2008 has been a pretty miserable year up to now, with dreadful summer weather, England’s absence in the Euros and, of course, the credit crunch.
The global liquidity problems are now starting to hit home for many, with increased food prices, the rising cost of petrol, and the threat of negative equity looming. While some people are still managing to keep on top of their finances, others are feeling the pinch.
If only there was a mortgage that could adapt to the different times in people’s lives -- a product that could offer benefits to those feeling flush, but provide a flexible approach to people who are going through a tough time.
Hang on a minute….. What about an offset mortgage? This is the most flexible type of mortgage deal and it comes into its own in challenging times like these.
What is an offset?
An offset is a revolutionary type of mortgage. It links your money in the black with what’s in the red. So by keeping your savings in the bank you can reduce your mortgage debt.
For example, let’s say you have:
- a £100,000 mortgage that you pay 7% interest on, and
- £10,000 in savings that you earn 4% interest on (and then that interest is taxed).
Instead of paying interest on your £100,000 mortgage debt and earning interest on your savings, an offset mortgage lender will allow you to link them up, so you only pay interest on £90,000.
So you’re saving 7% interest on £10,000 of your debt, rather than earning 4% (before tax) on £10,000 of savings. This means you effectively save at the higher rate of the mortgage (7%, instead of 4%). And best of all, you pay no tax because you’re not earning any interest. So offsets are particularly beneficial for higher rate taxpayers.
Confused? All you need to know is that, with an offset, you will be charged the best interest rate possible for your whole finances. And this basic principle of offsetting goes further than savings and a mortgage. Some products allow you to roll in other debts, such as loans, and other ‘savings’, such as the money in your current account.
What’s the effect?
Because all of your money in credit is ‘effectively’ being paid into your mortgage (although it actually remains in a separate pot) you owe your lender less and are therefore charged less interest on your debt.
Then a very clever thing happens. You start to chip away more and more at your debt, since the interest you have to pay accounts for less of your monthly payment. The cumulative effect of this virtuous circle of ‘less interest, less debt’ can literally save you tens of thousands of pounds
According to mortgage lender Intelligent Finance if you have a £220,000 25-year repayment mortgage, your monthly repayments would be £1,477 (based on an initial rate of 5.9% and overall cost for comparison of 7%)Assume you have £10,000-worth of savings to which you add a monthly sum of £100, plus you have a monthly income of £4,000 going into and coming out of your current account each month.By offsetting this money you could save £76,438 in saved interest over the term of your mortgage, which you would also cut by four years and one month.But what has this got to do with the credit crunch?
You can do a lot of different things with an offset so they suit a lot of financial situations.
If you receive a bonus you can use it to your advantage and offset the sum against your debt, or you can overpay each month when times are good. This does two things -- pays down your debt and gives you a buffer.
Many people are currently concerned about negative equity, for example those who bought recently and borrowed at a very high loan to value, or even took a 100% mortgage. By overpaying in the good months you can pay down your debt and reduce your LTV, which could be important if you want to move to a larger property. Lenders are currently unwilling to lend at high LTVs so it makes sense to reduce yours while you can.
But what if times are not so good?
Well, if you get made redundant, you could have a significant buffer in your offset mortgage if you have been overpaying. This gives you breathing space as offsets are not all about paying more in -- you can have that money back when you need it.
You could take a payment holiday for three months, underpay your mortgage for a while or even take your money out of your savings. Of course your projected term and total costs change each time you move the goalposts -- and there are limits.
Put simply, an offset mortgage gives you options and lets you use your money in the good years as a type of insurance policy against more difficult times. But unlike an insurance policy, if you don’t claim on an offset, you don’t lose your money; in fact you save even more over the long run.
By Christina Jordan
source: http://www.fool.co.uk/news/property-home/mortgages/2008/07/28/use-this-mortgage-to-crack-the-credit-crunch.aspx
It's Almost Here - Housing and Mortgage Relief!
The US Senate passed H.R. 3221 (also known as The Housing and Economic Recovery Act of 2008) this morning 72-13 in a rare Saturday session. The legislation now moves to the desk of President Bush, where it’s expected that he will sign the bill sometime this week as an added show of confidence for the nation’s housing and mortgage markets.
This is an historic piece of legislation and it helps not only consumers, but the housing and mortgage industries alike…
Here are a few of the highlights of the Act in its current state...
• Raises FHA loan limits to the lesser of 115 percent of the local area median home price or $625,500 (up from $362,790).
• Authorizes $300 billion in loan guarantees through fiscal year 2011 for a voluntary program to help at-risk borrowers refinance into viable mortgages.
• Permanently increases cap on mortgage loans Fannie Mae and Freddie Mac can purchase (“conforming loan limit”) to the lesser of $625,000 or 115 percent of an area’s median home price. Authorizes FHFA to adjust limit according to annual housing price index.
• Creates a new independent agency, the Federal Housing Finance Agency (FHFA), to regulate Fannie Mae, Freddie Mac and the Federal Home Loan Bank System, to be funded through assessments on those GSEs.
I’ll bring you more details on this once it is signed into law by The President. It looks as though the effective date would be October 1, 2008. Stay Tuned!
source: http://www.wral.com/business/blogpost/3286424/
By Jeremy M. Salemson
This is an historic piece of legislation and it helps not only consumers, but the housing and mortgage industries alike…
Here are a few of the highlights of the Act in its current state...
• Raises FHA loan limits to the lesser of 115 percent of the local area median home price or $625,500 (up from $362,790).
• Authorizes $300 billion in loan guarantees through fiscal year 2011 for a voluntary program to help at-risk borrowers refinance into viable mortgages.
• Permanently increases cap on mortgage loans Fannie Mae and Freddie Mac can purchase (“conforming loan limit”) to the lesser of $625,000 or 115 percent of an area’s median home price. Authorizes FHFA to adjust limit according to annual housing price index.
• Creates a new independent agency, the Federal Housing Finance Agency (FHFA), to regulate Fannie Mae, Freddie Mac and the Federal Home Loan Bank System, to be funded through assessments on those GSEs.
I’ll bring you more details on this once it is signed into law by The President. It looks as though the effective date would be October 1, 2008. Stay Tuned!
source: http://www.wral.com/business/blogpost/3286424/
By Jeremy M. Salemson
Wilbur Ross, the boss of bankruptcy
MUMBAI: US billionaire Wilbur Ross, who worked on the bankruptcies of Continental Airlines and Trans World Airlines in the 1990s, will invest in SpiceJet after record fuel costs deepened the Indian carrier's losses.
WL Ross & Co will buy $80 million of foreign currency convertible bonds held by Istithmar PJSC and Goldman Sachs Group, Kishore Gupta, a director of the New Delhi-based airline, said in a phone interview.
The US financier will join SpiceJet's board, according to a statement by India's second largest budget airline.
Ross may be betting on winning more passengers in the world's second-fastest growing major aviation market as mergers reduce competition.
"This investment reflects the fact that there is still belief in the long-term potential of Indian aviation,'' said Binit Somaia, a director for the Indian subcontinent at the Sydney-based Centre for Asia Pacific Aviation." There is interest from investors when assets are available at good valuations.''
Ross, whose company has about $7.9 billion of assets under management, made his fortune taking over bankrupt steel, coal and textile companies.
A native of Weehawken, New Jersey, Ross also worked as an airline analyst at Faulkner, Dawkins & Sullivan Securities in New York. The transaction is Ross's second investment in India. In February 2007, Ross acquired OCM India a worsted suiting maker, for about $37 million, according to the statement.
source: http://economictimes.indiatimes.com/Wilbur_Ross_the_boss_of_bankruptcy/articleshow/3239607.cms
WL Ross & Co will buy $80 million of foreign currency convertible bonds held by Istithmar PJSC and Goldman Sachs Group, Kishore Gupta, a director of the New Delhi-based airline, said in a phone interview.
The US financier will join SpiceJet's board, according to a statement by India's second largest budget airline.
Ross may be betting on winning more passengers in the world's second-fastest growing major aviation market as mergers reduce competition.
"This investment reflects the fact that there is still belief in the long-term potential of Indian aviation,'' said Binit Somaia, a director for the Indian subcontinent at the Sydney-based Centre for Asia Pacific Aviation." There is interest from investors when assets are available at good valuations.''
Ross, whose company has about $7.9 billion of assets under management, made his fortune taking over bankrupt steel, coal and textile companies.
A native of Weehawken, New Jersey, Ross also worked as an airline analyst at Faulkner, Dawkins & Sullivan Securities in New York. The transaction is Ross's second investment in India. In February 2007, Ross acquired OCM India a worsted suiting maker, for about $37 million, according to the statement.
source: http://economictimes.indiatimes.com/Wilbur_Ross_the_boss_of_bankruptcy/articleshow/3239607.cms
Lock'em if you Got'em!
Friday was a great day for folks looking to lock in mortgage interest rates, We had a big drop and was able to help plenty of Indiana homeowners get a great interest rate with their Indiana Mortgage.
Tony Grego here at Sagamore Home Mortgage! While mortgage interest rates have risen over the last 10 days Friday did help. Now looking at the Japanese stock market and the further loss of the US Dollar we are in for a "rocky" day with the stock market. I am recommending all of my Indiana clients to lock your mortgage rate today. Looking at this weeks calendar of financial reports does not indicate that anything will help lower your mortgage interest rate.
I expect to see a dip in mortgage interest rates when first released this morning then the Feds making the "big surprise announcement" of lower short-term rates 1/2 point. This will help the market and cause the bond market to dip and raise your mortgage interest rate.
source: Tony Grego's blog entry
Tony Grego here at Sagamore Home Mortgage! While mortgage interest rates have risen over the last 10 days Friday did help. Now looking at the Japanese stock market and the further loss of the US Dollar we are in for a "rocky" day with the stock market. I am recommending all of my Indiana clients to lock your mortgage rate today. Looking at this weeks calendar of financial reports does not indicate that anything will help lower your mortgage interest rate.
I expect to see a dip in mortgage interest rates when first released this morning then the Feds making the "big surprise announcement" of lower short-term rates 1/2 point. This will help the market and cause the bond market to dip and raise your mortgage interest rate.
source: Tony Grego's blog entry
the adjustable mortgage
The Adjustable Rate Mortgage, or ARM, lost much of its edge over the 30-year fixed in the last few years. Things actually got so tangled up for a couple of weeks in 2007 that the 5-year ARM, or 5/1 ARM, the most sought-after of them, demanded a higher interest rate than the standard 30-year mortgage. ARMs have traditionally offered lower rates due to their shorter maturity period and that they will adjust either up or down annually after their initial set time frame.
Even as recently as early January the 5/1 ARM and 30-year fixed displayed the same rate in Bankrate.com's weekly survey of big national lenders. Since then, however, the whole scenario has changed in a major way. Interest rates for these popular programs have been drifting in opposite directions, ARMs lower and 30-year fixed higher, to a point that the 5/1 ARM is now nearly ¾ of a percentage below its recent rival.
5/1 ARM, for instance, can be the right mortgage for a borrower who plans on living in his home for 5 years or less, anticipates income improvement and has some money saved. Its advantage is in lower payments thanks to a lower home loan rate. For that there is a minor risk factor involved, namely that the interest rate could rise if the loan is active beyond the fifth anniversary.
When the subprime mess descended on the mortgage industry over the last few years, ARMs gradually lost the attractive rate edge that eventually reached parity with 30-year fixed. But change is currently under way. Now that they are slowly widening the gap again, possibly pushing it all the way to where it historically stood before the lender problems started, does it mean that the home loan industry as a whole is returning to its previous, "normal" operating mode? It could be. Regardless, this certainly appears to be a step in the right direction.
source: Esko Kiuru
Even as recently as early January the 5/1 ARM and 30-year fixed displayed the same rate in Bankrate.com's weekly survey of big national lenders. Since then, however, the whole scenario has changed in a major way. Interest rates for these popular programs have been drifting in opposite directions, ARMs lower and 30-year fixed higher, to a point that the 5/1 ARM is now nearly ¾ of a percentage below its recent rival.
5/1 ARM, for instance, can be the right mortgage for a borrower who plans on living in his home for 5 years or less, anticipates income improvement and has some money saved. Its advantage is in lower payments thanks to a lower home loan rate. For that there is a minor risk factor involved, namely that the interest rate could rise if the loan is active beyond the fifth anniversary.
When the subprime mess descended on the mortgage industry over the last few years, ARMs gradually lost the attractive rate edge that eventually reached parity with 30-year fixed. But change is currently under way. Now that they are slowly widening the gap again, possibly pushing it all the way to where it historically stood before the lender problems started, does it mean that the home loan industry as a whole is returning to its previous, "normal" operating mode? It could be. Regardless, this certainly appears to be a step in the right direction.
source: Esko Kiuru
Mortgage Broker Tools
A mortgage broker is a middleman between the home buyer and the various lenders so therefore they need to use all of their mortgage tools to their advantage. A mortgage broker is also someone who is affiliated with multiple lenders. This helps the homebuyer because then their credit wouldn't have to be pulled more then once. The mortgage broker would pull the credit then shop it around to the lenders that are more then likely to say yes. By not pulling credit that often then the buyer's credit score doesn't get affected that much.
A mortgage broker's tools may also include a mortgage calculator. A mortgage calculator would allow a home buyer the opportunity to know how much their monthly payments would be based upon certain criteria they entered. This will help them determine if they can afford the home they are looking to buy.
A mortgage broker's tools may also include the ability to negotiate a better interest rate for the buyer. Most lenders have interest rates that are rarely negotiated but the mortgage broker can negotiate the rate because they are using more then one lender. This helps the buyer to find the lowest rate possible and thereby helps them to reduce their monthly payments and interest. A mortgage broker can be very helpful for those who are purchasing a home for the first time and don't know that much about the home buying process. This can ease the process and make it a bit easier for the buyer
source: http://www.loansiteplus.com/mortgage-broker-tools.html
Mortgages in the United States
Types of Mortgage Instruments
Two types of mortgage instruments are commonly used in the United States: the mortgage (sometimes called a mortgage deed) and the deed of trust.
Two types of mortgage instruments are commonly used in the United States: the mortgage (sometimes called a mortgage deed) and the deed of trust.
The mortgage
In all but a few states, a mortgage creates a lien on the title to the mortgaged property. Foreclosure of that lien almost always requires a judicial proceeding declaring the debt to be due and in default and ordering a sale of the property to pay the debt.
The deed of trust
The deed of trust is a deed by the borrower to a trustee for the purposes of securing a debt. In most states, it also merely creates a lien on the title and not a title transfer, regardless of its terms. It differs from a mortgage in that, in many states, it can be foreclosed by a non-judicial sale held by the trustee.[5] It is also possible to foreclose them through a judicial proceeding.
Most "mortgages" in California are actually deeds of trust. The effective difference is that the foreclosure process can be much faster for a deed of trust than for a mortgage, on the order of 3 months rather than a year. Because the foreclosure does not require actions by the court the transaction costs can be quite a bit less.
Deeds of trust to secure repayments of debts should not be confused with trust instruments that are sometimes called deeds of trust but that are used to create trusts for other purposes, such as estate planning. Though there are superficial similarities in the form, many states hold deeds of trust to secure repayment of debts do not create true trust arrangements.
Mortgage lien priority
Except in those few states in the United States that adhere to the title theory of mortgages,[6] either a mortgage or a deed of trust will create a mortgage lien upon the title to the real property being mortgaged. The lien is said to "attach" to the title when the mortgage is signed by the mortgagor and delivered to the mortgagee and the mortgagor receives the funds whose repayment the mortgage secures. Subject to the requirements of the recording laws of the state in which the land is located, this attachment establishes the priority of the mortgage lien with respect to most other liens[7] on the property's title.[8] Liens that have attached to the title before the mortgage lien are said to be senior to, or prior to, the mortgage lien. Those attaching afterward are said to be junior or subordinate.[9] The purpose of this priority is to establish the order in which lien holders are entitled to foreclose their liens in an attempt to recover their debts. If there are multiple
mortgage liens on the title to a property and the loan secured by a first mortgage is paid off, the second mortgage lien will move up in priority and become the new first mortgage lien on the title. Documenting this new priority arrangement will require the release of the mortgage securing the paid off loan.
source:www.wikipedia.com
Legal Types of Mortgage
Mortgage by demise
In a mortgage by demise, the creditor becomes the owner of the mortgaged property until the loan is repaid in full (known as "redemption"). This kind of mortgage takes the form of a conveyance of the property to the creditor, with a condition that the property will be returned on redemption.
This is an older form of legal mortgage and is less common than a mortgage by legal charge. In the UK, this type of mortgage is no longer available, by virtue of the Land Registration Act 2002.
Mortgage by legal charge
In a mortgage by legal charge or technically "a charge by deed expressed to be by way of legal mortgage",[3] the debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to enable them to enforce their security, such as a right to take possession of the property or sell it.
To protect the lender, a mortgage by legal charge is usually recorded in a public register. Since mortgage debt is often the largest debt owed by the debtor, banks and other mortgage lenders run title searches of the real property to make certain that there are no mortgages already registered on the debtor's property which might have higher priority. Tax liens, in some cases, will come ahead of mortgages. For this reason, if a borrower has delinquent property taxes, the bank will often pay them to prevent the lienholder from foreclosing and wiping out the mortgage.
source: www.wikipedia.com
participants in a mortgage agreement
in general, a mortgage of property involves the following parties.
Creditor
The creditor has legal rights to the debt or other obligation secured by the mortgage. That debt is often the obligation to repay the loan by the creditor (or its predecessor lender) who provided the purchase money to acquire the property mortgaged. Typically, creditors are banks, insurers or other financial institutions who make loans available for the purpose of real estate purchase.
A creditor is sometimes referred to as the beneficiary, mortgagee or lender.
Debtor
The debtor is the person or entity who owes the obligation secured by the mortgage, and may be multiple parties. Generally, the debtor must meet the conditions of the underlying loan or other obligation and the conditions of the mortgage. Otherwise, the debtor usually runs the risk of foreclosure of the mortgage by the creditor to recover the debt. Typically the debtors will be the individual home-owners, landlords or businesses who are purchasing their property by way of a loan.
A debtor is sometimes referred to as the mortgagor, borrower, or obligor.
Other participants
Because of the complicated legal exchange, or conveyance, of the property, one or both of the main participants are likely to require legal representation. The terminology varies with legal jurisdiction; see lawyer, solicitor and conveyancer.
Because of the complex nature of many markets the debtor may approach a mortgage broker or financial adviser to help them source an appropriate creditor, typically by finding the most competitive loan.
The debt is, in civil law jurisdictions, referred to as hypothecation, which may make use of the services of a hypothecary to assist in the hypothecation.
what is a mortgage anyway?
wikipedia explains a mortgage as a method of using property (real or personal) as security for the performance of an obligation, usually the payment of a debt.
The term mortgage (from old French, lit. dead pledge[1][2]) refers to the legal device used for this purpose, but it is also commonly used to refer to the debt secured by the mortgage, the mortgage loan.
In most jurisdictions mortgages are strongly associated with loans secured on real estate rather than other property (such as ships) and in some cases only land may be mortgaged. Arranging a mortgage is seen as the standard method by which individuals and businesses can purchase residential and commercial real estate without the need to pay the full value immediately. See mortgage loan for residential mortgage lending, and commercial mortgage for lending against commercial property.
In many countries it is normal for home purchases to be funded by a mortgage. In countries where the demand for home ownership is highest, strong domestic markets have developed, notably in Spain, the United Kingdom, and the United States.
www.realtor.com has this to say:
The mortgage is a legal document that secures the note and gives the lender a legal claim against your house if you default on the note's terms. In effect, you have possession of the property, but the lender has an ownership interest (called an "encumbrance") until the loan has been fully repaid. The lender agrees to hold the title or deed to your property (or in some states, to hold a lien on your title or deed) until you have paid back your loan plus interest.
Low mortgage rates may not last long
Whether you're thinking about refinancing your mortgage or taking advantage of January's exceptionally low rates to buy a house, don't sit around. Acting sooner rather than later should be a smart strategy.
Source: seattletimes.nwsource.com
Source: seattletimes.nwsource.com
Finding A Good Mortgage With Bad Credit
By: Writer2 -
The decision to buy a house is a great one, and nothing can make the outcome of that decision greater than being well informed of what to expect from the process of choosing and getting a mortgage. If credit history is an issue, prepare yourself and learn beforehand what you can do to optimize and improve it. A less than stellar credit history will not automatically exclude you from a mortgage approval. Armed with this knowledge, buying the right house will not only be possible, but it will be a pleasant experience. The first step in the process is to understand the process of mortgages. Next, decide what you need from a mortgage company, and pick one that will work well for you: not only in buying the home, but also in the long-term the time during which you will be paying off the mortgage. Lastly, begin planning now, and work to improve your credit history to minimize it getting in the way of an approval. Being informed will make the process of applying and being approved for a mortgage a much smoother and more pleasant process.
The process of a mortgage and its approval is generally uniform, with some minor differences from company to company. The initial step requires you to fill out an application form, from which the lender will have the information to research your personal finances and confirm what you have said. You may have to provide documents regarding your finances, such as previous years W2 forms, any outstanding debts you have, and information on the home you hope to buy. This information, together with any additional research, gives the lender an idea of your integrity and the probability of you paying off your mortgage. The next step would be to determine the mortgage payment. This begins with the amount you hope to borrow from the mortgager, taking into account the approximate price of the house, based on the estimate of the appraiser, as well as your own financial situation. The final decision is usually known within a month of applying. If you have been rejected, the mortgage company must, by law, inform you of the exact reason. Even if you receive a rejection, use it to learn from, try to find a solution and reapply. Last point: never let it slip your mind that in agreeing to a mortgage, you are agreeing to give up your house to the lender, who will sell it to earn the balance that you owe, in the case that you do not manage to pay off your mortgage. This is known as a foreclosure, and is certainly a situation that both the lender and you, the homeowner, want and work to avoid.
Knowing how to choose an appropriate mortgage company will reduce the risk of future problems both for you and the lender. Mortgage companies, by definition, act as intermediaries between the hopeful buyer (mortgagee) and the money lenders. A brokers job includes matching you with the best lender for you. In addition, the type of loan best suited for you is important. You can choose between a long-term or a short-term mortgage. A long-term mortgage is paid over the course of thirty years or more, while a short-term mortgage is anything paid out in less than thirty years (usually closer to fifteen). While a shorter term means lower interest, you will likely have to pay more every month. A good mortgage broker will be able to help you figure out which term is more appropriate in your case. While the interest rate that the mortgage company offers may influence your interest in working with them, keep in mind that a low interest rate should not be the basis for choosing a mortgage lender. Ask if the companys rates are variable with time, or fixed for the life of the loan. If you plan to live in your new house for the long-term, then dont automatically discount the long-term, higher interest rate mortgage. Also, be sure to check the total costs of the mortgage company, because a temptingly low interest rate could be lost in high closing costs. Last, but not least, in choosing your mortgage company, be sure you feel comfortable. If it is a huge, reputable mortgage firm, be ready to have less personalized assistance. On the other hand, a smaller firm may not be able to offer you the options of a large one, but a much more personal team or individual who will work on your mortgage throughout.
A mortgage is not exclusive for those who perfectly pay off their credit. For the mortals among us, there are many mortgage companies who are just as human and willing to help deserving individuals obtain a mortgage. What you can do as the potential mortgagee is know what the mortgage process consists of. In addition to the process of the mortgage, learn about the different types of mortgage lenders that exist, and identify which will be the best partner for you. Lastly, start improving any shaky credit history early on to avoid any potential hold-ups in acceptance for the mortgage. Organizing the work of buying the house will better prepare you to organize for the rewarding work of owning a house.
Finding a Good Mortgage with Bad Credit - A previously shaky credit history is no reason to blight the future. Finding a good mortgage company to support your bright future is not only possible, but necessary.
source: http://www.articledashboard.com/Article/Finding-A-Good-Mortgage-With-Bad-Credit/47658
Subscribe to:
Posts (Atom)