lender at Best Mortgage

Lending experts are fifty-fifty on 50-year mortgages: some of them say as it can be risky, others say it’s good. Many men, many mind. Nevertheless, Statewide Bancorp in California is the first U.S. lender to introduce a 50-year mortgage. It means that a mortgage has been supersized. Half of first-time home buyers are 32 or older, according to the National Association of Realtors. If those buyers get 50-year mortgages and never refinance or make extra payments, they won’t pay off their loans until they’re in their 80s. Would they be crazy to get loans that amortize or pay off the balance over 50 years instead of the standard 30 years? No way. Getting a 50-year loan is a perfectly rational way to avoid an interest-only or payment-option adjustable-rate mortgage.  Such loans only make up a small fraction of the market as you are not building wealth through homeownership with a 50-year mortgage. Although lenders offer 50-year loans, almost every company has variations: some have a straight 50-year mortgage, some have a balloon payment and some have adjustments. The customer is probably going to be charged a higher interest rate to have the privilege of paying 20 years more interest. Basically, a 50-year mortgage is the program of last resort and borrowers should remember that there will be a day of reckoning and maybe a bad day of reckoning.

Most 50-year loans are actually adjustable 30-year loans that are based on a 50-year repayment schedule. They are called “50s due in 30.” If carried to term, the loans have balloon payments due in 30 years. Some lenders offer adjustable home loans that can be repaid over 50 years. Because it is adjustable, the fully amortized 50-year loan is definitely profitable. Some buyers simply like the idea of having five decades to repay their loan.
As for taxes and insurance, the 50-year loan would begin with a monthly payment of $3,674 compared to $3,826 for the traditional loan. After 30 years, borrowers with the traditional loan would own their homes free and clear. Those with a “50 due in 30” would face a balloon payment of $388,036.  It’s expected that half-century mortgages will rapidly gain popularity. The advantage of a 50-year mortgage is that there is a lot of sizzle, but not much steak.

A reverse mortgage (known as lifetime mortgage in the UK) is a type of loan available to seniors (62 and over in the US), used as a way of converting their home equity (the value of the home, minus the amount of any existing mortgages) into one or more cash payments while retaining ownership of the property (continuing to live there) and avoiding monthly payments. Repayment of the loan is deferred until the borrower is no longer living in the home.
In a typical mortgage, a home owner pays a monthly amortized amount; after each payment, the owner has more equity in the house. After a certain amount of time (typically 30 years), the mortgage will be paid in full and the property released from the debt. In a reverse mortgage, the home owner pays nothing each month and all interest on the debt is added to the lien on the property. If the owner receives monthly payments, then the debt on the house increases each month.
If a house gains significantly in value after a reverse mortgage is taken on it, it is possible to get a second and even third reverse mortgage to borrow against the increased equity that the owner now has in the more valuable house. But, in the United States a reverse mortgage must be the first and only mortgage on the property (if there is an existing mortgage, it will be paid off with some of the proceeds from the reverse mortgage). In the United States, if the property increases in value (and as the mortgagee ages and qualifies for more money), the reverse mortgage may be refinanced to borrow more against the increased equity.
To qualify for a reverse mortgage in the United States, the borrower must be at least 62. The borrower must pay off any existing mortgages with the proceeds from the reverse mortgage and, if needed, additional personal funds. There are no minimum income or credit requirements, and for most reverse mortgages, the money can be used for any purpose. A pending bankruptcy that has not been finalized may, however, slow the process. Some types of dwellings, such as lower-value mobile homes, do not qualify. Before borrowing, applicants must seek HUD approved counseling. The counseling is a free safeguard for the borrower and his/her family, to make sure they completely understand what a Reverse Mortgage is, and what the process of obtaining one is. Reverse mortgages are offered by some state and local governments. These “public sector” loans generally must be used for specific purposes, such as paying for home repairs or property taxes. The majority of reverse mortgages are FHA insured.
The amount of money that an individual homeowner can receive from a reverse mortgage depends on their age, the Federal Housing Administration (FHA) or Fannie Mae (FNMA) appraised value of the home, and the starting interest rate (effective upon closing/finalization of the loan). The location of the home may also have an impact. There is also a type of reverse mortgage for homes valued over the maximum Fannie Mae limit. These are called “cash” accounts, and are proprietary loan products. In a reverse mortgage in the U.S., a borrower can be paid in a lump sum, monthly (payment of advances), through an increasing line of credit, or a combination of all three. The money received (loan advances) are not taxable and do not affect Social Security or Medicare benefits.
The cost of getting a reverse mortgage from a private sector lender exceeds the costs of other types of mortgage loans from such a lender. There is an insurance premium of 2% of the loan and a 2% origination fee in addition to normal closing cost. Thus a $200,000 loan would have $8,000 in costs beyond the normal closing costs, which are typically some thousands of dollars. In addition, there is a monthly service charge of $30 that is usually added to the total amount of the loan.
The lowest cost reverse mortgages are offered by state and local governments. They generally have low or no loan fees and the interest rates are typically low or moderate as well. But, as noted above, they often have many restrictions, and many states don’t have such programs at all.
The most popular type of reverse mortgage in the U.S. is the FHA-insured Home Equity Conversion Mortgage (HECM) which accounts for 90% of all reverse mortgages originated in the U.S. As of December 31, 2005, a total of 195,418 HECM loans had been issued since the program’s inception in 1989. However, program growth in recent years has been very rapid. The National Reverse Mortgage Lenders Association (NRMLA) reports that 55,659 HECM loans were endorsed thru the first nine months of fiscal year 2006, an 83% increase over the 30,404 loans endorsed during the same period in the prior fiscal year.

There are different types of mortgage insurance. Private Mortgage Insurance (PMI) is default insurance on conventional loans, provided by private insurance companies. The Homeowners Protection Act of 1998 allows PMI to be canceled when the amount owed reaches a certain level, particularly when the debt is less than 80% of the home’s value, and automatically when the loan principal is less than 78% of its original cost. Mortgagee’s Title Insurance is a policy that protects the lender from future claims to ownership of the mortgaged property. It’s generally required by the lender as a condition of making a mortgage. In the event of a successful ownership claim from someone other than the mortgagor, the insurance company compensates the lender for any consequent loses. Mortgagor’s Title Insurance is a policy protecting the buyer/ owner of real property from successful claims of ownership interest to the property. The coverage usually is supplemental to a Mortgagee’s Title Insurance policy, and the premium is customarily paid by the buyer.
 To go into details, Mortgage Insurance is a financial guaranty that insures lenders against loss in the event a borrower defaults on a mortgage. In case the borrower defaults paying off mortgage, the lender takes title to the property and the mortgage insurer reduces or eliminates the loss to the lender. In effect, the mortgage insurer shares the risk of lending the money to the borrower. Mortgage insurance should not be confused with mortgage life insurance, which provides coverage in the event of a borrower’s death, or homeowner’s insurance, which protects the homeowner from loss due to damage from fire, flood or other disaster!
Mortgage Insurance helps home buyers to benefit and allows them to become homeowners sooner. First-time buyers can use a low down payment to help them afford their first home, or to purchase a more expensive home sooner. Home buyers can put less money down and gain significant tax advantages because they will have more deductible interest to claim. They can also use the cash they would have used for a large down payment for investments, moving costs or other expenses. Without the guaranty of mortgage insurance, lenders normally require a borrower to make a down payment of at least 20% of a home’s purchase price, which can mean years of saving for some borrowers. This large down payment assures the lender that the borrower is committed to the investment and will try to meet the obligation of monthly mortgage payments to protect his investment. With the guaranty of mortgage insurance, lenders are willing to accept as little as 5% or 10% down from borrowers. Mortgage insurance fills the gap between the standard requirement of 20% down and an amount the borrower can more easily afford to put down on a purchase. A low down payment also allows borrowers to purchase more homes than they might otherwise be able to afford. Without mortgage insurance, a borrower who has saved $10,000 for the required minimum 20% down payment would only be able to purchase a $50,000 home. With mortgage insurance the borrower could make a down payment of only 10% and purchase a $100,000 home with the $10,000! Or put $7,500 down on a $75,000 home and use the remaining $2,500 for decorating, investing, or buying a car or major appliance. Mortgage insurance broadens a borrower’s options. 
Usually borrowers pay for mortgage insurance. An initial premium is collected at closing and its monthly amount may be included in the house payment made to the lender. Here are some examples of flexible plans for borrowers:
1) Annuals - The borrower pays the first-year premium at closing; an annual renewal premium is collected monthly as part of the total monthly house payment.
2) Monthly Premiums - The cost is slightly more than traditional mortgage insurance plans but monthly premiums dramatically reduce mortgage insurance closing costs. Borrowers pay for mortgage insurance monthly as part of their total monthly house payment but only need to pay one month’s mortgage insurance premium at closing, rather than one year’s.
3) Singles - The borrower pays a one-time single premium (instead of an initial premium and renewal premiums). Since single premiums are typically financed as part of the mortgage loan amount, no out-of-pocket cash is used for mortgage insurance at closing.
These plans offer the choice of refundable or nonrefundable premiums. A refundable premium allows the borrower the opportunity to receive money back on any unused portion, in the event that mortgage insurance coverage is discontinued before the loan is paid in full. The cost for a nonrefundable premium is slightly less than that of a refundable premium, thereby giving the borrower a small savings. If coverage is discontinued on a loan with a nonrefundable premium, the borrower has no opportunity for a refund.

A Jumbo Mortgage is a mortgage with a loan amount above conventional loan limits. Jumbo Mortgages apply when agency (FNMA and FHLMC) limits don’t cover the full loan amount. Fannie Mae (FNMA) and Freddie Mac (FHLMC) are large agencies that purchase the bulk of residential mortgages in the U.S. They set a limit on the maximum dollar value of any mortgage which they will purchase from an individual lender. Currently, the 2006 limit is $417,000; $625,500 in Alaska, Hawaii and the U.S. Virgin Islands. This leaves a portion of the market to look elsewhere for placement. Other large investors, such as insurance companies and banks, step in to fill the need with maximum mortgage amounts going to the $1 million or $2 million range. The average interest rates are typically greater than normal for conforming mortgages and vary depending on property types and mortgage amount.
Fixed Rate Jumbo Mortgage is a type of jumbo mortgage with a fixed rate. The characteristics of a jumbo fixed rate mortgage are the same as a conventional mortgage. Depending on the loan amount however, certain loan-to-value restrictions may apply. Consult a qualified loan officer for details.
Adjustable Rate Jumbo Mortgages are those with adjustable rates. The features of a jumbo adjustable rate mortgage (ARM) also depend on the loan amount.
Balloon Jumbo Mortgages are another option for a borrower. The guidelines for this type of jumbo mortgage vary depending on lender/broker.

There are some higher risks connected with Jumbo Mortgages, mostly for lenders. This is because if a Jumbo mortgage loan defaults, it is harder to sell a luxury residence fast for full price. Luxury prices are more vulnerable to market highs and lows. That is one reason lenders prefer to have a higher down payment from Jumbo loan seekers. The interest rate charged on Jumbo Mortgage loans is generally higher than a loan that is conforming due to the slightly higher risk to the lender. IT can vary but is generally .25 to .5 % higher. If you need current jumbo interest rates, you can check www.bankrate.com
Jumbo Mortgage loan options are similar to traditional loan programs. They simply require a slightly higher down payment, of usually an additional 5% for similar program types. No money down programs are generally available, but instead require a minimum of 5% down payment for a jumbo mortgage. Because the loans are large, jumbo lenders frequently offer variable loan programs to the jumbo client. The risk of an interest rate increase can result in a large dollar amount increase. Generally adjustable rate mortgages are popular due to the low payment. It is expensive to refinance a jumbo loan due to the closing costs. Some lenders will offer the service of an extension and consolidation agreement, so that the person who refinances jumbo will not have to pay for mortgage tax again on the same principal balance. In other cases title insurance companies will offer up to a 50% discount often required by law for those refinancing within 1 year to 10 years. The largest discount is for within one year.
There are some recent trends to know. Due to Increased Housing Prices there is a large increase in the number of Jumbo loan applicants. Many consumers are becoming jumbo borrower when simply buying a modest ranch and not the typical luxury residence we often think of when a jumbo loan is needed. New loan programs are now offered to address the large increase in Jumbo Loan applications. Because of the steep housing value increases during the recent years (2000- 2006) mortgage loans are required in excess of the conforming limits in most big city areas or their suburbs. The new loans are either a 40 or even 50 year amortization, or an interest only option. They allow the jumbo loan borrower to pay the loan back over a longer period of time, or to defray any repayment of principal for a few years - thus saving them on their monthly payment. In some cases the banker makes a larger profit if the loan takes more than 30 years to repay.

Ameriquest is one of the United State’s leading wholesale sub-prime lenders. It is a private company, owned by Roland Arnall, founded in 1979, in Orange County, California, as a bank, Long Beach Savings & Loan. The bank moved to Orange County in 1991 and was converted to a pure mortgage lender in 1994, renamed Long Beach Mortgage Co. In 1997, the wholesale part of the business (funding loans made by independent brokers) was spun off as a publicly traded company, called Long Beach Mortgage. The retail part of the business was renamed Ameriquest Capital and remained private. In 1999, Washington Mutual purchased Long Beach Mortgage.
Ameriquest is best known for its subsidiary, Ameriquest Mortgage Company, which makes direct loans to customers. Its Argent Mortgage Company affiliate works with independent brokers. It has offices nationwide and more than 12,000 employees. Other subsidiaries are Ameriquest Mortgage Securities, Long Beach Acceptance Corp. and Town & Country Credit.
Ameriquest was among the first mortgage companies to use computers to search for prospective borrowers and to speed up the loan process and is widely known in the United States. It advertises widely on television, has blimps that fly over football and baseball stadiums and was even sponsoring the 2005 Rolling Stones’ U.S. tour. The home stadium of the Texas Rangers is now called Ameriquest Field.
Sub-prime lenders made $587 billion in new mortgages in 2004, up from $390 billion in2003, according to National Mortgage News. Ameriquest’s share of that is estimated at over $50 billion.
Among Ameriquest’s Mortgage Programs include 30 Year Fixed Mortgage which is a fully amortized loan (paid off at the end of the loan period) with a fixed interest rate for 360 monthly payments. The payments are paid monthly and are due the 1st of each month. The payment on this loan remains fixed at the original interest rate for the life of the loan.
Then 15 Year Fixed Mortgage which is also a fully amortized loan with a fixed interest rate for 180 monthly payments. The payment on this loan also remains fixed at the original interest rate for the life of the loan.
5 Year ARM (Adjustable Rate Mortgage) is a fixed rate for the first 5 years, and then it converts to an adjustable rate loan that can adjust every 6 months. The total loan term is 30 years.
3 Year ARM (Adjustable Rate Mortgage) is a fixed rate mortgage for the first 3 years and then it converts to an adjustable rate loan that can also adjust every 6 months with the total loan term for 30 years.
Ameriquest offers the following quick mortgage rates on 08/16/2006:
Product        Rate       APR  
30Year Fixed – 6.625%  6.938%
15Year Fixed – 6.259%  6.756%
5Year ARM   - 6.250%  7.447%
3Year ARM   - 6.125%  7.629%

For more thorough information you can visit www.ameriquestmortgage.com

C-Mortgage is a mortgage used to buy a commercial piece of property or commercial building. Basically, it’s similar to residential mortgages, but collateral is business property. Interest rates are usually higher than for residential property, the length of the loan can range from 5 - 30 years, and payments due monthly. A commercial mortgage is probably the best way to finance the purchase of buildings and land for business purposes or to expand existing facilities. It provides the most flexible and affordable finance solution. Commercial mortgages are specialized due to the fact that the lender has a legal claim over the property until the loan has been repaid in full. The most common commercial mortgage is a fixed rate loan, where the interest rate remains constant throughout the term. Loans can also be variable or capped. A second commercial mortgage is an additional loan on a commercial property secured behind that of the first lien.
There are some advantages and disadvantages concerning C-Mortgages.
Advantages:
1) Tax Advantage - Interest payments on your mortgage are tax deductible and are made with pre-tax money.
2) Better Cash Flow - A mortgage gives you access to capital that you would not normally have access to with minimal up-front payments and the flexibility to design a repayment plan that suits your needs.
3) Retain ownership - Instead of raising funds by selling a share in the property or the business to an investor, you retain complete ownership. The lender is only entitled to an interest return on its mortgage, not a percentage of ownership that an investor would expect. Also they can only exercise the right if you default on payment. You retain all the benefits of ownership in an asset that has the potential to increase in value.
4) Simplified Cash flow management - Mortgage schedules are pre-set, making cash management more predictable.
Disadvantages:
1) Collateral - The nature of a mortgage requires you to pledge the purchased property to the lender. If you default on the mortgage, the lender is able to foreclose the property and sell it to repay the outstanding money owed to the lender. Make sure when the mortgage is repaid; the lender is obligated to release the mortgage and is required to make available any government files acknowledging this release.
2) Defaults - The lender may define a variety of events that will constitute a default on the mortgage, including failure to make any payment on time, bankruptcy, insolvency and breaches of any obligations in the mortgage agreement. Try to negotiate an advanced written notice of any alleged default, with a reasonable amount of time to cure the default.
A commercial loan can either be set up as either secured or unsecured where a commercial mortgage will be secured against the property. Some business loans may also require personal guarantees which could involve the borrower’s house forming part of the security for the loan as well as the business itself.
Interest rates vary widely (usually between 1% and 7% over base rate) and usually a secured loan will be cheaper than an unsecured loan. Lenders do not often advertise set rates for business loans but will negotiate a deal specific for each case. The lender usually looks at monthly cash flow projections, personal financial statements covering at least the last 3 years, a detailed business plan, tax returns, company balance sheets and profit and loss accounts, a management profile and details outlining how the loan will be used. This is not always the case however and there are some reputable lenders willing to look at a case with adverse credit history, either personal or business. A business loan is likely to be a cheaper option for a company with overdraft facility and sometimes even if there are funds available, there may be tax advantages against interest payments when borrowing money rather than dipping into company funds.
Another commercial mortgage option is flexible commercial mortgage. It may be suitable if you want to do something different with your small business premises. You can buy a new building or release cash locked up in your existing one. For example, Barclays Bank offers flexible commercial mortgages and outlines the following benefits of this option:
1) You get quick access to funds
2) A commercial mortgage is flexible – you can use it for a range of purposes, from purchasing the premises to releasing the equity locked in your property for business uses
3) You can free up your cash flow by taking advantage of an initial repayment holiday of up to 24 months
4) You can cover against death and/or critical illness
Barclays also gives the main C-mortgage features:
1) Any repayment period from one to 25 years
2) Up to 80% of the valuation or property purchase price
3) Optional repayment holiday up to 24 months at the beginning of mortgage period (interest rate will be debited to the current account)
4) Choice of fixed or variable interest rates, with the option to change during the mortgage term
And in conclusion, terms and conditions to follow: The maximum amount of loan is 80% of the market value of the property, and is subject to normal credit checks. There are some limitations for certain industries. You must own and occupy the property that you are offering as security. A legal charge over your property will be required.

An adjustable rate mortgage (ARM) or variable rate mortgage is a mortgage whose interest rate will change periodically or in other words it’s a loan secured on a property (house) and its interest rate and monthly repayment vary over time. Adjustable rates transfer part of the interest rate risk from the lender to the borrower. They can be used where unpredictable interest rates make fixed rate loans difficult to obtain. The borrower benefits if the interest rate falls and loses out if interest rates rise.
Variable rate mortgages are the most common form of loan for house purchase in the United Kingdom and the United States but are unpopular in some other countries. Variable rate mortgages are very common in Australia and New Zealand. For those who plan to move within a short period of time (three to seven years), they are attractive because they often include a lower, fixed rate of interest for the first three, five, or seven years of the loan, after which the interest rate fluctuates.
Adjustable rate mortgages, like other types of mortgage, may offer the ability to repay principal (or capital) early without penalty. Early payments of part of the principal will reduce the total cost of the loan (total interest paid), and will shorten the amount of time needed to pay off the loan. Early payoff of the entire loan amount (refinancing) is often done when interest rates drop significantly.
Each year, borrowers who have taken a fixed rate mortgage have learned that they have paid much more for their mortgage than they ever should have. This is due to poor planning, being too conservative in their approach to a mortgage, or just not having mortgage professional to work with who they trust to give them honest advice and choices. There are advantages and disadvantages to an adjustable rate mortgage, but when a borrower acts correctly the advantages far outweigh any of the disadvantages which help them save thousands of dollars.

Among adjustable rate mortgage advantages are such points as:
1) The Rate is fixed for a period of time of your choice
2) Interest Rates run in Cycles – You can take Advantage
3) Rates and Payments are lower on Adjustable Rate Mortgages

The disadvantages, though, may carry a great deal of uncertainty. The Adjustable Rate Mortgages are difficult to be sold in pooled or security form as there are no standard clauses. It is difficult to find large quantities of anyone kind of ARM, as there is diversity in initial interest rates, index, interest rate reset frequency, periodic or lifetime caps and so on.
There’s always a way out. You don’t need to stick to any certain kind of mortgage. There are, for example, Hybrid ARM mortgages which are a combination of fixed and adjustable rates.
The name “Hybrid ARM” has become less used in recent years as they have become more of the standard rather than the exception. This term came about because originally all ARM’s started to adjust immediately, whether that be after the first month or after the first year. Banks began to offer ARM products that would stay as a fixed rate for a period of time and then become a true ARM and this is where the name hybrid ARM came from. The banks wanted to distinguish their new product from the original ARM that many shied away from because they wanted to have some certainty that their mortgage payment would stay steady for at least some period of time. We now know a hybrid ARM as 3 year ARM’s, 5 year ARM’s, 7 year ARM’s and although the name is still used in certain circles, most borrowers understand that they are getting a product that will only stay fixed for the number of years in the name. In comparison to a true ARM that adjusts immediately, you will pay higher and higher interest rates the longer the period of time that the payment will stay fixed.

In conclusion, an adjustable rate mortgage is a very powerful tool for saving money and you should always use anything in your advantage to get the best deal possible for yourself. However, as with anything powerful, when not used correctly it can be very costly as well. The very best solution is to get an honest mortgage professional, who will truly do the best thing for you, listen to the details of your situation and give you a clear understanding of the advantages and disadvantages of each choice.

Today more and more lenders are offering home equity lines of credit or second mortgage closed-end loans. These types of loans may offer a sizable amount of credit, available for use when you need and at an interest rate that is relatively low. A second or junior mortgage is a closed-end loan and provides you with a fixed amount of money repayable over a fixed period. This type of loan advances all funds at the time the loan is closed with no further advances. You might consider a traditional second mortgage loan instead of a home equity line if, for example, you need a set amount for a specific purpose, such as an addition to your home.
What you must do is look carefully at the credit agreement and examine the terms and conditions including the annual percentage rate (APR), the costs you’ll pay to secure the loan and prepayment penalties. The disclosed APR will not reflect the closing costs and other fees and charges, so you will need to compare these costs among lenders, as well as the APRs. Remember that the APR for a home equity line is based on the periodic interest rate alone and it does not include points or other charges. You can compare the closed-end “note” rate with the line of credit APR and their other charges.
Let’s suppose you made up your mind to refinance. So, if you are a homeowner who was lucky enough to buy when mortgage rates were low, you may have no interest in refinancing your present loan. But perhaps you bought your home when rates were higher or perhaps you have an adjustable-rate loan and would like to obtain different terms. When can your refinancing be worthwhile? A general rule is that refinancing becomes worth your while if the current interest rate on your mortgage is at least 2 percentage points higher than the prevailing market rate. This figure is generally accepted as a safe margin when balancing the costs of refinancing a mortgage against the savings. If you finally decided to refinance you must know that there are costs to pay for second mortgages. Those are:
1) Application Fees that are charged by your lender and which cover the initial costs of processing your loan request and checking your credit. 
2) Loan Origination Fees and Points are charged for the lender’s work in evaluating and preparing your mortgage loan. Points are prepaid finance charges imposed by the lender at closing to increase the lender’s yield beyond the stated interest rate on the mortgage note. One point equals one percent of the loan amount. For example, one point on a $65,000 loan would be $650. 
3) Other Closing Costs  are listed below with average costs:
Appraisal Fee $ 75 to $300
Survey Costs $150 to $400  
Home Inspection Fees $175 to $350  
Lender’s Attorney’s Fees $75 to $200  
Title Search & Insurance $450 to $600  
Homeowner’s Insurance $300 to $600  
Mortgage Insurance (one year + 2 months premium depending on amount and type of loan) 
4) Prepayment Penalty on your present mortgage could be the greatest deterrent to refinancing. Prepayment penalties are forbidden on VA and some other types of loans. Second mortgage loans cannot have a prepayment penalty imposed on loans refinanced by the same creditor, accounts paid by the proceeds of credit insurance, or if paid after three years. 
5) Escrowed Funds are funds sufficient to pay for taxes or insurance that is coming due shortly.
A homeowner should plan on paying an average of 3 to 6% of the outstanding principal in refinancing costs or 3 to 10% on second mortgage loans plus any prepayment penalties.
And in conclusion let’s try to answer the following question: “Since it costs money to refinance, how do I know whether or not I will end up saving money?”
Let’s try to do some calculation. To save money, you must stay in your house longer than the “break-even period” – the period over which the interest savings just cover the refinance costs. The larger the spread between the new interest rate and the rate on your existing loan, the shorter the break-even period. The more it costs to obtain the new loan, the longer the break-even period. But beware! The break-even period is not the cost of the new loan divided by the reduction in the monthly mortgage payment. The rule of thumb does not allow for the difference in how rapidly you pay off the new loan as opposed to the old one.  Let’s say that in 1992 you took out an 11% 30-year fixed rate loan, which now has a $100,000 balance and 21 years to run. You refinance into a 7% 15-year loan at a cost of $3,750.
Monthly payment on the old loan = $1019
Monthly payment on the new loan = $899
Reduction in monthly payment = $120
$3750 divided by $120 = 31 months
The rule of thumb says that you break-even in 31 months. However, because of the shorter term and lower rate on the new loan, in 31 months you would owe $7,041 less than you would have owed on the old loan. So, the rule of thumb in this case seriously overstates the break-even period. Taking account of differences in the loan balance, you would actually be ahead of the game in 12 months, as shown below:
Savings in monthly payment: $120 for 12 months = $1440
Plus lower loan balance in month 12: $2620
Equals total saving from refinance: $4060
Less refinance cost: $3750
Equals net gain: $310
Next consider the case where an 11% loan taken out in 1992 was for 15 years and now has only 6 years to run, while you plan to refinance into a 30-year loan. With the remaining term shorter on the old loan and longer on the new one, the difference in monthly payment rises to $1238. Using the rule of thumb the $3750 cost would be recovered in only 3 months. But this fails to consider the slower loan repayment on the new loan. Due to a slower repayment, you don’t actually come out ahead until 14 months out.
 
Anyway, to calculate your refinancing you need to take to consideration such points as the time value of money, taxes and differences in the cost of mortgage insurance between the old and new mortgage. Various calculators are available online (e.g.: www.interest.com).

Most homeowners wish they won’t have to put that mortgage check in the mail every month. But trying to pay off your mortgage ahead of schedule is not something to be undertaken lightly. You must make sure you are financially secure, with no other significant debt and have money in reserve for emergencies. Sometimes borrowers want to repay their mortgage early and certainly they may face redemption penalties they’ll have to pay to the lender. It mostly happens if you are in a fixed rate mortgage and the penalties sometimes can be severe rather than unfair. Redemption penalties are detailed in any mortgage quotation you receive and you should make sure you are fully aware of them before deciding on a particular mortgage deal.
Annette Marshall, a victim of mortgage penalty, says: “I, like many others, fixed the rate of my mortgage some time ago and, very foolishly, did not read the small print properly. I did not realize how big the penalty would be for early redemption or for how long this penalty would be imposed. I now face paying them over £1,000 to redeem my mortgage. I feel like settling this matter in court…”
If you are in a debt-free financial position where you can pay off your mortgage more quickly without sacrificing other aspects of your life, there are a few ways to accomplish this. Nevertheless, you will have to consult your lender to see what you can and can not do. Here are a few of the most popular suggestions:
1. Increase your payment schedule - Biweekly mortgage payments have become increasingly popular as a way to pay off a mortgage more quickly.
2. Make lump sum payments - Depending on the terms of your mortgage agreement, you may be able to make lump-sum payments at specific times.
3. Shorten the time frame of your loan -You could elect to refinance and change your 30-year mortgage to a 15-year mortgage. Bear in mind, though, that your monthly payments will be considerably higher!
4. Increase your payments - If your financial situation has improved and you are making more money, you may be able to make higher payments or balloon payments. Most loans will allow you to increase your payments in this manner with certain restrictions.
5. Refinance at a lower interest rate, but pay the same amount each month - If you maintain a 30-year mortgage, but the interest rate drops from 6.25% to 5.10%, the money you were paying in interest can now go toward the principal.

An FHA Loan is a mortgage loan established by the Federal Housing Administration (FHA). The FHA doesn’t provide the loan but insures the loan for the lender. If the borrower defaults, the lender can seek recourse from the FHA. This lowers the lender’s risk and makes them more likely to issue a loan.
The FHA was formed in 1934 and joined the Department of Housing and Urban Development in 1965. The organization has insured more than 33 million home mortgages since its creation. Formerly, homebuyers’ options were only limited to short term loans ranging from 1 to 5 years in term.  Borrowers had to put as much as 40 to 50% down on the property and pay off the entire loan balance by the end of the term.  FHA revolutionized the mortgage industry at the time by offering the 30-year mortgage and made the possibility of home ownership available to Americans nationwide.  Today they continue helping low- and middle-income families to move into their dream homes by obtaining mortgages. More than 800,000 current homeowners have mortgages insured by the FHA.
There are several FHA home loan programs available: 
1) Standard fixed rate (FHA203b)
2) FHA adjustable rate nortgage (FHA251)
3) FHA2-1 buydown (FHA 203b, FHA 251)
4) Energy Efficient Mortgages Program
One of the benefits of an FHA-insured loan is low mortgage rates. For single-family homes, down payments can be as low as 3%, making it possible to afford a higher priced home than with a more conventional 10 or 15% mortgage. The FHA can also help home buyers finance their closing costs, and even offers mortgage insurance.
The FHA also doesn’t allow lenders to charge more than 1% for origination fees (the fee that lenders charge for putting loan documentation together) and has no prepayment penalties, meaning that if you pay off the loan ahead of schedule, you will not be penalized. Like with other mortgages, the lender may ask you to pay points, which typically equal 1% of the total cost of the home.
To qualify for an FHA you’ll have to meet specific requirements:
1) Good credit record
2) Enough money for a down payment, which can be as low as 3%
3) Total housing costs that are no more than 29% of your gross monthly income. Therefore, if your annual household income is $60,000, your housing costs including principal, interest, property tax and insurance should not exceed $17,400 or $1,450 per month.
To get an FHA-insured loan, you need to find FHA-approved lenders and compare their loan offerings. Inquire about the income qualifications, which will vary by area. Also keep in mind that FHA-insured loans have a maximum of $151,725.

This page is generated by Wpkeys plugin