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Archive for the ‘Mortgage Refinancing’ Category

During the housing market boom, it was very easy for property investors to grant loan to invest in properties. However during the present slowdown, it has become very difficult for home owner’s to meet the monthly mortgage payments on time. The reason might be your monthly payments are higher than what you earn? Or you owe more than what your property is worth? Or the monthly payments have gone up recently due to rise in adjustable mortgage rates?

If you are facing any of such situations and looking to modify loan in an effort to save your investment properties, then here is come helpful information that may be helpful when you approach your lender for loan modification.

The fact is that the economic condition continue to deteriorate, government has been coming up with many subsidy programs that are targeted to help primary residence homeowners and some programs for investors too. Therefore almost all banks are coming forward to modify more and more loans on all types of properties because the banks let the renters to vacant in the investment properties, it will hurt already slaughtered housing market and cost billions of dollars to banks if they don’t let the homeowners pay according to their budget.

Therefore, the lender modifies the terms of investment property loan also if they feels it make, sense to them to keep loan performing. The reason why banks take initiative to modify the investment property loans when the borrower approaches because they think that it will cost banks less in long run compared to foreclose if defaulting the home loans.

How will the banks determine which is the benefit for them? First, see if the approximate market value of the property is less than the loan balance if they try to sell the property, then you have some leverage. Secondly, if the rents do not cover the loan expenses that incur from the loan and have negative cash flow then prove this to lender as this will help you in getting the loan modified from the lender.

Keep in mind that your lender will try to collect debt in any circumstances and therefore anything you tell them about the property can be used either in favor of you or against. The big mistake many borrowers make while approaching lenders to modify loans is contacting lenders to apply for an investment property loan modification without learning how to do.

Here are the important steps that one must take before you approach lender for loan modification.

Prepare budget, your income and expenditure statement, financial statements and rental income and schedule before you speak with your lender. Doing so, you can have necessary information and have time to fine tune to make any changes to meet the guidelines for approval of loan modification.

Therefore, never contact lender before you have an idea bout what you are about to talk. Therefore investing a couple of hour’s time in preparing could mean the difference between getting your application approved or denied.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.

The Dollar Stretcher Blog
by Gary Foreman

Dear Dollar Stretcher,
I read as article about “Biweekly Mortgage Payment Programs” and I have a question. I have read that I can do the same thing myself by just paying an extra payment every year for the same affect so why should I pay someone else to do this?

The thing that I don’t understand, is how is it beneficial for me to buy the service when I didn’t have to? I owe $276k and can do the biweekly for set up fee of $375 and $3 a month. I will shave 6 yrs and 4 months off of my mortgage. I have 27 years left. So over the course of this loan, I pay them about $1k to do this. In the meantime, I save $87k in mortgage payments and 6 yrs. But aren’t I really paying them $1k for something I could do myself?

If I didn’t go with them, I would end up paying an extra payment a year split up monthly, that would amount to about 2k a year. So if I did this, I would end up saving $87k in interest and 6 yr, but I would have paid $40k in extra payments. Am I wrong in seeing it as $40k versus $1k?
Eric

It has been said that the key to most magic is to distract your attention from what is really happening. While you’re looking one way, the real action is happening somewhere else. The same is true for many financial offerings. The salesman is so busy pulling rabbits out of a hat that it’s hard to pay attention to what’s important.

And, when you look at something like a bi-weekly mortgage plan, there does seem to be a lot of rabbits hopping around. So let’s see if we can’t trap a couple of bunnies and determine what’s really happening with a bi-weekly mortgage plan.

Rabbit #1. The length of your mortgage. Any prepayment of principal will reduce the life of your mortgage. Larger prepayments will have a greater effect than smaller prepayments. And, prepayments made in the early years of a mortgage have a bigger effect than the same prepayment made later in the life of the loan. That’s true whether you make the payments yourself or have someone do it for you.

Rabbit #2. 12 months = 52 weeks. You knew that one. Eric points it out, too. Making half of your monthly mortgage payment every two weeks is the same as adding one extra monthly payment per year. Or adding 1/12th of a monthly payment to each regular monthly payment. You don’t need anyone to do that for you.

Rabbit #3. Bi-weekly mortgage payments don’t create free money. If your monthly mortgage payment is $2k, by going to a bi-weekly program you’ll need to find an extra $2k in your budget each year to add to your mortgage payments.

Rabbit #4. Service fees. Any money paid to the company setting up the bi-weekly program doesn’t go to pay your mortgage.

Rabbit #5. Making two payments a month. Paying half of your monthly mortgage payment two weeks early will reduce the length of your mortgage. But not by a significant amount.

OK, so let’s see if we can’t help Eric to focus on what’s really happening with a bi-weekly mortgage. He’s exactly right in that by going bi-weekly it has the same affect as making an extra payment each year.

In this case about one extra $2k payment for about 20 years. And, that will be true whether Eric goes bi-weekly or just adds 1/12th ($166) to each monthly payment himself. So if he reduced the legnth of his mortgage to 20 years he’ll be putting in about $40k in total prepayments.

If he works with the bi-weekly mortgage company he’ll also end up paying them about $1k.

In either case he says that he should reduce about $87k in interest that he won’t have to pay the mortgage company.

So the real difference is whether he wants to pay $1k to have someone to perform the service for him. In fairness, companies offering bi-weekly mortgage plans do provide some services to earn their pay. The biggest one is that they make sure that the mortgage company applies the proper amount to reducing principal each month.

But you can do that yourself. Just a matter of checking your principal balance after your payment is applied and make sure that it was reduced by the amount of any prepayment plus the portion of your regular payment that goes to principal.

So to answer Eric’s question – it would cost him about $1k for something that he could do himself. Being frugal, we’d just add the extra amount to each monthly payment and skip the bi-weekly business. But, if Eric needs the extra discipline, then spending $1k to save $87 isn’t a bad deal.

Keep on Stretching those Dollars!
Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website and various enewsletters. Visit the site for more info on mortgage prepayments. Send your frugal living questions to gary@ stretcher.com.

I have been investing in foreclosures in California for last couple of years and successfully closed few deals in profit. I have been encountering questions from many forthcoming investors regarding the how to go about while bidding at foreclosure auction in California. For this reason I came up with this post about foreclosure investing guide.

Home owner faces foreclosure when he falls behind the mortgage payments to bank or lender who in turn tries to sell your property to recover his amount which you owe him usually at auction. Many look forward to take this opportunity of buying properties at foreclosure because of the substantial cost savings compared to one that is sold privately by home owner. One can manage to save with purchasing foreclosure properties as the bank or lender will only try to recoup the amount what is actually owed, which is significantly less that actual worth of the property. Hence determining the bid price at foreclosure requires much more research and knowledge of the local rates and state laws to make a good investment.

Here is the process to go through when you are looking to purchase the property through foreclosure process.

First, one should learn the foreclosure laws in your state to make yourself aware of the things involved. Almost all states require that the list of foreclosures is to be advertised well before certain time and that include the minimum amount for bidding.

Second, visit the foreclosure sales and know the process of bidding before you start to precede bidding. Generally, the foreclosures are listed at the courthouse located where the foreclosed property is present. These listings are also published in the newspapers.

To bid on the foreclosure auction, research the market value of the property which you are looking to buy. To know the market value of the property that is listed at foreclosure is by comparing the foreclosed property with other property in the neighbourhood where the foreclosed property is located. This way can help you a lot in determining the amount to bid.

Find out the minimum amount for bid if it is not provided at the time of listing. You can get this by contacting the individual listed in foreclosures. Then start researching the title of the property to find out if it is not subject to any second and third mortgages, taxes and lines against the property listed out for foreclosure or any other factors that might prevent the transfer of the property after buying the home.

Next, visit the property to examine the physical condition of the property and find out any physical or structural problems that might lead to additional expenses beyond what you actually bid at foreclosure auction. Make sure to find out all the necessary improvements and estimate all the additional expenses to repair the property and add that figure to minimum bid price. After doing so if you find that property after attaining at a total cost of the home to be feasible then go ahead and bid the foreclosure.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

When a Oregon home owner facing foreclosure, he might be already in financial hardship and fall behind the mortgage payments for at least six month. If such is the financial position then it may be hard to hire a lawyer to defend the foreclosure process.

If you are facing such situation then you are at the right place as in this article I am going to explain you how to defend the foreclosure when you are facing it. My intention to take this article to you is not only help the home owners but also communities. Yes, we all are going to loss in any way when our communities lose home owners.

Before you know how to defend foreclosure process, it is important to know actual foreclosure process. Here is how the Oregon foreclosure process step by step.

In Oregon, the foreclosure process starts at the moment the notice of default is recorded under ORS 86.735 and advertisement for sale is issued as provided in ORS 86.740 to 86.755. After recording the notice of default and at least 120 days before the day of sale, the notice of sale should be served to home owner or any grantor facing the foreclosure.

If the trustee fails to give notice according to rule mentioned above then he posses the right to file a case against the trustee in the circuit court where the real property is located about the notice of sale is not served to him as required by ORS 86.740 and 86.750 saying that the omitted person could have cured the default under ORS 86.753 and sustained the damages that resulted the loss of property as a result such person had loss the opportunity to cure the default.

After the auction date is set, publication of sale is to be done in such a way that published once a week for 4 weeks where the last publication is no sooner than 20 days before the sale. Before the sale the trustee must submit the affidavits of the completed service and publication to prove the publication.

With in the period of 120 days time given after the foreclosure notice is given to home owner, there are many things that can happen. For example: the foreclosure auction may be postponed to another 180 days before the process restart or the defaulter may cure the loan or brought to current with no acceleration.

If you being a home owner facing a foreclosure feel that you have been treated unfairly, fight back. You can do this by following a produce the note strategy. In any state in US, you can sue the foreclosure by produce a note strategy. There are two types of foreclosure, non-judicial and judicial. Even if you foreclosure is non judicial you can ask the entity foreclosing your property to produce the note that you owe debt to them. It works because there is only one paper regarding your mortgage on which you had signed. If you don’t do this then you simply allow the foreclosure process to process and loss the home.

You can also defend the foreclosure process if any of the steps mentioned above were not followed and not served you with required notices well before the foreclosure process begins.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

Buying a home itself is a long and complicated process and even more if you are buying a foreclosure home as the foreclosure process can be very complex. Many think that buying a home through foreclosure is almost finished once your submitted offer is accepted. But before submitting the purchase offer and after it there are many other steps that any prospective home buyer must take action to successfully complete the process. If you are one who is looking to purchase home then you are at the right place as this article will guide you through a series of steps to be followed in Texas during purchase of home.

Before submitting a purchase offer, you must find out different offers at place you are looking to invest and find a right one for you. Once submitted, after several counter offers your purchase offer may be accepted. Accepting offer is not the final step in your buying a home but thereafter, post buying actions should be taken care off in order to smooth the home buying process.

First step after your purchase offer at foreclosure is accepted is getting appraisal done. This is most important because in most cases, the lender will only loan you 80 to 90 percent of the home value where the remaining 10 percent must be arranged by the buyer itself which is called as down payment.

To perform this action, one must approach a licensed real estate appraiser but in most cases, the lender wish to use his own real estate appraiser in such case you will not have any option to choose the real estate appraiser. In the process of appraisal, the appraiser will assess the property with help of different set of criteria to arrive at value of the property. In fact the figure at which the appraiser arrived at is the opinion of the appraiser. In simple words it is the value of the property according to him but it is mostly considerable when dealing with lender for home loan.

In case the appraised value of the property is less than your purchase offer, then it is up to you to make use of the Texas home loan lender or move to other home loan issuer. If you decided to go with loan issuer, bank will still loan you, but only a percentage of the appraised amount, where the remaining amount has to be arranged by the buyer itself.

If you are unable to meet the remaining balance amount then you can decide to lapse the purchase agreement with the foreclosure seller. In case the purchase agreement is lapsed only because of the apprised value does not meet the purchase price then the buyer money will be returned back. Then you can start looking for the new offer that suits your need.

Hence, one must remember to include the appraisal condition in the purchase agreement as in such conditions mentioned above will you can make or break the deal depending on the appraised conditions.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

The Foreclosure Rental Trap
The Dollar Stretcher Blog
by Gary Foreman
A record 2.8 million U.S. properties began the foreclosure process in 2009 (according to ForeclosurePulse.com). It appears that there’s no end in sight. And, while the focus has been on families losing their residence, there’s a subplot that’s gone largely unnoticed. Innocent renters are often hurt when banks foreclose on their landlords.

Nationwide it’s estimated that about one third of properties that are being foreclosed are not owner occupied. And, while some of those are second homes, many are rentals. It’s probably pretty safe to say that at between 25 and 30% of foreclosures are occupied by a renter. So about 750,000 renters were in foreclosed units last year.

What does foreclosure mean to the renter? If the bank forecloses on your landlord they take over the property. Their goal is to protect their financial interest. Sometimes that hurts the renter.

Historically, banks wanted the owner to vacate a foreclosed property. That meant the renter, too. So even renters who had leases were suddenly being thrown into the street. Without any legal recourse.

In May, 2009 the “Protecting Tenants at Foreclosure Act” became law. The main part of the law guaranteed that tennants could stay until their lease was up. Those on a month-to-month get 90 days.

Today, in part because of the law and in part because it’s bad business to chase away paying renters, banks are allowing more tenants to stay in foreclosed properties. Often they’ll use a management company. Some managers are more responsive to renter needs than others.

So what can a renter for protection? Unfortunately, even with the new law, their options are fairly limited.

It’s hard for a renter to determine if his current or potential landlord is in financial trouble. There is one website <RentalForeclosure.com> that can check an address for you. It’s not 100% certain. They only report what their records show. But, you’ll want to avoid any properties on their list.

In some counties, court records are available online. Checking your county’s website can be a real eye-opener. You can check your landlord by name (or by company name). Look for any pattern that shows financial problems. Make sure you look for liens and mortgages against the property you rent.

If the bank does notify you that your landlord is being foreclosed, contact the local housing agency. They’ll be in the best position to tell you which local, state and federal laws apply to your situation. Among other things you’ll need to know who should get your rent checks and who to call for a leaky faucet.

As a tenant you can sue the former landlord for lost deposits and rent. But the small claims process can take months. Plus you’re trying to get money from someone in foreclosure. The odds of getting your money back are pretty long.

The trickiest time for a renter is when the landlord expects to be foreclosed. Some will collect rent and make no effort to make their mortgage payment. They’ll also avoid doing any maintainence. This can go on for months. That’s why it’s a bad idea to prepay your rent in this economy. If you have next month’s rent available, better to put it into an insured savings account until the rent is due.

If you’re looking for a rental, beware of landlords who seem overly anxious to get you into their unit. Some are attempting to use renters’ first/last/deposit to keep themselves afloat financially. Reputable landlords will check your credit and references. Failure to do so could be a sign that they’re just after your deposit. Time to run!

Bottom line? It’s important for a renter to check out the landlord. The tools aren’t particularly good, but they can help you avoid some obvious problems. And, if you do find that your landlord is in foreclosure contact the bank and housing agencies to see what steps you need to take to protect yourself.

Keep on Stretching those Dollars!
Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website <www.TheDollarStretcher.com> and various enewsletters including Financial Independence <http://www.stretcher.com/subscribe/subscribeFI.cfm> Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom! Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

Mortgage Prepayments
The Dollar Stretcher Blog
by Gary Foreman
I am trying to find the best way to really take advantage in reducing our mortgage to save on interest paid. We are in our home for 5 years with a 30 yr fixed @ 6.1% rate. Payment is $1500 mo. We are now sending in our regular payment weekly by dividing 1500 by 4. On top of that we are sending in $400 to $500 weekly to add to principal. We did not know if dividing th original payment by 4 if it would make a big diference since it is getting there early in weekly amounts. We would sure appreciate advice and help.
TR

Wow! TR is to be congratulated on her dedication to paying off the mortgage quickly. But, let’s see if all those extra payments are reducing the length of her mortgage.

Hopefully, TR has already taken the first step. That’s to make sure that her mortgage allows for prepayments without penalty. Most mortgages do allow it, but it’s good to be certain. If not, they’ll take all her payments and just apply them to the next regular due date. Effectively making all her early payments an interest free loan to her mortgage company!

Let’s talk about what TR is trying to do. By sending one quarter of her monthly payment in each week she could be reducing the amount of interest owed and that would mean that more of her payment goes to reducing principal.

Basically it’s a math problem. We’ll break it down into easy to understand pieces. Beginning with the interest rate.

Typically we talk about interest rates on an annual basis. In this case 6.1% per year. But in reality it’s a daily rate. In this case 6.1% divided by 365 days or 0.0167% or 0.000167 per day.

So the mortgage company multiplies the principal (i.e. the amount that TR still owes on the mortgage) by 0.000167 each day. That amount is added to the amount owed.

Suppose that TR’s mortgage is $100,000 (probably not a realistic number, but a nice round one to work with). For each day TR will owe an additional $16.71 in interest. So for a 30 day month she’d owe $501.37 in interest on the $100,000 mortgage amount.

If her payment were $1500 roughly one third would go to paying the interest owed ($501.37) and two thirds ($1500 – $501.37 = $998.63) would go to reducing the principal.

What happens when TR sends in one quarter of her payment 3 weeks early? The amount she’s sending in is $375 ($1500 / 4 = $375). The amount of interest to borrow $375 for 21 days is $1.32 ($375 * .000167 * 21 days = $1.32). That’s true no matter how big or small the mortgage principal is.

The second weekly payment would save $0.88 ($375 * .000167 * 14 days = $0.88). The third weekly payment would save $0.44 ($375 * .000167 * 7 days = $0.44).

What about the extra principal that TR is sending in weekly? Let’s say that she sends in $500 per week. That $500 is worth $0.58 per week.

So sending in all those weekly payments really isn’t saving TR much money. In fact, if she’s mailing them the cost of the envelope and postage is consuming much of the savings. That, and her time has some value, too.

Now some of you will have noticed that by paying weekly TR has added the equivalent of a full monthly payment each year. But she doesn’t need to make weekly payments to get that effect. All she has to do is to keep adding extra to each payment for principal reduction.

And, in that area TR does have the right idea. By adding $400 or $500 a week to reducing the principal, she’s making a major dent in the length of her mortgage.

Calculating the effects of additional principal prepayments is a little more difficult. The reason is that they reduce the amount of interest owed next month. So the amount of next month’s payment that goes to pay interest is reduced and the amount that goes to pay principal is increased. And, that effects the next month’s payment even more. And, that the month after, etc.

Suppose that TR combines her extra principal into one $2,000 payment per month. She’ll reduce the amount of interest owed by $10.16 ($2000 * .061 / 12 = $10.16). So her next monthly payment will in effect be prepaying an additional $10.16 of principal. And, that will make the payment after that even more effective. Just that one $2,000 prepayment would shorten the life of the mortgage by one and a half years.

Unless you’re a math fiend, it’s eaiser to use a prepayment calculator you find on the net. One that I like is found here
<http://www.decisionaide.com/mpcalculators/ExtraPaymentsCalculator/ExtraPayments1.asp>.

So what should TR do? Probably skip the weekly payments. They’re having a very minimal effect and increase the chances for a clerical foul-up at the mortgage company. But, TR should continue to make monthly principal prepayments. They’ll make a major difference in the legnth of her mortgage.
Keep on Stretchin’ those Dollars!
Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website <www.TheDollarStretcher.com> and various enewsletters including Financial Independence <http://www.stretcher.com/subscribe/subscribeFI.cfm> Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom! For more on mortgage prepayments read <a href=”http://www.stretcher.com/stories/03/03jun16e.cfm” target=”_blank”>How Mortgage Prepayments Work</a>.

Because of the present economic problems, a lot of people need to refinance their mortgages. The trouble is that banks are more frightened than before to refinance mortgages. Though, there are a few tips that could assist you ensure you get the refinance that you require. A lot of homeowners have lots of questions on the topic of mortgage refinancing. Lots of those questions are vital to know if or not a refinance is correct thing for you to do. Recognizing how to obtain the best feasible mortgage interest rate would help guarantee that you are obtaining the best refinancing deal feasible.

Primarily, you require taking a look at alternatives you have for refinancing prior to you visit a lender. Discover how much your house is worth as well. If you realize that the value of your home has fallen down as well as you owe more money than your house is worth, you might need to work on raising your home’s value. This could comprise doing some improvements to your home to build the home worth more money.

Your credit history will surely be significant when you are searching for a mortgage refinance. If you have low credit scores than you used to, it might turn out to be harder to acquire a good refinance. Though, if you could work to augment your score, there is very good probability that you could get a good refinance. Make sure you choose a good lender whom you feel you could work with. Get a lender you like as well as programs you are fascinated in and go with them. Applying with a number of lenders can spoil your credit score, therefore locate a good lender and go for refinance you require for the top results.

One more important thing you could do is saving as well as put in the bank, as much money as feasible. Set as much as you could on down payment on your fresh mortgage. The more you can put down, the better the probabilities are that you would acquire the lowest interest rates feasible. Though there is a lowest percentage you should put down, putting more than desired or than the minimum is extremely helpful. The more money you could put down now, the more you would save from refinancing. Mortgage refinance rates are lower at present. Finding the top rates is all up to the borrower. If you are determined, and conscious of what to search for, you have a better possibility of getting best refinance deal feasible.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.