Everyone starts with renting and many of us lives with the dream of owning our home. We will discuss here the advantages of renting versus Owning. At the early years of living on your own, most of us start with a room in a shared apartment or in someone else’s house. This is what we can afford initially. Especially at this stage, renting would be the best option for a few years. Since you have not established yourself, found your perfect job and the location you want to live, you should not yet think about buying. Renting provides flexibility. In most cases, you can move with a short notice as you may need to move around a bit until you settle. This is the way it works. Not many people land in perfect situation with inherited down payment in the bank. We need to build from the ground up. 

Even in the later stages you need to consider the cost of a closing home as well as cost of selling a home and buying another one. These are sizable amounts. In addition, selling your home and buying another one to move into is time consuming business. To most of us these things come during a natural process. We find a job to settle into, start enjoying our surroundings, find a life partner and even start a family. Then you start thinking about buying your ideal home.

The clearest cut advantage of owning your home is that you start paying towards the capital of the home as well as the loan interest. Mortgage loans allow you to pay for your home over a very long time period while replacing the rent with interest payments. When the time and the circumstances are right this is the way most people go. Until then no matter how much you want to own your home, renting still looks the better option.

There are external factors that speeds the process of moving from the rental property into your own home or hinders. The ideal scenario would be that you are ready to buy, the home mortgage loan interest rates are very low and the house prices just started picking up.

Filed under: Home Ownership and Prices by JS Lee
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In your home mortgage loan or refinance application process, one of the things that you alone will decide is the type of interest. Your application will be decided by the lender, but this is the decision that will determine how your interest rate payments will change over the years. You can learn or get advice on this, however your preferances, attitude to risk, interest rate change expectations and/or predictions will be the most important factor in this decision, as well as how long you would stay in your home.

You can read more on this subject on the home page of my website Refinance Home Mortgage Loan

Filed under: Mortgage Rates and Fees by JS Lee
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Fixed rate mortgages are very popular in many countries, but not so much in others. As the name suggest, these financial products fixes the mortgage interest rate for a long time to come at a rate that is agreed at the time of mortgage application. Fixing could be for 7 years, 15 years or for the life of the mortgage.

These products are extremely popular at low interest rate periods. Mortgage applicants would love to keep the rates they are getting as long as they can. Many homeowners either well aware of consequences of interest rate increases by experience or naturally cautions. They feel that they could sleep better at night knowing that whatever happens in the economy their monthly payments will remain the same. Fixed rate products may suite better to settled homeowners who will not be moving soon, because as a cost of fixing, banks would normally require early payment penalties. They are very easy to budget for. After getting a fixed rate mortgage homeowners can spend remainder of their income more comfortably. They do not need to take in to account of any interest increases. Should the interest rates go down further considerably, homeowner could always get a refinance. Savings a refinance mortgage loan offers could be much more than the early redemption penalties they have to pay. Normally as the time goes the amount of redemption penalty is reduced. For example, it could start with 6 months interest for the first 3 years and go down to 3 months for the remainder of the loan.

Similarly, these products are not popular in the high interest rate environment, especially if there is an expectancy that the interest rates will go down. However, some homeowners may be worried that the cost of borrowing will go up even further and still prefer fixing their monthly payments. These loans are not ideal for families who are not likely to stay in their home more than two years, due to high redemption penalties. Nevertheless, some lenders would allow the fixed rate mortgage to be carried over to new property. This may require the homeowner to sell his home and buy another one in the same time. 

Normally the fixed rate mortgages are more expensive to start with. Some mortgage applicants may not see their long term saving potential and may not necessarily be concerned with interest rate increases. They may decide to apply for an adjustable mortgage instead. The problem here that many new mortgage applicants is drawn to lower interest rates like a bee to honey. Their decisions may not be based on sound considerations, but based on cheaper is the better mantra.

Filed under: Mortgage Rates and Fees by JS Lee
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Mortgage products that have their interest rate adjusted with the interest rate changes according to set criteria called Flexible Rate Mortgage. These mortgage rates increases if the interest rates go up and decreases when the interest rates go down. Some product rates may be adjusted monthly, some yearly. In some counties, they are very popular (or banks mainly offer these products). They are called Adjustable Rate Mortgage as well.

In most cases, these loans have a low interest start and increases to banks normal lending rates which is mostly calculated as the base rates + a percentage charge. For example, if the bank base rate (or central bank base rate) is 1% and the lender charges 2%, the rate charged would be (1 + 2 =) 3%. When the base rate goes up to 2%, the mortgage interest rate charged to borrower would go up to 4%. Although banks may use different rates as their base rate (LIBOR, Central Bank Base Lending Rate, etc), the calculations are similar and set on the mortgage terms. 

These products may be popular at times of high interest rate periods with an expectancy of rate cuts. Since they follow the rate changes, they do not tie the borrower down with a fixed rate. These types of mortgage products are used quite well by banks. They may offer very low initial interest rates to draw and qualify as many customers as possible, knowing that they will be able to charge the rate they intend in a year or so. Adjustable rate mortgages normally have lower interest rates than the fixed rate mortgages. As they have a cheaper interest rate (lower monthly payments) to start with more people would qualify for these mortgages and they would be able to borrow more than a fixed rate deal allows. Maximum mortgage amount offered to an applicant is in most cases calculated based on what the applicant can afford with his/her income. That is why adjustable rate mortgage would allow an applicant to qualify higher mortgage amount. 

The problem with flexible rate mortgage is that applicants may be short sighted with their low interest rates and monthly payments. They may not pay much attention to where the rates might end up. Or they may be optimistic about their future earning potential. Some people somehow manage to see only the positive side of things. They would be laughing if the rates keep going down, but they may not be able to afford mortgage payments even the rate changes slightly.

The other problem is that the mortgage lenders may manipulate these rates. They may offer ridiculously low starting rates for a short period of time. Lenders do these promotional discounts to get more customers in their book and qualify even more customer. As the loan applicants qualify for larger mortgages, this makes it even more difficult for them to pay the increased monthly payments when the rates go up.

Filed under: Mortgage Rates and Fees by JS Lee
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You are already behind in your mortgage and you can not meet your mortgage payments due to major hardship or a change in your circumstances. Then you need to look into loan modification.

A home loan modification is much like a mortgage refinance in the way that allows you to find a more affordable mortgage payment for your financial situation. You can still look for a refinance, however if you have already missed some payments, it is unlikely that another lender will offer you a reasonable term. That is why looking in to changing the terms of your existing mortgage is more viable option.  

The administration’s push to keep more people in their home and the lenders desire to reduce the foreclosures helps many struggling home owners. Since it is your existing lender that will modify your mortgage the conditions varies. Nevertheless, there is a common loan modification qualification standard; a) You need to show them that you are experiencing considerable hardship due to the change in your circumstances. b) You need to be at least 3 months behind the mortgage payments. c) You need to own and occupy the property as a primary residence. d) Not filed bankruptcy

As I said earlier, it is your existing lender that will modify your mortgage. Therefore, you should contact your lender and advise them of your hardship and get more information. Each mortgage lender will have different loan modification programs and processes. It could be difficult to find the right information and advice in times. Seeking expertise to help your loan modification process can often save you a lot of frustration and money.

You will need to show the bank that you have had a material change in your financial circumstances. You have made every effort to make your mortgage payments and have been cooperative and responsive in working with them. You are not in any way purposefully defaulting to get a loan modification. You are willing to be open, honest, and provide all necessary documentation. You need to prepare a modification package to provide your lender with sufficient documentation to evaluate your ability to pay the new modified mortgage payment.

It is in the best interest of the bank to help you manage your mortgage. It is a better option for them than dealing with foreclosure proceedings. It is not only you. The current economic conditions placed many home owners in similar situation and the banks understand that they have to deal with it.

Filed under: Mortgage Loan Modification by JS Lee
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