Lowering Your Mortgage Balance
Many individuals are now looking for ways of minimizing monthly expenses and lowering mortgage payments due to the increasing living costs. Once you have figured out how to buy a home the next step is how to pay it off. There is no denying the fact that monthly mortgage payments can take more than 50 percent of your monthly income. Below you will find few tips that can go a long way in minimizing mortgage payments, mortgage home loans should not be a financial burden.
Mortgage refinance is one of the best available methods for the minimizing of mortgage payments. This can be of great helo if your new mortgage rate of interest is at least two percent lower than the current rate. Moreover, you need to have your house equity up to the mark if you wish to get out of this situation.
You have to make sure that there is no repayment penalty associated with your loan package. Talking about the prepayment penalty, it can be termed as a fee that is charged by the financial institution in case if your mortgage loan is refinanced before the expiry date of prepayment. In addition to being quite an expensive affair, a prepayment penalty which is usually about six months interest can enhance the new mortgage refinance payments. And that is the place where you check your Note for all the prepayment penalty details or call your financial institution.
It is observed that while it costs six months interest or more than fifteen perceny of your loan balance, whichever is less, prepayment penalties last for a period of one to three years. It is recommended that you opt for a package that doesn’t cost you more than your savings when you are trying to minimize mortgage payments.
It is mandatory that you stay away from amortized loans and choose an interest only mortgage refinance loan if your objective is to minimize mortgage payments. Having the lowest mortgage payments also with no provision of extra money into th loan principle amount is the best thing about these loan packages.
An important point here is that most of the borrowers can pay extra with regard to principle at any time, without having concern about the fees to minimize the full loan amount so long as the amount does not cross 15 percent of the principle during prepayment.
It is a fact that one of the best ways to reduce mortage payments is an interest only loan. It also allows you to pay extra if you have no issues in terms of monthly source of income.
The two ways to reduce your debt and get out of debt from your mortgage balance is to either refinance or just make extra mortgage payments.For example you can change a 30 year loan into a 20 years without much of a difference to your current payment!Or in case you do not want to refinance your mortgage or are not able to do it, you can just pay an extra $100 or $200 per month which will be applied directly to it.Depending on the rate of your home loan. if all your monthly extra payments can add up to an extra payment each year.You can actually make your mortgage repaying time ten years lesser.The need for discipline is the only difference between this and refinance.Not something that exists with all of us when it comes to getting out of debt. But it is a strategy that many home owners in the Santa Maria real estate market use to pay off their homes sooner.
Should Hard Money Loans Be Used For Real Estate Investing?
Many of the so called real estate “gurus” out there preach the value of using OPM (other people’s money). In their view, the best real estate investment is one where the direct risk isn’t on you. In reality, if your investment really is great then you will be better off using your own money, but most of us don’t have hundreds of thousands of cash lying around. Anyways, that’s a different subject, this article is focused on the wisdom of using hard money.
Hard money loans are privately funded loans that have high interest rates and high origination fees. These loans aren’t hard because they are hard to get, but because the terms of them are very “hard”. Hard money loans aren’t received without their cost. They usually have an upfront origination fee of 3 to 5 percent, and double digit interest rates.
The primary difference between hard money lending, and other types of lending, is the subject criteria. The focus on traditional mortgage loans is the borrower. Traditional lenders only approve borrowers with good credit, low debt, and consistent income. Hard money lenders place their emphasis on the value of the real estate. If the value of the property is substanitally more than the amount lent, a hard money loan will usually fianance. If the borrower happens to default, the hard money lender doesn’t have a problem foreclosing on a property with substantial equity.
There is a place for hard money loans, and they can be a valuable means for making real estate deals happen. Many foreclosure auction and other deals need financing very fast. They have to finance the property in a matter of days. Good hard money lenders in California can provide financing within just a few days. If the property is a good investment, and there’s a solid exit strategy, then even though the borrowing cost may be high, the profit made is worth the cost. The important factor is the net profit, not the costs spent.
If an investor borrowed $100,000 from a hard money lender at 20% interest, and sold it three months later for $140,000. If the up front fee was 3 points, or $3,000, plus the $6,000 in interest paid. Despite paying the hard money lender nearly $10,000, the real estate investor would still have a profit of about $30,000..
Hard money loans can be a good tool for smart real estate investors, if they take caution and use them wisely.
Ask Your Loan Officer These Questions When Buying A Home
Are you a first time home buyer? If so, you may be interested in asking your loan officer some of the home buyer questions found below. Even if you are not a first time home buyer to consider the following home buying questions found below. No matter whether you are buying your first home or you are a repeat buyer – if you have questions make sure you ask them. Waiting until after you have closed on your home to ask your questions is a big mistake and could cost you a lot of money and grief. If you wait to ask your questions, you could stand to lose money, time, your credit, and the home of your dreams.
Buying Your First Home? Top Home Buyer Questions To Consider
- Do you need to know about some of my bills that are not on my credit report?
- Does it make a difference if I apply for credit cards or other credit accounts even if I don’t take the credit card?
- Does it make a difference if I buy a new refridgerator with my credit cards or money from my bank account before I get my mortgage?
- Will it make a difference if I transfer money between my different bank accounts before I buy my house?
- I just financed a car loan for my kid who still lives at home. Is that a problem when getting a mortgage?
- In being self-employed how long do you have to wait in order to apply for a mortgage?
- How many times can I have my credit pulled before my scores lower?
- I recently financed a car but I do not think it is on my credit report will that impact my mortgage qualification?
- Now that I am approved, does it matter if if I didn’t make my last credit card payment?
- Does the lender look at your credit history after you have been approved?
The reason for the previous questions is to get you consider your finances and credit before you do something that could hurt your chances of qualifying a mortgage if you are in the middle of buying a home. It is likely that if you ask your mortgage broker about any of these questions or if you are considering doing any of these things above – your mortgage company will say that you should refrain until you go to your mortgage settlement. If you have not figured it out by now, even after you get your loan approval you should be cognizant about your finances and credit until you got to settlement and get your keys.
The Case for Abandoning a Mortgage
New U of A discussion paper hits a social nerve
As the nation’s housing crisis enters its fourth year, the option of walking away from mortgages on over-encumbered homes is gaining social acceptance. Recently, University of Arizona law professor Brent White published a paper about the tactic of abandoning a home, (“Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis,” University of Arizona, Discussion Paper No. 09-35 November 2009).It isn’t the first time the idea has been brought up, and debt survival is a sensitive issue, but White’s paper and it’s conclusions may hit a nerve.
It’s crowded underwater
According to First American CoreLogic, some 10.7 million Americans are presently underwater on their mortgages, meaning that their mortgage balances exceed their home values. White states:
As of June 2009, more than 32% of all mortgaged properties in the U.S. were “underwater,” meaning that the homeowner owed more on their mortgage than their home was worth. This percentage is expected to increase to 48% by the first quarter of 2011, by which time housing prices in the largest 100 metropolitan areas are predicted to have dropped 42% from their peak.
One in four homeowners would be better off renting
Walking away from over-mortgaged homes is a move that can save people money if they’re willing to take personal financial risks. One of those disconcerting risks, of course, is that a foreclosure remains on an individual’s credit report for seven years, making it difficult to obtain new credit.Though it’s possible that people with good credit otherwise might overcome lending hurdles sooner, just about anyone would and should hesitate to wreck their credit. This hesitancy is borne out by the fact that millions of people – about one in four — would be much better off financially if they walked away from their mortgages, and yet, they do not.
Homeowners tend to take the highroad
If all owners of over-mortgaged homes walked away, economic havoc would no doubt ensue.Home prices could take a deeper plunge, which would make bansk even MORE hesitant to lend to both individuals and businesses. Still, it’s odd that in the midst of a severe housing crisis, borrowers have taken the high road and struggled to honor their mortgage commitments, while the lenders that doled out high-risk mortgages in the housing boom have eagerly taken in billions of taxpayer dollars. These are the same lenders that now shamelessly resist the modification of troubled mortgages. White points out that this is a double standard involving a contradictory (READ: hypocritical) business morality.
White, who is a scholar of both behavioral economics and law, just may know what he’s talking about. Obviously, the norms governing borrower behavior are at odds with those of lenders. Lenders, as recently demonstrated in stark relief, seek to protect the bottom line without concern for morality or social responsibility. “Wall Street gets to maximize profits and minimize losses irrespective of concerns about morality,” he says.
Homeowners, on the other hand, are expected to honor their promises, however unmanageable a change of circumstance may be. This moral asymmetry, White concludes, results in a distributional inequality with homeowners bearing a disproportionate burden from the housing collapse.
Emotional constraints deter strategic defaults
White suggests that the choices of most homeowners not to strategically default are the result of two emotional constraints. The first is a desire to avoid the shame and guilt of foreclosure and the second is an exaggerated anxiety about the perceived consequences of a foreclosure. These emotional forces, he continues, are “actively cultivated by the government and other social control agents in order to encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision.”
Suboptimal economic decisions are irrational
White believes that shame and an exaggerated anxiety about the effects of a foreclosure may be keeping homeowners from walking away in droves. Even in non-recourse states such as California and Arizona where foreclosure is the lender’s only remedy and personal deficiency judgments cannot be obtained against borrowers, “the vast majority of underwater homeowners continue to make their mortgage payments – even when they are hundreds of thousands of dollars underwater and have no reasonable prospect of recouping their losses.”
While such behavior may appear irrational on its face, behavioral economists liken the behavior of underwater homeowners to the irrationality that leads people to make other suboptimal economic decisions. “Underwater homeowners aren’t knowingly making bad choices, they just can’t cognitively grasp that they would be better off if they walked away from their mortgages,” White explains.
The moral playing field requires leveling
Walking away from over-encumbered homes may well undermine the basic tenants of mortgage lending, but no more than does taxpayer assistance for lenders who remain unwilling to make interest-rate or other concessions. Rewriting interest rates on existing mortgages would keep many of distressed borrowers in their homes, but lenders have little incentive to make any concessions. Over the last couple of years, we have seen that banks cannot be shamed into action.Congress briefly toyed with the idea of a bill that would allow bankruptcy judges to rewrite mortgages, but it was shot down quickly, perhaps thanks to lobbyists.
Walking away may be the most financially responsible choice
Struggle as they may against the emotional constraints pinpointed by White, plenty of homeowners arrive at turning points where they have no choice but to walk away. With 10.7 million people in the US underwater with their mortgages, perhaps a re-evaluation of lending philosophy is in order. Walking away just may be the most financially responsible choice a distressed homeowner can make, when doing so makes it possible to meet other, unsecured credit obligations and provide a stable income for his or her dependents.
Mortgage Approvals Rise by 4%
The total number of mortgage approvals for March this year has risen by 4% on the previous month and reached 39,230, and according to new figures released by the Bank of England, the rise in mortgage approvals might carry on going up.
The total value of mortgages approved in March came to £4.6 billion which is a increase of £900 million from February, however, this increase of £900m is not as large as the monthly average of £1.6 billion, or even as large as the increase that was seen in February of £1.5 billion, however, the total amount of money that was approved in mortgages in March, £4.6 billion which is well over the monthly average.
There was also some encourgaging news from the building societies, the overall amount of mortgages that had been approved in March rose to £1,542 million which is double the amount approved in the previous month.
Finally, there were also some figures released by the British Bankers Association about lending to small businesses. They said that their figures showed that lending to small businesses rose by £271 million in March of this year. However, the news releaased by the Treasury Committee say that small businesses are finding it even harder to borrow money that they need.
Although these figures sound good, mortgage approvals are seen to be forward thinking, the actual mortgage lending in March only rose by £800 million which is far less than expected and a lot less than the 6 month average of £1.2 billion.
Although all of the above figure releases are good news for the economy and the housing market, there are still concerns that house prices could slump again in the next few months, and even if they didn’t, the economy is still a very fragile area.
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