03 Mar 08 Refinance Plan Meant to Help Curb Rising Foreclosures

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The article, Mortgage crisis: Don’t forgive debt, just postpone repayment on CNNMoney.com explained some of the details for a new refinance plan meant to help curb the many foreclosures projected over the next few years. Basically, the idea is to reset the amount of a homeowner’s mortgage so that they are only making monthly payments on the current value of the home. For example, if a home was purchased 3 years ago for $300,000 and is now worth only $250,000, the homeowner’s mortgage would be adjusted so that the they only pay the monthly payment on a $250,000 home loan. This would likely save thousands, if not millions of families hundreds of dollars a month. The best part about this new plan is that every homeowner can opt to take advantage of it, even if they are current on their mortgage.

This plan would not necessarily leave the banks high and dry because the banks are still owed the money. If the homeowner sold the home a few years later, the bank would be reimbursed from the profits made from the sale of the home. For instance, if the homeowner sold the home from the example above in 10 years for $310,000, the homeowner would get $10,000, and the bank would be entitled to the remaining $50,000 as payback on the original amount of the mortgage. It basically allows the homeowner to postpone repayment on a portion of their original home loan. This plan could help many American families avoid foreclosure, and the money lost or placed on hold by the banks would likely cost them less than if the property was foreclosed on.

As a homeowner who recently purchased a new home, I stand to benefit from this plan, but what about homeowners that bought years and years ago? Other than helping the nation avoid a possible recession, this plan does little for these homeowners financially. However, in most cases, because these homeowners have equity in their homes, they are able to capitalize on the current interest rate reductions that many recent buyers miss out on because their current loan to value (LTV) ratio is too high.

The article mentioned that there are a lot of details that still need to be worked out before anything happens. As it stands right now, it’s just an idea waiting to be implemented.

How many appraisers like this plan?

Tags: cnn money, foreclosure, home loan, homeowner, loan to value, mortgage help, new homes, refinancing

19 Dec 07 The New Combo Loan

Any home loan over 80% of a homes value requires that the homeowner takes out a mortgage insurance policy. Traditionally, a Combo Loan has been a term used to describe the process when a home buyer takes two loans out on a property to avoid mortgage insurance. The first loan is typically at 80% of the homes value; the second loan makes up the other 20%, or the percentage that is left over after the down payment. This loan is also commonly referred to as an 80 – 20 loan or a 100% financing loan.

More recently, lenders are using the term Combo Loan to describe the process of bundling all or most of the consumer’s dept into one large loan with a low interest rate. This loan would include the home loan(s), car loan(s), and credit card debt; other consumer debt may also be included. The benefit to the consumer is that their debt is consolidated into one or two monthly payments, it becomes preferred debt and they lower their monthly bills. Another benefit of a Combo Loan is that it doesn’t affect the consumer’s credit rating the same as other popular consolidation programs.

There are several Combo Loan programs available. In most cases, the Combo Loan program is setup so that the borrower makes two monthly payments or takes out two different loans. One loan is setup on a 30 year payment plan and the second is setup to be paid over 15 years. There are many more options available so before considering a Combo Loan, be sure to seek advice from a qualified professional. Make sure you weigh the benefits against the costs as these loans are not for everyone. Often, consolidating debt into one loan can free up extra money each month which will allow you to save more or put more money toward your current debt.

Tags: 80 / 20 loan, combo loan, debt to income, eighty twenty loan, financing, home loan, mortgage loan, preferred debt

30 Sep 07 Little Things Add Up…

Traditionally, as home buyers, after we found the new home of our dreams, we spend hours and even days searching for the best home loan with low interest rates and low closing costs. We fight for the lowest possible monthly payment and most of the time don’t think twice about our total cost of interest or if we can pay off our home loan a little sooner. For most of us, after we sign our closing documents, we forget about it, and go through life paying the minimum payments.

Little things add up when paying down your home loan. The most popular loan program most homeowners do take advantage of is bi-weekly mortgage payments. This approach is a great way to pay down your loan faster and save money on interest payments. It basically adds up to an extra payment a year and makes a huge long and short term difference on the interest you pay. Lenders usually charge a set up fee but this is offset with the eventual savings. If you didn’t have the option to take advantage of this approach, or opted out of it, you may want to contact you lender to see what you can do to set up a bi-weekly payment option. If you are unable to make bi-weekly payments you can always pay a little more on each payment or make a large lump sum payment each year. By paying your principle down faster, you will save thousands of dollars during the life of your loan. Recently, several programs have developed that can help you pay your mortgage off in as little as 15 years.

Like everything else in life, it’s the small things that matter, and your efforts to pay your principal down now can put you in a great place in the near future. Before agreeing on a loan, ask your lender what you can do to pay your loan off faster and save money on interest. Many lenders have great programs and useful information. Taking the time to learn a little more about paying your principle down faster can significantly reduce the interest costs of your real estate investment.

Are there any loan programs you recommend?

Tags: home buyers, home loan, Homes for Sale, interest payments, lenders, mortgage, new homes