Category: Mortgages

Generally, there are a couple of kinds of second mortgages: home equity lines of credit, and the more classic home equity mortgage loan. Selecting between these types of mortgages depends on the requirements of the homeowner or buyer.

The home equity line of credit (HELOC) commonly has a shorter term that can be drawn upon such as a bank card. Checks are drafted against a home equity credit line in an effort to pay for unpredicted costs. Interest payments are made monthly when there is a balance outstanding. Second mortgage rates for home equity lines of credit are based on short term rates, which makes them typically lower than the first mortgage loan rate. The risk with a home equity line of credit is that the whole balance is due at maturity. Running up the balance due on a home equity line of credit increases the risk of higher rates at refinance, or the possibility that the line of credit may not be renewed whatsoever. There is considerable rivalry among mortgage companies for these mortgages, which lessens this risk to some degree.

The more common second mortgage loan is the home equity loan. Home equity loans are fixed-rate loans over a longer term than home equity credit lines. Because the rate is set, the interest is usually higher than that of a first mortgage. The advantage of the home equity mortgage is the fact that it amortizes to a zero balance over the period of the mortgage. Therefore, there is no refinance risk.

There are numerous uses for second mortgages. A traditional home equity mortgage loan is often used for home improvement tasks that can add worth to a home. Nevertheless, the use of them is often not restricted. Many property owners use these loans to combine other bills simply because the rate of interest, though higher than 1st home mortgage loans, is generally lower than higher-interest personal debt like bank cards. Many property buyers with limited capital available for an initial investment (down payment) may use a second loan rather than private mortgage insurance. This is often referred to as an 80/20 loan arrangement, because the first mortgage loan represents eighty percent of the acquisition cost with one of these second mortgages making up the rest.

As all mortgages are not ideal for everyone, understanding the specifics before making a final selection would be advised. A reverse mortgage pros and cons, for example, should be considered, despite the popularity of this mortgage option. Making a decision that is based on all relevant facts may assure you of making the best choice.

The repayment options often make this type of loan designed for seniors particularly appealing. Having the option of paying the loan back in a lump sum or in installments is often well-received. This allows loan recipients to manage their repayment in a way that is most conducive to their budget.

Another positive aspect in choosing a reverse mortgage is that the loan may likely be tax-free. Moreover, there may be no associated income guidelines as well. For older homeowners that may have achieved a relatively substantial income level, this may be especially beneficial.

While there are several advantages to these loans, there are potential disadvantages that should also be considered. Medicaid funding, for example, may be impacted if you receive money from a reverse mortgage loan. Moreover, the amount of any required end-loan payment and related interest may prove to be unfavorable as well.

As with other types of mortgage, any closing costs should be factored into the overall equation. Any other related fees should be considered as well. If not, the loan may end up being not in your best interest, despite what may seem like an attractive interest rate.

Reverse mortgages often receive a fair amount of advertising. This, however, does not necessarily mean that they are ideal for all homeowners over the age of sixty-two. A brief overview may fail to even mention any potential disadvantages.

For a homeowner of significantly advanced age, additional factors may need to be considered. The inability to repay the loan during the recipient’s lifetime, for example, may impact surviving family members. With a thorough understanding of the pros and cons of reverse mortgages, you may be in the best position to choose wisely.

A “mortgage point” is equal to 1 percent of the loan amount, and is sometimes paid to obtain a lower interest rate on a home loan. Orlando mortgage borrowers can also sometimes choose to take a slightly higher rate and receive a credit from the mortgage company to cover some or all of the closing costs on the loan. It can be a tough decision whether to pay points or “buy down” the rate on a home loan. Ask yourself the following 5 questions to help sort through some of the confusion:

1) How long do I plan to own this home?
The longer you keep the mortgage the longer you will have to take advantage of the lower rate. If you sell or refinance a year or two down the road the lower rate will most likely not have generated significant savings.

2) Can I afford the additional up front costs?
Be sure you can cover your down payment, closing costs, and maintain the required reserves, or savings, needed to qualify for your loan before you consider paying points. When buying a new home it’s also a good idea to have a moving fund set aside for moving expenses and purchasing additional items you might not realize you need until you’re in the home.

3) Who is paying the closing costs?
If you are moving for work and your employer is paying your closing costs as part of a relocation package, or the seller of the home you are purchasing has offered to cover the closing costs, buying down the mortgage rate can be an excellent way to take advantage of the funds at your disposal. In both cases the amount is generally limited to a percentage of the loan amount, so you will want to be sure that the other necessary closing costs are paid for, and then any remaining amount may be able to go towards mortgage points. Check to make sure that discount points are an allowable use of the relocation assistance or seller paid closing costs.

Whether or not to pay points often comes down to running the numbers. Your Orlando mortgage professional can help you calculate how many months it would take to break even when accounting for the additional up front costs. You also may want to ask a tax professional about the tax implications of paying points or additional interest as part of your monthly payment.

Recently reverse mortgages have become more popular and more readily available. To get a reverse mortgage you must be over the age of 62. Mortgage loan providers who provide this type of mortgages aim their ads at seniors who have built up equity in their homes. You may need to be aware about reverse mortgages pros and cons.

The way that a reverse mortgage works is that the lender will make payments to you, instead of the traditional way that a mortgage works with you making payments to the lender. Taxes and interest amounts are included in the amount to be repaid. The way that the lender gets repaid is after the home owner dies or when the house has a new buyer.

Many of these mortgage loans do not have to be repaid for a quite a long time. The way that the lender determines how much money you will be paid is through a system of figuring out what your home is worth, how much equity the home has, your age and the reverse mortgage rates at the time.

You have some options on how to be paid. You may choose a lump sum, monthly payments, or as a line of credit you can use when needed. You may also choose to combine monthly payments and a line of credit.

When deciding on whether or not to consider a reverse mortgage be aware that there are some cons to this type of mortgage. There can be large fees, so be sure you understand them and shop around for the lowest fees. You can find a reverse mortgage calculator online to help you with this. Having an income from a reverse mortgage could also effect your government benefits such as social security or medicaid. When you pass away if you have not repaid your lender, your house will go to them.

A reverse mortgage can be a great idea for certain people in certain situations. Hopefully you can make an informed decision and decide if it is a good option for you.

If you want to borrow at a lower rate, consider using 95 mortgages. These mortgages require you to put down a five percent deposit on the overall amount. Such loans are very helpful for first-time buyers, who are defined as individuals who have not bought property in 3 years. With 95 mortgages, they can buy homes without being charged exorbitant interest. In addition, if these loans are acquired in bulk, they can stimulate the economy. This is why they are being actively promoted in Britain and the United States. The naming is a little different, (as 95 mortgages are known as 95 LTV mortgages in the United Kingdom), but the basic premise is the same.

As far as the interest rate, LTV loans are usually fixed. This means that your interest rate will stay the same regardless of any national increases. In fact, if you are willing to pay more 5 percent down, you could get the best of both worlds: a lower interest rate and a fixed monthly payment.

Just keep in mind that in addition to paying 5 percent down, 95 mortgages usually charge backend fees. Your provider may dress things up by using the term “lending charge,” but it is still a fee you have to pay. If you do not pay it upfront, your mortgage provider may calculate it into your loan, which drives up your overall fee. Try to avoid this, if possible. You are better off paying your fee now than being charged interest later.

The income multiplier is another consideration when thinking about 95 mortgages. Derived from your household income, it determines how much mortgage you can afford. Typically, a single person could get three times their income, while a couple might only get 2.5 times. While this might sound odd, mortgage companies assume that couples have more expenses than single people. People with high or perfect credit score are more considered to get this type of loan that those with average credit score rating.

In conclusion, 95 mortgages are a good choice for homebuyers in need of a cheaper loan. Granted, you will need to save up some money, but this is not much of a sacrifice when you think about the long-term benefits.