What is Mortgage Amortization and How Does it Work? #mortgage #questions


#mortgage loan amortization

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What is Mortgage Amortization and How Does it Work?

Paying off a mortgage is an overwhelming task.

A mortgage is a big debt—almost as big as your house—so the best most of us can hope to do is to shorten the term by prepaying as much of the loan that we can as quickly as we’re able.

Why should we want to do that?

Owning your home free and clear is a good place to be. You’re living in your home with no mortgage payment and that’s when saving money and life in general get easier.

But there’s something more.

The cumulative interest on mortgage loans makes your loan balance even bigger.

A mortgage of $200,000 will require nearly $350,000 in monthly payments over a 30 year period. Anything you can do to shorten the term can save a lot of money.

What is Mortgage Amortization?

Amortization —the built in payoff calculation contained in most mortgages—is your best tool in the process of getting your loan paid off. Amortization, simply put, is the difference between your monthly mortgage payment and the interest portion it contains .

By making prepayments on your mortgage, either by increased monthly payments or by periodic lump sum payments, you decrease the amount you owe AND the monthly interest payment. As the interest portion of your payment declines, the principal portion increases, and with it, the remaining term of the loan gets shorter.

Paying off your loan in 20 years instead of 30 will save nearly $120,000 in payments (based on a $200,000 loan), freeing up money for investing or for what ever else you want to do.

The Good and Bad News on Amortization

The good news on amortization is that it offers a guaranteed way to pay off your mortgage.

Even if you make no extra payments, because of amortization, you’ll own your home free and clear by the end of the loan term. In addition, with each payment that you make, your equity will grow just a little bit.

During the “interest only” frenzy of a few years ago, this concept seemed to get lost in the all consuming drive for lower monthly payments.

The bad news is that amortization is slow very slow!

Like snail slow.

Like, I paid how much towards my mortgage but the principle only went down that much. slow.

Because interest is front-loaded on a mortgage (most of the interest is paid in the early years, most of the principal is paid in the later years), it will be many years into your mortgage before you’ll start seeing any meaningful decline in your loan balance.

By making prepayments you can accelerate the amortization process, enabling you to pay your mortgage off early .

An Example of How Mortgage Amortization Works

The best way to see how mortgage amortization works in real life is with an example.

Let’s assume you take a 30 year fixed rate loan of $200,000 with an interest rate of 4.00%, how will that look at different intervals?

Beginning of loan, first payment:

Your mortgage amortization tells you how much you are paying in interest versus principle every month.

Monthly payment: $954.83
Principal portion: $288.16
Interest portion: $666.67
Remaining loan balance: $199,712

After five years, payment number 61:

Monthly payment: $954.83
Principal portion: $351.85
Interest portion: $602.98
Remaining loan balance: $180,543

After ten years, payment number 121:

Monthly payment: $954.83
Principal portion: $429.60
Interest portion: $525.23
Remaining loan balance: $157,139

As you can see from this example, about 70% of the first payment is interest—you’re hardly making a dent in the principal balance. In fact, you’ll have paid off less than $3,500 in principal during the first year of the loan.

After five years, your principal portion has only increased by about $64 per month and you still owe 90% of the original loan amount!

You’ll have to hit payment number 153—12 years and nine months into the mortgage—before the principal portion of your payment first edges out the interest portion!

And at that point, nearly 13 years into the loan, you’ll still owe a balance of $142,608, or more than 70% of the original loan balance. And you’re nearly halfway through the loan term!

Moral of the amortization story: amortization is a slow process, which is why it’s so important to begin prepaying your mortgage as early in the term as possible .

Try playing around with a mortgage calculator to see how much money you can save by accelerating the amortization process with extra payments.

A little each month or a lump sum here and there can make a big difference .

How Amortization Can Work Against You if You Refinance

As you can see from the example above, amortization works its magic very slowly over a long period of time.

Because of this, you have to consider the impact that a refinance will have on your efforts to one day own your home mortgage-free.

One of the primary reasons people refinance is to lower their monthly payment.

Getting a lower interest rate is one way to do this, but another is to lengthen the term of your new loan.

If you’re ten years into a 30 year loan, and you refinance back to another 30 year loan, your new payment will be lower, but you’ll achieve that by starting the amortization process all over again.

The best course—if you want to keep yourself on the original payoff schedule—is to set the term of the new loan to no more than the number of years you have remaining on the old loan, or in this case 20 years.

If you’re seven years into a 30 year loan, a refinance should be limited to 23 years—the same number you have to go on your current mortgage.

The recasting of loan terms back to 30 years was one of the biggest reasons why so many people watched their equity evaporate during the housing meltdown.

If you keep recasting your mortgage back to 30 years, your amortization will remain stuck in slow motion robbing you of the best chance you have to payoff your mortgage. Think about this the next time you decide to refinance.

Finally

Amortization is something of an strange term, but you don t have to shy away from it. What it basically means is your loan was set up in a way that will take a specific amount of time to repay it. As you go along, some of your payment goes to the interest and some to the principle. How much goes to each will change over time.

With mortgage amortization you pay a lot more interest in the beginning than principle. Keep this in mind if you ever want to refinance since you ll have a new amortization schedule.

Also, realize that the quicker you can start paying more toward your principle, the quicker you build up your equity and you pay off your loan faster too.

Mortgage amortization can help and hurt you, depending on how you use it.

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Second Mortgage: How Does It Work? #what #is #arm #mortgage


#second mortgage

#

Get a free assessment

Second Mortgage

What is a second mortgage?

A second mortgage is a charge over a property that already has another mortgage on it. The mortgages are ranked in the order in which they were lodged. In the event that the debt isn’t paid and the property is sold the lenders will receive their money in order of priority with the 1st mortgage being paid back before any money is paid to the 2nd or 3rd mortgagee.

For example if you had a mortgage with Westpac for $100,000 secured on your home and you then applied for a $100,000 loan with ANZ this would be set up as a 2nd mortgage behind the Westpac loan. In the event that you didn’t pay back your loans and the property was sold for $190,000 then Westpac would be repaid in full and ANZ would receive whatever was left over.

Why would you use a second mortgage?

Most people prefer to refinance their loan to another lender rather than obtain a 2nd mortgage. However there are some situations where a 2nd mortgage is more appropriate:

  • Fixed rates: If your 1st mortgage is a fixed rate loan then there may be high exit fees or you may not want to refinance because your fixed rate is much lower than the current variable rates. In this situation you may borrow additional money using a 2nd mortgage.
  • Guarantor support: If you are helping your children buy their first home then you may guarantee their loan using a 2nd mortgage over your property as additional security for the bank.
  • Private lenders: Many private lenders that can advance funds within 48 hrs will take a 2nd mortgage behind a major bank as security for their loan. We recommend that you avoid using private lenders at all costs.

How much can you borrow?

  • 2nd mortgage with the same bank: up to 95% of the property value.
  • 2nd mortgage with a different bank: up to 85% of the property value.
  • Low doc: Not available except through private lenders.
  • Discounts: Lenders rarely offer rate discounts on 2nd mortgages.
  • Note: The lender that has the 1st mortgage has to consent to you obtaining a 2nd mortgage on your property. They do not usually stop you from doing so, but will usually charge a fee of around $300 for assessing your request.

Why are the banks so conservative?

By their very nature 2nd mortgages are very poor security for a loan compared to a 1st mortgage. Because of the complexities of two lenders being involved and the low priority of the debt in the event that you default on your loan, most banks limit the amount you can borrow or refuse to do business with you.

Hello. How do we arrange the second mortgage consent for my parent s property as they ll providing guarantee for me to purchase my home next month.

Hi Rose, your parents will have to contact their lender to arrange second mortgage consent. Usually, the lender will provide consent for the second mortgage.


Help with mortgage costs if you – re out of work – Citizens Advice #reverse


#help with mortgage

#

Help with mortgage costs if you’re out of work

Table of contents

Help with mortgage costs if you’re out of work

If you’re struggling to pay your mortgage because you’re out of work, you must take action quickly to stop yourself from falling into debt.

If you get into debt and your lender thinks you’re not dealing with the problem, they will take action through the courts. This could lead to you losing your home.

If you’re not working, you may be able to get certain benefits which give help towards your mortgage costs.

On this page we tell you:

If you aren’t entitled to one of these benefits, you might be able to get other help. See More options for dealing with mortgage problems .

If you’ve already fallen into debt with your mortgage payments, there may be things you can do to stop yourself from falling further behind with your payments and to clear the debt. See How to deal with mortgage debts .

If you’re having serious difficulties paying your mortgage, for example, if you’ve started getting letters from your mortgage lender threatening court action, you should get help from an experienced debt adviser.

You can get debt advice from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB .

Which benefits give help towards mortgage costs

The following benefits give you some help towards your mortgage costs:

  • Income Support. This is help for lone parents or carers
  • Income-based Jobseeker’s Allowance (JSA). This is help for people who are looking for work
  • Pension Credit. This is help for people who are over 60 and on a low income
  • Income-related Employment and Support Allowance (ESA). This is help for people who are too sick or disabled to work.

For more information about whether you may be entitled to one of these benefits and how to make a claim, see the following pages:

How much of your mortgage costs can be paid

When you make a claim for one of the benefits mentioned on this page, you will be told whether you can get help towards your mortgage costs. This help is known as housing costs payments.

Housing costs payments contribute towards the cost of the interest payments on your mortgage. They may also contribute towards the interest payments on loans taken out to pay for repairs or home improvements. Housing costs payments can’t be used to pay off any of the capital of your mortgage.

Housing costs are paid at a standard rate of interest, regardless of the rate of interest you are actually paying.

This means that although there can be cases where housing costs payments are higher than the interest you have to pay, in many cases, the payments will be lower. You will have to make up any difference between the interest due to the lender and the amount of interest covered by the housing costs payments. However, if you can’t afford to make up the difference, it might be worth asking your lender if they will just accept the housing costs payments for the time being until you can make up the full amount at a later date.

For more information about how to deal with your mortgage lender, see Dealing with your mortgage lender .

You might want to get an experienced debt adviser to help you deal with your mortgage lender. You can get help from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB .

Can you get your mortgage costs paid straight away

When you make a claim for benefits, you will usually have to wait 39 weeks before housing costs are paid. This is a change to the previous waiting period of 13 weeks and applies to claims made from 1 April 2016.

If you’re entitled to Guarantee Pension Credit, there is no waiting period and you can get housing costs payments straight away.

More options for dealing with mortgage problems

If you aren’t entitled to any of the benefits which give help towards your mortgage costs, other help might be available.

For more information about your other options, see the following pages:

This advice applies to England

Advice can vary depending on where you live.


How Mortgages Work #standard #mortgage


#mortgages for dummies

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How Mortgages Work

Buying a home is the embodiment of the American dream. However, that wasn’t always the case: In fact, before the 1930s, only four in 10 American families owned their own home. That’s because very few people had enough cash to buy a home in one lump sum. And until the 1930s, there was no such thing as a bank loan specifically designed to purchase a home, something we now know as a mortgage.

In simple terms, a mortgage is a loan in which your house functions as the collateral. The bank or mortgage lender loans you a large chunk of money (typically 80 percent of the price of the home), which you must pay back — with interest — over a set period of time. If you fail to pay back the loan, the lender can take your home through a legal process known as foreclosure .

Up Next

For decades, the only type of mortgage available was a fixed-interest loan repaid over 30 years. It offers the stability of regular — and relatively low — monthly payments. In the 1980s came adjustable rate mortgages (ARMs ), loans with an even lower initial interest rate that adjusts or “resets” every year for the life of the mortgage. At the peak of the recent housing boom, when lenders were trying to squeeze even unqualified borrowers into a mortgage, they began offering “creative” ARMs with shorter reset periods, tantalizingly low “teaser” rates and no limits on rate increases.

When you couple bad loans with a bad economy, you get rampant foreclosures. Since 2007, more than 250,000 Americans have entered foreclosure proceedings every month [source: Levy ]. Now those foreclosures are turning into full-on repossessions, which are expected to reach 1 million homes in 2010 [source: Veiga ].

Looking back at the flood of foreclosures since the housing crash, it’s clear that many borrowers didn’t fully understand the terms of the mortgages they signed. According to one study, 35 percent of ARM borrowers did not know if there was a cap on how much their interest rate could rise [source: Pence ]. This is why it’s essential to understand the terms of your mortgage, particularly the pitfalls of “nontraditional” loans.

In this article, we’ll look at each of the many different types of mortgages, explain all of those confusing terms like escrow and amortization, and break down the hidden costs, taxes and fees that can add up each month. We’ll start with the most basic question: What is a mortgage?

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a data-track-gtm Byline href about-author.htm obringer Lee Ann Obringer a amp a data-track-gtm Byline href about-author.htm roos Dave Roos a How Mortgages Work 8 October 2002. br HowStuffWorks.com. lt http home.howstuffworks.com real-estate buying-home mortgage.htm gt 18 September 2016″ href=”#”>Citation Date


How does remortgaging work? Money Advice Service #100 #mortgage #financing


#remortgage

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How does remortgaging work?

Remortgaging is where you pay off your existing mortgage and switch to another lender. There are good reasons to consider remortgaging, but you need to consider the costs before you do.

At a glance

  1. Check the value of your property. It may have increased in value since you last checked. The higher the property value in relation to the mortgage, the more deals may be available to you if you decide to remortgage – and you may be able to get cheaper deals.
  2. Check the market for mortgage deals. This is your starting point for comparing what you’re paying now with what you might be able to get elsewhere.
  3. Make sure the benefits of switching outweigh the costs. Even though there may be lower rates available you need to take into account any fees associated with switching and the remaining length of your loan.
  4. Take what you’ve found to a mortgage broker. They have access to mortgages that aren’t available on comparison sites so may be able to improve on what you’ve found. They’ll also double check the costs and benefits of switching. Ask for an advised service.
  5. Set a reminder to review your mortgage each year. If you remortgage you may get an introductory deal on your interest rate – when this ends you’ll usually be put on a less competitive variable rate.

Check the market for mortgage deals

Comparison websites are a good starting point when you’re trying to find a mortgage tailored to your needs.

We recommend the following websites for comparing mortgages:

  • Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
  • It is also important to do some research into the type of product and features you need before making a purchase or changing supplier.

Use our Mortgage affordability calculator to find out how much you can afford to borrow.

Take advice

Taking advice from a qualified expert offers you extra protection because if the mortgage turns out to be unsuitable, you can complain to the Financial Ombudsman Service (FOS).

If you choose to go down the ‘execution-only’ route (where you make decisions on your own without advice), there will be fewer circumstances in which you can complain to FOS.

When it pays to switch and when it doesn’t

In the two examples below you can see how the size and remaining term of your outstanding mortgage can affect whether or not it’s worth switching.

In the first example, the cost of switching (£500) is greater than the saving (£239.04), so there’s no point in remortgaging. In the second example, it’s clear that switching mortgage saves money.

If you change your mortgage before the end of your deal you may have to pay a fee (called an ‘early repayment charge’).

You can use the links below to check current deals and work out what you might save by switching. But remember to check associated fees and costs.

Use our Mortgage calculator to see how much you could save by switching.

Check the costs

Before you switch be sure to check out the costs. Some lenders might offer fee-free deals to tempt you, but if they don’t you’ll have legal, valuation and administration costs to pay.

You can use the Annual Percentage Rate of Charge (APRC) to help you compare deals. The APRC is a way of calculating interest rates that incorporates some mortgage related fees in the calculation, giving you a way to compare mortgage deals.

What might look like a money saving deal could end up losing you money if you don’t do your sums first.

Reducing your loan-to-value to get a better rate

Every mortgage deal has a limit to how much you can borrow when compared with the current value of the property.

This is shown as a percentage and is called the ‘loan-to-value’.

When you remortgage, the lower the loan-to-value you need, the more deals that may be available to you – and you may be able to get cheaper mortgage deals.

How to calculate your loan-to-value

  1. Divide your outstanding mortgage amount by your property’s current value.
  2. Multiply the result by 100.
  • Your outstanding mortgage is £150,000
  • Your lender thinks your property is worth £200,000
  • 150,000 divided by 200,000 = 0.75
  • 0.75 x 100 = 75 – so your loan-to-value is 75%

Use the links below to get an idea of your home’s current value.

Your lender’s valuation

Bear in mind that when you apply for a mortgage, the lender’s valuation may just involve checking the outside of the property from the street.

If you think the valuation is much too low – and that you’re losing out on a better rate as a result – ask the lender to reconsider.

To support your case, you could provide evidence of the sale price of a few similar properties in your area and, if relevant, list the cost of any expensive home improvements you’ve carried out.

If as a result of cost savings you can make by remortgaging, you’re wondering whether to pay off your mortgage early, read our guide below.

Remortgaging to get a better interest rate

When you take out a new mortgage, you normally get an introductory deal – for example a low fixed or discounted rate or a low tracker rate for the first few years of your mortgage.

Introductory deals normally last for between two and five years. Once the deal ends you’ll probably be moved onto your lender’s standard variable rate, which will usually be higher than other rates that you might be able to get elsewhere.

So when your introductory period ends, take a look at the market to see if switching to a new mortgage deal will save you money. It’s also worth reviewing options before interest rates change .

Bear in mind that if you only have a small outstanding mortgage the amount you stand to save may be too low to make switching worthwhile.

Remortgaging for more flexibility

Remortgaging may also enable you to get a more flexible deal – for example if you want to overpay.

Or maybe you want to switch to an offset or current account mortgage, where you use your savings to reduce the amount of interest you pay permanently or temporarily – and have the option to draw your savings back if you need them.

Remortgaging to consolidate debt

If you have a lot of debt, you might be tempted to borrow some extra money and use it to pay off your other debts.

Even though interest rates on mortgages are normally lower than rates on personal loans – and much lower than credit cards – you may end up paying far more overall if the loan is over a longer term.

Instead of adding your debt to your mortgage, try to prioritise and clear your loans separately.

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  • Government help if you can’t pay your mortgage


    Second Mortgage: How Does It Work? #top #mortgage #lenders


    #second mortgage

    #

    Get a free assessment

    Second Mortgage

    What is a second mortgage?

    A second mortgage is a charge over a property that already has another mortgage on it. The mortgages are ranked in the order in which they were lodged. In the event that the debt isn’t paid and the property is sold the lenders will receive their money in order of priority with the 1st mortgage being paid back before any money is paid to the 2nd or 3rd mortgagee.

    For example if you had a mortgage with Westpac for $100,000 secured on your home and you then applied for a $100,000 loan with ANZ this would be set up as a 2nd mortgage behind the Westpac loan. In the event that you didn’t pay back your loans and the property was sold for $190,000 then Westpac would be repaid in full and ANZ would receive whatever was left over.

    Why would you use a second mortgage?

    Most people prefer to refinance their loan to another lender rather than obtain a 2nd mortgage. However there are some situations where a 2nd mortgage is more appropriate:

    • Fixed rates: If your 1st mortgage is a fixed rate loan then there may be high exit fees or you may not want to refinance because your fixed rate is much lower than the current variable rates. In this situation you may borrow additional money using a 2nd mortgage.
    • Guarantor support: If you are helping your children buy their first home then you may guarantee their loan using a 2nd mortgage over your property as additional security for the bank.
    • Private lenders: Many private lenders that can advance funds within 48 hrs will take a 2nd mortgage behind a major bank as security for their loan. We recommend that you avoid using private lenders at all costs.

    How much can you borrow?

    • 2nd mortgage with the same bank: up to 95% of the property value.
    • 2nd mortgage with a different bank: up to 85% of the property value.
    • Low doc: Not available except through private lenders.
    • Discounts: Lenders rarely offer rate discounts on 2nd mortgages.
    • Note: The lender that has the 1st mortgage has to consent to you obtaining a 2nd mortgage on your property. They do not usually stop you from doing so, but will usually charge a fee of around $300 for assessing your request.

    Why are the banks so conservative?

    By their very nature 2nd mortgages are very poor security for a loan compared to a 1st mortgage. Because of the complexities of two lenders being involved and the low priority of the debt in the event that you default on your loan, most banks limit the amount you can borrow or refuse to do business with you.

    Hello. How do we arrange the second mortgage consent for my parent s property as they ll providing guarantee for me to purchase my home next month.

    Hi Rose, your parents will have to contact their lender to arrange second mortgage consent. Usually, the lender will provide consent for the second mortgage.


    How Does a Reverse Mortgage Work – We Explain Everything You Need #mortgage #loans


    #reverse mortgage wiki

    #

    How Does a Reverse Mortgage Work?

    A reverse mortgage is a loan for senior homeowners that uses the home s equity as collateral. The loan generally does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the estate has approximately 6 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. Any remaining equity is inherited by the estate. The estate is not personally liable if the home sells for less than the balance of the reverse mortgage.

    Eligibility For a Reverse Mortgage

    To be eligible for a HECM reverse mortgage, the Federal Housing Administration (FHA) requires that all homeowners be at least age 62. The home must be owned free and clear or all existing liens must be satisfied with proceeds from the reverse mortgage. If there is an existing mortgage balance, it can be paid off completely with the proceeds of the reverse mortgage loan at closing. Generally there are no credit score requirements for a reverse mortgage.

    Outliving the Reverse Mortgage

    Generally speaking, a reverse mortgage loan cannot be outlived and will not become due, as long as at least one homeowner lives in the home as their primary residence, continues to pay required property taxes and homeowners insurance and maintains the home in accordance with FHA requirements.

    Estate Inheritance

    In the event of death or in the event that the home ceases to be the primary residence for more than 12 months, the homeowner s estate can choose to repay the reverse mortgage loan or put the home up for sale.

    If the equity in the home is higher than the balance of the loan when the home is sold to repay the loan, the remaining equity belongs to the estate.

    If the sale of the home is not enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement from the FHA. No other assets are affected by a reverse mortgage. For example, investments, second homes, cars, and other valuable possessions cannot be taken from the estate to pay off the reverse mortgage.

    Loan Limits

    The amount that is available generally depends on four factors: age (older is better), current interest rate, appraised value of the home and government imposed lending limits. Use the calculator to estimate how much you could be eligible for.

    Distribution of Money From a Reverse Mortgage

    There are several ways to receive the proceeds from a reverse mortgage.

    • Lump sum a lump sum of cash at closing.
    • Tenure equal monthly payments as long as the homeowner lives in the home.
    • Term equal monthly payments for a fixed number of years.
    • Line of Credit draw any amount at any time until the line of credit is exhausted.
    • Any combination of those listed above
    • Begin here to calculating the proceeds you may be eligible to receive: Calculate

    Difference Between a Reverse Mortgage and a Home Equity Loan

    Generally a home equity loan, a second mortgage, or a home equity line of credit (HELOC) have strict requirements for income and creditworthiness. Also, with other traditional loans the homeowner must still make monthly payments to repay the loans. A reverse mortgage generally has no credit score requirements and instead of making monthly mortgage payments, the homeowner receives cash from the lender.

    With a reverse mortgage the amount that can be borrowed is determined by an FHA formula that considers age, the current interest rate, and the appraised value of the home. Typically, the more valuable the home, the higher the loan amount will be, subject to lending limits.

    To summarize the key differences, with traditional loans the homeowner is still required to make monthly payments, but with a reverse mortgage the loan is typically not due as long as the homeowner lives in the home as their primary residence and continues to meet all loan obligations. With a reverse mortgage no monthly mortgage payments are required, however the homeowner is still responsible for property taxes, insurance, and maintenance.


    Help with mortgage costs if you – re out of work – Citizens Advice #mortgage


    #help with mortgage

    #

    Help with mortgage costs if you’re out of work

    Table of contents

    Help with mortgage costs if you’re out of work

    If you’re struggling to pay your mortgage because you’re out of work, you must take action quickly to stop yourself from falling into debt.

    If you get into debt and your lender thinks you’re not dealing with the problem, they will take action through the courts. This could lead to you losing your home.

    If you’re not working, you may be able to get certain benefits which give help towards your mortgage costs.

    On this page we tell you:

    If you aren’t entitled to one of these benefits, you might be able to get other help. See More options for dealing with mortgage problems .

    If you’ve already fallen into debt with your mortgage payments, there may be things you can do to stop yourself from falling further behind with your payments and to clear the debt. See How to deal with mortgage debts .

    If you’re having serious difficulties paying your mortgage, for example, if you’ve started getting letters from your mortgage lender threatening court action, you should get help from an experienced debt adviser.

    You can get debt advice from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB .

    Which benefits give help towards mortgage costs

    The following benefits give you some help towards your mortgage costs:

    • Income Support. This is help for lone parents or carers
    • Income-based Jobseeker’s Allowance (JSA). This is help for people who are looking for work
    • Pension Credit. This is help for people who are over 60 and on a low income
    • Income-related Employment and Support Allowance (ESA). This is help for people who are too sick or disabled to work.

    For more information about whether you may be entitled to one of these benefits and how to make a claim, see the following pages:

    How much of your mortgage costs can be paid

    When you make a claim for one of the benefits mentioned on this page, you will be told whether you can get help towards your mortgage costs. This help is known as housing costs payments.

    Housing costs payments contribute towards the cost of the interest payments on your mortgage. They may also contribute towards the interest payments on loans taken out to pay for repairs or home improvements. Housing costs payments can’t be used to pay off any of the capital of your mortgage.

    Housing costs are paid at a standard rate of interest, regardless of the rate of interest you are actually paying.

    This means that although there can be cases where housing costs payments are higher than the interest you have to pay, in many cases, the payments will be lower. You will have to make up any difference between the interest due to the lender and the amount of interest covered by the housing costs payments. However, if you can’t afford to make up the difference, it might be worth asking your lender if they will just accept the housing costs payments for the time being until you can make up the full amount at a later date.

    For more information about how to deal with your mortgage lender, see Dealing with your mortgage lender .

    You might want to get an experienced debt adviser to help you deal with your mortgage lender. You can get help from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB .

    Can you get your mortgage costs paid straight away

    When you make a claim for benefits, you will usually have to wait 39 weeks before housing costs are paid. This is a change to the previous waiting period of 13 weeks and applies to claims made from 1 April 2016.

    If you’re entitled to Guarantee Pension Credit, there is no waiting period and you can get housing costs payments straight away.

    More options for dealing with mortgage problems

    If you aren’t entitled to any of the benefits which give help towards your mortgage costs, other help might be available.

    For more information about your other options, see the following pages:

    This advice applies to England

    Advice can vary depending on where you live.


    Subprime Mortgage Crisis – How Subprime Mortgages Work #home #loans #calculator


    #subprime mortgages

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    How Subprime Mortgages Work

    Not all the news is bad in the world of subprime lending. One nonprofit organization called Neighbor Works America is doing something about it. Through its Center for Foreclosure Solutions, the organization has joined forces with mortgage and insurance companies to reach out to borrowers in need. It trains foreclosure counselors to assist borrowers and inform communities of their options.

    Neighbor Works took action after learning that a common problem between subprime lenders and their clients is a lack of communication once the borrower falls into financial straits. Often, the borrower is ashamed or afraid to call his or her lender, even though there are actions that could be taken to prevent foreclosure. Lenders often have trouble locating the people in need of advice.

    Neighbor Works received more than 100,000 calls in 2007 on their hotline. To explore your options, you can call the hotline at 888-995-HOPE, or visit their Web site .

    The drastic increase in the number of defaults and foreclosures on subprime mortgages beginning in 2006 led to a subprime mortgage crisis. By 2008, the overall losses from subprime mortgages reached about $250 billion [source: Rose ]. And, due to the complex repackaging of subprime mortgages into investments, this crisis in the housing market contributed to a financial meltdown in 2008 that contributed to a national economic disaster.

    The blame for the subprime mortgage crisis is shared among several factors. Many mortgage brokers steered their clients toward loans they couldn’t afford. Previously, when someone wanted a loan, he or she would go directly to the bank. More and more, people were going to mortgage brokers to act as the go-between. The result was an industry that wasn’t directly accountable when a loan goes bad. Mortgage brokers didn’t suffer any penalty when a loan they drafted defaulted, so there wasn’t much incentive to turn down applicants in this commission-based industry.

    The unemployment rate was also a factor leading to the crisis. Midwestern states hit hard by auto industry layoffs ranked among the highest in foreclosures [source: Federal Reserve ]. Many people had been counting on being able to refinance to make their loan affordable, but slowing appreciation rates in the housing market made it difficult or impossible. Once the introductory period on the subprime loans ran out, the new payments were more than many could handle.

    The borrowers also must bear some responsibility. In a time when credit was easily attainable, many didn’t read the fine print of their loan terms or simply took too big of a risk on a loan that they couldn’t afford to pay back. It’s also common for someone looking to get into the housing market to overstate his or her income to secure a loan.

    Another ugly facet of the subprime crisis is the assertion that many lenders exploited minorities in the rush to get rich. The Home Mortgage Disclosure Act (HMDA) of 1975 made it mandatory for lenders to maintain and disclose data in relation to their loans. In recent years HMDA numbers vary wildly across racial lines. Black and Hispanic borrowers are more likely to have a subprime loan than Caucasians. In fact, in 2006, there was a difference of 36 percent, with 53 percent of blacks having subprime mortgages compared to only 17 percent for whites [source: Federal Reserve ]. In addition, a 2006 study by the Center for Responsible Lending (CRL) found that when credit risk was equal, blacks were still 31 percent to 34 percent more likely to receive a higher rate than whites [source: CRL ]. Since 2007, the NAACP has filed more than a dozen lawsuit s against leading subprime lenders for practicing systematic, institutionalized racism in making home mortgage loans [source: CNSNews.com ].

    To understand how the subprime mortgage crisis led to the worst U.S. recession since the Great Depression, read How can mortgage-backed securities bring down the U.S. economy? For more information on mortgages and the financial system, please explore the links on the following page.

    Up Next


    Auto Insurance Tips: How Does Auto Insurance Work #how #car #insurance #claims #work, #auto #insurance


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    Auto Insurance Buying Guide

    Understand why you need auto insurance

    In short, you need car insurance to protect your car, yourself and your passengers. You also protect any assets, like your home and savings, as well as comply with state law.

    Auto insurance tip #2

    Know your current coverages-but be willing to adjust

    Use your current coverages and limits as a starting point; you can refer to your declarations page for this information. Then, adjust your coverages as necessary to match your lifestyle-which might be different than it was when you first bought the policy.

    For example, if your teenager starts driving next month, you might consider adding him or her to your policy now. Or, if you just bought a new car, you might choose loan/lease payoff coverage. so that if your car is stolen or declared a total loss, you’ll have help paying off your loan or lease.

    Auto insurance tip #3

    Decide what you want to protect, then choose your coverages

    Here are some of the auto insurance coverages that might be available in your state:

    Coverage to buy

    Protect your car against damage caused by a collision with another car

    Protect your car against damage caused by hitting an animal or other events, like theft or a fire

    Cover repair/medical bills for an accident that’s caused by a driver who has no insurance or doesn’t have enough

    Uninsured/underinsured property and bodily injury

    Cover medical bills if you or your passengers are seriously hurt in an accident

    Medical payment/personal injury protection

    Protect your assets in case of a lawsuit

    Bodily injury and property damage liability

    Cover the cost of a rental car if you have a claim

    Pay off your loan/lease if your vehicle is declared a total loss or is stolen and not recovered

    Auto insurance tip #4

    Use deductibles to your advantage

    Your deductible is what you agree to pay out of pocket when you use your car insurance. In general, the higher you set your deductible, the less you’ll pay for your policy. And conversely, if you set your deductible low, you’ll pay more for your policy, but less when you have a claim.

    Auto insurance tip #5

    Know that certain things affect your rate

    Insurance companies evaluate a variety of things when they calculate your rate, from your driving record to where you live and how many miles you drive on average. Keep this in mind when you see your rate.

    Also, remember that to help you get your best rate, Progressive factors in any auto insurance discounts that apply to you. Plus, with Snapshot . you can turn your good driving into additional savings.

    Ready to choose your coverage? Start a free Progressive auto insurance quote .

    Two ways to quote. Tons of ways to save.