Archive for October, 2008
Portability and Assumptions
Posted by Top Home Loans in Mortgage Advice on October 30, 2008
Two main features on mortgages that are not commonly thought about is ability to port your mortgage and the ability for someone to assume your mortgage. The reason less and less people learn about these details is because lenders increasingly have more and more fine print that the details of these two crucial elements become lost in the mortgage details.
Your mortgage professional will inform you of the details as you need it; however, it is something that is appropriate to know about before hand to make informed decisions.
Portability
The average person only lives at a house for a few years. They eventually want to move up, move somewhere else or downsize when the kids move out. If you had to payout your mortgage and pay the closing fees every time you decide to move, then it would become very costly. Also, when you purchase a property you would have to commit part of your life to living there.
Portability gives you the option to move somewhere else and take the mortgage with you to the new location. A mortgage being portable will usually transfer the rate and avoid any additional fees for paying out the mortgage. This is extremely convenient, especially if interest rates go up.
The portability could even make your house more inviting to people looking to buy your house when you want to sell so they do not have to assume your mortgage.
Assumptions
The ability to have someone assume your mortgage is extremely beneficial; however, it is also very circumstantial. The act of assuming someones mortgage basically means that you are taking over there mortgage from where they left off. The person assuming the mortgage keeps the interest rate, the lender and they must qualify for the mortgage as well. If you are a home owner, then you will want to be able to have the option of someone else to be able to assume your mortgage.
This is particular useful if you want to sell your house and go back to renting to prevent your property from depreciating in value.
Also, assumptions is useful if you are transferring ownership between yourself and anyone in your family. It can also serve other measures; however, it primarily means that someone can take over your mortgage.
A mortgage that is available for assumption purposes can actually increase the value of the property. This occurs by you selling the house and allowing the buyer to assume your mortgage. Let’s say you have a fixed rate of 5% and the current rate is 6%, then that will mean you are saving them 1% annually on interest. If the mortgage is $200,000, then you could be saving them over $2000 a year in interest payments.
A mortgage is a huge investment and you want to make sure that you have all the tools to make you a successful homeowner. You will also want to verify that you have all the knowledge about the tools that you are receiving in order to make informed decisions. Spend time reviewing your mortgage agreement from time to time to make sure that you know of all the available opportunities and that you are taking advantage of those opportunities.
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Your House, Your Investment
Posted by Top Home Loans in Mortgage Advice, Real Estate on October 29, 2008
Your home, it is where you live, have children, raise a family and where you sleep at night; however, is it more than your home? Is it something that you should research, analyze and manage accordingly? When was the last time your house has given back to you?
You put all kinds of money into your house repairing it, cleaning it, and making sure that it retains its market value; however, when was the last time your house has earned you income?
For most people, they had no idea the amount of investment power that lies within the fours walls of the home they come home to at night.
The House as an Investment
You are aware that you house gains value over time in most occasions, but why does it increase in value? The reason being that everyone wants to buy a house, a bigger house or to move to a different house. Hardly any people want to rent for their entire life. This means that, at any one point in time, extremely large numbers of people are shopping the market for housing. The higher the demand for housing, then the higher the amount of money a person is willing to pay for a house. If the demand for housing is not consistently increasing, then housing prices will begin to diminish. If no one is purchasing housing, then property values can decrease substantially.
When owning a house, you must be aware of market conditions and housing demand. For example, you own a house that has a market value today of $400,000. You have worked hard to pay down the mortgage from $390,000 to $300,000. You are not too market savvy, so you do not watch the market. You hear things in the news about bad market conditions, but you do not pay too much attention. Eventually, you decide to do renovations on your property using the equity in your property. The bank decides to send out an appraiser to verify your property value. To your amazement the appraiser comes back with a property value of $290,000. Now all the money that you have spent on mortgage payments have gone out the window, because you can buy the same house you own for less than what you own on your current property. If you plan on living at this location for many years, then you could assume that the price would eventually go back up; however, at that moment you would be at a loss.
The informed home owner would do things a bit differently. The informed home owner would speak to their mortgage professional every couple of months about the market. An informed home owner would regularly observe the housing prices in the area and city that they live in. If the informed home owner observes many key indicators (recession fears on the news, increased number of listings in the paper, for sale signs are up longer, lots of houses up for sale), then the home owner will consider selling their house and staying out of the market for awhile. The informed home owner would sell the house at $400,000, then buy back a similar house at a greatly reduced price.
The informed home owner will also know when to sell the property before it is too late, even a couple of months can make a big difference.
Using your House to Make Money
Owning your own home is an amazing achievement. An even more amazing accomplishment is using your house to pay for your retirement. This is accomplished by using the equity that you have built in your property to purchase investments, especially investments in your retirement. For example, if you own a property worth $400,000 and the mortgage remaining is $200,000. You will first be receiving an annual return on the investment in the property. The second thing that you can do is take money out of your property to use for investment purposes. The funds that you take out of your property will appreciate twice, appreciate on the investment you make and the property investment. Also, the interest that you pay will be tax deductible because it is used for investment purposes.
Using this strategy, you could actually be able to completely pay for your retirement by paying off your mortgage and complete two important life tasks at the same time.
Your home is the place you will live, grow, have a family and sleep at night; however, it can be more than that, it can either be a financial burden or a financial gift. It is up to you decide what you would prefer your property to mean to you, and if you will take advantage of all the opportunities that are available. Will you make money from your home or will your home make money from you?
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The Lowest Mortgage Rate is Not the Best
Posted by Top Home Loans in Mortgage Advice on October 29, 2008
When making the biggest investment of your life, many people become obsessed with rates, pricing, and other factors revolving around money; however, is it always the best possible option to choose the lowest interest rate?
Current Rates and Future Rates
The most important factor for both the home owner and the lender is the ability to repay your debts. If you cannot meet your borrowing expectations, then the lender has the right to repossess the possessions the loan has a lien against. The automatic assumption is that if I you can get the lowest payment possible, then you can borrow more money.
The ideal is fully about present gain instead of future gain, whereas when you are making one of the biggest investments of your life then you should be interested in both future gains and present gains.
If you are getting an amazing rate now, then what is the odds of getting this low rate for the duration of the mortgage.
When qualifying yourself for what you can afford with a mortgage make sure to look out into the future to make sure that you can afford the property. Good financial planning does not look at the best case scenario, good financial planning does not even look at an average scenario; however, it looks at the worst case scenario and improves upon it. Good financial planning will ask the tough questions. For example, a good financial planner will ask how your financial planning will be if rates go up to 20%. How long will you be able to survive if you get laid off? A professional lender or mortgage broker will not only look out for you when you are first signing the mortgage application but they will also look after throughout the entire mortgage process. They will assist you in refinancing when you need it, help you renew your mortgage and keep you up-to-date on the details of your investment frequently. This will help you to make informed decisions when you need to make them.
Locking In and Timing the Market
To begin, mortgage companies are not out to try and make you default on your loan. Mortgage companies do not want to rip off there clients either. They fully want to provide their clients with the best possible rate while also keeping their shareholders happy. If either the shareholder or the customer is not happy, then the company could go out of business. That is why when mortgage companies set fixed rates higher, they are not trying to give the client a bad deal; however, they are trying to adapt to a dynamic environment. The lender pays analyst literally hundreds of thousands of dollars to ensure that they keep their loans profitable. Even with these analysts, they can still make mistakes and when they do, big consequences can occur.
That being said, the lender will predict interest rates many many months in advance, and the company will adjust their interest rates in anticipation of the change in market conditions. They will generally know several months before what will happen in the future. It makes it very tough for the standard customer with a mortgage to watch rates on a day to day basis and make the necessary changes to the mortgage to ensure that they are getting the best deal.
A good lender/mortgage broker will be on the lookout for you, and will proactively inform you of all the market changes and issues as they come. They will make sure that you are well aware of what has occurred and what will occur in the future. Although, they are not prophets and they cannot predict the future, they will be well informed, and they will be able to tel you the information you need to make an informed decision.
Mortgage Advice for your Family
When getting a mortgage, you deserve the best. You also should have a lender that you will want to tell your friends and family about. You will want to ensure that these people you know will experience the same great service and knowledge that you are receiving. An exceptional mortgage professional will have an open door policy, so if you have any questions or concerns, then they are available to you, your family and your friends. If anybody you know has any questions or concerns at all involving mortgages, then your mortgage professional should automatically come to your thoughts.
A great rate is an important consideration when getting your mortgage. It may be the first thing you ask when you speak to a mortgage professional; however, the mortgage professional that is right for you is going to take care of you throughout the journey of having a mortgage. They will be able to assist you, your family and your friends with any mortgage concerns you may have. They will also make sure that you choose the mortgage that is right for you to protect your investment. When choosing a mortgage professional, make rates your second concern and the persons abilities your main concern.