The Mortgage Jungle
Posted by: admin in Real Estate, tags: Adjustable Rate Mortgage, Adjustable Rate Mortgages, Crises, Fixed Rate Mortgage, Greed, Jumbo Mortgage, Jungle, Mortgage Interest, Mortgage Payment, Subprime Mortgage Rate
Owning a home is one of the main ingredients of achieving the “American Dream.” You’re probably reading and hearing about the mortgage crisis in America right now. It’s real, but the main thing to remember is that, like all crises, it will pass – eventually.
The mortgage crisis that we’re facing right now is the direct result of predatory lending practices by lending institutions. People were “qualified” for a mortgage for which they weren’t actually qualified. The subprime mortgage rate combined with adjustable rate mortgages and unadulterated greed was like a balloon filled with too much air. It burst! Lots of people got hurt, and the end isn’t yet in sight.
Nevertheless, owning a home is still part of the American dream, and people are still buying homes. If you are one of those that dream of owning your own home, there are some facts about mortgages that you do need to be aware of. Mortgages are not all created equally.
The Fixed Rate Mortgage: A fixed rate mortgage means that the interest rate will not change for the duration of the loan. If the mortgage is for 30 or even 40 years, the rate that you agree to when you buy the home is the rate that you will still be paying when you make the final mortgage payment. The interest of a fixed rate mortgage isn’t tied to market fluctuations – good or bad.
The Adjustable Rate Mortgage: Unlike a fixed rate mortgage, the interest charged on an adjustable rate mortgage is tied directly to market fluctuations. If you get the mortgage when the interest rate is low, when the interest rate rises, your monthly payment will increase. On the other hand, if the interest rate decreases, your mortgage payment will decrease.
There are other types of mortgages available; the balloon mortgage and the jumbo mortgage are two examples. The main thing is that you investigate your options before you sign on the dotted line.
By: Milos Pesic
Commercial Mortgage – Flexible Finance Solution For Business Intended Properties
Posted by: admin in Finance, tags: Balloon Payment, Bank Of England, Business Purposes, Credit Score, Fixed Rate Mortgage, Interest Rate Options, Rate Of Interest, Value Ratio, Variable Rates, Warehouses
Commercial mortgage is the loan purchased by a borrower to finance a property for business purposes. The lender has a legal claim over the financed property until and unless the borrower repays the loan in full. With the help of commercial mortgage, one can purchase:
• Shops and offices
• Factories and warehouses
• A piece of land
• A brand new building
Commercial loan can also be used to buy an already existing business. For example, a running hotel or a retail store can be purchased using commercial mortgage. Here are some other aspects of commercial mortgage that are useful to know.
Eligibility Criterion’s
A Commercial Finance expects the borrower to fulfill certain eligibility criterion’s for the loan. For example, a good credit score is one of the most important requirements for the approval of commercial mortgage. Loan-to-value ratio is another thing considered by the lender. It is the expectation of the lender from the borrower to make some contribution in the purchase. Stability and profitability of the borrower’s business is another factor that can affect the lender’s decision to approve commercial finance.
Interest Rate Options
The commercial loans are available with two interest rate options. First is the commercial Fixed Rate Mortgage in which the rate of interest remains unchanged for a fixed term of the mortgage period. The standard variable rates are paid by the borrower once the fixed rate term ends. The second option is the commercial variable rate mortgage, in which the rate of interest changes according to the base rate decided by the Bank of England.
Commercial Mortgage Repayment
One way of repaying the Commercial Mortgage is through a set number of equal payments. Each payment consists of one part as the interest and remainder as the principal. A variation to this is the equal payments with final balloon payment. In this, a set number of small monthly payments are made with a final balloon payment at the end. Interest only payments require the borrower to pay only the interest through monthly payments while the principle is paid as a balloon payment at the end.
Benefits of Commercial Mortgage
The borrower retains the complete ownership of the property. The interest payments on commercial finance are tax-deductibles. Moreover, the borrower has the feeling of owning a commercial property while the monthly payments remain less than or equal to the amount he would otherwise pay as rent.
This is a boon to the small and big business owners of Mortgage. Make sure to deal with a reputed commercial lender.
By: Suzanne Wiiliams
Get Affordable Fixed Rate Mortgage Loan Rates
Posted by: admin in Real Estate, tags: Balloon Loan, Current Value, Fixed Rate Mortgage, Loan Forms, Minimal Percentage, Mortgage Rate, Mortgage Rates, Principal And Interest, Property Insurance, Rate Mortgages
A fixed rate mortgage loan is a mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may float.
Other forms include interest only mortgage, graduated payment mortgage, flexible rate including changeable rate mortgages and tracker mortgages, negative payoff mortgage, and balloon payment mortgage.
Take to consideration that each of the loan forms above except for a direct changeable rate mortgage can have a period of the loan for which a fixed rate may apply.
A Balloon Payment for fixed rate mortgage loan, for example, can have a fixed rate for the term of the loan followed by the ending balloon payment.
Terminology may differ from country to country: loans for which the rate is fixed for less than the life of the loan may be called hybrid flexible rate mortgages.
This payment sum is independent of the additional costs on a home some periods handled in escrow, such as property taxes and property insurance.
Thus, payments made by the lender may change over period with the shifting escrow sum, but the payments handling the principal and interest on the loan will remain the same.
They are described by their interest rate which including compounding frequency, sum of loan, and term of the mortgage. With these three values, the calculation of the monthly payment can then be done.
The fixed monthly payment is the sum paid by the lender every month that ensures that the loan is paid off in full with interest at the end of its term.
This monthly payment depends upon the monthly interest rate expressed as a fraction, not a percentage, i.e., divide the quoted yearly minimal percentage rate by 100 and by 12 to obtain the monthly interest rate, the number of monthly payments known as the loan’s term, and the sum lent known as the loan’s principal; rearranging the formula for the current value of an regular allowance we get the formula.
They are usually more expensive than flexible rate mortgages. Owing to the natural interest rate risk, long term fixed rate loans will lean to be at a higher interest rate than short term loans.
The change in interest rates among short and long-term loans is known as the yield curve, which usually slopes upward. The opposite situation is known as an inverted yield curve and is relatively infrequent.
The fact that it has a higher starting interest rate does not indicate that this is a worse form of borrowing related to the changeable rate mortgages.
If the rates rise, the ARM cost will be higher while the FRM will remain the same. In effect, the lender has agreed to take the interest rate risk on a fixed rate loan.
Some studies have shown that the majority of creditors with flexible rate mortgages save money in the long term, but that some creditors pay more. The price of potentially saving money, in other words, is balanced by the risk of potentially higher costs.
In each case, a choice would need to be made based upon the loan term and the likelihood that the rate will increase or decrease during the life of the loan.
By: Ricky Lim
House Mortgage- Are They All the Same?
Posted by: admin in Real Estate, tags: Adjustable Rate Mortgage, Budget, Fixed Rate Mortgage, House Mortgage, Loan Mortgage, Modes, Mortgage Companies, Mortgage Company, Principal, Refinance House
Choosing the right house mortgage that perfectly fits your budget and need is very crucial. This will decide whether you will be able to pay your mortgage for the next years. Thus, knowing first the different types of house mortgage should be the first step to take for a successful house ownership. Having said this, you now know that not all types of house mortgage are the same. They may sound similar or may look similar, but each has its own nature and modes of rate computation. Let us take a close look on the 2 types of house mortgage.
Fixed-rate mortgage.
Fixed-rate mortgage is still the more popular type of house mortgage among the two. This is because the fixed-rate mortgage fee does not change throughout the life of the loan regardless of the changes in the national interest rate. It has become more attractive to future home owners since they do not have to worry of the possibility that the mortgage rate will go up in the future, which can suddenly become unaffordable. Also, future home owners can easily budget their payment more easily with the fixed-rate mortgage making is more convenient in any year.
However, to be able to qualify for the fixed-rate mortgage, higher income is required. Also, if the interest rate suddenly goes down during the course of the loan, the borrower has to refinance their house in order get a lower rate as compared to adjustable rate mortgage where the borrower can automatically compensate with lower rate.
Another important thing to take note of with fixed-rate loan is the promotional rate mortgage companies are offering. Often, they give low initial payment the will run for several months and will shoot up after the promo expires. Moreover, during the first years of loan, your payment will go mostly to the interest rate and not to the payment of the principal which means that the mortgage company still owns most of your house for a while.
Generally, the fixed-rate mortgage is offered either in 15-year loan and 30-year term. The 15-year loan has higher monthly payment at a lower rate. The 30-year loan on the other hand has lower monthly payment but has a slightly higher interest rate. Choosing between the two relies on your capacity to pay.
Adjustable Rate Mortgage.
The adjustable rate mortgage (ARM), also know as variable rate mortgage is a short-term fixed-rate mortgage. Meaning, a fixed-rate is set from the first year of the loan and runs for the next 3, 5, or 10 years. After the fixed-rate expires, an adjustment will be made annually depending on the current interest rate condition. For example, the 30-year 10 to 1 adjustable rate mortgage has a 10-year fixed-rate mortgage, say, at 6.03%. On the 11th year, the rate will adjust on the current national interest rate and will change every year for the next 20 years.
The good thing about the ARM is that you can compensate on possible future lower rate. Also, compared to fixed-rate mortgage, the interest rate for the ARM is lower. Applying for the ARM is also easier too since the rate is lower and affordable.
The main drawback for this type of loan, however is that the rate can suddenly shoot up during the course of your loan, which can make the mortgage payment becomes unaffordable.
Based on this information, base your choice in the following criteria:
1. How much you can afford?
2. How long are you planning to stay at your house?
3. What is the interest rate’s current trend?
4. How much are you willing to gamble?
In general:
1. The type of loan approval depends on how much you can afford together with other factors such as your credit score, money at hand, assets, information about your purchase, and debts.
2. If you are planning to stay at the same house for years, a fixed-rate mortgage is a good choice.
3. If the interest rate’s current market trend is going up, the fixed-rate mortgage is a safer choice but if it is going down, then ARM can be a good choice.
4. If you do not want to worry about the fluctuation of the interest rate, fixed-rate mortgage is perfect for you; if, however, you do not care about the future changes on the interest rate, then ARM is a fine choice.
By: Nathalie Fiset
5 Year Fixed Rate Mortgage Rates
Posted by: admin in Real Estate, tags: Business Real Estate, Commercial Mortgage, Commercial Mortgages, Creditworthiness, Fixed Rate Mortgage, Fixed Rate Mortgage Rates, Graduated Payment Mortgage, Paying Off Mortgage, Property Insurance, Year Fixed Rate Mortgage
5 year fixed rate mortgage is a mortgage loan where the interest rate on the note remains the same through the term of the loan, as different to loans where the interest rate may change. Other forms of mortgage loans include interest only mortgage, graduated payment mortgage, changeable rate including changeable rate mortgages and tracker mortgages, negative paying off mortgage, and balloon payment mortgage.
Remember that each of the loan categories above except for a direct changeable rate mortgage can have a period of the loan for which a fixed rate may apply.
A Balloon Payment mortgage, for example, can have a fixed rate for the term of the loan followed by the ending balloon payment. Terminology may differ from country to country: loans for which the rate is fixed for less than the life of the loan may be called hybrid changeable rate mortgages.
This payment amount is independent of the additional costs on a home some periods handled in escrow, such as property taxes and property insurance. Therefore, payments made by the lender may change more than period with the adjusting escrow amount, but the payments handling the principal and interest on the loan will remain the same. There are different categories of commercial mortgage is a loan made using real estate as guarantee to secure repayment. Such as 5 year fixed rate mortgage.
A commercial mortgage is related to a residential mortgage, except the guarantee is a commercial building or other business real estate, not residential property. In addition, commercial mortgages are normally taken on by businesses instead of personal lenders.
The lender may be a partnership, incorporated business, or limited company, so assessment of the creditworthiness of the business can be more complicated than is the case with residential mortgages. In 5 year fixed rate mortgage no recourse, that is, that in the event of default in repayment, the borrower can only seize the guarantee, but has no further claim against the lender for any remaining shortage.
The common reason for this is twofold many laws extensively avoid the borrower from going after the lender for any shortage, and mortgages structured for sale as bonds give a higher priority to always receiving some sort of income and therefore require a sentence which permits the lender to take the property instantly, regardless of bankruptcy proceedings that the lender might be going through.
The 5 year fixed rate Mortgage in the in the globe, require the lender to simply make a monthly payment small sufficient to pay off the loan more than a 10 year period, need a balloon payment a total sum after a lesser period.
The lender most likely wills effort at that period to refinance the loan or sell the property. Thus there are two elements usually to the term of a commercial mortgage loan, the length of period allowed until balloon payment known merely as the term, and the paying off.
The length of the loan can vary from a matter of days to 10 years. If a loan had a 10 year paying off schedule, but a 5 year term it would commonly be referred to as a 5 year balloon with a 5 year payment schedule.
By: Ricky Lim
Mortgage Interest Rate Predictions For 2009 – 2010
Posted by: admin in Real Estate, tags: 30 Year Fixed Rate Mortgage, Facing Foreclosure, Financial Hardships, Fixed Rate Mortgage, Home Interest Rates, Loan Modification, Mortgage Lenders, Percentage Difference, Rate Home Loan, Theses
Even a small percentage difference makes a huge difference when is comes to mortgage rates. Homeowners looking to save the most money through refinancing or mortgage modification would benefit from having a good idea of what to expect from mortgage rates in 2009 and 2010. Here are my home mortgage rate predictions for the rest of this year through 2010, and how I made them:
4.69% was the average rate for a typical 30 year fixed rate home loan earlier in 2009. However, since these rates were so extremely low, homeowners rushed to mortgage lenders and banks to refinance or get a home loan modification. This quickly led to a record number of applications, and the mortgage lenders and banks got backed up with application from homeowners looking to save money. In order to slow down the amount of requests for refinancing or modification, the lenders needed to raise interest rates, in this case they did so by .5%. Right now a 30 year fixed rate mortgage can be had for around 5.19%. While theses rates are still very good, it made homeowners who just wanted to save money pause on applying, while homeowners who were truly facing financial hardships could still save their home. However, I think all homeowners will be happy with my mortgage rate predictions for the rest of 2009 and into 2010.
I predict that mortgage rates will drop to their prior lows of 4.69%, and this rate will last all the into 2010. Sometime around October 2009, I think the home interest rates will be lowered to this 4.69% rate in order to attract new customers, and help more homeowners who are facing foreclosure or other financial problems. I also think that this mortgage rate will last through April 2010 or so. Then will again be increased by at least .75%. So be sure to get a home mortgage refinancing or modification when the rates are, at least predicted by me, this low.
Homeowners facing financial hardships or losing their home should take action and do something about while interest rates are so low. Homeowners who are looking to save money and can wait, should.
By: Michael Petrone
Mortgage Rate Predictions For 2009-2010
Posted by: admin in Real Estate, tags: 30 Year Fixed Rate, Fixed Rate Mortgage, Homeowner Applications, Interest Rates, Lows, Mortgage Banks, New Wave, Paperwork, Rate Increase, Year Fixed Rate Mortgage
Mortgage rates have been all over the place this year, but recently have gone up. Homeowners who are able to refinance or modify their home loan when interest rates are lowest, stand to save the most money. Here are my mortgage rate predictions for 2009, and how I came to them:
Although still considered low, right now mortgage rates for a typical 30 year fixed rate mortgage are around 5.19%. This is a little higher than earlier in the year when mortgage rates were 4.69% for the same loan. However there is a reason the rates were increased, and a reason they will go back down again.
I think that mortgage rates were increased because of the surge of homeowners applying for a refinancing when the interest rate was 4.69%. This led the banks and mortgage lenders to become quickly overwhelmed with paperwork. As a result, interest rates were increased by .5% to stem the tide of homeowner applications. This rate increase was just enough to stop the flow of applications, but not enough that homeowners who need to save their home through refinancing wont be able to do so.
I predict that mortgage rates will drop again to their prior lows of 4.69%. I think that this will happen around October of this year, and these low rates will last through at least April of 2010. These low rates will almost certainly spur a new wave of homeowners looking to refinance. Mortgage lenders and banks will be better prepared this time around to handle all of the applications. Homeowners should wait a few weeks if they can, and watch the rates drop then make their refinancing move. Otherwise, if your at risk of losing your home, take action now. The longer you wait, the worse the situation will get.
By: Michael Petrone
Brief Overview of Mortgage
Posted by: admin in Real Estate, tags: Adjustable Rate Mortgage, Adjustable Rate Mortgages, Confines, Fixed Mortgage, Fixed Rate Mortgage, Lifespan, Low Interest Rates, Mortgage Loan, Mortgage Rate, Predictability
For many homeowners out there, the term “mortgage” is known all too well; this can either be a good thing or a bad thing. A mortgage is basically loan that is taken out to secure a particular house or property, but within the confines of a mortgage lays the promise by the borrower to pay back the mortgage. A mortgage has been a huge cause of financial problems for many individuals, especially if they do not pay it back on time. Considering that a mortgage is most likely the largest loan that an individual will ever take out, it would probably be best to follow the lender’s guidelines as best as possible.
When one applies for a mortgage, he or she does not merely apply for a mortgage as there are a few different types of mortgages. The four main types of Home Loans are: Fixed-rate mortgages, Adjustable-rate mortgages, Balloon/reset mortgages and reset mortgages.
Fixed-Rate Mortgages:
First time homebuyers will find comfort in a fixed-rate mortgage because one of the main advantages that come with a fixed-rate mortgage is the fact that it is stable. Regardless how long the term of your fixed-rate mortgage is, the monthly payments will most likely remain the same. This adds in an element of predictability, allowing you to figure out all of your expenses pretty easily. Other distinct advantages that can associate themselves with a fixed-rate mortgage are the aspects of low risk, long-term planning and even protection against inflation.
Adjustable-Home Loans:
A lot of people find adjustable-rate mortgages appealing because they usually start out with really low monthly payments coupled with low interest rates. However, it is important to remember that the monthly payments as well as the interest rates can change throughout the lifespan of an adjustable-rate mortgage. All adjustable-rate mortgages have adjustment periods that help lenders determine when the interest rates can change on a particular adjustable-rate mortgage.
Balloon/Reset Home Loans:
Balloon/reset mortgages are popularized by the fact that they have low monthly payments. However, while these types of mortgages do offer extremely low monthly payments, the entire amount of the mortgage must be paid off in full after the term is over. If the loan is not paid off in full by the end of the term, the there is usually a reset option that literally resets your interest rates back to what they were in the beginning of the term. A lot of people will sometimes call this type of mortgage a two-step mortgage because of the way they are laid out.
Reverse Mortgages:
A reverse Home Loans is essentially a baby because it was created not too long ago. A reverse Home Loans is basically a mortgage that does not have to be paid back until the home or property that the mortgage is securing is sold, the owner of the home dies or the owner of the home no longer resides there. This is why a reverse mortgage is particular appealing to homeowners who are a bit on the older side. Reverse mortgages also pose distinct tax advantages as well as supplemental retirement income for individuals.
With every Home Loans comes responsibility; it is of extreme importance that you do take a mortgage lightly as it could very well be the biggest loan you ever take out. Not paying off a mortgage can have extreme consequences financially that could potentially devastate. Make sure you do some in-depth research on mortgages before getting involved with them.
By: Sumit Dadhich
Mortgage Refinancing
Posted by: admin in Real Estate, tags: Finan, Fixed Rate Mortgage, Lower Mortgage, Money Mortgage, Monthly Expense, Mortgage Closing Costs, Mortgage Mortgage, New Mortgage, Refinancing Mortgage, Term Loan
Mortgage is a long term loan and the mortgage monthly payments form a major monthly expense. A lower mortgage rate means lower monthly mortgage payments. This is one reason why people hunt for low interest rates on a mortgage.
As we know, there are two types of mortgage rates i.e. fixed and floating, and different people prefer different types of rate. Again, the prevailing market rate keeps changing all the time. So it’s quite possible that you entered a mortgage at a rate that is higher than the current rate. This is when you start thinking of mortgage refinancing. By mortgage refinancing we mean full payment of the current mortgage loan by entering into a new mortgage loan at a lower rate. So mortgage refinancing starts making sense as soon as the difference in the mortgage rates becomes significant (say 1.50-2% points) i.e. prevailing market rate comes down significantly as compared to the mortgage rate on your current mortgage.
Mortgage refinancing decision would, of course, also depend on the remaining term of your mortgage (for mortgage refinancing would make no sense if you had just a short period of say 4-5 years remaining on your current mortgage). These criteria for mortgage refinancing are based on the various costs associated with mortgage refinancing. These mortgage refinancing costs include prepayment costs for the current mortgage, closing costs of the new mortgage and other fees etc. Generally, people use mortgage refinancing as a tool to move from a higher adjustable rate mortgage to a lower fixed rate mortgage. Though the reverse is possible too in some cases but adjustable rate mortgage to fixed rate mortgage is generally the case.
Another reason for mortgage refinancing is ‘need for money’. So, if you have built a significant home equity, you can use mortgage refinancing to get a home mortgage loan that will generate cash for you (by bartering your home equity). This money generated from mortgage refinance can be used for various purposes like financing the education of children, debt consolidation or home renovation. Debt consolidation is one big reason for mortgage refinancing. You can use mortgage refinance for creating money to get rid of high interest debts (like credit card debt, personal loans etc) and hence save money and your credit rating too.
By mortgage refinancing you can save thousands of dollars in terms of the total interest you pay over the term of loan. So mortgage refinancing is surely a good option but must be exercised only after proper evaluation of the situation and of your own needs.
By: Matt Ellsworth
