How A Balloon Mortgage and Payment Works #mortgage #rate


#balloon mortgage calculator

#

How A Balloon Mortgage and Payment Works

A balloon mortgage is a short term, non-amortizing loan available to real estate purchasers. These mortgages typically have lower monthly payments and interest rates and can be easier to qualify for than a traditional 30 year fixed loan plan. Unlike many other mortgages, balloon mortgages do not pay themselves off at the end of the loan term. At the end of the term, a portion of the principal remains and must be paid off in one lump-sum payment, known as the balloon payment . Balloon mortgages are usually fixed-rate mortgages, but the monthly payments borrowers make most likely include only the interest. Though the payments are usually based on a 30-year amortization schedule, and terms for balloon loans can range anywhere from 1 to 25 years, the balance will usually come due after a short time period three to five years.

For example, if a buyer obtains a seven-year balloon mortgage to purchase a home, he has seven years of equal monthly payments at a fixed interest rate. This rate is often lower than what the buyer would otherwise be able to secure under a traditional mortgage loan. At the end of the seven years, the balloon payment of the remainder of the balance of the loan is due, and the borrower must either pay it in full, refinance with the same or a different lender, or sell the home.

What are the advantages to using a balloon mortgage? Most borrowers use the balloon mortgage when they intend to sell the home before the balloon payment is due. For example, homebuyers who know that their employer will relocate them to another city or state within a few years often opt for a balloon mortgage. Some individuals use allotted years of lower payments to better invest and leverage their money. At the end of seven years, some homeowners can pay off the balance in full. Most, however, are not able to afford this payment and will choose to refinance with the existing lender or a new lender at that point in time. Refinancing is the simplest way of renewing the mortgage. The rates charged when renewing with the same lender may exceed those available from a new lender. Moreover, balloon loans generally offer the borrower a non-negotiable predetermined refinance option in case they have difficulty paying the balloon payment. Refinancing with another lender gives the borrower the chance to negotiate a new loan with a better interest rate and more appealing repayment options.

What are the disadvantages. There are several risks associated with balloon mortgages. At the conclusion of your loan term, you will have to pay off your outstanding balance, or the principal, according to your own arrangements. Borrowers who are unable to make the final payment may have to refinance, sell their home, or convert the balloon mortgage to a traditional mortgage at current interest rates. Also, since a balloon mortgage does very little to pay down a borrower s principal, it is not an effective way to build equity in one s home.

Answered almost 10 years ago

The option of making early repayment only lies with the balloon mortgages or else it can be extended up to a 30 year mortgage with fixed rate along the option to be embedded. If the total debt repayment would be compared according to conventional fixed rate mortgage, these balloon mortgages are quite lower. They can be termed to be the form of partially amortized mortgage or interest only loans.

updated almost 3 years ago

Answered about 3 years ago

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How Mortgage Insurance Works #jumbo #mortgage #rate


#mortgage insurance premium

#

How Mortgage Insurance Works

How Mortgage Insurance Works

“How Mortgage Insurance Works” is one of many informational pamphlets produced by the Mortgage Guaranty Insurance Corporation. It is posted here with their generous permission.

What is mortgage insurance?

It’s a financial guaranty that insures lenders against loss in the event a borrower defaults on a mortgage. If the borrower defaults and the lender takes title to the property, the mortgage insurer (MGIC, for example) reduces or eliminates the loss to the lender. In effect, the mortgage insurer shares the risk of lending the money to the borrower. (Mortgage insurance should not be confused with mortgage life insurance, which provides coverage in the event of a borrower’s death, or homeowner’s insurance, which protects the homeowner from loss due to damage from fire, flood or other disaster.)

Who is mortgage insurance for?

All home buyers can benefit. It allows them to become homeowners sooner, and it dramatically increases their buying power — excellent benefits from a buyer’s perspective. First-time buyers can use a low down payment to help them afford their first home, or to purchase a more expensive home sooner. Repeat home buyers can put less money down and gain significant tax advantages because they will have more deductible interest to claim. They can also use the cash they would have used for a large down payment for investments, moving costs or other expenses.

What does mortgage insurance do for borrowers?

Without the guaranty of mortgage insurance, lenders normally require a borrower to make a down payment of at least 20% of a home’s purchase price, which can mean years of saving for some borrowers. This large down payment assures the lender that the borrower is committed to the investment and will try to meet the obligation of monthly mortgage payments to protect his investment. With the guaranty of mortgage insurance, lenders are willing to accept as little as 5% or 10% down from borrowers. Mortgage insurance fills the gap between the standard requirement of 20% down and an amount the borrower can more easily afford to put down on a purchase. A low down payment also allows borrowers to purchase more home than they might otherwise be able to afford. Without mortgage insurance, a borrower who has saved $10,000 for the required minimum 20% down payment would only be able to purchase a $50,000 home.With mortgage insurance (and income and credit permitting), the borrower could make a down payment of only 10% and purchase a $100,000 home with the $10,000! Or put $7,500 down on a $75,000 home and use the remaining $2,500 for decorating, investing, or buying a car or major appliance. Mortgage insurance broadens a borrower’s options.

Who pays for mortgage insurance?

Generally borrowers do. An initial premium is collected at closing and, depending on the premium plan chosen, a monthly amount may be included in the house payment made to the lender, who remits payment to the mortgage insurer. MGIC offers flexible premium plans for borrowers:

  • Annuals. The borrower pays the first-year premium at closing; an annual renewal premium is collected monthly as part of the total monthly house payment.
  • Monthly Premiums. The cost is slightly more than traditional mortgage insurance plans but monthly premiums dramatically reduce mortgage insurance closing costs. Borrowers pay for mortgage insurance monthly as part of their total monthly house payment but only need to pay one month’s mortgage insurance premium at closing, rather than one year’s.
  • Singles. The borrower pays a one-time single premium (instead of an initial premium and renewal premiums). Since single premiums are typically financed as part of the mortgage loan amount, no out-of-pocket cash is used for mortgage insurance at closing.

These plans offer the choice of refundable or nonrefundable premiums. A refundable premium allows the borrower the opportunity to receive money back on any unused portion, in the event that mortgage insurance coverage is discontinued before the loan is paid in full. The cost for a nonrefundable premium is slightly less than that of a refundable premium, thereby giving the borrower a small savings. If coverage is discontinued on a loan with a nonrefundable premium, the borrower has no opportunity for a refund.

Is there anything else important to know?

No. Just remember, with mortgage insurance, borrowers can increase buying power, put less money down and purchase a home sooner. It’s as simple as that.

Programs and program availability may vary from state to state. Premium rates must be selected based upon the location of the property

Recommended Reading

Mortgage Rates Radar 09/13/2016: Despite Fed concern, mortgage rates holding steady

Mortgage Rates Radar 09/06/2016: Modest jobs report leaves rates flat

Mortgage Rates Radar 08/30/2016: Mortgage rates firm up a little

One simple form, up to 5 competing quotes!


How A Balloon Mortgage and Payment Works #mortgage #jobs


#balloon mortgage calculator

#

How A Balloon Mortgage and Payment Works

A balloon mortgage is a short term, non-amortizing loan available to real estate purchasers. These mortgages typically have lower monthly payments and interest rates and can be easier to qualify for than a traditional 30 year fixed loan plan. Unlike many other mortgages, balloon mortgages do not pay themselves off at the end of the loan term. At the end of the term, a portion of the principal remains and must be paid off in one lump-sum payment, known as the balloon payment . Balloon mortgages are usually fixed-rate mortgages, but the monthly payments borrowers make most likely include only the interest. Though the payments are usually based on a 30-year amortization schedule, and terms for balloon loans can range anywhere from 1 to 25 years, the balance will usually come due after a short time period three to five years.

For example, if a buyer obtains a seven-year balloon mortgage to purchase a home, he has seven years of equal monthly payments at a fixed interest rate. This rate is often lower than what the buyer would otherwise be able to secure under a traditional mortgage loan. At the end of the seven years, the balloon payment of the remainder of the balance of the loan is due, and the borrower must either pay it in full, refinance with the same or a different lender, or sell the home.

What are the advantages to using a balloon mortgage? Most borrowers use the balloon mortgage when they intend to sell the home before the balloon payment is due. For example, homebuyers who know that their employer will relocate them to another city or state within a few years often opt for a balloon mortgage. Some individuals use allotted years of lower payments to better invest and leverage their money. At the end of seven years, some homeowners can pay off the balance in full. Most, however, are not able to afford this payment and will choose to refinance with the existing lender or a new lender at that point in time. Refinancing is the simplest way of renewing the mortgage. The rates charged when renewing with the same lender may exceed those available from a new lender. Moreover, balloon loans generally offer the borrower a non-negotiable predetermined refinance option in case they have difficulty paying the balloon payment. Refinancing with another lender gives the borrower the chance to negotiate a new loan with a better interest rate and more appealing repayment options.

What are the disadvantages. There are several risks associated with balloon mortgages. At the conclusion of your loan term, you will have to pay off your outstanding balance, or the principal, according to your own arrangements. Borrowers who are unable to make the final payment may have to refinance, sell their home, or convert the balloon mortgage to a traditional mortgage at current interest rates. Also, since a balloon mortgage does very little to pay down a borrower s principal, it is not an effective way to build equity in one s home.

Answered almost 10 years ago

The option of making early repayment only lies with the balloon mortgages or else it can be extended up to a 30 year mortgage with fixed rate along the option to be embedded. If the total debt repayment would be compared according to conventional fixed rate mortgage, these balloon mortgages are quite lower. They can be termed to be the form of partially amortized mortgage or interest only loans.

updated almost 3 years ago

Answered about 3 years ago

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How The Mortgage Application Process Works #estimate #mortgage #payments


#mortgage application

#

How The Mortgage Application Process Works

Here you will find information on the following mortgage application topics

  • Mortgage offer delays
  • Property valuations and potential pitfalls
  • Solicitor conveyance issues
  • What does this Lender need to know about you?
  • Employer references when they are needed
  • Proving income when self employed
  • The mystery of mortgage underwriting

Yes here at mortgagemap we have all the in depth information that you want on all of these topics and much more.

The Process in Detail

The movement of a mortgage application through a lenders processing centre can be a mystery to most people. This article aims to unravel some of those mysteries.

Each mortgage lender will have their own unique system but much of the processes will be the same.

For reasons of simplicity and speed the process is divided into key tasks which enable different teams to focus on specific parts of the process. Sub dividing the processing in this way enables everyone to become highly competent at his or her part in the process. This works on the same principle as a car plant conveyor belt system.

Mortgage Application Overview

We will first spend time giving you an overview of the end-to-end process for setting up a mortgage and re-mortgage application. This will allow you to understand the different teams involved in the process and the tasks being performed on an application. Thereafter we will look at the detail undertaken by the different teams.

The process of setting up a mortgage can look quite complicated because of the number of people involved. This however, is not the case. Whilst there are a number of people involved the tasks being performed are relatively straightforward.

Mortgage Application Checks

The process is essentially an elaborate checking and fetching process to confirm that the lender is prepared to lend customers money for either a mortgage or re mortgage. This being the case the majority of work involved is:

Reviewing the content of documentation

Chasing outstanding documentation

Instructing third parties to provide additional information

Beyond the checking and fetching process the operation also has an informing role to play. At times the Mortgage Broker or you (the customer) will look for progress updates and may call the lender. On other occasions the lender may need to call the Broker or customer to let them know the outcome of decisions.

The process starts with the receipt of a mortgage or re-mortgage application and supporting paperwork. The lender creates a file to hold the paperwork and insert a logging checklist at the front of the file. They check the quality of the application and the available paperwork. The biggest hold up for most mortgage cases is missing information. It is much better if you can answer all the questions on the application form and make sure all the relevant documentation is submitted.

With the file they will then need to check to see what supporting documentation has been received with the application. Documentation that will be required here includes: –

Evidence of earnings

Evidence of identity e.g. passport

Evidence of address

Current Bank statements (not all lenders require these)

An employer’s reference may or may not be requested

Evidence of earnings

The evidence of earnings for an employed person and a self-employed person will differ. The overall degree to which the business goes to secure evidence of earnings will also differ dependent on the Loan to Value.

The case details are then in most cases entered onto a computer. This allows more than one department to look at the file simultaneously. More and more lenders are allowing Mortgage brokers to log applications online this does speed up the process, if inputted accurately.

A typical Mortgage application form will ask for the following;

Customer’s name and address

Property value, type of property etc

Loan purpose – re-mortgage, mortgage or equity release

Amount and term of loan

Basic employment details including salary

Employment (including full name address of employer)

Business details if the customer is self employed,(S/Emp)

If S/Emp, type of business, turnover etc

Bankers address, sort code and account number

Details of all personal loans or credit cards

Current mortgage details (If you have one)

Details of the property to be mortgaged

Is it freehold or leasehold, business use etc

Repayment method for the mortgage

Direct debit mandate

As you can see there is quite a lot of information needed from you the customer to enable the lender to consider you for a mortgage.

Checking the Application

Certain information is vital in processing the customer’s application. They would hope that the majority of applications are fully and accurately completed, but obviously they will receive some that are not. If any information is missing, they will contact the customer to obtain the missing data. The data on the application form is of prime importance, however without a signature on the declaration page, they are unable to process the application at all. The declaration page gives the lender authority to make the necessary enquiries with: –

Credit reference agencies,

Fraud prevention agencies,

The customer’s employer

Below is a list of Common Mistakes that hold a case up

Illegible data (Poor handwriting)

Unsigned application form

The completed file can now be passed to the Underwriting team for an initial underwrite. Some lenders will not do this until all outstanding information has been received as it cuts down the need for the same person to look at a case more than once. Brokers will very often discuss a case with the underwriter over the phone prior to submission for an initial decision. Any decision given though at this early stage is only a decision “in principle”.

Not until all the checks have been undertaken and the property valued will a formal mortgage offer be made.

Mortgage Underwriters

The Underwriters will after the initial underwrite give one of 3 possible decisions. The decision will either be yes, no or maybe. Yes or no speak for themselves, a maybe is most likely because the underwriter is not in pocession of all the documentation he needs. Still waiting for bank statements, pay slips accounts etc.

A no is usually due to affordability, bad credit history, etc. Again these people can be helped but a lender with a more liberal attitude to bad credit will have to be found. See the bad credit page of this site for more details.

Customers have to remember that they can “tell” a lender that they earn this or that amount; they live at this or that address and so on. But the lender will want documentary evidence. A simple rule is “no show, no dough”

There are exceptions but “self certification” or “fast track” mortgages are dealt with on other pages on this site.

Property Valuation.

The underwriter checks the customer is a good risk to repay the loan. The other thing that needs checking is the property that will be used as security for the loan. See “Valuations ” page.

Once the valuation comes back as satisfactory the formal mortgage offer can be made. (The valuation is not always satisfactory. Known as a “down valuation” for further info see “Valuation Problems”)

You the customer will then receive the formal mortgage offer in writing. This needs to be checked carefully then signed and returned when you are happy with it. See “Solicitors Process” page.

Once the signed mortgage offer has been sent back the only thing that remains is for a completion date to be set. This is done in conjunction with the lenders solicitor your solicitor and your mortgage broker.

So how long does the process take end to end? How long is a piece of string? It has so many variables and the lender is reliant on 3 rd parties. Such as surveyors, solicitors, employers and you the customer to give them what they want when they want it. In reality if a “clean” fully completed application comes in, and the surveyor gets a move on then a mortgage offer should be out to the client inside 10 working days.

Some lenders will promise the earth to get your business but be guided by your broker if you have one. They submit mortgage applications on a regular basis and therefore they should know which lenders have slick service in place for the processing of new applications.

If you are in a hurry to complete your purchase or remortgage, picking the wrong lender could be a big mistake.

So speak to one of our expert brokers if you want more information on the Mortgage Application Process.


How option trading works #how #option #trading #works


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Option

BREAKING DOWN ‘Option’

Options are extremely versatile securities. Traders use options to speculate, which is a relatively risky practice, while hedgers use options to reduce the risk of holding an asset. In terms of speculation, option buyers and writers have conflicting views regarding the outlook on the performance of an underlying security .

Call Option

Call options give the option to buy at certain price, so the buyer would want the stock to go up. Conversely, the option writer needs to provide the underlying shares in the event that the stock’s market price exceeds the strike due to the contractual obligation. An option writer who sells a call option believes that the underlying stock’s price will drop relative to the option’s strike price during the life of the option, as that is how he will reap maximum profit.

This is exactly the opposite outlook of the option buyer. The buyer believes that the underlying stock will rise; if this happens, the buyer will be able to acquire the stock for a lower price and then sell it for a profit. However, if the underlying stock does not close above the strike price on the expiration date, the option buyer would lose the premium paid for the call option.

Put Option

Put options give the option to sell at a certain price, so the buyer would want the stock to go down. The opposite is true for put option writers. For example, a put option buyer is bearish on the underlying stock and believes its market price will fall below the specified strike price on or before a specified date. On the other hand, an option writer who shorts a put option believes the underlying stock’s price will increase about a specified price on or before the expiration date.

If the underlying stock’s price closes above the specified strike price on the expiration date, the put option writer’s maximum profit is achieved. Conversely, a put option holder would only benefit from a fall in the underlying stock’s price below the strike price. If the underlying stock’s price falls below the strike price, the put option writer is obligated to purchase shares of the underlying stock at the strike price.


How The Obama Mortgage Plan Works: NPR #mortgage #calculater


#obama mortgage plan

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How The Obama Mortgage Plan Works

President Barack Obama says up to 9 million struggling homeowners could get help from the housing rescue plan he outlined. The plan commits $275 billion in government funds to the effort and would help some homeowners reduce home payments by refinancing.

MICHELE NORRIS, Host:

From NPR News this is ALL THINGS CONSIDERED. I’m Michele Norris.

President Barack Obama unveiled a new foreclosure-release effort today that he says could help up to 9 million struggling homeowners. Previous programs have all pretty much failed. But the plan announced today is both broader and more aggressive than previous efforts. The plan commits up to $275 billion in government funds to keep people in their homes. NPR’s John Ydstie now has more on how the plan works.

JOHN YDSTIE: There are three main ways homeowners could be helped by this plan. One involves a simple refinancing for homeowners who have loans owned or guaranteed by the government-controlled mortgage giants Fannie Mae and Freddie Mac. Right now, the problem is that because of big declines in home values across the country, many of those homeowners owe more on their mortgages than their homes are worth. They could benefit from lower interest rates, but no one will refinance their loans. President Obama said today he would loosen restrictions on Fannie and Freddie to make it possible for these people to refinance.

BARACK OBAMA: And the estimated cost to taxpayers would be roughly zero. While Fannie and Freddie would receive less money in payments, this would be balanced out by a reduction in defaults and foreclosures.

YDSTIE: But the government will increase the backstop it’s providing for Fannie and Freddie by $200 billion. The president says this element of the plan could help 4 to 5 million homeowners reduce their monthly mortgage payments.

MARK ZANDI: That’s helpful, that’s good, but that’s not where the problem is.

YDSTIE: Economist Mark Zandi of Moodyseconomy.com.

ZANDI: The real problem with foreclosure lies in loans that Fannie and Freddie don’t have a lot to do with – the nonconforming market, subprime loans, a lot of alternative-A loans, some jumbo loans – and that’s where most of the foreclosures are occurring and will occur. And they don’t benefit from that part of the plan.

YDSTIE: But the second element of the new housing rescue package is designed to help homeowners with those exotic mortgages. As President Obama explained today, it involves the government and lenders partnering to reduce monthly payments for those homeowners.

(SOUNDBITE OF CLAPPING)

OBAMA: Here is what this means. If lenders and homebuyers work together, and the lender agrees to offer rates that the borrower can afford, then we’ll make up part of the gap between what the old payments were and what the new payments will be.

YDSTIE: And in addition, the government would provide incentives to mortgage servicers, including a thousand dollars for every modified loan. The program would be voluntary, although any financial institution should take rescue money from the government in the future would be required to participate. The president estimated 3 to 4 million homeowners would be aided by this part of the plan. Mark Zandi thinks this element of the package depends too much on interest-rate reductions. He argues that given just how far home values have fallen, reducing principal on loans is necessary to halt foreclosures quickly.

ZANDI: I think that would have been the most straightforward, clean and quickest way to address this problem.

YDSTIE: But Susan Wachter disagrees. She is a professor of real estate at the University of Pennsylvania’s Wharton School.

SUSAN WACHTER: The evidence out there is that while principal reduction is important, what’s really key is the mortgage payment. That’s what needs to be reduced. And if that reduction comes through interest reductions or principal reductions – bottom line, it’s what people pay that needs to be affordable.

YDSTIE: Wachter says overall, she thinks this is a good plan and will have an impact. The last major element in President Obama’s housing rescue package depends on the passage of bankruptcy legislation moving through the Congress. It will allow bankruptcy judges to write down the value of the mortgage owed by a homeowner to the current value of the home. And to develop a plan for homeowners to continue making payments. John Ydstie, NPR News, Washington.

Copyright 2009 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc.. an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR s programming is the audio record.

Obama Sets $75 Billion Plan To Stem Foreclosures

From Planet Money

President Obama on Wednesday unveiled an aggressive plan that aims to help up to 9 million homeowners avoid foreclosure, a major cause of the nation’s financial crisis.

The president announced details of the plan in a speech in suburban Phoenix, where massive foreclosures drove down the median price of an existing home to $136,000 last month a 49 percent drop from 2006, according to The Arizona Republic.

The plan is designed to help homeowners whose mortgages exceed the value of their home and those who are on the verge of foreclosure. It includes $75 billion to cut the home payments of some homeowners and $200 billion from the Treasury Department to purchase preferred stock in Fannie Mae and Freddie Mac double what was originally pledged.

“Through this plan, we will help between 7 and 9 million families restructure or refinance their mortgages so they can avoid foreclosure,” Obama said in remarks to a crowd at a Mesa, Ariz. high school. “And we are not just helping homeowners at risk of falling over the edge; we are preventing their neighbors from being pulled over that edge too as defaults and foreclosures contribute to sinking home values, failing local businesses, and lost jobs.”

The announcement came shortly after the Commerce Department released even more bad news about the housing market. The government report showed that housing starts fell nearly 17 percent in January to a seasonally adjusted annual rate of 466,000 units, a record low. Applications for building permits, an indicator of future activity, also dropped.

The president’s initiative calls for allowing 4 million to 5 million ineligible homeowners with mortgages through Fannie Mae or Freddie Mac to refinance their home loans at lower rates. To accomplish this, Obama said he would remove restrictions that prevent Fannie and Freddie from refinancing mortgages valued at more than 80 percent of a home’s worth.

Housing Secretary Shaun Donovan stressed that homeowners don’t need to be delinquent in payments to get help.

The plan also offers financial incentives for lenders to reduce the mortgage payments of as many as 4 million homeowners who are at risk of losing their homes. Under the $75 billion Homeowner Stability Initiative, lenders would cut mortgage payments to no more than 31 percent of the borrower’s income.

“My plan establishes clear guidelines for the entire mortgage industry that will encourage lenders to modify mortgages on primary residences. Any institution that wishes to receive financial assistance from the government, and to modify home mortgages, will have to do so according to these guidelines which will be in place two weeks from today,” Obama said.

The plan is designed to aid homeowners and entire communities where double-digit foreclosure rates have led to declining properties and a shrinking tax base. Last year, there were nearly 3.2 million foreclosure filings including default notices, auction sale notices and bank repossessions on more than 2.3 million properties during 2008, an 81 percent increase in total properties from 2007, according to RealtyTrac, which tracks foreclosures.

The president stressed that the plan would not rescue speculators who made risky investments on homes to resell, dishonest lenders who distorted facts to get loans approved, or people who bought homes they knew they could not afford.

In addition, the Treasury Department announced it would provide up to $200 billion to Fannie Mae and Freddie Mac to stabilize the markets and hold down mortgage rates. In 2008, almost three-quarters of new home loans were financed or guaranteed by Fannie Mae and Freddie Mac.

“The increased funding will provide forward-looking confidence in the mortgage market and enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners,” said a Treasury Department statement.

The president announced his housing initiative just one day after he signed a $787 billion economic stimulus plan that aims to create or save 3.5 million jobs. On Wednesday, he said part of the economic stimulus included $2 billion in competitive grants to communities looking for innovative ways to avoid foreclosures.


How Mortgage Insurance Works #cheapest #mortgage #rates


#mortgage insurance premium

#

How Mortgage Insurance Works

How Mortgage Insurance Works

“How Mortgage Insurance Works” is one of many informational pamphlets produced by the Mortgage Guaranty Insurance Corporation. It is posted here with their generous permission.

What is mortgage insurance?

It’s a financial guaranty that insures lenders against loss in the event a borrower defaults on a mortgage. If the borrower defaults and the lender takes title to the property, the mortgage insurer (MGIC, for example) reduces or eliminates the loss to the lender. In effect, the mortgage insurer shares the risk of lending the money to the borrower. (Mortgage insurance should not be confused with mortgage life insurance, which provides coverage in the event of a borrower’s death, or homeowner’s insurance, which protects the homeowner from loss due to damage from fire, flood or other disaster.)

Who is mortgage insurance for?

All home buyers can benefit. It allows them to become homeowners sooner, and it dramatically increases their buying power — excellent benefits from a buyer’s perspective. First-time buyers can use a low down payment to help them afford their first home, or to purchase a more expensive home sooner. Repeat home buyers can put less money down and gain significant tax advantages because they will have more deductible interest to claim. They can also use the cash they would have used for a large down payment for investments, moving costs or other expenses.

What does mortgage insurance do for borrowers?

Without the guaranty of mortgage insurance, lenders normally require a borrower to make a down payment of at least 20% of a home’s purchase price, which can mean years of saving for some borrowers. This large down payment assures the lender that the borrower is committed to the investment and will try to meet the obligation of monthly mortgage payments to protect his investment. With the guaranty of mortgage insurance, lenders are willing to accept as little as 5% or 10% down from borrowers. Mortgage insurance fills the gap between the standard requirement of 20% down and an amount the borrower can more easily afford to put down on a purchase. A low down payment also allows borrowers to purchase more home than they might otherwise be able to afford. Without mortgage insurance, a borrower who has saved $10,000 for the required minimum 20% down payment would only be able to purchase a $50,000 home.With mortgage insurance (and income and credit permitting), the borrower could make a down payment of only 10% and purchase a $100,000 home with the $10,000! Or put $7,500 down on a $75,000 home and use the remaining $2,500 for decorating, investing, or buying a car or major appliance. Mortgage insurance broadens a borrower’s options.

Who pays for mortgage insurance?

Generally borrowers do. An initial premium is collected at closing and, depending on the premium plan chosen, a monthly amount may be included in the house payment made to the lender, who remits payment to the mortgage insurer. MGIC offers flexible premium plans for borrowers:

  • Annuals. The borrower pays the first-year premium at closing; an annual renewal premium is collected monthly as part of the total monthly house payment.
  • Monthly Premiums. The cost is slightly more than traditional mortgage insurance plans but monthly premiums dramatically reduce mortgage insurance closing costs. Borrowers pay for mortgage insurance monthly as part of their total monthly house payment but only need to pay one month’s mortgage insurance premium at closing, rather than one year’s.
  • Singles. The borrower pays a one-time single premium (instead of an initial premium and renewal premiums). Since single premiums are typically financed as part of the mortgage loan amount, no out-of-pocket cash is used for mortgage insurance at closing.

These plans offer the choice of refundable or nonrefundable premiums. A refundable premium allows the borrower the opportunity to receive money back on any unused portion, in the event that mortgage insurance coverage is discontinued before the loan is paid in full. The cost for a nonrefundable premium is slightly less than that of a refundable premium, thereby giving the borrower a small savings. If coverage is discontinued on a loan with a nonrefundable premium, the borrower has no opportunity for a refund.

Is there anything else important to know?

No. Just remember, with mortgage insurance, borrowers can increase buying power, put less money down and purchase a home sooner. It’s as simple as that.

Programs and program availability may vary from state to state. Premium rates must be selected based upon the location of the property

Recommended Reading

Mortgage Rates Radar 09/13/2016: Despite Fed concern, mortgage rates holding steady

Mortgage Rates Radar 09/06/2016: Modest jobs report leaves rates flat

Mortgage Rates Radar 08/30/2016: Mortgage rates firm up a little

One simple form, up to 5 competing quotes!


How vonage mobile works #how #vonage #mobile #works


#

Packed with clever little features to make business better. Vonage – the perfect phone system for your business.

Testimonials

With Vonage we consolidated our telecom needs, allowing us to have regional telephone numbers all routed to one office. Potential clients prefer to call a local number (regardless of where the call actually terminates) providing it is answered and dealt with in a professional manner. Vonage gives us greater control over company assets and employee deployment.

Business Project Manager, Small Construction Company via Techvalidate

I work outside of the UK and my customers in the UK know no difference. The service is good and, most importantly, users think I am in the area code of whichever phone line I call from. Vonage provides a commercially viable solution for keeping in touch with the UK, allowing my customers to call me as if I am in the UK even when I am not.

CEO, Small Business Professional Services Company via Techvalidate

Brand Video

We help over 600,000 business users save over 30% on their phone costs.

All prices include VAT unless otherwise stated.

Unlimited and inclusive calling applies to UK landline numbers starting with 01, 02, and 03, UK mobiles on all major UK mobile networks (Vodafone, O2, EE, Three, Virgin Mobile (EE), Asda Mobile (EE) and Tesco Mobile (O2)) and international geographic landline numbers and mobiles where specified.

A call set up fee (CSF) may apply to calls outside your call plan. Calls outside your call plan are billed per minute, part minutes are billed as whole minutes and are rounded to the nearest whole penny. Calls to service numbers are charged at the advertised service charge plus an access charge. Details of access charges and CSF can be found on our rates page or by calling our call centre on 0207 993 9000 0207 993 9000 .

Any minutes used on mobile, tablet or desktop applications (including Extensions) form part of your call plan and will count towards your total usage.

Early termination charges and disconnection fees may apply. Broadband required. View our full terms of service here. You can also view our cookies policy here .

Price comparison is for prices correct on 01/06/2017 with Vonage Talk Plan; BT Unlimited Weekend Call Plan, Calling Features Pack, Standard BT Line Rental, Standard Daytime Pricing, Standard International Per Minute Pricing, Individual Feature Pricing and Standard Installation Charges; TalkTalk UK Evening Weekend, Standard Line Rental, Standard Daytime International Pricing, Individual Value Features, Standard Installation; Sky Pay As You Talk, Standard Sky Line Rental, Standard Daytime Pricing, Standard International Per Minute Pricing, Standard Installation Charges. Skype Pay As You Go Service. Prices are exclusive of VAT at 20% unless stated otherwise.

Savings based on Vonage Customer Survey of 198 business customers, June 2014.


How A Balloon Mortgage and Payment Works #fha #mortgage #calculator


#balloon mortgage calculator

#

How A Balloon Mortgage and Payment Works

A balloon mortgage is a short term, non-amortizing loan available to real estate purchasers. These mortgages typically have lower monthly payments and interest rates and can be easier to qualify for than a traditional 30 year fixed loan plan. Unlike many other mortgages, balloon mortgages do not pay themselves off at the end of the loan term. At the end of the term, a portion of the principal remains and must be paid off in one lump-sum payment, known as the balloon payment . Balloon mortgages are usually fixed-rate mortgages, but the monthly payments borrowers make most likely include only the interest. Though the payments are usually based on a 30-year amortization schedule, and terms for balloon loans can range anywhere from 1 to 25 years, the balance will usually come due after a short time period three to five years.

For example, if a buyer obtains a seven-year balloon mortgage to purchase a home, he has seven years of equal monthly payments at a fixed interest rate. This rate is often lower than what the buyer would otherwise be able to secure under a traditional mortgage loan. At the end of the seven years, the balloon payment of the remainder of the balance of the loan is due, and the borrower must either pay it in full, refinance with the same or a different lender, or sell the home.

What are the advantages to using a balloon mortgage? Most borrowers use the balloon mortgage when they intend to sell the home before the balloon payment is due. For example, homebuyers who know that their employer will relocate them to another city or state within a few years often opt for a balloon mortgage. Some individuals use allotted years of lower payments to better invest and leverage their money. At the end of seven years, some homeowners can pay off the balance in full. Most, however, are not able to afford this payment and will choose to refinance with the existing lender or a new lender at that point in time. Refinancing is the simplest way of renewing the mortgage. The rates charged when renewing with the same lender may exceed those available from a new lender. Moreover, balloon loans generally offer the borrower a non-negotiable predetermined refinance option in case they have difficulty paying the balloon payment. Refinancing with another lender gives the borrower the chance to negotiate a new loan with a better interest rate and more appealing repayment options.

What are the disadvantages. There are several risks associated with balloon mortgages. At the conclusion of your loan term, you will have to pay off your outstanding balance, or the principal, according to your own arrangements. Borrowers who are unable to make the final payment may have to refinance, sell their home, or convert the balloon mortgage to a traditional mortgage at current interest rates. Also, since a balloon mortgage does very little to pay down a borrower s principal, it is not an effective way to build equity in one s home.

Answered almost 10 years ago

The option of making early repayment only lies with the balloon mortgages or else it can be extended up to a 30 year mortgage with fixed rate along the option to be embedded. If the total debt repayment would be compared according to conventional fixed rate mortgage, these balloon mortgages are quite lower. They can be termed to be the form of partially amortized mortgage or interest only loans.

updated almost 3 years ago

Answered about 3 years ago

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How A Balloon Mortgage and Payment Works #mortgage #home


#balloon mortgage calculator

#

How A Balloon Mortgage and Payment Works

A balloon mortgage is a short term, non-amortizing loan available to real estate purchasers. These mortgages typically have lower monthly payments and interest rates and can be easier to qualify for than a traditional 30 year fixed loan plan. Unlike many other mortgages, balloon mortgages do not pay themselves off at the end of the loan term. At the end of the term, a portion of the principal remains and must be paid off in one lump-sum payment, known as the balloon payment . Balloon mortgages are usually fixed-rate mortgages, but the monthly payments borrowers make most likely include only the interest. Though the payments are usually based on a 30-year amortization schedule, and terms for balloon loans can range anywhere from 1 to 25 years, the balance will usually come due after a short time period three to five years.

For example, if a buyer obtains a seven-year balloon mortgage to purchase a home, he has seven years of equal monthly payments at a fixed interest rate. This rate is often lower than what the buyer would otherwise be able to secure under a traditional mortgage loan. At the end of the seven years, the balloon payment of the remainder of the balance of the loan is due, and the borrower must either pay it in full, refinance with the same or a different lender, or sell the home.

What are the advantages to using a balloon mortgage? Most borrowers use the balloon mortgage when they intend to sell the home before the balloon payment is due. For example, homebuyers who know that their employer will relocate them to another city or state within a few years often opt for a balloon mortgage. Some individuals use allotted years of lower payments to better invest and leverage their money. At the end of seven years, some homeowners can pay off the balance in full. Most, however, are not able to afford this payment and will choose to refinance with the existing lender or a new lender at that point in time. Refinancing is the simplest way of renewing the mortgage. The rates charged when renewing with the same lender may exceed those available from a new lender. Moreover, balloon loans generally offer the borrower a non-negotiable predetermined refinance option in case they have difficulty paying the balloon payment. Refinancing with another lender gives the borrower the chance to negotiate a new loan with a better interest rate and more appealing repayment options.

What are the disadvantages. There are several risks associated with balloon mortgages. At the conclusion of your loan term, you will have to pay off your outstanding balance, or the principal, according to your own arrangements. Borrowers who are unable to make the final payment may have to refinance, sell their home, or convert the balloon mortgage to a traditional mortgage at current interest rates. Also, since a balloon mortgage does very little to pay down a borrower s principal, it is not an effective way to build equity in one s home.

Answered almost 10 years ago

The option of making early repayment only lies with the balloon mortgages or else it can be extended up to a 30 year mortgage with fixed rate along the option to be embedded. If the total debt repayment would be compared according to conventional fixed rate mortgage, these balloon mortgages are quite lower. They can be termed to be the form of partially amortized mortgage or interest only loans.

updated almost 3 years ago

Answered about 3 years ago

You Must Be Logged In To Answer

Product: Today Last Week

Compare rates in your area:

Product: Today Last Week

Compare rates in your area:

About

The MND Q

Highlights

– 10,000+ new unique visitors daily
– 60,000+ industry professionals
– 2000+ questions answered

Share this question on