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Advantages Of Refinancing Your Home Mortgage

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Advantages Of Refinancing Your Home Mortgage

By Brian Jenkins
Should I refinance my mortgage? This is a question by many homeowners whenever the mortgage interest rates drop or people find themselves in different financial situations than when they first purchased the house. Although mortgage refinancing does not make sense for everyone, there are definitely advantages to refinancing. Here are some that you should consider: (continued below)

Advantages Of Refinancing Your Home Mortgage

(cont.)
Advantage #1: Saving Money In Interest Payments Over Time

Most people refinance in order to save money when it comes to their interest payments. When you refinance for a lower interest rate, it typically doesnt look like youre making a huge difference, since your monthly mortgage payment wont drop that much.

However, say you still have 13 years left on your loan and you monthly mortgage payment drops by just $25. Over the life of the loan, that means that youll save nearly $4000. The small savings can really start to add up. A word to the wise: make sure that your closing costs dont negate the benefits of refinancing. If youll save $4000, but you have to pay $4500 in closing costs to refinance, youre better off not saving the $25 every month.

Advantage #2: Lowering Your Monthly Payments

Although refinancing is most common for those who want a lower interest rate, you can also refinance in order to lower your monthly payment. With this option, youll lengthen the term of your loan. So, if you still have $50,000 left on your mortgage and are supposed to pay that back over the course of 10 more years, you can lower your monthly payment by paying back over the course of 20 more years instead.

When you take this course of action, you will pay more in interest in the end, so it does not make sense to refinance unless you are nearing a desperate situation. After all, you will have to pay for closing costs in this case as well, and since your financial situation is not good, those costs will have to be added to the total of the loan, costing you even more money in interest. If you choose this option, some lenders will also increase your interest rate. However, compared to foreclosure, refinancing to lower your monthly payments can be a good choice.

Advantage #3: Consolidating Debt

If you have enough equity in your home, you can refinance your mortgage to consolidate other debts. This works especially well if you have a lot of credit card debt. You put equity into your home whenever the value of your home increases (due to improvements or market condition) or whenever you make a payment that goes toward the principle of the loan (not the interest). Your down payment added initial equity, and most lenders require at least that amount (around 10% 20%) to stay with the house. That way, if you default, the bank can sell the home quickly to recoup all losses, even if they have to sell it for under the amount of your original mortgage. When you refinance to get access to your equity, you can take money out, re-adding it to your mortgage total, as long as you keep that 10% to 20% intact. That money can then be used to pay off debts where the interest rate is much higher than the interest rate on your mortgage. In the end, youll save money in most cases (though dont forget about closing costs, once again).

Advantage #4: Shortening the Term

You can also refinance your home to pay it off early. Paying off the mortgage sooner than expected is good for your credit and less of a hassle, since you wont have to remember to send out monthly mortgage checks. With a typical loan, like youd get with a used car loan or student loans, youre more than welcome to pay off the loan as quickly as possible.

However, with a mortgage, lenders discourage paying off the debt early. Lenders make money by charging you interest, and if you pay off your debt really early, theyre missing out on a lot of interest money, since a house is so expensive. To ensure that they dont lose too much income, they charge an early payment penalty. If you refinance, however, you can shorten the term of your loan, making it possible to pay it back earlier without paying a fine.

Advantage #5: Getting Cash Back For Home Improvements

Like with consolidating debt, you can cash in on the equity of your home in order to get money for home improvements. Lenders are usually on board with this type of refinancing and may even offer you a lower interest rate if you put the time into home improvements, since it will vastly improve the value of the home.
About The Author
Brian Jenkins is a freelance writer who writes about mortgages and home ownership, offering tips such as how to find the lowest mortgage rates.

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Mortgage Loans

The Ins And Outs Of Locking In A Mortgage Rate

Mortgage Loans
Mortgage Loans information.

The Ins And Outs Of Locking In A Mortgage Rate

By Brian Jenkins
The mortgage interest rates you are offered will be one of the primary ways you will determine which mortgage lender to use when you purchase a home. When you are quoted a rate, most mortgage lenders are actually giving you what is called an adjustable interest rate, which means it can change over time. So how can you lock in a mortgage rate, rather than fall prey to the changing economy? (continued below)

The Ins And Outs Of Locking In A Mortgage Rate

(cont.)
What does Adjustable Mean?

Most interest rates are adjustable, not fixed. That means that the mortgage rate you locked in when you signed your mortgage contract is not necessarily going to stay the same over the life of the loan. There are a number of different things you want to look at when you originally agree to an adjustable mortgage rate, or AMR:

The Initial Rate: This is the starting point for your interest rate
The Adjustment Period: This is how often the rate will change and the monthly payment amount will be recalculated
The Margin: This is the number of percentage points added to the interest rate in your specific case, and it should not change over time. (more on margins below)
Rate Caps: Your mortgage lender caps the amount the AMR can change over a certain period of time and over the entire life of the loan (more on rate caps below)

Basically, mortgage lenders use an index to come up with an initial interest rate. A margin is then added, based on your credit and other factors (for example, you might be paying index + 1%). As that index fluctuates, so will your interest rate.

Caps on Interest Rates

Never sign a mortgage agreement with an adjustable interest rate if there is no clause about caps. With an interest rate cap, your lender is free to change your interest rate whenever they want to make more money, which is not fair to you. There should be two caps specified. The first should be a cap on how much the interest rate can rise over the course of a short period of time (usually between one and five years). The second, higher cap should limit how much the interest rate can rise over the entire life of the loan. Some caps specify the percentage points an interest rate can rise, while others specify how much your total monthly mortgage payments can rise. Either is fine just make sure your contract has such a clause.

How can you get a Fixed Interest Rate?

Adjustable interest rates are not your only option in the mortgage world. The opposite of this kind of interest rate is the fixed interest rate, which is, as the name implies, an interest rate that is locked in and does not change. Fixed interest rates are not tied to any kind of index, though an index may be used to determine your rate initially. The advantage to locking in your interest rate is that you know exactly how much you will owe every month on your mortgage, and it will never change unless you refinance. Will you save money with a fixed mortgage rate? Maybe, but that is not always the case. Initially, fixed rates are usually much higher than adjustable rates, since the mortgage lender is compensating for the indexs rise that is certain to happen over the life of the loan. However, if the index does jump high, you will be saving money, since your interest rate will still be low.

Prepayment Penalties

Whether or not you lock in a rate, your mortgage agreement will likely have a prepayment penalty clause. When you have a fixed rate, this is likely a flat fee, while if your rate is adjustable; it may be calculated based on the index.

Essentially, a prepayment penalty is a fee that you have to pay to a lender if you pay off your loan early. Usually, this only applies to people who pay off the mortgage extremely earlier, not people who pay it off a month or two ahead of schedule. Lenders make money through interest, so if you pay off the principle of the loan early, you are avoiding paying the rest of the interest that would have compiled. When you have a fixed interest rate, you will likely be responsible for a penalty that covers a percentage of the interest you would have had left. If your rate is adjustable, the penalty could be calculated based on the current index, based on your initial interest rate, or based on a combination of factors.

About The Author
Brian Jenkins is a freelance writer who writes about mortgages and home ownership, offering tips such as how to find the lowest mortgage rates.

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Mortgage Loans

Second Mortgage a Good First Step

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Second Mortgage a Good First Step

By Mike Hamel
A second mortgage can be the first step to climbing out of debt, especially for homeowners who have bad credit. A second mortgage is a loan taken out in “second position” on a property that already has a mortgage. There are fixed-rate loans, adjustable-rate loans and home equity lines of credit (also known as HELOCs). Fixed-dollar-amount mortgages are the way to go when you need all the money at once. A HELOC is a credit line that can be drawn upon as needed up to the limit of the loan. (continued below)

Second Mortgage a Good First Step

(cont.)
“Bad Credit” Second Mortgages
Your right to credit is guaranteed by the Equal Credit Opportunity Act. You can’t be denied credit based on race, gender, marital status or ethnicity. But how much money you can borrow and how much interest you will be charged will depend on your credit score.

Credit is easy to get and hard to control. Not using it properly will get you a low FICO score from the three major credit bureaus. Generally, a score of 680 or better signifies good credit. Scores in the 680-620 range are still considered good, but will cause creditors to take a second look before lending you money. 620 and lower, and you are in the bad credit range.

Here are some indications that you are in bad credit territory:

  • You have to apply for new credit cards to pay off old ones, thus rotating but not retiring your debt.
  • You can only make the minimum payments on your loans and cards each month.
  • You are at the limit on all your cards and accounts.
  • You have to get subprime financing when you need to borrow money.

Improving Your Financial Situation
It’s a catch 22 that getting a bad credit second mortgage can lower your FICO score initially, but it can also help raise it in the long run-if you use the money to pay off high interest debts. This new loan doesn’t reduce your debt; it just restructures it to help you get back on your feet financially. An added bonus is that the interest you pay is tax deductible. The IRS says joint filers can deduct all the interest to a maximum of $100,000 on home mortgages.

It’s easy to shop and compare bad credit second mortgages online at reputable sites like www.badcreditsecondmortgages.com. The no-obligation application process is quick and confidential. Interest rates are still relatively low, but might rise in 2006, so now is a great time to see if a second mortgage is a good financial move for you.

About The Author
Mike Hamel is the author of several books and the Senior Writer for AIM Techs (www.salesandmarketingllc.com), an Internet marketing company that specializes in improving visitor-to-sale conversions using proprietary software and advanced SEM techniques. Source: articlegeek.com

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Debt Beat Down 2009!! Mortgage Loans

Discovering Fraudulent Appraisals During Foreclosure

Mortgage Loans
Mortgage Loans information.

Discovering Fraudulent Appraisals During Foreclosure

The Credit ResourceBy Nick Adama
Without question, one of the enablers in many fraudulent mortgage lending schemes has been a crooked appraiser willing to give a property any value that the Realtor, mortgage broker, or lender wanted. The real estate bubble could not have been inflated to such a high level without the complicity of many appraisers who threw all conservatism out the window and began giving properties ridiculous values in order to help secure loans. (continued below)

Discovering Fraudulent Appraisals During Foreclosure

(cont.)
Now, with the housing market collapsing all around us, these appraisers have had to go back to valuing homes at more reasonable levels. However, this leaves many homeowners out in the cold, having received inflated appraisals just a few years ago and now finding out their homes were never worth that amount. What recourse, though, do these borrowers have, especially when they fall into foreclosure ?

The degree of appraisal inflation and fraud has been found to be astronomical in too many cases already. Homeowners have discovered that their home’s value was inflated by up to 1,000% of its non-bubble price. The typical mortgage insured by the Federal Housing Administration (FHA) is inflated by 30-50% in order to raise prices of property on first-time home buyers and low income borrowers.

So clearly, there is a problem with a large number of appraisals, but homeowners may have trouble holding the individual appraiser or his company liable for the inflated value. However, there are a number of different claims that can be brought against an appraiser that blatantly misrepresented the actual fair market value of a home, especially if the borrowers relied on that appraisal in their decision to buy or refinance.

The most obvious claim borrowers may be able to bring against an appraiser is fraud due to the misrepresentation of the home’s value. While valuing a home is sometimes just as much art as science, obviously using inappropriate comparable sales or making unreasonable adjustments to justify a higher value can be a clear case of fraud.

The only problem with this claim that homeowners may find is that the conditions may be hard to meet. For example, the borrowers will need to show all nine elements are present for a fraud claim to be made. Unfortunately, this may be easier said than done, and homeowners may want to contact an attorney to discuss the potential of a fraud case in more depth. These nine elements are the following:

1. representation of an existing fact.
2. the fact is material.
3. the representation of the fact is false.
4. the speaker knows it is false.
5. the speaker intends the listener acts on the knowledge.
6. the listener is ignorant of the falsity.
7. the listener relies on the truth of the fact.
8. the listener has a right to rely on it.
9. damages are suffered by the listener.

Far more promising as a claim against appraisers is state Unfair and Deceptive Acts and Practices (UDAP) statutes. This claim is also somewhat easier to make. The reliance on the misrepresentation does not have to be show, and some of the other conditions are also loosened. Homeowners should contact a lawyer or do some research on their state’s UDAP laws, however, to find out all of the relevant information.

There are also a number of other claims that can be made against an appraiser, either in or out of foreclosure. Depending on the circumstances of the case, some of these include violations of state licensing laws, civil conspiracy, fraudulent concealment, and civil RICO claims. Again, it may be in the homeowners’ best interests to speak with legal counsel or research these issues in depth before making a claim.

Far too many homeowners were given the most expensive mortgages they qualified for and their home values were inflated to justify the large loans. Appraisers played a role in these transactions, and many of the most corrupt may have engaged in acts that carry significant legal liability. Especially in cases where a lender pushes homeowners into foreclosure, doing some research on these issues and holding the appraiser accountable may be called for.

About The Author
Nick publishes articles for the ForeclosureFish website. These articles provide advice to families dealing with the loss of a home, describing a number of methods they can use to stop foreclosure. The site details numerous options, including mortgage modification, foreclosure refinancing, deed in lieu, filing bankruptcy, and more. Visit the site to find out more about how foreclosure works: http://www.foreclosurefish.com/