Monthly Archives: March 2007
Homeowner Loan â” What It Really Means
Posted March 28, 2007 – 9:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceGoing into debt is never an easy decision, but getting a homeowner loan is probably the best debt you can have. Homes build equity â” think investment more than loan.
There are hundreds of varieties of loans available today. The important thing is to choose the homeowner loan that suits your financial situation first and then your long term goals. The property should never dictate the loan terms. Know your limits â” the payment you can afford and the duration you are willing to stay in debt â” before you begin looking for a home.
Many people step into a long term homeowner loan without much thought. It is the normal way of doing business after all. The last two times I have looked at refinancing our property, no one even offered me a short term loan. All the lenders immediately looked at the rates for a thirty year mortgage.
Getting a thirty year homeowner loan means that I would be in debt until after I was able to retire. On the flip side, if I had taken some time and thought about what we were doing, we would have already paid off our mortgage. Weâd be completely debt free and that $600 (or $1000 or whatever your amount is) would now be available for savings, building a barn for the horses our kids want, or just taking a vacation.
Once that picture dawned on me, I felt stupid. Maybe our payments were a little lower by getting a long term homeowner loan. All we did was spend that money somewhere else. To compensate, Iâm now making an extra half payment each month. At this rate, we should have the existing debt paid in full before the children graduate high school. There will still be some time for family outings then, wonât there? And at least we will have some way to pay for all that college theyâll be heading to.
Kathryn Lang is a freelance writer covering the finance industry. She has written various articles on <a href="http://www.fairinvestment.co.uk/loan.aspx">homeowner loan</a> products and <a href="http://www.financemarkets.co.uk/category/loans/">loans</a> in general.
No Comments | Tags:A Fixed Rate Mortgage Could Be the Right Choice
Posted March 28, 2007 – 9:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceIn todayâs economy, a fixed rate mortgage is the best route for most people to go through. With the interest rates threatening to rise, locking in a low rate today could save you lots of money in the future.
A fixed rate mortgage is usually a little higher than an adjustable rate mortgage. This is because the lender is forced to offer the same rate no mater what the prime rate may rise to in the future. In the 70âs and early 80âs, people with fixed rate mortgages were in a nice position as flexible rate mortgages climbed into the 20% rates.
There is an exception to the fixed rate rule, but it takes some serious discipline. If you can make yourself pay off the loan BEFORE the first interest rate hike then a flexible rate will work for you. You get a lower interest rate which means you pay less in finance charges. If paying off your mortgage early is your goal then you need to check with your lender to make sure there are no prepayment penalties. Some companies write in a clause to prevent you from paying off the loan early so they are sure to get all their finance charges.
What ever direction you choose to go with your mortgage, whether you get a fixed rate mortgage or a flexible rate mortgage, aim for the shortest term length you can manage. It will mean higher payments on the front end, but it will mean a great savings in the finance charges on the back end of the loan.
For the first time buyer or for those who have had financial difficulties in the past, a fixed rate mortgage could keep them from being pushed into future financial problems. Keep in mind that as times change, and interest rates fall, it is a good idea to examine your mortgage situation to see if a new route could be a better one.
Kathryn Lang is a freelance writer covering the finance industry. She has written various articles on <a href="http://www.fairinvestment.co.uk/mortgage.aspx">fixed rate mortgage</a> products and <a href="http://www.financemarkets.co.uk/category/mortgages/">mortgage news</a> in general.
No Comments | Tags:How to claim the Discount Points on your income tax return
Posted March 15, 2007 – 9:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceInternal Revenue Service (IRS) allows the deduction of the discount points on your income tax return. Discount points which are one of the most important tax deductions to homebuyers are paid upfront to reduce the mortgage payment.
Calculate the Discount Points
Each point equals one percent of the principal. For example, a 2 discount points on $150,000 mortgage comes to $3,000 ($150,000 x 0.02). The Closing Statements shows how much is your discount points. If you do not see discount points, have no fear. Discount points are also called Loan Origination Fees, Maximum Loan Charges, or Loan Discount.
First Time Homebuyer Discount Points
For a first time buyer, IRS allows to claim the full amount of discount points on the year paid. For example, Joe bought his first home on 2005. In his closing statement, the discount points come to $3,000. Joe claims the full amount on Schedule A of his income tax return.
Discount Points on refinance without home improvement
The homeowners claim the full amount of discount points, when the homeowners refinance towards the improvement of the home. Without the home improvement, the homeowners claim the discount points over the life of the mortgage. For example, Joe refinances his home with a lower interest rate on a 25 year mortgage. The closing statement shows $3000 discount points. Joe claims $120 per year ($3,000 / 25 year mortgage).
Discount Points on refinance with home improvement
The discount points which are paid to improve the home is fully tax deductible on the year paid. The rest are claim over the life of the loan. For example, Joe refinances his home to add a swimming pool on a 25 year mortgage. He paid $20,000 to add a swimming pool. The total mortgage comes to $150,000. The closing statement states $3,000 discount points. Joe claims $400 ($20,000 swimming pool / $150,000 principal x $3,000) + $104 per year ([$3,000 discount points - $400 discount points of swimming pool] / 25 year mortgage).
If the homeowner has an outstanding discount points to claim, the homeowner claims the outstanding discount points on the year of refinance. For example, Joe has $2,000 discount points which are not claimed yet. Joe claims a total of $2,504 ($2,000 outstanding discount points + $400 swimming pool discount points + $104 per year discount points).
IRS yearly update
This article may or not contain the most current tax regulations, and laws. You may want to consider checking with your trusted Tax Advisor or IRS.
Dennis Estrada is a webmaster of <a href="http://mortgagecalculatorme.com">mortgage calculators</a> website that gives access to many resources, and calculators for mortgage.
No Comments | Tags:CALIFORNIA SECOND MORTGAGE
Posted March 8, 2007 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceMortgage is a kind of loan, which is applied by the borrowers by keeping their home or valuable assets as a security. California Second Mortgage program is nothing but the supplementary to the first California mortgage. There are many banks in California out there where one can apply for this program! The California Second Mortgage program gives the borrowers a chance to get lump sum cash without refinancing the first mortgage loan. It is of use when you require money to pay off your earlier/ first mortgage amount. Before application one must make sure that the bank is safe and reputed. For this research work is essential and one can do the same by browsing around and visiting various banks in California, talking to the lenders or taking the help of Internet. The California Second Mortgage program can enable the borrowers to make the payments easily to the creditors, however one needs to be very careful while dealing with such type of mortgage program. Before applying for this kind of financial program, it is essential on the part of the borrower to decide if he can afford the loan re-payments. With the California Second Mortgage program one can consolidate his credit payments. While dealing with such Mortgage loans one has to do a lot of calculations, which can be confusing so one should use proper Mortgage calculators. This kind of mortgage may not be always suitable thus one should at least think before going in for this type of program.
Deepak Bansal is an internet marketing consultant having experience of 4.5 years in search engine optimization industry. We are specialist in search engine optimization, link building, internet marketing, copyrighting and content development. This article is written by content writing team of http://www.deepakbansal.com - <a href="http://www.deepakbansal.com/search-engine-optimization.htm">Search Engine Optimization</a>
No Comments | Tags:Like In The Most Horrific & Scary Movie:The Audience Cries Out:'Watch Out!!!':While The Actors Hear Nothing
Posted March 6, 2007 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceThis was somewhat palatable in a rising market, but now as the market goes sideways or even down and more borrowers are finding themselves upside down while owing more than the property is worth. Much like the movies, one might take it upon himself or herself to honk at title companies, escrow officers or real estate attorneys to try and dissuade anyone from going ahead and signing a new ARM that has negative amortization. A mounted speaker on top of the car could also be employed to spout the warnings “Watch Out!”. You can be sure puzzled looks would find it’s way in the direction of the warning, wondering if this person is in their right mind. But, alas, the borrowers sign up anyway.
Fortunately, the borrowers have options. They can pay a minimum payment and let it go negative as the mortgage increases, they can pay a fully indexed interest only payment for a while with no negative amortization, a thirty year fixed payment or a fifteen year fixed payment. Each month the statement is received in the mail the borrowers have the opportunity to chose one of the options. Only the minimum payment option will give the negative amortization. For a suitable and a well financially educated based borrower this might work if there was a place for the money savings such as a business or other safe investment that is yielding a higher rate of return than the negative growth of the mortgage amount. Later on, lump sum payments can be made to offset the negative amortization from the profit gains from the investment. In that case, the money would be working harder in an alternative investment. Baring that, a borrower can be neck deep in financial trouble real quick. Qualifications for this niche product are at the fully indexed rate for debt to income qualifications. Borrowers can protect themselves, to a degree, by dealing with a lender/broker who will squeeze down the margin to a razor thin amount to keep any increases at the absolute lowest incremental amount.
As an example: Borrowers Bill and Linda have a new $300,000.00 Option ARM (Adjustable Rate Mortgage). The index for the first payment is 4.75%. The set margin as outlined in the ARM Disclosure signed and agreed at mortgage settlement is at 3.25%. Thus the fully indexed rate for the first month is the 4.75% index + the margin in 3.25% = 8.00% representing the fully indexed rate. The minimum payment option is at a rate of 1.00%. If this option is selected, the mortgage would go negative by 8.00% - 1.00% = 7.00% on an annual basis. This option would go negative by $300,000.00 x 7.00% = $21,000.00/12 = $1,750.00 negative the first month. Then the new balance is $300,000.00 + $1,750.00 = $301,750.00. This minimum 1.0% payment rate for the first month with this scenario would lead to a payment of $964.92/month with the mortgage amount going up. This is the minimum payment option. The 30-year fixed payment based on the fully indexed rate for the first month would be $2,201.29/month. The 15-year fixed payment based on the fully indexed rate for the first month would be $2,866.96/month. The interest only option for the fully indexed rate is $300,000 x 8.0% = $24,000.00/12 = $2,000/month with no amortization of the loan (no increase either). This again is the scenario with a built in 2.75% margin, which remains constant for the life of the loan. The maximum negative amortization, depending on the mortgage product can be 115% to 125% of the original balance as two of the more recognized run up limits. In this scenario it could go up to $300,000.00 x 115% = $345,000.00 or $300,000.00 x 125% = $375,000.00. Once the selected trigger limits on run up are reached, the trip wire is initiated and the loan will need to be amortized from then on at the fully indexed rate as calculated monthly. House wins. Borrower loses.
Tommy and Tammy are a “little” more astute and aggressively negotiated a margin of 2.25%. This half point difference in this scenario will be for the life of the loan. The margin is carved in stone and never changes. With the MTA index at 4.75% plus the 2.25% margin then the fully indexed rate is at 7.00% a full 1.00% below the prior example. Right from the get go the $300,000.00 x 1.00% = $3,000.00/12 = $250.00/month less than per month on the running interest meter. Again, the minimum payment at 1% the payment would be $964.92. The same as Bill and Linda’s loan scenario. However, the negative amortization would be 7.00% - 1.00% = 6.00%. The original loan amount of $300,000.00 x 6% = $18,000.00/12 = $1,500.00. The new loan balance would be $300,000.00 + $1,500.00 = $301,500.00. Because of the margin difference, Tommy and Tammy’s loan is a better deal. The 30-year fixed loan for the first month is $1,995.91/month. The 15-year fixed loan for the first month is $2,696.48/month. The interest only option at the 7.00% fully indexed rate would be $300,000.00 x 7.00% = $21,000/12 = $1,750.00/month. This loan scenario would go negative a lot slower than Tommy and Tammy’s loan.
The two loans are summarized as follows: (*negative amort.)
Loan Scenario: Margin: Current Index: Payment:
Bill and Linda 3.25% 8.00%
1% Minimum Payment *$ 964.92/mo.
30-Year Fixed $2,201.29/mo.
15-Year Fixed $2,866.96/mo.
Interest Only $2,000.00/mo.
Tommy and Tammy: 2.25% 7.00%
1% Minimum Payment *$ 964.92/mo.
30-Year Fixed $1,995.91/mo.
15-Year Fixed $2,696.48/mo.
Interest Only $1,750.00/mo.
So if anyone is entertaining an Option ARM they will need to fight like a tiger to get the lowest possible margin as possible. If not deterred by all the warnings of the dangers of an Option ARM product with the audience yelling at the top of their lungs-”Watch Out”, then a borrower needs to get the lowest possible margin available on the planet. If not, bad news will follow. The next step is to lock into the most stable and reliable index possible available after exhaustive research. The broker/lender can take their fees and compensation on the front end of the mortgage origination and keep the margin as low as possible with this Option ARM product.
In conclusion, if anyone is looking at an Option ARM caution’ needs to be the keyword to this consideration with eyes wide open with full due diligence. If the borrowers are going to be in the home for a few years and the property is in a slow appreciating market, later resale may be in peril if the minimum payments are made each month. If the borrower is going to be in the property for a longer term, the threat of hitting the “trip wire” for the maximum loan amount of 115% or 125% will kick in and payments will drastically go up on a forced basis. It should be noted Option ARM products contain at least a 2-year prepayment penalty. This would amount to a six-month interest on 80% of the balance. This loan of $300,000 would be with the Bill and Linda scenario: $300,000.00 x 80% = $240,000 x 8% (or at index at payoff) = $19,200.00 for the whole year or six months would be $9,600.00. The Tommy and Tammy scenario (again index at time of payoff) would be $8,400.00 if either would be paid off in the first two years.
Again borrowers watch out’. If only they were listening. When things go bad with this product the credit and all that goes with it hits the fan. Foreclosures have accelerated drastically in this niche product and Congress is holding hearings. Never a good sign.
Dale Rogers
http://www.brokencredit.com
Dale Rogers is a rapid rescore mortgage expert who contributes his credit repair and mortgage knowledge regularly to the Broken Credit Blog. Broken Credit Blog hosts the internet's #1 credit repair seminar. All are welcome to gain free knowledge on how to improve their credit score and obtain the lowest mortgage rates available in the market.
<A HREF="http://www.brokencredit.com"><B>www.BrokenCredit.com</B></A>
No Comments | Tags:CALIFORNIA MORTGAGE CALCULATOR
Posted March 5, 2007 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceMortgage is a financial program, which involves borrowing money by keeping some valuable asset as a collateral security. This kind of financial program involves several calculations, which can be pretty confusing. Thus the best method to find out about the mortgage payment would be to use a Mortgage Calculator and if you are staying in California make sure that you use the best California Mortgage Calculator!
There are several banks in California that are offering Mortgage and different banks of California use different types of California Mortgage Calculator programs, thus one should apply for at such places, which use easy calculators. For using the calculator one needs to do is fill in his monthly financial information like total income before taxes, fixed expenses, existing liabilities and also all the loan details.
By using the best California Mortgage Payment Calculator the borrowers can find out how much they can afford to borrow and spend. California Mortgage is of varied types, the borrowers therefore have to use the calculator according to the financial program they have opted for! Using the Calculator isnât difficult, one can discuss about the same with the lenders.
With the development of Internet one can also do the mortgage calculations using the Online California Mortgage Calculator. While using the calculator the borrowers need to keep in mind the mortgage quotes and prices. By filling in the credit details in the calculator one can find out about the mortgage payments! So if you want to do proper calculations without conducting any mathematical mistake then you should use a good Calculator.
Deepak Bansal is an internet marketing consultant having experience of 4.5 years in search engine optimization industry. We are specialist in search engine optimization, link building, internet marketing, copyrighting and content development. This article is written by content writing team of http://www.deepakbansal.com - <a href="http://www.deepakbansal.com/search-engine-optimization.htm">Search Engine Optimization India</a>
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