Does the term adjustable rate mortgage or the thought of having one send you into a panic? While an adjustable rate mortgages (ARM) is not right for everyone or for every situation, there are advantages to having an ARM over a fixed rate mortgage.
First, adjustable rate mortgages tend to have lower interest rates than fixed rate mortgages. Depending on when the ARM is due to adjust and what interest rates are expected to do (increase or decrease), an adjustable rate mortgage can cost a borrower a lot less in the long run.
A scenario where it may be beneficial to have an ARM is when you know that your time living in the home or having the mortgage will be short. If you can deal with possible adjustments in your monthly mortgage payment and only plan on living in the home for a short period, it may save you thousands of dollars to obtain an ARM over a fixed rate. For example, if you know that you will only be living in the home for 3 years, then a 3/1 ARM may work for you. This is a fixed-to-adjustable rate mortgage that has a fixed interest rate for the first 3 years of the mortgage. After the third year, the interest rate adjusts every year.
If you'll only be in the home three years, it doesn't matter what the interest rate does on the fourth year because you'll no longer be living there. During the three year period, however, you can enjoy a lower interest rate than a fixed rate mortgage, which means less in monthly mortgage payments.
Another situation where ARMS are more beneficial is when interest rates are expected to drop. For example, Mr. Smith purchases a home using an adjustable rate mortgage that adjusts every six months. He did this because he expects interest rates to drop over the next couple of years. It is a gamble because interest rates can go either way, but if you can emotionally and financially handle fluctuations, ARMs can be more cost effective ways to finance a home.
Wednesday, August 26, 2009
Adjustable Rate Mortgages – Good or Bad?
Tuesday, August 25, 2009
Mortgage Fraud Task Force
At least eight states have woken up and seen what is going on the arena of mortgage fraud. The Attorney General (AG) offices for the states of Arizona, Colorado, Illinois, Nevada, North Carolina, Massachusetts, Missouri and Ohio have announced that they are forming a mortgage fraud task force.
The task force will be tackling issues such as equity skimming, bogus foreclosure rescue, straw purchases and unethical lending practices.
The leader of the task force is the Washington Attorney General Rob McKenna. Representatives from the Department Justice, federal treasury, Department of Housing and Urban Development and (HUD) Federal Trade Commission (FTC) will also be involved in combating mortgage fraud as part of the task force duties.
Friday, August 21, 2009
Cash for Clunkers Comes to a Screeching Halt
The Cash for Clunkers program was introduced a few short months ago and the total amount devoted to the stimulus program was $1 million. The program was to run until November 1 or when the $1 million set aside in rebates was reached, whichever of the two came first.
As of Monday, August 24, 2009 the Cash for Clunkers program will come to a halt, so car buyers have one last weekend to get to their favorite dealership and trade-in their clunker for a brand new car--at least if you want to take advantage of the $4,500 rebate.
Wednesday, August 19, 2009
5 Reasons Why Seniors Get Reverse Mortgages
If you're nearing the age of retirement, usually 62 years old, and you have equity built up in your home, you may have looked into doing a reverse mortgage. You should do your homework and really research what a reverse mortgage is all about and how it may or may not benefit you to have one before making any final decisions. Here are the top five reasons that seniors obtain a reverse mortgage. Do you see your self in any of these scenarios?
1. Retirement Lifestyle
Homeowners that have lived in their home for the last thirty years or so have either paid off their mortgage completely or have been making monthly payments that is bringing them to the end of their mortgage journey. Depending on how much your mortgage is or was, this may be the biggest expense you pay out on a monthly basis. As you reach retirement, you may be starting to worry about how your fixed income will weather in continuing to cover all of your fixed monthly living expenses such as housing, medical and insurance. Even if you have income from retirement accounts, pension plans, social security or other sources, a reverse mortgage can allow a retiree to increase their fixed income amount. In essence, the added income a reverse mortgage provides can establish a higher quality of life--a nicer retirement lifestyle--than if they didn't have the reverse mortgage payment coming in every month.
2. Pays for medical expenses
Medical expenses are a fact of life, but this fact seems to increase as you get older. And since the cost of health care isn't getting any cheaper, rising costs make it harder for seniors to pay for health care on a fixed income. It forces some to have to choose between buying food and paying for their medication on a regular basis. With a reverse mortgage adding to monthly income, it can help you to cover all of your expenses and not have to choose between medicine and some other necessity.
3. Changes to home
As you age, your living accommodations have to change as well. For example, it's harder for you to get up and down the stairs, so if you have a two-story home it may be time to modify your existing home or move to a more accommodating home for your aging needs. Reverse mortgage payments can help to cover moving or renovation expenses to make your home more comfortable for your next thirty years of life.
4. Gives you spending money
Probably one of the top things that retirees look forward to when they retire is the ability to travel more. Reverse mortgage payments have been known to provide retirees with extra spending money to cover the necessities in life and to splurge a little along the way on items such as vacations.
5. Pay off or pay down debt
Just because you retire doesn't mean that your debts simply disappear. Reverse mortgage payments may be the extra cash you need to finally pay off, or at least pay down your outstanding debts. Once your debt is paid off, the reverse mortgage money that keeps rolling in means you'll have even more money each month to apply toward other expenses and purchases.
If you are nearing retirement and you have equity built up in your home, you may want to consider what a reverse mortgage can do for you. Be sure to research what a reverse mortgage is all about and how it may or may not benefit you before making a final decision. It may be just what you need to live out your retirement years in style.
Tuesday, August 18, 2009
The Positive Effects of the Mortgage Bailout
Of the trillions of dollars going toward the various federal government bailout programs, only about one-tenth of the funding is earmarked for the mortgage and lending bailout. Plenty of programs have already been instituted to help lenders as well as homeowners, but how are things shaking out so far?
The proof is in the numbers.
Recently, the U.S. Census Department and the Department of Housing and Urban Development (HUD) reported that the home sales in the U.S. are on the rise. In June of 2009, house sales were up by 11% as compared to the May figures. It's also 21.3% over the figures reported in June of 2008.
While foreclosure rates are still very high, it's not as bad as it could be.
The Federal Housing Finance Agency (FHFA) reported fourth quarter 2008 foreclosure rates totaling 149,981 homes. The foreclosure figure had increased to 243,824 by the end of the first quarter of 2009, which indicates a 61% increase in a short three-month period.
This doesn't create a future picture that is very positive, but when you take into consideration that the bailout provided incentives to lenders to institute programs such as loan modifications to prevent foreclosure, these foreclosure numbers could be worse without these programs.
Again, the proof is in the numbers. During the fourth quarter of 2008, approximately 65,000 homes were saved from foreclosure because of programs such as loan modifications. In the first quarter of 2009, homes saved from foreclosure because of these programs increased to 78,000.
And with even more home retention and government programs still being put in place, foreclosure rates may be kept from reaching higher rates--making the bailout even more of a success.
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