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
Which is Better – Fixed Rate Mortgage or Variable Rate Mortgage?
Posted by: admin in Real Estate, tags: Adjustable Rate Mortgage, Amount Of Money, Fluctuations, Home Buyers, Interest Rate, Interest Rates, Mortgage Payment, Principal And Interest, Steadiness, Variable Rate Mortgage
To choose the right type of mortgage between a fixed rate mortgage and a variable rate mortgage (more commonly known as an adjustable rate mortgage or ARM); you need to understand the difference between the two. Fixed rate mortgages are that the interest rate remains fixed at a certain percentage over the life of the loan and therefore your monthly mortgage payment (principal and interest) never changes. With an ARM, the interest rate can and probably will change at periodic intervals during the life of the loan based on the market index your lender uses.
Know the positives and negatives of Fixed Rates mortgages
Fixed rate mortgages are some of the most common mortgages available on the market today. Since you always know what your monthly payment will be until the loan is paid in full, fixed rate mortgages are considered a safe and a predictable way to borrow money with little downside risk. Usually with this steadiness comes higher interest rates and, consequently, higher monthly mortgage payments.
Know the Ins and Outs of ARMs
Interest rates for ARMs are based on the market index. Your lender uses common indexes which includes the amount of money lenders pay on the money they borrow as determined by the FDIC, how much money the Treasury pays on the money it borrows, how much home buyers are paying on new mortgages nationwide etc.
Typically, interest rates for ARMs can fluctuate on a six-month, 1-year, 3-year or 5-year basis. With an ARM, there are limits on just how much the interest rate can change. These ‘caps’ has to be outlined in your contract and fluctuations in the rate can only be made based on those terms.
Know the Benefits and the Risks
The benefit of a fixed rate mortgage is that you always know what your monthly mortgage payment will be. The downside is that it’ is more difficult to qualify for this type of loan and typically, you are not able to borrow as much money as you can with an ARM. The benefit of an ARM is that the initial interest rate is often lower than a fixed rate which means your initial monthly payments are lower, and it’s a much easier mortgage to qualify for great for home buyers with lower incomes.
The downside of an ARM , however, is that your interest rate will fluctuate as your lender’s index rate changes. This could mean higher monthly mortgage payments – an important consideration in determining whether or not you can afford the greatest possible increase in the interest rate and ultimately, the greatest possible increase in your monthly mortgage payment.
By: Victor Thomas
Get Affordable Mortgage Disability Insurance Rates
Posted by: admin in 270, tags: Abode, Disabilities, Foreclosure, Foreclosures, Health Insurance, Life Insurance, Mortga, Mortgage Payment, Mortgage Rates, Span
It helps to be insured. It could be your car, your home, or even your motorcycle. If you insure these, it’s only practical that you also insure your health, right? So you have health insurance and disability life insurance and other kinds of insurance.
Another insurance you should have is the mortgage disability insurance. This is because your home is a single large investment that you have done. Think of all the hours you toiled so you could afford your abode.
A number of people realize the importance to insure against loss of homes. But they ignore the fact that paying the mortgage might not be completed – because we are mortal. Let’s say we get sick or die, paying the mortgage will not be that easy.
That is why there’s mortgage disability insurance. Either of these two events cannot affect the mortgage payment of the house if you have this.
Mortgage disability insurance is specifically designed to provide you with the funds you need in order for you to meet the responsibilities you have for your mortgage loan. It ties you up to three years, just in case you become disabled during that span.
It is very affordable especially if you are a two-income family. Think of you and your spouse insured in paying the mortgage.
Let’s say something happens to you or your spouse, you wouldn’t have to worry about losing your home, just as long as you have mortgage disability insurance.
Another scenario is you being bedridden. It won’t be that easy to pay the mortgage. At least with mortgage disability insurance, you get to pay the bill just in case you do become an invalid and cannot earn the income that you need in order to pay your home.
The reality is the foreclosures of most mortgages are the results of disabilities. The homeowner can no longer meet his end of the bargain on a financial level because of this.
Since the contract states that foreclosure will take place if any even happens, that is the ending of the whole mortgage drama. With the mortgage disability insurance, the homeowner wouldn’t have to face that scenario.
If you are smart enough, you wouldn’t agree to be a statistic. With your mortgage disability insurance plan approved, you are secure that your home will be paid in sickness or in health.
If you do get injured, you can recover easily because you don’t have to worry about not paying the bills.
By: Ricky Lim
Mortgage Unemployment Insurance Basics
Posted by: admin in 394, tags: Assumptions, Citifinancial, Contingencies, Household International, Insurance Basics, Insurance Policy, Life Insurance, Mortgage Payment, Premium Credit, Six Months
Mortgage unemployment insurance is sometimes known as job loss mortgage insurance. Those of us who have been fortunate enough to purchase homes have been offered mortgage insurance better known as credit life. This protection insurance protects the buyer in the event of loss of life. In which case, the mortgage is paid off. Job loss insurance protects us in the event of loss of employment.
The Basics of mortgage unemployment insurance may not be self explanatory because one might think; OK, my mortgage will be paid every month until I obtain work again. You might also think that it will pay 100% of the mortgage payment; however, these assumptions are a bit premature.
The fact is, there are several prerequisites to filing a claim. Some of the contingencies state that the job loss has to be involuntary. A person can’t just quit his or her job and file a claim. Disability is a justifiable claim. Most companies require that the insured have the policy at least six months before a claim can be filed.
Every worker is not eligible for job loss protection insurance. Self employed individuals and seasonal or temporary workers are not eligible. Labor union employees may be able to file a claim during strikes. Currently there are no laws available making it up to each provider.
The Cost of Mortgage Unemployment Insurance
People over 40 may remember companies that offered this type of insurance such as Household Finance, Beneficial, and Citigroup. Many people started to realize that the basic concept behind this insurance contributed to sub prime lending. The cost was just too high for an insurance policy buyers rarely benefited from. Especially, with the cost of the premium sometimes collected at closing. This was known as the single premium credit life.
These companies are today known as Household International and CitiFinancial. Associates First Capital Corporation was acquired to improve the lending process after it was determined that their practices contributed to predatory lending. These companies did not assertively market unemployment insurance at first. Most of them sold policies through banks and credit unions.
Updated Mortgage Unemployment Insurance
Although some companies still sell mortgage protection insurance through banks, credit unions and insurance companies, there are some who offer it through down payment assistance programs. The monies they extend to first time homebuyers for down payment is matched by sellers as a charitable donation. The costs include administrative expenses. One of the recognizable names is Bank of America. Another company with great promise is Paycheck Guardian that offers a direct to member cash benefit plan in the event of unemployment.
To replace the profits made from single premium credit life policies, Bank of America implemented the Borrower Protection Plan. The single premium credit life policies are being phased out.
Mortgage Payment Protection Inc. still sells its policies through the banks and credit unions. Utah has a program called “Neighborhood Gold”. This program offers the first year of protection free to the buyer while they pay for the second year with their mortgage payment. After the second year, the buyer communicates directly with Mortgage Payment Protection Inc. There is also a program called “Family Home Providers” of Cumming Georgia. Their administrative offices are in Roswell, GA
How Mortgage Unemployment Insurance Claims are Paid
GE Casualty offers its policy holders payments of half of all mortgage payments with a maximum payout of six to nine months at $45 per month. Most policies start within 30 to 60 days. Some companies, depending on the type of policy you have and the amount of the loan, will only pay principal and interest. Others might pay a limited amount of principal, interest, taxes and insurance. This type of payout is usually six months.
Should you purchase this type of coverage? It depends. Some people are better off just purchasing enough term life insurance to cover the mortgage amount. Some term insurance policies offer job loss protection insurance. Now that the basics of mortgage unemployment insurance are changing, they are more publicly advertised. Especially with the state of the economy, more people are in need of this type of insurance, and with need come more publicized services.
By: Robert McKnight
Mortgage Loan: PITI Explained
Posted by: admin in Real Estate, tags: Adjustable Rate Mortgage, Insurance Policies, Insurance Policy, Insurance Premiums, Interest Interest, Mortgage Loan, Mortgage Payment, Principal Loan Balance, Principal Mortgage, Property Taxes
If you are shopping for a mortgage loan you have probably seen the acronym PITI in many of the loan offers you receive. PITI stands for principal, interest, taxes, and insurance. Here is what you need to know about PITI.
Principal
Mortgage principal is the total balance of your loan. When you make your monthly mortgage payments you are gradually paying down this balance along with the interest due for that month. Mortgage loans are front loaded with interest so in the early years of your mortgage you will find very little of your mortgage payment is being applied to the principal loan balance. The interest paid on any given month is based on the outstanding principal balance; as the years go by more of your payment is applied to the principal balance and less is paid to the lender as interest.
Interest
Interest is what you pay the lender for loaning you the money to pay for your home. The interest is a percentage of the principal balance due. Interest rates come in two flavors: fixed rates that do not change over the term of the loan, and adjustable interest rates that change at regular intervals set in your loan contract. If you have an adjustable rate mortgage your interest rate is tied to some financial index plus the lender’s markup. When the lender periodically updates your interest rate the amount of your monthly mortgage payment will change with it.
Taxes
Property taxes are often included in your monthly payment amount. Lenders do this to protect their investment in your home; if you allow your property taxes to lapse, your State or local government could put a lien on your home. If this happens the lender would be unable to foreclose if you fall behind on your payments.
Insurance
Your homeowner’s insurance policy protects your home from damages. Insurance premiums can be rolled into your monthly payment like property taxes; again, lenders do this to protect their interest in your property. Most homeowner’s insurance policies only protect your home against fire, vandalism, and certain other damages. If you live in an area prone to flooding the mortgage lender could require you to purchase flood insurance in addition to your homeowner’s policy. Mortgage lenders may require borrowers with poor credit or low down payments to purchase Private Mortgage Insurance in addition to their homeowner’s policy. Private Mortgage Insurance protects the lender from loses in the event of foreclosure. This insurance does nothing to protect you, the homeowner.
To learn more about shopping for the right mortgage and avoiding common mistakes, register for a free mortgage guidebook using the links below.
By: Louie Latour
