Posted on October 27th, 2009 by admin in
Home loan Mortgage payment calculators are helpful in determining both the monthly payment on a fixed rate mortgage and the total cost of borrowing over the life of that loan. They use the sale price of your home, the amount of your down payment, mortgage term and annual interest rate to calculate your estimated monthly payment amount.
Some mortgage payment calculators also allow you to include the cost of your private mortgage insurance and real property taxes into the mix. In determining the amount of your real property tax escrow payments, the mortgage payment calculator will take the prior tax rate and calculate projected rate increases to arrive at an estimated figure representing monthly tax escrow payments over the life of your loan. Some mortgage payment calculators can also determine your new loan payoff date based on amount of projected increase in monthly principal payments if you are contemplating making extra payments on your mortgage loan.
Years ago, bankers used to calculate monthly mortgage payments using multiplication and a simple chart to arrive at a result. The process was fairly simple as every loan had a fixed interest rate. The mortgage market of today requires a much more sophisticated mathematical equation to calculate a monthly payment amount.
The plus side to mortgage payment calculators is that you can use them to extrapolate different financial scenarios to get an idea of what properties you can and cannot afford. Mortgage payment calculators are quite useful if you are planning to take out a fixed rate mortgage, but they do not work well with adjustable rates. They will help you only with the initial fixed rate period as they cannot possibly predict future interest rate resets.
Even though mortgage payment calculators are valuable tools for helping you decide on a housing purchase, their calculations are not always entirely accurate. There is no way to doublecheck their results as we have no way of accessing the mathematical equations they use to arrive at those results. It is always best to confirm your figures with a mortgage professional. However, if all you want is a broad estimate and not a figure that is precise and to the penny, mortgage payment calculators are valuable in helping you avoid a disastrous financial mistake.
The end of March, consumers were delighted to see the interest rate for the average home mortgage still at historically low levels. The Federal Reserve made a decision to keep rates low and many analysts expect them to stay fairly low for the remainder of 2009. In the current economic downturn, it is welcome news for potential buyers and current homeowners interested in refinancing a home mortgage. Lenders, however, have adopted much more stringent lending requirements since the credit crisis and decline of the real estate market. A better credit score, cleaner credit history and more money down are now required for most loans. Because of those requirements, less people who apply for a home mortgage are actually approved. Those who currently own homes and apply for refinancing must meet the same standards. The best rate loans now need equity percentages of 20 to qualify and credit scores of 680 or higher. The biggest hurdle for applicants in the areas of the country where values have dropped the most is having enough equity. One of the goals of the new government housing aid plan is to assist those responsible homeowners who no longer have enough equity, due to a decrease in the value of their homes. But those who owe more than 105 percent of the value of their home will not be eligible for a refinancing under the plan. A minimum of 5 percent is required in equity to apply for refinancing.
Many who are considering refinancing a home mortgage are waiting to see if the rates drop below 5 percent. They may be right and snag an even lower rate in the future, or wish they would have grabbed the lower rates. One of the risks for homeowners who are in areas hit with declining prices is that the longer they wait, the more the value of their home (and, consequently, their equity) will decrease. Consumers who wish to take advantage of the current low interest rates to refinance their home mortgage should do some simple calculations to determine if such a move makes sense for them financially. Knowing all the costs of the refinancing is essential. Many people simply look at the savings differential between their interest rate and the new lower rate and forget to consider the actual costs of refinancing. If you plan to continue to own the house after you recoup the costs and start benefiting from the monthly savings, it probably makes sense for you to refinance.
Posted on October 15th, 2009 by admin in
Home loan If you plan it right, refinancing a mortgage can be a wise financial move. Given the current economic downturn and the crises in the real estate market, many homeowners are unsure if they should refinance. Mortgage payments can be a hefty burden during a time when retirement portfolios have taken a hit and job insecurity is looming for some. A lot of consumers who bought their properties when real estate was at the peak are left holding the bag of decreased values now. As adjustable rate mortgages reset to higher rates, consumers with those types of mortgages will see a big increase in their payments. You only have to do a brief search on the web to see the many advertisements for refinance mortgage information and help lines. Deciding what is best for your own budget can be a bit daunting.
Refinancing is an individual decision that depends on your financial situation. Reducing monthly payments is the main reason most people refinance. Mortgage refinancing done at the appropriate time can help your budget in the long run, but you need to factor in all the costs and benefits incurred during the time you anticipate owning the house. Your first step is to figure out how much you would save each month under the new interest rate. Second, estimate the cost of the appraisal, lawyer fees, documentation preparation and filing fees, charges from the new and old lenders, and any other refinancing costs. Third, divide the total cost of the refinancing by the estimated monthly savings. That will let you know when your “break even” point is, or how long it will take for you to actually start saving as a result of the refinance. Mortgage refinancing would not make sense, if you plan to sell the house before or on the break even point of the refinance. Mortgage holders whose adjustable rate mortgage will reset soon, may choose to refinance with a fixed rate mortgage, regardless of the break even point. The peace of mind offered by a fixed rate mortgage during economic uncertainty may alone be worth the refinance. Mortgage holders can also consolidate a higher interest loan or credit card debt with their refinance. Mortgage refinancing with a low fixed rate will usually tender lower interest rates than those of credit cards.
When deciding whether to refinance, mortgage holders should have a solid understanding of their current economic circumstances and monthly budget. Compare the costs and benefits of the refinance with the current monthly payments and how long you plan to own the property. Educate yourself on all the options and be aware of all the terms and rates set forth by any new mortgage you take on.
President Obama will be in Phoenix, Arizona tomorrow to announce the plan his administration hopes will boost the dilapidated housing market. The country has been anxiously awaiting the details of the proposed $50B that will go toward a plan to help the housing sector. At the centerpiece of that plan will be stemming foreclosure rates on mortgage loans. An estimated 2.3 million homes were foreclosed this past year and many analysts predict that the number could reach as high as 10 million in the coming years, if the recession continues. The state of Arizona has one of the highest foreclosure rates in the country. The state is also struggling with the economic downturn, as unemployment was nearly 7 percent at the end of the last year. Announcing the housing relief plan in the state will speak directly to people struggling with the very issues this stimulus package is designed to help.
President Obama was in Colorado yesterday to sign the new stimulus bill. As he spoke to the press, he made it clear that one of the aims of the housing relief plan is to help responsible consumers who are having difficulty making payments on their mortgage loans or are in danger of foreclosing, as well as help stem decreasing property values. The drop in values has affected homeowners in most areas of the country. One survey by Zillow demonstrated that of every six people who ownstheir homes, one is now in a situation of owning a home worth less than the mortgage on that home. Zillow estimates that the housing market lost over $3T the past year. Homeowners who have mortgage loans and wish to undergo refinancing have a tougher time when their home values have decreased, because it decreases the amount of equity they own. Add that to the current glut of inventory of unsold homes due to foreclosures and tighter lending standards, and the housing market looks like a sinking ship. It is expected that the housing plan will offer voluntary incentives to lending institutions to reduce payments on mortgage loans to as low as 31 percent of pretax income for qualified consumers. The plan will aim to reduce monthly payments on mortgage loans, rather than reduce the principal on properties. Another objective of the relief plan will probably be to simply make home loans more accessible to consumers. That could be accomplished through opportunities to let homeowners hit by declining values undergo refinancing and through decreased interest rates for new mortgages.
The housing relief plan will not mean that everyone who is in trouble with their mortgage loans will get to keep their homes. The goal, however, is to lend a hand to those homeowners who have been responsible, which will then give a boost to the housing sector as a whole. Only time will tell if the efforts will be enough to keep the housing sector afloat.
With interest rates at record lows, now may be a great time to apply for a home mortgage. If this is your first time buying a home, the different types of home mortgage on the market might be confusing. Here is a guide to the two most common types of home mortgage, fixed rate and adjustable rate mortgages.
The interest rate and monthly payment amount for fixed rate mortgages do not change over the course of the loan. Whatever the rate when you close the loan, that is the rate you will have until you sell the property, refinance, or pay off the home mortgage completely. Lenders usually charge marginally higher interest rates for fixed rate home mortgages as security against times when interest rates rise. This slightly higher interest rate is a premium you pay for the security of a fixed rate.
Adjustable rate mortgages, on the other hand, have an interest rate that rises and falls usually with the prime rate. When interest rates are high, your mortgage payments increase; when interest rates are low, your mortgage payments decrease accordingly. Because banks take on less risk when they issue adjustable rate loans, they offer slightly lower interest rates for adjustable rate loans than for fixed rate loans. They also offer a grace period, typically 36 months to seven years, during which your interest rate does not fluctuate and is locked at an appealingly low rate.
Which one is best for you? Avoid immediately being swayed by the lower rates offered by adjustable rate loans. The length of time you plan to live in your house is a factor. So is the possibility of interest rates rising or falling during your ownership. If interest rates are at a record high when you buy your house, taking out an adjustable rate mortgage is a sensible idea, since your rate is likely to improve. Adjustable rate mortgages are also good for people who plan to resell their house during the introductory period. However, if you plan to stay in your house for a long time and national interest rates are low, then “locking in” a lower interest rate with a fixed rate mortgage may be your best move.
Consider not only your own financial condition, but national trends in interest rates, when you choose a home mortgage. Both kinds of home mortgage can offer you an excellent deal in the right economy.
Refinancing a mortgage can save you money, but make sure you carefully examine and calculate all potential costs and savings before you sign on the dotted line. When you refinance, you apply for a new mortgage to replace the old one. Borrowers typically refinance to obtain a lower interest rate or change the term on the original loan. Term refers to when the loan matures. The most common term is 30 years. Your credit will be given the same scrutiny as it was by the bank the first time, and you will need to have an updated appraisal done on the property. The home appraisal allows the lender to assess the value of the property now. Your credit score and credit report will be requested, as well as any information on additional mortgages on the home. A refinance will have similar paperwork to fill out as you did when you received the original mortgage on the house. Your original mortgage (and any additional ones on the property) will be paid off by the refinance. You will have to pay appraisal fees, documentation preparation fees, title documentation fees, lawyer fees, lender fees and points (if applicable) like you did the first time you obtained a mortgage for the home.
Most homeowners who refinance choose to do so because interest rates have decreased significantly compared to the current mortgage. When deciding if you should refinance your mortgage, you should first determine the savings you would incur over the life of the loan by using the old interest rate versus the new. Then, compute the cost of the fees and expenses incurred by applying for and obtaining the new mortgage. Make sure you include any penalty fees for paying off the original loan early, if applicable. Lastly, determine how long you intend to keep the property. If the interest rate for your original loan is 7.5 percent and the rates have now dropped to 5 percent, a refinance could add up to tens of thousands of dollars by the time you sell the house. If the fees to refinance will only cost $1000, for example, it would be worth it. If you plan to sell in two years, though, it may not be worth the cost of the refinance.
The refinance of a mortgage can lower your monthly mortgage payments, making it easier to make those payments on time. Your credit rating will be maintained, since you will not miss payments. Before jumping into any refinance, do the calculations to see if the savings over the time you plan to hold the mortgage will be greater than the costs of the refinance.
When buying your home, one of the first big decisions you’ll have to make is whether to go for a fixed rate or an adjustable rate mortgage (ARM). Before knowing which is best for you, however, you need to be aware of how each one works.
A Home Mortgage with Fixed Rate Interest
To put it simply, the interest rate of a fixed rate home mortgage is unchanging. This rate is frozen for the term of the loan, meaning that your rate will stay the same no matter what happens to interest rates over the term of the loan. Oftentimes, new buyers decide to use a fixed rate home mortgage, as this kind of loan is easier to plan for in the long term. As the interest rates you are paying on your home mortgage are always the same, so are your mortgage payments. For example, if you take on a $175,000 home mortgage with a fixed rate of 6.5% for 30 years, your payments will be $1106 throughout the length of the fixed rate loan (without escrow costs).
There are pros and cons to singing up for a fixed rate home mortgage. Though you will always be able to predict your monthly home mortgage payments (except for any property taxes and homeowner’s insurance), your interest rates will generally be higher than with an adjustable rate mortgage. The reason for the higher rates is that the banks typically take a greater risk on fixed rate mortgages and therefore can charge a premium to lock in a rate for the entire term of the mortgage.
Adjustable Rate Home Mortgage
An adjustable rate home mortgage (ARM) “floats” or fluctuates with changes in interest rates. Typically, adjustable rate mortgages begin with a short period in which the rate is fixed (usually 3 to 10 years). When this length of time has passed, your interest rate will change at intervals which are decided ahead of time. At these adjustment periods the rate you pay will rise and fall along with whatever index your rate is tied to. To put it simply: if interest rates go down, your payment will go down also.
In general, a variable rate home mortgage starts with a lower interest rate than a typical 30 year fixed rate mortgage. But if rates go up across the board, your interest rates will rise. Fortunately, many adjustable rate home mortgages come designed with a rate cap, which will limit the number of percentage points your rates can go up.
The key to choosing the right loan for you is knowing how long you will be in your home and understanding your tolerance for risk. If you plan to stay in your home only a few years, it’s possible for you to save money by choosing an adjustable rate home mortgage with a lower fixed rate for the first few years of the loan. Chances are, you will have left the house before your rates ever change. If you plan to stay in your home a long time and do not want to deal with changing interest rates, a fixed rate option might be best for you.
Are you in need of a home mortgage? How badly do you need a home mortgage? There is a class of mortgage lender that hopes you need a new mortgage very, very badly, and they’re exactly what you don’t need when you’re in a tight financial spot. Here are the top five signs to watch out for when you’re considering mortgage lenders:
* Questionable marketing tactics. Borrowers seek out good home mortgage lenders; legitimate and reputable lenders do not need to hunt down borrowers. On the other hand, disreputable lenders are always on the prowl for new customers. Hard sell tactics, telemarketing, and junk mail campaigns are all advertising methods that predatory lenders use but legitimate lenders do not. Avoid any lender who uses these marketing tactics.
* Unusually high interest rates. Interest rates on bad mortgages are usually markedly higher than the market average. Some lenders convince borrowers to accept high interest rates by targeting borrowers with credit ratings poor enough that they are hard pressed to get a home mortgage from a legitimate lender. Others simply hope the borrower will be too inexperienced to know the interest rate is too high. Bad lenders often tell borrowers to handle the high interest rate by frequent “flipping,” or refinancing, of the home mortgage.
* Sky high fees. Legitimate mortgage fees might look staggering on paper, but they don’t come to more than 1% of the amount of the mortgage. Bad mortgages frequently come with fees of 5% or more.
* A kickbacks known as a yield spread premium. This official sounding piece of jargon is a euphemism for a kickback paid to the broker for finagling you into taking on a much higher interest rate than you would be qualified to get from a legitimate lender. A legitimate loan will never have a yield spread premium on any account. If you see one on a home mortgage you are offered, not only does it mean the mortgage is bad, it also means you could get a much better interest rate elsewhere.
* A penalty for prepayment. This is a charge for refinancing or paying off the mortgage early. While legitimate mortgages very rarely have a prepayment penalty with a short term tacked on, predatory lenders routinely discourage you from refinancing to a better lender with prepayment penalties for terms of three years or longer.
If you see any of these signs, back off and look elsewhere. No matter how desperate you are for a home mortgage, you don’t need a mortgage as lousy as the one you’ve been offered.
Mortgage refinancing is a process in which a mortgage holder, usually a homeowner, takes out a new mortgage with better terms than the old mortgage. As part of the process, the mortgage holder pays the remainder of the old mortgage with the new mortgage, basically replacing the first mortgage with the second mortgage. Mortgage refinancing can be a valuable financial tool as long as the terms of the new mortgage are chosen with care.
For instance, mortgages with a lower interest rate are usually an excellent investment. In determining the total cost of any type of loan, the interest rate is the variable with the most weight, so a mortgage with a lower interest rate usually offers substantial savings. However, if a new mortgage offers a lower monthly payment, but the interest rate is no lower than the old mortgage’s interest rate, the new mortgage will have a higher total cost. This effect can be seen in mortgages that have a higher interest rate but drop the monthly payments by extending the term of the loan. This type of loan should be chosen only when the homeowner is having difficulty making higher payments at the moment, but foresees being able to pay more per month in the future.
Another consideration is whether there are “hidden” fees associated with either the new or the old mortgage. For example, mortgages commonly have a penalty attached that levies a substantial fee if the holder pays off the loan within a certain period after taking out the loan. The penalty is intended to keep the mortgage open long enough for the bank to make a decent profit from it. Most mortgages have this kind of penalty attached, and normally the penalty period does not pose a problem. The penalty period is usually so short (for example, one year on a twenty to thirty year loan), that it is extremely uncommon for a mortgage holder to pay off the mortgage or get mortgage refinancing during the penalty period. However, a longer penalty period can be troublesome, and can effectively prevent a homeowner from getting mortgage refinancing during a period of exceptionally low interest rates. Because paying off the mortgage within the penalty period can be pricey, there may be no savings in taking out a new mortgage.
However, mortgage refinancing is a sound financial move if the first mortgage’s penalty period has passed, interest rates are low, and fixed rate mortgages are available. Paying attention to all the terms, including the ones the lender does not point out, can pay off in major savings. With some thought and care, mortgage refinancing can lead to increased financial stability and a bright financial outlook.
The country is two months into 2009 and a few weeks into a new Presidential administration. More Americans are losing their jobs and the economy shows little signs of revival. The economy is front and center on the agenda of lawmakers and aiding the faltering housing market will be part of any proposal to boost the economy. A plan introduced by Republicans the first week of February proposes targeting home mortgage rates directly. That plan could drop interest rates to 4 percent for a home mortgage. That is a significant drop to the already historically low rates being offered right now. As of the first of February, the interest rate for a 30 year fixed rate home mortgage was 5.1 percent. Proponents of a rate decrease think it will be enough to help hesitant buyers take the plunge into the real estate market. They feel that lower home mortgage rates will help reduce the current glut of unsold homes. The National Association of Realtors estimates that every percentage point drop in home mortgage rates encourages 500,000 new sales. Many believe that the housing sector can begin to recover once people start buying up some of the inventory.
In addition to reducing home mortgage rates, Congress is debating other means to address the housing sector directly. One proposal is to extend a tax credit to all home buyers, rather than just those buying for their first home. That tax credit would also be raised. There would be an income qualification of $150,000 per year for those filing joint tax returns and $75,000 for an individual. Slowing the home mortgage default rate is certain to be included in any plan. Many banks have voluntarily postponed any home mortgage foreclosures until after the details of any stimulus plan to help the real estate sector are announced.
The Obama Administration plans to introduce its economic plan in the next couple weeks. Regardless of the various components being debated, it seems guaranteed that any plan will target the home mortgage foreclosure rates and encourage consumers to buy. Shortly after taking office, President Obama said he favors putting half of the money remaining from the stimulus bill introduced by the last administration toward decreasing home mortgage defaults. In addition, Obama favors a recent proposal introduced by the FDIC that would oblige lenders to decrease home mortgage payments for consumers who are delinquent on payments to 30 percent of their income.