Do you, in common with millions of other home owners, have a short-term mortgage? If so, it�s very easy to set up the monthly repayment and then get involved with so many other aspects of your life that time slips away and before you know it, the two or three year period of your loan is coming to an end. Whilst many lenders write to their customers towards the end of the loan period, it isn�t compulsory.
When you sign on the dotted line for your mortgage deal, you are issued with a key facts mortgage document which will include all the loan details together with the all important date that your fixed price deal will come to an end. If you forget this date and also fail to receive a reminder, the first thing you�ll become aware of it a notice of a change in monthly re-payments, which means that you�ll be going on to the lender�s usually expensive SVR, or standard variable rate.
As an example, on a loan of �150,000, you could easily be paying out a substantially higher amount - more than �200 a month extra. This is assuming that the SVR is 2.25% more than the �special rate�, which would not be unusual.
Obviously most borrowers would opt to change to an alternative short term mortgage, but it takes between four to six weeks to arrange this change-over.
If you are extremely diligent at remembering to take action you may run into problems too as if you ask what your options are when there�s more than a month or so to run, your lender will very often say they�re unable to make a decision until nearer the date. Then you�ve been stalled and still can�t make a decision.
There has been some improvement in the way insurers are handling the situation. An increasing number of them are contacting borrowers around three months before the end of their current deal and setting out options.
It�s not always the right thing to automatically change to another lender to get the best price. Consider your options carefully. If you stay with your current lender, there will be a saving on legal charges and you shouldn�t need another valuation. Nor will exit fees be charges, which could mean a fairly big saving. It just could be that a slightly more expensive deal with your current lender may work out best in the long run.
Because of this and with the intense competition in the re-mortgaging business, it�s becoming increasing common to find new lenders who will fund the charges, just to get your business.
If you used a broker to arrange the mortgage, you may well find that they�ll send you a friendly reminder. This is a service which will be no problem for them and another thing less for you to think about, which has to be good news. Your broker will weigh up the deals and come up with some facts and figures when it comes to renewal too. The internet�s the place to look and an on-line broker�s the person to look for.
Monday, April 7, 2008
Mortgages - Short Term Memory
Ohio Mortgage Loans And Financing
When Should You Refinance Your Mortgage? There are two primary reasons to refinance a mortgage: to get a more desirable rate and terms or to extract cash from the home's equity. Both of these reasons can of course also be fulfilled!
Rate-and-term refinancing
Rate-and-term refinancing pays off one loan with the proceeds from the new loan, using the same property as collateral. This type of loan allows you to take advantage of lower interest rates or shorten the term of your mortgage to build equity faster. Rate-and-term refinancing refers to a myriad of strategies, including switching from an ARM to a fixed or vice versa. For example, if you have an ARM that is set to adjust upward in a few months, you can refinance into a fixed-rate mortgage. Or if you have a fixed-rate loan and you know you will move in two or three years, you could refinance into a lower-rate 3/1 hybrid ARM.
Cash-out refinancing
Cash-out refinancing leaves you with additional cash above the amount needed to pay off your existing mortgage, closing costs, points and any mortgage liens. You may use the additional cash for any purpose.
For example, say you bought your house for $150,000 a few years ago and borrowed $120,000. Now the house has an appraised value of $250,000 and you owe $110,000. With a cash-out refinance, you could get a mortgage for $150,000. You would pay off the $110,000 you owe and pocket the $40,000 difference, minus closing costs.
Ohio Mortgage Bankers Association
To learn more about Ohio Mortgage options you can check with the Ohio Mortgage Bankers Association, founded in 1961. OMBA is a statewide organization devoted exclusively to the field of residential and commercial real estate finance. OMBA's membership comprises mortgage originators and servicers, as well as investors, and a wide variety of mortgage industry-related firms. Mortgage banking firms engage directly in originating, selling, and servicing real estate investment portfolios.
Members of OMBA include mortgage bankers, mortgage brokers, banks, mortgage insurance companies, attorneys, credit unions, saving & loans associations etcetera.
OMBA is dedicated to the maintenance of a strong housing, residential and commercial, real estate finance system. This involves support for a strong economy; a public-private partnership for the production and maintenance of single and multi family home ownership opportunities; a strong secondary mortgage credit delivery system; equitable tax laws; suitable shelter for low income families and the disadvantaged; housing opportunities for the nation's veterans; appropriate environmental measures; and fair and equitable bankruptcy laws.
Five Reasons That Banks Reject Commercial Mortgages
This article highlights the five main reasons that banks decline commercial mortgage loan applications. The reasons provided below do not represent obscure issues, so it is likely that two or three of the reasons described will be important for typical commercial mortgage situations. The first two reasons (business plans and tax returns) will potentially impact all commercial borrowers. Many commercial loan officers will start their loan review process by stating some variation of �Can you show me your business plan?� and �We will need to see several years of tax returns�.
Many commercial projects are too unique for traditional commercial banks. In these situations (even if a commercial borrower has favorable tax returns and an adequate business plan), it is not unusual for commercial borrowers to be declined for a commercial mortgage loan by a traditional commercial lender. Commercial borrowers are likely to be confused when they are turned down and will be unsure as to why it happened and what to do next. For each of the five major reasons that a bank might decline a commercial real estate loan, a strategy is provided for converting the declined loan into an approved commercial mortgage.
Reason # 1:
A bank's loan officer or loan underwriter is not satisfied that the business plan provided by the commercial borrower supports the requested loan.
Strategy # 1:
Most commercial borrowers will benefit directly from dealing with a commercial lender that does not require a business plan due to the following major benefits:
(1) Reduce commercial mortgage costs by thousands of dollars. A common range for an average business plan (prepared to typical bank specifications) would be $5,000 to $10,000.
(2) Reduce mortgage closing time by several months. Business plans can be prepared before or after applying for a loan, but either way the net extra time required will probably be 1-2 months or more.
(3) If the lender does not require a business plan, there is one less item standing between the commercial borrower and their approved loan.
Reason # 2:
Loan underwriters find something on a tax return that disqualifies a borrower under the bank's lending guidelines. This "something" will frequently be insufficient net income, but when loan underwriters look at tax returns, there are many other possibilities which produce a similar result. For example, IRS Form 4506 (which authorizes the lender to obtain tax returns directly from the IRS) is routinely required by most traditional banks. Some lenders require this form in addition to current tax returns.
Strategy # 2:
Business loan borrowers will NEVER have Reason Number 2 to worry about if they are applying for a "Stated Income" commercial real estate loan. Very few traditional banks use Stated Income (no tax returns, no income verification, no IRS Form 4506) for a commercial mortgage. Commercial borrowers should seek out lenders using Stated Income Commercial Loans and "Limited Documentation Requirements". This strategy will not work for all commercial mortgages since there is a maximum loan amount of $2-3 million for most Stated Income Commercial Mortgage Programs.
Reason # 3:
The bank does not generally make business loans for the type of business involved or imposes special requirements that make the loan impractical for the commercial borrower. Fewer and fewer banks are making loans to bar/restaurant properties. Similarly, auto service businesses are frequently given unnecessary (and expensive) environmental reporting requirements. There are many "special purpose" properties such as funeral homes, nursing homes, assisted living facilities, RV parks, marinas, golf courses, bed and breakfast, day care centers, churches and car washes that most traditional banks will not include in their business lending portfolio.
Strategy # 3:
For most business borrowers that can get approved at a traditional bank, there are better options available elsewhere. And "better options" are clearly available ONLY elsewhere when the bank won�t make the business loan in the first place! There are very capable commercial lenders that are interested in unique or special purpose properties.
Reason # 4:
When a business is refinancing their current commercial mortgage and wants to get a significant amount of cash out for various uses, it is not unusual for the bank to limit the amount of cash to amounts as small as $100,000. Even though the bank might make the loan, if they won�t provide the amount of cash needed by the commercial borrower, this is equivalent to declining the loan.
Strategy # 4:
As mentioned in Strategy Number 3, there are better options available elsewhere! The commercial borrower's mission (and it is not impossible at all) is to use a commercial real estate lender that will allow them to get much larger amounts of unrestricted cash out of a commercial refinancing, i.e. more cash out and no restrictions on what they do with it.
Reason # 5:
The bank will not provide a business loan without adequate collateral, usually in the form of a lien on personal assets such as the commercial borrower's home.
Strategy # 5:
Commercial mortgage borrowers should seek out lenders that do not "cross collateralize" assets as a condition for obtaining a business loan. This will provide greater flexibility for the commercial borrower and avoid unnecessary (and unwise) connections between personal and business assets.
Revolutionary Fixed Rate Option Arm Mortgages
Love it or hate it, the Payment Option ARM or Pick a Pay mortgage has become one of the most popular home loans in the USA, and is definitely the fastest growing option in high cost states like California, New York, New Jersey and Connecticut. While many people love the 1% start rates, there are a lot of people who don't feel comfortable with the possibility of payments increasing in as little as 1 month on many of the most common programs. The common wisdom is that Option ARMs are incredible products for savvy homeowners and investors, but may be too powerful for the average homeowner to handle.
Introducing Hybrid ARMs
For the rest of us, an innovative class of new loans has been recently introduced for homeowners who want the security of a Fixed Rate mortgage, with the flexibility and exceptionally low payments of an Option Arm. These home loans go by many names, including Hybrid Option & Fixed Option Arms, but they have one thing in common: A fixed payment for several years. Some of these mortgages have fixed interest rates, some of them have fixed minimum payments which don't go up, and some of them have both!
So what are the key benefits of Hybrid ARMs?
- Fixed Minimum Payments for 1, 3, 5 or 7 years
- Fixed Interest Rates for the Full Term on Many Programs
- Minimum Payment is typically 55% lower than a Regular Loan
- Increased Cash Flow, Decreased Risk Makes Housing Affordable & Secure
- Interest Only Payment Option Continues Even After Recast
- Greatly Reduces the Sticker Shock of a Fixed Mortgage
- Greatly Reduces the Payment Shock of an Adjustable Mortgage
- Greatly Reduces Negative Amortization
- Retains Flexibility of an Option ARM
Like an Option ARM, Your Payment Coupon Has 4 Options on it
1. Minimum Payment
2. Interest Only Payment
3. 15 Year Fixed Amortized Payment
4. 30 or 40 Year Amortized Payment
A Real World Example
Your Minimum Payment is generally 55% of what a regular fixed rate mortgage would cost. Let's take a look at a hypothetical scenario. Jane has a house in
But Do I Qualify?
Because of the very low effective rate of this financing and the very generous terms, these types of loans are generally available only to borrowers with credit scores of 620 or more. If you don't know your credit score, you should call your loan officer and find out. Other things to look out for are any late payments on your mortgage in the past 1 to 2 years, and of course any serious delinquencies like liens or judgments on your credit report. Also, you will usually be limited to borrowing no more than 80% to 95% of the value of your home. And if you talk to your loan officer and they haven't done a lot of Hybrid ARMs, get a new mortgage company, because there are a lot of ways they can steer you wrong simply out of ignorance (which we cover in a few of our other articles on the subject). These Hybrid loans are very new, very powerful financial tools and are best handled by those with extensive experience with the product.
But Wait There's More!
We've had so many questions from consumers and success stories from our customers who have used this loan, that we have decided to publish a series of articles to inform our readers about this new category of products, and will be covering a variety of topics including some of the most common and some of the most creative uses of this financing, as well as a detailed look at the benefits and risks of this type of mortgage as compared to traditional fixed mortgages and Option ARMs.
Mortgage After Bankruptcy: These Steps Could Help
If you want to increase your chances of qualifying for a mortgage after bankruptcy, here are some steps you can take:
First, if you plan to apply for a mortgage after bankruptcy, you will want to have any inaccurate or obsolete negative information on your credit reports corrected or removed. This can help increase your credit score.
Also, you will want to establish some new accounts, and pay them in a timely manner over time. If you've paid the accounts on time for about 18-24 months since your bankruptcy, this should help rebuild your credit - which can be a plus when applying for a mortgage after bankruptcy.
Next, you will want to work with an experienced mortgage broker. Why? Because buying a home is probably going to be one of the biggest investments you'll make. You will want to have an experienced professional guiding you through the lending process - especially when it comes to applying for a mortgage after bankruptcy.
A mortgage broker typically has access to dozens of lenders and will probably have a good idea of which ones will (and will not) approve you for a mortgage after bankruptcy. In addition, they will be able to tell you what to expect in terms of the financing process.
So how do you find a mortgage broker? One way is to to ask friends or real estate agents for a referral. Once you have a few names, set up an appointment to interview each mortgage broker.
Among other questions, you will want to know if they have successfully been able to get other individuals a mortgage after bankruptcy. You also want to make sure they are licensed.
Another question you will want to ask is what type mortgage loan (A, B, C, or D) the mortgage broker thinks you can qualify for. Why? The lower the grade of the loan, the higher the interest rate. This is an important consideration when applying for a mortgage after bankruptcy.
In addition, there are other important questions you will want to ask a potential mortgage brokers - ones that could help you save money and/or increase your chances of qualifying for a mortgage after bankruptcy. While there isn't enough room to cover them here, I go into detail on them in After Bankruptcy Credit Solutions.
Also make a point to bring your financial information with you when you meet with a mortgage broker. For example, you should have your income and expenses available as this will help the broker determine the loan amount you may be able to qualify for when it comes to a mortgage after bankruptcy.
Generally speaking, most lenders will allow you to get a home loan with a payment of up to 28% of your gross income. So if you make $4,000 per month, that would be $1,120. But keep in mind that this just an example. Again, a good mortgage broker can explain the criteria that each lender has.
If you have copies of your credit reports from each of the major credit reporting agencies (Experian, Equifax, and Trans Union) this will help also. Your credit report will play a major role when it comes to qualifying for mortgage after bankruptcy.
On that note, if you want to increase your chances of qualifying for a mortgage after bankruptcy, make sure that any inaccurate or obsolete negative information is removed from your credit report. This is important for two reasons: (1) It can mean the difference between qualifying or not qualifying for a mortgage after bankruptcy, and (2) if you end up qualifying for mortgage after bankruptcy, any inaccurate or obsolete negative information on your credit report could cost you up to $1,000s or even $10,000s in additional interest.
How do remove any inaccurate or negative information from your credit report, so you can improve your chances of qualifying for a mortgage after bankruptcy? There are specific steps you need to take. While I cover them in After Bankruptcy Credit Solutions, there is not enough room to go into detail here. Just remember that ideally you want rebuild your credit history before applying for a mortgage after bankruptcy.
By the way if you think that removing inaccurate or negative information from your credit reports takes a long time, I have good news. There is a way to have it removed in as little as 72 hours - the service is typically not available directly to consumers. In After Bankruptcy Credit Solutions I show you how to find this type service if you are trying to qualify for a mortgage after bankruptcy.
In this article we touched on two important steps you can take if you plan on applying for a mortgage after bankruptcy: Correcting or removing any inaccurate or obsolete negative information from your credit reports, and finding a mortgage broker to guide you through the lending process.
Hybrid Option Arm Mortgages
The reality of today�s market is that interest rates are higher than rates from the past few years. What this means for first time homebuyers, real estate investors, and property owners with adjustable rate mortgages is that monthly payments for the traditional 30 year mortgage are becoming more and more of a financial burden.
Fortunately, for current and prospective homeowners who have good payment histories over the last two years and credit scores above 620, an emerging product is making monthly payments for mortgages both affordable and safe.
Hybrid Arms
Similar to Option-Arm mortgages, Hybrid Arm mortgages have 4 different options for monthly payments. These options are:
1.Minimum Payment - minimum payment�can lead to negative amortization.
2.Interest Only Payment - payment on only the interest of the mortgage
3.15 year Amortized Payment - payment towards the principal and interest based on a 15 year term
4.30 � 40 year Amortized Payment - payment towards the principal and interest based on a 30 or 40 year term
The primary difference between an Option-Arm mortgage and a Hybrid Arm mortgage is the length of time the minimum payments and interest rates in a Hybrid Arm are fixed.
Option-Arm mortgages typically have fixed interest rates of 1 to 3 months. In contrast, Hybrid Arms have fixed interest rates between 1 and 7 years.
What this means for homeowners is that the benefits of Option-Arm mortgages are now combined with the security of longer termed mortgages.
For example, a homeowner with a 200,000 5-year adjustable mortgage pays $1467.00 before her taxes and insurance. With a 5 year Hybrid Arm, the homeowner would pay $800 a month on the same mortgage. The savings on the minimum payment would be comparable to the savings of an Option-Arm mortgage.
However, for an Option-Arm mortgage, the minimum payment would increase after 1 to 3 months, leading to minimum payments above $800. With a Hybrid Arm, the minimum payment would remain at $800 for the 5 year term. For the homeowner, this means a more predictable monthly payment and a reduced risk for negative amortization.
Hybrid Arms (also known as Hybrid Option Arms and Fixed Option Arms) typically save homeowners about 55% of their typical monthly payments. They are powerful tools to save money and ensure financial freedom. To see if you qualify for a Hybrid Arm, contact a mortgage professional today.
Friday, April 4, 2008
Be ARMed With Knowledge When Shopping For an Arm Mortgage
When you go shopping for a house there are many important decisions to make. Not only do you have to find that perfect house that you want to live in for years and years, but you have big decisions to make at your financial institution as well. Before you go to your lender, arm yourself with knowledge about mortgages and the different types that you will be offered so you can make a thoroughly informed decision when choosing a mortgage.
There are generally two types of mortgages - a fixed rate mortgage and an adjustable rate mortgage, or ARM mortgage. A fixed rate mortgage offers one interest rate for the entire life of the loan, while an adjustable rate mortgage offers changing interest rates at intervals of time.
By arming yourself with knowledge before you head to the lenders, you can ensure that you are going to get the product you need at the price you can afford. There are advantages and disadvantages of adjustable rate mortgages that need to be weighed before deciding for, or against, an ARM mortgage.
Adjustable rate mortgages usually come with a significantly lower interest rate than is offered on a fixed rate mortgage. For this reason, ARM mortgages are very tempting to home buyers. On the other hand, a fixed rate mortgage offers the security and consistency of payments and interest rate throughout the term of the loan. There are risks involved with an ARM mortgage, such as higher interest rates in years to come.
Is the risk worth it? It is this primary question you need to ask yourself before heading to the lender to secure a home mortgage loan.