Monthly Archives: February 2009
How a mortgage refinance can help you?
Posted February 23, 2009 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceOver the past few decades the interest rates for a home loan mortgage refinance have gone from high to low. Early in the eighties the average interest rate for a home mortgage was roughly eighteen percent, but these days we are now seeing the interest rates for the same exact loans around five or four percent. This is largely due to how our economy has been progressing throughout the years and how banks are trying to make large loans viable to consumers.
A lot of the people that have bought homes when the interest rates were really high are starting to consider refinancing their home mortgage in order to take advantage of the much lower interest rates of today’s economy. If you happen to be one of these individuals and are seriously considering taking advantage of a home refinance you should first consider a few benefits to doing it.
The first thing you are going to want to make certain is that the cost of the refinance is worth the effort that you put into it. The best way to take this into consideration is to ensure that the interest rate you currently have is at least two percentage points above the interest rate that you would be refinancing out. This way you will be certain that you are getting a good deal on the loan and would be saving money over the lifetime of the loan.
Additionally there are some benefits to getting a bad credit refinance or a home mortgage refinance from an online lender. The first thing is you will obviously have lower monthly payments on your mortgage. This means it will be much easier to manage and budget for as well as saving you money to spend on other things that you need. How much you are going to save is really dependent upon the difference between interest rates and the length of the home refinance loan that you take out.
Next, by changing the type of loan that you currently have you can take advantage of the weakened financial markets. Some consumers out there had the unfortunate luck of getting an adjustable rate mortgage and have seen their interest rates fluctuate quite a bit over the past few years.
Lastly, you will be able to get money from the home equity that you have built up by getting a mortgage refinance. The longer that you have been in your home the more equity that you have likely built up over the course of your mortgage. By pulling money out you will be able to take care of other debts, or have the money to spend on other purchases that you have been wanted to make.
Whenever you consider a major financial decision you should always make certain to do as much research as possible before signing anything. You should consult with a home mortgage refinance professional and see what sorts of deals are available for your own unique situation. Getting in touch with a financial professional could not be any easier. Simply fill out the short form on our site, and in no time you will be in direct contact with a highly skilled home loan professional that can help you go over the best options for you.
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123refinanced.net is team of highly qualified and trained professionals in the field of finance with a proven track record and has helped thousands of individuals so far with their refinance needs. Our prime motto is to help the people who are trying to reduce their monthly financial bills. We with our knowledge and expertise enable them to lead a better quality for life. We mainly deal in <a href== http://www.123refinanced.net/bad-credit-mortgage.html>Bad Credit Mortgage</a>, Mortgage Refinance, <a href= http://www.123refinanced.net/home-loan-refinance.html>Home Loan Refinance </a>and refinancing all kind of loans.
Recourse and Non-Recourse Loans - What Is the Difference?
Posted February 22, 2009 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceWhen a borrower cannot repay a loan, the lender may or may not be able to sue the borrower to collect any shortfall. The key difference is whether or not the loan is classified as a recourse loan or a non-recourse loan.
Many would-be sellers failed to sell their homes at inflated bubble prices. This might not have been a financial burden depending on how they managed their mortgage debt. They may have regretted missing the windfall they could have received by selling at the peak, but they stayed comfortably in their homes and forgot about the excitement of the real estate bubble.
The sellers who missed the peak sales prices and fell underwater on their mortgage faced more difficult choices. Many borrowers concluded a foreclosure was the best course of action because they owed more on their loan than their property was worth. Also, due to the exotic loan terms utilized by many borrowers, they were experiencing increasing loan payments and decreasing property values. With the prospect for recovery bleak, many decided to give up paying their mortgages and allowed the lender to foreclose. One can argue the morality of this decision, but financially, it was the best course of action given the conditions. Once people had given up on paying back their loans, they faced the issue of whether or not these were recourse or non-recourse loans.
Loans used to purchase real estate assets can be either recourse loans or non-recourse loans. A recourse loan is one where the lender can sue the borrower for any amount owed in the terms of the loan contract. As with foreclosure laws, whether a loan is recourse or non-recourse varies from state to state. In California, all purchase money mortgages are non-recourse loans.
In most states, including California, all refinances, home equity lines of credit or other loans not used to purchase the property will be recourse loans. This distinction becomes very important in a foreclosure or short sale. If a loan is non-recourse, the lender cannot collect from the borrower for deficiency under any circumstances. The sale and closing of the property is the end of the matter: the debt does not survive. If the loan is a recourse loan the lender may have the right under certain circumstances to go after the borrowers assets after a foreclosure. This depends on whether the foreclosure was judicial or non-judicial.
<a href="http://www.thegreathousingbubble.com/author/">Lawrence Roberts</a> is the author of The Great Housing Bubble: Why Did House Prices Fall?
Learn more and get FREE eBooks at: <a href="http://www.thegreathousingbubble.com/">http://www.thegreathousingbubble.com/</a>
Read the author's daily dispatches at The Irvine Housing Blog: <a href="http://www.irvinehousingblog.com/">http://www.irvinehousingblog.com/</a> Visit <a href="http://www.articlepool.com/recourse+and+nonrecourse+loans++what+is+the+difference-32184">Recourse and Non-Recourse Loans - What Is the Difference?</a>.
Credit Crunch - Why Did We Have It?
Posted February 21, 2009 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceIn 2007, the financial markets were abuzz with talk of a “credit crunch.” It was portrayed as some unusual and unpredictable outside force like an asteroid impact or a cold winter storm. However, it was not unexpected, and it was not caused by any outside force. The credit crunch began because borrowers were unable to make payments on the loans they were given. When lenders started losing money, they stopped lending money: a credit crunch.
New Century Financial is the poster child for the Great Housing Bubble. New Century Financial was founded in 1995 and headquartered in Irvine, California. New Century Financial Corporation was a real estate investment trust (REIT), providing first and second mortgage products to borrowers nationwide through its operating subsidiaries, New Century Mortgage Corporation and Home123 Corporation. The company was the second largest subprime loan originator by dollar volume in 2006. On April 2, 2007, the company filed for Chapter 11 bankruptcy protections. The date of their financial implosion is regarded as the day the bubble popped. The death of New Century Financial has come to represent to death of loose lending standards and the beginning of the credit crunch. Subprime lending was widely regarded as the culprit in starting the cycle of credit tightening, and New Century has been linked to this problem, but the scale and scope of the disaster was much larger than subprime.
The massive credit crunch that facilitated the decline of the Great Housing Bubble was a crisis of cashflow insolvency. Basically, people did not have the incomes to consistently make their mortgage payments. This was caused by a combination of exotic loan programs with increasing payments, a deterioration of credit standards allowing debt-to-income ratios well above historic norms, and the systematic practice of fabricating loan applications with phantom income (stated-income or “liar” loans). The problem of cashflow insolvency was very difficult to overcome as borrowing more money would not solve the problem. People needed greater incomes, not greater debt loads.
The response of the Federal Reserve to this mess was to lower borrowing costs as much as possible. The Federal Funds Rate was lowered to zero, and the FED began buying longer term treasuries in a program known as quantitative easing. Unfortunately, lowing interest rates does not force people to borrow or banks to lend. People had already borrowed too much, and banks had few creditworthy customers to loan to who were not already overburdened with debt. The credit crunch could not be solved with monetary policy. The only thing that was going to help was time and people paying down their enormous debt loads.
<a href="http://www.thegreathousingbubble.com/author/">Lawrence Roberts</a> is the author of The Great Housing Bubble: Why Did House Prices Fall?
Learn more and get FREE eBooks at: <a href="http://www.thegreathousingbubble.com/">http://www.thegreathousingbubble.com/</a>
Read the author's daily dispatches at The Irvine Housing Blog: <a href="http://www.irvinehousingblog.com/">http://www.irvinehousingblog.com/</a> Visit <a href="http://www.articlepool.com/credit+crunch++why+did+we+have+it-32176">Credit Crunch - Why Did We Have It?</a>.
Refinancing with Bad Credit - Should you Refinance
Posted February 20, 2009 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceYou have a mortgage, and would like to refinance the loan. But you know your credit is not very good, maybe even bad. There are lenders in the financial market that will make loans to people with less than perfect credit. As a lenders risk goes up so does the interest rate, so if you got bad credit you can expect a high interest rate. If you can drop your rate by at least 2 % saving money is still possible.
There are several questions you should ask yourself when considering refinancing your mortgage. First of all you need to know your credit stats. Has getting credit been a problem for you in the past, if so you will want to take control of your finances. Sign up for a credit monitoring service to look for ways to improve your credit. Try to bring the balance of some of the revolving accounts down before you refinance your mortgage. This will make lenders feel better about loaning money to someone with less than perfect credit. When you refinance your home mortgage you want to better the situation, instead of hurt it.
You will want to calculate all of the costs before making a decision to refinance. When refinancing you need to be able to lower your interest rate and it is always great to get a shorter loan life. Sometimes people are only interested in lowering their monthly payments. However, you will need to remain in your home long enough to benefit from refinancing. There would be no reason to refinance if you plan on moving within a few years. Take the time to figure out how long it will take to recover the costs of refinancing your home. Loans may offer a lower rate of interest but have excessive closing costs and fees. You should find out all costs involved including any additional income taxes you may be charged.
The 2 % Mortgage Rule
The two percent rule refers to your Home Mortgage rate, can you drop your new rate 2% below current rate. Lenders recommend that you refinance your mortgage if you can drop the interest rate two percent less than your current rate. This is just a general rule and should not be the only deciding factor when trying to decide whether to refinance or not to refinance. Are you planning to live in your home for over five years, or do you plan to move. This can be important factors when deciding to refinance.
The average the cost of refinancing is at least 3 % of your home mortgage loan. Three percent of the mortgage is a lot of money to spend, so you want to be able to recover these costs when refinancing your mortgage. If you are making payments on your home and plan to buy a larger home in the near future, then a drop in the interest rates may be the perfect time to purchase a larger home. This could be a great time to refinance, into a larger home. There are always many decisions to make when purchasing or refinancing a existing mortgage. To find out more on mortgages visit this website â youhave2.comâ for all the answers you need.
Writen by: Vincent Robertson
<a href="http://youhave2.com" target="_top">http://youhave2.com</a>
No Comments | Tags:Credit Crunch - Why Did We Have It?
Posted February 20, 2009 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceIn 2007, the financial markets were abuzz with talk of a “credit crunch.” It was portrayed as some unusual and unpredictable outside force like an asteroid impact or a cold winter storm. However, it was not unexpected, and it was not caused by any outside force. The credit crunch began because borrowers were unable to make payments on the loans they were given. When lenders started losing money, they stopped lending money: a credit crunch.
New Century Financial is the poster child for the Great Housing Bubble. New Century Financial was founded in 1995 and headquartered in Irvine, California. New Century Financial Corporation was a real estate investment trust (REIT), providing first and second mortgage products to borrowers nationwide through its operating subsidiaries, New Century Mortgage Corporation and Home123 Corporation. The company was the second largest subprime loan originator by dollar volume in 2006. On April 2, 2007, the company filed for Chapter 11 bankruptcy protections. The date of their financial implosion is regarded as the day the bubble popped. The death of New Century Financial has come to represent to death of loose lending standards and the beginning of the credit crunch. Subprime lending was widely regarded as the culprit in starting the cycle of credit tightening, and New Century has been linked to this problem, but the scale and scope of the disaster was much larger than subprime.
The massive credit crunch that facilitated the decline of the Great Housing Bubble was a crisis of cashflow insolvency. Basically, people did not have the incomes to consistently make their mortgage payments. This was caused by a combination of exotic loan programs with increasing payments, a deterioration of credit standards allowing debt-to-income ratios well above historic norms, and the systematic practice of fabricating loan applications with phantom income (stated-income or “liar” loans). The problem of cashflow insolvency was very difficult to overcome as borrowing more money would not solve the problem. People needed greater incomes, not greater debt loads.
The response of the Federal Reserve to this mess was to lower borrowing costs as much as possible. The Federal Funds Rate was lowered to zero, and the FED began buying longer term treasuries in a program known as quantitative easing. Unfortunately, lowing interest rates does not force people to borrow or banks to lend. People had already borrowed too much, and banks had few creditworthy customers to loan to who were not already overburdened with debt. The credit crunch could not be solved with monetary policy. The only thing that was going to help was time and people paying down their enormous debt loads.
<a href="http://www.thegreathousingbubble.com/author/">Lawrence Roberts</a> is the author of The Great Housing Bubble: Why Did House Prices Fall?
Learn more and get FREE eBooks at: <a href="http://www.thegreathousingbubble.com/">http://www.thegreathousingbubble.com/</a>
Read the author's daily dispatches at The Irvine Housing Blog: <a href="http://www.irvinehousingblog.com/">http://www.irvinehousingblog.com/</a> Visit <a href="http://www.articlepool.com/credit+crunch++why+did+we+have+it-32176">Credit Crunch - Why Did We Have It?</a>.
Ways to Purchase a Mortgage Online.
Posted February 18, 2009 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceThe internet has meant that many transactions that once had to be done in person can now be accomplished online, such as applying for a mortgage. It is relatively easy and straightforward to compare costs and services from different lenders, although in general you should limit your search to major brokerage firms or well known banks. When it does come time to sign all those mortgage papers, it can be done easily in your home or local bank. You will however need to be accompanied by a notary
Most online lenders have a feature called a mortgage calculator, or something similar which will give you some idea of how much house you can afford, what the interest rate on your mortgage will be and how much your monthly payment will be. Most of these mortgage calculators are easy to use and once you have provided the information on a particular site, it should retain it so you don’t have to re-enter it. Some sites allow you to enter some of your information and then return at a later time to complete the inquiry or application without starting all over again.
The online application process generally works the same way, regardless of which lender you use. After supplying basic information, your application is looked over and a tentative decision is made. Somebody from the lending company will probably contact you at some point, either by phone or email. At this point, you will have to provide your social security number and there is a good chance a credit report will be requested. Even though you applied online, it’s important to remember that you should be able to call someone if you have any questions or issues.
Some sites allow you to provide your information to apply for a loan, and then they will submit this information to several other lenders who will then all make an offer available to you. LendingTree is perhaps the most well known of these sites, although there are quite a few others others. The obvious advantage is that it saves you from having to shop around and submit the same information over and over again. You can also be assured of receiving competitive rates. Not surprisingly, these sites are extremely popular. LendingTree alone estimates around 20 million people have used their service.
Most of these sites are fairly easy to use and some have live customer service in the form of online help in case you get stuck navigating the site. Depending on the site, the results of your enquiry or application may not be immediate. You may have to wait some time before accessing them or having them emailed to you. Once you receive your offers and look them over, you aren’t obliged to take any of them, even if you don’t, it’s a quick and convenient way to get an idea of what the options are that might be available to you.
Although most sites that you use during this process are secure, you should always be on the lookout for fraud and phishing web sites. Some sites, in particular those in which you are supplying a large amount of personal information will sell your details to other companies, some of which may have nothing to do with applying for a mortgage. You may find that your in-box is suddenly inundated with unwanted emails; or worse, you could be a victim of identity theft.
There are definitely some clues that a web site isn’t all it appears to be. Be wary of a company that doesn’t seem to have an address or a phone number. If in doubt, it is best to just not use that site. Another indication that the site is safe is a little padlock symbol in the bottom right hand corner of the screen if using Internet Explorer; if using Netscape Navigator, a key symbol will tell you that the site is secure. You can also check the web address of the page you are on. If it is a secure page, the address will generally read “https” instead of “http.” On a secure site, you can give out personal details or your credit card details without any worries.
If you are refinancing, that too can easily and conveniently be done on line. Both the shopping around for rates or lenders and the overall application, it can be done is a secure manner online. You can also apply for a fixed-rate mortgage, an adjustable mortgage, or a combination of the two. You can also specify the term of your mortgage, anything from 10 to 40 years. In fact these days, there aren’t too many financial transactions that can’t be processed online. Just use your common sense when giving out personal and financial information. If you are having doubts about a particular site, pick up the phone and call the company instead. It’s better to be safe than sorry.
Shawn Thomas is a freelance writer who writes about economic issues and financial products pertaining to the mortgage industry such a fixed rate mortgage as well as the <a href="http://www.absolutemortgageco.com/rates.aspx"> lowest mortgage rates </a>
No Comments | Tags:Housing Bubble Credit Expansion - Credit Inflated the Housing Bubble
Posted February 18, 2009 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceThe Great Housing Bubble was inflated by a massive expansion of credit and the influx of capital into residential mortgages. The expansion of credit took four forms: lower interest rates, lowering or eliminating qualification requirements, different amortization methods, and higher allowable debt-to-income ratios.
Lower interest rates expand credit by allowing larger sums to be borrowed with the same payment amount. In 2000, the interest rate on a 30-year mortgage was 8.05%, and in 2003, it was 5.83%. This reduction in interest rates accounts for 20% to 50% of the increase in house prices experienced during the bubble. Subprime lending is an oft-cited example of lowering qualification requirements, but many loan programs included limited documentation that also allowed people with good credit to purchase multiple properties with little or no money down and no real ability to make the payments.
Credit was also expanded by borrowers utilizing risky financing options including interest-only and negative amortization. Interest-only loans artificially “add” affordability to the market because it allows for larger sums of money to be borrowed with lower payments. The final component of credit expansion was a willingness of borrowers to take on larger debt-service payments as evidenced by increasing debt-to-income ratios. All of these factors also helped speculators. The acquisition and carrying costs of a speculative flip was greatly reduced. More people were eligible to speculate, and with rapidly rising prices, more people wanted to do so.
Nationally, prices during the bubble rally increased by 45%. About half of this increase was due to lower interest rates. However, in the markets most prone to irrational exuberance, prices increased much more than the change in interest rates can explain. These markets also saw a large increases in the use of exotic financing and major increases in debt-to-income ratios utilized by many borrowers.
For example, the median household income in Irvine in 2006 was $83,891. Applying a 28% DTI leaves a payment of $1,957. Interest rates at the time were about 6.5%; a payment of $1,957 on a fixed-rate 30-year mortgage at 6.5% would finance $309,691. Short-term adjustable rate mortgages carry lower interest rates than long-term fixed rate mortgages because the lenders have less interest rate risk exposure. The same $1,957 payment on a 5-year ARM at 5.5% would finance $427,081. The interest-only loan terms allows borrowers to increase their loans by 25% thus artificially increasing prices by 25%.
The most important single factor in the expansion of credit was the negative amortization loan, also known as the Option ARM. The payment rates on Option ARMs differ widely, but for the sake of this calculation, assume a 3.8% teaser rate (they were as low as 1 %). The $1,957 payment finances $309,691 with a Conventional mortgage, $427,081 with an Interest-Only mortgage, and a whopping $618,144 with Negative Amortization. Stop for a moment and ponder the math: the same payment now finances 100% more money. Is it any wonder the real estate in bubble markets like Irvine, California, were 100% overvalued at the top?
People purchasing with Option ARMs were buying at the rental equivalent monthly cashflow, at least for a while. From a financing perspective, the market was not overvalued. People were paying exactly what they should have been paying. They were just doing it with loan terms which were going to destroy them, hence the terms “toxic financing” and “suicide loan.” This point cannot be overemphasized, Negative Amortization loans inflated the Great Housing Bubble. If this loan product had not been offered and aggressively pushed by lenders, the bubble would not have inflated to the degree that it did.
Most financial manias are associated with an uncontrolled expansion of credit. The Great Housing Bubble was no different. In the end, all Ponzi Schemes collapse as the flow of credit is shut down. The credit crunch which began in August of 2007 was triggered by homeowners defaulting on their toxic mortgages. The near elimination of credit caused the Ponzi Scheme to collapse, and it lead to the deflation of the housing bubble.
<a href="http://www.thegreathousingbubble.com/author/">Lawrence Roberts</a> is the author of The Great Housing Bubble: Why Did House Prices Fall?
Learn more and get FREE eBooks at: <a href="http://www.thegreathousingbubble.com/">http://www.thegreathousingbubble.com/</a>
Read the author's daily dispatches at The Irvine Housing Blog: <a href="http://www.irvinehousingblog.com/">http://www.irvinehousingblog.com/</a> Visit <a href="http://www.articlepool.com/housing+bubble+credit+expansion++credit+inflated+the+housing+bubble-32175">Housing Bubble Credit Expansion - Credit Inflated the Housing Bubble</a>.
What is a Balloon Mortgage and How to Choose the Right Lender?
Posted February 18, 2009 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceA balloon mortgage is a short term loan, which unlike a regular mortgage, isn’t paid off completely in regular payments. Instead, you are left with a portion of the principal amount, which then has to be paid off in a lump sum. This outstanding amount is also sometimes known as a balloon payment. Most balloon mortgages, sometimes called bullet loans have a term of between five and seven years, although 15 year terms have also become more popular in the last few years.
Suppose you buy a $100,000 home and take out a five year balloon mortgage. Because the loan is amortized over the normal 30 year period, your monthly payments will still be based on that timeframe. They will consist of mainly the interest, somewhere between $700 and $850 per month. At the end of the five year period; the actual term of the loan, you will have to come up with the balance. This balance is going to be close to the purchase amount, all you have been paying so far has been mainly the interest.
Just like most other financial transactions, there are advantages and disadvantages of taking out a balloon mortgage. Perhaps the biggest advantage of a balloon mortgage is that you generally do not need to come up with a substantial down payment. The monthly payment amounts are generally lower than they are with other types of mortgage. Balloon mortgages usually also come with lower interest rates. Just as with a conventional mortgage, you also have the option of making an extra payment every month. And as the interest rate is fixed, monthly payment amounts will not increase even if interest rates in general do increase.
Qualifying for a balloon mortgage may be easier than qualifying for all other types of mortgages, making it easier for many people to be homeowners. In addition, many buyers can qualify for a larger home due to the fact that the interest rate and the monthly payments are lower. The application process for a balloon mortgage is much the same as for any other type of mortgage. You will still need to qualify as far as credit and income are concerned. Make sure you understand the options for refinancing at the end of the loan and make sure you verify with your lender that there is no possibility of losing that option.
A balloon mortgage does however have several disadvantages. The most obvious disadvantage is the fact that you will have to pay a substantial lump sum at the end of the loan period. A balloon mortgage can also potentially cost you more money during its term, if interest rates increase to more than five percent above your existing balloon interest rate, you will have to go through the process of requalifying all over again. Apart from the potential extra cost, it can also be time consuming to refinance the loan; however some balloon mortgages come with a built-in refinancing option.
Many people take out a balloon mortgage assuming that they are going to sell the house before the loan comes due. This makes the balloon mortgage an ideal option for those looking to buy and sell quickly in order make a quick profit, or to “flip the house” as it is commonly known. The obvious disadvantage with this method is that the house may not sell as quickly as you had intended or for the price you desired. You may end up having to sell at a lower price just to eliminate the substantial lump sum payment that comes with the balloon mortgage.
Choosing the right lender is almost as important as choosing the right loan. You will want a lender who is reliable and helpful, remember, they will be part of your financial life for the next few years. It’s especially important when it comes to a balloon mortgage, a somewhat specialized product which the lender is experienced in selling. It is a good idea to try to get recommendations from friends, family or work colleagues who have already taken out a balloon mortgage. Regardless of which lender you choose, a balloon mortgage can be complicated and confusing. Just make sure that your lender explains everything and that there are no hidden charges or fees. They are required to give you an estimate of the closing costs.
Clearly, a balloon mortgage is not for everyone. Many buyers only take out a balloon mortgage if they intend on selling the property before the term of the loan is up. Many private investors also benefit from balloon mortgages when loaning money. They don’t want their money tied up for a 30 year period. As with any financial transaction, especially one of this magnitude, you should always seek professional advice before signing the papers.
Shawn Thomas is a freelance writer who writes about topics and financial products pertaining to the mortgage industry such an adjustable rate mortgage available from a <a href="http://www.absolutemortgageco.com/"> mortgage lender </a>
No Comments | Tags:Commercial property mortgages — what borrowers should do
Posted February 18, 2009 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceCommercial property mortgages are generally used by businesses to acquire business assets, business expansion, business real estate refinance etc. This type of loan is secured by collateral in the form of commercial property, which will be used by the lender to recover the full amount of the loan outstanding in the event of default on the part of borrower.
There are mainly three sources of commercial property mortgages - banks, third-party lenders and commercial mortgage brokers.
Banks are usually the first stop for any kind of loans and commercial property loans are no exception, however borrowers with a bad credit record or who are new to the business may find getting approval from the banks rather difficult. Third party lenders usually serve such borrowers. They can provide mortgages more quickly and with less documentation. Third-party lenders charge a significantly higher interest rate than banks.
Commercial mortgage brokers don’t provide mortgages directly. Instead, they investigate many banks and lenders to find you the right mortgage suitable for your business and at the most competitive price.
While commercial property loans are a very common business activity, the requirements to qualify for such a loan are quite strict. However if all the requirements are met and the application is found creditworthy, it typically takes around 60 days to disburse the loan. Following is a discussion on the steps commonly required of the borrowers.
Steps to be taken by the borrowers
Property hunting: This is first and foremost requirement, the borrower needs to have finalized a building or land before going for the commercial property mortgage. Even if the borrower has the buy to let commercial mortgage in mind, they need to have tenants to convince the lender of the repaying capacity of the property.
Find a lender: The next step is finding a lender. This is one of the most important steps as the right lender will not only approve the application quickly, but also will help the borrowers prepare for the application process. Here brokers can play a very important role as they are networked to a number of lenders and will help work out the best commercial mortgage rates and terms within a shorter period of time.
Complete a loan application: Here the actual process of loan application starts. It seems a pretty simple task but one should be very careful while filling in various details as any false or unsubstantiated (by valid documents) information or claim can seriously damage the success prospects. Remember, lenders are experts at scrutinizing the applications and it is very difficult to camouflage the actual facts from them. Rather give them the actual picture and explain the reasons honestly.
Provide documentation: This is the Holy Grail for the lenders and with good reason, all claims are just claims without proper documents to support them, with backing documents these claims become facts. So lenders ask for detailed financial statements from the previous three years, including business and personal records. These would include operating statements, bank records, tax returns and corporate financials. Prepare these documents carefully as they may make or break the commercial property loan application. Take professional help to prepare them.
Hire a lawyer: A property transaction is full of legal formalities, so hire a competent lawyer while purchasing a commercial property mortgage. They are experts at presenting and interpreting legal documents. They will help finalize the best terms and conditions.
Richard Heaney is a writer on business and finance specializing in writing on <a href="http://www.businessfinancequote.com/assetfinance.aspx">business asset finance</a>, <a href="http://www.businessfinancequote.com/">commercial property mortgages</a> and <a href="http://www.businessfinancequote.com/">buy to let commercial mortgages</a>.
No Comments | Tags:Future Loan Terms and Residential Real Estate Markets
Posted February 13, 2009 – 10:00 pm in: Foreclosure, Mortgage rates, Mortgage recovery, rating agencies, refinanceOne of the primary mechanisms for inflating the Great Housing Bubble was the widespread use of exotic loan terms including interest-only and negative-amortization adjustable rate mortgages. The appeal of interest-only and negative-amortization loans is the lower payments they offer, or their ability to finance larger sums of money with the same payment. These loan terms are unstable, and they may not be offered to future buyers. If these loan programs were eliminated, the financing sums would decline, and home prices would decline along with them.
Adjustable rate mortgages are very risky; it is a risk that has been forgotten, ignored, or not understood by a great many buyers. In an era of steadily declining interest rates, the risks of adjustable rates mortgages do not become problems and many forget (or never realized) the risks were there. Once prices decline to a point where the loan balance is greater than the value of the property, mortgage holders are unable to refinance when their mortgage reset comes due. Most often this will result in a foreclosure. In fact, this is the primary mechanism of the decline, and it will also prevent any meaningful appreciation for years to come.
Of all the factors that contributed to the inflation of the Great Housing Bubble, the negative amortization loan with its offers of extremely low initial payment rates was the primary factor that pushed prices higher than anyone could previously imagine. Toxic loan products, or as the lending industry likes to call them, affordability products, distort the traditional measure of the debt-to-income ratio. The debt-to-income ratio is calculated with an assumption of a 30-year fixed rate mortgage, when in reality, borrowers were using interest-only and negative amortization loans to keep their debt-to-income ratio to manageable levels.
Since adjustable-rate mortgages of all types performed poorly during the collapse of house prices, and in particular the negative amortization loans, it is likely these loan terms will be curtailed or eliminated in the future. These loans are inherently unstable and prone to high default rates due to the escalating payments that can, and often do, result from their use. The widespread use of these loans destabilizes home prices by detaching them from fundamental valuations. The use of these loans creates the very conditions in which they poorly perform.
People who purchased during the bubble rally at inflated prices using these loan terms were risking that these terms would always be available to buyers in the market because without these terms, future buyers would not be able to finance the inflated sums necessary to allow a bubble rally buyer to get out with a profit. Without these exotic loan terms the Great Housing Bubble could not stay inflated.
<a href="http://www.thegreathousingbubble.com/author/">Lawrence Roberts</a> is the author of The Great Housing Bubble: Why Did House Prices Fall?
Learn more and get FREE eBooks at: <a href="http://www.thegreathousingbubble.com/">http://www.thegreathousingbubble.com/</a>
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