A vendor take-back mortgage is a unique situation. It can work in your favour; but it can also be very complicated.
If you consider this option, be sure to use a lawyer who is aware of the intricacies of a vendor take-back mortgage. You need to plan ahead for all sorts of situations: if the vendor dies, and their estate (including your mortgage) needs to be 'liquidated'; if the vendor becomes insolvent; if you want to make lump sum payments in addition to your regular payments; if you would like to renegotiate the mortgage (including penalties, if any). And these are just a sample of the items which should be specified in the mortgage agreement.
If you know the vendor remember that it can be difficult to deal with a friend or relative if something goes wrong. This can be a serious drawback to this kind of arrangement.
However, the pros for vendor take back mortgages are often worth the hassle. Sometimes vendors may take a lower interest rate than a bank. They may not require the same kind of credit check. They may also be more flexible regarding repayment terms.
It's important to weigh the pros and cons. Understand your own unique situation. Consult a real estate lawyer who has handle vendor take back mortgage transactions before. Be sure the constraints of the mortgage agreement will work in your favour - and are more advantageous than using another type of lender, such as a finance company mortgage.
SOURCE:http://www.mortgageguide101.com/vendor-take-back-mortgages.aspx
FINANCE COMPANY MORTGAGES
Finance companies will also give mortgages, but you may be looking at higher interest rates. Also, some companies may not have the same stability as a bank. These are things to be aware of if you are considering a finance company as your lender.
Having said that, there are finance companies that deal with people with less-than-perfect credit. Most banks will exclude such clientele. Some small lenders like credit unions will also exclude folks with problematic credit reports. This can start to limit your choices. So, if you are dealing with a credit rating that isn't quite what the bank would want, don't despair. Check what a finance company can do for you.
Some finance companies actually specialize in "credit repair". This means that they will work with you to help you to improve your credit rating. In addition, while you may start out with a higher interest rate at the beginning, you can usually negotiate a lower rate on renewal if your payment history is good.
Another route if you are having trouble because of credit rating is a small mortgage lender. While not technically a "finance company", they are also not a bank or a credit union. These folks compete almost strictly for mortgage business. Some small companies are very competitive, even with those with credit problems of one kind or another, because they want to get into this business. (It is very lucrative, and gives investors in such companies a much better return than they would get if they left their money in a bank on deposit.) However, the issue is getting a reputable lender, and a stable lender. If your lender goes bankrupt in the middle of your mortgage, there could be problems for you.
How will you know if your lender is stable? One place you can go to check is the large rating companies. Six major credit agencies will give you information about financial strength. You can do this online:
A.M. Best Co. - www.ambest.com
Duff & Phelps Inc. - www.duffllc.com
Fitch, Inc. - www.fitchratings.com
Moody's Investors Services - www.moodys.com
Standard & Poor's Corp. - www.standardandpoors.com
Weiss Ratings, Inc - www.weissratings.com
These rating companies look at a broad range of factors concerning the financial performance of an organization. Note: a high financial rating is not the same as a high consumer satisfaction rating. Just because your finance company mortgage lender is very stable doesn't mean you will like doing business with them.
What do you do if these rating companies haven't rated your small lender? You'll have to do some local footwork. Talk to other clients if possible. Even check with your local Better Business Bureau to see if there are complaints.
While the best interest rate is always good, you also want a lender you can put your trust in. After all, they are holding your home in their hands. If something goes wrong with them, you could be in foreclosure. A little homework now can save you a lot of hassle and heartbreak later.
source: http://www.mortgageguide101.com/finance-company-mortgages.aspx
Having said that, there are finance companies that deal with people with less-than-perfect credit. Most banks will exclude such clientele. Some small lenders like credit unions will also exclude folks with problematic credit reports. This can start to limit your choices. So, if you are dealing with a credit rating that isn't quite what the bank would want, don't despair. Check what a finance company can do for you.
Some finance companies actually specialize in "credit repair". This means that they will work with you to help you to improve your credit rating. In addition, while you may start out with a higher interest rate at the beginning, you can usually negotiate a lower rate on renewal if your payment history is good.
Another route if you are having trouble because of credit rating is a small mortgage lender. While not technically a "finance company", they are also not a bank or a credit union. These folks compete almost strictly for mortgage business. Some small companies are very competitive, even with those with credit problems of one kind or another, because they want to get into this business. (It is very lucrative, and gives investors in such companies a much better return than they would get if they left their money in a bank on deposit.) However, the issue is getting a reputable lender, and a stable lender. If your lender goes bankrupt in the middle of your mortgage, there could be problems for you.
How will you know if your lender is stable? One place you can go to check is the large rating companies. Six major credit agencies will give you information about financial strength. You can do this online:
A.M. Best Co. - www.ambest.com
Duff & Phelps Inc. - www.duffllc.com
Fitch, Inc. - www.fitchratings.com
Moody's Investors Services - www.moodys.com
Standard & Poor's Corp. - www.standardandpoors.com
Weiss Ratings, Inc - www.weissratings.com
These rating companies look at a broad range of factors concerning the financial performance of an organization. Note: a high financial rating is not the same as a high consumer satisfaction rating. Just because your finance company mortgage lender is very stable doesn't mean you will like doing business with them.
What do you do if these rating companies haven't rated your small lender? You'll have to do some local footwork. Talk to other clients if possible. Even check with your local Better Business Bureau to see if there are complaints.
While the best interest rate is always good, you also want a lender you can put your trust in. After all, they are holding your home in their hands. If something goes wrong with them, you could be in foreclosure. A little homework now can save you a lot of hassle and heartbreak later.
source: http://www.mortgageguide101.com/finance-company-mortgages.aspx
BANK MORTGAGES
The first place most people think of when they think "mortgage" is "bank".
Bank mortgages generally require the purchaser to have a quite reasonable credit history and reliable income. Of all mortgage lenders they are likely to have the most rigorous requirements for credit history. However, banks are also likely to be the most stable organization with which to get your mortgage.
For that stability, you can pay a price. Banks may not give you the best interest rate on your mortgage. It's extremely important to shop around. The best thing to do is get pre-approved with a number of banks and other financial lenders. Then you can negotiate more effectively with them for the best possible rate.
Don't be intimidated just because you are dealing with a bank for your mortgage. What you need to remember is that you are doing them a favour. If the banks don't loan out money then the banks don't make money. Since the bank mortgage lender is going to make money from your business, you should treat the negotiation of your mortgage the same way you would anything you buy
SOURCE:http://www.mortgageguide101.com/bank-mortgages.aspx
Bank mortgages generally require the purchaser to have a quite reasonable credit history and reliable income. Of all mortgage lenders they are likely to have the most rigorous requirements for credit history. However, banks are also likely to be the most stable organization with which to get your mortgage.
For that stability, you can pay a price. Banks may not give you the best interest rate on your mortgage. It's extremely important to shop around. The best thing to do is get pre-approved with a number of banks and other financial lenders. Then you can negotiate more effectively with them for the best possible rate.
Don't be intimidated just because you are dealing with a bank for your mortgage. What you need to remember is that you are doing them a favour. If the banks don't loan out money then the banks don't make money. Since the bank mortgage lender is going to make money from your business, you should treat the negotiation of your mortgage the same way you would anything you buy
SOURCE:http://www.mortgageguide101.com/bank-mortgages.aspx
CASH OUT REFINANCE VERSUS SECOND MORTGAGE
Debt Consolidation With a Cash-Out Refinance
“I need $50,000 to refinance credit card debt. Is it better to refinance my existing mortgage (with a balance about $140,000) into a new $190,000 mortgage, or should I borrow the extra $50,000 with a home equity loan?”
Cash-Out Refinance Versus Second Mortgage
The most important factor determining whether a debt consolidation is cheaper using a second mortgage or a cash-out refinance is the current level of interest rates relative to those at the time the first mortgage was taken out. If current levels are lower, a cash-out refinancing is likely to be better because the new first mortgage can have a lower rate than the existing one. If current rates are higher, on the other hand, a second mortgage is likely to prove cheaper. However, many other factors enter the equation. Here is a more complete list.
* The interest rate and points you have to pay to refinance the first mortgage, compared with the same costs for a second mortgage.
* Any mortgage insurance requirement on the new first mortgage.
* The interest rate, mortgage insurance, and period remaining on the term of the existing first mortgage.
* The term you select on the new first relative to that on the new second.
* The amount of cash you need.
* Your income-tax bracket.
* The length of time you expect to remain in your home.
* The interest rate you can earn on savings.
source:http://www.mtgprofessor.com/A%20-%20Debt%20Consolidation/consolidating_with_a_cash-out_refi.htm
“I need $50,000 to refinance credit card debt. Is it better to refinance my existing mortgage (with a balance about $140,000) into a new $190,000 mortgage, or should I borrow the extra $50,000 with a home equity loan?”
Cash-Out Refinance Versus Second Mortgage
The most important factor determining whether a debt consolidation is cheaper using a second mortgage or a cash-out refinance is the current level of interest rates relative to those at the time the first mortgage was taken out. If current levels are lower, a cash-out refinancing is likely to be better because the new first mortgage can have a lower rate than the existing one. If current rates are higher, on the other hand, a second mortgage is likely to prove cheaper. However, many other factors enter the equation. Here is a more complete list.
* The interest rate and points you have to pay to refinance the first mortgage, compared with the same costs for a second mortgage.
* Any mortgage insurance requirement on the new first mortgage.
* The interest rate, mortgage insurance, and period remaining on the term of the existing first mortgage.
* The term you select on the new first relative to that on the new second.
* The amount of cash you need.
* Your income-tax bracket.
* The length of time you expect to remain in your home.
* The interest rate you can earn on savings.
source:http://www.mtgprofessor.com/A%20-%20Debt%20Consolidation/consolidating_with_a_cash-out_refi.htm
MORTGAGE LENDERS
Looking for a mortgage? Congratulations! You must be a homeowner.
While the seller of a property might be willing to do a 'vender take-back mortgage', there is no way of knowing this in advance. Therefore, you always need to go through the process of 'pre-approval' with a bank or other mortgage lender. It's a good process regardless: Your pre-approval confirms your credit rating; it also confirms the kind of interest rate you might expect to pay; and finally, it confirms how much you can afford to spend!
As for the differences between a bank or a credit union or a finance company, it mostly comes down to the interest rate you will get, the services that are included and whether you will qualify with the lender for a mortgage. It's worth checking out both big and small lenders in your hunt for a mortgage. It's also worth being pre-approved by more than one type of lender, in order to compare the kinds of services and interest rates you could get. Even a difference of percent could save you hundreds if not thousands over the life of a mortgage.
Why else get pre-approved? Well, probably the best reason is that a pre-approved mortgage helps you to set your house-hunting budget. Your lender will consider your credit history, income and payment history (as well as other factors) and then tell you how big a mortgage they will be willing to approve. Add to that number the amount of down payment you have and now you know your price range!
Alternatively, you might look at the amount that you've been pre-approved for and figure out how big a monthly payment that is. This might even give you a better idea; not everyone wants to have as much as 40% of his or her take-home pay tied up in mortgage payment.
So, once you know how much you can qualify for, you might want to take the time to work out payments, and then decide if that works for you. If not, consider lower mortgage amounts until you get a payment amount you are comfortable with. That lower mortgage amount becomes your key information in house hunting.
source: http://www.mortgageguide101.com/mortgage-lenders.aspx
While the seller of a property might be willing to do a 'vender take-back mortgage', there is no way of knowing this in advance. Therefore, you always need to go through the process of 'pre-approval' with a bank or other mortgage lender. It's a good process regardless: Your pre-approval confirms your credit rating; it also confirms the kind of interest rate you might expect to pay; and finally, it confirms how much you can afford to spend!
As for the differences between a bank or a credit union or a finance company, it mostly comes down to the interest rate you will get, the services that are included and whether you will qualify with the lender for a mortgage. It's worth checking out both big and small lenders in your hunt for a mortgage. It's also worth being pre-approved by more than one type of lender, in order to compare the kinds of services and interest rates you could get. Even a difference of percent could save you hundreds if not thousands over the life of a mortgage.
Why else get pre-approved? Well, probably the best reason is that a pre-approved mortgage helps you to set your house-hunting budget. Your lender will consider your credit history, income and payment history (as well as other factors) and then tell you how big a mortgage they will be willing to approve. Add to that number the amount of down payment you have and now you know your price range!
Alternatively, you might look at the amount that you've been pre-approved for and figure out how big a monthly payment that is. This might even give you a better idea; not everyone wants to have as much as 40% of his or her take-home pay tied up in mortgage payment.
So, once you know how much you can qualify for, you might want to take the time to work out payments, and then decide if that works for you. If not, consider lower mortgage amounts until you get a payment amount you are comfortable with. That lower mortgage amount becomes your key information in house hunting.
source: http://www.mortgageguide101.com/mortgage-lenders.aspx
MORTGAGE BASICS
What the heck does "mortgage" mean anyway?
Strangely enough, the word "mortgage" comes from the French word "mort," which means "dead," and "gage," from Old English which means "pledge".
According to Sir Edward Coke (who lived from 1552 to 1634), the term came from the doubtfulness of whether or not the mortgagor would pay the debt! In those days, if the mortgagor did not, then the land pledged as security for the debt was taken away. The land was considered 'dead' to the mortgagor. (In other words, as if the person never had it.)
Nowadays, the term mortgage is commonly used to refer to a loan for the purpose of purchasing a property. We don't associate anyone's death with it! (Although, it might seem as if you might be dead before your mortgage is paid off.)
Home mortgages are the most common type of mortgage. Very few of us will be in the unique position of paying cash for our home.
Unlike most loans, your home mortgage will be renegotiated before you've paid it off. This is standard. In fact, you will have a 'life' of the home mortgage and a 'term' for the interest rate that you pay. The life of the home mortgage is commonly 20, 25 or 30 years. This represents the length of time in which your home will be paid off (if you pay regularly and with the specified amount).
You will also have a term for the interest rate that you pay on your home mortgage. This is the length of time over which you will have an agreed payment schedule with certain additional conditions. In effect, this is the time period over which you've agreed to:
Pay at a particular rate of home mortgage interest (either locked in or floating)
Certain restrictions for additional payments (usually a certain percentage of the original home mortgage which you can put down each year)
Certain restrictions for the increase of monthly home mortgage payments (usually a percentage of the specified monthly payment)
Certain restrictions on your ability to re-negotiate the home mortgage interest rate (which is determined by whether the mortgage is "open" or "closed")
Penalties if you want to renegotiate the terms of the home mortgage before the specified time period of the contract is expired.
This contractual agreement is normally from 6 months to 10 years. Note that many financial institutions will only negotiate terms for a home mortgage for 5 years or less.
source:http://www.mortgageguide101.com/mortgage-basics.aspx
Strangely enough, the word "mortgage" comes from the French word "mort," which means "dead," and "gage," from Old English which means "pledge".
According to Sir Edward Coke (who lived from 1552 to 1634), the term came from the doubtfulness of whether or not the mortgagor would pay the debt! In those days, if the mortgagor did not, then the land pledged as security for the debt was taken away. The land was considered 'dead' to the mortgagor. (In other words, as if the person never had it.)
Nowadays, the term mortgage is commonly used to refer to a loan for the purpose of purchasing a property. We don't associate anyone's death with it! (Although, it might seem as if you might be dead before your mortgage is paid off.)
Home mortgages are the most common type of mortgage. Very few of us will be in the unique position of paying cash for our home.
Unlike most loans, your home mortgage will be renegotiated before you've paid it off. This is standard. In fact, you will have a 'life' of the home mortgage and a 'term' for the interest rate that you pay. The life of the home mortgage is commonly 20, 25 or 30 years. This represents the length of time in which your home will be paid off (if you pay regularly and with the specified amount).
You will also have a term for the interest rate that you pay on your home mortgage. This is the length of time over which you will have an agreed payment schedule with certain additional conditions. In effect, this is the time period over which you've agreed to:
Pay at a particular rate of home mortgage interest (either locked in or floating)
Certain restrictions for additional payments (usually a certain percentage of the original home mortgage which you can put down each year)
Certain restrictions for the increase of monthly home mortgage payments (usually a percentage of the specified monthly payment)
Certain restrictions on your ability to re-negotiate the home mortgage interest rate (which is determined by whether the mortgage is "open" or "closed")
Penalties if you want to renegotiate the terms of the home mortgage before the specified time period of the contract is expired.
This contractual agreement is normally from 6 months to 10 years. Note that many financial institutions will only negotiate terms for a home mortgage for 5 years or less.
source:http://www.mortgageguide101.com/mortgage-basics.aspx
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