Adjustable vs Fixed Rate Mortgages

Adjustable vs Fixed Rate Mortgages

Brought to you by http://www.wolverinefinance.com

Mortgage rates can either be fixed for the duration of your loan or can be adjustable. An adjustable rate mortgage is a loan that is set up with an interest rate that changes based on pre-determined criteria, primarily tied to the federal interest rate. If the interest rates are up, then your interest rate on your loan will be higher, if the interest rates are low then the interest rate on your loan will go down.

Adjustable rate mortgages (ARM's) are generally fixed interest rates for a period of time and then become adjustable. Generally speaking, the introductory interest rate for an ARM loan will be lower than a fixed rate mortgage. This is done in order to lower initial payments and allow people to take out larger mortgages, or give them smaller payments for the introductory period. This is attractive to people who may know that their income will be increasing over that period of time.

Whether or not to choose an ARM or a fixed rate mortgage has been debated for as long as there have been ARM's. Though people feel strongly in both camps, simple mathematics can assist you in determining which mortgage is best for you and your personality. Your personality? Yes. Some people are not comfortable with any uncertainty in their lives. The idea of having an uncertain mortgage payment in the future may cause them more stress than the money they are saving is worth. Therefore, factor your own comfort level into the equation.

Generally speaking, ARMs are 2, 3 or 5 years, though they can be longer or shorter. At the end of that period your interest rate will become variable unless you sell your home or refinance. If you think that the likelihood of your selling or refinancing within the period of the ARM is strong, than the lower interest rates of the ARM loan will be of great benefit to you. If you think it is unlikely that you will sell or refinance within that period, then you may not benefit from an ARM. Bob and Robyn are a young married couple just starting out. Bob is in advertising sales and Robyn is a teacher. Bob is fairly confident that his income will continue to increase over the next several years as he works his way up to becoming an account executive. Robyn's income is more predictable and is on an upward trend. Being a young couple they do not have the finances for large mortgage payments.

Bob and Robyn are presented with two mortgage proposals for their $150,000 mortgage. Proposal one is a 30-year fixed rate mortgage at 6% and the other is a 5-year ARM at an introductory rate of 5.25%. The fixed rate mortgage payments would be $899.33 per month, not including taxes. The ARM would have a 5-year period where payments would be $828.31 per month, not including taxes. Bob knows that even if he can afford the extra $70.00 per month for the fixed rate mortgage, that $70 per month may be better spent knocking down principle during the ARM period. He is further confident that as his salary increases, he is likely to upgrade his home within five years or refinance to make home improvements. Bob and Robyn took the ARM loan.

John and Catrina are a married couple with three grown children. John has been employed at the same company for 18 years and Catrina has been with her company for 12 years. They have consistent and stable income. Neither John nor Catrina expect any substantial increases in their salaries. After their last child moved out of the home they decided to downsize and buy a smaller home. They have a substantial down payment and will only be taking a mortgage of $100,000 on their new home. John and Catrina are presented with the same loan options as Bob and Robyn were. John and Catrina, however, know that it is unlikely they will sell or refinance in the next five years. They are comfortable with the payment schedule and, therefore, prefer the certainty of the fixed rate mortgage.

There are countless websites that offer mortgage calculators to determine your mortgage payment. For your convenience we offer one on our site. You can review the different payment schedules based on the interest rates quoted for the fixed-rate and the ARM. Once you know the different payment amounts you will be able to determine which loan makes the most sense for you and your unique circumstances.

Your mortgage professional should also be able to assist you in reviewing the options and making the best decision for you. The more open and honest you are with your mortgage professional the more helpful they will be. It is only if they are armed with full and honest information that they will be able to make recommendations to you. About the Author: Max Hunter is the author of many credit related articles. If you are looking for help with Home Loans or any type of credit issue please visit us at http://www.wolverinefinance.com For Credit Repair Software, other products, ebooks & articles, visit http://www.globalbizwiz.com

About the Author

I own a mortgage company and want to keep people in the know. You'll always pay more if your credit is poor!

Mortgage Refinancing Below 500 FICO

If you have been turned down for a mortgage refinance, especially a cash out or debt consolidation refinance, because your lender says your credit score is under 500, there are a variety of new options and strategies available which can help you get the cash you need now to pay off your credit card debts, collection accounts, and other derogatory or poor credit accounts and improve your FICO credit score to the point where you can qualify for a low interest, fixed rate loan.

First, you may be wondering why the number 500 is such a big deal. A FICO credit score is a number from 300 to 850 which is meant to represent your reliability as a borrower, and takes into account how much credit has been extended to you, how much money you owe and whether or not you pay it on time. Banks like to tell us that 99% of people in the US have credit scores of 500 or higher, and use this as an excuse not to even bother lending to people with credit scores under the magic 500 FICO score. As far as they're concerned, since only 1% of the population has a FICO below 500, they simply don't have the time to design programs to help these people buy or refinance homes.

We've worked with dozens of people who have come to us with FICO scores below 500 over the years, and every one of them says the same thing. "I just need help right now, and everyone I talk to keeps saying NO". This is because until very recently, it was extremely difficult to get a loan if your credit score was 499 or less, and even today, only a few mortgage lenders, whether they're banks or brokers, have the time or attention required to focus on the needs of what they think are a few unfortunate people. So until very recently, if your credit score was under 500, you had almost no options to refinance your home.

Many people have touted the benefits of credit repair services to prospective borrowers with scores under 500. The proposal often reads like this, first, give them a thousand dollars out of your pocket to fix your credit, which they will accomplish in six months, and then once your scores are over 500, they get a loan done for you. Of course never mind that $1,000 is a lot of money for most people with 700 credit scores, and very often a heck of a lot for an individual seeking a mortgage / refinance to consolidate debts. Add to that the fact that conventional credit repair takes too long for most people to wait without the extra cash to pay off bills that you get with a refinance, and you can see that credit repair by itself is not a very efficient proposition if what you really need is a refinance loan today. That's not to say credit repair doesn't work, it's just that it doesn't work very well for most people who are under 500 FICO seeking a debt consolidation, refinance or home purchase loan.

Over the years we've taken a harder look at the numbers, and it turns out that the banks and credit reporting agencies may have drastically underestimated the number of people in this country whose credit ratings are actually under 500 FICO. There are literally millions of people nationwide who fit into this category, and we have spoken with our share. What do we know? That most people with credit scores below 500 are hardworking, honest people whose credit is suffering from the realities of living and working in America today. As tight as our budgets are stretched in this country today, it only takes a very short term disability or unemployment to severely damage our credit scores. And some of us might have gotten in a little over our heads when we were younger, but in the years since we've been trying to get back on the road to good credit, and we're sick of getting charged sky high interest rates every time we get a new credit card, apply for a car loan, or get denied for a bank loan and wind up calling on the aforementioned hard money / private mortgage lenders. We knew the banks had missed something. Our friends below 500 were not only more numerous than they had previously estimated, they were also more than some credit score, they were good people.

So we developed a strategy which we are sharing in the hopes that other borrowers under 500 can reap some of the benefits that our own clients have. We've helped borrowers with no money in the bank, $50,000 of bad debt, and sky high monthly payments driving them into the poor house get out of debt, get some money in their pockets and eventually achieve major financial improvement in a very short amount of time.

And how does it work? First, there are a few major, institutional lenders which have programs that allow us to arrange and refinance real mortgage loans at competitive interest rates for borrowers with credit scores under 500. These are real, federally and state regulated lenders. Ask your mortgage broker about these programs, and if he doesn't know what you're talking about, get a new broker.

The typical strategy is a credit improvement strategy, where the goal is to take enough cash out of your home to pay off as many of your past due, high interest, or high payment debts as possible. We recommend taking a little extra cash from closing if possible, or to use some of the savings from your lower overall payments so that you can enter stage two of the strategy, which is third party credit repair. A good quality credit repair agency should cost less than 300 dollars overall and can clean up your credit and remove a lot of delinquencies and other items which are negatively impacting your credit. Combined with all the truly harmful items which you've paid off with your debt consolidation refinance, you should be able to improve your credit score by 50, 100 points or even more. I have seen a client go from a 485 FICO and $65K in combined credit card and auto loan debt and a total monthly payment of over $2800 to a 610 credit score and a payment of $1900 per month in less than 4 months. How did that payment get so low? Once their credit score went over 600, we were able to qualify them for a new mortgage at a low interest rate, because now our friends had "good credit", and paid off the few remaining debts which they had by consolidating through refinance. Before the process, their average interest rate across all debts including home, cards and cars was nearly 22%, and afterwards, the average rate was under 9%.

There are some important limitations. If your credit score is under 500, you are generally limited to borrowing a maximum of 70% of the real market value of your home. This means if your house is worth $200,000 then you would be limited to a new loan of $140,000 or less. This limitation only applies to your first mortgage, so you if you currently have both a first and a second mortgage, and your first mortgage is less than 70% of the true market value of your home, you can still refinance and keep your existing second mortgage. Generally, you will need to have a first mortgage of at least $100,000 to qualify. It may be possible to borrow more than 70% of the value of your home but only if your current mortgage is not reporting on your credit report. Many programs will even allow you to use stated income to qualify!

We hope you find this information useful in reshaping your own financial future, and hope that you tune in for the next in this series of articles.

About the Author

Tristan Hunt is a seasoned financial professional with a wealth of experience in the mortgage industry, advising clients on debt consolidation, refinancing & investor loans. Website: http://www.RefinanceOne.net

Life After Bankruptcy

Life After Bankruptcy: Can You Get a Loan?

Refinancing after bankruptcy can be a challenge, but establishing a good credit after bankruptcy can be done with the right lender.

Establish good credit to prepare for refinancing
Generally you will have to wait six months after the discharge of your bankruptcy before refinancing. During this time it is crucial to start rebuilding your credit. A refinance itself will aid in rebuilding your credit within two years. However, in order to get a refinance or apply for a loan, you need to start rebuilding your credit immediately after bankruptcy. You can accomplish this by beginning to make purchases on credit and make your payments on time. You can also build a savings account. Cash assets will increase the appeal of your application for a refinance to a lender. How can you make purchases on credit if you have no credit? Consider credit cards that require an annual fee, a "sign-up" fee and a savings deposit. You send the company $500, for example, and they will give you a card with a $500 limit. It's a bit expensive, but it works.

Research and know your lenders
Research lenders and refinance rates in order to make sure the lender you choose will provide the best deal available. The Internet is a valuable source to use for these comparisons. You can often get online quotes for a refinance. The better deal will often have a higher interest rate, but lower fees. You will likely need to work with a sub prime lender due to your bankruptcy. Interest rates will typically be a few points higher than a traditional mortgage.

Choose the best refinance package for you
As part of a refinance, you may have the option to take some of your home's equity in cash. This would allow you to buy a new car or make improvements to your home like a traditional home equity loan. Keep in mind that leaving the equity in your home will improve your credit rating. After bankruptcy improving your credit rating is always an important consideration. This refinance will help to improve your developing credit and after two years you may be eligible for a lower interest rate through another refinance. If you have continued to build a solid credit history after bankruptcy, you should be able to obtain a refinance through a traditional lender.

Individuals wanting to remedy the stresses of their current financial situation file chapter 13 bankruptcies. You would want to file a Chapter 13 bankruptcy if you have a large of amount of assets and some debts that may not be dischargeable in bankruptcy. In Chapter 13 bankruptcy, instead of having your assets liquidated as in a Chapter 7 bankruptcy, you make arrangements to have all of your creditors paid.

The positive impact of Chapter 13 bankruptcy on your finances
Creditors look more favorable upon you if you have filed a Chapter 13 bankruptcy as opposed to a Chapter 7 bankruptcy. In filing a Chapter 13 bankruptcy you have taken steps to ensure that all of your creditors are paid what they are owed over the next few years. Creditors will view a Chapter 13 bankruptcy more favorably when it appears on your credit because they know that your past creditors received payment on the debts they were owed. In addition to the favorable outlook of future creditors, your current creditors will continue to look at you as someone who does not walk away from the debts they owe.

The negative impact of Chapter 13 bankruptcy on your finances
A Chapter 13 bankruptcy filing negatively impacts your credit. If you are unable to pay your bills and you own a home and you are being threatened by foreclosure, Chapter 13 is a good option. Creditors will view the Chapter 13 bankruptcy as an indication that you were not capable of managing your finances. Creditors will flag your credit as high risk because of a Chapter 13 bankruptcy. This can make it more difficult to obtain any sort of financing or mortgage approvals. In addition, a Chapter 13 bankruptcy will stay on your credit report for the next seven to ten years. Any creditor you views that report will know that you have had financial difficulties in the past and may question your future ability to pay because of the Chapter 13 bankruptcy.

The easiest way to begin searching on the Internet is to type in "Chapter 13 bankruptcy" in the search bar in whichever search engine you are using, the best results will be listed from top to bottom. Before filing for Chapter 13, make sure that you way all of your options. You want to check out all the listings and see what they have to offer, and maybe even contact them if you feel the need too. With using the Internet you have hundreds of companies at your disposal, you can narrow your search by going just local, or maybe looking for specifics like having a really large amount of debt that you want consolidated or a relatively small amount.

About the Author

Andy Gorton is the founder of Fresh Finance who provide debt solutions to UK residents www.freshfinance.net

How to settle your home loan fast!

OK, as a normal working adult like you and me, we know that almost 30% of our salary goes to paying our home mortgage every month. Therefore, can you imagine how much money we can spare if we do not have any home loan installment to make every month.

You must always remember that your home is your liability unless you settle your loan. No matter how your financial planner tells you, no matter your home has appreciated how much since you bought it many years ago, it is still your liability if your home can not make any money for you every month.

I think there are a few ways for you to settle your home loan fast, always use these techniques and becomes a free man like me in 5 years time,

1) Choose the best rate Always do your survey and choose the best rate in town, never underestimate the power of even 0.5% of difference. A lot of home buyers are attracted to all kinds of promotion the bankers are offering. Never take a higher percentage home loan because you are attracted to the gift they are offering to you even though the interest is only 0.01% higher!

2) Choose a package that the interest is calculated on daily basis. You will be surprised how much you can save in interest if you chose a daily interest home loan package rather than a monthly interest package. You immediately save on interest every time you pay extra.

3) Make a habit to pay extra Do not think that you extra 50 bucks will not make a difference. It makes a difference and save you a lot of money even you pay 50 bucks extra every month. Make a habit to pay extra every month

4) Use your bonus to pay extra Yes, you are going to get a month bonus during this coming Christmas, do not spend your bonus, save 1-2 thousand and pay a lump sum to your home loan account!

5) Never Refinance your house Never, ever refinance your house unless you have a good reason to do so. You will think that you can get fast money from that and trust me, you will never settle your home loan by doing so!

Hope you find these tips useful, visit www.investing-tip.com for more interesting articles!


About the Author

Hnery Goh is a practising doctor by profession but has a strong interest in internet and web site design.

Sell Your Home Faster with Seller Financing

Seller financing opens your home up to an entirely new segment of prospective buyers, and the more buyers view your home, the quicker you will find that one qualified buyer. Specifically you will attract more buyers who don't want to or would have a problem getting a bank loan, or those who want a quicker closing or more flexible payment plans than banks offer. Such buyers include the self employed who may be great candidates but are not viewed as favorable by banks as are W-2 employees. Also those with credit blemishes, who may be going down the long road of credit repair. Real estate investors are another large group, since they may own many properties with mortgages, which makes it difficult to get another mortgage from a bank.

Banks typically take 30 days to close a loan, but with seller financing, YOU make the decision and this can be done much quicker, thereby removing a buyers contingencies faster and in effect leading to a much faster home sale. Regardless of whether you are selling FSBO (For Sale By Owner), or with a real estate agent, make sure you use "Seller Financing" in your marketing and advertising, be it in newspaper ads, flyers, or in the MLS description.

Other Ideas to Sell Your Home Faster
Number 1: PRICE IT RIGHT ! Not too high, not too low, check comparables and local agents to get the right number, if you are not getting any action after a week or two, you probably have it priced too high.

If you will be selling FSBO, use a flat rate MLS open listing. For under $500 you can get listed in MLS with no frills, check the newspaper or call agents to find one who offers this. It will give you much broader exposure and is advertising well spent. Also strongly consider offering a buyers agent commission of 2-4% depending on how quick you want to sell and how hot your local market is.

Put up lots of signs around the neighborhood, especially on weekends, hold regular open houses, prepare your house for sale, keep it neat & tidy and remove the clutter.

Sell Your Home for Full Price
1. Normally a seller will accept a lower price (below market) for an all cash no contingency fast closing.
2. It will sell for market price if the buyer needs 30-60days to close escrow and will need to qualify for a loan at a bank and do a home inspection.
3. You as a seller should charge even more (above market) if you will be giving seller financing terms, maybe 5-10% higher than Case 2, or more depending on the terms.

A Good Investment
Taking back a note can be a very good investment since you will be making interest on your money which is usually better than CD's, money market rates. In fact you can select the interest rate you want! This is especially appealing if you have no need for the money right now.

In fact it is such a good investment, that many investors buy seller carry-back notes. If you have no interest in holding a note, it is common for a home seller to carry-back a note and sell it at the same time as the home closing occurs. This is called a simultaneous closing.

We Buy Real Estate Notes and can facilitate simultaneous closings, call for more info on this. We can also help in setting the terms of the note so you get the best price.

Tax Benefits
When selling a home, under current tax law, if you lived in your home for 2 of the last 5 years, your capital gains will be exempt up to $250,000 (twice that if married). Otherwise, your capital gains will be taxed in the year that you collect the capital gains. If you will have significant taxable capital gains on your home sale, it may be very good for your tax situation to take back a seller carry-back note and spread your sale proceeds over several years, or postpone it for several years. Talk to your tax adviser.

Steps for Successful Seller Financing
1. Pull the prospective buyers credit report. You will need their permission, but always review a credit report on each borrower, it is a small expense.

2. Can they afford the home, job, income. If they cant afford it, or have a shaky job or income situation, a foreclosure will be much more likely.

3. Use a professional to draft the paperwork. Each state has many laws regarding real estate sales, contracts, and mortgages. Use an experienced attorney to draft the promissory note and mortgage or deed of trust.

4. Down payment - Sellers usually ask for 10-30% down payment to protect themselves in case the buyer stops making payments and the seller has to foreclose on the loan, and take the property back. The larger the down payment the more equity protection you as the seller have. The buyer will also consider how much money he has put down if he is in foreclosure and cant make the payments and wants to walk away from the house. Zero down is very little encouragement for a buyer, should he hit a rough patch.

5. 1st position or 2nd position - A first position note is much safer for the seller than a second position note.

6. Set the interest rate above current bank rates, to encourage the buyers to refinance down the road.

Also Read this Article: "Tips for Creating a Seller Carry-back Real Estate Note" at http://www.jmacfunding.com/articles.htm

Other Alternatives to Seller Financing

1. Land Contract / Contract to buy
2. Lease Option

This information can be useful to:

Home Sellers, Home Buyers, Note Buyers, Attorneys, Accountants, Financial Advisors, Real Estate Agents, Business Brokers.

Disclaimer:
I am not an attorney, nor a tax accountant, laws vary from state to state, and any advice implied by this paper should be checked with an attorney and/or tax adviser.

About the Author

James MacArthur is a real estate broker licensed in the State of California as well as an investor of real estate and debt instruments. We buy real estate notes and real estate contracts nationwide and make private and hard money loans on real estate in California. Feel free to contact me with any feedback, or if you are contemplating selling a real estate note.