News Channel Mortgage

A fixed-rate mortgage is a home loan that has a stable interest rate over a predetermined length of time.  More specifically, the rate of interest never varies, but rather, always stays the same over the lifetime of the loan.  The most common terms for fixed-rate mortgages are 10, 15, and 30 years.
 
The majority of home loans are fixed-rate loans with the 30-year term being the most popular.  The longer the term of the loan, the smaller the monthly payment will be.  Additionally, the longer the term of the loan, the greater the amount of interest, spent over the lifetime of the loan, will be.  
 
Likewise, the shorter the term, the larger the monthly payment will be.  However, the loan will be paid off more quickly and a substantial savings in the amount of interest spent will be realized.
 
Since the rate of interest calculated remains constant for the duration of the loan, the monthly payment will always be the same amount.  Typically, this type of loan is very popular when interest rates are relatively low.  If the interest rate is sufficiently low, the opportunity to lock in at that rate is quite appealing, particularly to homeowners who intend to stay in their particular home for a long time.
 
Several advantages are clearly presented with this type of loan.  The interest rate is locked in and so it never changes.  The borrower never has to be concerned with fluctuating interest rates.  Additionally, the monthly payment does not vary over the years.  Therefore, no surprises are in store for the homeowner.
 
A 30-year fixed rate mortgage has an additional advantage over the shorter-term fixed-rate mortgages.  A longer term equates to smaller monthly payments.  This can make a higher priced home more easily affordable to a prospective buyer.  Additionally, since the payments are smaller with a longer term, money is more readily available for other expenses.
 
Likewise, this loan is not without a few minor disadvantages.  Since the interest rate is fixed, any decrease in existing interest rates will not be reflected in the loan.  Generally, a 30-year mortgage comes with a slightly higher interest rate than a shorter-term mortgage.  The difference, however, is usually inconsequential.
 
In addition to slightly lower interest rates with a shorter-term fixed-rate mortgage, equity is built up in the home much more quickly.  Since the payments are larger, the amount of the payment that goes to the principal is larger.  Therefore, the equity is built up more quickly, the loan is repaid more quickly, and the amount of interest paid decreases more quickly.
 
Several factors affect the amount of the monthly payment of a fixed-rate mortgage.  The term, the interest rate, and the amount of principal all play into the process that determines the final number.  
 
The term of the fixed loan, once decided, remains the same throughout the duration of the loan.  The interest rate, also once selected, remains steady.  The principal, or the amount of money that an individual borrows, also helps to determine the amount of money that must be paid back on a monthly basis.  The more money that an individual borrows, the larger the payment, by necessity, will be.
 
The fixed rate mortgage offers a certain level of security through its set interest rate.  It offers a certain level of flexibility initially with its wide span of terms, including 10, 15, 20, and 30-year terms.  It also offers predictability with a stable mortgage payment throughout the duration of the loan.
 
Traditionally, no penalties are imposed for early repayment or prepayment on fixed-rate mortgages.  Therefore, the homeowner may benefit from making additional payments and increasing the equity of the home, while decreasing the lifetime of the loan.
 
A fixed-rate loan is simple and easy to understand with a few basic facts.  A fixed-rate loan allows the borrower to lock in at a particular, specified interest rate for a specified time frame.  Hence, the interest rate and the payment amount never change.  The amount of the monthly payment that goes to the principal amount of the loan increases slightly as the amount of the monthly payment that goes to interest decreases slightly with each additional payment.  The entire loan is paid off by the end of the predetermined term.  

What is Home Equity?

Home equity is when your home exceeds the worth placed on it by the mortgage company when you took out your home loan. Although most of your property is currently being used as collateral to ensure that you repay your mortgage, you still have ownership over the amount of equity that is in your home.

What Does This Mean for You?

This means that you can take out another loan against the equity in your home if need be. This can be great for those who run into an emergency and require further monetary resources than a personal loan can provide. For example, consider this:

- If you have a large amount of debt on high interest credit cards, you can take out a lower interest rate loan against the equity in your home to pay off this debt. This way, although you will still owe the money, you may not have to pay as much in the end.

- If you want to upgrade or remodel a part of your home to make its value grow even further, you could use the equity already in your home to do so. This can be ideal for those who plan on selling their home and want to increase its overall value before placing it on the market.

- If you currently do not have enough money coming in to pay the bills for some time, a large loan may help you get by. Financial hardship can surprise many families when an adult is suddenly laid off or when someone in the family requires extensive medical attention that is not fully covered by insurance.

How Do You Know If You Have Equity in Your Home?

If you have remodeled your home since your last mortgage or property values have risen significantly due to development in your area, then you should have some equity in your home. The best way to discover what your equity is, is to have the home reliably appraised. Once you discover the value of your property, then you can begin to determine what your options are.

Getting into debt is not a difficult task, especially with the number of credit agreement and credit accounts that are available to the average consumer. It is not uncommon for a single person to have a mortgage, auto loan, overdraft, bank loan, two or three credit cards and several credit purchase agreements. While all have their uses, the mismanagement of credit can lead to serious financial problems including repossession, foreclosure and possibly even bankruptcy.

The Problem With Multiple Debts And Multiple Lenders

One of the biggest problems with having so many debts to so many companies is keeping an accurate budget. It is quite possible to owe more than ten companies different amounts of money on different dates and without keeping a very close eye on the individual payments, the debt can easily overtake your income and eventually your life. Debt consolidation is the act of borrowing one large amount of money to repay some or all of these outstanding debts. While in the long term it may mean repaying more money than you initially owed it can also be the difference between financial survival and financial ruin.

Remortgaging Your Home To Consolidate Debts

One of the most common ways to consolidate debt is through the remortgaging of your home. This is the most cost effective method of debt consolidation because the interest you will need to repay on a mortgage loan is considerably lower than that of any other type of loan. However, you do need equity in your home and you should be aware that a failure to meet the repayments on your mortgage will eventually lead to the foreclosure of your home.

You should first consider contacting your current mortgage lender and asking if they can help. If this doesn’t bear the results you require then look around at specialist mortgage lenders. Be careful not to jump at the first offer you receive; take your time to consider the options and determine if there are any potentially better options.

The Specialist Debt Consolidation Loan

A specialist debt consolidation loan is another option and enables you to consolidate some or all of your outstanding debt. This does not normally include your mortgage, which will have a much lower interest rate anyway. A debt consolidation loan is an excellent way to pay off all your credit cards and other high interest loans leaving you with one simple repayment to make on a monthly basis. Consult your own bank or loan lender before shopping around the rest of the marketplace. You already have a borrowing history with these companies and they may be able to offer you the help you need quicker than other companies.

Balance Transfer Credit Cards

Balance transfer credit cards may be an option for you, but they are an option you should not take lightly. A balance transfer card offers 0% interest on any balance you transfer to your new credit card. This can help to consolidate several credit card and loan debts into one and give you the added advantage that you don’t need to repay any interest until the offer expires. However, problems can arise primarily because of temptation. Once you have repaid the balance of your old credit card you should cut it up and cancel your account. This prevents you from running up yet more debts at very high interest rates.

Changing Your Spending Habits To Prevent Further Problems

Regardless of the type of debt consolidation you opt for, the most important thing is that you alter your borrowing or spending habits once you have repaid your existing debts. There is a very reasonable chance that you have used a debt consolidation loan because you have previously overspent against your monthly budget. Using a debt consolidation loan will clear all the balances on credit cards, overdrafts and other credit loans. The temptation, then, is to go out and spend more than you can afford, relaxed in the knowledge that you now have a credit card balance to help repay your debt.

A Debt Consolidation Summary

Debt consolidation is a tool to help debtors fight their way out of debt troubles. Used wisely and correctly they can be of huge benefit but misuse can lead to further and irreparable damage. Take the time to sit down and calculate your finances. Write up a budget that details your incoming money and your outgoing money; this will leave you with the amount of money you can reasonably afford to spend on a monthly basis. The final step is to avoid temptation. Curb your spending habits to an extent that means you are only spending what you can afford to spend otherwise you will be in an identical position in no time whatsoever.

New homes being designed and built in today’s market are significantly larger and offer more amenities than homes built two or three decades ago., according to a report on new home characteristics released by the U.S. Census Department in June.  The information provides a snapshot of changing aspects of home design in recent decades, including the continued expansion of new home sizes through last year.

            The average floor area in a newly built home last year reached an all-time high of 2,434 square feet.  That’s up from an average 2,349 square feet in 2004 and just 1,645 feet in 1975.  The Northeast Region had the largest average new home size, with the Midwest reporting the smallest sized new homes.

The title insurance industry is in the middle of a three-year rise in loss ratios, now at the highest point in 10 years, according to data published by Demotech Performance of Title Insurance Companies.  During this cycle, despite increasing overall income, net operating gains are down over 25 percent.  That amounts to a $250 million drop from 2003 levels.  At the same time, the yield on invested assets is at a 10-year low.

            Two out of three title companies increased their surplus during the past year, Demotech noted.  Some of the largest increases are from industry leaders.  Stewart Title Insurance Company, Fidelity National, Chicago Title and First American Title all report double-digit increases in their surplus, averaging over 25 percent more surplus than at this time last year.

Freddie Mac, a major buyer of existing mortgages and supplier of funds for new loans, recently announced a new Loan Prospector automated underwriting service that will enhance its suite of affordable mortgage products to help more low- and moderate-income borrowers qualify for mortgages that are eligible for purchase by Freddie Mac.

            “We believe the new changes will further demonstrate how we are fulfilling our mission to expand homeownership opportunities for American families while delivering a consistently superior business experience to our lender customers,” said Paul Mullings, senior vice president of Freddie Mac.  “Also, by removing our Loan Prospector assessment fee and providing more `accept’ responses, it will enable our lenders to expand their business while discovering how many more of their customers qualify for Freddie Mac’s most affordable mortgage products.”

Home sales are decreasing due to rising interest rates, but prices are still increasing due to rising land values.  Increasing home prices are reflecting the rising value of the land on which they are situated, rather than building values.  That was determined by a recent study conducted by the Federal Reserve.  In the 46 biggest metro housing markets, land’s share of property prices increased from 32 percent in 1984 to 51 percent in 2004, according to Michael Palumbo, chief economist in the Fed’s Flow of Funds section.

Land value increases were most dramatic during the 1998-2004 housing boom when land’s share of property values gained rapidly.  “With residential land having appreciated so significantly over the last 20 years, the future course of land prices is expected to play an even more important role in driving home prices in the next two decades in terms of average appreciation rates and volatility,” the study report stated.

The increasing share of property values are being determined by rising land values.  “This could mean faster home price appreciation, on average, and possibly a larger swing in home prices,” the report noted.  Most experts now point to a much slower pace of home value increases in future years.  However, the cumulative gains in land values in past years means that house prices might rise more quickly on average than they did before the boom, according to the study report.  At least, this might be the case on some areas.

Markets where homes are particularly high priced have seen the biggest increases in land’s share of prices, but the recent housing boom has been marked by rapid appreciation of residential land just about everywhere, the study revealed. 

When buying a newly constructed home, don’t let the builder pressure you into obtaining needed financing through his affiliated mortgage lender.  That’s the advice coming from several government agencies.  Some builders try to motivate buyers with “free upgrades” or closing cost discounts if they will deal with their lender.  In some cases, they threaten to withhold those incentives or even scuttle the home purchase transaction if the buyer insists on getting the mortgage from another source.  That’s illegal.

“Often consumers feel compelled to use a builder’s hand-picked mortgage company because they feel they’ve been offered an incentive they can’t refuse,” said Brian Montgomery, federal housing commissioner.  “But federal real estate settlement rules require that these incentives be legitimate and not built into the price of the house or the cost of the loan.”

The builder, of course, receives a monetary reward for directing home buyers to an affiliated lender.  In some cases, it’s a lender firm owned, or partially owned, by the builder.  The buyer can usually find a much more advantageous loan from another mortgage firm.  The money saved by going with a more desirable loan will probably far surpass the advantage of any incentive offered by the builder.

“Tie-in sales” can violate federal antitrust laws, it’s noted on the Federal Trade Commission’s Web site (www.ftc.gov).  The sale of one product on condition that a customer purchase a second product which the customer may not want or can buy elsewhere at a lower price, is a tie-in, and they are illegal.

Middle-class neighborhoods are shrinking.  They are losing ground in most regions nationwide.  If fact, they are shrinking at more than twice the rate of the middle class itself.  At the same time, poor and rich neighborhoods are expanding, as cities and suburbs have become increasingly segregated by income, according to a new study by Brookings Institute.  It found that as a share of all urban and suburban neighborhoods, middle-income neighborhoods in the nation’s 100 largest metro areas have declined from 58 percent in 1970 to 41 percent in 2000.

Expanding income inequality has been well documented in recent years, but the Brookings analysis of census data uncovered a much more accelerated decline in communities that house the middle class.  It far outpaces the seven percentage-point decline between 1970 and 2000 in the proportion of middle-income families living in and around cities.

Middle-income neighborhoods, where families earn 80 to 120 percent of the local median income, have plunged by more than 20 percent as a share of all neighborhoods in cities like Los Angeles and Chicago.  In all income levels, the primary goal of most families is to own their own home.

The Flood Modernization and Reform Act (H.R. 4973), passed by the House of Representatives on June 27, will strengthen the protection of property owners against flood related damage and provide flood insurance to millions of homeowners across the country, according to the National Association of Realtors. 

            “Floods can strike any place and at any time, and in the wake of the most destructive hurricane season in the century and the recent heavy rains experienced over much of the country, this legislation is very important,” said Thomas Stevens, NAR president.  “It underscores the importance of accurate and current flood maps and will enhance the authority of the National Flood Insurance Program to pay existing claims.”

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