Barclays offers zero down payment mortgages in UK – May #online #mortgage


#zero down mortgage

#

They’re back! Barclays offers 0% down payment mortgages in UK

When the global financial crisis exploded, economists were quick to lay some of the blame on mortgages that did not require a down payment.

The risky loans all but vanished as banks reacted to the housing market collapse. Even as interest rates dropped, down payment requirements moved higher.

But now they’re back: Barclays ( BCS ) has become the first big British bank to offer 0% down payment mortgages since the crisis as part of a program called “Family Springboard.” There is a catch, however.

Barclays will grant a mortgage to buyers with no down payment provided a “helper” (read: parent) is willing to put 10% of the purchase price into a savings account. If the buyer makes their loan payments, the bank will return the 10% deposit after three years, with interest.

There’s a logic to the scheme: Barclays said that 35% of first time buyers in the U.K. ask their parents for help when securing a mortgage. Of those, 20% see the money as a gift from the “bank of Mum and Dad.”

Buyers do face a tough market — especially in London. UBS says prices in the city have jumped 40% since 2013 alone. In response, the government has tried to tamp down the market with higher taxes on second homes and property transactions.

Under the Barclays program, first time buyers with incomes above £50,000 per year ($72,000) can borrow up to 5.5 times their annual earnings.

“We want to offer more people a way to get on the property ladder and to walk through the door of their first home earlier than they perhaps thought,” said Raheel Ahmed, head of Barclays Mortgages.

Home loans with low down payments have also made a comeback in the U.S. Fannie Mae and Freddie Mac, which guarantee more than half the country’s mortgages, have slashed minimum down payments from 5% to 3%.

Bank of America ( BAC ) is also offering mortgages with as little as 3% down.

CNNMoney (New Delhi) First published May 4, 2016: 9:27 AM ET


Barclays offers zero down payment mortgages in UK – May #pre #approval #mortgage


#zero down mortgage

#

They’re back! Barclays offers 0% down payment mortgages in UK

When the global financial crisis exploded, economists were quick to lay some of the blame on mortgages that did not require a down payment.

The risky loans all but vanished as banks reacted to the housing market collapse. Even as interest rates dropped, down payment requirements moved higher.

But now they’re back: Barclays ( BCS ) has become the first big British bank to offer 0% down payment mortgages since the crisis as part of a program called “Family Springboard.” There is a catch, however.

Barclays will grant a mortgage to buyers with no down payment provided a “helper” (read: parent) is willing to put 10% of the purchase price into a savings account. If the buyer makes their loan payments, the bank will return the 10% deposit after three years, with interest.

There’s a logic to the scheme: Barclays said that 35% of first time buyers in the U.K. ask their parents for help when securing a mortgage. Of those, 20% see the money as a gift from the “bank of Mum and Dad.”

Buyers do face a tough market — especially in London. UBS says prices in the city have jumped 40% since 2013 alone. In response, the government has tried to tamp down the market with higher taxes on second homes and property transactions.

Under the Barclays program, first time buyers with incomes above £50,000 per year ($72,000) can borrow up to 5.5 times their annual earnings.

“We want to offer more people a way to get on the property ladder and to walk through the door of their first home earlier than they perhaps thought,” said Raheel Ahmed, head of Barclays Mortgages.

Home loans with low down payments have also made a comeback in the U.S. Fannie Mae and Freddie Mac, which guarantee more than half the country’s mortgages, have slashed minimum down payments from 5% to 3%.

Bank of America ( BAC ) is also offering mortgages with as little as 3% down.

CNNMoney (New Delhi) First published May 4, 2016: 9:27 AM ET


Should You Pay Off a Mortgage Early? The Answer May Surprise You! The Motley Fool


#pay off mortgage early

#

Should You Pay Off a Mortgage Early? The Answer May Surprise You!

Sep 14, 2014 at 7:00AM

Imagine a married couple — let’s call them Matt and Donna Smith — bought their dream house two years ago. The house was $250,000, and they paid $50,000 as a down payment. Since then, both have gotten raises, and with the extra cash, they are now asking themselves a crucial question: Should we pay off the mortgage early?

The math on this is clear: You should absolutely not pay off a mortgage early. You could lose money by doing this. But it’s funny how math is much less absolute when it’s dropped into the real world. There are hidden variables at play that make the decision to pay off a mortgage early the best option for the vast majority of Americans.

Couldn’t I make more by paying the mortgage on schedule?
Mortgage rates are still at historical lows right now — that’s an important factor in the math. Back when Matt and Donna bought their house, they took out a 30-year, $200,000 mortgage with a 4% interest rate. That equates to monthly payments of roughly $950. But after getting their raises, they can throw $1,200 at the mortgage.

A quick Internet search showed that the stock market averages roughly a 9% return per year over long periods of time. “Even if it’s only 6%,” Donna thinks, “it makes more sense to invest our extra cash instead of putting it toward a home. The stock market can give us a higher return.”

And, on paper, she’s right. Here’s how the two scenarios would play out in terms of the overall value, assuming the home’s value continues to appreciate at roughly 3% per year, while the stock market returns its average 9%.

Source: Author’s calculations. Home equity values calculated using amortization tables

Like any chart trying to predict the future, this isn’t perfect. The family could move, wages could rise, or any other number of variables could change. But the bottom line is clear: Using this simple math, not paying off a mortgage early means more money in your pocket (and house) at the end of 30 years.

Who wouldn’t want more money when all is said and done?

Can you really expect returns like that?
Here’s where the first lurking variable rears its ugly head. It is true that the S P 500 — since as far back as 1871 (though it wasn’t technically the S P 500 then) — has returned an annualized gain of 9.07% per year after dividends are reinvested. If every investor like Matt and Donna got returns like that, that would be phenomenal.

The problem is that the average investor does far, far worse than 9.07%. In fact, a recent release by JPMorgan Funds shows just how poorly the average investor has done over the last 20 years: 2.5% per year.

Why does this happen?

In a nutshell, the average person is not a good investor. They buy high, sell low, and generally shoot themselves in the foot over and over again by paying high fees. Because of this painful truth, paying off a mortgage early looks like a much better decision.

Of course, if you have a track record of successfully controlling your emotions and holding stocks for the long run, this might not apply to you.

But another key variable might.

What’s your goal: money or financial independence?
Earlier, I wrote: “Who wouldn’t want more money when all is said and done?”

Admittedly, that was a loaded question; there’s a caveat to it. What if you have less money but also a greater sense of financial independence? Would that change things? There’s nothing that can match the feeling of knowing you own your home outright and the bank can’t take it away. There’s also nothing like knowing you never have to make a rent or mortgage payment again for the rest of your life.

Wes Moss, author of You Can Retire Sooner Than You Think. has found — in his own surveys — that the psychological benefits of paying off a mortgage early are undeniable: “There’s a world of happiness and freedom out there just waiting for you once your biggest monthly expense is eliminated. Happiness levels rise undeniably as mortgages vanish.”

So, even if you have more money by not paying off the mortgage early, is it worth sacrificing the happiness you’ll experience by shedding the payment years — even decades — in advance?

The Smiths are a fictional couple used to illustrate the bigger points in this article. Try any of our newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .


Refinance To An ARM? The Timing May Be Perfect #10 #year #fixed #mortgage #rates


#5 year arm

#

Refinance To An ARM? The Timing May Be Perfect.

ARM Mortgage Rates Average 2.99%

Today’s mortgage rates remain near historical lows and, with more than 6 million U.S. homes eligible to refinance, a mini-refinance boom is underway.

According to Freddie Mac’s most recent mortgage rate survey, 30-year fixed rate mortgages currently average 3.93 percent nationwide; and, 15-year fixed rate mortgages average 3.16%.

However, for the right borrower, the 5-year adjustable-rate mortgage (ARM) looks excellent.

The popular ARM loan now averages 2.93%.

Mortgage Rates: 4.25 Points Beneath Averages

Each week, government-backed Freddie Mac surveys a network of more than 100 lenders to find the “national mortgage rate” for prime borrowers.

“Prime” borrowers are defined as those having a credit score of 740 of better; verifiable income with acceptable debt-to-income ratios; and a loan-to-value of eighty percent or lower.

The most recent Freddie Mac survey shows the average 30-year mortgage rate at 3.93%; and the average 15-year mortgage rate at 3.16 percent. Rates are available to borrowers agreeable to paying 0.6 and 0.5 discount points, respectively.

As compared to history, these rates are remarkable.

Freddie Mac has tracked mortgage rate data since 1971. Throughout those 44 years, the 30-year mortgage rate has averaged near 8.375 percent. Rates today are less than half of that.

Borrowers are required to pay far fewer points, too.

Historically, banks have assessed 1.3 discount points per loan to U.S. borrowers. Today, those costs are down close to two-thirds.

Borrowers are saving big money.

Historically, it’s required $375,000 to pay a $100,000, 30-year mortgage to zero. Today, that cost is $171,000.

Today’s homeowners pay 55% less to own their home outright.

Today’s ARM Mortgage Rates Drop Below 3%

Along with fixed-rate mortgage rates, adjustable-rate mortgage rates are near new lows, too.

Freddie Mac’s weekly mortgage rate survey puts the 5-year adjustable-rate mortgage at 2.99% nationwide with just 0.4 discount points required at closing.

The 5-year ARM and its low rate can be enticing, but it’s important to understand how an adjustable-rate mortgage works before choosing one to finance your home.

Today’s ARMs are governed by strict rules which determine by how much rates can change each year; and, which place limits to how high your adjustable-rate mortgage rate can go in any given year.

However, you’ll still want to know to what you’re agreeing.

ARMs work like this.

For some fixed number of years — usually between three and ten — the mortgage rates for an ARM cannot change. With a 5-year ARM, this initial period is five years. With a 7-year ARM, the period is seven years.

Then, after the initial, fixed number of years have passed, the ARM mortgage rate can change but only based on a pre-determined formula .

Most ARMs are limited to interest rate changes of no more than 2% per year, save for their first annual adjustment.

For example, at its first adjustment, a 5-year ARM is typically limited to a range of ±5 percentage points from the original “teaser” rate; and, a 7-year ARM is typically limited to a range of ±6 percentage points.

This first adjustment is the only time an ARM’s rate can move by such large amounts.

Beginning 12 months after the initial adjustment, and repeating every 12 months during the loan’s 30 years, ARM mortgage rates are subject to adjust again, but limited to just ±2 percentage points in either direction.

Your mortgage rate can never move more than 2 percentage points in a year — up or down.

In addition, your rate is “capped”.

ARM mortgage rates can’t move infinitely higher. ARM mortgage rates are restricted by “collars”, which are typically ±5% or ±6% from the loan’s starter rate.

The “rules of the ARM” protect borrowers. Payments can’t climb at the discretion of the bank; nor can rates changes based on some arbitrary factor.

ARMs can only adjust according to prescribed rules.

Are ARMs Better Than Fixed Rate Mortgages?

In today’s market, the mortgage rate of a 5-year ARM is a 94 basis points (0.94%) lower than a comparable 30-year fixed. Rates for the 5-year ARM average 2.99% and rates for the 30-year loan average 3.93%.

Because its rates are lower, 5-year ARMs save $52 per $100,000 borrowed at today’s mortgage rates.

Getting access to “cheaper payments”, though, should not be the reason you choose an adjustable-rate mortgage over a fixed-rate one.

There are 3 bona fide scenarios in which a homeowner should consider an ARM over a 30-year fixed.

The first scenario is one in which the homeowner intends to move or sell within the next 5-7 years.

For homeowners not in need of a “long-term” loan, an adjustable-rate mortgage can be an excellent way forward. There’s no need to pay more for the fixed-rate nature of a 30-year fixed rate loan when a 5-year ARM can suffice.

A second scenario for which to consider an ARM is when you know with certainty that you will refinance your home within the next five years.

This scenario can be tricky, however, because there’s no guarantee of what mortgage rates will be in the future when you decide to refinance; or whether you’ll qualify for a loan when the time comes to refinance.

Lastly, consider a adjustable-rate mortgage if you’re comfortable with the notion that your mortgage rate may change, and you’re budgeted to make larger payments.

Payments for an ARM won’t leap uncontrollably, but any increase to your payment can be an uncomfortable one.

What Are Today’s Mortgage Rates?

Current mortgage rates are low. Fixed-rate mortgage rates are below four percent and adjustable-rate mortgage rates are in the 2s. It’s a good time to compare your mortgage options and see what you can save.

Get today’s live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.


Should You Pay Off a Mortgage Early? The Answer May Surprise You! The Motley Fool


#pay off mortgage early

#

Should You Pay Off a Mortgage Early? The Answer May Surprise You!

Sep 14, 2014 at 7:00AM

Imagine a married couple — let’s call them Matt and Donna Smith — bought their dream house two years ago. The house was $250,000, and they paid $50,000 as a down payment. Since then, both have gotten raises, and with the extra cash, they are now asking themselves a crucial question: Should we pay off the mortgage early?

The math on this is clear: You should absolutely not pay off a mortgage early. You could lose money by doing this. But it’s funny how math is much less absolute when it’s dropped into the real world. There are hidden variables at play that make the decision to pay off a mortgage early the best option for the vast majority of Americans.

Couldn’t I make more by paying the mortgage on schedule?
Mortgage rates are still at historical lows right now — that’s an important factor in the math. Back when Matt and Donna bought their house, they took out a 30-year, $200,000 mortgage with a 4% interest rate. That equates to monthly payments of roughly $950. But after getting their raises, they can throw $1,200 at the mortgage.

A quick Internet search showed that the stock market averages roughly a 9% return per year over long periods of time. “Even if it’s only 6%,” Donna thinks, “it makes more sense to invest our extra cash instead of putting it toward a home. The stock market can give us a higher return.”

And, on paper, she’s right. Here’s how the two scenarios would play out in terms of the overall value, assuming the home’s value continues to appreciate at roughly 3% per year, while the stock market returns its average 9%.

Source: Author’s calculations. Home equity values calculated using amortization tables

Like any chart trying to predict the future, this isn’t perfect. The family could move, wages could rise, or any other number of variables could change. But the bottom line is clear: Using this simple math, not paying off a mortgage early means more money in your pocket (and house) at the end of 30 years.

Who wouldn’t want more money when all is said and done?

Can you really expect returns like that?
Here’s where the first lurking variable rears its ugly head. It is true that the S P 500 — since as far back as 1871 (though it wasn’t technically the S P 500 then) — has returned an annualized gain of 9.07% per year after dividends are reinvested. If every investor like Matt and Donna got returns like that, that would be phenomenal.

The problem is that the average investor does far, far worse than 9.07%. In fact, a recent release by JPMorgan Funds shows just how poorly the average investor has done over the last 20 years: 2.5% per year.

Why does this happen?

In a nutshell, the average person is not a good investor. They buy high, sell low, and generally shoot themselves in the foot over and over again by paying high fees. Because of this painful truth, paying off a mortgage early looks like a much better decision.

Of course, if you have a track record of successfully controlling your emotions and holding stocks for the long run, this might not apply to you.

But another key variable might.

What’s your goal: money or financial independence?
Earlier, I wrote: “Who wouldn’t want more money when all is said and done?”

Admittedly, that was a loaded question; there’s a caveat to it. What if you have less money but also a greater sense of financial independence? Would that change things? There’s nothing that can match the feeling of knowing you own your home outright and the bank can’t take it away. There’s also nothing like knowing you never have to make a rent or mortgage payment again for the rest of your life.

Wes Moss, author of You Can Retire Sooner Than You Think. has found — in his own surveys — that the psychological benefits of paying off a mortgage early are undeniable: “There’s a world of happiness and freedom out there just waiting for you once your biggest monthly expense is eliminated. Happiness levels rise undeniably as mortgages vanish.”

So, even if you have more money by not paying off the mortgage early, is it worth sacrificing the happiness you’ll experience by shedding the payment years — even decades — in advance?

The Smiths are a fictional couple used to illustrate the bigger points in this article. Try any of our newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .


Refinance To An ARM? The Timing May Be Perfect #arbor #mortgage


#5 year arm

#

Refinance To An ARM? The Timing May Be Perfect.

ARM Mortgage Rates Average 2.99%

Today’s mortgage rates remain near historical lows and, with more than 6 million U.S. homes eligible to refinance, a mini-refinance boom is underway.

According to Freddie Mac’s most recent mortgage rate survey, 30-year fixed rate mortgages currently average 3.93 percent nationwide; and, 15-year fixed rate mortgages average 3.16%.

However, for the right borrower, the 5-year adjustable-rate mortgage (ARM) looks excellent.

The popular ARM loan now averages 2.93%.

Mortgage Rates: 4.25 Points Beneath Averages

Each week, government-backed Freddie Mac surveys a network of more than 100 lenders to find the “national mortgage rate” for prime borrowers.

“Prime” borrowers are defined as those having a credit score of 740 of better; verifiable income with acceptable debt-to-income ratios; and a loan-to-value of eighty percent or lower.

The most recent Freddie Mac survey shows the average 30-year mortgage rate at 3.93%; and the average 15-year mortgage rate at 3.16 percent. Rates are available to borrowers agreeable to paying 0.6 and 0.5 discount points, respectively.

As compared to history, these rates are remarkable.

Freddie Mac has tracked mortgage rate data since 1971. Throughout those 44 years, the 30-year mortgage rate has averaged near 8.375 percent. Rates today are less than half of that.

Borrowers are required to pay far fewer points, too.

Historically, banks have assessed 1.3 discount points per loan to U.S. borrowers. Today, those costs are down close to two-thirds.

Borrowers are saving big money.

Historically, it’s required $375,000 to pay a $100,000, 30-year mortgage to zero. Today, that cost is $171,000.

Today’s homeowners pay 55% less to own their home outright.

Today’s ARM Mortgage Rates Drop Below 3%

Along with fixed-rate mortgage rates, adjustable-rate mortgage rates are near new lows, too.

Freddie Mac’s weekly mortgage rate survey puts the 5-year adjustable-rate mortgage at 2.99% nationwide with just 0.4 discount points required at closing.

The 5-year ARM and its low rate can be enticing, but it’s important to understand how an adjustable-rate mortgage works before choosing one to finance your home.

Today’s ARMs are governed by strict rules which determine by how much rates can change each year; and, which place limits to how high your adjustable-rate mortgage rate can go in any given year.

However, you’ll still want to know to what you’re agreeing.

ARMs work like this.

For some fixed number of years — usually between three and ten — the mortgage rates for an ARM cannot change. With a 5-year ARM, this initial period is five years. With a 7-year ARM, the period is seven years.

Then, after the initial, fixed number of years have passed, the ARM mortgage rate can change but only based on a pre-determined formula .

Most ARMs are limited to interest rate changes of no more than 2% per year, save for their first annual adjustment.

For example, at its first adjustment, a 5-year ARM is typically limited to a range of ±5 percentage points from the original “teaser” rate; and, a 7-year ARM is typically limited to a range of ±6 percentage points.

This first adjustment is the only time an ARM’s rate can move by such large amounts.

Beginning 12 months after the initial adjustment, and repeating every 12 months during the loan’s 30 years, ARM mortgage rates are subject to adjust again, but limited to just ±2 percentage points in either direction.

Your mortgage rate can never move more than 2 percentage points in a year — up or down.

In addition, your rate is “capped”.

ARM mortgage rates can’t move infinitely higher. ARM mortgage rates are restricted by “collars”, which are typically ±5% or ±6% from the loan’s starter rate.

The “rules of the ARM” protect borrowers. Payments can’t climb at the discretion of the bank; nor can rates changes based on some arbitrary factor.

ARMs can only adjust according to prescribed rules.

Are ARMs Better Than Fixed Rate Mortgages?

In today’s market, the mortgage rate of a 5-year ARM is a 94 basis points (0.94%) lower than a comparable 30-year fixed. Rates for the 5-year ARM average 2.99% and rates for the 30-year loan average 3.93%.

Because its rates are lower, 5-year ARMs save $52 per $100,000 borrowed at today’s mortgage rates.

Getting access to “cheaper payments”, though, should not be the reason you choose an adjustable-rate mortgage over a fixed-rate one.

There are 3 bona fide scenarios in which a homeowner should consider an ARM over a 30-year fixed.

The first scenario is one in which the homeowner intends to move or sell within the next 5-7 years.

For homeowners not in need of a “long-term” loan, an adjustable-rate mortgage can be an excellent way forward. There’s no need to pay more for the fixed-rate nature of a 30-year fixed rate loan when a 5-year ARM can suffice.

A second scenario for which to consider an ARM is when you know with certainty that you will refinance your home within the next five years.

This scenario can be tricky, however, because there’s no guarantee of what mortgage rates will be in the future when you decide to refinance; or whether you’ll qualify for a loan when the time comes to refinance.

Lastly, consider a adjustable-rate mortgage if you’re comfortable with the notion that your mortgage rate may change, and you’re budgeted to make larger payments.

Payments for an ARM won’t leap uncontrollably, but any increase to your payment can be an uncomfortable one.

What Are Today’s Mortgage Rates?

Current mortgage rates are low. Fixed-rate mortgage rates are below four percent and adjustable-rate mortgage rates are in the 2s. It’s a good time to compare your mortgage options and see what you can save.

Get today’s live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.


Should You Pay Off a Mortgage Early? The Answer May Surprise You! The Motley Fool


#pay off mortgage early

#

Should You Pay Off a Mortgage Early? The Answer May Surprise You!

Sep 14, 2014 at 7:00AM

Imagine a married couple — let’s call them Matt and Donna Smith — bought their dream house two years ago. The house was $250,000, and they paid $50,000 as a down payment. Since then, both have gotten raises, and with the extra cash, they are now asking themselves a crucial question: Should we pay off the mortgage early?

The math on this is clear: You should absolutely not pay off a mortgage early. You could lose money by doing this. But it’s funny how math is much less absolute when it’s dropped into the real world. There are hidden variables at play that make the decision to pay off a mortgage early the best option for the vast majority of Americans.

Couldn’t I make more by paying the mortgage on schedule?
Mortgage rates are still at historical lows right now — that’s an important factor in the math. Back when Matt and Donna bought their house, they took out a 30-year, $200,000 mortgage with a 4% interest rate. That equates to monthly payments of roughly $950. But after getting their raises, they can throw $1,200 at the mortgage.

A quick Internet search showed that the stock market averages roughly a 9% return per year over long periods of time. “Even if it’s only 6%,” Donna thinks, “it makes more sense to invest our extra cash instead of putting it toward a home. The stock market can give us a higher return.”

And, on paper, she’s right. Here’s how the two scenarios would play out in terms of the overall value, assuming the home’s value continues to appreciate at roughly 3% per year, while the stock market returns its average 9%.

Source: Author’s calculations. Home equity values calculated using amortization tables

Like any chart trying to predict the future, this isn’t perfect. The family could move, wages could rise, or any other number of variables could change. But the bottom line is clear: Using this simple math, not paying off a mortgage early means more money in your pocket (and house) at the end of 30 years.

Who wouldn’t want more money when all is said and done?

Can you really expect returns like that?
Here’s where the first lurking variable rears its ugly head. It is true that the S P 500 — since as far back as 1871 (though it wasn’t technically the S P 500 then) — has returned an annualized gain of 9.07% per year after dividends are reinvested. If every investor like Matt and Donna got returns like that, that would be phenomenal.

The problem is that the average investor does far, far worse than 9.07%. In fact, a recent release by JPMorgan Funds shows just how poorly the average investor has done over the last 20 years: 2.5% per year.

Why does this happen?

In a nutshell, the average person is not a good investor. They buy high, sell low, and generally shoot themselves in the foot over and over again by paying high fees. Because of this painful truth, paying off a mortgage early looks like a much better decision.

Of course, if you have a track record of successfully controlling your emotions and holding stocks for the long run, this might not apply to you.

But another key variable might.

What’s your goal: money or financial independence?
Earlier, I wrote: “Who wouldn’t want more money when all is said and done?”

Admittedly, that was a loaded question; there’s a caveat to it. What if you have less money but also a greater sense of financial independence? Would that change things? There’s nothing that can match the feeling of knowing you own your home outright and the bank can’t take it away. There’s also nothing like knowing you never have to make a rent or mortgage payment again for the rest of your life.

Wes Moss, author of You Can Retire Sooner Than You Think. has found — in his own surveys — that the psychological benefits of paying off a mortgage early are undeniable: “There’s a world of happiness and freedom out there just waiting for you once your biggest monthly expense is eliminated. Happiness levels rise undeniably as mortgages vanish.”

So, even if you have more money by not paying off the mortgage early, is it worth sacrificing the happiness you’ll experience by shedding the payment years — even decades — in advance?

The Smiths are a fictional couple used to illustrate the bigger points in this article. Try any of our newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .


Should You Pay Off Your Mortgage Early? The Answer May Surprise You – The Motley


#pay off mortgage early

#

Should You Pay Off Your Mortgage Early? The Answer May Surprise You

Jan 18, 2014 at 2:00PM

What’s better: Paying off your mortgage early or saving? Photo: AT T YouTube.

When it comes to home ownership, the American dream used to be quite simple: Buy a house with a 30-year mortgage, make your payments, and someday down the road, you’ll own your home free and clear.

Nowadays, people tend to move around a lot more than they used to, resetting the 30-year clock every time they do, greatly decreasing the likelihood that a home will ever be paid off in full. Also, people tap into their home’s equity and refinance their mortgages much more today than they used to for repairs, upgrades, etc. often creating a new 30-year loan in the process.

This got me thinking: Does anyone actually pay off their home in 30 years (or less) anymore? Is this a goal younger homeowners have in mind? And perhaps most importantly, is it worth it?

How many people actually live “rent-free”?
The actual number depends on where you live, but almost one-third (29.3%) of U.S. homeowners have no mortgage. As would be expected, the percentage gets higher in the older age groups. Of those homeowners over 85 years old, over 77% own their homes outright, and about 63% of those in the 74 to 84 age group own their homes.

One interesting statistic is the higher percentage in the lowest age group, those homeowners from ages 20 to 24. 34.5% of these young homeowners have no mortgage, and generally speaking, these young homeowners either inherited their money or have some kind of assistance. Another reason could be the fact that most younger buyers tend to buy more inexpensive, or “starter” homes and have fewer financial commitments (like kids), making it more feasible to pay off a house quickly.

The percentage of homeowners who own homes free and clear has dropped steadily over the past several decades, from a high of 42% of homeowners in 1960. However, after years of building up our “debt culture,” we are beginning to see younger homeowners make paying down their debts a priority, having witnessed the effect of too much debt on the older generation. In fact, the average percentage of equity in the average home is up to about 45% from a low of around 38% in 2009.

A few actual accounts.
The website about.com has a pretty interesting thread of people who share their experiences with a paid-off mortgage. The first entry is from a 35-year-old whose parents paid off his mortgage as a gift, and he now puts his former mortgage payment into a retirement account.

Another entry is from a 43-year-old who paid off his mortgage in just over 12 years as a means of financial safety should he ever lose his job. Several other entrants chose to buy fixer-upper houses in order to have the lowest purchase price, and hence the lowest mortgage possible. Another homeowner took a loan from his IRA in order to build a home without a mortgage.

Foolish final thoughts
While not having a mortgage may indeed be freeing, not everyone agrees it’s the best course of action. According to many experts, paying off your mortgage may not be the best use of your money. While it certainly would be nice to not have to make that $2,000 house payment every month, it has not been hard to find fairly safe investments at any point in history that offer returns higher than the interest a mortgage is costing you.

For instance, let’s say I owe $320,000 on my house on a 3.875% 30-year fixed mortgage and happen to come into some money and have enough in the bank to pay off my balance. If instead of simply paying off my balance, I invest the money in a pretty safe income fund that pays, say 6%, my $320,000 investment should be worth about $1.7 million in 30 years, which far outweighs the $541,713 in mortgage payments I would have made over that time.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .


Barclays offers zero down payment mortgages in UK – May #free #loan #calculator


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They’re back! Barclays offers 0% down payment mortgages in UK

When the global financial crisis exploded, economists were quick to lay some of the blame on mortgages that did not require a down payment.

The risky loans all but vanished as banks reacted to the housing market collapse. Even as interest rates dropped, down payment requirements moved higher.

But now they’re back: Barclays ( BCS ) has become the first big British bank to offer 0% down payment mortgages since the crisis as part of a program called “Family Springboard.” There is a catch, however.

Barclays will grant a mortgage to buyers with no down payment provided a “helper” (read: parent) is willing to put 10% of the purchase price into a savings account. If the buyer makes their loan payments, the bank will return the 10% deposit after three years, with interest.

There’s a logic to the scheme: Barclays said that 35% of first time buyers in the U.K. ask their parents for help when securing a mortgage. Of those, 20% see the money as a gift from the “bank of Mum and Dad.”

Buyers do face a tough market — especially in London. UBS says prices in the city have jumped 40% since 2013 alone. In response, the government has tried to tamp down the market with higher taxes on second homes and property transactions.

Under the Barclays program, first time buyers with incomes above £50,000 per year ($72,000) can borrow up to 5.5 times their annual earnings.

“We want to offer more people a way to get on the property ladder and to walk through the door of their first home earlier than they perhaps thought,” said Raheel Ahmed, head of Barclays Mortgages.

Home loans with low down payments have also made a comeback in the U.S. Fannie Mae and Freddie Mac, which guarantee more than half the country’s mortgages, have slashed minimum down payments from 5% to 3%.

Bank of America ( BAC ) is also offering mortgages with as little as 3% down.

CNNMoney (New Delhi) First published May 4, 2016: 9:27 AM ET


Should You Pay Off a Mortgage Early? The Answer May Surprise You! The Motley Fool


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Should You Pay Off a Mortgage Early? The Answer May Surprise You!

Sep 14, 2014 at 7:00AM

Imagine a married couple — let’s call them Matt and Donna Smith — bought their dream house two years ago. The house was $250,000, and they paid $50,000 as a down payment. Since then, both have gotten raises, and with the extra cash, they are now asking themselves a crucial question: Should we pay off the mortgage early?

The math on this is clear: You should absolutely not pay off a mortgage early. You could lose money by doing this. But it’s funny how math is much less absolute when it’s dropped into the real world. There are hidden variables at play that make the decision to pay off a mortgage early the best option for the vast majority of Americans.

Couldn’t I make more by paying the mortgage on schedule?
Mortgage rates are still at historical lows right now — that’s an important factor in the math. Back when Matt and Donna bought their house, they took out a 30-year, $200,000 mortgage with a 4% interest rate. That equates to monthly payments of roughly $950. But after getting their raises, they can throw $1,200 at the mortgage.

A quick Internet search showed that the stock market averages roughly a 9% return per year over long periods of time. “Even if it’s only 6%,” Donna thinks, “it makes more sense to invest our extra cash instead of putting it toward a home. The stock market can give us a higher return.”

And, on paper, she’s right. Here’s how the two scenarios would play out in terms of the overall value, assuming the home’s value continues to appreciate at roughly 3% per year, while the stock market returns its average 9%.

Source: Author’s calculations. Home equity values calculated using amortization tables

Like any chart trying to predict the future, this isn’t perfect. The family could move, wages could rise, or any other number of variables could change. But the bottom line is clear: Using this simple math, not paying off a mortgage early means more money in your pocket (and house) at the end of 30 years.

Who wouldn’t want more money when all is said and done?

Can you really expect returns like that?
Here’s where the first lurking variable rears its ugly head. It is true that the S P 500 — since as far back as 1871 (though it wasn’t technically the S P 500 then) — has returned an annualized gain of 9.07% per year after dividends are reinvested. If every investor like Matt and Donna got returns like that, that would be phenomenal.

The problem is that the average investor does far, far worse than 9.07%. In fact, a recent release by JPMorgan Funds shows just how poorly the average investor has done over the last 20 years: 2.5% per year.

Why does this happen?

In a nutshell, the average person is not a good investor. They buy high, sell low, and generally shoot themselves in the foot over and over again by paying high fees. Because of this painful truth, paying off a mortgage early looks like a much better decision.

Of course, if you have a track record of successfully controlling your emotions and holding stocks for the long run, this might not apply to you.

But another key variable might.

What’s your goal: money or financial independence?
Earlier, I wrote: “Who wouldn’t want more money when all is said and done?”

Admittedly, that was a loaded question; there’s a caveat to it. What if you have less money but also a greater sense of financial independence? Would that change things? There’s nothing that can match the feeling of knowing you own your home outright and the bank can’t take it away. There’s also nothing like knowing you never have to make a rent or mortgage payment again for the rest of your life.

Wes Moss, author of You Can Retire Sooner Than You Think. has found — in his own surveys — that the psychological benefits of paying off a mortgage early are undeniable: “There’s a world of happiness and freedom out there just waiting for you once your biggest monthly expense is eliminated. Happiness levels rise undeniably as mortgages vanish.”

So, even if you have more money by not paying off the mortgage early, is it worth sacrificing the happiness you’ll experience by shedding the payment years — even decades — in advance?

The Smiths are a fictional couple used to illustrate the bigger points in this article. Try any of our newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .