Mortgage Basics

Whether you are searching for your first home or upgrading to a bigger one, it is important to have a good understanding of what mortgages are and how they work.

Mortgages are typically referred to as home loans, but mortgages are not actually loans in the traditional sense. A mortgage loan is actually more of a security instrument than a traditional loan. The money provided by the lender is secured by the property on which the mortgage is written.

The introduction of a mortgage loan actually creates a lien on the property against which it is written. The home itself serves as the collateral for the loan. If the home buyer defaults on the mortgage payments, the bank, credit union, savings and loan or mortgage broker has the right to repossess the home in an attempt to recover the money they are owed. The lien created by the mortgage also means that the home cannot be transferred to another party until the lien is satisfied.

Mortgage Basics

There are several types of mortgages available for home buyers today. The first thing many people think of when they hear the term mortgage is the traditional 30-year fixed rate mortgage. This mortgage provides for a set monthly payment every month for the entire 30-year life of the loan. The monthly payment is determined at the outset of the loan, and the homeowner continues to make payments until the loan is paid off and the lien is satisfied.

These fixed rate mortgages also come in 15-year terms. Even though the loan term is only half of the 30-year mortgage loan, the payments are not double as you might expect. This is due to the way interest is calculated. The monthly mortgage payments on a 15-year loan are higher than those on the same amount mortgaged over 30 years, but you may be surprised at how little that difference really is. If you are considering a 15-year mortgage, you may want to run the numbers on a mortgage payment calculator to determine if you can afford the payments on a 15-year mortgage.

In addition to the traditional fixed rate mortgage, there are variable rate mortgages on the market as well. As opposed to fixed rate mortgages, these adjustable rate mortgages will see their monthly payments fluctuate as interest rates rise and fall. There will be a cap above which the interest rate cannot rise, as well as a rate and a time at which the adjustable rate mortgage can be converted to a fixed rate mortgage.

As you can imagine, a variable rate mortgage is great when interest rates are steady or falling and not so great when interest rates are on their way up. A rise in interest rates means a rise in your monthly mortgage payment, so it is important to make sure that you can afford the monthly payments even if the interest rate rises to its highest possible level.

No matter what type of mortgage you decide on, the decision to purchase a home is a significant financial decision. It is important that the buyer understand all the costs associated with home ownership - things like insurance, taxes and utilities can really add up. Once the buyer is ready to make the plunge, however, they may find that a home is their best investment in addition to a great place to live.

I hope this information will be useful to you in getting a better understanding of what a home mortgage is ! More information on mortgage terminology can be found on the embedded video in the middle of this post :)

Interest Only Home Loans

If you have a steady job, a family, and like the idea of building equity in your home, an interest only home loan is not very ideal for you.

An interest only home loan does not pay off the principal of a loan as you go, so there is no equity built into your home as you pay. What this means is that if you are suddenly in need of large sums of money you couldn't get a home equity loan or sell your home for a profit because you have not put anything into the home. Many families consider their home a safety net, because if they get into trouble or there is a family emergency they can borrow against the home or even sell it for liquid money. If you have an interest only home loan you lose the safety net.

One serious disadvantage to the interest only home loan is that it has a substantially higher interest rate than other loan programs. Many lenders tell borrowers that the interest rate is the same or lower, but over time the interest rate is higher than a traditional loan program because it is riskier for the lender to extend an interest only home loan to a borrower.

Another thing that borrowers must consider is that the interest rate of an interest only home loan may increase substantially after the interest free period. This might not be an issue if you are able to make the payments, but the change in payments can often render the homeowner unable to pay, so that they end up defaulting on their loan. Investing the money during the interest free period is a great idea, but a good deal of people simply fail to do this, or they invest too aggressively and end up losing money. There is a very find line here, making the interest only home loan very costly and less than ideal for some people.

While an interest free loan may work for some, it can spell disaster for others. The most important part of the loan process is research and finding out what type of loan is best for you.

Considering Loans

Thanks for coming by.

When considering loans and mortgages, please read through all the legal text to ensure that everything is proper before you sign on the dotted line.

Other than that, ensure you have a loan which you are comfortable with and able to service it. Do not get something that you cannot afford or find it tough to manage as times go by.

If you are unsure, use a mortgage calculator, plenty of them online.

Cheers !

Four Mortgage Problems to Avoid

When trying to get a mortgage for your new dream home, you want to avoid potential problems.

Here are a few mortgage problems to avoid :

Never Pile On your Debts
John has a stable career that pays well. He has no problem qualifying for a mortgage loan as his credit was excellent and so he got the mortgage. But then John did a silly thing.

He went out and bought a very expensive car and didn't tell the lending institution. All of a sudden, the day before settlement, the mortgage broker called and said that they could not do the loan. The recheck on the credit report showed a new $700 payment. He had to get his dad to co-sign for him, which was very embarrassing.

So the moral of the story is not to take out new debts during the mortgage process, no matter what.

Packing and Moving Out
Lenders often need financial information during the critical time between mortgage pre-approval and the closing or settlement. Unfortunately, that's the same time when people are starting to move and pack away their valuable paperwork.

Plenty of people pack away the items they need. It happens all the time. If you're doing a 30- to 45-day settlement, the approvals for your mortgage are going along that whole time, but people pack up and send their belongings on the truck if they're moving out of state. Then the lender needs copies of bank statements and pay stubs for the last six months, or they want to see proof that a certain loan was paid off.

Remember : Keep all of your important papers with you in a briefcase or somewhere you can easily find them.

Job Changing
Danny was the family's breadwinner, but after being pre-approved for a mortgage, he decided he could make more money by becoming self-employed and doing his own business. Problem is the mortgage lender refused to close on Danny's mortgage because he had made a "material change" in his lifestyle and financial circumstances.

If people have to change jobs, they should always contact the mortgage professional and give them the details. If it's a job in the same field, it's usually not a problem. But if they were employed and think they'll make more money by being self-employed, it could be a problem because they need a track record.

That's not my debt On MY Credit Report !
Many people have debts on their credit reports that they don't even know about, but need to be corrected before applying for a mortgage.

I recommend having your credit checked well before you find your home, at the beginning of the home-buying process when you first start house hunting, just to make sure there's nothing you have to work on clearing up.

Current Interest Rate Charged by Banks on Home Equity Loans in San Francisco

Realty rates has been exploding in the fast few years especially in the major urban areas like San Francisco spurred by the all time low interest rates in the home mortgage segment. There are a number of choices available for home equity loans in San Francisco and due to the intense competition many financial institutions are providing highly competitive rates.

The average interest rate on a 30 year old home equity loan has broken the barriers of 5% interest to the lowest level of 4.97%. The average interest rate for 15 years old home equity loan is around 4.46%.

How to avail low interest rates from banks in San Francisco ?

Interest rates on any types of loans to a great are dependent on your credit score. It’s always advisable to keep an eye on your credit score and the current rate of interest before start your search to avail the best interest rates. If your credit rating is high or better then there are bright chances that you can get lower interest rate.

Along with calculating the interest rate with the help of your credit score, it’s also advisable to research about the interest rates offered by various banks.

FHA Financing Explained

FHA loan is a federal assistance mortgage loan in the United States insured by the Federal Housing Administration. The loan may be issued by federally qualified lenders.

The FHA was set up to help those with more difficult loans get insurance for the payments, so that lenders would be willing to fund the loans.

Take a look at this vid by a Los Angeles mortgage broker, for more information.

More on Mortgages

The method of using a real or personal property as collateral for the payment of debt is called mortgage. Mortgage is the standard method by which an individual or business can buy a residential or commercial real estate, delaying the necessity to pay the full amount instantly.

The main participants in mortgage are, the lender or the mortgagee, usually a bank, insurer or a financial institution, which has the legal right to the debt and the debtor or the mortgagor who owes the obligation. Typically, the debtor must fulfill the conditions of the mortgage or he runs into the risk of foreclosure. Debtors can be homeowners, landlords or business who purchase through loan.

The other participants are lawyer or a mortgage broker or a financial advisor. Arranging mortgage is the basic process in which the individuals or corporations are allowed to acquire possessions sometimes with the help of mortgage online services, which may also aid in comparing rates between lending companies.

Mortgage is of two types, namely mortgage by demise and mortgage by legal charge. In the first type, until the loan is repaid in full, the creditor becomes the owner of the mortgaged property and upon the condition that the property will be returned when the full repayment of the loan has been made. In some countries, this type of mortgage has become practically obsolete. In the second type, even though the debtor is the legal owner of the property, the creditor has the right to take possession of the property, foreclose or sell it if the debtor does not keep up to his end of the deal. At times, the lender may foreclose on the mortgaged property if the loan is not paid and the property may then be sold.

There are two types of mortgage instruments the mortgage deed or mortgage and the deed of trust. The mortgage deed creates a lien on the title and foreclosure of that lien requires a judicial proceeding. The deed of trust creates a lien on the title and not on the title transfer. Here, it can be foreclosed by a non-judicial sale. The foreclosure can be much faster for a deed of trust than for a mortgage deal since the foreclosure does not need any actions by the court, the transaction costs are also less.

Home mortgage loans are of two categories fixed rate mortgages and variable interest rate mortgages. With fixed rate, as the name suggests, the payment remains the same till the loan is paid and in variable rate, mortgage changes as the interest changes. The second type is suitable for poor credit.

The services of a broker who has connections with banks and other lenders may be utilized in finding a fair mortgage deal. When there is a need to switch over from fixed rate interest to variable rate or lower the interest rate, mortgage refinancing can be done.

The best mortgage is the one that enables easy payment of the monthly instalments with a low interest rate. So be diligent and thorough when selecting one that fits you best.

Mortgage Basics

A mortgage is a loan taken on a house or property which is to be paid in a specified time period. They come in different sizes and shapes, each of which has its own merits and demerits.

The most common type of mortgages is of course home mortgage.

When you are done with the search of the property you require, you must approach a lender. The most important thing is to look for a mortgage with low interest rate. Interest rate comes out to be the most watched out thing when you opt for a mortgage loan.

Interest rates vary from lender to lender with each of them having their own terms and conditions. There may even be a difference of 1% on the loan depending on the lender. There comes a mortgage term with every loan given by a lender. Exit penalties may come into play when the borrower gives up on the mortgage before the agreed upon time period.

Note that you cannot take up another loan if one of them is on-going and if so happens you may have to end up paying a given per cent of extra amount to the lender. So you need to be flexible and prevent any mortgages which may let you down.

A good investor hopes that the property he buys on a mortgage rises in its value over the time period provided. And if this happens which generally does, this turns to make the investment look good and perhaps makes a good deal. This will make the mortgage you initially paid look smaller when compared to the original price of the property you have at the end. The term of loan is generally 25 years. You can easily get a mortgage of your own time period these days. For all those employed in a company it may be difficult to get a mortgage of time period which goes beyond the time of your retirement.

However this may also depend on the approach of the borrower and if by any chance the employee convinces the lender to pay the mortgage by his pension amount the mortgage turns out to be well and good.

Learn how To Create a Fixed Rate Loan / Mortgage Calculator

Highly informative video tutorial from Youtube showing you how to make a fixed rate loan or mortgage calculator via Excel. It is actually quite easy to do and after watching this step-by-step clip, you will be able to make your own as well. This tutorial uses the PMT() function to calculate the required loan payments.

I hope this will help you out when doing your Math and get all ur loan rates in order !

Home Equity Loans

Home equity loans are loans that are issued out to individuals in need of money, against the security of their residential houses. In this kind of loans, the houses of the borrowers are kept as collateral against the sum borrowed by them.

Home equity loans, in recent times has emerged out as the main source of finance to people who are in desperate need of cash. More and more of individuals are increasingly resorting to home equity loans for their financial needs, the main reason being the collateral and security factor.

Usually, to take up a loan of such huge amount, people have to sell off their assets and dispose of their belongings to raise the finance, for their needs. But, the one standing character of home equity loan is the fact that, the borrower needs not to submit extra collateral except the house against which he is getting the loan, like he needs to do for getting any other loan credited in his account.

Also equity home loans are really beneficial and affordable since the interest that accrues, actually accrues on the amount that the borrower has drawn till that time, or while repayment of the loan, the borrower needs to pay the interest only on the amount that is yet to be repaid. All these enticing factors are drawing more and more number of individuals, looking for a loan that involves easy repayment terms.

The best part of home equity loans is that of revolving credit, once the amount of loan that the lender will lend to the borrower has been fixed by the lender, calculating on the value of the home against which loan is sanctioned, the borrower needs not to borrow the entire amount at the same time but can actually draw according to his needs, and pay the interest only on the amount that he has drawn till that time and not the entire amount of loan that has been sanctioned.

Lenders who want to attract more and more borrowers also give the borrowers many schemes, which make the repayment of the loan all the more easy. The fact that borrower needs not give any other collateral, or pay any extra interest makes the entire thing even more easy for the borrower.

Day of Reckoning

Told my current lender that I found a better deal on my current mortgage with another institution. If they want to keep me and not have me transferred out, they have to match my new offer.

Afterall, it is troublesome to refinance or switch and it is always good to stick to the exisitng ones if they can offer you better perks.

So will be meeting up my consultant tomorrow for a further discussion on how he can help me in this matter.

To conclude : never be afraid to ask as ultimately you are the person servicing the mortgage loan.

Second Mortgages

Second mortgage is one of the things that come naturally once you have not planned the whole mortgage package. However all is not lost, the thing that one has to do is to make the most of the opportunity that is in hand.

This is how the second mortgage system runs, once the first mortgage is not paid back and the owner is bound to take the 2nd mortgage. However there are many things that are related to the second mortgages. The first is that once the second mortgage is taken, it pays of the first mortgage, but as you can see that as the mortgage amount that is being lent to the borrower is very high, i.e. it is the total of the first mortgage and its interest and then the second mortgage interest and its amount. This means that the interests rates will be extremely high, and unless the person cannot come up with an appropriate solution the owner can claim foreclosure on the borrower and then eventually get your property on the first mortgage which will be in the good shape as the second mortgage has paid it all.

So the basic thing is that second mortgage should not be taken unless it is completely required. However if you have no other way out, there are market plans such as the bad market credits which can help you in such situations and there are other lender which would agree on lesser interest rate then the bank itself or major lenders, as they would first check all your record and then give you an interest rate that would become a difficulty to pay.

Unless you want to take the second mortgage make sure that you have some amount of money coming your way and try to get rid of the second mortgage as soon as possible; however here is another thing that one has to decide, and it is indeed a very critical one. If you have failed to pay your first mortgage and the only option left is the second mortgage, the mind usually stops to work, and you get confused with everything. The think that you should think of is whether your financial situation is going to get good, or is there any option that you can get a refinance to your mortgage. If none of these things is happening that the wise choice would be to just sale the place which the mortgage plan that is available or hand it back, it may require some legal documentation but the biggest step is your mental state. However this only remains as a suggestion. The main decision lies in the borrowers hand, and every person’s financial condition is only clear to him.

The next thing, which is good news, is that there are various companies opening day by day, offering you incentives that were unknown and unheard of in the previous days, and that is the thing that can help you spice up in our quest to find the best 2nd mortgage deal. Each of the firms has sites on the internet, so you won’t even have to go and visit them personally a general view and careful analysis of the entire plans will give you the best second mortgage package ever. However the most important thing is that if you really want your dream home or any other thing on which you have taken the mortgage to stay under your hands, then the second mortgage is more of blessing that can help you gain the ownership once again.

Will update on a regular basis.

So stay tuned !