Mortgage Tips and Resources

Unfortunately scamers and con artists are everywhere.  If you’re facing the possibility of foreclosure and are trying to find a stop foreclosure program, please watch the following video so you can look out for and avoid some all too common foreclosure scams.

NY senator: Bailout should include mortgage help
“New York Sen. Hillary Rodham Clinton offered her own to-do list Monday for the financial crisis, saying the government has to alter the terms of millions of now-shaky mortgages.

Clinton offered her goals after a private meeting with Timothy Geithner, president of the New York Federal Reserve Bank. She said the Bush administration’s proposed $700 billion bailout package ignores the key part of the economy where the troubles began: bad mortgages. ” AP, silive.com Keep Reading >>

Blame Fannie Mae and Congree For the Credit Mess
“Many monumental errors and misjudgments contributed to the acute financial turmoil in which we now find ourselves. Nevertheless, the vast accumulation of toxic mortgage debt that poisoned the global financial system was driven by the aggressive buying of subprime and Alt-A mortgages, and mortgage-backed securities, by Fannie Mae and Freddie Mac. The poor choices of these two government-sponsored enterprises (GSEs) — and their sponsors in Washington — are largely to blame for our current mess.” Wall Street Journal Keep Reading >>

U.S. Mortgage rates unchanged on Monday
“The average rate on a 30-year U.S. mortgage with no upfront points was unchanged on Monday at 6 percent, according to BestInfo Inc.

If the mortgage market on Tuesday continues in its current direction, rates may rise.  The 30-year mortgage rate with one upfront point was unchanged at 5-3/4 percent.” Reuters Keep Reading >>

Two of the most common choices you’ll find in the mortgage market are variable rate mortgages and fixed rate mortgages. Fixed rate mortgages are the most traditional type of home mortgage, offering a fixed interest rate that does not change throughout the life of your mortgage term.

There are a number of important advantages associated with this type of mortgage. First, if you are budget conscious, this type of mortgage will give you the peace of mind in knowing that your monthly mortgage amount will not change. You can budget the remainder of your financial obligations without worrying about a changing mortgage payment to throw things off.

A variable rate mortgage works differently. With this type of mortgage you may be able to obtain a lower interest rate than would normally be available with a fixed rate mortgage; however, the interest rate is not fixed. This means that your monthly mortgage rate may change as interest rates change. With such a mortgage you may not be able to regularly plan your budget due to such fluctuations.

While there is usually a cap that will keep the interest rate from fluctuating too much, even a little fluctuation can be too much for some homeowners. Of course, there is also the possibility that interest rates will drop and if that is the case, because your mortgage is variable, your monthly payments will drop right along with the interest rate.

When deciding whether a fixed rate or variable rate mortgage is your best choice, you need to give thought to several factors. Ask yourself whether it is more important to be able to plan your monthly budget without wondering whether your mortgage will fluctuate or whether you would prefer to receive a lower interest rate in the beginning of your mortgage.

Remember that if you decide you would like to obtain the advantages of both you do have other options available to you. For example, you can opt for a variable rate mortgage with a cap set – so when rates go lower your own payments fall…but the rate can never rise beyond the cap that is set, no matter how high interest rates may soar in the wider economy.

If you do elect to go with a variable rate mortgage make sure you understand exactly how high the rates may go as well as ensure you have enough ‘wiggle’ room in your monthly budget to cushion increases if they occur. This may help to keep you out of a tight spot and possibly losing your home due to rising interest rates.

First time home buyers are especially vulnerable to taking out unsuitable or expensive mortgages – simply because they haven’t the experience to know any better. This can lead to years of higher than required payments or penalties.  Sso if you’re just taking your first steps onto the property ladder it’s worth looking around and comparing the many different types of mortgage deals and lenders. It could save you thousands in the long run.

Remember that the mortgage industry is highly competitive, so lenders are fighting each other off with sticks to get your business. It’s a good position to be in, so you can probably find a very good deal that’s perfect for you when you shop around a little.

You’ll also find that quite a few lenders actually target first time buyers – this means they will offer you a special deal, possibly for the first year or two of your term if you take your first mortgage out with them. It’s certainly worth trying to shortlist mortgage deals that have special offers for first time buyers so you can compare them to the rest.

Here are a few things that first time buyers may wish to consider before taking out their first mortgage:

1.    Take heed of circumstances. Will a fixed or variable rate be best for you? Will you suffer if the rate moves up to the point where you may not be able to cope with repayments?

2.    How much do you need to borrow? What level of deposit can you come up with? 100% mortgages are available but many times require a mortgage indemnity guarantee (an insurance policy that lenders will try and force first time buyers into signing if they have zero or a low deposit).

3.    Collect as much information about special first time buyer mortgages to see if you can get a special rate that may be unavailable to non-first time buyers.

4.    Remember that if you choose to leave the mortgage before it’s term runs out you may be subject to redemption penalties – this can be about 5% of the loan value when you leave early so read the fine print carefully.

Ultimately, your first home purchase is a huge step – and getting the best mortgage available is very important part of the process.

So when you’re repaying your mortgage should you rush to pay it early or take your time?  Let’s think about it…

For years, banks and financial advisors have been recommending that you pay extra cash into your mortgage, to cut down the huge interest amount and reduce the period over which you pay back the loan.

For example, if you borrow $200,000 over 30 years at a rate of 5%, your monthly repayments would be around $1,074. Over 30 years, you would actually pay 1074 x 360 (months), which is $386,640.  That’s $186,640 in interest!

If you could find an extra $246 a month, and pay $1,320 a month into the mortgage, you’d cut 10 years off the repayment period the loan would be fully paid in only 20 years. Moreover, your total payments would be $316,664, saving $69,756!

The flaw in this technique is that it ignores the time value of money.

Everyone knows that money is worth less now than it was when they were younger. If you take that $1,074 mortgage repayment, for instance, in 30 years time, when the last payment is due, it would only be worth $437 in today’s money.

A dollar now is always better than a dollar in a year’s time, or in 10 year’s time.

How does the time value of money affect our example?

You cannot simply subtract the mortgage interest amount for a 20 year mortgage from the interest on a 30 year mortgage. What you need to do is calculate the Present Value of each mortgage.

The Present Value of a 30 year mortgage with repayments of $1,074 at a 5% interest rate is $200,066.

The Present Value of a 20 year mortgage with repayments of $1,320 at a 5 interest rate is $200,066.

The two repayment schemes are exactly equal.

The $69,756 ’saving’ in the interest rate is really just the effect of adding the extra $246 a month into the repayments - in fact, that $246 a month adds up to $59,040 over 20 years.

What if you took that $246 a month and invested it in, for example, mutual funds?

If you could get a return of 10 p.a., after 20 years you would have $186,804. With inflation at 3, that would be worth $102,597 in today’s money.

Why would the banks recommend that you pay off your mortgage quickly? Surely the longer the income stream lasts, the better?

The banks love being able to prove that their recommendations will ’save you money’. But in reality, the banks do understand the time value of money. They know the true value of that extra $246 a month that you’re giving them now, not in the future. And the shorter the time you take to repay the mortgage, the lower their risk, and the sooner their money comes back to them to be loaned out again.

There are some arguments for paying your mortgage back quickly for one thing, the quicker you pay, the quicker your equity grows. But you should understand that every dollar you give the bank now is a dollar that you can’t invest.

Giving your money to the bank to avoid paying 5% interest means that you can’t use that money to earn 10 or 12 or 15 somewhere else.

“The Wall Street Journal continues to be a great resource for Baby Boomers with it’s Encore section of the paper.  Encore is targeted at the 50+ crowd and covers a range of different topics from finance to travel and many others.  The weekend edition of the Ask Encore section features a question from a senior in San Diego who wants to know if the mortgage problems on the news could affect her reverse mortgage?” ~ Reverse Mortgage Daily

Keep reading >>

Mortgage brokers are professionals who play an important role in mediating between a lender and a borrower. Brokers collect personal information about the client for the lender including employment and medical history. They also provide the clients’ financial and credit information to the lender.

What Mortgage Brokers Do

Mortgage brokers guide customers through the process of selecting a suitable mortgage package with competitive package offers. They also offer financial advice on mortgage and property. Their job is to find a mortgage package that meets the borrower’s needs, and to help the client process and complete their mortgage application form. In the United States, mortgage brokers negotiate over 80% of home loans issued. Banks go through brokers to effectively outsource the job of finding and qualifying borrowers.

Mortgage Insurance Brokers

Most people take out insurance on their homes. Insurance brokers source contracts of insurance on behalf of their customers. An insurance broker will help you to choose the best to fit your specific needs – important as there are many different levels of insurance coverage.

You should always remember though, while brokers are supposed to help you find the best deal for you – they work largely on commissions, and so many try and push the deals that suit them the best. If you’re armed with a solid foundation of knowledge about mortgages you’ll be able to identify a rogue broker very quickly.

All in all, a good mortgage broker really can help to secure a very good mortgage deal for you and it’s worth finding one if only to talk to.

How To Spot Potentially Bad Brokers/Lenders

In any multi-billion dollar industry there are sharks looking to prey on the uninformed and innocent. The mortgage niche can be very confusing to some consumers and this is why some sharks enter the market to make easy gains on trusting people.

Despite increasing mortgage regulations in most countries you still need to be on your guard. Your mortgage could be the biggest expense of your life so make sure you’ve researched everything thoroughly before signing on the dotted line.

Here are a few tips to help you determine whether the company you are dealing with is legitimate:

1. Beware if the lender doesn’t give you a good faith estimate of what the closing cost will be. Under The Real Estates Settlement Act, a mortgage broker must provide you with this information within three days once you have applied for a loan. An honest lender will give this to you without a problem, as there is nothing to hide. Some of the better brokers will even give you a good faith estimate on your pre–qualifying information. Also, watch out for any company that won’t give you information up front, such as interest rate and other fees.

2. Beware if the lender says it is ok for you to lie about any information, especially about your income, to increase your chances of approval. Any sort of lying on any loan form is classified as fraud and is a criminal act. If a broker is encouraging you to do such a thing, use your common sense. If the broker gives you the leeway to do it, then they will probably have no problem committing fraudulent acts upon you. Of course, there are exceptions to the rule. Just make sure to ask about this should the situation arise.

3. Beware of interest rates that are amazingly low or incredibly high. Low interest rates can be very tempting, especially when they beat everyone else by two or three percent. You may think that this will save you money, but in the long run, it will only cost you more, since most loans with significantly lower interest rates tend to increase dramatically throughout the lifetime of the loan. People with a less than perfect credit rating usually fall victim to high interest rates that range anywhere between two and three percent higher than everyone else. There are many places online that offer to check interest rates against your credit and can give you an accurate estimate of how much you should be paying. Make sure you are doing your homework.

4. Proceed with caution if you feel pressured into applying for a mortgage loan that you don’t understand or can’t financially afford. If you do feel unsure of anything with the loan, ask your broker to explain it to you in detail, or go to someone else who you know can trust. If you are being pressured to go with a certain company for a loan, proceed with caution. Never take a loan because you feel like you are being forced into it.

When searching for a mortgage, make sure the contract does not differ from the original contract.

Companies that ask for more signers, credit insurance, or prepayment penalty fees are probably looking for ways to make money off of you, and quite honestly, don’t have your best interest in mind. In this case, you should take your business elsewhere.

Here’s some of your borrowing options when getting a mortgage…

Very few people are able to purchase a home without taking out a mortgage. first time homeowners may not know exactly where to go to get one, and with the huge amount of competition in the marketplace the many available lenders and mortgage types can get very confusing. The good news is that there is a lot of information widely available, both on the internet and off.

The first place that you are likely to approach, when looking for a mortgage, is a bank or building society that offers mortgages. These are often referred to as mortgage lenders. Mortgage lenders focus mostly on home loans. Here are a couple of pointers to get the ball rolling RE your mortgage:

1.    Write down your circumstances – are you in business for yourself or employed as a worker? This may affect the type of mortgage you need to take out.

2.    Learn about the different types of mortgages that are available and consider which appeals most to you. Your mortgage advisor can help advise further but it helps if you know the basics.

3.    Pick a few reliable, well known lenders to arrange an appointment with. You’ll find details of some reliable mortgage lenders here.

To start, it’s advised that you schedule a consultation appointment or at least speak over the phone with a couple of mortgage lenders. Most mortgage lenders have branches near you and you can usually pop in and arrange for an appointment. In fact this is recommended as if you develop a good relationship with your manager, it can help later on should any issues arise.

When speaking to or meeting with a mortgage lender, you will need to discuss a number of important things. If you are only looking for information, you will want to discuss your past credit and your current financial situation. This will give a mortgage lender the ability to give you an estimate as to how much money you may be approved for. If you are looking for a low-cost mortgage, you will also want to familiarize yourself with the financial lender’s policy on down payments and interest rates.

Next, after seeing a few potential lenders, examine your lending options more closely. You should compare the interest rates, loan amount, and down-payments of multiple banks and financial lenders. Also make a note of any penalties and restrictions that are attached to any mortgage deals the lenders have showcased. The goal of most potential homeowners is to own a home, but save money at the same time. To save money, you will need to find a low-cost mortgage. This can easily be done by comparing offers.

Once you have closely examined all of your lending options, you can make a decision. After that decision has been made, you will want to fill out a loan application. Once that application is submitted, you may receive a response in as little as one week.

Mortgages are a multi-billion dollar a year industry and there are different types of mortgages now available to suit a wide variety of needs and situations. No matter what your circumstances, you’ll probably find a mortgage that suits you.

Here, we’ll look at the various different types of mortgages that are widely available in the market:

Before starting you should know that most mortgages fall into two distinct categories – repayment and interest only. With the first, your monthly payments include repayment of the loan amount plus the interest. With interest only mortgages only the interest is covered and the person arranges to make the actual loan repayment independently.

Here’s some more information about the different types of mortgages available:

Fixed Rate Mortgages – with the fixed rate mortgage your rate is steady for a certain number of years. The good thing about fixed mortgages is that you know exactly what your payments will be for the fixed period. This works well for those on a strict budget who need to know exactly what will be payable month after month. The downside to fixed rates is that if the interest rate falls you continue to pay the higher rate. Of course, on the flip side, interest rates might rise which means your rate stays at the fixed level.

Usually, fixed rate mortgages come with strict penalties should the borrower wish to end the term early.

Variable Rate Mortgages – Variable rates are linked to the underlying base rate of interest. As the underlying interest rates rise, so will your underlying variable rate. Variable rates are usually popular in economic cycles where the rate is generally headed lower. Of course, you can never tell for sure what the rate will do so there is a certain element of risk attached with variable rate mortgages.

Capped Mortgages – Capped mortgages are supposed to offer the best of both worlds. They impose a “cap” on the maximum interest rate you’ll ever pay and so offers a security – so if rates fall so do your repayments, but rates can only rise to the value of your cap. On the surface the capped mortgage appears to be ideal – but dig a little deeper and you’ll see that the number of cap rate mortgages offering competitive rates are somewhat limited.

Discounted Mortgage Deals – Sometimes, mortgage providers offer new clients “discounted rates” – these are rates that are lower than their standard variable rates and they last for a certain period. After the period the mortgage switches to the standard variable rate. This can be a good option but you’ll need to check that the rate it switches to is competitive.

100% Mortgages – This is a mortgage where the borrower does not pay any deposit. With other mortgage types, the borrower needs to put some money down, but with 100% Mortgages, this is not required. This is a good option if you’re unable to find money for a deposit but beware – 100% mortgages tend to be far more expensive than other mortgage types. You may also find that most of these mortgage types tie you in for longer periods (never a good thing) and you may be required to sign up to a mortgage indemnity policy (again, not a good thing).

Buy To Let Mortgages – Many people are discovering that they can increase their net worth quickly by acquiring “buy to let” properties. There are now specific buy to let mortgages that help people who want to let out their properties for investment purposes. These tend to be different to standard mortgages.

Bad Credit Mortgages – There are even mortgages available that cater to people who have bad credit.

Other Mortgage Types – Believe it or not we’ve only covered a sample of the mortgage deal types out there. There are many other very specific mortgages from self certification mortgages to offset mortgages that may cover you if the standard ones do not apply.

It’s now estimated that mortgage payments in western countries such as USA, UK, and Western Europe account for 40% of monthly household expenses.

There is no doubt that your Mortgage will be one of the most serious commitments you will ever make in your life – and with the huge range of mortgage types available these days it’s worth understanding what mortgage type may be right for you. This could save you tens of thousands of dollars and more over the term of your mortgage payment.

Home buying is a major step. The last thing that you want to do is rush into such a mortgage option that may be completely wrong for you. Someone who is not informed about the current trends and latest information is opening themselves up to major problems.

For example, not all mortgage companies are moral in the way they do business. Known as predatory lenders, the bad ones will seek to get you into a home and sign the papers without any thought as to whether the mortgage deal they’ve given you is actually a good fit for your needs. For example, here are a few factors that you should consider when finding out which mortgage would be the best choice for you:

• Interest rate
• Type of mortgage (fixed? variable? offset?)
• Fees/penalties
• Lending flexibility

Mortgage providers vary significantly in this regard, and you really need to make sure you do some solid research to find your best option.

The information contained on this site will help you, whether you’re looking for your first ever mortgage, or to refinance an existing loan.