.

In the United States, the private mortgages are well known. Even though the private mortgages exist in Canada for a long time, the private mortgages are only starting to be well known.

The private mortgage lenders hold the title or deeds of the property until the borrower pays off the entire loan. If the borrower defaults on the mortgage payment, the private mortgage lenders foreclose the property for resale.

The private mortgage clauses can include balloon mortgage payment. At the maturity of the mortgage, the borrower pays the large final mortgage payment to pay off the mortgage. This is more commonly known as balloon mortgage payment.

There are many ways to tarnish the credit ratings. When the borrowers suffer from bad credit ratings, the banks and financial institutions reject the mortgage financing. Thereby, the credit ratings remain stagnant. The credit ratings stay bad for a very long time.

In a way, the private mortgages help to repair bad credit rating. The private mortgage lenders take the risk to lend to the borrower with bad credit ratings. As the borrower pays the mortgage, the borrower rebuilds the good credit rating and builds the equity.

Higher risks means higher returns. The private mortgage lenders charge higher interest rate for riskier mortgage financing. As the borrower improves the credit rating, the borrower can switch to the conventional mortgage with lower interest rate.

The private mortgages are for select type of borrower. The borrowers are facing foreclosure, defaulting mortgage payments, failing mortgage application, and needing quick close.

The borrower also needs the equity to qualify for private mortgages. The private mortgage lenders accept up to seventy percent loan to value ratio. For example, the home is appraised for $350,000. The private mortgage lenders can lend up to $245,000 ($350,000 x 70%).

Hard Money Mortgages

2007-05-12T11:42:00.001-08:00

The hard money mortgages are mortgage refinancing at a higher interest rate which is offered to borrowers with bad credit history. Using the property as collateral, the borrowers with bad credit history try to get mortgage refinancing on fifty to seventy percent of the market value. Hence, the hard money lenders require equity on the property.

The hard money mortgages started in the 1950s. The term of hard money mortgages are more common in United States and Canada. After the mortgage lenders suffered the meltdown of hard money mortgages on early 1980s and 1990s, the mortgage lenders lowered the loan to value ratio. The financing of property that exceeded the market value was to blame for the meltdown.

Banks or financial institutions would normally reject the financing on extreme case of bad credit history. At the beginning, the borrowers seek the mortgage refinancing on conventional mortgage refinancing. After the borrowers exhaust all possible mortgage refinancing options, the borrowers seeks the hard money mortgage refinancing as the last resort.

The hard money lenders are typically the investors group, trust, or private individuals. Unlike banks or financial institutions, the hard money lenders will take on the risks. In return, the borrowers pay between ten to nineteen interest rates. When the borrower defaults on mortgage payment, the hard money lenders charge between twenty and twenty nine percent. The annual percentage rate would normally ranges between nineteen and twenty eight percent.

The points always exist on hard money mortgages. It is normal to see four to ten points. In return, the borrower prevents the quick sale or foreclosure of the property.

The hard money lenders accept from fifty to seventy percent of loan to value ratio (LVR). For example, the home property has a market value of $300,000. The hard money lenders can lend as much as $210,000 ($300,000 x 70%).

The equity on property must have appreciated for years. The borrowers gain equity on property as the borrowers pays off the mortgage, fixes up the property, and adds capital improvement.

How To Get A Mortgage For Investment

2007-05-05T20:41:00.000-08:00

Investors can structure the mortgage in such a way to be a great investment. The human mind seems to keep on finding newer ways to make a significant profit. Here are common ways to get a mortgage for investment.

Mortgage-backed Security

The investors pool all their money together. The investors use the pool of money to lend to the borrowers. Meanwhile, the investors earn the interest from the pool of money. This is more commonly known as mortgage-backed security.

Interest Only Mortgage

In interest only mortgage, the investors pays only the interest for the specified duration. Since the investors pay only the interest, the mortgage that the investors own stays the same. The investors patiently wait for the property to appreciate in value. When the property appreciates in value, the investors sell the property with the market price. Thereby, the investors earn a capital gain.

Buy To Let Mortgages

The investors can acquire several properties thru buy to let mortgages. With the property, the investors find tenants who want to rent. As the tenants pay rent each time, the investors uses the rent to pay off the mortgage and build home equity. When the property appreciates in value, the investors earn capital gain. If the property fails to appreciate in value, the investors can still successfully build home equity. Thereby, the investors can still earn capital gain.

Discounted Investment Mortgage

The investors can purchase an existing mortgage on a discount. Thereby, the investors earn a profit on the difference. An existing mortgage is a mortgage in which the borrower is already paying off the mortgage. For example, the total mortgage comes to $100,000. The investors purchase the mortgage for $90,000. As a result, the investors earn $10,000.

Private Mortgages

Oftentimes, the investors are looking for property at a bargain price. The investors will take a mortgage to acquire the property. If the property needs some fixing, the investors will fix up the property to drive the price higher. Finally, the investors sell the property at a higher price. This is more commonly known as flipping.

Hard Money Mortgages

The investors are private individuals who lend to borrowers with bad credit rating. Most of the times, the borrowers with bad credit rating can only be approved on a mortgage at a higher interest rate.

Buy To Let Mortgage Refinancing

2007-04-28T19:01:00.001-08:00

The buy to let mortgage allows the borrower to purchase a property. Then, the property can be rented to the tenant. The tenant pays the rent in which the borrower uses to pay the mortgage payment.

The borrower benefits from buy to let mortgages by creating the home equity. As long as there are tenants, the borrowers never need to use their own money to pay the mortgage payment. Eventually, the borrower can sell the property at a higher price.

The mortgage lenders may approve many types of buy to let mortgage refinancing. That includes fixed rate, variable rate, capped mortgage, discounted mortgage, cashback mortgage, and interest only mortgage.

In a fixed rate mortgage, the borrower pays the same interest rate on all the payments. So, the borrower pays the same mortgage payment on each payment period. This is conventional way to finance a property.

In a variable rate mortgage, the borrower pays the current interest rate. The interest rate fluctuates from time to time. As the interest rate increases, the borrower pays less on the principal. As the interest rate decreases, the borrower pays more on the principal.

In a capped mortgage, the borrower pays the current interest rate up to the maximum interest rate. The mortgage lenders set the maximum interest rate that the borrower pays. If the current interest rate went past the maximum interest rate, the borrower will only pay the maximum interest rate. If the current interest rate went below the maximum interest rate, the borrower pays a lower interest rate.

In a discounted mortgage, the borrower pays less interest rate than the current interest rate. For example, the current interest rate is five percent. The mortgage lenders charge one percent below the current interest rate which is four percent.

In a cashback mortgage, the borrower gets a certain percentage from the mortgage. For example, the mortgage lender gives three percent cashback on a $100,000 mortgage. So, the borrower gets $3,000 (3% x $100,000).

In an interest only mortgage, the borrower only pays the interest rate up to the end of mortgage term. So, the borrower does not pay off the mortgage. At the end of the mortgage term, the borrower pays the normal amount of mortgage payment.

What Is An Offset Mortgage

2007-04-21T19:23:00.000-08:00

The offset mortgage is a type of mortgage in which the borrower can use their savings account to offset the mortgage interest. The mortgage interests are substantial amount especially at the start of the mortgage.

Using the interest on savings account, the borrower uses pay off the mortgage interest. In other words, the interest on savings account cancels out the mortgage interest that the borrower pays on a conventional mortgage.

The offset mortgage originally started from Australia. Later, the offset mortgage rises in popularity in the United Kingdom. Before, the mortgage lenders only target the wealthy. Now, the mortgage lenders are widening the market for this type of mortgage.

Since the borrower receives no the interest on savings account, the borrower do not pay the tax on interest on savings account. Naturally, the interest on savings account will be use to pay off the mortgage interest. In United Kingdom, many borrowers are on a high tax bracket. The borrower often sees the forty percent of the interest goes to tax.

In many times, the borrower pays a loan to value ratio of ninety five percent. That means the borrower pays five percent as down payment. Due to competition, many mortgage lenders may offer as low as loan to value ratio of eighty percent.

The interest on savings account is big enough that many mortgage lenders may offer to repay any amount without mortgage penalty. In a conventional mortgage, the borrower pays mortgage penalties on any repayment over the maximum limit to repay the mortgage early.

Usually, the mortgage lenders link the mortgage and savings account into a single account. Therefore, the borrower sees only one balance. This is more commonly known as Common Account Mortgage (CAM). For example, the borrower takes $300,000 mortgage. The borrower uses the savings account that is worth $100,000 to offset the mortgage interest. In return, the borrower only pays interest on $200,000.

The variation of offset mortgage is increasing in numbers due to compete with other mortgage lenders. For example, the mortgage lenders may allow any debts into the account. In short, the borrower can include the personal debt like credit card, and car loan.

Discounted Mortgage

2007-04-14T16:08:00.001-08:00

In a discounted mortgage, the borrower pays lower interest rate in a set number of periods. So, the borrower pays lower mortgage payment until the number of period expires. After the set number of periods, the mortgage reverts back to the regular interest rate.

The discounted mortgage may be fixed or variable interest rate. For example, mortgage lenders offer one percent off the regular interest rate. And, the borrower pays lower mortgage payment with one percent off the regular interest rate. In a variable rate, the interest rate may deep lower. Hence, the mortgage payment deeps lower as well.

For the first time home buyer, the discounted mortgage may be an excellent idea. The initial expenses for the first home may be overwhelming. As a first time home buyer, the home buyer may need to furnish, repair, or renovate some parts of the home. And, the home buyer pays the mortgage financing closing costs. If the home buyer lives far away to the new home, the home buyer pays the moving expenses as well.

The closing costs on mortgage are fees to process the mortgage refinancing or financing. For example, the escrow fee, underwriter, document preparation, origination fee, appraisal, administrative fee, processing fee, wire transfer, mortgage broker fee, tax service fee, and flood certification are closing costs.

Since the borrowers pay lower mortgage payment, the borrowers can use the extra cash as they please. For example, they can renovate the kitchen, repair the bathrooms, or convert the garage to extra room. The renovations may actually help to increase the value of the home.

The mortgage lenders are constantly stream lining the mortgage application procedures to reduce the closing costs. At the same time, the mortgage application procedures improve the efficiency and simplicity of the whole procedures. In fact, the borrower can apply for pre-approval without extra costs, apply for discounted mortgage by phone, or apply for discounted mortgage by internet.

The borrowers may be allowed to pay lump sum to pay off the mortgage early without penalty. Penalty is a fee that is charge to the borrower for paying the mortgage too quickly. However, the mortgage lenders will charge penalty when the borrower pays off the total mortgage or switches to another mortgage financing.

What Is Capped Mortgage

2007-04-07T14:40:00.001-08:00

The capped mortgage is basically an adjustable rate mortgage in which the maximum interest rate is set. Any spike of interest rate over the maximum interest rate will not affect the mortgage repayment. The borrower knows the maximum mortgage payment.

When the interest rate takes a dive, the borrower pays a lower monthly mortgage payment or bi-weekly mortgage payment. Using the capped mortgage, the borrower is protected from a spike in interest rate.

This protection on interest rate spike comes with a price. The mortgage lenders will charge a slightly higher interest rate. For example, the current interest rate is 4.5%. The borrower pays 5.0% interest rate.

The main benefit of capped mortgage is peace of mind. The borrower knows exactly how much is the highest mortgage payment. And, the borrower knows that the mortgage payment will not exceed the maximum mortgage payment.

Recently, the mortgage lenders suffered from mortgage meltdown. The interest rate went up high enough that the borrower could not repay the mortgage. There were so many foreclosures. In this instance, the capped mortgage could have been advantageous for the borrower.

The interest rate for capped mortgage is a compromise between the fixed rate and adjustable rate. So, the interest rate will be slightly over the fixed rate.

Annually, the mortgage lenders allow a certain level to pay additional or lump sum amount without paying mortgage penalty. When the borrower pays additional amount or lump sum amount over the certain level to pay off mortgage early, the mortgage lenders charge the mortgage penalty as well.

In most mortgage lenders, the capped mortgage is available mortgage options for buy to let mortgages. The buy to let mortgage is a mortgage in which the borrower purchase the property to rent. The borrower can purchase several property with buy to let mortgages.

Buy To Let Mortgages

2007-03-31T17:03:00.000-08:00

The buy to let mortgages are type of investment mortgages in which the borrower lets the property for rent or lease. The rental income covers the entire mortgage payment. The only time the investors pay from their pocket is when the tenant leaves the property.

The investors enjoy profitable return in two ways. First, the rental income pays off the mortgage. Thus, the investors create home equity. Secondly, the home values may appreciate in value. Again, the investors create home equity. Using the home values appreciation, the investor sells the home property at a higher price.

The risk factors for investor are the depreciation, rental void and maintenance. There are no guarantees for home appreciation, but we can not create land. Land is a limited resource. Eventually, the land will increase in value.

When the tenant leaves or moves from the rental property, the investors repay the mortgage payment. This is more commonly known as rental voids. The mortgage lenders will insist on rental income to cover 125% of the mortgage payment to protect from rental void, but many mortgage lenders accept a 100% cover on mortgage payment.

Hopefully, the tenant will take care of the property. Since the tenants do not own the property, the tenants have the tendency to take the property for granted. Then, there is the natural wear and tear of the property.

In most cases, the mortgage lenders will ask for a larger down payment or deposit. The larger down payment will ensure the rental income to cover the entire mortgage payment. Often, the investors will be approved for eighty percent of the property value. And, the borrower needs twenty to twenty five percent mortgage down payment. In some buy to let mortgage deals, the borrower can put five, ten, or fifteen mortgage down payment.

The mortgage lenders may also insists on mortgage insurance. The insurance will protect the investors from loss of income to repay the mortgage. The loss of income comes from death, critical illnesses, or disability.

The investors pay higher interest rate on buy to let mortgage due to the risks. Even though the mortgage financing are risky, the investors can still find mortgage deals in which the investors pay less interest rate on mortgage deals.

On buy to let mortgage, the mortgage lenders may approve one or more properties. Usually, they approves maximum of five properties for buy to let mortgage. Just think all the tenants left at the same time. The investors will need to repay all the mortgage payment for all buy to let properties.

Before the mortgage lenders approve the mortgage refinancing, the mortgage lenders will look at rent potential of the property, income of the investors, outstanding loans of the investors, and attractiveness to the tenants. The income and rent must satisfy the mortgage repayments. And, the property looks good for the potential tenants. The tenants will want to live in the property.

The popular mortgage refinancing which is available to the investors are fixed rate, capped, discounted, and variable rate mortgage as well as cashback mortgage and interest only mortgage.

Surviving The Mortgage Meltdown

2007-03-25T11:00:00.000-08:00

The housing market has severely weakened. There are many subprime mortgage lenders who are going out of business. To survive, some mortgage lenders lay off employees, cut down on business expenses, and closed down several mortgage centers. Unfortunately, many subprime lenders did not act fast enough.

Last year, the subprime mortgage loans accounted for twenty percent of the mortgage market. When the home prices were high, the mortgage lenders entice the borrowers with exotic mortgage like interest only mortgage, easy mortgage loan application, low introductory interest rate, piggyback second mortgage, and adjustable rate mortgage.

The subprime mortgage lenders had put the borrowers in a bigger house than the borrowers can afford. Interest rate goes high enough to cause panic, because the mortgage payments get higher as well. Suddenly, the borrowers were not able to afford to pay off the mortgage. Here are a few things to survive the mortgage meltdown.

Stay on top of the mortgage interest rate

At the end of the introductory low interest rate period, the interest rate will increase. It is important to be realistic on your financial status. In case of higher interest rate, the income of the borrower must be enough to cover the mortgage payment. At the same time, the borrower will be ready for the higher mortgage payment.

Watch closely on the trend of interest rate

Especially, the borrower uses an exotic mortgage like adjustable rate mortgage. Many borrowers do not fully understand how the adjustable rate mortgage works. With the adjustable rate mortgage, it is possible for negative amortization. Negative amortization happens when the mortgage payment does not cover the interest. Thereby, the mortgage payment does not pay off the mortgage.

Know the different mortgage refinancing options

The mortgage refinancing is a way to switch to another mortgage. Usually, the borrower switches on the drop of interest rate or at the end of the mortgage term. There are many mortgage refinancing options. The mortgage brokers will be able to direct the borrower for the best option. A drop of interest rate happens all the time. So, the borrower might be able to take advantage of the drop of interest rate.

Set aside funds for the emergency fund

It is a good idea for the borrower to set an emergency fund. The emergency fund is a set of funds for living expenses in case of loss of income. The general rule is three to six months of emergency fund. The idea is to buy time to get back on the good foot.

Consider to rent out for extra source of income

If there is an extra room, the borrower can rent out the extra room for extra source of income. The rent income may be able to cover the spike on mortgage payment. For example, some homeowners convert the garage into an extra accommodation. That would be perfect to rent out. Since the homeowners increase the ability for the property to create income, the home value appreciates as well.

Cover the loss of income with mortgage insurance

The loss of income is one of the reasons to miss the mortgage payments. The accidents, illnesses, or deaths cause loss of income on the family. It may be a stretch to repay the mortgage. The mortgage insurance will protect the family in case of accidents, illnesses, or deaths.

Realistic personal budget

The borrowers know their personal worth. Like anybody, the borrowers have several financial obligations. Discipline is the key to get back on the right foot. The borrower may be able to cut off unnecessary expenses. Then, the borrower will set a realistic personal budget to satisfy the financial obligations.

Mortgage Meltdown

2007-03-18T00:05:00.001-08:00

For the promise of a low monthly mortgage payment, the Americans snapped the expensive real estates. Now, the foreclosures of the real estate property are on the rise. It is due to several factors.

During the hot real estate market (2000 - 2005), the Americans enjoy a low monthly mortgage payment and low mortgage interest rate. Looking at the monthly mortgage payment alone, they snap expensive real estates. Recently, the interest rate increased in a steady state. Thereby, the mortgage payments went too high to handle.

Many homeowners have no choice. They have to sell their home. Eventually, the homes for sale flood the home market. There are too many homes that are not selling. It means the demand is low. Using the law of supply and demand, the homeowners see the home prices go down. So, they have to sell at a lower price too.

Also, the mortgage delinquents for subprime mortgage have risen. Although the subprime mortgage is a small portion about one fifth of the home market, the subprime mortgage proliferated during the hot real estate market. The mortgage delinquents for subprime mortgage are big enough to make an impact. Today, there are $1.3 trillion subprime mortgage which is outstanding.

At that time, the mortgage underwriter standards are relaxed on credit. The Americans enjoyed an easy access to easy credit. Now, the mortgage underwriter standards have tightened. It is hard to get a credit now. By the way, the mortgage underwriter is the one who basically approves or rejects the mortgage application.

The subprime mortgage loans are a mortgage in which the subprime mortgage lenders lend a mortgage to borrower with bad credit score. The FICO credit score ranges from 300 to 850. With a score below 620, the mortgage lenders consider the mortgage as subprime mortgage.

Since the mortgage market melts down, many subprime mortgage lenders went bankrupt. That is why the investors are staying away from subprime mortgage lenders.

Lastly, the home values and homeowner wages remained stable. If the home values appreciate, the home values offset the higher mortgage payment. Unfortunately, the supply is plenty and the demand is low.

Mostly, the foreclosures of home are in the low income neighborhood too. The income of the homeowners fails to increase as much as the higher mortgage payment. It is a stretch to repay mortgage payment.

Mortgage Underwriter

2007-03-10T15:35:00.000-08:00

The mortgage underwriter understands the mortgage loan qualification, approval, and pre-approval. He makes the decision if the borrower qualifies for the mortgage. If the mortgage application fails to meet the qualification level, he determines the best mortgage loan options for the borrower.

To qualify for the mortgage, the mortgage underwriter basically looks at the credit history, credit score, down payment, equity, income, and outstanding loan. So, he also understands how to repair bad credit rating, and increase the credit score.

The credit history tells how the borrower pays off loan obligation. As you pay off the mortgage, the Credit Score increases. A high score is a positive indicator. The borrower will possibly be approved for the mortgage.

The income and debt ratio helps the mortgage underwriter prove that the income is enough to cover the mortgage, and outstanding loan. To prove, the mortgage underwriter verifies all the different source of income.

First, the loan officer prepares the necessary documents for the mortgage application. Then, the loan officer enters the personal and credit information into the underwriting system. The system checks the qualification of the information. Eventually, the loan officer gets the qualified application. Then, the loan officer sends the qualified application to the mortgage underwriter. The mortgage underwriter verifies the documents including pay stubs, and bank statements. If there are missing documents and unsatisfactory documents, the mortgage underwriter asks the borrower to provide the documents. This makes sure that the borrower has enough income to pay off the mortgage. Finally, the mortgage underwriter gives the final approval.

All these steps ensure that there is absence of fraud, and meets the standards. So, the mortgage underwriter knows the good and bad practice on mortgage application. The standards are set by the company and government.

What Is Murabaha Financing

2007-03-04T10:05:00.001-08:00

The Islamic Sharia Law prohibits the payment of interest. To use a mortgage is the most common form to purchase a home for many countries. On a conventional mortgage, the borrower needs to pay interest. So, the devoted Muslim avoids to purchasing a home.

A few years ago, only the very rich can really afford to purchase a home. Now, mainstream financial institutions are changing to accommodate the Muslim devotees. Financial products are created. So, the Muslims are able to purchase a home.

As many countries lack the knowledge and language of Quran (Islamic bible), the Muslim scholars is needed to review the financial products. This is to make sure that the financial products are halal (permissible). The Muslim scholars also look at the money that is use by financial institution. The money must come from permissible sources.

There are more and more Muslims that is living on a country with different predominantly religion. Naturally, the financial institutions are seeing the need to tap the Muslim market. It is believe to be worth in billions.

The Murabaha and Ijara are the two mortgage refinancing options that meet the Islamic Sharia Law. In English, the Murabaha means deferred sale finance. As for Ijara, it means lease to own in English.

In Murabaha, the borrower pays twenty percent as down payment. So, the borrower needs a substantial amount of capital in this option. First, the borrower shops for a home like the conventional mortgage. Next, the borrower pays the twenty percent down payment. Then, the financial institution purchases the home for the borrower. In return, the financial institution sells the home to borrower on a higher price. The higher price is determined by original price, repayment period, and down payment. Finally, the borrower agrees on the repayment amount and term agreement.

In Ijara, the borrower looks for a suitable home. After he found a suitable home, the borrower negotiates the price to the home owner. When the price is settled, the financial institution purchases the home to gain ownership. Then, the borrower agrees to the lease agreement. On top of the lease, the borrower pays additional to pay off the mortgage.

In any case, the borrower can pay off the mortgage without penalties. In reality, the Murabaha and Ijara are more expensive than the conventional mortgage. However, the Muslim devotees feel at ease. They rather pay more as long as it is permitted to their religion.

Technically, the home is sold two times. First, the financial institution purchases the home. Then, the borrower purchases the home from financial institution. So, the borrower pays the mortgage refinancing closing costs two times. Recently, the mainstream financial institution charges only one closing costs for equality.

Muslim communities in many countries are growing steadily. It is a dream to purchase a home someday. Nevertheless, there will be a few obstacles that will get in the way. It is just natural. Many devotees will feel guilty to take part that violates their religion. So, it is okay to pay extra. There are no complains. At first, many devotees think that conventional mortgage is the only way to proceed. Times are changing. Mainstream financial institutions bends toward their need and religion.

Mortgage Disability And Critical Illness Insurance

2007-02-26T23:29:00.000-08:00

Mortgage Insurance protects us from our mortgage obligation. Due to medical advancement, we are living longer than ever. As a borrower, you may opt to cover disability and critical illness too.

We can acquire assets and wealth thru our ability to earn an income. With sufficient income, we can afford to finance or purchase an asset like a car, house, and boat. When critical illness hit us, the critical illness disrupts our ability to earn an income. Therefore, the bills build up high. And, we are unable to pay off the mortgage or loan.

Mortgage Life Insurance only protects us in the event of death. With all the medical advancement, we are more likely to beat the odds. This is when the disability and critical illness comes into play. Any borrower can opt to add disability and critical illness coverage on mortgage life insurance with a slightly additional cost.

The mortgage disability insurance pays a benefit up to the benefit term. The borrower can decide how long to cover in the event of disability. The average of disability usually lasts an average of three years. Nevertheless, the borrower can decide to cover between two years or to age 65 years old.

The mortgage critical illness insurance pays a lump sum in the event of critical illness. The lump sum can be used at anything like take an early retirement, pay off the mortgage, pay off any expenses, settle the medical bills, or supplement the lost income.

The disability and critical illness insurance usually covers the borrower from heart attack cancer, paralysis, multiple sclerosis, organ transplant, coma, loss of speech, stoke, severe burns, blindness, and loss of limbs. There may be more. Consult your mortgage insurance agent.

This type of insurance coverage started in the eighties by a heart surgeon. The patient who is not fully recovered from critical illness or surgery tries to regain the ability to earn an income. After critical illness or surgery, the patient may not be ready to go back to the work force. The patient needs as much rest until the patient is fully recovered.