In today’s economy many consumers are searching for ways to keep more of their hard earned money.

One way to make this possible, is to secure a fixed mortgage loan. Why can a fixed rate mortgage loan be a viable solution? The reason for this is that it helps prevent you from falling prey to a volatile economy and interest rates. For example, if you have an adjustable rate mortgage (ARM), and interest rates start to raise, chances are you can expect to see your monthly mortgage payment increase. If you actually miss a mortgage payment, you will have more accrued interest on your loan, and this can increase your loans principal balance…this is called negative amortization. As you can imagine, this is not a favorable situation for your loan as a consumer, or your wallet.

So how can you secure the best fixed rate mortgage to meet your needs?

Here are a few tips that can be helpful as you secure your next mortgage loan.

1) Don’t be fooled by hype and empty promises from mortgage lenders.

• If your mortgage rate and terms sound too good to be true…they probably are.

2) Don’t feel pressured to instantly lock in the first rate you see.

• Interest rates fluctuate. You may want to ask your lender to put a temporary mortgage lock in place for
  a period of time, so that there is opportunity to see if rates will go down further, allowing you to save more of your hard earned money.

3) Make sure you read the fine print of your mortgage loan terms.

• There may be hidden fees and penalties within the fine print of your loan documents that may easily prove that you are not getting the best fixed rate mortgage solution for your needs. Don’t fall for empty promises that non-trustworthy lenders may present you with. It’s in your best interest to understand the terms of your mortgage loan.

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Best Fixed Rate Mortgage

Author: T Crowley
Article Source: EzineArticles.com
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Leaving Fixed Rate

With so many investors and purchasers soon reaching the end of the fixed rate mortgage deals that they entered into two years ago, the remortgage market is looking as buoyant as ever. Although there may be plenty of options out there, the financial climate has changed somewhat since these fixed rate deals were initially offered and many owners may find themselves facing a huge and often unmanageable jump in payments.

Interest rates have risen considerably in the last 2 years. At this time in 2005, the Bank of England interest rate was 4.5%; it is now 5.75% and some experts believe it will hit 6%, before the end of the year, 2007. Those who entered into fixed rate deals in 2005 have been largely untouched by these rises, as they are still paying a mortgage based on the 4.5% figure. However, anyone who had a variable rate mortgage will have felt the pinch, in recent times, and may have had to readjust to every rise as it happened. Any borrower now reaching the end of a fixed period is likely to have to deal with the whole 1.25% interest rate rise, in one go, making a huge difference to the monthly payments going forward.

How Much of a Difference?

As borrowers prepare themselves for the worst, it is important to remember that not everyone will suffer the same degree of ‘rate shock’. Borrowers who took out a fixed rate plan back in 2001 may not suffer that much as rates were at 6% in January of that year. But, by the end of the year, this rate had dropped rapidly to 4%. One broker commented: ‘If you are just coming to the end of a five-year fix, you will not see much of a shock, as rates now are roughly back where they were when you took out the loan…And there is a good chance that your income has gone up in that time, making your loan more affordable’.

How Can You as a Borrower Mitigate the Situation?

The key to dealing with this potential crisis is to prepare months in advance. When a fixed rate comes to an end, the lender will typically put you back on to their standard variable rate. With SVRs averaging around 7.75%, this can induce panic and prevent borrowers from adequately surveying their options. By planning ahead, a borrower can switch to a better deal immediately at the end of the fixed rate period, thus preventing even a single month of payments at the higher rate.

Fixed Rate or Not?

Most borrowers who have been on a fixed rate mortgage will be keen to stay on a fixed rate. But be warned; this is not necessarily the most cost effective option for the future. Whilst it does offer a degree of security and is excellent for the purposes of budgeting, bear in mind that fixed rates will not alter if the interest rates go down, during the borrowing period. Currently, fixed rate mortgages are being offered at around 6.25%. Therefore, unless interest rates trump 6.25% and continue to rise, there will be no benefit to the borrower from being locked into this rate.

Anyone who can afford to take the risk that interest rates will rise above 6.25% would be wise to consider the tracker rate mortgages that are commonly available. Best rate trackers are available at around 5.45%. Even if rates were to go over 6%, they would have to remain there for some time before anyone on a 6.25% tracker started to become better off.

Another issue to consider is financial flexibility. Once a fixed rate mortgage has been entered into, there are often very draconian penalties for anyone wishing to switch mortgages or to redeem early. With a tracker mortgage, there is always the option of moving to a fixed rate if that seems more suitable, some time in the future. Of course, penalties may still be imposed, but they are unlikely to be as harsh as those attached to fixed rate deals.

Financial Difficulty

Many people nearing the end of a fixed term period may well be in the uncomfortable position where they simply cannot afford ANY type of new loan whatsoever. If this is the case, all is not lost. One of the available options which can work wonders at reducing your monthly payments is to extend the term of the loan. This will mean that the payments are less on a monthly basis but, in most cases, will result in greater overall debt, as the interest is being paid over a longer period of time.

If you are in dire straits, it may be worth considering an interest only mortgage. This type of mortgage will, of course, reduce your monthly payments, but can cause longer term financial problems. By taking an interest only mortgage, none of the capital is being paid off. If you continue with an interest only mortgage, at the end of the term you will be faced with having to find a large lump sum, which may not be possible.

Anyone looking at an interest only mortgage should have some longer term plan in mind. For example, most interest only mortgages will allow overpayment, when you have extra cash; this allows borrowers to make inroads into the capital amount due as and when they have the financial means.

Similarly, it may be possible to take an interest only mortgage for the time being and then opting for a fixed rate repayment mortgage, when the interest rates drop (which is predicted to happen in the foreseeable future). Furthermore, by taking out an interest only mortgage, it will mean that borrowers keep a clean credit rating, thus allowing them a much better choice of mortgages, in the future.

Flexible Mortgages – The Way Forward?

Just as fixed rate mortgages were all the rage two years ago, it seems flexible mortgages may be about to take their centre stage place in the coming months. Today’s borrowers are not as sure of the property market and are much more reluctant to lock themselves into any sort of deal, no matter how good it may look on the face of it. Interest rates are no longer a certainty and taking a fixed rate mortgage may be seen as a risk that borrowers are unprepared to take. Many people firmly believe that interest rates cannot continue to rise and will begin to fall, in the near future. In this case, entering into a fixed rate now would be a clear mistake.

As a possible alternative, borrowers are now looking more towards flexible mortgages as a way of financing their properties. Crucially, many flexible mortgages allow overpayments, underpayments, payment holidays and, in certain circumstances, a borrow-back facility. This allows total flexibility in the face of potentially changing economic conditions. Borrowers are looking to take back control of their finances and want to make their own financing plans. For these individuals, flexible borrowing may provide all of the important solutions.

Summary

Anyone approaching the end of a fixed rate deal needs to keep their wits about them. Shop around early and be prepared to take a fragmented approach to sorting out your long-term financing. Most experts predict that interest rates will drop in the coming 2 years. Therefore, a fixed rate mortgage may not necessarily be the best way to proceed.

Fundamentally important is the need to keep a clean credit score. With so many lenders feeling the pinch from the credit crisis, lending criteria have become much stricter. Borrowers with any ‘black marks’ will find themselves paying a lot more than they bargained for. Worryingly, it has been estimated that approximately 80,000 people who are currently classified as sub-prime will be ending their fixed rates by December 2008.

Make sure you know where you stand and that you act NOW to deal with any upcoming mortgage rate changes!

Author: Paul Giles
Article Source: EzineArticles.com
Provided by: Canada duty

In today’s housing market, it has never been so difficult to secure financing The end of the rainbow is knowing who to consult with and when the optimal time is to start the process.

When homes loans were readily available for any Ted, Shelly or Henry and easier than making apple pie, people could come home feeling relieved on the signing of their new mortgage. However in the current real estate market with skittish banks, all paths for locating a home loan come with their own guidelines and limitations.

The majority of banks have adamantly fastened their lending guidelines so tight and trimmed down their offerings it is tough. There are some banks that will not use the services of mortgage brokers, due to some bad companies for pushing bad loans during the boom years. As a result, this makes securing a home loan more than just a few hours one day retrieving documents and becoming approved. If a borrower wants to get an attractive rate, they will need to research at a minimum the following sources.

Search the Internet

Searching online for a mortgage loan has changed from the days of almost everyone qualifying for a home loan. At some websites, you can browse without giving your identity and receive specific rates for your situation. One must remember that most of these sites are referral services, so in the end you’ll more than likely complete your transaction with a bank or mortgage broker.

Pros: If you know the type of mortgage loan you want, the internet should be your starting point; understanding the current rates and closing costs will assist you in knowing if you’re getting a competitive rate when you discuss your situation with a mortgage broker or bank representative during the process.

On the other hand, if you are totally new to the process and unsure of what type of mortgage you need, you’ll want to discuss everything with an actually loan officer as soon as you can. Watch out for site that want your private personal information; websites which ask for your Social Security number and address right away. They may access your individual credit report, which could affect your score even if you don’t get a mortgage with them. Additionally, make certain that all the costs involved are properly disclosed from the company you are dealing with when you receive a rate quote. If not, you may be unpleasantly surprised as you review the closing documents from the lender.

One way to get the best rate and terms is when inserting your information into the online mortgage application; do not approximate your salary or income, credit history score, or other significant data. Information submitted inaccurately will probably get you an inaccurate rate quote as well. Garbage in equals garbage out.

Get a mortgage with the bank directly

Banks are still lending these days, although with the utmost precautions. People who want a conforming loan which is a home loan below $417,000 in all areas, except high-cost areas, since some banks and lenders ceased taking applications on jumbo loans.

Another way to get the most attractive rate available is to do business with a loan officer who works mainly in the local housing market and may have greater access to niche programs for you at a lower rate than a company located somewhere else.

Consult with a broker

Mortgage brokers may have made lots of questionable loans at second glance during the good times. But a good and trusted broker can guide borrowers more thoroughly than you could do on by yourself. If you’re actively searching for a jumbo mortgage loan or investment property financing, or your situation will not fit into the conforming category, a broker will have or find lenders who do approve loans such as yours. There are some brokers which specialize in certain niches and that is just why you may need to close your deal.

Author: Ray Heinson
Article Source: EzineArticles.com
Provided by: Excise Tax

Today’s mortgage lending environment is becoming more and more difficult for borrower to get approved for mortgage refinance traction. Since the housing market began to turn lenders have started to tighten up their underwriting standards making it harder for borrower to get approved. Fortunately, for veteran borrowers they have two very flexible transaction options to ease the approval process through their own VA home loan program.

VA Interest Rate Reduction Loan (IRRL)

The 1st option is something called a VA Interest Rate Reduction Loan (IRRL). This is a loan where the veteran borrower already has a VA home loan and would like to refinance down to a lower interest rate given the current market interest rates. The amazing benefit of this loan is that it’s incredibility easy to get approved. There are no appraisals required so value is not of a concern. There are no minimum credit scores; however, some investors and large banks have started requiring minimum credit scores recently.

The paperwork needed to process these loans is minimal at best. There are no paystubs, W2s, or bank statements required. One thing to watch at for is with such easy credit standards veterans become very susceptible to unscrupulous lenders that are more than willing to take advantage of borrower. The majority of my previous clients are receiving unprecedented amount mailers that make it seem that VA rates are lower than that actually are. So please watch out for your closing costs when proceeding with caution with such a transaction.

Summary of the VA IRRL

· VA to VA loan rate and term rate reduction
· Appraisal, income docs, or asset docs are not required
· Verification of the past 12 months of mortgage payments, and minimum credit scores may be required
· 1 or 2 skipped mortgage payments
· Up-to 2 discount points may be rolled into the loan

Cash out or rate and term VA refinance

The 2nd option is what is considered a full VA refinance transaction with an appraisal, and all of the other normal documentation i.e. paystubs, W2s, ect. The nice thing about this loan is that it allows borrower to refinance all the way up to the current value of the veterans home. That’s right 100% financing on refinance transaction for not only borrowers who are looking for rate and term refinancing coming out off an ARM or another conventional loan but also for cash out refinance transactions as well. So veterans that want to consolidate debt, do home improvement projects, or for other various reason are allow. In addition, to this the VA loan will allow VA jumbo loan refinance transactions that are over $417,000 or some in high cost areas. But another word of warning the guidelines for VA jumbo refinance transactions can get very complicate so please make sure your loan officer is very familiar with VA loan or you could really get yourself into some problems.

Summary of VA Cash out Refinance

· Cash out refinances up to 100% of the value of the home established by a VA appraisal
· Refinance out of ARMs or other mortgage like conventional & FHA loans
· VA jumbo refinance loans are available but proceed with caution
· No monthly mortgage insurance unlike most mortgages without 20% equity.

Author: Josh Klenda
Article Source: EzineArticles.com
Provided by: Import duty tariff

Balloon mortgages are becoming increasingly popular as more and more applicants select them as an option to purchase a home without having to make huge sacrifices every month to afford high monthly payments. The applicants can save all through the life of the loan variable amounts every month so they can afford the final lump sum payment of the balloon mortgage when the loan is due.

Low Monthly Payments

Balloon mortgages come with lower monthly payments because the installments are composed only of interests and a small portion of the loan’s principal. These loans are meant for those with a limited or variable income that cannot commit to high monthly payments and thus need lower installments that they can afford without having to make sacrifices.

The composition of the loan installments will be agreed between the lender and the borrower so as to suit the borrower’s needs and budget. The monthly payments can be lowered either by extending the loan repayment program or by reducing the percentage of principal that integrates the loan installments. In the last case, you need to bear in mind that the lump sum to be paid when the loan is due will thus be higher.

Control Over Debt Payments

The amazing thing about Balloon mortgages is that you can seize control over your payments. There are only minimum payments that you need to respect. These payments are, as explained above, integrated only by a small portion of the principal. This means that as long as you want your monthly payments will affect your income only slightly.

However, this also means that if you happen to have an extraordinary income one month, you can always destine a larger amount towards debt repayment and you’ll then be canceling a higher proportion of the loan’s principal thus reducing the lump sum you’ll need to put down by the end of the loan repayment program. You can do this as many times as you want and it is advisable to do so in order to avoid having to pay too much when the loan is due.

Risks Of Balloon Mortgages And How To Overcome Them

There is however, a problem with balloon mortgages that should be taken into account if you are considering such loan product to finance the purchase of a property. Since the monthly payments are low and there is a lump sum that needs to be paid by the end of the loan repayment program, there are chances that you can’t raise the money by the end of the program and thus you may default on the loan.

Yet, if for some reason you can’t obtain the money and you fear you will loose your property, there is an alternative that is sometimes even offered by the lender in order to avoid costly legal processes. You can always refinance your home mortgage loan balance and get a regular home mortgage with a new repayment program. This will of course imply that it will take longer for you to become debt free. Yet, you won’t lose the property to repossession.

Author: Joycelyn Crawford
Article Source: EzineArticles.com
Provided by: Creditcard Currency Conversion Fee

Buying real estate is undoubtedly considered to be a large financial burden. Mortgage lending serves as the best mechanism to finance private ownership of residential, as well as commercial property. A mortgage loan is a kind of a loan, being secured by real property. Just like the other loans, mortgages have certain interest rates, which are due to be paid over a particular period of time, typically 25-30 years. The main feature, that makes mortgages different from common loans, is that mortgage represents some kind of encumbrance on the property. In other words, certain restrictions are always imposed on the disposal of the property by the owner, for instance, unless the outstanding debt is paid fully, selling the property is prohibited. Another aspect, making mortgage loans distinct from other types of loans is foreclosing or seizing the property by the lender when certain circumstances, such as failing or detaining paying defaults, occur. Despite the mentioned, in some jurisdictions lenders are too limited in foreclosing pledged property, causing considerable slowdown in lending market development. Besides, mortgage loans in some countries may have non-recourse character-the creditor is authorized to seize the collateral without having right on any remaining deficiency, while common mortgage loans always set responsibility on the borrower to cover all remaining debts whether the net of costs, receiving from the sale is sufficient for paying the debt or not.

Depending on the type of collateral, mortgage loans can be residential or commercial. In both cases real estate is used as securing pledge of the loan, but in commercial mortgages the collateral must be represented by the business’ real estate rather than residential one. This kind of mortgage is usually referred by partnerships, limited companies, etc. and not individual borrowers. While the value of the property and thus creditworthiness of residential mortgages may be determined by certain ways-that is using the transaction value of the property, appraise or survive the value or estimate it, evaluation of the business creditworthiness is always connected with more complicated factors.

Mortgage loans may differ depending on various factors such as terms, payment amounts and frequencies, etc. But the interest rates are the most essential distinguishing factors. Depending on it, mortgage loans may be divided in two basic types-fixed rate mortgages and adjustable rate mortgages also referred as floating or variable rate mortgages. As interest rates remain the same for the whole term of the loan, fixed rate mortgages are attractive for borrowers taking long-term (mostly from 3 to 25 years) loans and willing to secure themselves from radical fluctuation of the rates. In difference with the rates and the principal amount of the loan that should be paid, property taxes or insurance costs may usually vary from one point to another.

In variable rate mortgages rates change adjusting up to different market indices. As the risk of fluctuating rates is partially transferred from the lender to the borrower, adjustable rate mortgages are as usual available in lower rates (approximately from 0,5 to 2 % lower) than in fixed rate mortgages. It’s also possible to opt for combination of fixed and adjustable rate mortgages setting a fixed rate for a particular period of time, after which the change of the rates is possible.

According to amortization periods, we can distinguish amortizing loans from a partial amortization loans or bullet loans. Amortizing loans don’t require paying the principal amount at a certain date; it must be paid step by step during the whole life of the loan. On the other side, a bullet loan is a kind of a lone, where the principal of the loan, sometimes along with the interest rates is due to be covered at the end of the loan term. Because of the large size of the last payment, bullet loans are also referred as balloon loans. There are loans with no amortization or with negative amortization. The latter means that monthly payments of interest rates are less than is due to the lender. The unpaid sum is later added to the principal amount of the loan.

Recently jumbo mortgages have gained much popularity on American loan market. A Jumbo mortgage belongs to so-called non-conforming loans, as they exceed the standard conventional loan limits, set by American federal mortgage association. Consumers, willing to purchase luxurious residences, price of which highly exceed the above-mentioned limits, can successfully refer to jumbo loans. But some negative aspects are connected with taking a jumbo loan. Rising risks on the lenders’ side is among them, as selling such valuable property in case of defaults may appear a serious obstacle for them. Because of the mentioned risks, interests rates are correspondingly higher on such loans.

This is a brief review of mortgage loan types, showing that the financial market is sufficiently provided with most kinds of mortgage loans in order to fit every possible requirement of customers and be in compliance with their demands.

Author: Alexander Anderson
Article Source: EzineArticles.com
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