Mortgage Elimination Saving You Thousands & Slash Years Off Your Mortgage

In this financial turmoil you may be looking for the best financial strategy to save thousands of dollars.
One way is to use a mortgage elimination strategy and retire debt free. Mortgage elimination has been around since the beginning of time and the question is how can it work for you in this new financial market where your home equity has been slashed almost 40%?

According to Roget’s thesaurus the word elimination means eradication, extermination, taking away, withdrawal.

Imagine being in the situation where you can completely exterminate and eradicate your mortgage. I know this sounds a little harsh, but remember it the end of the day is your finances we are talking about.

The main reason we choose mortgage elimination as a financial technique to save thousands of dollars is that our mortgage costs us almost double than what we originally borrowed.

No doubt, living the American dream is owning your own home. One of the biggest sources of retirement income after our retirement savings, is the equity we have built in our home. In the event of an emergency or we are short of cash in retirement we can tap into a home equity to provide us with an extra source of income in our retirement years.

But having a home has one downside. It is called mortgage interest. Sure, you get a tax deduction when you pay mortgage interest. But let’s assume you have a $200,000 mortgage. Over 30 years, assuming a mortgage is 6%, you will end up spending over $430,000 in mortgage repayments. Over $230,000 goes towards interest. You end up spending little more interest in what you borrowed to pay for your home.

As you can see irrespective of your mortgage deduction for tax purposes, most of your hard-earned paycheck goes towards paying mortgage interest. Imagine for a second, instead of paying $230,000 of interest you end up paying $130,000 in mortgage interest. And you got to keep hundred thousand dollars of interest for yourself.

Let’s assume you invested hundred thousand dollars of interest over 30 years assuming $69 a week for over 30 years at a 5% interest rate. Well I don’t know about you but if you invested that over time and you invested that wisely lets the conservative and say you could end up with over $249725.90 in savings.

That is almost over a quarter million dollars that you could keep for your retirement instead off paying that to the bank in mortgage interest.

So I ask you a question is mortgage elimination part of your overall financial strategy?

There are various ways to pay off your mortgage. One way is to spend extra from your pocket each month or use a biweekly mortgage program to eliminate your mortgage payments.

But there is a smart alternative. To achieve through mortgage elimination without spending more, refinancing or changing your lifestyle you can use the mortgage acceleration method.

All this method requires, is to use a home equity line as a checking account instead of a regular checking account. By using the home equity line to deposit your cash and pay your bills, you turn this into an automatic interest savings account. Just by using this checking every single month, you can slashed almost 13 years of your mortgage and save over $60,000 in interest.

And if you pay a little extra towards the mortgage each month on top of the mortgage acceleration program then you could end up paying off your mortgage in under 10 years.

Banking Group Launches New Mortgage Scheme For First-time Buyers – Mortgage Advice

First-time buyers are finding themselves in a predicament with falling house prices as the housing market becomes more affordable. Expert opinion is they are being squeezed out of home ownership by the very large deposit they are required to have in order to secure their first mortgage. Saving up to £25,000 for a deposit takes a lot of effort and you need to have the commitment to save that much money each month for a deposit. Lloyds Banking Group was recently rescued by taxpayer’s money when the government stepped in after they acquired the ill-fated HBOS (Halifax and the Bank of Scotland). Today they have released an innovative mortgage product aimed at first-time buyers looking to get on the property market.

Now is a good time for first-time buyers to buy their first home. It is a ‘buyers market’ and buyers can negotiate some great deals with sellers that are eager to sell. Property prices now stand at 2004 prices which make them excellent value and the fall in house prices is possibly nearing the bottom. The best time to buy a home is when the market is nearing the bottom of a falling market before house price stabilise and then start to rise which they will do one day in the near future.

This new product from is a good deal for adults who are fortunate to have parents that are able help them purchase a new home. This is a niche mortgage product and unfortunately is not suitable for buyers where their parents are unable to help them financially. This will limit the number of people this mortgage will be available to help. The mortgage market remains an unfair battle ground as lenders battle to find more ingenuous ways to lend money without risk to their balance sheets.

They are offering a very attractive mortgage deal for first-time buyers and an exceptionally low mortgage rate for a 95% mortgage; you would expect these interest rates for a 75% mortgage scheme.

Here is their lending criteria to secure a first-time buyers 95% mortgage:

1. Mortgage for 95% of the property value
2. A 5% deposit required
3. Parents or guarantors will need to deposit 20% of the purchase price of the home into a Lloyds Savings Account for the next 3 ½ years. They have not announced the interest rate for their saving account yet. There will be a legal charge over the money deposited a savings account and the deposit is locked away for 3 ½ years.
4. Income required is between 2 ½ times income to 5 times income. It is dependent on the type of job, time in employment, other financial commitments, whether or not you are a customer already, etc.
5. A £99 activation fee and a valuation fee based on the house price is required to start the application process.
6. This mortgage is portable which means that you can move from one home to another without any penalty.
7. There is no ‘Higher Lending Fees’ which is normally added to a mortgage over 75% loan-to-value.
8. There is a Penalty fee of 3% of the outstanding mortgage for the first two years and then a 2% fees for the third year if you were to sell the house and repay the mortgage early.
9. This product allows up to 10% overpayments each year and after the first twelve months you are allowed to under pay the mortgage if required by any overpayments previously made.
10. The interest rate is fixed from 4.39% to 4.89% for the next three years depending on the product fee you pay.
o 4.39% has a product fee of £995 which can be added to the mortgage.
o 4.49% has a product fee of £495 which can be added to the mortgage
o 4.89% has no product fee

This scheme works like this:

The house is valued at £100,000; the first-time buyer finds a 5% deposit of £5,000 plus valuation fees, solicitors’ fees, search fees and other disbursement fees. The parents or guarantors agree to deposit 20% or £20,000 into Bank Savings Account for the next 3 1/2 years minimum. After the three and a half years if the value of the mortgage has dropped to below 90% of the value of the home purchased then the parents or guarantors are free to move their money.

Their commitment to the legal charge placed over their savings money ends to the mortgage lender. The parents will remain tied into the mortgage until the value of the mortgage has dropped to below 90%. So parents could be tied in for a long time if house prices continue falling and the housing market does not recover soon.

If you take a repayment mortgage over 25 years for £95,000, after three years you would have paid back around 6% of the capital borrowed. So after three years your mortgage balance would be £89,300 and your parents would then be released from their legal commitment to the mortgage.

This is a great opportunity for first-time buyers to take advantage of in the current climate. First-time buyers are essential to the housing market returning to normality. Other products offered in the past required the parents, guarantors and grandparents to provide a legal charge over their own home and this placed them at total risk of losing their home as well.

Always take ask to speak to a Mortgage Adviser before committing to a new mortgage and ask as many questions as you need to in order to fully understand your new mortgage product. Mortgage Brokers who use the ‘whole of the mortgage market’ are the best. They will be able to provide you with the best mortgage for your circumstance from the whole of the mortgage market. Furthermore, they will be able to provide you with full ‘Advice and Recommendation for your new mortgage.

Fixed Rate Mortgages – Past, Present and Current Market Status

Mortgage loans and fixed rate mortgage history:

The fixed rate mortgage can be understood as a type of mortgage for which the interest rate has been “fixed”, or made “constant”, for the entire length of the mortgage term. Simply, it a mortgage loan with a constant interest rate, which does not change over the entire tenure of the loan. Mortgage loans are traditional types of loans, and have been in existence since centuries. In the past, moneylenders and “lords” (Europe 16th to 18th century) offered home mortgage loans to “needy” people, often the pheasants and laborers.

However, the middle class families too “borrowed” money to satisfy their financial needs, and later repaid the amount. In such cases, the lender generally decided the “final” fixed interest mortgage rate to be charged for the credit amount lent. The rate of interest was more or less standard, and did not change, but it was at the discretion of the moneylender to “decide” and “fix” the net chargeable home mortgage loan amount, since there was no “controlling authority” which “decided” which moneylender should charge what interest rate, and what kind of benefits the debtors should avail from the creditor, apart from the “loan” facility.

So, to summarize the mortgage loans scenario of the past, the loan procedure and working was not “standardized” or streamlined. There was little or no authority to question the creditor about “fair practice” or “ethical trade” related issues. The rule was quite simple. The moneylender was rich and had surplus money, and was ready to offer some amount at a particular rate of interest. It was for the borrower to decide how badly the credit facility was needed, and whether it was possible to accept the terms and conditions. If “yes”, the lender would give the money, and the borrower repaid the home mortgage loan rate amount as per convenience.

Mortgage and fixed rate mortgage status now:

Things are different now. Democracies and republics play the part of deciding how fixed interest mortgage rate and credit finances should be lent, and recovered. And since the governments are composed of “common people”, financial market has been greatly influenced by how creditors should lend their money, and what kind of protection the debtor should have while paying back the money borrowed. There are regulations in place, along with checks and counter checks, which balance the market economy, and ascertain that creditors do not “harass” their debtors, and also help the lenders to recover their capital in case the debtors fail to redeem. It has to be a two way street, a path which can be used by both the creditor as well as the debtor, in a harmonious manner.

Mortgage and fixed rate mortgage current market conditions:

As far as the current mortgage indices are concerned, mortgage rates are indicating yet another strong move higher this week. This is owing to the focus amongst bond investors, who have strong concerns regarding the budget deficits and inflation. Even with the prevailing market conditions, mortgage rates still remain well below the 6 percent mark. The rates do not pose an impediment to deserving borrowers. The Federal Reserve currently has a $1 trillion deficit in terms of outstanding mortgage payments, and if this deficit is catered to, it is possible to bring the mortgage rates down.

No further announcements are likely to take place before June, this year, by the “Federal Open Market Committee” meeting. Mortgage rates sharply increased last week, indicating that the average 30-year fixed mortgage rate increased up to 5.65 percent. As per the national survey, the average 30-year fixed mortgage is associated with an average of 0.44 discounts, as compared to its origination points. The average 15-year fixed rate mortgage rose to 5.06 percent, and the average jumbo 30-year fixed rate rebounded back to 6.68 percent.

As far as the average adjustable rate mortgages are concerned, the rate decreased to 5.01 percent while the 5-year ARM jumped to 5.20 percent. Everything said and done, the mortgage rates still remain significantly lower as compared to what they were a year ago. At this time last year, the average 30-year fixed mortgage rate was availed at 6.52 percent, indicating that a $200,000 loan would ideally carry a monthly payment of $1,266.77. With the average rate remaining stable at 5.65 percent, the monthly payment for the same loan amount would be $1,154.47, suggesting a savings of $112. 30 per month.

4 Nonsense Loan Fees Charged by Some Mortgage Brokers

Here in Essex County there are virtually hundreds of Windsor mortgage brokers that can assist you with a mortgage loan. Just open our local Yellow Pages and have a look. Some agents are offering special mortgage rate programs, others refinancing, and others home equity loans. But sometimes when you really drill down into these loan programs, you may find what I like to call “nonsense fees” popping up.

While the majority of Windsor credit unions, lenders and mortgage agents are honest and often provide a positive experience, it’s very important that you be aware of some of the dishonest tactics you may encounter when you refinance or seek a Windsor home loan program.

If you live in Windsor, it’s no doubt you’re very aware of the troubled times we’re facing. Businesses are closing, layoffs and job losses appear in the Windsor Star almost daily. At the time of this writing, Windsor’s unemployment rate is 13.6%! With all of Windsor’s economic circumstances, choosing a mortgage broker who understands how to successfully work with our city’s unique challenges, and who doesn’t charge additional / extra fees, is crucial for positive loan outcome. In fact, avoiding unnecessary fees can save you thousands of dollars over the course of your mortgage loan. To be forewarned is to be forearmed….

Many of the nonsense fees you’re about to learn, are additional fees that are simply not necessary (in most cases). They can be fees completely made up or added by a Windsor mortgage broker who is simply trying to make more money from your refinance or mortgage loan, and sadly at your expense! It’s easy to conceal many of these fees within a complicated mortgage/refinance contract. And unless you have a lawyer reviewing every dotted “I” of your loan agreement multiple times, nonsense fees can be easy to miss.

Nonsense fees are created at the mortgage broker/agent level, and are completely at the discretion of the mortgage broker you choose to work with. Some Windsor mortgage brokers can get really creative with their fees. Here are just a few creative nonsense fees I’ve seen in the past:

TOP 4 NONSENSE FEES TO AVOID:

  1. Lender Charges
  2. Document Processing Fees
  3. Retainer Fees
  4. Application Costs

The above listed fees can add up to hundreds, even thousands of extra dollars, and when you’re finished paying, you may end up paying more for a mortgage or refinance loan then you should have!

If you see any of these fees, call your Windsor mortgage broker or agent out on them. For instance, ask why you’re paying a lender fee, if your mortgage agent is already being paid by the lender for the same thing? Otherwise, your mortgage agent is basically charging double what he/she should be – in other words, double dipping.

A Few More Unfair Mortgage Loan Tactics That Could Cost You Thousands!

Mortgage Penalties: If your existing mortgage loan has a prepayment penalty, some lenders or Windsor mortgage brokers will offer to “handle” penalties when you refinance, just to keep your deal. What they often fail to mention is that you’re actually still paying them anyway. Some mortgage lenders will figure those penalty fees into the interest rate that they offer you. So not only are you actually paying them, you’ll pay interest on it as well.

Lender Tied Selling: Dishonest mortgage loan tactics are one thing; this next point pretty much crosses the line into being on the border line of illegal. If you have a Windsor mortgage loan with a particular lender, chances are you may have a credit card account or maybe even a line of credit with that same lender. Sometimes, when a lender learns that you may be refinancing your loan with a different financial institution, you may be told that your credit card account or credit lines may be closed if you refinance your Windsor mortgage loan with someone else. This is called Tied Selling and is considered illegal.

Monthly Interest Compounding – Some Windsor mortgage brokers or lenders will compound the interest on your refinance or mortgage loan monthly instead of twice a year, while offering you a slightly lower interest rate. This results in you paying much more interest in the long run.

Remember, cheap Windsor mortgage loans or refinancing options aren’t so cheap if it winds up costing you a whole lot more in the long run. Take the time to really understand the fees that any Windsor mortgage brokers put in front of you.

Popular Mortgage Products Explained Including Fixed and Variable Mortgages & Their Comparative Cost

With there being such a spectrum of products being available in the mortgage market I thought I would explain some of the most popular ones available.

Variable Rate Mortgages

Standard Variable Rate

Considered to be one of the most popular types of mortgage available, the interest charged on the loan varies throughout the term of the mortgage. The rate charged on the mortgage varies due to many influencing factors such as: competitor’s rate, Bank of England (BOE) base rate and general market forces.

The Standard Variable mortgage rate fluctuates with influencing factors; therefore these mortgages are not suitable for those who like to know what their fixed payments will be over a long period of time. Those borrowers in particular would opt for a fixed or capped mortgage product.

Tracker Mortgages

Put simply a tracker mortgage is a Standard Variable Rate mortgage that “tracks” an index. This is usually the form of the Bank of England (BOE) base rate or the London Interbank Offer Rate (LIBOR).

These mortgages are perfect for those who can afford to take a risk on monthly outgoings as while they may pay a higher rate when the base rate is increased, during times of low base rates they will benefit from savings made on the lower interest rate.

Fixed Rate Mortgages

A Fixed Rate mortgage  mortgages] is a rate agreed between the customer and lending institution  for a period of time “Fixed Rate Period” The fixed rate is perfect for those who like to know exactly how much money is coming out of their account each month for a known period of time, thus allowing them to keep a steady grip on their finances.

Most fixed rate mortgages require an arrangement fee so this must be taken into consideration of the true cost of the mortgage.

Prior committing to a fixed rate mortgage the borrower should consider future trends in interest rates, their household income and early repayment charges.

Capped / Collared Mortgages

By having a capped rate mortgage the interest rate charged is guaranteed not to rise above a contracted percentage during the fixed term period. The collared aspect applies the opposite; when rates drop the interest charged will not fall beneath a contracted percentage.

Variable Rate Mortgage Cost .Vs. Fixed Rate Mortgage Cost

There is no true way to say which of the two is the cheapest or most expensive as both carry their individual fees.  It is truly down to the borrowers attitude to risk which will determine the true cost personally to them as a debt which they have carried over a long period of time.

Those who are risk adverse are best suited to the variable rate mortgage products as they are willing to take the highs with the lows as both can be very respectively beneficial or detrimental. Those who are not risk adverse and are more regimental with their outgoings a fixed product with the flexibility of overpayment’s would suit them very well.

Making Sense of the Economic Recovery Act and How it Applies to Home Mortgage Rescues

Newly passed legislation about home mortgage modification seems to be the talk around the water cooler lately. But figuring out just how this valuable legislation can affect you as a homeowner and the interest and terms of your home mortgage is difficult. Basically, the Obama plan is centered on two groups of homeowners: the first is those who are facing foreclosure due to missing payments and default, the second is those homeowners who cannot refinance to a better rate due to falling prices in the housing market.

For the first mentioned group, those who are facing foreclosure, the government offers incentives to lenders in order to secure mortgage modification on their existing mortgage. In doing so, the homeowner can reduce their monthly payment requirement enabling them to stay current on their mortgage and avoid foreclosure. For homeowners who are current on their mortgage but cannot refinance because the value of their home has gone down drastically in their area, the Obama mortgage rescue plan can allow them to refinance their mortgages to better terms that include smaller monthly payments. These mortgages are known as underwater mortgages.

Modifying Your Mortgage Under The Obama Rescue Plan

For mortgage modification, the homeowner must have taken out a mortgage on the home prior to January 1, 2009 and the mortgage cannot be a second mortgage (must be their primary mortgage). The principle of the mortgage must be less than $729,500 and the homeowner must actually live in the home that qualifies for mortgage modification under the Obama mortgage rescue plan.

Additionally, the homeowner must document their financial situation fully via income tax return statements and pay documentation in the form of paystubs or pay statements. The homeowner must also prepare a financial hardship statement that details how and why they fell into financial difficulty that requires that their mortgage be modified. If the borrower has a total household debt that is greater than fifty-five percent of their income, the borrower must agree to go for credit counseling. The homeowner does not have to be late on their mortgage payment to qualify for mortgage modification.

Once these qualifications are met, the mortgage lender can determine the amount of the new monthly payment in order to make sure that it is no more than 31% of your pre-tax (gross) monthly income and the interest rate can be as little as 2%. This provides significant savings that can keep the family in the home and allow the home to be its most affordable for them in the future.

Refinancing Your Mortgage Under The Obama Rescue Plan

For mortgage refinancing, the homeowner must live in the home and it must be their primary residence. The mortgage must be owned by either Freddie Mac or Fannie Mae (check with your lender, many mortgages are owned by these two huge entities; you may be unaware of it). The borrower must show that they have enough income coming into to sufficiently handle the mortgage payment, and borrowers cannot take cash out of the mortgage in order to pay on other debts. Also, the mortgage cannot be written for more than 105% of the current fair market value of the home. The mortgage can be refinanced under this option to a fixed 15 or fixed 30 year rate.