Posts Tagged ‘Mortgage Loan’

Different Types of Mortgage Refinancing Loans

June 23rd, 2011



There are several types of mortgage refinancing loans available in the market today. With these different types of getting your mortgage refinanced, you can make the choices based on your circumstances and your needs. These are mostly taken out to make some renovations, pay off debts or use the proceeds for your child’s college education. Regardless of where you will use the proceeds of the refinancing loan, it would be smart to know the different types in order to make an informed decision.

The different types are; fixed rate, variable rate, interest only, balloon type, home equity, and fully amortizing mortgage refinance loan.

Fixed rate type is one where the interest rate is locked to a fix amount and will stay for the duration of the loan. In other words, it would simply mean that you are going pay at a constant rate of interest for the whole life of whatever balance you have.

Variable rates are where the interest rates fluctuate or changes with certain predetermine index. This is not for the faintest of heart as this can change anytime as the market changes its directions. This type of refinancing normally gives the borrower and introductory low rate which is usually between 3 to 5 years then the real variable rate starts to kick in.

Interest only type is self explanatory in the sense that you are being ask to pay only the interest mostly for a period of time. After the specified time has lapse, you will start paying the principal.

Fully amortization is one where your monthly payments are a combination of all the interest charges and additional payments towards the balance. This is very good option as it will reduce your balance every time you make your payments, thus paying off the mortgage loan will be faster.

The home equity type of refinance is where you borrow against your equity on the house and use it as a collateral or security for your borrowings. You then be able to get the money in the form of a revolving credit line or cash.

So now that you know and understand the different types of mortgage refinancing loans, you are not going blindly into applying to refinance your mortgage loan. Learning, understanding and knowing what the types are can really help you make an informed decision when the time comes to refinance your mortgage loan.

Comments Off

Posted in Mortgages

Tags:

Understanding No Money-Down Mortgage Loans

February 2nd, 2011



Most often than not, many people especially in the U.S. have a hard time saving money in purchasing houses since the price increases of homes do not usually match their average household income. Most mortgage companies require applicants to pay at least a down payment of 5% in addition to closing costs. On the other hand, many mortgage companies are now offering no money-down mortgage loans for people who cannot afford to pay costly down payments.

Some mortgage lenders offer homebuyers an 80/20 loan for no money-down mortgage loans. This option includes a mortgage of 80% of the asking price while the 20% is for home equity loan for the remaining balance. This can be very useful and convenient for homebuyers since they can avoid paying private mortgage insurance. In addition, they can also have a mortgage loan for 103% of the asking price, which allows them to pay down payment as well as a portion of closing expenses.

Homebuyers can purchase a home without down payment through a mortgage broker. Many mortgage companies are offering different loan programs with either zero or low down payment options. On the other hand, if you are planning to obtain such programs, you should be able to look for potential lender through a mortgage broker since they are associated with government programs, private lenders, and sub prime lenders among others. They can refer you to lenders that can help you obtain a zero down mortgage for your home. However, some lenders offer zero down payment loans to people with good credit rating only. This means that if you have bad credit, these lenders would not take a risk in granting your preferred loan.

Comments Off

Posted in Mortgages

Tags:

Combination Mortgage Loans

November 4th, 2010



An increasingly attractive mortgage option is what is referred to as the combination loan or combo loan. Combination loans have several key advantages over traditional 30-year mortgage loans and there are a wide variety of combinations to suit most financial situations.

By far, the most popular combination mortgage loan is the 80/20 loan. This loan is actually two loans; the first loan is for 80% of the homes value, and the second loan is for the remaining 20%. With the 80/20 mortgage loan, the buyer pays no down payment and is ideal for those without a significant amount of savings. Another key advantage of the 80/20 mortgage loan is that the buyer avoids PMI or private mortgage insurance. PMI is required on all mortgage loans that are greater than 80% of the homes value. A third advantage of the combination mortgage loans is that both loans are tax deductible. By avoiding PMI and increasing their tax deduction, a buyer gains a significant cost savings advantage over traditional mortgage loans.

Combination loans are available in many other ratios as well. The 70/30 mortgage loan is usually preferred to the 80/20 loan for more expensive homes, when 80% of the homes value would be classified as a jumbo loan (above the FNMA/FHLMC limit) and subject to higher interest rates.

Another option is the 80/15/5 mortgage loan, where the buyers makes a down payment of 5%. Other options include the 80/10/10, 75/15/10, etc which are all variants of the same.

In combinations mortgage loans, the primary loan usually has a 30-year amortization term, while the second loan can have 30 or 15 year term. Expect the interest rate to be about 2% higher for the second loan. The buyer can opt for a fixed rate mortgage or an ARM (adjustable rate mortgage) on either or both loans. The ARM will have a lower monthly premium and allow for additional cost savings, but be sure to refinance the ARM loans if interest rates start to rise.

Comments Off

Posted in Mortgages

Tags:

Benefits of Mortgage Loans

July 23rd, 2010



Mortgage loan is the generic term for a loan secured by a mortgage on real property; the “mortgage” refers to the legal security, but the terms are often used interchangeably to refer to the mortgage loan. Mortgage loans generally refer to a loan secured by residential property, often for the purpose of acquiring the residence. Mortgage loans may be lower priced than other forms of borrowing because the value of the property reduces risk for the lender. There are many benefits of Mortgage Loans.

The first benefit of mortgage loans is that there are many types of mortgage loans and are available and used worldwide. The flexibility of interest rates also adds to the benefits of mortgage loans. Here, the interest rates may be fixed for the life of the loan or can be changed at certain predefined periods. The amount paid per period and the frequency of payments; in some cases, the amount paid per period may change or the borrower may have the option to increase or decrease the amount paid.

Another benefit of Mortgage loans is that there are a variety of ways in which you can repay a mortgage loan. The repayments may depend on locality, tax laws and prevailaing culture. The most common way to repay a loan is to make regular payments of the capital, also called principal and interest over a set term. This is commonly referred to as (self) amortization in the U.S. and as a repayment mortgage in the UK. A mortgage is a form of annuity and the calculation of the periodic payments is based on the time value of money formulas. Certain details may be specific to different locations: interest may be calculated on the basis of a 360-day year.

The main alternative to capital and interest mortgage is an interest only mortgage, where the capital is not repaid throughout the term. This way you can benefit more from Mortgage loans. This type of mortgage is common in the UK, especially when associated with a regular investment plan. With this arrangement regular contributions are made to a separate investment plan designed to build up a lump sum to repay the mortgage at maturity. This type of arrangement is called an investment-backed mortgage or is often related to the type of plan used.

Another important benefit of Mortgage Loans is that during your interest only period, your entire monthly payment is tax deductible. Interest rates on mortgage loans have record lower rates that can save you your money. Interest Only loans offer lower payments. Yet another benefit of Mortgage loans is that interest rates are tax deductible and are also made with flexible options with fixed rate or ARM’s.

Mortgage Loans have a number of loan options. You can easily find the right lending package for your individual needs, depending on your current and future financial situation. A Mortgage Loan also has the flexibility of lowering your mortgage duration so that you can become debt free sooner than usual.

Comments Off

Posted in Mortgages

Tags:

Home Mortgage Refinancing | When Should I Lock My Interest Rate?

July 17th, 2010



When homeowners choose to refinance their existing first mortgage loan, they must decide when to lock in their interest rate. Submitting your loan application does not necessarily lock in your rate. With mortgage interest rates low in 2009 and many borrowers refinancing locking or floating is again an important issue to understand when applying for a loan.

In the same way people try to time the stock market – deciding when to buy and sell stock in companies – many borrowers try to time when they lock in their rate when refinancing. Based on the history of mortgage interest rates, this strategy usually backfires.

Many borrowers literally wait for months or years for lower mortgage rates because they only want to refinance if they can get the absolute lowest rate. Usually, they miss out on savings while they wait. For example, if borrowers can save $200 per month by decreasing their rate from 6.5% to 5.25%, they should focus on the savings they can get, not on the small amount they might be missing because rates are not at 5.125%. Our advice is that if a refinance makes sense with current rates, the borrower should consider one right away.

You can always refinance again only 6 months after you close on your refinance if rates drop and you want to do it again.

The scenario that gets played out over and over goes as follows: Interest rates drop and then everyone rushes to apply to refinance. Some borrowers see good rates, apply and lock in. Those borrowers are very happy two months later when they are making lower payments on their loan. Other borrowers apply but hold off on locking in a mortgage rate. More often than not, interest rates spike back up sharply and they wait around hoping for lower rates.

If you look at a history of mortgage rates since 1980, you will find the same pattern: mortgage rates tend to decrease very slowly, lulling borrowers into the feeling that rates will stay low for long periods. But when rates increase, they tend to spike up extremely quickly – often in hours. By the time you find out that interest rates are increasing, it is already too late to lock your rate at the lower rates from yesterday.

 

Consumer Checklist for Mortgage Rate Lock-Ins

Get all rate locks in writing or by e-mail. Make sure the rate lock shows the loan program, the interest rate and the total points if any on the loan. For adjustable rate loans, make sure all index, margin and cap information is included. Anything that is too good to be true is! If one lender seems much lower than all the others, approach with caution and get it in writing. If lock-in fees are required, get written confirmation of how those fees will be refunded or credited at closing.

Comments Off

Posted in Uncategorized

Tags: