Florida Mortgage Broker Discusses Interest Only Refinance Options

Adjustable Rate Mortgage Popularity

Over the last five years almost forty percent of all home buyers selected adjustable rate mortgages. In early 2004 signs of inflation begin to appear. These indications pressed the Federal Reserve into action. From June 2004 to June of 2006 the Federal Reserve increased the Federal Funds Rate 17 times. The impact of these increases was to push up the short-term mortgages indexes that determine the target or fully indexed rate on these adjustable rate mortgages. Borrowers that enjoyed the benefits of these low payment mortgage products are now finding themselves with considerably higher interest rates as their mortgages adjust.

Short Term Rates Up

This interest rate environment has a silver lining. The intent of the Federal Reserve's actions during this period of time was to contain inflationary forces that would have resulted in higher long-term interest rates. As of this moment, the Federal Reserve has been successful and long-term mortgage rates have remained near historic lows. The Federal Reserve has been so effective that long term rates such as thirty-year mortgages are now lower than adjustable rate mortgage offerings.

Long Term Rates Down

The anomaly of long term rates falling below short term rates is referred to by economists as an inverted yield curve. This phenomenon is currently providing the best possible refinance environment for borrowers that have recently experienced an increase in their adjustable mortgage rates. No one has been happy about watching their monthly payment increase. But imagine the alternative scenario where short and long term rates might have moved up together making it impossible for borrowers to refinance into an affordable mortgage.

Option ARM Concerns

One of the most popular mortgage programs of this period of time was the negative amortization loan. This loan type has been branded by many different names including the Option ARM. This loan allows borrowers to make a payment based on an interest rate that is often significantly below the effective, or fully indexed, rate. Borrowers selecting this low payment option find themselves owning more than they originally borrowed. Florida Mortgage brokers originated significant numbers of these mortgages as real estate values soared and buyers were eager to find ways to make their home payments affordable.

The New Fixed Rate Interest Only Mortgage

A new product has emerged that has become a terrifically popular option for borrowers wishing to refinance and to keep their home loan payments at a minimum. This program is the new thirty year fixed rate interest only mortgage. Interest only mortgages allow a borrower to pay only the interest due on a loan thereby minimizing their payments. Until very recently these interest only programs were only available on adjustable rate mortgages. That meant that in a short period of time, ranging from two to five years, the interest only feature would expire and the rate would adjust. This combination of events has the potential of more than doubling a borrower's monthly payment.

A Caveat

This new breed of fixed rate interest only mortgage combines the security of a fixed rate mortgage with an attractive low interest only payment. Like previous versions of interest only programs the interest only period is for a finite period of time. These new programs have improved on this aspect of the mortgage as well by extending the interest only period to ten years. There is one caveat to be aware of. Although the rate will remain fixed when the loan transitions from an interest only loan to a fully amortized loan at the end of ten years, the amortization period is limited to the remaining twenty years. The change from an interest only payment to a twenty year amortized payment will be noticeable and should be planned for.

Market Factors

Another factor that is driving this move to refinance is the weakened real estate market. As a Florida mortgage broker I have seen a significant increase in the number of borrowers that have decided against selling their homes, opting instead to refinance. Refinancing into an interest only program for many borrowers is the most attractive option. Many of these same people are refinancing out of their negative amortization loans wishing to keep their payment at a minimum and at the same time put an end to the reverse amortization effect of their current mortgages. The weakening real estate market has further underlined the importance of maintaining equity. There is little that we can do about market forces, but we do have control over the mortgage options that we choose.

Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.

About the Author

Jim Kemish is the president and founder of Power Mortgage, a Florida mortgage broker business based in Delray Beach, Florida. Power Mortgage Corp was established in 1989 and serves the states of Florida, Georgia, Massachusetts, and Virginia. Jim is also the President of Sky Blue Credit, a national credit repair business.

Things are changing in the world of Commercial Mortgage Lending

New Commercial Lending Initiatives

Things are changing in the area of commercial mortgage lending. Some commercial lenders have introduced a new, innovative, residential-style approach to commercial mortgage lending. New programs provide an alternative to bank financing that is ideal for strong borrowers seeking loans from $100,000 to $1.5 million. These are very attractive to borrowers, brokers and easy for both to arrange. Owner occupier and investor properties are eligible.

Loans are available on a range of property types including multi-family, mixed-use, office and retail, and range from $100,000 up to $1.5 million, for purposes of rate/term refinance, cash-out refinance or purchase. Credit scores of 580+ are acceptable for primary borrowers or primary guarantors. High Loan To Value mortgages (LTV) for eligible property types, up to 97%

Several term options are available, each of which is fully amortizing:

* 6 Month Adjustable: This loan adjusts every 6 months by adding the loan's margin to the Wall Street Prime at the time of closing.

* 2 Year Fixed: The interest rate at closing stays fixed for 2 years and then adjusts every 6 months by adding the margin to Prime at each adjustment.

* 3 Year Fixed: The interest rate at closing stays fixed for 3 years and then adjusts every 6 months by adding the margin to Prime at each adjustment.

* 7 year Fixed: The interest rate at closing stays fixed for 7 years and then adjusts every 6 months by adding the margin to Prime at each adjustment.

* Declining Fixed Rate: A bonus offering - a conventional Fixed Rate with 15, 20 or 30 year terms and a unique feature. Although the interest is fixed for the life of the loan, the rate will drop by .500% every 5 years as long as the borrower maintains an excellent payment history. The loan must be current at the time of closing.

* Interest Only: The loan is amortized over 30 years to make the payments reasonable but the borrower makes interest only payments for the first 3 years, after which he pays principal and interest on the remaining balance. At the end of a 10 year period, the balance is due and must be paid off or refinanced. It is available only to A credit borrowers.

Blanket mortgages are also available.

Key Benefits include :

48-hour pre-approvals, Most rates locked at pre-approval, Streamlined underwriting, Subordinate financing, Quick closings, Multiple pricing options, Minimal costs, Long terms, No lender points, no yield maintenance and no loan committees.

Commercial properties are divided into tiers (1 to 4) for eligible property types :

Tier I Properties Multifamily - Structures containing five or more dwelling units. Properties that offer weekly or monthly housing would not be considered multifamily properties. Mixed-use - properties must contain at least one commercial unit (retail, office etc.) and at least one residential unit. Common types of mixed-use properties include a ground floor retail or office unit with apartment(s) above, all within the same building. The primary use at the property must be for residential purposes in order for it to be considered Tier I mixed-use. Tier II Properties Automotive - auto repair shops, used car lots, quick-lube facilities, tire repair shops, etc. The type and size of building will vary with the use. Bed & Breakfast - inns are residential-type buildings designed for transient boarding and are family style in character. Light Industrial - is characterized by a small size facility where no heavy manufacturing or specialized industrial process takes place. Office space within light industrial ranges from 3% to 25% of the total area. Mixed-use - properties must contain at least one commercial unit (retail, office etc.) and at least one residential unit. If the primary use at the property is for commercial purposes, the property will fall under mixed-use Tier II guidelines. Mobile Home Parks - are considered as long as not more than 25% of the total spaces are used for RV. Mobile home parks vary in quality and amenities and all will be considered unless the RV component is too high. Office buildings - are buildings designed for general commercial occupancy and are normally subdivided into smaller units. Office use implies a general business use that does not include retail, manufacturing or warehouse type operations. Retail buildings - are designed for retail sales and display and usually have display or decorative fronts. This retail classification encompasses a wide variety of uses including, but not limited to: markets, convenience stores, drugstores, department stores, big box retailers, barber shops, laundromats, etc. Self Storage - Mini-warehouses are warehouses subdivided into a mixture of cubicles of generally small size, designed primarily to be rented for small self- storage or noncommercial storage and may include some office-living space. Warehouse - buildings are designed primarily for storage purposes.

Tier III Properties Flagged Hospitality - Hotels with national franchise affiliation are considered "flagged." Hotels must be in good standing with their affiliated franchise to maintain this tier. Funeral Homes - include those used for viewing purposes as well as those that include embalming services. Industrial - Where the principle structure is designed for manufacturing processes, heavy assembly or involves the use of heavy machinery. It contains an average amount of office space commensurate with the quality of the building and the intended use. Their heavy frames, walls and floors, specialized manufacturing processes and power or utility-service characterize industrial facilities. Rooming House - Occupancy is more transient. Rooms are rented on a daily, weekly or monthly basis and usually only include a bedroom. Most rooming house properties contain less than 20 units. Tier IV Properties Day Care Centers - are early childhood, handicapped, adult, and senior care facilities; or developmental centers, such as kindergartens, nurseries or children's preschools. Gas Stations - automotive properties or any other property that dispenses any amount of fuel for retail sale. Health Care - Assisted Living or Nursing Home types of operations where a license is required to operate the business. Hospitals and medical treatment facilities, such as out patient care or walk-in emergency medicine. Restaurants - cafeterias, bars, and taverns, where design is of restaurant type. RV Parks - are those that are designed for recreational vehicles. May include mobile home pad rentals but will be considered an RV park if 25% or more of total park is for RV. Transient type occupancy is common. Unflagged Hospitality - Hotels or motel properties with no national franchise affiliation are considered "unflagged." The lower the tier, the higher the LTV permitted on the loan.

Underwriting favors a strong borrower, in terms of credit score and personal financial strength, rather than property cash flow - a residential style approach to commercial lending. This common sense approach to underwriting creates flexibility. The primary focus is to establish the borrower's ability to repay the loan by drawing upon all income sources, not just the property. As a result, there is no minimum property debt service coverage requirements and are therefore, able to finance properties that may not pass traditional commercial underwriting guidelines.

Also, underwriting is streamlined and fast - the residential style of underwriting keeps the process easy, providing written pre-approvals within 48-72 hours of receiving a completed loan application and a commitment to funding loans quickly (within 30-45 days).

For requirements, borrowers need to be willing to document all income sources and provide documentation such as tax returns and bank statements. Every loan must have the borrower sign a personal guarantee.

In summary, new commercial loan techniques allow a far more flexible, cost effective approach than traditional banks or financial institutions offer. Businessmen can at last escape balloon payments which may previously have been the only financing option available.

About the Author

Steve is an experienced Mortgage Broker, specializing in Commercial loans and cash-out re-financing, based in Clearwater, Florida.

Mortgage Solutions Now - Florida Mortgage, Commercial Loans, Refinance, and Home Loans

Are $200,000 Dollar Mortgages at $650 a Month Realistic?

Of course they are, but buyer beware. I have people calling me all the time asking me why the can't have a $200,000 dollar mortgage only paying $650 a month. The truth is they can, but for some people those kind of loans just aren't good. The part no one ever mentions when advertising such a loan program is that the excess payment is added on to your loan total.

For example, if you took out a $200,000 dollar loan it would typically cost you $1300.00 a month. Instead of paying $1300.00 you pay $650. 1300-650= 650, The excess added to your loan is $650 making your new loan amount $200,650.00 next month.

This loan program is called a negative amortization loan. Most mortgage companies call it a pick your payment plan, it has more sales appeal that way. This type of loan has gotten a lot of home buyers in trouble. I am shocked by how many people want this type of loan, yet are unaware of the full nature of the loan. It is in my opinion that these loans were made for investment properties and people with a commission based salary.

The loans are perfect for people who are planning on selling that house in a year or more because it would only add $7800 to the loan amount per year, most home values would increase more then that in 1 year. The commissioned based salary people, like me, have fluctuating income. This month could be little, next month can be a lot, allowing us to make us for the months we only paid $650.

I recommend that all borrowers research their loan programs before meeting with a broker. Also, it is important to find a Mortgage Broker that is trustworthy and would disclose all the important information associated with a particular loan program. It saddens me and stains our profession that some brokers only care about making money.

About the Author

If you need any help making a decision feel free to call me, Danielle Farmer, at 954-464-8535 or visit my website at: www.solutionmtg.net for your Mortgage solutions.

Commercial Real Estate Investment Decisions

WEIGH YOUR RISKS CAREFULLY

When you decide to embark on a commercial real estate investment program, how do you get your start? We know that there is no such thing as 100% financing for commercial property, so where do you get your initial capital for that first purchase? One method which I have discussed before is to use Other People's Money as your initial "stake." Perhaps having partners is not the path you wish to follow in your investment program. That makes the other option using your own funds. Before you dip into your resources, however, consider some of the risks you face.

First, you are embarking on an investment program about which you have little practical experience. You may have read every book on commercial real estate investing ever printed and gone to every seminar ever produced in a hotel for a year, but you have no experience in the business. Do you really know what can go wrong? Do you realize what additional reserves you might need in case things don't go as planned?

Second, consider the source of your equity. For most people who have done some real estate investing, they have probably focused on residential investment properties. Residential properties usually enjoy a large number of comparables to easily estimate value, financing programs for residential properties allow potential buyers to facilitate sales with little equity investment, and residential properties are usually less expensive, and therefore more accessible, to most people. If you are such an investor, then you probably have a pretty good pool of equity to tap. But how do you access it? Sell them outright and pay your capital gains? Sell them in a 1031 Exchange? Refinance them? Each option has its advantages and disadvantages.

Third, if you are like most people, your biggest chunk of equity is sitting in your home. There may be a great temptation to go get yourself an equity line, suck out the equity, and go buy a commercial property somewhere. Before you do, make sure to consider how the increased debt service of the equity line will affect your finances. Can you truly afford the payments if something doesn't work out with your commercial investment? Yes, your commercial property will be producing income. However, the majority of that income will be used to pay its operating expenses and paying off the loan you arranged to acquire it. That doesn't leave a lot left over for you in the initial years of the investment to pay down the equity line, which will most likely have a rate somewhere above the Prime rate (8.25% today).

The point is to consider your investment goals, your tolerance for risk, and your ability to live without the funds you are using for your commercial investment. Over time, your commercial portfolio should provide you with significant current income, a hedge against inflation, and net appreciation. You need to pay careful attention to how you structure your commercial real estate financing to minimize unforeseen risks and increase your chances of success. In your quest to achieve your commercial investment goals you need to carefully asses the impact of the financing decisions you make.

About the Author

WANT TO USE THIS ARTICLE IN YOUR E-ZINE OR WEB SITE? You can, as long as you include this complete statement with it: ' "The Investment Property Insider" is published by Craig S. Higdon, a veteran commercial mortgage broker. He publishes the weekly e-zine and blog, www.InvestmentPropertyInsider.com, for commercial real estate investors, developers, and industry professionals. Visit the blog and get this free report: "The 7

Targeting Your Prospects

Are you losing profits due to inconsistent and ineffective follow up?

Your leads are like gold! Following up with your prospects is more than just a process, it's an art. In order to be truly effective, a well-designed plan is called for. What are you doing now for follow up? Sticky notes? Outlook?

I have found that an autoresponder email system is nearly flawless. Whoa, let me back up a bit here, when I first started email marketing with prospects I used a follow up system that I now call the "List Technique". I had a large database containing the names and email addresses of my prospects, and past clients.

I would open my list and every now and then, when I had a moment (which was rare!) and I would write what I thought was a great follow up letter and mass mail it to my entire list. (I used the bbc and thought this was really a neat feature). But the return on this effort wasn't what I had hoped for.

Why wasn't this effective? · The List Technique isn't consistent. My clients were at various stages, some were new homeowners, some still looking for that good deal, and some were in need of a refinance. · List Technique messages don't have the ability to give my clients new and updated information, as I have it available. · These were more or less "newsletters" not personalized in any manor to target the direct needs of each of my valuable prospects.

Yes, I now know that I could have been much more effective in those days with an autoresponder system. Now that I have it in place, I am amazed that more Real Estate Professionals aren't aware of this time saving software. Maybe that is why my leads are more loyal and send me tons of referrals.

How do I use my autoresponder?

First, I follow up with each lead individually, but at set intervals. And I have pre-written messages targeting just their needs. It looks and feels personal. Most of my clients need to feel that they are my only clients. And this system has that touch.

The timing of my follow up letters is critical. You don't want to spam their inbox, nor do you want to stay out of the inbox for very long. It's a delicate balance, but my system takes care of all that. I just need a few minutes to construct the messages I want to be sent, and load them into the system.

Follow up seems complicated, but when you have the help of an automated system, like the automated prospect follow up system that I use, once it is set up, it is on automatic pilot, marketing for you while you get other tasks done. Like meeting your clients at Starbucks?

More Sales - Less Work. The best agents I know verify that it can take up to seven phone calls, emails, etc. for a prospect to get to know and trust you. When you follow up manually, your marketing message is only delivered once. If you don't sell your prospect with that very first attempt, then you don't make the sale.

Follows up with your prospects automatically over the time frame that you specify. Tailored to each client's needs. I have increased my conversion rates substantially, and cut down my follow up time to a fraction of the time I was spending with my List Technique.

About the Author

Betty Ziegler http://www.information-valley.com has even more to share at her website, www.Information-Valley.com. You can contact Betty direct at b@Information-Valley.com. For more information about email marketing with autoresponders go to: http://www.aweber.com/?220441