The Newest, Latest, Greatest, Fastest, Cheapest, Most Revolutionary Mortgage
There’s a new kind of mortgage, and it’s taking the refinance world by storm. The promoters of this new kind of loan claim that you can pay it off in full in eight years without changing your budget at all! This sounds like it would be ideal for any homeowner. Let’s take a look at this mortgage and see if we can figure out if it is really all its cracked up to be.
This new kind of mortgage is commonly referred to by many different names, but because its purpose is to accelerate the paying off of a mortgage, we will refer to it as an accelerating mortgage. This accelerating mortgage makes use of compounded daily interest, instead of, monthly interest. It also makes use of the fact that the borrower and co-borrower deposit their entire paychecks into a mortgage account each time they get paid. Then, they actually use their mortgage account as their checking account and pay their regular monthly expenses by writing checks against the mortgage account. The process of depositing money into the mortgage account before using it for everyday expenses saves interest because of the daily compounding used by the accelerating plan.
What the advertisers for this mortgage don’t mention is, in order to pay off the mortgage very quickly, like in 8 years or so, each month you need to leave more money in the mortgage account than the amount the regular 30-year mortgage payment would be. The mortgage writer or broker will refer to this as your monthly savings and ask if you put aside 10, 15, 20, 25 or more percent for your savings on a monthly basis. The amount you tell him will be the extra amount you will be expected to leave in your mortgage account each month.
I see three problems with this type of mortgage financing. First, the majority of people close on their new houses in a tapped out condition. They save for years to accumulate their down payments and then they buy the most expensive houses they are able to make payments on. To them, their savings is the equity in their houses.
Second, if you have the ability to pay in an extra 10, 15, 20 or 25 or more percent of your salary toward any mortgage, you will pay it off a whole lot sooner than 30 years. For instance, it will take 30 years to pay a $200,000 mortgage at 6% if you are paying the scheduled monthly amount of $1199.10, but if you add $800 to this payment each month, your mortgage will be paid in 11 and one-half years.
It is true, that when comparing an accelerating mortgage with a regular 30-year fixed mortgage, that has the same parameters (principal, interest and term); the accelerating mortgage will reach 0 more quickly than the 30-year mortgage will. However, it would be a matter of several months sooner, not 22 years as some of the advertisements for the accelerating mortgage would lead you to believe.
So, what’s wrong with paying the same amount into a mortgage account, and still getting it paid off sooner? Nothing! But here’s problem number three: an accelerating mortgage uses a HELOC. (Home Equity Line of Credit) there are some things you should know about HELOCs. First their interest rates are usually higher than a conventional 30-year mortgage interest rate. Second, they are adjustable-rate mortgages. On top of that, they have no cap and they adjust every month. What this means is that if you find a fixed rate 30-year mortgage at six percent, you know that in four years that mortgage’s interest rate will be six percent. With a HELOC, you may find one at six percent but in four years you could be paying thirteen percent. So much for paying your mortgage quickly, because as you know, when interest rates rise, so does the monthly payment.
We are now in a time in American history, where interest rates are relatively low. With inflation under control, it looks as though interest rates are trending downward. It may well be that the current interest rate downtrend will continue well into 2008 when it will test the post-1960’s low of 4.75 percent. After that, you never know what the future will bring.
In January 2009, the U.S. will be inaugurating a new president. Many of the candidates running for the high office would like to reverse the free trade policies of the last three presidents. These free trade policies have in large part, brought us the robust economy along with the low interest rates we have enjoyed since the mid ’90s. These candidates also want to end the George Bush tax cuts. These tax cuts have had a tendency to cancel the inflationary effects of higher oil product prices. Some of these candidates also want to institute national health-care. It has been proven that private industry is more efficient than government run entities. Private industry money gets reinvested and creates more money. When money goes to the government as in government run health-care, it is being sent down a one-way dead-end street. This is a very inflationary scenario, and inflation means high interest rates.
Not long ago, I wrote an article about biweekly mortgages. In this article, I called the biweekly plan a scam. I don’t feel the same way about the accelerating plan. I think the accelerating plan is creative and in true mathematical terms, it would pay your mortgage off a little sooner than a regular mortgage, if rates stayed flat. The problem is, at least, the way I see it, there is a potentially unstable interest rate environment on the horizon. I also see some of the promotions for this mortgage as misleading and this makes me worry. Throw in the fact that I have never known anyone to institute an accelerating plan and then pay it off in the prescribed short term, and this makes me see the accelerating plan as speculative. Therefore, I’ve got to believe that for the time being, a fixed-rate mortgage is the best way to go.
Ed Lathrop is a successful Real Estate investor. He has developed EzCalculator, a Mortgage Calculator that calculates anything to do with mortgages. EzCalculator includes the famous “How to Make $100,000 on Your Mortgage” calculator. Come visit this free site at http://ezcalculator.com
What Is A Reverse Mortgage And What Are Its Benefits?
When it comes time to think about the future because you are getting older and closer to retirement, you may want to consider getting a reverse mortgage for your home. This is a rather new thing among mortgages, but it can provide you with a stable income until you no longer have need of the house. Here are some things you should know about a reverse mortgage.
The idea of a reverse mortgage is to provide you with an income in your senior years when your income level may be lower or nearly non-existent. To start with, you must be at least 62 years old, and have some equity in your home. Other considerations of how much you can get include the value of the home and how much remains on the mortgage that is unpaid.
What Is It For?
The goal of getting a reverse mortgage is to tap into the equity of your home and use it to provide you with cash so that you can either meet upcoming expenses (possibly medical), or simply use it to maintain a certain level of living. Payments from the mortgage company to you can be obtained in a number of ways, including monthly payments as long as you live in the house, a lump sum, monthly payments over a term, payments plus a line of credit, and combinations of these things. Your options and amount you can receive are based on things like age and the amount of equity that you have in the house. The older you are the larger payment you will be eligible to receive.
How Does It Work?
A reverse mortgage works differently than a regular mortgage. The first difference is that they pay you instead of you paying them. You make no payments until you, or those also named, no longer live in the house. At that time, however, the full amount becomes due, and generally will need to be sold in order to make the payment.
Who Qualifies?
Another difference that applies to a reverse mortgage is that it does not matter how much you make in income at any time. Since you are not paying them - you can automatically qualify. There are, however, some things that remain the same as a regular mortgage - the fees and closing costs. When you no longer need the house, that is, either you move to a nursing home, or, at death, the house will be sold and you will pay back the principal and the interest. Any mortgages that exist on the house when you get a reverse mortgage will automatically be paid off at that time.
Many people find that reverse mortgages can be rather confusing. This demands that you take a little extra time to learn about them well enough to know what is involved. Different lenders have different features, and you need to know that there are scams out there that deal with reverse mortgages. Compare each of them carefully. Most agencies, especially the Federal ones, will require counseling to help you understand all the options of a reverse mortgage before you apply.
Joe Kenny writes for the UK personal finance sites http://www.ukpersonalloanstore.co.uk/mortgages.html and also http://www.nationsfinance.co.uk/mortgages/
What is a Home Equity Refinance?
When it comes time to do a home equity refinance there are several terms that you should be familiar with. Many people do not understand how a home equity loan works or even what home equity is. There are two basic types of loans you can get when it comes to home equity; an equity loan or an equity line of credit.
So what is home equity? Quite simply it is the difference between what you still owe on your home and its appraised value, or what your home is worth. Here’s a simple example. If your home is appraised at $150,000 and you still owe $50,000 on your mortgage the equity in your home is $100,000.
When you take out an equity loan, or refinance your current loan, you are borrowing against the value you have built up in your home. This type of loan will give you a one time lump sum in the form of a check that you can do whatever you choose with. You will have to pay it with a monthly payment over a set amount of months, much like a mortgage.
A home equity line of credit works a little differently. You still are able to borrow a specific amount of money based on the value of your home, but the money is not paid out in a lump sum. You can tap into your line of credit as needed, much like we do with a credit card. The nice thing about a home equity line of credit is you only have to make payments on the money you have borrowed. If you have a $10,000 line of credit and your use $3,000 to do some home remodeling you will only make payments on the $3,000. It is important to remember that just like any other loan you will be paying interest on any money you use out of your credit line.
When you are looking to do a home equity refinance loan you must realize that you are using your home as the collateral in order to get the loan. You are guaranteeing your ability to repay the loan against the value of you home. If for any reason you cannot make your payments the lender has every legal right to foreclose on your home so they can sell it to cover the value of the loan.
One of the best reasons to do a refinance your current home equity loan is to get a lower interest rate. If your original loan had a high interest rate you can save quite a bit of money if you are able to obtain a lower rate.
If you are thinking of doing a home equity refinance then do some research and get at least four quotes from reputable lenders to see which package may work best for you.
To find out more about doing a home equity refinance please visit the website Home Equity Loans at http://home-equity-loan.home-choices-net.com
Fixed-Rate or ARM - What Are The Advantages?
All mortgages tend to fall into one or two basic categories - they are either a fixed rate mortgage or an adjustable rate mortgage. Among these two categories, however, there are many different options that allow you to get a mortgage that suits your personal needs. Here are some of the advantages of these two basic types that you need to know if you are considering buying a house.
A fixed rate mortgage gives you the predictable leverage of knowing that your payments and rate of interest stay the same throughout the length of the mortgage. There are no changes or adjustments of any kind during the term of the mortgage. The obvious advantage occurs when the interest rates, driven by the economy, changes for the worst. Since you are locked in to your rates, you will not be effected. On the other hand, a fixed rate mortgage may backfire, if the interest rates do drop during economic boom times. This could easily leave you paying much higher rates than others.
The advantage of fixed rate mortgages is obviously the stability it provides - you always know what your payment will be. There are a number of options that will give you greater or lower payments, though, such as the longevity of the mortgage. You can choose from 15-year mortgages, and then at various intervals, all the way now up to 50 year mortgages. The longer the loan, of course, the higher the amount of interest that you will pay throughout the term of the mortgage.
An adjustable rate mortgage, provides you with certain advantages that depend on both your own circumstances, as well as the economy. Most adjustable rate mortgages have a fixed rate portion of the loan, which typically, comes in 1,3,5,7, or 11 years. This portion of the loan allows you to enjoy a fixed rate for that period of time that you choose. This can be really good if the economy is doing well and the rates are low. It is this feature that could also allow you to get a larger house than you might be able to afford if you went for a fixed rate mortgage.
Adjustable rate mortgages lock you in, for a few years to the rate at the time you bought the house. Usually this means that you have a lower rate than anyone who buys a fixed rate mortgage at the same time. At the end of the fixed rate portion, though, you will see an adjustment made that will reflect the market - whether it is good or bad. This means that you could see quite a large jump all of a sudden. It could be hundreds of dollars more - or it could even be less than what you were paying earlier - if the market is that good. An adjustable rate mortgage will usually have some limits on the amount of an increase there can be in any year. This increase, however, is one of many. Depending on your contract, it could mean that your adjustments are made on either a monthly or yearly basis.
In either case, there are pros and cons - all depending on the economy. The good thing is that there is always the possibility of refinancing - if need be. Be sure to compare any offers you receive in order to determine the best buy for your situation. Get several offers from different companies in order to see the possibilities, and you may want to get some advice from outside sources as to whether a fixed rate or adjustable rate is the best for you.
Joe Kenny writes for the UK personal finance sites http://www.ukpersonalloanstore.co.uk/mortgages.html and also http://www.nationsfinance.co.uk/mortgages/
Mobile Home Refinancing
For mobile home owners the thought of refinancing does not normally cross their minds. While they may have some sort of financing in place, usually through the manufacturer or mobile home park in which they live, many do not realize that they can refinance their current loan much the same way as they would if they owned a conventionally built house. Many lenders treat mobile and manufactured homes the same as stick built homes.
There are any number of reasons to refinance your mobile home including consolidating debt, paying college tuition, or even purchasing a car.
As with any loan refinance you will be paying off your current loan with the new loan that will have better terms that should save you money each month. The most important thing to look for in any refinance opportunity is a lower interest rate. This will lower your monthly payment and allow you to do other things with the extra money.
Another advantage of refinancing you may want to take advantage of is shortening the length of the loan. If you can easily afford your current monthly payment then by getting a lower interest rate you can pay off your loan more quickly.
If your mobile home is located in a mobile home park or on your own private land chances are good you can get financing for it. The only difference may be laws and regulations that are specific to the state you live in because of the way in which mobile homes are built. Talking to your lender will help clear up any issues you need to be aware of when it comes to loans on these types of dwellings.
The costs associated with a mobile home refinance will be the same as any mortgage for a conventional home. There will be closing costs which can either be paid up front or rolled into the loan if paying them out of pocket is not an option. While rolling these costs into the overall loan is a good option to be aware that it will be subject to the interest you are paying on the loan.
Another way to save money over the life of the loan is to buy down the interest rate with points. Points are an up front fee that is paid to the lender with each point dependent on the overall loan amount. Most lenders base the amount their points are worth at one percent of the total loan amount. For each point bought the interest rate will drop one percentage point. Points are a good investment if you plan on owning your mobile home for a long period of time.
While there may be a few differences with mobile home refinancing for the most part the process is identical to refinancing a traditional home. By working with your lender you will be able to come out with a loan that works best for you.
To learn more about mobile home refinancing please visit the website Home Equity Loans at http://home-equity-loan.home-choices-net.com
What Advantage Is There With Mortgage Plans That Have Bi-Weekly Payments?
Some mortgage companies allow you to set up your mortgage so that you are making bi-weekly payments. This allows you to pay off your mortgage at a much faster rate. While certainly not for everyone, here are some things that you need to know as to why you may want to consider getting your mortgage with bi-weekly payments.
The most beneficial bi-weekly payment option, which is a true bi-weekly mortgage payment plan, will take payments out every two weeks. Yes, they like the automatic payments - probably better for you, too, that way you do not have to worry about late payments. The first payment is half of your monthly mortgage payment, and then the second one is also half. All together, you will have paid the equivalent of 13 months of payments in only 12 months.
The difference in programs that have bi-weekly payments makes a real difference in how much you end up paying. This means that you need to understand exactly what happens with the payments when the company gets them. What you want is to have your lender apply the payment to the mortgage on the very day that they receive it. This will give you a nice reduction in interest.
Other lenders, not wanting to lose some of that sweet interest, put your payments into another account, and then when they have a full payment for each month, pay for that month. Also, at the end of the year, when they have the full 13th payment, then it gets applied. What a difference it will make over the years in the interest that you pay when the lender fools around like this with your money. What you want is for the payment to be credited to your account when you make the payment.
A similar effect can be obtained if you make an extra payment each year on your own, but the savings will not be quite as good. Being that with a real bi-weekly payment plan, you could pay off a 30-year mortgage in about 18 to 22 years, the potential savings are tremendous. It is possible to save about $34,000 for each $100,000 that is owed.
Anytime that you make extra payments on your mortgage - the effect is the same - reduced interest rates. Bi-weekly payments allow you to have big savings on your mortgage, and will also allow you to build up equity in your home at a much faster rate, too.
If you already have a mortgage, your lender may not allow you to easily switch to a plan with bi-weekly payments. Since it involves more work for them, they may not want to be bothered and may not even offer such a program. Even if they have it, about the only way some lenders would allow you to make the change would be for you to refinance your mortgage and then all fees would apply, including points.
A bi-weekly payment mortgage plan is also a little higher in interest because of the added work for the mortgage lender. Be sure to look at all the fees that may apply, and then compare offers thoroughly before you buy.
Joe Kenny writes for the UK personal finance sites http://www.ukpersonalloanstore.co.uk and also http://www.selectloans.co.uk
Is Mortgage Financing Possible With Bad Credit?
Being able to buy that new home is still an option - even if you have bad credit. Lenders are definitely getting softer on their requirements for financing mortgages for those whose credit is not perfect. Here are some things that you need to know about getting your next home financed with bad credit.
The first thing that you should know is that getting the best deals in mortgage financing is only for those who do have good credit. Still, though, there are deals available that can put you into that house.
A zero down mortgage will allow you to possibly get financing and not even have to put anything down. In fact, it may be possible to get as much as 107% of what you need, and that could even include the closing costs. Depending on your actual credit score, this type of mortgage can be obtained with a credit score as low as 580, with documentation. The way it works is to give the borrower two mortgages, a first and a second. Typically offered in an 80/20 or 75/25 arrangement, this allows you to have greater savings since that process will not require private mortgage insurance.
Another way to reduce the payment is to be able to put something down - the larger the better. Although you may want to get a mortgage as cheaply as possible, you can reduce the mortgage payments, and possibly the interest, if you can put something down to even 3 to 5% will make a difference. This will show the lenders that you are making enough to save something, and that you have some control over your spending, which is always a good thing to them.
Other deals will simply include the more traditional type of mortgages. This type of financing for people with bad credit is available even for lower credit ratings than that. Some lenders will extend a mortgage for someone with a rating of 500, and some will probably even go lower than that.
Even though you can get a mortgage on your new home, it may be more important to wait and rebuild your credit first. Although it means holding on to those dreams a little while longer, by rebuilding your credit first, you can not only get a better interest rate, but you can also get a larger mortgage, and lower payments. If you take some steps quickly, rebuild your credit to closer to where it should be, then you can get those rates you want, a nice house, and payments that you enjoy even more. Besides, this could even allow you to have some extra money to do some of those other things you want, too.
Of course, you want to be very careful about the type of mortgage you get. This means that you take the time to learn about the different mortgage types, such as fixed rate and adjustable rate, and also know the terms. Unfortunately, some lenders are looking for people with bad credit, knowing that they may be a little more desperate to get a mortgage, and may do so hastily without carefully reading the agreement, or really understanding what they are signing. Only by being careful and understanding what is involved can you be sure to avoid trouble.
Joe Kenny writes for the UK personal finance sites http://www.nationsfinance.co.uk/mortgages/ and also http://www.ukpersonalloanstore.co.uk/mortgages.html
Using Debt Consolidation Refinance to Pay Off Your Debt
For the vast majority of people living with too much debt is a burden that threatens the very foundation of their financial lives. Many financial experts like to distinguish between good and bad debt, but when there is too much of both it all seems bad no matter how you look at it. It all has to be paid no matter how good or how bad it may be. If this is you then a debt consolidation refinance loan may be the best way to get some relief.
If you are swimming in a pool full of debt that includes credit cards, car payments or medical bills it may be worth looking at some form of debt consolidation loan. This type of loan has become very popular in recent years because of the ability to take all your monthly payments and roll them into one payment at a significantly lower interest rate. The nice thing about this type of loan is that the interest is deductible on your income taxes.
The easiest way to do a debt consolidation refinance loan is to borrow money against the equity built up in your home. Your equity is value of your home minus any outstanding mortgage or second mortgage you may owe on it. This is important to remember because you are using your home as collateral so it’s imperative that you are sure that you can meet the monthly payments. You can use this equity to pay off any high-interest credit cards and lower your monthly payments at a lower interest rate.
But, and this is a very big but, you need to destroy all your credit cards and cancel the accounts if you do this. The temptation to start using them again is more then most people can handle and if you are not careful and rack up more credit card debt you may be in even worse financial shape. And if you default on your home equity loan the lender can foreclose and seize your home to recoup the cost of the loan. It is important to use a debt consolidation refinance loan as part of an overall program to get out of debt and stay out of debt.
Typically the interest rate you will pay on a debt consolidation loan is much less then on credit cards or other types of loans you may have. This is the main reason that these types of loans are so popular. With a lower rate more of your money can go towards paying the principal getting you debt free in a shorter amount of time.
Getting out of debt should be a priority for everyone. Debt is debt and the more you have the greater your chance of never experiencing true financial freedom. With that being said doing a debt consolidation refinance can be a good starting point for getting your finances under control to a point where you can breath easier and start building a brighter financial future.
To learn more about debt consolidation refinance please visit the website Home Equity Loan at http://home-equity-loan.home-choices-net.com/home-refinancing/Debt-Consolidation-Refinance.html
Helpful Remortgage Information That You Should Know
If you borrow money form a lender and pledge your home as security for the loan then this is commonly known as a mortgage. It is also often known as a home equity loan because it is secured against the equity in your home. The terms and conditions of the mortgage are set by the lender and they set such things as the manner in which you are to pay the instalments; when you have to pay the instalments; the term of the loan; the fact that the lender has the right to repossess your property should you default on the payments; and the interest rate. If you are not happy with any of the terms, in particular the one governing the interest rate that is to be applied to the loan then you should consider a remortgage.
A remortgage is where you take out a further mortgage, normally with a different lender, and use the proceeds of the new mortgage to pay off your existing mortgage. In this way you can often get better terms and conditions and in particular a lower interest rate.
If you built or bought your home with a mortgage and been paying a high rate of interest on it you may consider a remortgage. It could be that the loan market is offering lower interest rates in general or that you in particular are now able to get a lower rate of interest. This could be due to your credit score or rating having improved since you took out your mortgage. This is the time to remortgage and save huge amounts of money over the term of your loan. A lower rate of interest means a cheaper loan.
You may have more equity in your home now because real estate prices have gone up. You could consider a remortgage to allow you to use some of that extra equity to increase your mortgage. If you get a lower rate of interest you may be able to borrow more and still pay less per month.
If you do have spare equity in your home you may be able to do a debt consolidation remortgage. This is where you refinance your mortgage and increase the loan to enable you to not only pay off the existing mortgage but also your unsecured debts such as loans and credit cards. As you are using your house for collateral you are likely to be able to get a lower rate of interest than you the rate on the unsecured debt.
If you can afford to pay a bit extra per month you may consider a remortgage and reduce the term of the mortgage. If you reduce your mortgage term the mortgage will cost you a lot less. However, it will cost you more each month because you need to pay more of the capital each month to repay the loan over the shorter period of time.
Shelley Green is the owner of http://www.mortgages-click.com, a site that specializes in mortgages. Shelley Green is also the owner of http://www.loans-click.com and http://www.refinance-click.com.
Why Using A Mortgage Broker Can Save You Money
Being able to get the house you want should make you happy as a lark. But what if, after you move in, you find out that you may have been able to get a much better financial deal than what you got? Would you still be as happy as a lark? It is quite possible to get the best deal in the first place by using a mortgage broker. Here is how a mortgage broker can save you some money.
It needs to be stated from the start that a mortgage broker will not always be able to get you the best deal, but could, probably, in most cases. So many people, however - too many people, in fact, are still accepting the first offer they are given for their mortgage. Getting that good deal, however, takes more than just comparing loans.
A bank lender will only be able to offer mortgage products that their own bank creates. These products, of differing values, are limited. Sometimes a lending agent may not want to compare the different products his or her bank offers in order to find an exact match for your needs. At other times, a bank agent will work very hard for you.
A mortgage broker, however, only gets paid when a sale is made - in other words - when a mortgage is signed. This means that it is in their best interests to get for you a highly competitive deal. They deal with many different lending companies on a regular basis and know what each of them are willing to do - in the very recent past. When you contact a mortgage broker, there often will not be any fees. They will then get your information from you and send it to several companies that they think will give you a very competitive offer.
Another benefit comes from the way that they perform their services. A banker will give you a more institutionalized service, and your interaction with him or her will be more formal. A mortgage broker, however, will be glad to take more personal time with you, making you feel more welcome and will probably spend more time with you and for you. In fact, he or she may even come to your house.
Mortgage brokers have access to mortgages at a slightly less price than a banker might provide. This is because they deal with wholesale prices rather than the retail. Their service offered to lenders means a savings for the lender because the lender does not need to maintain sales staff except when a sale is made.
Even when there may be a problem with your credit, the value of a mortgage broker can really be seen. Because they know many different lenders and each of their specialties, they can work to find lenders that can give you a great deal. They would already know which lenders regularly give money to those with bad credit or whatever special need you may have. A bank representative, however, while still able to offer a number of products, is limited to only what their branch offers and the special deals they give.
Joe Kenny writes for the UK personal finance sites http://www.ukpersonalloanstore.co.uk/mortgages.html and also http://www.nationsfinance.co.uk/mortgages/
