Meszamis

The Perils of Plastic

Millions of credit card borrowers are about to face larger monthly payments, a change that represents both good news and bad for consumers.

Under new guidelines suggested by the federal government, starting in January minimum monthly payments for credit card debt will generally increase. Many mortgage lenders will no longer require payments equal to 2 percent of the debt, an amount that includes interest and fees. Instead most will now require a payment equal to 1 percent of the debt plus fees, interest and charges. Altogether, the new payment will be more than 2 percent of the borrower’’s outstanding debt in many cases.

This is the good news. The higher monthly payments will reduce overall interest costs and force people to borrow less with credit cards.

The bad news? It will reduce the ability of many consumers to obtain a mortgage.

According to the most recent Federal Reserve report, we now have 799.1 billion pounds in outstanding credit card debt. That’’s about 2,681.54 per person: For a household with four people, average credit card debt amounts to almost 10,750.

Such debt would not be a problem if it were offset by equally robust savings. Unfortunately, the Bureau of Economic Analysis says our saving percentage was -.2 percent in both October and November. Instead of putting money away, in those two months alone we spent 37.4 billion more than we earned.

Credit card financing is unsecured debt — a form of financing that’’s especially risky for mortgage lenders. More risk means higher interest, and in the case of credit cards interest rates between 18 and 28 percent are well known.

Let’’s imagine a household with 10,000 in credit card debt. Imagine also that the interest rate is a modest 18 percent and that a monthly repayment equal to 2 of the outstanding balance is required. If you borrowed no more this loan would take 7.8 years to repay and interest over time would amount to 8,622. Increase the required monthly payment to 4 percent, the same debt could be repaid in 2.7 years and interest would amount to 2,628 — a plump savings of almost 6,000.

The new repayment standards for credit cards will reduce credit card debt for millions — but the higher minimum payments will also impact mortgage applications.

When mortgage lenders look at mortgage applications they consider many financial issues. Of particular interest is what borrowers spend each month, spending divided into two general categories: Housing expenses and consumer expenses.

Housing expenses are typically seen as mortgage interest and principal plus property taxes and insurance — “PITI” in lender jargon. Consumer expenses include PITI plus such things as required monthly payments for credit card bills, auto payments, student loan pay, etc.

Expenses are described as a percentage of monthly income. If your household has a monthly income of 8,000 and monthly PITI is 2,240 then your “front” ratio is 28 percent. If overall required expenses are 2,880 then the “back” ratio is 36 percent. Overall, lenders would say the ratios are “2836.”

As it happens, to qualify for given mortgage loan programs you must meet certain front and back ratios. The ratios for loan programs vary, so if you do not qualify for one program you may qualify for others. For instance, there are different ratios for conventional loans (2836), FHA financing (2941) and VA loans (effectively 4141). Adjustable rate mortgages often use 3338 ratios while other loans have even more liberal standards, some with a back ratio above 50.

Now go back to the new payment standards for credit cards. If your required monthly payment goes from 200 to 280, that’’s good for reducing credit card debt — but your monthly required payment has increased. For instances, monthly expenses may go from 2,880 to 2,960. No a big deal in terms of cash or in the cost of a household with a monthly income of 8,000, but now the “back” ratio is 37 percent.

Whoops. That higher credit card payment means some borrowers will no longer qualify for certain mortgages. They monthly costs are above the guidelines.

What to do?

First, start with the realization that paying non-deductible, high-cost credit card charges is not a magical path to great wealth. To get the best possible mortgage, and to simply save more money, reduce credit card use.

* Look at your credit situation and get rid of credit cards you don”t use and don”t need. Keep one for emergencies.

* Speak with underwriters. Ask if it is possible to get an “exception” to the guidelines.

* Start saving. People save enormous sums of money with such basic steps as putting aside all singles found in their wallet at the end of the day or all coins in their pockets. Eat-in more often, bring lunch to work, keep safe cars longer and cut back on fashion and frills.

* If you have credit cards, always make full and timely payments and keep balances at zero.

* Instead of credit cards, use debit cards — with a debit card you”re simply using money already in your checking account. Using cash on hand instead of credit means you”re likely to buy less.

* Get over-draft protection (a line of credit) for your checking account or link savings to checking accounts. Both can help prevent over-drafts and excess fees.
So the next time you pull out that credit card think about your real goal — a new sweater or a new fireplace, a fancy dinner or a better kitchen, higher monthly payments or less. In no time it will be easy to keep the plastic out of sight and out of mind.

The New 50 Year Mortgage

Just a few short years ago, many people were amazed by the prospect of a 40 year mortgage. While 30 year mortgages had dominated the market for decades, the idea of being able to spread out your mortgage payments over forty years was just almost too much to comprehend. Now, there is the new 50 year mortgage and if the 40 year mortgage took the finance world by storm the 50 year mortgage is leaving many people speechless.

But, is a half century mortgage really a good idea? Well, there are certain some advantages to a 50 year mortgage. The most obvious advantage is that it allows a homeowner to spread out the cost of a home purchase and lower monthly mortgage payments. In housing markets where prices have skyrocketed this can be a major pro because it may make it available for individuals to purchase homes who might not have been able to do so otherwise.

Of course, there are also major disadvantages to consider as well. When considering a 50 year mortgage it is extremely important to consider your age at the time of the purchase. For example, lets say youre 30 at the time your purchase the home. With a 50 year mortgage, your home would not be paid off until youre 80. If you think youll still be able to meet those monthly mortgage payments long after the age by which most people have retired, this might not be a bad option. On the other hand, if youre looking to be debt free by the time you retire, its best to consider another option.

It is also important to remember that the longer you draw out the payments on your home purchase, the more youre paying in interest. This is why many critics of the 50 year mortgage are referring to them as interest-only loans. When you stop and actually look at the numbers, youll see that with this type of mortgage youre paying a lot more in interest for your home that you would with any other type of home loan, even a 40 year mortgage. Thats money you might be able to put toward something else, especially if youre looking ahead toward retirement. On a 300,000 home purchase at the going interest rate the monthly payments would be in the neighborhood of 1,800 per month with a 30 year mortgage. Conversely, with a 50 year mortgage at the same interest rate you could drive down the price of the monthly mortgage payment by about 200 per month. Since, youll be paying for the home 20 years longer with the 50 year mortgage than you would with the 30 year mortgage; however, youll actually end up paying more than 300,000 more for the home over the course of the 50 year mortgage than with the 30 year mortgage. If you went with the 30 year mortgage and the monthly payment that is 200 a month more, sure youll spend 72,000 over the course of the next 30 years but then your home will be paid for in full. With the 50 year mortgage youll still be responsible for that 1,600 a month house payment for the next 20 years.

The Million pound Mortgage Mistake

Getting a mortgage loan or a mortgage loan refinanced without a financial plan is one of the worst decisions Americans make every day.

Unbeknownst to the average American, they are losing over 1,000,000 for their retirement!

Dont get me wrong. Mortgage loans are a necessity of life. However, mortgage loans in Nevada can be dangerous if a family doesnt get a financial advisor to help them.

Nevada mortgages can be dangerous because:

* Lenders in Nevada only need to fill out a form to get their mortgage license.
Thats right! Anyone with a pulse can offer a mortgage loan to consumers simply because he or she turned in a form. Most of the mortgage lenders in Nevada became mortgage brokers simply because they heard of the growing housing market and are desperate to make high commissions off of those who dont know any better.

* Private mortgage companies can only offer one or two specific mortgage loans.
Private mortgage companies are not looking out for the consumers interest. They will do anything to sell you on a mortgage loan, even if it isnt right for you, your lifestyle, or your budget. Because they have contracts with certain loan companies, they can only sell you one or two specific mortgages, and their commission depends on it.

* Desperate mortgage brokers will do anything to make a sale and I mean ANYTHING.
While many of us are optimistic that the person we are dealing with is being honest, oftentimes, mortgage brokers are not as honest as we would hope. Any of us who have signed mortgage papers before, know what a mountainous stack it can truly be. Do any of us really read the find print on each page? That would take over a month! So usually, a mortgage lender will summarize each page for you, so you dont have to read the fine print. How nice of them or is it? Sometimes, the mortgage market is so tough that mortgage brokers will tell a family one thing, but the fine print will say another. For example, the mortgage broker might not mention that a fee will incur of three years payment if a family refinances their home before 5 years after the first mortgage.

What is a Family to do?

The answer is simple. Get a financial planner. A financial planner is not only a PROFESSIONAL that can help you with your mortgage, but they can help you in other aspects of your finances as well.

Las Vegas financial planners can be life saving because:

* They are professionals in financial planning, INCLUDING MORTGAGES, so you dont have to worry about their qualifications.

* They arent tied down by contracts with mortgage lending companies, so they can offer you hundreds of different options for mortgages verses the one or two from private mortgage companies. THIS CAN GUARANTEE YOU THE LOWEST INTEREST RATE IN NEVADA!

* Financial planners have an established career as financial planners, so you dont have to worry about dishonesty to make a sale.

* Financial planners can help to eliminate credit card debt and help with other debt management at the same time you are purchasing a mortgage, which can ultimately help you save hundreds of thousands of pounds.

* Some financial advisors will help you for free!

* Financial planners can show families how to house their savings in a FOREVER TAX FREE accumulating account with up to a 12% interest rate. THIS CAN ULTIMATELY HELP FAMILIES RETIRE WITH 1,000,000 OR MORE!

* Financial planners dont just plan, they teach. They will teach you everything you need to know about your mortgage loan and any other savings plans so you know what is happening with your money.

The Disadvantages Of Reverse Mortgages

A reverse mortgage can be an attractive option for many home-owning seniors that are having a hard time making ends meet. With a reverse mortgage, a senior homeowner will receive money for their home equity from a lender without having to make repayments for as long as they live in their home. So with the right reverse mortgage a senior homeowner can maintain their standard of living while retaining ownership of their home.

This of course, is the picture that all the reverse mortgage companies try to paint for prospective borrowers. Nonetheless, there are many differences that have to be understood between reverse mortgage’s and conventional loans. If these differences are not understood, they can cause financial problems for reverse mortgage borrowers.

Disadvantages of Reverse Mortgages.

The first disadvantage is the relative cost of a reverse mortgage. Reverse mortgages tend to be very expensive when compared with a conventional mortgage. This is due to the rising-debt nature of reverse mortgages. For example, a typical reverse mortgage may provide a homeowner with a 300 per month payment with a yearly interest rate of 12 percent compounded monthly. Over the course of ten years, the homeowner will receive 36,000 in payments, but will owe almost 70,000-almosttwice as much as received.

The second disadvantage is the complex and confusing contracts of reverse mortgages, that can have a tremendous impact on the overall cost of a reverse mortgage to the borrower. The complexity of the contracts often allow lenders and third parties involved in arranging reverse mortgages to not fully disclose the loan’s terms or fees. These numerous other front-end andor back-end fees can also quickly drive up the cost of a reverse mortgage. These fees can include origination fees, points, mortgage insurance premiums, closing costs, servicing fees, shared equity and shared appreciation fees.

Out of all these fees, the shared equity and shared appreciation fees should be avoided, as they can quickly raise the cost of the mortgage without providing any benefit to the borrowers. As an example, a shared appreciation fee can give a lender an automatic 50% interest in the difference between the current value of the home when the loan is signed and the appreciated value of the home when the loan is terminated. What makes the fees unfair is the fees have no relation to the amount that is borrowed.

The third disadvantage is the reverse mortgage payments can affect eligibility for old age pensions, Medicaid, or supplemental Social Security income. Senior’s may not even realize this problem until after they already have their reverse mortgage, and only then do they find out that this can have the opposite affect on a seniors finances then what they were trying to accomplish in the first place by taking out the reverse mortgage.

Another disadvantage is the fact that reverse mortgages reduce the value of a senior’s assets and estate. This will affect the amount of inheritance received by the borrower’s heirs.

How to avoid these hazards

The best way for a senior to avoid these hazards is to be careful when choosing a lender, by obtaining bids from three separate lenders. They should take these contracts to a reverse mortgage counselor for evaluation. This will allow them to accurately evaluate the three contracts before deciding on best one for their situations.

The Current Mortgage Rate

The Current Mortgage Rate

So you are looking to purchase a home or refinance the one you are currently living in. If this is the case, not only do you want to obtain the best mortgage rate out there, you want to obtain the current mortgage rate and not a percentage point higher.

Before you begin to track down a lender who can get you going with a current mortgage rate, take some time to do a little research to find out what the current mortgage rate is on your own. Dont just take the lenders word for it.

You can find out information on the current mortgage rate, and rates in general from many resources. To name a few, the internet or the business section of your local newspaper is a good place to start and will give you a very good idea of what rates are doing.

The current mortgage rate can be easily obtained if you have excellent credit, or what lenders call A credit.

However, if your credit is challenged in any way, you will still be able to get a mortgage. Except the rate you receive may not be the current mortgage rate, but a little bit higher because the lender sees you as a slight risk because of your payment history.

Wether you have excellent credit or challenged credit, or you need someone to help you out with a unique situation, shop around.

By shopping around, you allow for a few to several mortgage brokers or loan officers to assess your situation.

Once each loan officer is finished assessing your situation, they will get back to you with what they have to offer rate wise.

Once you have a number of offers, base your decision on what you believe to be the best loan scenario for you.

Remember, the mortgage industry is a very competitive one, and these lenders do not want you to take your business to their competitor, so they will do their best to get you the best deal out there.

Loan officers and mortgage brokers also get paid on commission, so getting the mortgage to the closing table is just as important to them as it is to you.

The Benefits of Remortgaging Your Home

Britain has become a nation of homeowners Unfortunately, forty percent of all UK homeowners are blindly staying with their standard variable rate mortgages unaware that they are potentially losing out on some big time savings.

If you are currently paying the standard variable rate with your lender, or are coming to the end of a special rate, you could find that a lower rate of interest on offer from alternative lenders. By renegotiating the interest rate, you could have lower monthly payments.

So, for example:

If you have an existing interest only mortgage of 220,000 with a standard variable rate of 6.5%, you would be paying 1,191 per month.

If you switched to a remortgage package that offers a two year fixed rate of 4.49%, the monthly interest payments would only be 823.

That is a monthly reduction of 368, and over the two-year term thats worth an amazing 8,800 in savings!

Apart from saving you money, remortgaging your home can also present you with other options that may be more beneficial to your financial needs it could allow you to pay off your existing mortgage early, to raise extra money or even to consolidate your outstanding debts.

To repay your mortgage early:
If we were totally honest with ourselves, nobody really wants a mortgage, and the quicker you can be rid of it the better! If you repay it early then you will have more time to finance the things that you really want like that big family holiday, a shinny new car, a nice conservatory etc.

With some clever remortgaging and switching to a lower rate of interest whilst still maintaining the same monthly payment amount that you have been used to, you could potentially reduce the life of your mortgage by years.

However, be aware that your existing mortgage might incur early repayment charges, especially in the early years and even if there are no early repayment charges your mortgage lender may require an administration charge.

To raise extra money:

If you want to raise money for home improvements or other purchases then remortaging can often be a cheaper and more flexible alternative to taking out a personal loan. In many cases home improvements and modernisation can be far cheaper than moving house altogether and you will also benefit from the increase in value to your property.

To consolidate your outstanding debts:

Remortgaging can allow you to release some of the equity that is tied up in your own home allowing you to pay off any debts that you have, such as credit cards or car loans. The rate on remortgage packages can often be considerably less than those of a personal loan.

However, before taking this option, you should carefully consider the risks of moving unsecured debt into secured debt and also any increases to the length of the repayment term.

The Bad Credit Mortgage Company How To Avoid Predatory

The Bad Credit Mortgage Company How To Avoid Predatory Mortgage Lending Companies

One of the most important parts of choosing a bad credit mortgage company to work with is avoiding predatory lenders. Predatory lenders run smooth operations, and specialize in taking advantage of those who are inexperienced or think that they have few or no other loan options. However, thoughtful and informed mortgage company shopping will go a long way towards avoiding predatory lenders and the hook, line and sinker methods they employ.

Watch The Hook – If a bad credit lender is trying to hook you making first contact and aggressively selling their services be suspicious. When avoiding predatory lenders, youll have to be alert, as some use more subtle types of hooks than the blatant hard sell. They may sprinkle their conversation with such phrases as bad credit, no problem, and make it all seem very easy. A predatory lender may try to rush you, perhaps pushing you towards a deal, saying it may not be available much longer. They are interested in making their fees, and you keeping the house is not important to unscrupulous bad credit lenders. In fact, its better for them if you dont.

Beware of The Line – Knowledge is the best way of avoiding predatory lenders when seeking a bad credit lender. Predatory lenders count on their victims not having a lot of knowledge about the lending process, legal or financial. If you do a little research prior to seeking a lender, you have less of a chance of being fooled by some of the lines predatory lenders use. You wont be lured into a loan that is too high under the premise that youll be able to refinance after a year or so for a lower rate. A legitimate new home loan bad credit lender will advise you against an arrangement that consumes more than 30% of your monthly income. Youll know to read every word of the contract to make sure that it matches exactly what you were told. With research, youll know what common lending rates and fees are and be able to compare with clarity, rather than be taken a smooth line.

Avoid The Sinker – Often, predatory lenders prey upon those that they consider to be in a financially precarious position. They prey on people who feel as though they dont have a lot of choices when it comes to lenders. Unprincipled new home loan bad credit lenders take advantage of these situations by offering arrangements that court loan repayment failure. These include balloon payments, a large sum due at the end of the mortgage, prepayment penalties, which punish the borrower for paying off the loan early, generally through sale or refinancing, and mandatory arbitration clauses, which do not permit you to bring a complaint against the lender to court.

When it comes time to shop for a bad credit lender, do your research first. There are numerous resources available to help you in avoiding predatory lenders. And, remember, no matter how bad your credit may be, you always have a choice. Making the choice to wait is always better than accepting a predatory loan arrangement.

Tax Reform Limit of Mortgage Tax Deduction

A committee appointed by President Bush has come up with an alarming recommendation. They want to limit the tax deduction for mortgage interest!

Reform

Following his re-election, President Bush set up an aggressive agenda in which he hoped to reform social security and the tax code amongst other things. As with many things in the political world, this sounded easier done than it really was. With social security, political forces have forced the President to pull back from private accounts. With tax reform, a similar political and practical mistake is being made.

Limited Deduction

The bipartisan tax reform committee appointed by President Bush is making a mess of things. They are proposing the elimination of the Alternative Minimum Tax, which is clearly a good thing. Unfortunately, they are also proposing a limit on the tax deduction you can take for mortgage interests.

Although the final recommendations are not yet published, leaks have led to the belief the tax reform committee is going to propose the mortgage interest tax deduction be limited to the percentage of any loan that the Federal Housing Administration would write. Put another way, you would only be able to write-off interest on the first 315,000 of a mortgage! On top of this disaster, the committee is proposing to eliminate the deduction for property taxes.

Economic Disaster?

The implementation of the above recommendations would be an economic disaster for the United States. The real estate industry would suffer incredibly and the real estate boom would become a bust. In many parts of the country, a single family home averages well over 315,000. In San Diego, the average cost of a home is in the 600,000 range. To get into such homes, many families apply for interest only loans to make ends meet. If they lose half of the interest deduction, default will not be far behind.

Once again, we are faced with a situation where politicians just dont get it. Our housing market is incredibly strong and they want to throw a wrench in the process. Developers and homeowner associations have vowed to fight this tax reform. You should as well if losing half of your deduction troubles you.

Subprime Mortgages And A Past Bankruptcy

Even with a Chapter 7 bankruptcy in your credit report you can still qualify for a sub-prime mortgage. Once approved, you can then use your mortgage to improve your credit history, qualifying you for lower interest rates in the future.

The Effects of a Bankruptcy

A bankruptcy will affect your credit score based on how long ago it was. So a bankruptcy discharged less than a year ago will qualify you for a D loan. These types of loans usually require 30% down and a high interest rate.

By waiting a year after a bankruptcy, you can qualify for a B or C loan with their lower rates and down payment requirements. If you wait two years, you can qualify for a FHA home loan. In four years, you can qualify for a conventional loan.

Besides your bankruptcy record, financing companies will want to see a steady payment history. This includes your credit and rent payments. Cash reserves for six to twelve months will also offset your credit risk.

Search For Lenders

Not all sub-prime lenders evaluate borrowers the same way. So you may qualify for a B loan with one lender and a C lender with another. To find who will offer you the best financing, you will need to request quotes from several lenders.

You can request quotes over the phone or online. Online sites will provide a fairly accurate quote based on the generic information you provide. You can also use free mortgage broker sites which provide home loan quotes from several different financing companies.

Before You Apply

Before you apply for your mortgage, make sure that all accounts involved in your bankruptcy have been closed. You can request a copy of your credit report from the reporting agencies to check your information. You may also consider including a letter in your report explaining the circumstances of your bankruptcy. Some lenders will look more favorably on your account if illness or job loss affected your finances.

After Your Mortgage

Once you have purchased your home, plan on rebuilding your credit history by making regular payments. Within two years you may qualify for a conventional mortgage with low rates.