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By admin On March 4, 2010No Comments
You have worked very hard and saved up some money. It’s time to invest in a home, but what about the different options when it comes to financing? This is an area that tends to confuse practically every new home owner, fraught with terms and definitions as it is. Let’s try to clear it up a bit. There are many types of home financing options and these typically vary in terms of the points charged and the interest rates. They can differ on some of the finer points based on who is actually issuing the loan and by whom they are being backed. One can get a loan that is backed by a private bank or one that is backed by the government.
Home financing loans also differ in terms of the payment structure. When taking a loan one will need to determine which method of payment is best suited to ones needs. There are fixed rate mortgages and adjustable rate mortgages. Each has their own disadvantages and advantages.
Fixed Rate Mortgage Loans:
As the name suggests, with a fixed rate mortgage one’s monthly payment remains the same. It doesn’t matter if the interest rates fluctuate. The amount that is paid from month to month never varies. Some people prefer this type of payment plan since it allows for more precise budgeting of funds.
Adjustable-Rate Mortgage Loans:
Unlike the fixed rate mortgage, one’s payments will fluctuate according to the interest rates. So if they go up, so too do the payments. Why would anyone choose this type of home financing? Typically one would pay a lower initial rate so, should the interest rates remain steady, overall monthly payments would be lower.
Conventional Loans:
This type of loan is sourced from a private lending institution, such as a bank, savings and loans organization or a mortgage broker. There is typically a minimum deposit which can range anywhere from 3 to 20%. Some institutions may demand that the borrower take out private mortgage insurance as well. While this is meant to protect the lender in the case that one defaults on the loan, it’s not necessarily good for the borrower who now has to pay increased fees.
Government-Backed Loans:
The final type of home financing is a government backed mortgage. These are typically issued to groups which fall into a low income bracket, such as war veterans, and they are usually transferable. There are generally no penalties for early repayment.
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By admin On February 14, 2010
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Tips for choosing the right kind of insurance plan (509 words)
Whether you are taking life insurance or general insurance (non-life insurance) products like auto insurance, health insurance, homeowners insurance etc, there are some basic commonalities that a consumer should take into considering while choosing an insurance product. Here are tips on choosing the type of insurance for you:
1. Find out the benefits and coverage: You have to find out the coverage and benefits offered by a particular insurance product. Compare it against another insurance product and find out if the coverage is worth it. Do not compare orange against apples. In other words, compare an auto insurance product against another one. Also find out if a particular type of insurance gives enough coverage or if you need to take a specialized policy. For instance, a health insurance policy can offer cancer protection, but if it is not enough or if the benefits are less, you can take a specialized cancer cover
2. Compare insurance quotes online: Go to an insurance aggregator website or an independent website in which different insurance vendors are listed. On such a website, insurance companies tend to base their quotes competitively. Find out which insurance company is the best for you in terms of various parameters apart from just the price quotes. Read through the exclusions, inclusion and disclaimers to find out which is the better insurance company
3. Find out the premium: Find out the premium that you have to pay for the insurance. For instance, if you do not have a good record at driving, you may be asked to pay high premiums for auto insurance compared to the one who has a squeaky, clean record. Also when you take life insurance, a person who applies for term insurance pays low premium generally compared to the one who goes for whole life insurance
4. Claims procedure: Find out exactly how the claims procedure works. It is no use taking a fancy, hyped-up insurance policy when the claims procedure is strenuous. The insurance company that you go for should have an efficient redressal system to address your grievances as well.
5. Customer service: Nowadays, every insurance company strives to give better service. So, look for the one that is more transparent, more sensitive to people and the one who is more welcoming to people’s questions. Go for the insurance company that is very good at resolving queries, clarifying doubts and giving better options.
6. Free look out periods: Check if the insurance has a free-look out period wherein you can take the insurance and experience it for a month without paying premium, for a month or so. Secondly, find out how much money you can get if you surrender the policy.
7. Do not agree impulsively; When the insurance company calls you and tells you how well the insurance policy is for you, do not just say ‘yes’ outright. He is being trained to say all the good and rosy things. Tell him that you will look into it and get back to him. Do your research properly and then form a decision.
By admin On February 5, 2010
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With almost everyone looking for ways to lower their monthly bills, many people are refinancing their mortgage. When done properly, refinancing a mortgage can have both immediate and long term benefits. But, is it a good financial move to refinance your home? And, how can you be sure that it’s the best option for you?
There’s a lot of advantages in refinancing a mortgage. It’s a great way to save money on interest and have lower monthly payments. It’s also an excellent way to obtain extra money if you’re planning on doing some home improvements. But, it isn’t always the best option for everyone, it depends upon your specific circumstances.
One of the main factors you need to consider before refinancing your home is whether or not you plan to stay in the home. Even when you can get a much lower interest rate, if you plan to sell your home in a few years the closing costs may out weigh the savings you’ll see on the interest charges.
Even when you do plan to stay in your present home, there are still other factors that you need to consider.Closing costs and fees average several thousand dollars. And, if your monthly savings over the term of your current mortgage doesn’t equal more than the costs, you might be better off with your current mortgage agreement.
While most experts agree that a lower interest rate of just one or two percentages indicates a good reason to refinance, it depends on how much you owe on your home. If the balance on your mortgage is substantial, a one percent interest reduction can be a huge savings. But, if you have a lower balance, refinancing might not make much sense.
If you have an adjustable rate mortgage, refinancing for a fixed rate mortgage can be a good financial move. At a time when interest rates are rising, a fixed rate can guarantee your set monthly payment. You won’t need to worry about your payment raising with the market and you will be better able to budget your monthly income.
You should also consider refinancing if your credit rating has improved since you first bought your home. Your credit score has a big impact on the interest rate you receive. A low credit score means a high rate and if your rating has increased you will be able to refinance at a much lower rate of interest.
Whether or not you should refinance your mortgage is all about the bottom line. As a general rule if you can recover the costs of refinancing your home within two or three years, you probably should refinance. And, if you want to consolidate your debts or just need a large sum of money, refinancing might be the only way you can get the money you need.
By admin On January 23, 2010
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It has been proved through a lot of statistical evidence in the form of government based agencies that student debt is on the rise. It is growing at a shocking rate of 25 to 27 percent every year. One of the reasons to blame for this is the economic decline that the world is going through. Banks have tightened their grip and are now cautious about giving loans and are prompt about recovering them. That leaves student with little choice as they go through depression because they are at dark about how they could possibly pay back the lenders.
Parents, who have high expectations from their kids, are to be blamed for going over-the-top with loans. They take obscene amount of money as loan to fund for their children’s college education and when the time comes to pay the money, they are not able to pay back and expect their kids to pay the money. Students, who also do not realize the gravity of the situation, when the money is being borrowed, find themselves trapped during the recovery process. There has been news about how students have resorted to prostitution, drug trafficking, dropped out of college, stolen money and due to their inability to pay back their school loans.
Students mostly look for part time jobs and sacrifice valuable learning years and productive years of their lives to service the debt. The government seems to have finally woken up and is keeping a close watch on loan agencies who offer high loans with exorbitant interest rates. If you want to postpone paying your student loan for a certain period of time, you can do so with ‘deferment’-an agreement between the borrower and the lender where you call upon the lender to postpone the due date to a certain period.
You can choose deferment of loan over forbearance. Deferment means the interest rate on the loan is frozen and you will not have a bigger debt after the grace period is over. In forbearance, you have to pay the debt with the interest rate that has increased over time. However, deferment of student loans is not given to anyone. If you can prove that you have no job, the lenders will not pressurize you for payments and you can defer the payment. If you are still in college, you are not liable to pay the loan and you can defer the period. If you can show with proof that you are earning less money as of now but your income will rise after you are absorbed in the company or some such condition, you can defer the loan. If you are in constant contact with the lender or the bank and let them know of your situation, they will give the matter its due sensitivity. If you give a strong reason for loan deferment they will comply with your request. However, please understand that such a situation should not arise in the first place; parents should never take high student loans for their children based on high expectations.
By admin On November 7, 2009
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Refinance rates started the month on an upward trend as the stock market has again topped the 10,000 point barrier. Fixed interest rates have steadily moved up from the beginning of October when they briefly flirted with the potential to drop below five percent for thirty year loan terms. Since early October, long term interest rates have been on a slow but steady ascent higher. The upward move with mortgage rates can be traced to a number of areas.
The first item that contributed to pushing long term rates higher was the rapid rise in oil prices. The month of October saw oil rise above $80 per barrel for the first time this year. This sharp increase in pricing helped renew fears over the potential long term effects higher energy prices could have on inflation. Inflation is one of the key components to moving interest rates, a perception of low level risk associated with inflation helps to keep long term rates lower, as investors are more content with their investments. Fears of higher inflation lead investors to seek higher rates, pushing up bond yields and interest rates for loans such as mortgages along the way.
The second factor that pushed up long term rates over the past thirty days has been the perception that the economy is getting healthier. The third quarter report on gross domestic product (GDP) was a shocker for the entire economy. The report highlighted positive economic growth for the first time in the past year, a signal that the economic recession is coming to a quick end and brighter days are certainly on the horizon. This report also was a key ingredient in helping to drive the stock market back above the 10,000 point level. The rise in the stock market tends to dilute the interest in the bond market, which inevitably leads to higher interest rates. The bond market moves like any normally commodity based on supply versus demand and investors pulling capital out of bonds in favor of equities leads to higher interest rates.
The last component that is driving up refinance rates is the FOMC. The Federal Reserve met again this past week and announced their would be no changes to the current monetary policy, leaving rates unchanged for the Fed Discount and Fed Funds rates. This move had no impact on interest rates, as it was all but certain the Fed would not be changing interest rates. The area of the Fed that has the impact to influence long term rates has to do with the Feds commitment in subsidizing the secondary mortgage marketplace by purchasing mortgage securities from Fannie Mae and Freddie Mac. The Fed has reiterated its position that it would like to transition this role over to a private secondary investment market. The process of the Fed pulling out of its role in helping to keep liquidity in place for mortgage bonds is certainly going to add fear into this market, which will have an immediate impact of pushing rates higher. Long term refinance rates remain very attractive as they have remained well under five and a half percent for the entire year (excluding the first two weeks of June) and have provided a great opportunity for eligible home owners to lock in financial savings and reduced interest expenses on their home loans.
By admin On October 19, 2009
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California has become the latest state to target companies taking advantage of struggling home owners searching for help to save their homes. The state is the most recent to join a growing list of governments that have banned companies from charging a fee upfront for a promise to help home owners modify their mortgage. Loan modifications have become one of the most highly marketed financial services over the last two years. Homeowners who are struggling with their finances and face the potential of losing their homes have become a target for shady companies and scam artists.
The purpose of a loan modification is for a home owner to rework their mortgage commitment with their existing mortgage lender to offer more favorable payment terms. The modification may include the forgiveness of payments and interest, reduction to the interest rate or lowering of the principal balance of the note. Borrowers typically explore a loan modification when they are unable to refinance their existing mortgage loan, because they do not qualify or their value is not sufficient to meet the lenders guidelines.
The government has been instrumental in pushing more lenders and loan servicer’s to offer loan modifications through their Making Home Affordable program. This program was put in place earlier this year with a goal of helping five millions homeowners keep their homes and avoid foreclosure over the next two years. The push to help struggling homeowners comes at a time when job losses are mounting and consumers are struggling to pay their bills. To date, the program has been met with mixed reviews and ample criticism for poor customer service from many of the countries largest lenders and loan service providers.
The move by the State of California to ban upfront payments for loan modifications is an action taken to curb private companies from trying to take advantage of homeowners. The traditional marketing pitch is that a separate company will represent the borrower to handle to the loan modification on their behalf, working directly with the lender to negotiate a better settlement. These companies often charged $1000 to $5000 upfront for their services, with no guarantee the lender will modify the borrower’s loan. The changes to the law still allow for individuals to be represented by third party companies, but eliminate the ability of the company to charge the borrower a fee upfront for this service.