Thursday, August 20, 2009

Mortgage Plain-talk: What's the Difference Between "amortization" and "term"?

There are many stresses associated with home buying - both financial and emotional. And frankly speaking, it doesn't help that the process comes with its very own foreign language. While your mortgage broker can help de-mystify these terms, it helps to have a bit of a primer on what some of these terms mean. After all, it's your money and your home we're talking about; as a Mortgagor, you have a right to understand what you're reading. (You didn't know you were a mortgagor? Read on...)

We'll start with Amortization" and "Term". Both refer to periods of time in the life of your mortgage, and you'll want to be sure that you understand the difference.

The amortization" of your mortgage is the length of time that would be required to reduce your mortgage debt to zero, based on regular payments at a specified interest rate. The amortization period is typically 15, 20 or even 25 years, although it can be any number of years or part-years. You could establish that you are able to make a certain payment each month of say $950 for your $130,000 mortgage at 5.5%. In this case, your amortization period will be just under 18 years. Or you could tell your broker that you'd like to be mortgage-free in just 10 years. With an amortization period of 10 years at the same interest rate, your $130,000 mortgage will cost you about $1,407 per month. That's a tougher monthly payment, but you would save thousands of dollars in interest. (More than $35,000, in fact.) As you arrange your mortgage, then, keep in mind that your amortization period may be fairly long -- although the shorter you can make it, the less you'll wind up paying for your home in the long term.

The "term" of your mortgage will typically be shorter. The "term" is the duration of your mortgage agreement, at your agreed interest rate. This will be a very specific length of time, although you will have several choices. A 6-month mortgage is a very short-term mortgage. A 10-year mortgage will be one of the longest terms, generally with a higher rate of interest to represent the higher degree of uncertainty in the economic outlook. After your mortgage term expires, you will need to either pay off the balance of the mortgage principal, or negotiate a new ontario mortgage at whatever rates are available at that time.

Now, back to the term "Mortgagor". This is one of three very similar terms: "Mortgagee", "Mortgagor", and "Mortgage". A Mortgagee is the lender of the money: a bank, company, or individual. A Mortgagor is the borrower: the person or persons (or company) that is borrowing the money, and who will pay it back to the mortgagee. The Mortgage, of course, is the legal document that pledges the property as a security for the debt.

Still confused? Speak with a mortgage professional. Get the best mortgage suited to your needs and all your questions answered in plain talk.

Tag : mortgage,mortgage rates,mortgage refinance

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Sunday, August 16, 2009

Fix Your Mortgage - Set Mortgage Payments Reduce Stress

There's no doubt that for most of us, a home is the biggest purchase we'll ever make. If it wasn't for mortgages, there's no way most of us would ever be able to afford a home.

Despite that, the mortgage can be an enormous source of stress and aggravation. Disputes over money are one of the most common causes of marital breakdown. If you've chosen an adjustable (variable) rate mortgage, an increase in interest rates can make your repayments quickly rise to a level where you just can't afford it any longer.

In that situation, not only do you have to deal with the stress of trying to make the mortgage repayment each month, you also have the fear of losing your family home mixed in. For some people they live with that possibility on a day-to-day basis. No wonder marriages suffer as a result.

If you're worried that a few interest rate rises will make it impossible for you to make your repayments, then maybe it's worth considering a fixed rate home loan. With a fixed rate loan, you are locked in with a set interest rate for either a set period (say 5 years) or the entire period of the loan. This can give you great peace of mind, because although your repayments may start off a little higher, you have the certainty of always knowing what the repayment will be, and can budget accordingly.

Fixed rates can work in a couple of different ways. One is to set the loan as a fixed rate loan for the entire period of the loan. The only problem with this is that you may have a loan that last 25 years, but you need to sell up and move elsewhere either for work or lifestyle long before the 25 year period is over. Many fixed rate loans have quite hefty break costs, which may make the process of moving a lot more stressful than it needs to be.

Another option is to fix the rate for a set period, say 5 years. This works well for a lot of people, as the average time in a house is 5-7 years. So it's possible that in 5 years time you'll be getting close to moving anyway. It's also quite often the case that after 5 years, mum may have returned to work after having a couple of children, improving your financial situation to the point where you may want to investigate other loan options.

A further option is to take an interest only loan, with a fixed rate of interest, with a balloon payment. This can reduce your monthly payments enormously, which can be very helpful in a time of transition, such as the early years of starting a family. The disadvantage is that you pay little or nothing off the loan in that time. Also, if you want to remain in your home at the end of the interest only period, you will need to organise another loan to continue on.

There's no doubt that having a fixed mortgage payment each month can make life much easier. You can budget for all the usual household bills, confident that your mortgage payment won't change. Yes, it's quite possible that over the term of the loan you may well end up paying more than if you'd chosen an adjustable rate mortgage, but sometimes money isn't the only thing that's worth something - peace of mind and a reduction in stress is definitely worth something too.

Tag : mortgage,mortgage payments,mortgage rates,mortgage refinance

Wednesday, August 12, 2009

How To Choose The Best Deal With Home Loan Mortgage Refinance

Home Loan Mortgage Refinance refers to replacing the existing mortgage with the new one when required. Many circumstances lead the people to do so. Refinancing your mortgage gets you number of benefits but to get these benefits, it requires you to choose the best deal. If you choose wrong lender and fail to get the appropriate deal, you may have to incur loses in spite of enjoying benefits.

The most important thing to be taken care while availing Home Loan Mortgage Refinance is the cost of the loan. Lenders impose a number of charges in the name of processing fee like, Lender fee or funding fee, Attorney fee, Appraisal fee, Credit report fee, Document preparation and recording fee, Origination or underwriting fee etc.

With this you should also consider the interest rate offered by the lender, compare the interest rates offered by different lenders and processing fees. A cut throat competition in market lets you get the refinance loan at reasonable price. You should also check whether the interest offered by the lender is fixed or adjustable.

You should also check the closing fee of the loan. Sometimes it happens that you get enough money any how so that you repay your complete loan at once, then it requires closing fee to be paid to the lender. If the closing fee is high then, either you will have to go with burden of loan otherwise, you will have to pay a big amount for this which would lead you to save nothing. Therefore, this condition should be taken care in advance. Closing fee includes- Flood determination, State and local taxes, Surveys and home inspection fees, prepaid private mortgage insurance or PMI, Prepaid amounts towards interest, hazard insurance, taxes, etc.

After comparing the quotes and finding the best lender you need, you can also negotiate with lender. Write all the fees together and negotiate with lender. This way you can find the best of best deals. Your ultimate aim towards finding the best deal with Home Loan Mortgage Refinance is to save as much money as you can. Home Loan Mortgage Refinance gets you rid from a lot of financial troubles you are facing.

By: Christen Scott

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Tag : mortgage,mortgage refinance,mortgage rates,mortgage loan

Monday, August 10, 2009

Interest Only Mortgage? Consider A Graduated Payment Mortgage

Graduated payment mortgages (GPM) offer financing solutions for those who expect their income to rise in the future. A hybrid of an adjustable rate mortgage and fixed-rate mortgage, a GPM with its fixed interest rate starts with low payments that increase yearly based on the loan’s terms. If you have considered an interest only mortgage loan in the past, you might want to consider the benefits of a graduated payment mortgage instead.

GPM Features

A GPM offers low monthly payments by increasing payments for the rest of the loan’s term. At the beginning your mortgage will not completely cover your interest charges (negatively amortizing), but larger payments will be made later on to cover both interest and principal.

Generally, a GPM’s beginning payments will be a couple of hundred dollars less than a comparable fixed-rate mortgage. However, in later years you can expect to pay at least a hundred dollars more in monthly payments than a fixed rate mortgage payment.

Lenders also offer several different types of payment plans. The most common is to graduate payments annually for the first seven years, after which payments remain the same. Longer graduated periods or a greater rate of increase can lower your initial payments even more.

GPM Benefits

A GPM allows a borrower to enjoy low monthly payments with the security of a fixed-rate. Most homebuyers expect their income to increase if only due to inflation. A GPM takes advantage of this situation by increase payments as your income should increase.

A GPM also allows you more buying power based on the lower monthly payments and expectation of increased income. With initial reduced payments, you can pay for moving expenses and home furnishings.

GPM Drawbacks

Like with any type of mortgage loan, you need to weigh all the factors before choosing a GPM. One of the risks with a GPM is that you may not be able to afford the higher monthly mortgage payments, which could threaten your financial situation.

You may also find that if you have to move within a couple of years that you may owe on the loan after selling due to negative amortization. Even if you don’t owe interest, you will have very little equity in the home until several years into your mortgage.

Consider your financial goals with different financing packages to find the best fit.

Tag : mortgage,mortgage rate,mortgage refinance,mortgage loans

Thursday, August 6, 2009

Pick the Right Perks for your Adjustable Rate Mortgage

These are heavy days for Canadian homeowners. If you've been in your home even a few years, you've probably already enjoyed a modest climb in the value of your home. Even if you don't intend to sell, it's good to know that your real estate investment is doing well. But we're also enjoying an environment in which mortgage rates have reached historic lows.

That combination -- strong valuations and low mortgage rates -- has an unprecedented number of Canadians looking for ways to capitalize on the great opportunities available to them.

Whether it's to buy their first home, trade up, or take equity back out of their homes, Canadians are jumping at the opportunity to borrow at today's rock-bottom rates.

While many homebuyers are reconsidering the value of fixed-rate mortgages to lock in those low rates, you should keep in mind that adjustable-rate mortgages - the darling of the dropping rate trend - can still offer real value to homeowners. It's a matter of finding the right combination of mortgage features and options.

As banks have been joined by other lending institutions, we have seen our menu of ontario mortgage options grow accordingly - with some innovative new mortgage types now available to help Canadians take advantage of today's unusual opportunities.

One of the most innovative mortgages we've seen in a very long time is a new adjustable-rate mortgage with some very compelling features. First, it's based on an institutional rate benchmark known as Bankers Acceptance. Most of us are familiar with the rate benchmark known as Canadian Prime - and we are accustomed to assessing mortgage rates based on Prime. The BA, on the other hand, is the rate at which banks will lend money to one another - and it's typically a lower rate (sometimes much lower) than the prime rate offered to a bank's best customers. The new BA-based mortgage - compared to the best prime-based mortgage available - could have saved a mortgage client a bundle over the last several years, primarily because the prime rate tends to be "stickier" in an environment where rates are falling. Often, the more fluid, market-based BA rates deliver the rate change more quickly. The BA rate is no trade secret, by the way; pick up a copy of your favourite financial paper and look for the published money rates to find the Bankers Acceptance Rate.

But the attractive rate structure is not the only perk. The same BA-based mortgage - so welldesigned to help clients wring the last quarter point from their mortgage rate - now also comes with a rate cap which guarantees that your rate will never climb higher than 2.15% above the starting base rate - no matter what happens to rates during your mortgage term. There's no worry about locking in too high because the rate is always adjustable down.

Only the ceiling is fixed. It's a homebuyers' dream:

A mortgage with limited upside and unlimited downside. If you're thinking about buying a home this year, or you haven't had your mortgage reviewed in the last several months, take the opportunity to get an expert assessment of your many options from a mortgage professional. It could be the best investment you'll make this year!

Tag : mortgage,mortgage rates,mortgage calculator,mortgage loan

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