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Are You Really Ready to Own a Home?

Have you spent years renting homes or apartments and have grown tired of paying all that rent money to someone else? If so, then it might be your time to consider purchasing a home, and keeping that cash for yourself. However, you do need to ensure that you are prepared on more than one level before jumping into the equity market. There are many financial considerations to make note of before you start looking for a home. But, if you can arrange your finances into a sensible plan and secure a mortgage then this can ultimately be the most rewarding purchase you have ever made or will make.

Finance plays a huge role in the decision to purchase your first home. This is to be expected as if you are purchasing your first home you will not likely have a few hundred thousand dollars sitting around and will have to find a mortgage of some sort. You should really make sure that you are prepared for the application for a mortgage as it will involve a thorough investigation of your past credit history. If there are any issues that you know of with your credit then you should take care of them before you apply for the mortgage. Sometimes this is a simple case of oversight, some things have been taken care of and not recorded as such, and sometimes there can be some debts that you will need to see to. Once these are taken care of, be sure to get a letter of release that you can show to the mortgage broker or company if necessary. If there are no issues with your credit then that will only make the process easier.

There is no stronger tool in the home buying process than having all your financing in line before you start shopping. This is a great attraction for sellers as they want their homes to sell quickly and without incident or trouble in the money phase, a buyer with ready-to-go financing’s offers will hold greater favor with almost any seller. If you are mindful of these things then when the time comes to make your offer, the whole affair will go much more smoothly and you will be able to dedicate your time to what is important. How to decorate your new home.

When Is The Right Time To Remortgage

One of the great mysteries of our time concerns the matter of when to refinance. It used to be that borrowers would refinance only when rates fell by 2 full percentage points, a standard which makes no sense in today’s marketplace.

Now you can refinance quickly at almost any time: No less important, refinancing no longer takes a ton of cash.

It was in June 2003 when mortgage rates hit a low not seen in decades: 5.21 percent according to Freddie Mac. In the first quarter of 2006 rates are roughly 1.25 percent higher, a big difference in terms of monthly payments.

Refinancing when rates are falling is easy to understand, but why refinance when rates are rising?

The answer works like this: Some borrowers should refinance in full, some should refinance in part and some should not refinance at all. The trick is to know which option best meets your needs.

If you were fortunate enough to finance or refinance with a fixed-rate mortgage in the summer of 2003 or thereabouts you certainly want to hold onto such debt for as long as it makes sense. However, there are situations where even borrowers with loans at great rates should look at refinancing options.

Cashing-Out

According to the National Association of Realtors, a typical home cost $165,400 in 2003. As of January 2006, that same home was worth $211,000 — an increase of $45,600.

Growing home values tell us two things: First, if you want to refinance you likely have far more equity then even a few years ago. Second, that additional equity means you can get a lot of cash from your home without touching your current loan. This is great news if you have low-rate financing you don’t want to touch.

Go back to that 2003 home. Imagine it was bought with 5 percent down. That means a $165,400 house was financed with $8,270 in cash and a first mortgage worth $157,130. At 5.5 percent interest, two years later the loan balance has been reduced to $152,585. If the house is worth $211,000 today then the available equity is roughly $58,415.

You could get cash out of the house by getting a new loan for $211,000. However, if you refinanced for $211,000 it means the old loan would be paid off and replaced by a new loan at a higher rate. That’s not good.

The better choice is this: Get a fixed-rate second loan or a home equity line of credit (HELOC), a form of financing which usually involves an adjustable interest rate. Such additional financing leaves the first loan in place and untouched. By getting a second mortgage you hold on to the old loan and its low rate plus you get additional cash.

The other attraction of second mortgage loans is that they are often available with little or no cash out of pocket. This is not to say such loans are “free” or nearly free, instead what happens is that the lender pays most or all closing costs.

In exchange for closing help the mortgage lender charges a somewhat higher rate. In addition, loans that require little or no cash up front often have a pre-payment penalty. If the loan is refinanced with another lender or the property is sold within two or three years then a penalty may be due. Ask lenders for specifics.

Safeguarding the Future

It may be that your current financing has a low interest rate or a small monthly payment — for the moment. But borrowers with interest-only loans, option or flexible ARMs, or loans that convert from a fixed rate to an adjustable-rate mortgage after three to five years should be checked for potential payment shock.

In other words, a 5/1 ARM may have allowed you to acquire a property that has appreciated in value — a property that could not be financed at the time with a fixed-rate loan. Because you could get the loan you could get the property. In turn, because the value of most homes has risen substantially in the past five years, getting that 5/1 ARM a few years ago has greatly increased your net worth.

But the loan which was terrific a few years ago, the loan that was the right financing at the time, may soon become overly expensive if rates go higher. In such circumstances, refinancing now to a fixed-rate loan can be the smart move to defend your finances.

Consider a $300,000 two-step ARM made a few years ago. There’s a 5.5 percent start rate that lasts for five years then the loan converts into a one-year ARM for the remaining 25 years of the loan term.

The monthly cost for this loan during the first five years is $1,703.37 for principal and interest. In year six, let’s say the new rate is 6.50 percent and the mortgage balance has been reduced to $276,949.78. The new monthly payment for principal and interest will be $1,869.98.

Is the higher monthly cost a problem? If your income has risen over five years, then no. But what if rates go higher than 6.5 percent? At 7.5 percent — not a high rate by the standards of the past 25 years — the monthly payment will be $2,046.63 for principal and interest. Insurance and taxes are extra, of course.

Like cars, loans are bright and shiny when new but they can become outmoded over time. At the very least, it’s appropriate to see if the loan that worked so well a few years ago is the right loan for today — or for tomorrow.

Residential Mortgages Locating Funds In Residence

I bet you had the same reaction when you heard “residential mortgages” – you probably thought they are some new strain of mortgages? Well residential mortgages are our good old mortgages re-packaged with a different name. That makes residential mortgages one of the most reliable, flexible, innovative loan products to frequently find solutions for those individuals for whom loans mean a freedom from financial constraints.

Mortgage rates are still at a fairly low which makes mortgage one of the most sought after product. This also means that one find the best residential mortgages that they can ask for. But it is always with residential mortgages that finding the best mortgage can be like a Gordian knot. The hunt for residential mortgage begins with understanding which mortgage product suits your circumstances. When you know what you want it is easier to shop.

Residential mortgages have different mortgage products depending on the interest rates. The various residential mortgage are – fixed, variable, capped, discounted, cash back, tracker.

Fixed residential mortgages will have a fixed interest rate for a fixed period of time which then changes to variable rate. With Fixed residential mortgage you enjoy the same rate even if the interest rates rise. You have the freedom to plan your budget for you know in advance your monthly outgoings. One of the obvious disadvantage is that you cannot make use of fall in interest rates.

With the Variable rate residential mortgages the interest rate rise and fall according to the changes in the interest rate. This means that if the mortgage interest rates fall, you pay lesser. However, in case the interest rates rise you pay more. Unless, the borrower is capable of paying higher interest rate, they should opt for fixed rate mortgages. Variable rate will be either the lender’s variable rate or any standard rate like the Bank of England’s base rate.

With capped rate residential mortgages you are linked to a variable rate but there is limit up to which rates can rise, known as the cap or the ‘ceiling’. These residential mortgages prevent you from any significant rise in interest rates. Another mortgage on similar lines is cap and collar mortgage where the rate you pay does not fall beyond certain limit.

Discounted rates with Residential Mortgages the payments are based on the rate which is lower than variable rate for a specific period of time. This gives you an opportunity to have lower interest rate especially if you are setting up a new home. Nonetheless, if your payments rise while you are on discount the monthly payments will increase.

With cash back mortgages in place of a discount you get a lump sum or cash back which depends on the amount of mortgage you receive. Monthly payments are linked to a variable rate. This residential mortgage can prove to be very useful contribution by providing cash when you need it. Tracker residential mortgages link your interest rate to some independent rate like Bank of England base rate. The interest rate for your mortgage rises and falls with the independent rate.

The variation with residential mortgages is much more than the above mentioned. Sub-prime residential mortgages are formulated for borrowers with not so good credit. Non-conforming residential mortgages called jumbo loans exceed the set loan limit and enable you to borrow more. However, they have a higher interest rate than other mortgage types.

Real estate prices are rising making home buying not financially feasible for every borrower. Council tenants can become homeowners with Residential mortgage with a specialized product called council right to buy. First time buyers mortgage can help anyone become a homeowner.

Don’t forget to ask for APR (annual percentage rate) because this will decided how much you pay each month. It is the most important question while applying for residential mortgages. Credit score, income, personal financial status are some of the questions you would be asked. Residential mortgages are an individualized concept which makes them unique for every borrower.

With mortgage your home is at risk if you fail to repay. Should you mortgage or not? This is not an easy question to answer. Just take a moment and think of all the information you have and use of this to make an informed decision. It is not a decision that you can’t make if you don’t forget to ask yourself how much you can afford.