When Refinancing Your Home - An ARM Or A Fixed Rate?

Refinancing a home means restructuring the loan that you currently have. You have two basic choices to consider: a fixed rate or an ARM loan. A fixed rate loan simply means that the loan's interest rate remains the same throughout the entire term of the loan. It will always be the same. In an ARM loan, the interest rate fluctuates, generally with the fluctuations of the Prime rate or other indexes. Here, you can benefit from lowered interest rates but may also need to consider the times when these rates may go up.

How To Decide Between An ARM And A Fixed Rate

There are many things that play a role in which of these options is right for you. For example, you should consider how flexible you are in making payments that are not the same all the time. This year your loan may be a percent higher than last year. Could you handle this type of increase? Most ARM loans do have a limit to how high they can go. For example, it is common to see a the maximum that it can go up or down at 1 percent per year, with a total increase no more or no less than 5 percent over the term of the loan. A fixed rate can be a better solution for those that need a loan that has a stable amount of payment every month.

On the other hand, though, those that are looking to potentially save money can consider an ARM if they believe that interest rates are going to be lowers over most of their loan period. Often, interest rates on loans that are ARM (or adjustable rate mortgages) are lower to start with than those that are fixed. These aspects need to be taken into consideration. Talk to your lender about the different options in an ARM and a fixed rate for your mortgage refinance.

Mortgage And Refinance Mortgage Loans For Home Improvements

Depending on your situation you may need to resort to a mortgage loan or a refinance mortgage loan. You may also be able to resort to home equity loans in order to finance home improvements and both home equity loans and refinance mortgage loans will be guaranteed with the available equity on your loan in order to keep rates low.

Home Equity Loans

Home equity loans resort to equity in order to provide the needed guarantee to allow the lender to provide better loan terms. Equity is the difference between the market value of a real estate property and the amount of debt that the property secures (usually a home mortgage balance). This guarantee reduces the risk for the lender with many benefits for the borrower too.

Home equity loans provide loan terms almost as advantageous as those of home loans. With home equity loans you can obtain lower interest rates, higher loan amounts, longer repayment programs and lower monthly payments compared to unsecured loans. All of this is particularly beneficial when it comes to home improvements.

Refinance Home Loans

Refinancing a home loan consists on taking a mortgage loan and using the money to repay the previous loan. The same property is used because, once the loan is obtained, the previous mortgage is fully paid off and canceled. If the new loan provides a higher amount than the remaining of the previous mortgage debt, the additional cash can be used for any purpose, including home improvements.

These loans are known as cash-out refinance home loans and the extra cash has obviously the same loan terms as the rest of the loan which implies extremely low interest rates, low monthly payments, a flexible repayment schedule and high loan amounts. All of which are especially beneficial for home improvements.

Home Improvements Purpose

As long as the money is used for home improvements, lenders can provide you with promotional interest rates and other advantageous terms. This is due to the fact that when used for home improvements the money that the lender grants contributes to increasing the value of the property that is being used as collateral for the loan.

Thus, don't forget to mention the fact that you are planning to make home improvements when you request loan quotes from different lenders as they might be able to offer you special loan programs to suit your needs. More and more lenders are designing exclusive loan programs for home improvements in order to attract customers who need finance for that particular purpose.

Also, don't forget not to go with the first offer you receive. Instead, compare loan quotes from different lenders paying special attention to the APRs and the loan terms that most concern you (repayment program and loan amount). That way, you'll be able to get the best terms on your home improvement loan.

Do You Qualify for Mortgage Refinancing?

For a homeowner, nothing can be more distressing than the prospect of losing your home and the interest you have put into it. Each year thousands of people and families may have to face foreclosure due to loss of employment or an injury, accident or illness that depletes income meant for house payments. Sadly, many people are forced to leave their homes due to tight financial woes, yet in some cases this would not have to be necessary.

As there is an array of reasons one might find himself in such a predicament, each homeowner's case is unique. There are options available that can prevent foreclosure. A homeowner needs only to know whether or not any processes apply to his case. Therefore it is important for a homeowner in danger of foreclosure to fully assess his situation and determine what can be done to prevent losing the house in which he has invested so much time and energy.

Do you qualify for mortgage and loss mitigation assistance?

This brief, simple self-evaluation is designed to help homeowners determine the best course of action where foreclose is concerned.

1. Are you able to make your regular mortgage payment now?

Do you have a cash reserve or another means of making one more payment?

2. Can you make your regular mortgage payments consecutively?

If you are able to make one payment, will a second one be possible?

3. Are you currently living in your home?

4. Have you recovered from the financial hardship that caused you to get behind?

If you were unemployed, have you since found work? If you have experienced illness or accident, have you been able to recover well enough to cover your debts?

If you find yourself in danger of foreclosure, yet can answer "yes" to the above questions, there is the possibility you qualify for mortgage relief assistance. The one positive, too, is that even if you have let some time lapse before foreclosure you can still enlist the aid of a loss mitigation counselor to help you with your situation. But don't wait much longer. If you wish to save your home from foreclosure and have the means to stay afloat, do what you can and seek assistance of a professional who can keep you in your home.

Stamp Duty Burden Means Bigger Mortgages

A growing number of homebuyers have to take out larger mortgages in order to meet the cost of expensive stamp duty bills as a result of soaring house prices, according to a new study.

The research by mform shows that more than one in four borrowers are increasing their mortgage by around 3,770 to cover the burden of stamp duty, which is charged on properties worth at least 125,000.

Around two-thirds of people who purchased a property in the last three years paid stamp duty, including many first-time buyers, the report stated.

Chief executive Eamonn Rice said: "With all the other costs associated with homebuying it is no surprise that people are using their mortgage to help pay their stamp duty bill.

"However putting the cost on your mortgage means you will be paying for stamp duty for a long time and the interest will mount up."

According to Pierre Williams, communications chief at Inside Track, first-time buyers in London are being forced to take out bigger mortgages as stamp duty rises to about 7,700.

The mortgage lending sector at the start of 2007 is in robust shape, the Council of Mortgage Lenders (CML) has confirmed.

According to the CML, gross lending hit record January high of 26.8 billion and although this was down by six per cent on the 28.5 billion in December, it is up by 16 per cent on the previous January figure of 23 billion.

CML director-general Michael Coogan said he expects the strong nature of the market to continue for the next months, although much depends on the movement in interest rates.

"While we avoided a rate rise earlier this month, the markets are still expecting at least one more quarter point rise by the middle of the year," he pointed out.

"And, because of this uncertainty, it would be surprising if some home buyers did not review the timing of their decision to move."

Research by Yorkshire Bank shows that more than two-thirds of homeowners think house prices will continue to rise this year, with most expecting prices to increase even further in 2008.

Auction Aware

AUCTIONS

BASIC TIPS FOR BUYING OR SELLING PROPERTY AT AUCTION

Auctions are one of many methods used to buy and sell property. It is also the worst method, especially if you are the seller. Ask yourself the question, "who really wins at an auction, the buyer, the seller or the agent? Once you have done your research you will see it is almost always the real estate agent.

SELLING AT AUCTION

Should you sell your property using the auction method? No, because you very rarely
receive the price you were hoping for or the price the agent has promised you. If you decide to sell at auction you will be asked 'what is your reserve price?' Your reserve price is the lowest amount you would be prepared to take for the sale of your property. Now why would you want your lowest price out there when you are trying to get the highest price possible?

There is also the possibility that your property may be 'passed in'. This means your property did not meet the reserve you set, therefore did not sell. If this is the case, how much has it cost you to not sell your house? The cost of advertising your property and auctioneers fees can run into thousands. Do not pay your agent any money until your house is sold and you walk away feeling satisfied your agent has done the best for you.

BUYING AT AUCTION

All sellers are over-quoted by the agent and all buyers are under-quoted by the agent. Because of this, the buyer could also be "out of pocket' with nothing to show for it. The property has been sold for more than the agent told you it could possibly get and you have now wasted your money spent on advice and building inspections. If possible try to converse with the owners prior to auction and compare quotes given to you both by the agent

A common practice at property auctions is the Dummy Bidder. The dummy bidder is placed amongst the crowd and bids like a genuine buyer. This is to drive up the price of the property. Could you imagine bidding against a dummy bidder only to find out you won the purchase but it cost you thirty thousand dollars more than you could actually have paid.

ESSENTIAL TIPS

There are many tips advising you against buying and selling at Auction. For instance, there is the possibility the auction could only attract spectators and not genuine buyers, the closer the auction gets the agent will start conditioning you to accept a lower price than you wanted and you will also be told how many houses they have successfully sold by auction, when in reality these houses would have sold anyway even if not at auction.

Always investigate other methods of buying and selling your property before deciding on the auction method. Whether you are a buyer or a seller it is your financial future and security at stake here. By not doing your research you could lose thousand of dollars and be caused a lot of stress and heartache.

Private Mortgage Insurance - Will You Need It?

If you are considering the purchase of a new home, try to have as much money as possible for your down payment. While it is true that you can obtain a mortgage with as little as five to ten percent down, and even with zero money down, ideally; you would like to have at least twenty percent of the purchase price for your down payment.

Should the cash available for your down payment be less than twenty percent of the sale price, you will be required to obtain private mortgage insurance (PMI) from your lender. The purpose of PMI is to protect the lender should you default on your mortgage loan.

What is the cost of private mortgage insurance? The cost will vary depending on the lender, the amount of the mortgage loan, and the size of your down payment. In most cases, you will find the charge for PMI to equal about one-half of one percent of the money borrowed.

Here's an example, lets say you purchased a home for $300,000 and put down a ten percent down payment of $30,000. The mortgage amount would be $270,000. The lender would calculate your PMI charge by multiplying $270,000 by 0.005. The result would be an annual PMI charge of $1350. This charge would add an additional $112.50 to your monthly mortgage payment.

Unlike the interest paid on your mortgage, charges for PMI are not tax-deductible.

You will have to continue paying for private mortgage insurance until the equity in the home exceeds twenty percent. It certain economic conditions it could take years to pay down the principal enough to get rid of the PMI. However, in a market where housing prices are rapidly increasing, it will happen a lot faster. Should the value of your home appreciate enough to cause your equity to exceed twenty percent, you can have the charges for private mortgage insurance dropped. In order to prove this, you may have to pay to have your home appraised which will show that the home's value has increased. This home appraisal may cost a few hundred dollars, but this expense will be recovered quickly by having your monthly payment reduced.

If you are unable to make a twenty percent down payment, is there any way to avoid having to pay PMI? Yes, you will have a couple of options.

The first is called a "80-10-10" mortgage. This involves taking out two mortgages. The first mortgage will be for 80 percent of the sales price, and the second mortgage would be for 10 percent. The remaining 10 percent represents your down payment.

In this case, the second mortgage would have a slightly higher interest rate. But since this higher interest rate is applied to a smaller amount, it is still less expensive than paying one large mortgage with PMI. Also, you receive added savings because the interest is all tax deductible.

Your second mortgage option to avoid paying PMI would be to pay a higher interest rate. Many lenders will gladly waive the private mortgage insurance should you agree to pay a higher interest rate until your equity exceeds twenty percent. After reaching the twenty percent mark, your interest rate would be lowered.

The initial higher interest rate will usually range from 0.5 to 1 percentage point. Again, the higher the down payment, the lower the interest rate increase. Here again, you will have the advantage of the added interest being tax deductible.

Copyright 2007 Carl DiNello

Mortgage Refinance Can Lower Your Monthly Payment and Give You Better Terms

Refinancing is a good option as opposed to taking a new mortgage on top of your old loan

Basically, refinancing means taking a new mortgage to replace the old one. When you decide to refinance your mortgage you may need to consider the costs of such refinancing including your tax bracket and the duration for which you plan to stay in your home. You may be charged a penalty for paying off your original loan early with this new refinanced mortgage. So, it is very important for the borrower to choose the loan that will help to meet both his short term and long term needs.

Refinancing can lower your mortgage payment by refinancing at a lower interest rate. Changing the terms of the mortgage also can lower your mortgage payment. Changing from a ten to twenty year mortgage, for example, will considerably decrease your mortgage payment. Changing from the traditional payment including both principal and interest into a new payment that requires only interest also lowers your mortgage payment.

Consider refinancing an adjustable rate mortgage into a fixed mortgage if you plan to stay in your home for many years. Likewise, if you plan to stay only for few years then you may want to convert your adjustable rate mortgage because paying higher interest for many years will cost you lots of money. It is advisable to use the equity in your home rather than credit cards to finance expensive purchases, saving you much money in the long run.

It is difficult to know what will happen in the interest rate in future but, as a smart consumer, it is important to know the intricacies of the market. Any slight change may cost you lots of money.

How To Buy Second Homes And Holiday Homes

According to UK estate agents, of those people that pay for a second home with cash, the most popular sources of financing are either inheritance, bonuses or through selling one large property and buying two smaller properties. For the majority of the population who buy a holiday home, finance would have to be organised through re-mortgaging a main property or by possibly taking out a second mortgage.

Whilst a few years ago the high street banks and building societies seemed to be uncomfortable with providing mortgages for second homes their attitude seems to have changed in recent years and it is now possible to get mortgage rates at levels that are very similar to those offered for a main property. It is likely that there would still be arrangement fees on the mortgage but if you go to your existing mortgage supplier sometimes they are flexible on this point.

Steps to buying a second home or holiday home
The first thing to think about is financing. If you are lucky enough to have cash for the full purchase price then this is not something for you to spend a lot of time on. For everybody else, consideration needs to be given to how much money you have available for a deposit, what their current financial commitments are and therefore what additional repayment commitments can be made. As we all know, property is not a "one-way bet" and you have to consider the risks associated with extending yourself in property and think about how your personal circumstances would look if the value of your second home dropped by 50% over the next five years? Before any commitments are made you should consult with a qualified financial adviser to explore your options.

The next thing to think about is where you might like your second home to be. In most cases this will probably the first step that people go through: falling in love with an area that you have visited on holiday, wanting somewhere to return to in the area in which you brought up, buying somewhere for your student child to live during their studies - the list is endless.

Practical considerations need to be taken into account such as distance from your main home and ease of travelling- factors like this can have a significant impact on whether your experience of second home ownership lives up to your expectations or develops into a chore. If buying over-seas you need to consider what you would do if the low cost airlines significantly increased their prices or cut routes that you need to rely on. Also, if you intend to spend a lot of time over-seas, will friends and family travel the required distances to see you on a regular basis?

The next step is the process of researching your chosen locations. Obviously driving around the area and signing up with local estate agents would be a good first step but in addition to this, buying a subscription to the local newspaper and having it sent to you along with using some of the online property sites will allow you to ensure that you are getting all the information that you need.
The final step is the appointing of advisers (solicitors, surveyors, engineers) to help you through the process of actually buying the property. Even if you are buying in the UK this is never a straightforward process, but if you're buying overseas then a great deal of caution is required. The advice is generally to ensure you appoint competent legal advisers in the country in which your purchase is being made. The nightmare stories of people finding out years after they had bought their property overseas that the property did not have planning permission and must be demolished are all too common. Similarly, laws on taxation are very different in other countries and it is important to understand how these will affect you (and your heirs).