Avoiding Repossession

Posted on December 17, 2010 by admin | Permalink Comments Off

Statistics regarding the number of people faced with imminent loss of their homes are sobering. In the U.S., banks plan to foreclose on more than one million homes this year. Though the housing crisis may seem most pronounced in the states, economies like the UK are also facing problems, particularly due to overvalued properties. In fact, residents worldwide are taking steps to avoid losing their homes.

The process of losing one’s residence varies depending on the country being examined. The situation of repossession in the UK involves a mortgage company taking back the home, selling it, using the proceeds to pay off the loan balance, and sending any excess profit to the mortgage holder. Mortgage companies normally obtain a court order to repossess the home, though this is not required by law. The company must attempt to obtain the true market value of the property, which does not need to involve selling the property at auction.

In the U.S., the process of foreclosure involves a mortgage company taking back the home, selling it, and keeping all of the proceeds. A lengthy legal process is involved, resulting in homeowners being able to remain in their homes for years without making any mortgage payments. Some people have learned how to work this system and have managed to stay under the radar. This is becoming more the exception than the rule as home foreclosures hit record highs.

People who are experiencing difficulty paying their mortgage on time, or who expect to have difficulty in the future, should contact their mortgage lender. The sooner the lender is contacted, the more help the entity can provide. Options include loan modifications, refinancing, short sales, forbearance, repayment plans, deed-in-lieus, and federal initiatives.

A loan modification is a written agreement between the mortgage holder and lender that makes permanent changes to the mortgage loan, designed to make it more affordable. Within the U.S., loan modifications are also offered through the Home Affordable Modification Plan. Another option is forbearance, a temporary suspension or reduction of the mortgage payment, which is often combined with a repayment plan providing a period within which the amount owed can be repaid.

People who have a lot of equity in their homes should consider refinancing. This will allow them to use a new mortgage pay off the amount they are in arrears, as well as late fees and attorneys fees. A new mortgage with a longer duration and lower interest rate will make the monthly payments more affordable. Those who think they can repay the money owed but just need a bit more time should consider reinstatement, in which lenders allow them to repay the money due in a lump sum by a certain date.

In more extreme circumstances, it may not be possible for people to keep their home, but they can still avoid foreclosure. A short sale involves selling the home for less than what is owed, with the lender agreeing to accept this reduced amount as payment in full. A deed-in-lieu of foreclosure involves the mortgage holder transferring the home’s title to the mortgage company in exchange for cancellation of mortgage debt.

Debt Advice, Mortgage Advice

Avoiding Bankruptcy

Posted on December 17, 2010 by admin | Permalink Comments Off

When people find themselves in an enormous amount of debt, filing for bankruptcy may be the only solution. Though bankruptcy can help erase debts, it can also affect an individual’s financial situation in a negative way for years. Bankruptcy ruins the credit standing of the filer and may result in a loss of property. Taking steps to avoid bankruptcy will prevent it from being the only solution to improving the financial standing.

One way to avoid bankruptcy when the minimum payments cannot be made on debts is to engage in debt settlement or reduction. Individuals can do this on their own or retain a professional settlement service. The process involves negotiating with creditors to reduce debts by between 40 and 60 percent of the current balance, a situation that should help make repayment more feasible.

Debt consolidation is an option for people who wish to make a single payment with a reduced rate of interest. Bills are consolidated into one monthly payment using a low-interest loan to pay off the debts. An alternative is debt management, in which a company or credit counseling agency helps to reduce penalties and interest rates. The debtor makes the monthly debt payments, plus a fee, to the entity performing the consolidation services.

Using an outside source to help with the solutions above may make things easier on the individual. However, it will also result in debtors paying additional fees for these services. Those who want to go it alone should negotiate with each creditor, offering a payment that is affordable. It is important that creditors be contacted as soon as the individual sees the financial situation headed in a negative direction because this will help avoid bankruptcy.

If these approaches seem like a lot of work and unnecessary expense, individuals should consider why they may want to use them. Bankruptcy makes a severe negative mark on a person’s credit, reducing the credit score by approximately 200 to 250 points. This result lasts for between seven and ten years, making it very difficult for a person to qualify for credit or loans for at least three years. In addition, bankruptcy does not remove all debts, so it is not the ultimate solution.

Individuals who file for bankruptcy may lose their property, including their car and home, depending on what type of bankruptcy they file. Money gained from the sale of these assets will be used to repay debts. In addition, 30 days after a bankruptcy case ends, creditors whose debts were not discharged can sue the individual who is behind on payments. Individuals who have reaffirmed their car and home loans must pay these, while liens remain on them.
If losing the home and car were not enough to incent individuals to take steps to avoid bankruptcy, losing the retirement savings may be. In the U.S., retirement plans and Social Security accounts may be used to repay debts under Chapter 7 bankruptcy filings. Avoiding bankruptcy through things like debt settlement, debt consolidation, debt management, and do-it-yourself plans will help keep an individual out of bankruptcy.

Bankruptcy Advice

When Should You Re-Mortgage?

Posted on December 17, 2010 by admin | Permalink Comments Off

Remortgaging or refinancing is the act of using a new mortgage to pay off the old mortgage, with the same property serving as security. This process, which should not be confused with taking out a second mortgage, is the transfer of the mortgage from one lender to another. There are many reasons why individuals may elect to re-mortgage, including consolidating debts, reducing the interest rate or monthly payment amount, or paying off the mortgage earlier.

If the current interest rates for mortgage loans are one to two percent lower than the rate of the individual’s current loan, it may be time to re-mortgage. Prior to committing to this change, homeowners should review the terms of the new loan and determine how long they will remain in the home. Closing costs must be paid during remortgaging and it could take a few years to break even, so a re-mortgage is not a good choice if the individual plans to sell the home during that time.

Extra cash in the pocket is another reason to consider remortgaging because it can lower the monthly payments. Borrowers can stretch the remaining loan balance out to 30 years, allowing those who had the previous mortgage for several years to reduce their payments. Alternatively, individuals can reduce their mortgage term, paying more each month, enabling them to pay off the new mortgage quicker and save thousands of dollars in interest.

Some people elect to re-mortgage because they want to access their equity in the property. The longer the homeowner has lived in the home, the more equity he or she has in it. Through a re-mortgage, the individual can get some of that equity and use the money for any desired purpose. Homeowners do this to pay for a child’s education, pay off debts, take a vacation, or make major home improvements.

Individuals who have bad credit should not let the situation stop them from considering a re-mortgage. It may take time to find a lender that offers an initial low fixed interest rate, but they are out there. When researching these lenders, be sure to read the fine print regarding fees and redemption penalties. Often, there is a fee for exiting the mortgage after the introductory rate period. These fees and penalties should be assessed to determine whether they are offset by the lower rate of interest.

If the decision is made to re-mortgage, individuals should plan ahead to take advantage of interest rates when they are at their lowest. Reducing the current loan to under 75 percent of the property value will help an individual secure the best re-mortgage rates. Borrowers who are already into the variable rate term of their mortgages will often find that any remortgaging fees are much less than the variable rate.

Homeowners should consider their current financial situation and anticipated period of home ownership when they are reviewing the available re-mortgages. Since interest rates fluctuate daily, individuals may need to act quickly to get the best deal. They should know exactly what features they desire in a re-mortgage and jump on the loan that contains those.

Mortgage Advice

Considerations when Choosing a Mortgage

Posted on December 17, 2010 by admin | Permalink Comments Off

A mortgage loan represents the most major financial obligation most people enter into during their lifetimes. Many people apply for mortgages multiple times within their period of homeownership. Shopping for mortgages involves consideration of many factors to reach the most cost-effective and financially feasible decision.

When selecting a mortgage in the U.S., choosing between an adjustable or fixed interest rate is one of the first decisions. The fixed rate mortgage features the same interest rate throughout the lifetime of the mortgage. In an adjustable rate mortgage, the interest rate is adjusted up or down during certain times of the mortgage term, making it ideal for those who do not plan to own the home for many years. In general, an adjustable rate mortgage features a lower initial interest rate than a fixed rate mortgage and the rate will adjust upward, often after the first year.

The term, or length of time covered by the mortgage loan, should also be determined. As mortgage terms decrease, the interest savings becomes more pronounced. Common terms are 15, 20, and 30 years and individuals should always compare 15 and 30-year term payments because the difference may be smaller than they expect. Those who are not able to afford a 15-year mortgage should try to make at least one additional payment annually on a 30-year loan because this will reduce the term by close to ten years if it is done every year.

Conventional, VA, FHA, and no-document loans are the most common mortgage types. The federal government does not insure a conventional, or traditional, mortgage but private corporations that are government regulated administer most loans over $275,000. An FHA mortgage is insured by the Federal Housing Administration and is designed for first-time and low to middle income buyers.

FHA loans feature more relaxed standards for qualification than do conventional loans. However, there are limits regarding the maximum loan amount. Borrowers can select from 15 and 30-year fixed loans and one-year adjustable loans. Home buyers who qualify due to military service should consider the mortgage loans insured by the Veterans Administration. These feature as little as no money down and have more lenient qualifying ratios than conventional loans.

Individuals who are self-employed, do not want to verify their income, have little or no credit, or have a poor credit history will find no-document loans a nice option. The application process does not require the borrower to provide employment, asset, or income documentation. Since little verification is done, the approval process is streamlined. However, these loans are not offered by many lenders and they feature higher rates of interest.

Points, which are one percent of the loan amount paid to the mortgage broker or lender in cash at closing, are another consideration. These represent one of the first charges associated with the loan and individuals should determine whether they want to pay these prior to completing the mortgage application. When comparing mortgage loans, individuals must consider points, an interest rate of a fixed or adjustable nature, loan terms, and loan type, to find the mortgage that is most suitable.

Mortgage Advice

Are Mortgage Rates Going Down?

Posted on December 17, 2010 by admin | Permalink Comments Off

The economy is in quite a state recently and as a result, everything seems to be acting in an unusual manner. Currently, mortgage rates are up but are holding, with current 30-year fixed mortgage interest rates at about 4.25 percent for qualified buyers paying a one-point origination fee. The rate for a 15-year fixed mortgage is 3.75 percent, while jumbo mortgage rates remain unchanged at the record low of 4.875% for a 30-year fixed loan.

FHA mortgage rates mirror the rates of conforming mortgages, with a 30-year fixed FHA rate at 4.125 percent, which is only slightly less than the 30-year conventional rates. However, FHA fees and required mortgage insurance make the FHA loan closing costs higher.  Overall, mortgage rates are approximately 0.25 percent higher than they were just a few weeks ago and they are well above their all-time record lows.

Though they are not the lowest they ever were, these rates are still excellent and much lower than what individuals could find only one year ago. For months, the rates have steadily dropped and when they looked like they might head back up, they reversed their course and continued their march downward. Some experts predict that the 30-year fixed rate on a conventional mortgage will drop below four percent in the near future.

As we near the end of 2010, one can never tell what will happen with interest rates. With Republicans gaining additional seats in Congress, consumer confidence will likely be affected and the fallout may cause changes to the mortgage rates. As things stand right now, it is a great time to purchase a home or to refinance. Not only are the mortgage rates low, home values are depressed and foreclosures abound, making this a buyer’s market.

In terms of refinancing, the rates are falling, dipping below four percent and providing homeowners with an excellent way to ease their financial worries. Refinancing rates are expected to drop further through 2011 and increase by the end of next year. A record number of people are taking advantage of the current situation and refinancing their homes. In an attempt to tighten the competition, banks are keeping initial mortgage and refinancing rates low so they can attract customers.

To maintain the stability of the U.S. financial system, the Federal Reserve moves short-term interest rates. As the economy experiences ups and downs, this often causes the Fed to take action. Though the changes it makes only have a direct effect on short-term loans, they indirectly affect long-term loans such as mortgages.

Home ownership is a great investment, especially now when home prices are so low. Individuals who can find an undervalued home and get a mortgage with a low interest rate win twice. Those who currently have a mortgage but want to use the equity in the home to pay off debts or just lower their monthly mortgage payment should consider refinancing. In either situation, people can save a lot of cash if they act now rather than waiting until the economy rebounds.

Mortgage Advice