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In case you have an ARM on your mortgage and trying to sell your house for a while, but so far no luck. Your company is transferring you & is paying for your rent on your new location, pay for utilities on your house right now You have not refinanced, because you trying to sell your home. Meanwhile, your mortgage continues to rise! Maybe you
feel like refinancing now, so that you can save on the increase in your mortgage. Maybe this will be not worth it…

What do you say? To refinance or wait till you sell your house. Probably the cost of closing on a new mortgage loan will cost you more then the increased payments you have now. Basicly, it all depends on how long it will before you sell your home! A suggestion might be to call around to some lenders & see what they recommend.

On the other hand if you can refinance at minimal closing costs, then this can be a solution, but if this is not the case as mentioned before, it’s probably better to stick with what your got now. Other important questions you should as yourself are relevant as well to make a decision: how long you will have to keep your house, how long your company will keep on paying your rent, etc. All those things are important to see if it is worth it or not! Maybe you should even lower your price on the house if you get desparate.

Should you inform your mortgage bank that they should contact person and take off your name from the mortgage? What are your rights here since the house is on somebody else’s name now. If your mortgage bank isn’t informed about the situation you are the one who still has to pay the mortgage, whereby late payments can show up on your credit report. This person is let see an investor and not living in the house and tells you to sign paperwork and he promises to get you a good chunk of money for your house! This investor promised you that he will give you back your money (mortgage payments) as well once the house has been sold, there is no written contract.

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It’s important in this sort of situations to trust your instincts from the very beginning! If something doesn’t look right, you must ask questions and if in doubt, get out and don’t sell the house. You might losing here tens of thousands of dollars at the end of the road! A suggestion is to retain a lawyer and report activities of this investor. A bad credit report will cause probably a higher interest rate in case you want to buy a house in the near future & who knows which other costs will be involved!

Do keep track of all of your paperwork (including correspondance and e-mails). Also it is a good idea to send a certified letter to this investor where in you explain the situation & the oral agreement you had in detail. For sure a lawyer can give you all the advice on this matter. Anything you can get from this person in writing will be a great advantage for you (like a contract, IOU or a promise to pay).

A broker finds different mortgage lenders around the country that offers the lowest interest rates and a broker puts all lenders together with customers who need to buy or refinance a house.

A broker can search the web for financial companies in the US, next the broker negotiates in order to get the lowest rate possible. The last few years there is trend called ‘adjustable-rate mortgage’.

The interest rate of an ARM changes in response to other rates all the time. The interest rates for those types of mortgages are normally lower in the beginning than a ‘fixed-rate mortgage’ in order to compensate for the risk that the rate could increase later on. As soon as the mortgages adjust & interest rates increase, most people have trouble making payments on time. Therefor consumers typically want to refinance into fixed-rate products.

Requirements of banks to lend to their customers are strict. Most banks will give best interest rates to those customers with good credit ratings. Customers with poor credit scores can borrow money at higher rates!

Subprime lenders make mortgage loans to customers with low credit ratings.
Those lenders made too many mortgage loans to people who were not able to make their monthly payments. From the moment home prices started to fall, people finding it hard to make payments and noticed it was sometimes cheaper to walk away. The reason for this is that these mortgage loans don’t require down payment or paperwork regarding annual income.

2006 subprime mortgage loans started defaulting at a higher rate then was expected, with many borrowers becoming overdue within the first three months of the loan. Next when more homeowners defaulted, the subprime mortgage lenders who promise investors that they will buy back troubled loans within a certain time frame, can’t honor those obligations and stop their activities as a subprime lender.

What is the meaning of subprime mortgages?

Prime borrowers are people whose credit ratings are generally above 620, ranging from 300 to 850. Borrowers who don’t make this cut are considered ’subprime’ and therefore people with poor credit ratings. Their rates are anywhere between 2-5 percentage higher than folks paying ‘prime’ rates!

How effect these subprime problems me & my mortgage?

Home owners with only a interest mortgage, like a option ARM (Adjustable Rate Mortgage that offers a choice of payment options ranging between a minimum payment or only interest to fixed rate levels) or other exotic mortgage loans might see soon their payments increase. Many of these mortgage loans are fast reaching the date when mortgages reset to a higher rate or come due in their entirety.

According to specialists those resets will create a mini re-financing boom. Home owners who looking to refinance notice that they can’t borrow as much as they wish, either because mortgage lenders became more strict regarding their criteria or their property values have dropped. Some customers with subprime mortgage loans are not able to refinance anymore because they don’t meet the minimum criteria needed.

And if subprime borrowers are closed out of the home market, less buyers put downward pressure on real estate values. This could be a problem for people who need to borrow or sell against their own equity!

Who will be hurt?

People who have application requests pending with sub prime lenders who closed their doors. Being without a lender, home buyers risk to loose homes they have already contracted to purchase.

Also being hurt are customers who took already out loans, but they couldn’t afford back when mortgage lenders were lending to almost anyone who was applying!

What action should home buyers & homeowners undertake?

Mortgages could be in for a rocky few years. Saying that people with upcoming borrowing needs shouldn’t ignore offers. Those folks with mortgages that are about to reset may want to re-finance at this time, and those people who plan to finance their children like college education with their home equity may want to start arranging their mortgage loan or line of credit.

What products are attractive in the current market?

At this time the fixed rates looks very good. Check out both: the 30-year fixed rate & the five-year ARM mortgage.

Subprime mortgages are still available?

Subprime mortgage loans made up 25 percent of the national mortgage market in the last three years, therefore there is no change that they will disappear at this stage! Though lendin criteria have changed a lot. Subprime mortgage loans are still available, but not without a down payment. There is a good change that mortgage lenders will not offering low-cost teaser rates in this mortgage market.

Question about mortgage interest deductions:

Let see… a family member was paying on a mortgage loan, but suddenly had to go abroad to take care of his sick parents.

No mortgage payments were made in 2006, nor was any income supplied for my mother. My mother had a few part-time jobs, but could not afford to pay the mortgage. Therefore, 2006 I assumed the bill & payed all of the mortgage payments myself.

The question here is, who deducts the mortgage interest paid?

Should it be on my mother’s tax return, since the mortgage is in my mother’s name?

Or, will it be on mine, since I am the one who paid all the time. I worry that if I put it on my mother’s name, the IRS will wonder how she was able to pay all that interest herself, when my mother didn’t have even a third of that income!

What are your thoughts?

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Answer:

The only person that is eligible to deduct the mortgage interest is the person that is on the mortgage loan. The lender will send your mother a tax form at the end of each year that shows how much interest your mother paid during the tax year. This interest deduction follows the social security number of the mortgage borrower.

At the closing of the mortgage loan, the borrower needs to fill out a form that makes them eligible to deduct the interest. Although you are right since you are the one who paid the interest throughout 2006, I do not think it’s possible that you can deduct on your tax forms.

Question: I would like to refinance a home in which I have a large amount of equity. The problem is not to get refinanced. I know a broker with whom I have worked for many years. Besides that I know what my closing costs/APR will be.

I also contacted a different broker who says that his mortgage company can offer a ‘cash out’ refinance without closing costs. I have no idea if this broker is telling the truth.

Answer: There is no such a thing like ‘free’. The closing costs (loans with ‘no closing cost’) are not for free, they are just hidden somewhere!

Most of the time, the rate is higher than what you pay for a mortgage loan with the same terms and conditions from another mortgage lender. An additional 1/4 percentage point every month is enough to cover all the closing costs on a mortgage loan that stays on records for example 7 years, what is basicly how long customers keep a mortgage loan before trading it in for another loan or selling the house etc.

If the mortgage broker tells you, he is paying the closing costs on your behalf, the broker might be receiving what’s called in the trade as a ‘Yield-Spread-Premium’ fee, also called a kickback from the funding mortgage lender for bringing in a mortgage loan at a rate that is more then the current market is using. Yield Spread Premiums are also known under a different nam: ‘gain-on-sale incentive or ‘par-plus pricing’!

The mortgage lender maybe wants to take some of the costs for his account, especially if the financial company has a special agreement with a title company. Definitely it can’t assume all the costs, otherwise the company will not stay long in business. I mean someone has to pay the mortgage lender!

Unless Yield Spread Premiums are disclosed on the good faith estimate, the GFE (first rate funding) won’t do you much good for you. In case the fee is disclosed, there is very good chance that the closing numbers will be different from what you were quoted by the lender in the very beginning. Therefore the best thing to do is stick with the professional you know and trust!

Mortgage lenders, financial institutions, credit card companies, etc. will look at the so called ‘3 Cs’ which are character, capacity and credit. Based on that they decide whether you are considered as a good risk!

Character:

You receive character points for keeping jobs for reasonable period of time.
Moving to different jobs often is not a good thing to do.

Capacity:

The more debt you will be able to repay, based on your salary/income and assets you have, the more capacity you will have.

Credit:

Someone has a good credit when he is paying his bills on time (creditors).

Many folks have financed their home with an ARM (= adjustable rate mortgage). Is it a good time to refinance now, and the big question if interest rates will increase?

Many factors play a role here:

In case rates are increasing would you consider refinancing your home loan?
When rates are falling this is not a relevant question. You would consider a refinance of your mortgage loan whether it be a fixed loan or equity loan. In case rates are rising consider refinancing only if you want to take cash out of the equity in your house or if you think it’s time to lock in a fixed rate. If the mortgage market appears to be on a longer rise, locking in a fixed rate at this time can save you financial in the future. Owners of houses with ARMs can rise at the end of the initial low rate ARMs charge for the first year. Right now that means your mortgage rate can increase with approximately 2.75 points depending on your lender agreement. This means higher payments then you paying now!

When you do a refinance, you must take the actual cost into consideration. The amount of money you going to spend to arrange the financing takes time to recoup. Also it’s important to know here if you planning to live in your house long enough. Otherwise it might be not a smart idea to do so. If that’s not the case, look for low cost home equity loans! When you have a good arrangement with your bank, maybe they can reduce your costs on a home equity line of credit or mortgage loan.

If you require a fixed mortgage payment, then you should consider doing it. It goes like this: rates rise for a while, then stay stable for a while, next they will drop. A change in the mortgage market attitude & spending of consumers must happen in order for the Fed to reduce rates. Don not refinance your mortgage loan if there is no good reason. Paying for a luxury vacation is most likely not a good thing to do with the proceeds of a loan when rates are rising! If you need to pay off some debt, think about it before you will proceed. Do some research, talk to your bank, people who have knowledge before you take any action. It’s possible to reduce your mortgage payment or get a fixed payment if that is what you want.