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Saturday, January 12, 2008

Discount Points Lowers Mortgage Payment

By Dennis Estrada

Discount points are paid upfront to lower the mortgage. Borrowers often confuse between origination fee and discount points. Although the calculation of origination fee and discount points are the same, both are two different cost of borrowing. The origination fee is paid for the privilege of acquiring a mortgage. Ask your mortgage consultant if you need to pay origination fee too.

How to calculate discount points?

Discount points usually range from 1 to 3 points where each point equals one percent. For example, the borrower pays $1,500 upfront ((1% / 100) * $150,000) on a 1% discount points of $150,000 mortgage.

How much is the monthly mortgage payment with or without discount points?

On a $150,000 principal, 6.5% interest rate, 1 discount points, and 30 year mortgage, the monthly mortgage payment without discount points amounts to $948.10. Using 1 discount points, the borrower pays only $851.68 monthly mortgage payment which saves the borrower $96.42.

When you do get back the discount points?

Recoup time is how long to get all the money back with discount points upfront. The borrower gets $1,500 back in 16 months ($96.42 x 16). The borrower benefits from discount points if he does not leave and refinance before the recoup time on his home. Let's say the borrower locks the mortgage on a five year mortgage term. The borrower pays $851.68 for five years which put $5,785.20 ([$948.10 x 60 months] - [$851.68 x 60 months]) back on his pocket.

General Rule

Discount Points are options. It is up to the borrower to decide whether to buy discount points. With planning and shopping, the borrower indeed can save money. Not to mention, the IRS allows the discount points as a tax deductible.

Dennis Estrada is a webmaster of mortgage calculators website which calculate the monthly payment, bi-weekly payment, affordability, refinance, annual percentage rate, discount points, and more.

30 Days Late On A Mortgage Payment

By Ben Afzal

Basics

Your mortgage lender reports your payment history to credit bureaus. This information in turn shows up on your credit report and affects your credit rating.

Mortgage lenders report if you are late by 30 days, 60 days, 90 days, or more. They will also report how long you were late by for each of the months you are late.

For example, you can be late by 30 days in April 2006 and late by 60 days in December 2005.

Lenders will count up the number of times you are late by categories, so you can be late 4 times by 30 days, 1 time by 60 days, etc.

Mortgage lenders that work wtih borrowers who have been late in the past have specific types of late payment scenarios they will accept. Some lenders will only work with borrowers who have been late by 30 days, while others will work with people who are late by 60 days or more.

A late payment once by 30 days is not necessarily a deal breaker for a mortgage lender. Sometimes borrowers are late on their payments for honest reasons, including having their loan resold to another lender and sending in the payment to the previous lender.

Conclusion

There is more than one lender that will work with you if you are 30 days or 60 days late on your mortgage. It is particularly helpful to you if you have some equity in your property. This makes it easier for a mortgage lender to approve your application.

A Mortgage Payment Is a Wonderful Thing

By Stan Kazwell

“Say what?” Yeah, I hear you, but let me explain. Stick with me though because I’m going to deal with reality. That means I’m going to talk about the bad news, a little history, and then the good news!

FIRST: The Bad News.

Let’s acknowledge that, at times, in the hustle–bustle of life, a mortgage payment can feel burdensome. Even in the best of times, it’s one big bill in the pile that you have to pay every month. We also know that the headlines are depressing. Depressing headlines add to the depressing of people which depresses consumer confidence which adds to depressed real estate sales which depresses prices which depresses values which cycles back to depressing headlines. Gosh, it’s just plain depressing!

Some of us are struggling with mortgage payments on real estate that is currently appraising for less than we purchased it for a couple of years ago. You can count me in this group with one of my properties.

The worse news is the folks that are losing their properties to foreclosure or even bankruptcy. These are terrible, painful circumstances to go through that need to be acknowledged. My heart goes out to these people.

Yes, there are these problems and others to be sure. They are unpleasant. Investing in real estate does have risk but then again, so does getting out of bed. Yet, most of us get out of bed anyway and keep on keeping on. Why? Because, even though we do risk experiencing bad things, there is more reward from getting up and living life than completely avoiding it. The same thing is true with investing real estate.

A Little History

Throughout the whole of humanity’s existence, very few people have been able to own property. Only the few, rich and/or powerful people owned real estate while most folks languished in poverty. Most of these people had no possibility of ever bettering their situation. Generations of people, for thousands of years, had little or no hope of bettering their situation. Property was a source of wealth and power that was not available to the masses.

A few centuries ago, the most powerful invention in all of history started to develop. It came to be known as capitalism. As with all inventions, it has it’s good aspects and it’s bad. The over all effect of capitalism however has been overwhelmingly positive. It has allowed the mass populations of societies that employ it, to enjoy benefits once reserved only to a very select few. Out of the creation of the capitalist system has evolved the modern day economy which includes the real estate, credit and financing systems as we know them.

Finally, Some Good News!

Land is still the major source of wealth just as it has been throughout all of history. Yet when most of us start out on our own, we don’t own any. Unlike most of our ancestors however, we are able to do something about it. The ability to participate in prosperity and create wealth is relatively easy for us. I’m not saying it is never difficult, but I am saying it’s fairly simple. Work to make money. Spend less money than you make. Save and invest your money. Pay your bills on time and build your credit. We have great systems in place to accomplish these things just as we have a great system to acquire real estate. It’s the modern mortgage system and millions of folks have, do, and will continue to use it to own history’s biggest source of wealth.

Even with foreclosure rates high right now, they still account for less than 1% of all mortgages. That means that 99% of mortgages are current. Those are pretty good odds. More Good News, Every Problem Is An Opportunity!

As discussed earlier, real estate prices are depressed right now. Just as the stock market is destined to rise when it hits low points, the real estate market will do the same thing. That means that today’s problem of low values is a big buying opportunity! The glut of homes on the market will eventually dry up and prices will rise. Those who invested during the depressed market will make a lot of money. That’s how the rich get richer and the poor get rich too!

“But I Don’t Have Much Money!” The Best News!

The best thing about investing in real estate is you don’t need a lot of money to do it. It’s nice to have it but it is not necessary. The system is set up so that you can “leverage” a little money to make a lot of money. The tool used to “leverage” your money in real estate is mortgage financing. Honestly, you don’t need to have a lot of money to buy real estate, you need the right tool. You can be buying your first home or your fifth. You can be buying to stop paying rent or to have someone pay rent to you. In any of these cases it is not necessary to have a large down payment.

Some things however are necessary. Your credit is important. The better your credit the easier it is. Knowledge is important. You don’t need a P.H.D. in anything to do it but the more you understand about real estate, financing and money management the better off you are. Are positive results guaranteed? No, but if you do nothing it is guaranteed that your results will not be positive. However, if you learn about the tools of financing, are responsible with your finances and then take action, you can stack the odds greatly in your favor. For those who take the proper steps to leverage their resources to create real estate wealth, a mortgage payment is a wonderful thing!

Copyright Stan Kazwell Jr.

Stan Kazwell Jr. is the president of Kazwell Financial Services, Inc a mortgage company located in Port Charlotte, FL He writes a monthly newsletter on financial issues and co-host the “Real Estate Charlotte” radio show heard in southwest Florida on WCCF-AM, NewsRadio 1580. For more articles and special reports on mortgage financing, go to http://www.kazwell.com

Mortgage Payment Protections

By Thomas Morva

Mortgage payment protection is beneficial to both lenders and borrowers. Without adequate safeguards against default, the financiers would be taking additional risks, which could reflect in higher interest rates. For borrowers, loss of job, sickness, accident, or death could lead to defaults. To avoid a distress sale to pay off the loan, some kind of shield is required.

Different types of insurance products are available to cover the risk. When the down payment is less than 20%, a Personal Mortgage Insurance (PMI) or Lenders Mortgage Insurance (LMI) will protect lenders from potential default by the borrower.

The fee is passed on to the borrower and collected as a part of the monthly payments. If the arrangement is properly incorporated into the mortgage documents, the borrower can obtain tax benefits on the payment of the premium. In some cases, lenders permit discontinuation of PMI/LMI after a period.

Accident, sickness and unemployment (ASU) insurance, which is often called 'mortgage payment protection', provides monthly installments for a period of time. There would be a maximum limit for such payments. Credit disability and life insurance takes care of mortgage payments if the borrower loses his job, or

dies. The disbursal, which is made direct to the lender, is not taxable. There is also Mortgage Life Insurance. Almost everyone is eligible for these schemes.

Mortgage protection is available from the Federal Housing Administration (FHA) for loans advanced by lenders approved by it. Bush Administration proposals to be made effective in 2007 contain a new scheme to help those buying a home for the first time. Higher insurance premiums may be charged on people with weak credit histories, but this would taper down if regular repayments are made.

Check the market for competitive mortgage insurance rates.

Mortgage Payments provides detailed information on Mortgage Payments, Calculate Mortgage Payments, Bi-Weekly Mortgage Payments, Mortgage Payment Protections and more. Mortgage Payments is affiliated with Online Mortgage Lending.

Mortgage Payment Protection Insurance Or Loan Payment Protection Insurance Can Be Much Cheaper

By Rick Lomas

Loan Payment Protection Insurance

Loan payment protection insurance pays your monthly loan repayments if you become unemployed through accident, sickness or disability.

Normally people who are taking out a loan arrange it quickly and by default accept the loan payment protection insurance that is offered by the loan company.

In actual fact this doesn't have to be the case, loan payment protection insurance can be arranged independently which can save hundreds of pounds or even thousands over the term of a loan.

Mortgage Payment Protection Insurance

Mortgage payment protection insurance pays your monthly mortgage payments if you become unemployed because of accident, sickness or disability.

This insurance is the icing on the cake for mortgage lenders; they have made one of their most lucrative sales (the mortgage) and then they 'add on' the protection insurance, to give them a bit extra!

Once again by shopping around, enormous savings can be made, especially when you consider that mortgages typically run from 15 to 25 years! Many homeowners don't take out policies at the time of the initial home purchase, but wait until things are 'looking bad' at work, this is a bad mistake as prior knowledge of redundancy is often an exclusion clause for this kind of policy.

The majority of borrowers take mortgage payment protection insurance from their lenders as they don't know about the alternatives.

Payment Protection Insurance on TV

A British Channel 4 TV show, 'Tonight with Trevor Macdonald" was broadcast in 2006 where loan payment protection insurance was the subject. It was revealed that most people with loans didn't even realise they had an option to use an independent insurance company.

In the show there was a short interview with Simon Burgess from British Insurance Ltd.

Simon said that the reason that taking out payment protection insurance from lenders was more expensive than 'going independent' was purely the fact that the lenders were greedy and took too much commission. He stated that "there was nothing inferior about his British Insurance polices, but the premiums were cheaper as they took 10% commission whereas the lenders took up to 50% in commission".

The author of this article is Rick Lomas. With the help of Steve Pritchard, Rick was one of the original pioneers (from 1999) of setting up web sites to sell payment protection insurance online. British Insurance Ltd is now one of the UK's leading insurance company to provide mortgage payment protection insurance for the British homeowner. Independent mortgage payment protection insurance can be arranged by British Insurance Ltd at http://www.uk-insurance-online.com
Free ebooks containing information and advice about loan payment protection insurance, mortgage payment protection insurance and income payment protection insurance can be dowloaded free from http://www.ukinsuranceonline.co.uk

Mortgage Payment Calculator - Helping You Follow the Path to Mortgage Free Living - Part Two

By Eddie Lamb

Paying a monthly mortgage year after year gets old fast, but most people just go through the motions, thinking there's nothing they can do about it. However, with a mortgage payment calculator, you might be able to save some money. The first part of this article explained that by merely paying extra on your monthly mortgage payments, you could shorten the life of your loan by years, if not decades. All it takes is a little sacrifice, some determination, and knowing that your efforts will pay off, big time.

There are considerations that need to be addressed when it comes to determining how you go about paying off a mortgage in under five years, and that may depend on how much of a down payment you made, your current balance and interest rate, it is possible to take 6 years off your mortgage payments by sending in an extra $100 a month on your house payment.

By using a mortgage payment calculator, you can find ways to save money, and save big. Now, if you cut corners and reduce frivolous spending, most people realize that they can save that amount, but if things are really tight, you can still send in an extra $50 a month. Either way, you'll save thousands, even tens of thousands of dollars on the life of your loan by following these pointers.

Whether you come into some money or not, there are ways to curtail and cut back on extra spending every month that will allow you to pay an extra $50, $100, or even more on your monthly mortgage payments, which will save you between thousands to tens of thousand dollars on payments that mostly go toward interest and not principal.

Our last article gave you ten tips on where you can cut back spending. Using a mortgage payment calculator, you can insert different amounts of money that can be applied to your monthly mortgage payment and see how many years you can take off your loan. This article will give you several more.

These are just the obvious basics, but if you spend a little time, you'll be able to come up with more as well. This doesn't mean you have to live a boring existence for the sake of paying off your house, it just means trimming the fat. You can still enjoy that steak dinner or the play or Disneyland, but just not as often as you used to. Living mortgage free is worth some sacrifices and belt-cinching after all, and just think of all the extra money you'll have then to entertain yourself to your heart's content!

Here are some additional tips on where you can trim the fluff out of your monthly living budget.

Cut down on Entertainment Expenses: Do you really need that golf club membership or those season tickets to the football or baseball games? Do you have to attend every play or event held at your local opera house or theater? If you expect your kids and spouse to cut back, then you have to as well.

Cut back on Car Expenses: Can you walk to work? Take the bus? If you can, do it! You don't need that six CD-player installed in your car, either. After all, you can only listen to one CD at a time anyway. The same goes for frivolous extras like fancy rims, tires and accessories.

The Power of Saying 'No': Sure, we all like to treat our kids, but we don't always have to buy that bike or guitar that's just going to start gathering dust in a few months anyway. Kids are amazingly resilient, and if you treat them with less expensive gifts and fun, they'll be content. Really.

Clear Your Credit Card Debt: Sure, we live in the age of plastic, but try to curtail that as well, especially if you're paying more on interest than 10 percent. Get rid of your high interest credit cards and try to keep them at home more often.

Make Money at Home: Many people have special talents, whether it's playing musical instruments, creating crafts or other skills. Start taking in students in your spare time and offer language, guitar, craft and other types of skills to others willing to learn from you.

The possibilities are endless, really. By taking advantage of tools like a mortgage payment calculator and focusing on saving money, living mortgage free is not a pipe dream. It's a reality that's attainable by just about everyone, no matter how much money you make or if you're just getting by. There's always a way to cut back on living expenses, and that's the key to making it all possible. So, what are you waiting for!

Eddie Lamb is the owner of LiveMortgageFree.com and he is sending a clear message out to property-owners everywhere: "Paying off your mortgage early is more than possible". If you want to eliminate your mortgage, make sure you check out his excellent free 38 page special report, "Discover The 12 Fundamental Steps That Will Put You On The Road To Living A Mortgage Free Life In 180 Days Or Less!" You too can dump your home mortgage and Live Mortgage Free in 4 years or less.

The Interest Only Mortgage Payment - What are the Critical Dates That Impact Your Payment

By Paul Sunndin

Traditional mortgages require that each month you pay back some of the money you borrowed (the principal) plus the interest on that money. The principal you owe on your mortgage decreases over the term of the loan. In contrast, an interest only mortgage payment allows you to pay only the interest for a specified number of years. After that, you must repay both the principal and the interest.

Most mortgages that offer an interest only payment plan have adjustable interest rates, which means that the interest rate and monthly payment will change over the term of the loan. The changes may be as often as once a month or as seldom as every 3 to 5 years, depending on the terms of your loan. For example, a 5/1 ARM has a fixed interest rate for the first 5 years; after that, the rate can change once a year (the "1" in 5/1) during the rest of the loan.

The interest only mortgage payment period is typically between 3 and 10 years. After that, your monthly payment will increase - even if interest rates stay the same - because you must pay back the principal as well as the interest. For example, if you take out a 30-year mortgage loan with a 5-year interest only payment period, you can pay only interest for 5 years and then both principal and interest over the next 25 years. Because you begin to pay back the principal, your payments increase after year 5.

So knowing that your payment will at some point change, what are some important dates that will impact your interest only mortgage payment?

Introductory period. Many interest only mortgage payments have a 1-month or 3-month introductory rate period at the beginning of the loan. During this period, lenders use a lower interest rate to calculate your payments. For some interest only mortgage payment loans, this introductory period lasts 1, 3, or 5 years.

Interest rate adjustment period. Most interest only loans have interest rates that adjust monthly after the introductory period. You could find that the interest you owe increases even though your minimum payment stays the same each month, adding to your negative amortization. Typical interest rate adjustment periods for an interest only mortgage are monthly, every 6 months, or once a year.

Payment adjustments. Most interest only mortgage payments have payments that adjust once a year. In addition, most of the adjustments are limited by a payment cap, often 7% to 8%. Keep in mind that payment caps do not apply when your loan is recalculated at the normal recalculation period. Payment caps also do not apply if your balance grows beyond 110% or 125% of your original mortgage amount.

Recalculation period. With an interest only loan, your loan will be recalculated. The recalculation period is usually 5 years, but it can vary depending on the terms of your loan. When your loan is recalculated, the payment cap does not apply, so you could see a large change in your monthly payment. After your loan is recalculated, you will still have the option to make a minimum payment. Interest only loans are recalculated at the end of the option period (usually 3, 5, or 10 years); after that you will pay back both the principal and interest for the remaining term of the loan.

Make sure that you remember the critical dates that impact your interest only mortgage payment. Keeping track of these dates will allow you to budget for any changes and analyze if or when a refinance makes sense.

About the Author

Paul Sunndin is a writer and real estate investor. He is the author of the book “Everything You Have Learned About Real Estate is Wrong.” To obtain a free copy of the eBook and to discover innovative tactics for the beginning real estate investor as well as the seasoned real estate investor, visit his site at http://www.realtactic.com

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