Alan Greenspan says the housing adjustment is over, or at least the worst of it. Of course, Greenspan is no longer the chair of the Fed, but he does seem to have a finger on the economy’s pulse nonetheless, and we can only hope he’s right this time, too.
If you’ve ever owned a home in Australia, you might be familiar with mortgage accelerator loans. Now they’ve come to the U.S.
The way this works is, you deposit your paycheck into a special account. Every dime of it. Then, you use that account to pay your expenses, and every dime you don’t spend, goes to pay principle on your mortgage.
I’m not sure this is the best way to prepay a mortgage. I’m not even sure that prepaying a mortgage is really a good idea; I’ve been doing a lot of research on the topic and realize that prepaying does not protect you from foreclosure, where saving that money in a contingency fund could.
But that aside, if you want to prepay your mortgage, this is an interesting way of doing it.
Refinancing is becoming a hot topic these days with the rising interest rates, sluggish housing markets and increased number of foreclosures. If you’re thinking about a refinance, here’s a few things to consider:
-Why do it? Well for a couple of reasons. You may have a variable interest rate loan and be concerned that your rate will raise your payments higher than you can afford to make. Another reason would be to use the home equity to pay off outstanding debts like credit cards or student loans.
-Is it worth it? Well, if you plan on moving out of your home in the next year or two, probably not. You’re more likely to lose money in those instances. But if you’re planning on lengthy stay, the money you’ll save will compensate for any closing costs.
-Shop around for rates. Check with different banks and lenders, asking about their rates and terms. Also ask your current lender about their rates and terms. They already have business with you and would like to keep it, so they are very likely to offer you favorable terms, especially if you let them know you’re shopping elsewhere too. Sneaky, but effective. With the housing markets slowing down, competition for new loans is keen and the lenders know it.
Most important for you to know is that nothing is final until you sign on the dotted line. Do your research and make an informed decision.
With interest rates on the rise, you may be asking yourself what you should do before your mortgage payments rise higher than you can afford you pay. Your home and credit are on the line and time is of the essence. What do you do?
It’s possible to take a “cash-out” refinancing loan. You can call your lender and ask to have your variable rate credit line converted to a fixed rate, fixed term mortgage; you may be surprised how easily the yes answer comes. You can take out a simpler refinancing loan that again locks your interest rate and eliminates the credit line. You can sell the house and downsize. Or you can take a second and third job to pay the note… just kidding.
Banks want your business, and will attempt to keep you a happy customer who’s not going to be returning a home you can no longer afford the payments on. So give it a shot, check with your banking institution or lender what your options are for checking the rapid rise in interest rates on your home. The important thing to note is that these lenders want and need your business, especially with the housing markets drying up so quickly. You’ll find them to be especially accommodating if you simply ask. A paying customer is better than a bankrupt one.
California has enacted a new law that will make obtaining a reverse mortgage in California a bit easier. Governor Arnold Swarzenegger has signed the law that will provide protection to California homeowner’s who are looking to obtain a reverse mortgage.
California homeowners will now receive independent counseling advice from certified counseling agencies. These agencies will explain the pros and cons of obtaining a reverse mortgage and will not be a part of the deal. These counselors will be from outside agencies that do not deal with the bank or lender.
All documents will be translated into the language of the borrower. With so many languages being spoken in California, this will help insure that the process is completely understood by the borrower.
Lenders will now have to stop forcing borrowers to obtain annuities as a part of the reverse mortgage deal.
This new law and these new changes will insure that homeowners know exactly what they are getting into when obtaining a reverse mortgage. The new law also insures that lenders will not be able to take advantage of borrowers or add additional conditions to the loan agreement.
With the downturn in housing markets, people may wonder if they wouldn’t be better off going back to renting instead of buying a house. Allow me to say, renting is never the prudent financial choice to make if you can help it.
Sure, you can rent an apartment for less than a house payment in most areas of the country. But your money is going into someone else’s pockets who is getting the income, the tax breaks, and the slow building of a nest egg though equity.
For your $1000 rent a month, you could be making a mortgage payment with a guaranteed return on your money over time. You could be writing off the interest on your taxes, and working towards house ownership, a comfortable place to be come retirement.
Prices are dropping with the market spiraling down. Don’t let that discourage you from a house purchase. Take advantage of the lower prices to get a bargain payment. After all, renting is just as good an investment for you as flushing your money like toilet paper.
Are there ways to save your money when buying a new home? Sure there are! Financial planners will give you an abundance of advice using big terms on how to save your money. I’d rather have the dish in plain language. Pick and choose the ones that seem right for you. Don’t feel you have to use them all, although if you can, great!
* Recycle the proceeds of your previous house sale into a down payment. This will lower the amount of money you need to borrow.
* Ask about seller financing. Somewhat risky, but if a sound contract is written, both parties benefit.
* Put down 20% of the sale price. You’ll save yourself the mortgage insurance. If you don’t have it upfront, make sure you notify your lender when you’ve paid in the 20% and that they’ve stopped charging you for it.
* Try to assume the existing house loan. You’ll have a lower note than if you bought the house at market value.
* Pay points to lower your interest rate. Sure it’s a chunk of change at the outset, but those lowered rates will save you thousands across the life of the loan.
* Play the “Who Wants to Hold My Loan?” game. Lenders want your business. Get them to compete a little for it.
* Good with your hands? Buy a fixer-upper. Nothing like a little sweat equity to make you smile.
* What’s one of the best deals around? Foreclosures. Banks are desperate to offload houses they’ve had to foreclose on. These bargain beauties may need a little TLC, or not, but you’re guaranteed to get it for a deep discount price.
A reverse mortgage is a loan against your home equity that requires no repayment for as long as you live in your house. The loan will be paid off when you cease to live in your home. There are no monthly payments and you can choose to get the money in one lump sum or in monthly payments. The money is also tax-free.
A reverse mortgage requires no monthly payments and therefore you do not have to worry about not making payments or losing your home. You can qualify for a reverse mortgage if you are 62 years of age or older. The loan amount is determined by how much equity your home has built as well as what the current interest rates are, etc. Your personal credit has nothing to do with whether or not you will qualify. If you are still paying on your existing mortgage, the amount that is left will be used to pay off your mortgage.
For example, say if you have you owe $100,000 on your existing mortgage and your house qualifies for $125,000 reverse mortgage and you plan on living in the house for at least another 5 years. Your current mortgage would be paid off and you would have $25,000 to do whatever you want with. You could put a down payment on a vacation home, take the vacation of your dreams or give the money to your grandchildren for college. It is completely up to you what you choose to do with the money. The loan is repaid when you cease to occupy your home. The amount owed can never be more than the value of your home. If your home is sold for less than the mortgage, the rest of the money goes to your estate.