Property Blog

A reverse mortgage is a great financial solution for homeowners age 62 or over who want to eliminate their mortgage costs, as well as supplement their incomes. This type of loan offers many benefits, such as allowing homeowners to utilize their home equity. Although this loan is very beneficial to many homeowners, some find that it can be expensive. But some lenders are making this type of financing much more affordable by eliminating some of the loan’s fees.

Fewer Fees Increase the Proceeds Available from this Loan

One reverse mortgage lender has decided to offer a greater incentive for borrowers who choose the lump sum as their disbursement option, which has a fixed interest rate. Soon, this lender will completely eliminate the loan’s origination fee, as well as its servicing fee. In the past, other lenders have eliminated one cost or another, but this lender is eliminating both loan costs. By eliminating these costs, eligible homeowners will be able to receive even more proceeds from their loans!

How this Loan Allows Homeowners to Use their Home Equity

In addition to the benefit of having no monthly mortgage payments, homeowners with sufficient home equity can convert their equity into cash. The amount of money a homeowner can receive depends upon his or her age, home value (which is determined by an appraisal) and current interest rates. Generally, older homeowners with higher home values will receive more loan proceeds. The money received from the loan can be used for anything the homeowner desires, such as medical bills, other payments or personal expenses.

Loan Eligibility and Requirements

To be eligible for this type of financing, a homeowner must be at least 62 years old and financing his or her primary residence. This means the homeowner must reside in the home at least six months out of the year. Because there are no monthly mortgage payments, this loan does not have any income or credit requirements, so it is simple to qualify for this type of financing. The homeowner is also required to attend loan counseling to determine if this type of financing is best for his or her needs.

In most cases, a homeowner will owe nothing on the loan for as long as he or she resides in the home unless they fail to meet the loan requirements. These requirements include staying up to date on home repairs, taxes and insurance. If these requirements are not met, the loan will become due and payable.

Even though the absence of the service and origination fees is only available with the lump sum disbursement option, there are other disbursement options a homeowner can choose from. Other disbursement options include a line of credit, monthly payments or a customized combination. With the new changes being introduced by reverse mortgage lenders, this type of financing will be able to offer more benefits to homeowners and give them even more access to their home equity. This will make life after retirement simpler for homeowners and provide them with greater financial independence.

What Loan Modification is All About

One of the many possible solutions that you can consider to save your home from being foreclosed is loan modification. This works in such a way that you will be approaching another lender – or the lender to whom you owe the mortgage to – and apply for a loan modification.

As the name implies, the program will work in such a way that the terms of the loan are modified or completely revised. The resulting new terms should result to a lower interest rate, a lower monthly premium or an extension for the time that you need to pay the loan. This way, it will be easier for you as a homeowner to come up with the money that you need to pay off the past due payments and any other loan defaults that you may have owed.

To give you more of an idea about how loan modification works, it can be any one or a combination of the following methods:
1. A reduction of the principal balance that you still owe on the mortgage loan.
2. A reduction of the interest rate for the loan.
3. A significant extension for the length of the loan.
4. A combination of any of these methods.

If you think that banks and lenders marvel at the thought of repossessing your home during the foreclosure process, think again. This is actually a more costly option which is not good for their business – so bank or loan managers would generally be more adaptable at coming up with a loan modification agreement with you rather than foreclosing your home.

How to Look for the Best Loan Modification Company

After learning about the processes involved in loan modification, how can you make sure that you are dealing with a company who will give you the best set of terms and conditions? The first thing that you need to ask is how long the lender has been specializing in loan modification.

‘Specializing’ is the keyword here – because if a lender specializes in offering this type of loan, you can rest assured that they would know how to best approach your case to help prevent your home from being foreclosed. You can do a quick search online or seek references from friends, colleagues or family members who have been in the same situation. Don’t hesitate to ask for references when you already have narrowed down your choices to two or three loan modification companies.

Why would you even think about the prospect of having your home foreclosed when you know that there is something that can be done about it? With the help of loan modification, you can change your loan conditions in such a way that it will be easier for you to pay it off over time – and not have to face the prospect of losing your home at all.

This is a question that people applying for a new mortgage loan often ask their mortgage loan consultant. So let’s take a look at this question in more detail to help with your decision making.

There are a few variables to consider before you make a decision about the term of your new mortgage. Things such as, how long you plan to stay in the house, is it your primary residence or an investment property, what is your debt to income ratio, can you afford the payment, will the interest rate be different and how much money will you save.

Using your hard earned money wisely should be your first consideration. Few people can pay cash for a new home but still, paying more interest on a loan than you absolutely have too is not really in your best long term interest.

30 Year Mortgage

Let’s say that you are looking to buy a new home worth $180,000 and you are going to put down 5% ($9,000) and the interest rate will be 5.75%. Your principal and interest payment will be $997.91 amortized over 30 years.

Keep in mind that this is not your total house payment. Added to the P & I will be escrows for taxes and insurance and private mortgage insurance. So, find out your actual house payment before making a final decision.

Let’s say you stayed in the home for 30 years. Over the life of the loan you will pay your balance due on your mortgage of $171,000, plus you will pay in total interest $188, 247.59 if you do nothing but make your regular monthly payments.

If you live there five years, you will have paid $12,376.66 toward your principal balance, will still owe $158,623.34 on your mortgage and will have paid $47,497.94 in interest.

20 Year Mortgage

For the same loan amount, down payment and interest rate the principal and interest payment will be $1,200.56.

If you stayed in the home for 20 years your total interest paid over the life of the loan will be $117,135.76. You will have paid $71,111.83 less in interest and your home mortgage will be paid off in 20 years. This is over $71k that you will not have had to work hard to earn.

If you only stay in the house for five years you will have paid $26,425.09 toward your principal balance and will still owe $144,574.91 on your mortgage and will have paid $45,608.51 in interest. So, short term this is not a lot of savings to you in interest paid.

15 Year Mortgage

Ok, for the same scenario for a 15 year mortgage here are the numbers for you to consider. Your principal and interest payment would be $1420.00.

If you stayed in the home for 15 years your total interest paid over the life of the loan will be $84,600.47. You will have paid $103,647.12 less in interest than you would have for a thirty year mortgage and your home will be paid off in 15 years.

If you only stay in the house for five years you will have paid $41,637.42 toward your mortgage and will have paid $43,562.58 in interest. Even though you will not have saved that much in interest you will have a considerable amount more in equity in your home.

You will be paying $422.09 a month more in a house payment than you would for a thirty year loan. This amount times 60 months comes to $25,325.40. That added to the $12,376.66 that you would have paid during a 30 year term comes to $37,702.06. Above we stated that you would have paid $41,637.42 toward your mortgage, so why the difference. It is because more of your payment has actually gone toward the principal amount due vs. the interest amount charged. So, comparing just the difference in the interest paid is not giving you the total picture because you have actually built more equity in your home, even with staying in it just 5 years.

Another thing to consider is the interest rate. Throughout these scenarios we have used the same interest rate. Lenders may charge a different interest rate depending on the term of the loan which would change your numbers.

Other Factors

Even if you look at these numbers and decide that you can make the higher house payment, the lender may not agree with you. If the increased payment pushes your debt to income ratios out of their guidelines then you may no longer qualify for the loan.

You might also want to look at a comparison of putting this money in another long term investment. Most investments don’t pay as much interest as you will pay to borrow money. However, if you could put your money into a 401k offered by your employer where they match the funds then that might be a return that would be more positive than saving interest on your home.

People tend to spend a lot of time looking at ways to invest their money but seldom put a lot of thought into the numbers associated with the investment in their home.

Hopefully this will give you some good food for thought and help you to look at your home investment in a clear light.

As the economic crises get worse, homeowners look to loan modification as a way to manage their financial concerns. As loan modification allows them to adjust the current conditions of their mortgage, money borrowers can meet their monthly installment dues more conveniently and consistently.

Any borrower having difficulties in paying the mortgage is eligible to apply for a mortgage modification. However, not all who apply are accepted. The key to acquiring a loan modification program is to know the qualifications set by lenders.

In applying for mortgage modifications, a borrower is generally asked to submit an application form that is duly accomplished, a few documents for verification, and a hardship letter addressed to the lender. The hardship letter is a great factor in determining one’s qualification for modification. Essentially, it must state that the crisis experienced by the borrower is genuine and that altered loan conditions can altogether increase the chances of paying the mortgage.
There are lenders who render efficient commendation services from their websites, which are useful if you are sure you will be approved. Some of these applications request the hardship letter on the Internet, while others request that you mail them in.

It’s preferred to print and mail the application and the hardship letter together, to build the whole process go smoother. Completing the application on-line then mailing in the letter should double the response time or even impede your chances of being approved.

Applying for mortgage modifications is not a guarantee for its acquisition. However, submitting its requirements completely and appropriately can increase a person’s chances of being awarded the modification.

Like so many of the mortgage providers out there today, Chase has really stepped up in terms of helping out people in need. Nobody needs to see houses lost to foreclosure and it truly causes a detrimental effect almost across the board. What Chase has done is they have joined up with the government on the new loan modification program, allowing people to change up their mortgages to get monthly payments back under control. This benefits your directly as a consumer, so you need to understand how to go about applying for and completing the modification process. Here are some important tips to keep in mind.

Know that when you go to Chase to talk about modification, it is going to be your first job to show them that your situation is out of hand. How you do that depends upon your preferences and how comfortable you are forming the right arguments. Many people like to elicit the help of a financial company to put together their letter. You will send a letter to Chase stating that your payments are outclassing your current means, and that you need to re-evaluate your loan situation. The idea is not just to tell them what you want, but to show them that you meet their criteria for modification.

When you are framing your argument, be sure to present things in clear, certain terms. If working with a financial company, they will show you how to do this. You need to produce charts, graphs, or whatever else in order to show that you are paying more than 37% of your monthly income to the mortgage lender. That is the amount that the government has said is unreasonable, so you will need to show that you’re making payments in excess. When you do that, your next goal will be to show that you have had financial hardship.

You will need to submit forms to show that you have either lost your job or you have become disabled. There are other items that might allow you to qualify, so consulting a financial service before moving forward is a good idea. Another good tip is to go to Chase with ideas of getting your interest rate cut down. They have the option of just extending out your loan term, but this will cost you in the end. If you insist on having your rates cut, you will benefit in a big way.

One of the difficulties of entering into loan modification is that you have to step out and approach your mortgage lender. This can be somewhat difficult for many people, since the majority of us spend our time running from lenders. No one wants to have that hard conversation, especially when your finances are in disrepair. It is something that must be done, though. You have to go ahead and give it a shot, because you will lose your home otherwise. So how do you properly approach Bank of America about loan modification in order to get accepted into their program?

One of the best moves that you can make is to get in touch with a professional company that has experience working with people like yourself. A company can do good things for you, framing your own situation in a way that will help you with lenders. The first step is to send a letter directly to your lender, stating your situation and your desire to modify your loan. The key here is to make sure that your tone is correct and that you put proper emphasis on the details of your case. You have to be careful with how you construct arguments, as well.

It is smart to show them that you are under a ton of financial pressure and you can do this in a couple of different ways. Emotional arguments only go so far in the financial world, so you need to base your arguments off of the numbers. Show them that you make a certain amount of money each month and compare that to how much money you are paying them each month. From there, you can go about the business of discussing your personal situation and letting them know of the financial hardship that you might have faced.

Many people in your situation do not want to do this, but getting on board with a solid loan modification program can make a lot of sense. Since the government offers to help out the lenders, you are essentially getting assistance from two different sources. If foreclosure is in your near future, then this is really one of your only options. Though it might seem difficult at the beginning to approach Bank of America, you should know that they are very open to working with customers, as long as you are honest and you take the proper approach.

Mortgage lenders are like any other business. They must compete with one another for borrower’s business. This is great news for anyone looking to secure a mortgage and is the number one tool to ensure you get the best rate. Government lenders such as Fannie Mae and Freddie Mac, and private lenders will vary in the rates they offer. It’s all up to the borrower to do their homework and find the best rate.

Mortgage rates are affected by several factors. Two of the biggest are one’s employment status and credit history. Rates can vary greatly based on those two things. There’s little one can do to quickly help a credit score, but they can offset less than stellar credit by offering a larger down payment. Though lenders are often willing to finance up to 95% or more of the cost, they will offer better deals if they can see you are immediately vested in the property. A larger down payment is how you do that.

Many private lenders will waive the requirement of purchasing mortgage insurance if the borrower puts down at least 10% of the price. This can save you thousands of dollars over the life of a mortgage, not to mention the lower interest rate. Therefore it will often be in your best interest to wait to purchase a home until you can pay a substantial amount down.

If absolutely necessary, you have the option to take out a second loan to use to make a larger down payment. Two loans at lower interest rates will save you money over the long term. Even if the down payment loan has higher interest, it will be smaller and can quickly be paid off, leaving you will lower interest on the majority of the mortgage.

Besides keeping your credit in order, a large down payment is the best way to find the lowest rates on home loans. Banks want your business but they face risk. Show them that you are serious and they will pass on the lower risk they incur in the form of lower interest rates.

Equity release has been around in several forms since the 1960?s, but is gaining a lot of attention nowadays because of the important roll it can play in retirement planning. Unlike the older schemes, it is now a specialist form of financing where both advisors and providers are highly regulated by the Financial Services Authority.

This type of finance is also attracting attention as a way of meeting the costs of long-term care that might otherwise fall on the state, and for estate planning, to help mitigate possible inheritance tax burden.

Described in various different ways such as lifetime mortgages, home reversion or home income plans, equity release schemes and so on, all schemes essentially provide a mechanism to release the value of the equity tied up in your home.

It provides a way to release some of the value of your home in retirement when needed most, without having to sell it or move out, and can be the right option for many who need additional money to boost either their spending power for luxuries, or simply to cover the every costs of living when current pension provision is inadequate.

Lifetime Mortgages are now readily available for home owners age 55 or over, and are provided with flexible terms, and at prices only slightly higher than those for mainstream mortgage lending. However, unlike conventional mortgages, equity release mortgages do not require you to make regular repayments.

When looking at the different products available in the market look for the SHIP logo or ask your adviser if the plan being recommended carries the SHIP logo to see if your equity release plan is protected. SHIP stands for Safe Home Income Plans and is the trade body that represents the majority of the equity release market in. SHIP members include providers of both lifetime mortgages and home reversion plans. SHIP equity release members guarantee that you can live in your home for the rest of your life, move to another property without penalty, and never owe more money than the total value of your home.

These products are not the right option for everyone. For some people, trading down to a smaller property, or utilising existing savings may be a more suitable route to consider. If using an equity release plan to consolidate debt, you should consider that you are taking a previously unsecured debt and securing it against the home.

Releasing equity in the home is not something to be dismissed out of hand either. It may not be the right thing for some people, but it is for others. It is essential however, that each scheme is examined and the benefits and pitfalls of equity release identified in relation to your own personal circumstances. This includes the effect inflation will have on your remaining property value and the possible effect on your estate.

Releasing equity in the home can be the ideal solution for many, providing extra cash to supplement the state pension, and thereby providing a better quality of life in later years. Some may even consider releasing equity in the home to provide for their children or grandchildren, for school fees or even the deposit to buy their own home.

A Lifetime mortgage is a complex financial product, and consumers considering equity release should always seek independent financial advice as releasing equity from a property can affect eligibility for the means-tested benefits Pension Credit and Council Tax Benefit as well as your tax. Furthermore, it can place restrictions on your ability to move in the future.

As a mortgage broker , I am often asked by mortgage “shoppers” to provide a Good Faith Estimate of settlement charges. I am proud to say that the Good Faith Estimates that I provide very closely match the settlement statement at closing. A Good Faith Estimate cannot be exact, because some settlement charges, such as prepaid interest, are calculated based on the number of days left in the month when the loan closes.

However, not all loan originators provide accurate Good Faith Estimates. Some conveniently omit certain fees to make you think you are getting a better deal. With that in mind, I have decided to write a series of articles explaining the typical fees you can expect to see on a Good Faith Estimate.

Settlement charges are grouped into sections: lender fees, title related fees, government fees/taxes and prepaid charges. This article will focus on the lender fees. These are fees associated with the cost of processing and underwriting your loan.

Here is what you can expect to see:

Loan origination fee: this is how the loan officer or mortgage broker is compensated. This fee is split with the broker’s company to cover their overhead costs.

Broker fee:same as above.If you see both a broker fee and a loan origination fee, this is just a sales tactic to break up the commission so it looks smaller

Discount points: A percentage of the loan amount, usually 1-2%. Points are used to buy the rate down. This is not a commission paid to the loan originator-this fee is paid to the lending institution. Since this is a form of interest paid in advance, it is usually tax deductible. Verify this with your tax planner.

Application fee: This is not a standard fee. Some companies do charge this fee to cover some expenses in case you decide to pull out of the loan for any reason. It is usually refunded at closing. If it is not refunded at closing, it is a junk fee in my opinion.

Administrative fee:This is usually another junk fee. Companies with very high overhead may charge this fee to cover expenses.

Processing fee: Covers the salary of the processor who submits your loan to the underwriter and handles the file through closing. A good processor is worth their weight in gold and is invaluable in navigating through the many glitches that can come up.

Underwriting fee: This is a 3rd party fee charged by the lender for underwriting your loan. Not a junk fee.

Yield Spread Premium: Commission paid to the originating company from the lender. this should be disclosed as a dollar amount or a specific percentage, not a range of 1-3%.

Appraisal fee: Fee paid to the appraiser for completing the appraisal.

Credit Report fee:Fee that the mortgage company is charged for ordering your credit report.

Flood Cert fee: covers the cost of certifying whether or not your property is in a flood zone.

Tax Service fee: covers the cost of servicing your escrow account.

Now is the best time to do a mortgage refinance in Denver and everywhere else since interest rates are really low. Many have already taken advantage of it. If your current loan has a high interest rate, then now is definitely the best time to refinance your property. But, there are some things you need to consider before going ahead with it.

Your Property Value Needs To Exceed Your Loan Amount

In order to qualify, the assessed value of your property has to exceed or be even with the loan amount you are trying to get. With the real estate market as it is right now, it would be wise for you to get an appraiser to give you an assessment to make sure your house value is high enough. It is sad thing that many have been unable to refinance because they did not qualify due to their home being valued less than what they owe. Thus, we see all the people that are experiencing the necessity for foreclosure. And also because of this situation, it may make it harder for you to take advantage of current rates.

If what you owe is less than your property value, however, then you are in a good position to get a mortgage refinance whether you live in Denver or elsewhere.

How Is Your Credit Score?

Next thing would be to see how your credit score is. If it is lower than 620, then you will need to find ways to make it better, otherwise you will not quality for any type. If you wanted to do conventional, then you would need a score of 660 or better. Remember that the higher your credit score, the lower the interest rate you will be able to lock in. If yours is lower than you would like, there are companies out there that will help you to repair it. It may take some time, but it will be worth it if you are able to save money on your mortgage refinance.

A Good Loan Officer

Who your loan officer is will determine how quickly and how good a rate you will be able to get. A good one will know exactly what documents are needed to close the loan on time. They will also have the experience to solve problems. Many will just tell you that you cannot do it right now because of this or that issue. Someone with experience will know that there are solutions to many common problems people have. Even if you have a second mortgage, you can still refinance the first. This point is often neglected by many.