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Interest Only Mortgages

August 1, 2011 By

A mortgage is a loan secured for real property and an interest only mortgage comes with a definitive feature – the monthly repayments should cover the interest only.This type of mortgage is not like the fully amortizing mortgage since the set amount of repayments do not recompense for the principal.A borrower bounded by the terms of an interest-only mortgage is given the liberty to repay the principal at his own accord and convenience.

For example, should a borrower decide to borrow $50,000 at 5% interest, he will have to handle monthly repayments of $208.This amount of repayment compensates for the interest only and will not dispose to any deductions on the principal.As such, it is easier for a borrower to repay every month with a smaller amount.A borrower can then pay for the principal whenever possible.

Six advantages of interest-only mortgages

  1. One: the ease that comes with interest only mortgages is something to reckon with.When it comes to a tight budget, paying for the interest alone makes things easier.When there are enough resources already, the principal can be then paid for accordingly.Most interest-only mortgages are bounded by a term of 5-10 years and this is enough time to repay everything that is owed.
  2. Two: the avenues to get a more expensive dream house come within closer reach.Having a small income can be overlooked as a borrower pays low initially, under an appropriate mortgage that suits his paying capacity.
  3. Three: a borrower is given enough freedom to invest in other income-generating opportunities.A good example would be investing on a business rather than paying the principal despite poor cash flow.
  4. Fourthly, a fast turnover can happen with an interest-only mortgage.For a costly house, the capital gain is deemed to be positive.
  5. Interest-only mortgages allow enough allocation of income to pay a more pressing second mortgage.Should there be an interest-only mortgage and a HELOC covering a real property, the HELOC should be prioritized before the interest-only mortgage.
  6. Most interest-only mortgages come with an adaptive feature.If a borrower chooses to repay the principal on a particular month, the next repayment will have incurred reductions.This makes the modes of repayment easier to a borrower.

Some drawbacks on interest-only mortgages

The simple premise which would give in to a disadvantageous interest-only mortgage demonstrates when one or more of the practical pluses mentioned above could not even materialize.There are many traps which a borrower may be a victim of.These are pitfalls which mostly direct a borrower into thinking that some advantages are there when they are in fact not.Just to cite an example, an interest-only mortgage naturally has a larger interest rate than the same mortgage which is fully amortizing.If it should it be otherwise, a borrower is mostly misled and should look into the market which bounds the mortgage.

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Everything that has been cited should make a borrower more responsible when it comes to choosing an interest-only mortgage.This kind of mortgage is only beneficial when reaped of its full potentials.

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Mortgage Rates Give Back Some of Their Recent Rise

February 25, 2011 By

Here is some data for those of you looking to buy a house or re-finance a current mortgage loan.This information about current mortgage rates could influence your monthly loan payments, so it is advised you take a minute to read more and learn how it could impact you.

Super mortgage buyer Freddie Mac released the outcome of its Primary Mortgage Market Survey (PMMS) in which mortgage interest rates for the 30-year fixed-rate mortgage (FRM) averaged 5.00 pct. with an average .7 point during the week ending 2/17/2011, down from a week ago when interest rates for the mortgage loan program averaged 5.05%. Four weeks ago, the 30-year FRM averaged 4.74 pct..

Mortgage rates for the 15-year mortgage program this week averaged 4.27% with an average 0.7 point, down modestly from the prior week when rates for the home loan program averaged 4.29 percent. Four weeks ago, the 15-year FRM averaged 4.05 pct..

Interest rates for the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.87 percent this week, with an average 0.6 point, down a bit from the prior week when rates for the home loan program averaged 3.92 percent. Four weeks ago, the 5-yr. adjustable rate loan averaged 3.69 %.

Mortgage rates for the 1-year Treasury-indexed ARM averaged 3.39 percent this week with an average 0.6 point, up from the former week when rates for the loan program averaged 3.92 percent. Four weeks ago, the 1-year ARM averaged 3.25 pct..

With mortgage rates at these latest amounts, one would be wise to give some thought to the possibility for re-financing his or her present home loan if it has a more lofty interest rate. In fact, check with a local institution to see if they can offer an even better interest rate on their mortgage loans. So, call up your local banks to see prevailing mortgage rates with their bank loan programs.

If a local  loan company retains their loans on their books, rather than selling them in the secondary market, it can offer mortgage loans at lower rates than the national average to achieve a competitive advantage. There can be additional considerations to go with a neighborhood lender to handle your home finance loan. A lot of lenders will service (i.e. collect monthly payments, pay property taxes) their mortgage loans. This can help to establish and preserve a regular relationship with their customers. An additional way to lessen the interest rate on your mortgage is to pay points (a percentage of the loan amount) as an upfront fee. You can execute this alternative with both local and national mortgage businesses.

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Mortgage Rates Exhibit Minimal Activity This Week

February 5, 2011 By

One of the biggest purchasers of mortgage loans has conducted its most recent survey of mortgage interest rates by major mortgage loan companies.

Super mortgage buyer Freddie Mac released the results of their Primary Mortgage Market Survey (PMMS) where mortgage interest rates for the 30-year fixed-rate mortgage (FRM) averaged 4.80% with an average .7 point for the week ending 2/4/2011, up slightly from a week ago when rates for the loan program averaged 4.80 pct.. 4 weeks ago, the 30-year fixed rate averaged 4.77%.

Mortgage rates for the 15-year loan program this week averaged 4.08 pct. with an average 0.7 point, down modestly from the former week when rates for the home loan program averaged 4.09%. Four weeks ago, the 15-year FRM averaged 4.13 percent.

Mortgage rates for the 5-yr. Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.69% this week, with an average 0.7 point, down a bit from last week when rates for the mortgage loan program averaged 3.70 pct. 4 weeks ago, the 5-year ARM averaged 3.75 pct..

Interest rates for the one-year Treasury-indexed ARM averaged 3.26 percent this week with an average 0.6 point, unchanged from last week when rates for the home loan program averaged 3.26%. Four weeks ago, the 1-yr. ARM averaged 3.24 percent.

With mortgage loan rates at these current amounts, one would be wise to think about the possibility for re-financing his or her current home mortgage if it has a much larger interest rate. In fact, check with a local institution to see if they can offer an even better interest rate on their mortgage loans. So, call up your local banks to see prevailing mortgage rates.

If a hometown  lender keeps its loans on its books, rather than selling them in the secondary market, it can offer home mortgages at lower rates than the national average to gain a competitive advantage. There can be additional motives to select a hometown lender to handle your home mortgage. A lot of providers will service (i.e. collect monthly payments, pay property taxes) their mortgage loans. This can help to form and sustain a continuing association with their customers. An additional way to lower the interest rate on your mortgage loan is to pay for points (a per cent of the loan amount) as an advance fee. You can perform this option with both local and national mortgage businesses.

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Filed Under: Paycheck Advance Tagged With: , , ,

Getting a Loan – What to Do Beforehand

May 12, 2010 By

You may find yourself thinking that you need a loan more out of the blue than you may expect. Life throws a lot of unexpected things your way, and sometimes you may not know you need a large amount of cash until the last moment. In some instances, this may be expected. Trying to move into a new home can spur the need for a mortgage loan.

Mortgages are obviously much larger than other types of loans, so much so that some people forget that they are in fact loans. There are a lot of things to keep in mind when looking for a home, especially financially. Shopping between lending companies is a good idea to save money and get the best monthly payments and interest rates.

When you need a loan for a home, or any large purchase, the worst thing you can do is take the very first offer without making sure there’s nothing better available. You will take a couple of small hits to your credit report if you search around, but finding the best rate for your mortgage will be well worth it in the long run.

Sometimes there are instances when you need a loan for something other than for a home. In these instances, there are other options. The most common of which is the payday loan, which takes a look at your past pay checks and lends you an amount of money relative to your weekly pay rate. The interest rates on these types of loans can be up to 400%, so it is imperative that you repay these as soon as possible to avoid excessive debt.

Someone with a credit score under 600 may qualify for a 30 year fixed mortgage with an interest rate around 7% while someone with a much higher score of 700 may qualify at a rate closer to 6%. This may not seem like a great rate, it can present some savings in comparison to some sub prime mortgage loans, which can have huge amounts of interest. You can also score some lower monthly mortgage payment rates this way as well. When you have bad credit and need a loan it is even more important to shop around for lenders and see what rates they can offer you.

Loans are tricky business, and it can be all too easy to get suckered into a sub prime or awful interest rate. Work with a lender with a good reputation so that you can get the best rates possible. Always remember to never take out a loan without being sure that you will be able to make the payments on time, especially on a mortgage. Nothing can be more damaging to a credit score than late payments and defaulted accounts. Shop carefully and you can avoid having to take out another loan in order to pay the initial one, which is an all too common occurrence.

There are times in life when you just know that you need to get a loan, whether for a home, a car, or simple emergencies. Going into the bank or lending office knowing about your situations and rate factors may help you get better rates.

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