Mortgage

Mortgage Loan

According to many real estate professionals, the massive development of the mortgage is impossible for the simple reason that most people in need of better housing conditions cannot pay the bank loan. This fact was the basis for creating new favorable conditions for mortgage lending. One example of a little scheme of home loan has become a so-called social mortgage loan. However, this tool is liked by no means.

Social mortgage is seductive, but has some significant drawbacks. As we know now, you will not wait 20 years to buy a house, so the waiting list, as well as people with low incomes are invited to purchase an apartment for their own money, but at below market prices. Moreover, some banks are going to propose the citizens such loans on the most favorable conditions – 7-8% per year (until the bank rate is about 14%) and up to 30 years. Now and then all the sums are calculated in U.S. dollars. However, you can buy an apartment which was built on the social and urban programs (a full-scale housing with a minimum level of comfort). In addition, a significant portion of the proposed flats on the social conditions of the mortgage are located in remote areas, outside the city and even in the near suburbs. The rare exceptions are areas of infill development in the field of demolition of dilapidated housing.

The saddest thing is that the vast majority of the inhabitants cannot afford to buy a house on their own. With regard to the capital, the cost of one ‘square’ does not fall below $ 4, as well as a steady increase in property prices. The number of people wishing to use credit, frankly, is not increased. The banks and developers are losing potential customers. To prevent this from happening, they invented all sorts of schemes that allow someone to buy a cheaper apartment. For example, the needy citizens invest in a newly built dwelling house (unless he has money for an initial fee, which shall be not less than 10% of the total cost). Of course, at the initial stage of construction of housing is almost 2 times cheaper than after the state commission assessed it. If the construction period will be met (and now houses can be built quickly), it is possible to offer real estate investors and low bank interest. The main thing that remained in the pace of monetary and trade relations is, however, the interest rate. The higher it is, the more profit. And sometimes it is no less advantageous to choose a steady rate, rather than a high one.

However, the question arises is if the income is formed due to a good turnover rate, what banks offer long-term loans up to 25, 30 years? It is unlikely that dealers and traders think about the quality of life of socially vulnerable population. Rather, in the first place they care about their own benefit, so it can be assumed that the real long-term loans are extremely rare and they are part of a portfolio of long-term bank assets.

In addition, the underpayment of ‘poor’ customers can offset the other buyers who purchase a house which is not on social programs. That is, relatively speaking, undrawn profits from the ‘state employees’ can be incorporated into the price of housing for the ‘privateers’ without publicity, of course. Accordingly, the interested parties – the developer and the bank – are working together to gain profits. Often developers are luring buyers or sellers with low bank interest rates, but did not immediately indicate the cost of additional mandatory services (consulting, design documents, use a bank account, etc.). And it turns out that in reality the customer is exposed to incidental expenses. This is largely to blame for unfair advertising (which is broadcasted everywhere). The primary task of modern advertising is to attract attention and interest, and then by hook or by crook to try to keep a client; it is a matter of experienced managerial schemes. Often, the informational in leaflets and booklets indicate only the benefits of a mortgage scheme, omitting information about its shortcomings…

And often, buyers realize that they are relatively honest cheated after signing the contract. It turns out that they had no idea what might be lurking in the nuances of the wording of one of the items they signed in the agreement for mortgage loan. And now let us return to the reasons why social mortgage is quite seductive, but has some significant drawbacks. In addition to the strict standard of housing, location of home, loss of place in the queue for free housing, the expense of their own funds, high fees for the loan and so, the future owner of the housing really has to prove a lack of family income. At the very least he is asked to sign a written confirmation of low levels of income from all family members. This is despite the fact that any creditor or bank is interested primarily in the borrower. Best loans are given to young, healthy, well-educated, working people who have no dependents and financial burden. In other words, not every poor person is in a position to take advantage of social mortgage; no one recognized the poor and this is not enough for an initial payment… However, despite some limitations, since 2005 (the ‘social mortgage’ had just started), 14 thousand households were sponsored by loans, more than two thousand of them were on the waiting lists.

The figures, of course, are not huge, but they allow you to judge it. We can say that, at least, some program of social mortgage lending came to a result! And this is the main argument in its favor! Although the loan does not mean the house-warming, it's still a real step on the path to it. Further softening of preferential interest rates may increase the number of members of the program. However, to make more accurate conclusions will be possible only after the creditors will receive the housing in their property.

Did you like this? Share it:

Published March 31, 2012 | By Morosanu Ancuta Elena | Posted in Mortgage

Mortgage Loan Refinance

The entire economy is based on credit relationships, which, in fact, are contemporary realities. Credit has become a major component of economic life and chained to it all the attention. Credit and non-payment of the loan are so closely related concepts that have become almost synonymous (at least for some of us). To solve this problem, the global market came up with various options and the easiest of them is the refinance. Of particular importance, mortgage loan refinance can sometimes be a life saver alternative (or better said, house saver).

Refinancing: when paying off debt, you need to re-register

In everyday language of economics, refinancing mortgage and any other loan is in fact a renewal of a loan with a change in its initial conditions, which for one reason or another, are difficult. If, however, we would express a more knowledge-intensive explanation, refinancing is an operation to obtain a new loan, which has a lower interest rate than the original loan. This difference in the percentage of loans, which can range from tenths of a percent to 5%, gives the borrower the freedom of financial maneuver by which he can raise money and still pay the original loan. The second loan is taken at another financial institution, after which the debtor repays the loan in the first bank and later concludes a credit agreement for milder conditions. Thus, the theory of mortgage refinancing is the real mechanism that all parties will benefit of: the first bank needs to mitigate the credit terms to the debtor, which may face the threat of default, and the second bank, which gets a new customer, albeit with a lower interest rate.

What is useful about refinance …

Thus, mortgage refinancing does not mean climbing in new debt to repay old ones ( this is how many interpret the term ‘refinancing’ ).This is the bank’s desire to use the client's own potential for maximum benefit. However, the reasons for refinancing a mortgage may vary. The main motive is, of course, the desire to reduce the monthly payments on your mortgage.

If the borrower may face with various financial difficulties (reduction of income, unfavorable foreign exchange and financial market conditions – especially for foreign currency loans), an increase in other expenses will require him to look for a way to reduce the amount, which he must regularly pay off for the loan. To do this, it is necessary to reduce the interest rate. In principle, it is possible that in the same bank to be new loan programs with lower interest and the client could make a request to be a part of these programs. However, most banks meet the waiver, which is understandable – why giving up this advantage in the contract? Therefore, mortgage refinancing, in most cases, involves conversion to another new bank.

What if refinancing is dangerous?

In other cases there is a need to refinance a mortgage loan driven from the desire to increase the client's mortgage repayment period. This happens either as a result of the revaluation of their own long-term financial prospects, either due to a sharp change in the situation in the property market – due to a significant increase in one-time cost of the selected residential real estate. It turns out that it is necessary to increase the amount of the loan that is most often associated with the bank’s need to maintain its financial balance. In this situation, mortgage loan refinance may come to help the client – the lower interest rate makes the procedure less painful. But here lies the trap.

Refinancing benefits are only visible when the interest rate is significantly lower, ie, by 2-4% in the global context. If the reduction amounts to tenths of a percent, it is completely overlapping with the increase of the total amount. And then, indeed, it turns out that a person receives a new debt to repay old ones. In addition, mortgage refinancing is always associated with additional costs: the design of the new agreement, the new real estate appraisals. These costs are estimated to range between thousands of dollars. Besides this, lending transactions involve a new procedure for evaluating the creditworthiness of the customer and what was acceptable in one bank may be deemed as bad by the other one. Therefore, the refinancing is not a panacea for all difficulties with mortgage payments and the final decision requires careful analysis and evaluation of financial capabilities.

Why not?

At first it would seem a very good bargain! However, restructuring loans is not in a hurry. The reasons are, first of all, the ignorance. People either do not hear about this service or simply have no idea how a mortgage refinancing works. And third, even though they know, they do not want to pass through a complicated procedure for the second time: to issue, register the mortgage, pay all fees and restructure the insurance on the other bank. However, if these shortcomings are over passed, refinancing is a real financial benefit, because the difference in rates can be of at least 2-3%. If the difference is less, then refinance is unprofitable, as the customer not only pays for this service, but also spends a lot of effort and time.

The second reason is the reluctance of borrowers to refinance their loans. Thus, only a few thousand people who took a mortgage 3-5 years ago, when rates in comparison with the present, were quite high, are interested in this procedure. With this in mind, the new service is a stepping stone for the future. There is also the issue of unsecured period when, due to the complexity of the procedure of re-mortgage. Bankers are forced to hedge their risks through the introduction of higher rates for the period of re-registration, as well as selected borrowers. This further narrows the customer base. And finally, the inability to obtain information from credit bureaus. Now, while the credit bureaus operate only at reception desks and banks have to trust the paper document, which the borrower has handed over.

Did you like this? Share it:

Published March 28, 2012 | By Morosanu Ancuta Elena | Posted in Mortgage

Mortgage Loans

Despite the fact that the materials on the mortgage loans are pretty abundant and every media outlet is committed to a more or less regular basis to educate its audience on the subject, 80% of those have vague ideas about what a mortgage loan is. Moreover, there were acquired speculations, misconceptions and myths that mortgage brokers have to deny. There are real problems that interfere until the mortgage will become a more popular and accessible type of loan. What are the most common misconceptions?

Mortgage – a rip-off. Many believe that mortgage is a trap, a deception. People responsible with loans will calculate the interest on your mortgage and you will see quite large numbers. For instance, you take credit of 300,000 dollars and after 20 years you return 700-800 thousand dollars. However, in reality it is just a financial and economic confusion of citizens. They do not consider such thing as value of money from a time perspective. It is one thing to have 300,000 dollars today and quite another in 20 years.

Let us think. Today you can get a loan at 11.5% interest rate. The figures will surely double in the following 20 years. Since 2000 property prices are growing at 25-30% per year. And this year, prices increased by 5-8% per month. If we assume that the growth continues, they will grow up to 50%! So it turns out that to take a mortgage for 20 years now is extremely profitable. If you overpay of the loan 2 times, then the price of your apartment will increase 6 or more times!

Mortgages are available to all, it is a nearly free credit. There is a category of people who believed that the payments on your mortgage are less than the payments on any other type of credit. The question: ‘How much are you supposed to pay?’ is on everyone’s lips. First assess if you are capable to pay and only then apply for a mortgage.

Insurance for the mortgage is very expensive and unprofitable. This is a waste of money. When making a mortgage, a life insurance policy is a prerequisite for the conclusion of the agreement. The requirements of the bank are clear: if they are going to give you credit, the bank must be sure that you will repay it. In 20 years anything could happen: the borrower can get sick, lose the ability to work, or, God forbids, die. In such cases, the insurance company will assume responsibility for payment of the loan. Perhaps the distrust in the insurance companies is mainly due to our mentality and perceptions. People do not believe that under certain circumstances, the insurance company will really help them and this skepticism is rather difficult to overcome. What if you lose your job? Banks, when estimating financial capacity of the borrower, pay attention to his professional experience, education, presence of any additional qualification skills in order to make sure that people will quickly find another job.

I have passed the age! The average age of the majority of mortgage borrowers is over 30 years. Probably because they have fewer stereotypes and they are not afraid to take a mortgage loan. Older people are more susceptible to all sorts of fears about the mortgage. Of course, with mortgage lending, there are certain restrictions on age. The older the borrower has alleged, the harder it is to get a loan. But there is a specific set of occupations, without regard to age, if the bank is satisfied with a person’s steady income. For example, a woman over 60 cannot easily obtain a loan for 20 years. If she receives revenue from patents on inventions, they have it for life and will be inherited by their children and grandchildren. In fairness, let us say that not all banks would even consider this. But every day lenders are all loyal to their clients.

Selling an apartment on a mortgage is dangerous. It is better to wait. At a time when prices are rising rapidly, some salespeople are afraid to deal with buyers who are taking mortgage loans. They do not want to wait for the money that will be handed in only after the state registration of transfer of ownership. This triggered a stereotype that refers to the fact that money must be registered within a month.

Moreover, the coordinated work of the bank and Real Estate Company may be shortened to 4-5 days. Of course, there are difficulties with registration of a mortgage loan and there is something to work on both banks and real estate companies. Other very large delays in obtaining credit are the standard process that may take up to 3 weeks. It is almost impossible in an environment of rising prices. This includes the assessment of the client's solvency, the study documents for the apartment, the work of the appraiser, insurer. Thus, a key criterion when choosing a mortgage program is not the interest rate, not the presence or absence of the entry fee from the client, but the period of consideration of the loan and the ability to quickly obtain it.

I will style a mortgage. Provided that you have economic education and you are able to maintain your job for the years to come, you can try to walk on the banks and look for the most appropriate mortgage program. Now quite a great number of banks are working with a mortgage and several programs. It is difficult, almost impossible for the programs to be constantly modified and revised to keep up with all the non-specialists. Choosing the best option that would fit for you is very difficult. Therefore, it is necessary to contact the experts who monitor the whole situation on the market. There are lots of nuances that must be considered in the selection of an optimal program: financial capabilities and desires of the client, the technology of making a deal on mortgages, loan processing times, etc. This should only be dealt by professionals!

Did you like this? Share it:

Published March 27, 2012 | By Morosanu Ancuta Elena | Posted in Mortgage

Home Loan Calculators

Before you finally decide on the choice of mortgage program, you must calculate yourself how much credit can you expect to be granted in view of your income, as well as necessary funds for the monthly payments on the loan. Home loan calculators are just the tools that allow you to calculate the size of future payments on the loan, depending on your income, the loan term, its size or interest rate. When working with a mortgage calculator you must begin by entering the information about the loan, including the potential terms of the loan, interest rate and loan amount. It should be remembered that many mortgage calculators do not ask you to enter the amount of your wages or other additional sources of income.

First, the calculator will tell you a monthly amount of the loan, as well as the total amount you repay during the whole time. Next, the calculator will show you the amount of the interest rate, as well as the total amount of tax deductions, deductions for insurance and the date of repayment. Many calculators can provide information illustrated in graphs and tables (this is surely a more convenient approach).

Another advantage of using mortgage calculators is you have the possibility to compare the analysis of several types of loans. In fact, you can easily use the mortgage calculator to compare different loans offered by several companies or banks. Typically, mortgage calculators do not require payment for usage.

Most of the major banks offer online calculators to help you get a clue on mortgage payments. These calculators usually have three drawbacks: they are configured only for a certain amount of interest rate adopted by the bank, making it impossible to use them to calculate the loan under a different annual percentage; they are prompted to enter some information not relevant to the calculation formula and just confusing the user; they do not provide information on how much money you will pay off in reality.

In order to calculate monthly payments using the mortgage calculator, the borrower must have a general idea about how to repay the loan. Today, most banks offer their customers the possibility to repay loans in annuity payments. Borrowers often do not suspect that there are other types of payments on the loan, other than an annuity. Furthermore, there are mainly used two types of annuity payments, equal and differentiated (decreasing). The borrower who chooses the annuity method of repayment has to pay each month the same amount and thus can plan his budget for the next few years.
There are also other ways to repay the loan with a fixed and floating interest rate based on the conventional index, which is the basic guideline of the market. The best-known index in the financial market is LIBOR (London InterBank Offered Rate). For most of the markets, this figure has a very indirect relationship as it is primarily related to the situation of global markets. However, the majority of banks use a fixed interest rate.

In addition, the borrower should be aware that the calculation does not take into account additional payments to the bank – for example, a percentage of the cash deposit, insurance since the size and the presence of these payments may vary. This calculator is presented for an approximate calculation of credits. For the user to obtain more accurate data, he should contact the credit institution to which he is going to arrange a possible house loan.

According to experts, for an accurate calculation is better to use more complicated versions of home loan calculators – the ones that take into account commissions. These mortgage calculators allow you to change settings in all cells of the borrower and make the necessary data, shows the amount of overpayment on the loan. It can also easily calculate the effective rate. There are also calculators to help you calculate the maximum loan amount based on the borrower's monthly income and his family’s. There are other types of calculators, where you can calculate payments based on the value of the house.

Each year the sale of real estate and inherently the demand of mortgage loan are becoming more popular. At current prices, it is more difficult to accumulate the required amount of money to buy an apartment or other real estate. But even if you have the money, it is often more advantageous not to withdraw them from circulation and buy an apartment with mortgage. Not surprisingly, mortgage and mortgage lending captures much of the real estate market.

Elementary loan calculators can now be found on many sites, especially on sites belonging to banks and brokers. However, they usually deal with calculation of the monthly payment and the loan amount based on the amount of your income, but does not allow a full analysis of all parameters of the loan. For example, you do not have enough income to buy the desired apartment. What can be done to increase the amount of the loan without breaking the limit for the monthly payment? How will this aspect affect the parameters of the loan? Does it make sense to fight for a slight decrease in loan rate? What do you win by finding a bank that gives a credit with a smaller rate? The answers to these questions can only find an answer if you visit an expert, because they depend on certain factors.

However, the calculation of mortgage loans in the current environment represents another ball of technical difficulties – different currencies with which to deal. For example, the price of flats for sale may appear in Euros, the loan is more profitable in dollars. A professional mortgage calculator can specify all amounts in different currencies and will convert different data so as the borrower can easily understand the real value. You can also calculate your monthly mortgage payments based on the known price of the apartment. Or, on the contrary, knowing the approximate size of the amount you can pay on a monthly basis.

Did you like this? Share it:

Published March 21, 2012 | By Morosanu Ancuta Elena | Posted in Mortgage

Jumbo Mortgage Loan Rates

In America the Jumbo loan rates are considered the amounts that are coming above the conventional limits of a classic loan. This term was settled up by two enterprises, respectively Fannie Mae and Freddie Mac, that are both sponsored by Government. These enterprises are also establishing the limits of a mortgage that they can purchase from a specific lender, in order to free some liquidity and to allow to lend a higher number of mortgages. When the limits established by Fannie Mae and Freddie Mac are not covering the full borrowed amounts, the loan is known as a “jumbo mortgage”. In general the interest rates applicable on jumbo mortgages are higher than in the case of a traditional mortgage loan.

In 2010 the limit settled for a jumbo mortgage loan was of $417.000 for the majority of the American states, excepting Alaska, Guam, Hawaii and the Virgin Islands, where the limit was of $625.500. After the Housing and Economic Recovery Act was adopted in 2008, the limits increased to the amount of $729.750, but in October 1, 2011 this limit was reduced to $625.500. Lenders are using these limits as theoretical, as the mortgages above the limit of $417.000 are still attracting higher interest rates.

The Jumbo mortgages are used in general for purchasing high priced homes, for which higher amounts are needed than in the case of a normal loan. The jumbo mortgage rates are redefined each year, and therefore these are subject to changes. The higher interest rates that are applicable for the jumbo mortgage loans can be justified by the fact that Fannie Mae and Freddie Mac are purchasing the bulk of residential mortgages from various lenders, and are reselling them to some professional investors. These are traded on a specific market in a similar mode the way stocks are traded, but the market is a smaller one. Therefore, the applicable interest rates are higher, for making the jumbo mortgage loan more profitable. The difference between the two jumbo mortgage rates, called the spread, is depending on the risk price currently evaluated by the market. In general this can fluctuate between 0.25% and 0.5%, but in some special situations it can even exceed 1.50%.

As the jumbo mortgage loans are carrying higher interest rates, consumers can use some strategies for avoiding the jumbo rates. In general the jumbo rates are higher with a quarter of a percent that the traditional consumer loans. When the amounts to be borrowed are closer to the jumbo mortgage loans limits, consumers can use some solutions for avoiding the jumbo status. One solution comes from the mortgage companies that can approve for the applicant two loans at the same moment. The first loan will be the first mortgage, and for the remaining difference the applicant will obtain a second mortgage that will be smaller, but will work in parallel with the first one. Even if the interest rates to be paid for the second small loan will be a little higher, this can be paid back in short time. Managing to avoid the jumbo mortgage rates will surely justify the costs associated with the second loan, that for long periods of time can bring important savings.

A Jumbo mortgage loan is more expensive mainly due to the high risk assumed by the lenders. For example if a jumbo mortgage loan defaults, it will be more difficult to sell an expensive residence in short time. This is because the prices of luxury residences are more sensitive to the highs and lows of the market. This is the main reason for which the lenders prefer to require applicants to provide a higher down payment.

Refinancing a jumbo mortgage loan can be possible, but will involve higher closing costs. Some of the lenders are offering to jumbo refinancers the possibility to extend or consolidate the agreement, and due to this they will no more have to pay the mortgage tax for the principal balance. In other situations the insurance companies can offer important discounts of up to 50%, that is required by the law for those that are refinancing within periods of 1 to 10 years. Those interested in applying for a jumbo mortgage loan, can obtain relevant information and advices from a professional with experience in dealing with jumbo mortgage loans.

Did you like this? Share it:

Published March 13, 2012 | By Ciubotaru Nicoleta | Posted in Mortgage

Recent Posts

Mortgage Loan

Mortgage Loan Refinance

Mortgage Loans

Home Loan Calculators

Jumbo Mortgage Loan Rates

Search this website

Comments

Categories

Archives

Calendar

May 2012
M	T	W	T	F	S	S
« Apr
	1	2	3	4	5	6
7	8	9	10	11	12	13
14	15	16	17	18	19	20
21	22	23	24	25	26	27
28	29	30	31