What follows is an all too familiar story in hundreds of thousands of homes across America.

Mr. and Mrs. Owin finally realized the dream of owning their own home in July 2005. They took on a home loan secured against their house in the amount of half a million dollars. It was hard, but they could make the monthly debits on this home loan and they did just that for two whole years. The monthly amount was twelve hundred and fifty dollars because the interest rate for the first two years was a very low 3%. Now the Owins are good honest people but they were miss- sold this mortgage. They didn’t pay much attention to the small print in the contract where it said the interest rate would be altered upwards in July 2007 by nearly double. Their new monthly payments would become nearly two thousand four hundred dollars. Which is a good six hundred dollars beyond the Owins’ budget.

They only half saw it coming. It was too late to sell up when the full extent of the money owing struck them. They would like to sell now but they can’t find a buyer and the property is valued at less than four fifths of their half million dollar debt. So now they are between the proverbial rock and a hard place. They can’t sell but neither can they afford the arrears. Repossession is bearing down on them like an express train.The only way out for Mr. and Mrs. Owin is a quick sale of their dream home. This is where someone pays bottom dollar for a home in advance of it being repossessed by the lending company.

So the Owins, or we should say the bank gets three hundred and seventy five thousand dollars for the house and then writes off the remaining $120,000. Unfortunately the Owins’ difficulty does not end there because the federal government sees this write off as unearned income and wants their share of it. So the Owins have no home, no money, a poor credit rating and an internal revenue bill.

This is an all too familiar picture in America in 2008. With many more people in the rate hike pipeline, facing the upward ratcheting of their home loan payments, the George W. Bush administration rushed through a package of helpful legislation. The ‘Mortgage Relief Act’came in to force just in time for Christmas last year. The aim of this act was to stem the tide of foreclosures, prop up the US economy and help people like the Owins to escape from between the rock and the hard place. It is rightly called a national homeowner crisis because people like the Owins could never earn enough to pay back the amount they were bamboozled into taking on.

This new law now changes the Federal taxation requirements so that when people have been let off the home loan, anything up to $2,000,000, they are no longer to be taxed on it. So it is much needed good news for people like the Owins.This new act is also good for the economy as a whole because it benefits two key sectors in it. These are the banks and savings & loans and the first-time homebuyers. The effect of the Act is to multiply the number of pre repossession sales and to motivate banks to market the real estate on their books aggressively.

This means millions of houses and condominiums are coming down in price. The banks make profits on lending so they are being very accommodating to anybody who comes to them with a good credit history and a desire to borrow money. Thus, this is boosting the first time buyers and thereby the economy.First time homebuyers are the engine of the whole housing market. They now are faced with an over-supply of affordable properties and very approachable lending institutions. They can negotiate inexpensive home loans for places that just last year were beyond their budgets. There are also a number of federal and local ‘easy finance programs’ available to qualifying first-timers. It is believed that with all these initiatives together the American economy will soon bounce back from its’ self-inflicted sub-prime debacle. 

Shop Around For Refinance

When shopping around the mortgage brokers for a change of lender and home loan contract please do not be mesmerized by the price. By price we mean of course the rate of interest. These are nearly rock bottom at this time and therefore very tempting but there are three other important factors that you must take into account before committing yourself to this major money product.

Know, in detail, your aims with regard to money over the next year, two years and through the next life stage that you are coming to.Could a adjustable rate  mortgage be for you? Because the bank rates are so low, most refinance shoppers want to nail down their repayment with a set interest rate. But remember that while these deals are ‘fixed’ they are not permanent and there will come a time when they will be reviewed and changed, probably upwards.

Ask yourself whether you are likely to sell your property within the timeframe of this review. If your answer is yes or probably then you could reduce your monthly repayments with around .25% less on the interest rate of a variable loan.   If you can answer ‘no I’m staying put for the foreseeable future’ then a second refinance option is something for you to consider. ‘Pay Points’ buy not only a lower rate but also are a tax deduction. The price of pay points is between 1 and 2 percent of your full home loan.The days of one mortgage in a lifetime are long gone.

The wise homeowner is prepared to remortgage when the conditions are ripe for it. With this in mind the third factor to weigh up when refinancing is the penalty payments for early termination. Think about a mortgage that does not have any termination charges. They are available but will attract slightly higher interest rates. Looking past this drawback you will keep more of your capital gain when you come to sell your property or remortgage the next time. Refinancing your major asset is not as simple as just comparing interest rates. Know your own circumstance and future intentions and select the best deal to meet your individual needs.

Tax deductions for Refinancing

The major benefit that any mortgage loan will give you as a homeowner is the advantage of tax deductions. Be it a primary mortgage, a second mortgage or a mortgage that you have refinanced, the tax deductions are yours for the taking! As a homeowner, you get three main kinds of tax deductions with your mortgage:

i)                    Tax deductible mortgage interest payments

ii)                  Property Taxes

iii)                Points paid on mortgage refinance

These three categories are discussed in detail below.

Tax deductible Mortgage Interest

In most cases, the interest payments on any mortgage are completely tax deductible. The only exceptions occur in cases wherein homeowners want to tap into their home equity to fund other financial needs like college education etc. In these refinancing cases, there is a limit to the interest payments which will be tax deductible i.e., interest on a maximum equity debt of $100,000.

Let’s illustrate the above limitation with an example. Homeowner XYZ had an original mortgage of $125,000. He refinances his mortgage for $300,000. The additional $175,000 is used for buying new cars, vacations and other such discretionary spending. In such a case, the entire interest related to the original $125,000 of the primary mortgage will of course be tax-deductible, and so will $100,000 of the refinanced equity debt. However, there will be no tax deductions on the interest payment of the remaining $75,000 which has been refinanced.

Property Taxes

In the year property taxes are paid to the collector of property tax, they are tax deductible. Future real estate taxes cannot be immediately deducted at the time of mortgage, but are deductible in the same financial year that the property tax becomes liable for payment.

Points Paid on refinance mortgage

Usually the points paid on a mortgage –primary or refinanced, are proportionately deducted over the entire tenure of the loan. However, if the refinance is being used for funding home improvements, all the points might be fully deductible in the first year itself. Your tax advisor will be better able to guide you regarding whether you meet the requirements for such a deduction.

So, consult a qualified tax advisor and discuss the specifics of the deductions that you can avail!

Visit www.myloanexpert.com/refinance-mortgage.html to get started.

Reduce the Term with Mortgage Refinance  Generally, all home owners go for a conventional fixed rate 30-year mortgage, especially those who purchase their first one. If you are one of this vast majority, you too must have opted for the longest payout schedule possible, in order to take advantage of lower monthly payments. However, if you are in the process of buying a home, you need to look at the other option of shorter loans, because they can represent huge savings over the life of a mortgage. Let us get down to the brass tacks. The fact of the matter is that bulk of the money you spend for your monthly mortgage payment is dedicated to paying interest. A house that sells for $200,000 today may wind up costing more than twice that price, once all the interest payments are calculated during the course of three decades. If you decide to shorten the life of the loan, you can dramatically increase your savings, often by hundreds of thousands of dollars. No wonder, more and more people are going for this option. All you need to do is a bit of the math and it becomes clear as daylight that by refinancing and shortening the term and reducing interest payments you can make dramatic mortgage loan savingsYou need to organize your finances before you take on the commitment of your own home and a 30-year period of loan repayment. Again, if you go in for mortgage refinance and change your mortgage loan’s term, you can organize your financial plans. For instance, if you’re 50 years old and plan to retire at the age of 65, you should think of paying off your mortgage in 15 years so that you have no liability when you stop working. It is both financially and personally rewarding to have all loans out of the way when retirement arrives.If you are a younger parent with children, you will be planning for their college education in 10 to 15 years. In that case, too, you would want to do a home refinancing to shorten the term and pay off the mortgage before the tuition bills begin to arrive in the mail.This is the best way to avoid making payments of tuition and mortgage at the same time. It can otherwise be terribly difficult to combine the two. If you explore all the possibilities of mortgage refinance, you can even save enough to offset the cost of your child’s education by not paying an extra 15 years of mortgage interest. This is the time to take advantage of this double-barreled bargain, because the interest rates are near their all-time lows. However, there are loud signs that they will reach double digits within the next few years.  Refinance by visiting Refinance Mortgage

Hidden Costs of Mortgage Refinancing  There is much more about mortgage refinance than meets the eye. While you rejoice the prospect of saving a lot of money, you should also be prepared for hidden costs that may take you by surprise. It is always better to do your homework before you take the plunge. Make sure you do the math properly taking everything into account to see how much you’d really save.

Comparison is the name of the game. Never settle for the first offer. Always compare rates from at least four lenders for refinance.  Generally, the cost of home refinancing will be lower than your original loan, but the fact remains that refinancing a mortgage loan involves closing costs. There are some fees that don’t apply to refinancing; but the closing costs can still be substantial. So, it is prudent to confirm the fees that your lender will charge this time around.

You may want to consider the roll-in financing option that some mortgage lenders offer. This gives you the freedom to roll the refinancing closing costs into the loan itself. Thus, you won’t be required to pay any up-front costs, but, remember, this will result in somewhat higher monthly payments, because your loan balance is higher. You will obviously want to know how much you can save by lowering the interest rates. After all, that is the primary reason why go in for refinance in the first place. You can use the amortization calculator to see how much you can save through better rates alone.

All you have to do is just enter the loan amount, interest rate, and the length of the loan to see how much interest and principal you’ll be paying each month.You must know that even a couple of percentage points can make a big difference and swing the percentage any which way. For example, you can save $300 a month by switching your $180,000, 30-year loan from a rate of 9 percent to 7 percent. That’s quite a lot, isn’t it? On the other hand, if you take a home loan mortgage refinancing for a lower rate, it will cut down tax deduction, which means you will have to pay higher income taxes. Now, this is something you were totally unaware of. But, it is a big factor in considering the cost of refinancing. You know your tax bracket. So, you can figure out the impact it will have on your tax return. For instance, if you’re in the 25 percent tax bracket, and a mortgage refinance will lower your monthly interest payment by $200, taxes will claim $50 of that savings.

As a result, your true savings will be $150 a month.  If the value of your home increases over time, then you will regret your decision of refinancing, because you will lose those pesky PMI payments. However, you have the freedom to end your PMI payments as long as the new loan amount is lower than 80 percent of the property value. In order to find out how much PMI is costing you, you need to check your current mortgage statement.In the ultimate analysis, refinancing is a welcome option when you’re stuck in a high-interest loan. It can considerably lower your rate even if it is less by just a couple of percentage points. You can recoup the closing costs in a matter of months. However, you must look at the numbers before you leap. That will help you save a lot and you need not worry about unanticipated surprises. 

Top Four Benefits of Refinancing

A few years ago, there was a boom in the mortgage refinance sector due to lowered interest rates.  The significantly low rates made homeowners refinance without a second thought, Now that interest rates are going up, the decision to refinance may be tricky. However, there are still significant benefits to be reaped by refinancing your mortgage.The mortgage on your home forms a significant part of your financial picture. Refinancing the mortgage can actually help you stabilize your financial outlook by providing you with appreciable savings over the life of your loan. Here’s a look at the top four benefits that refinancing your mortgage can yield.

1. Lower your interest rate

Traditional wisdom says it is time to consider refinancing if the market rate is two percentage points lower than the rate of your mortgage. However, in today’s competitive scenario, lenders are willing to offer deals on closing costs especially to homeowners with a good credit rating. You can take advantage of this scenario and refinance even for a smaller difference in interest rates. A lowered interest rate will mean a lower monthly mortgage payment which is the most common reason people opt for refinancing.

2. Lock-in your interest rate

An ARM or an adjustable-rate mortgage can sound very attractive initially in a low interest market but over a period of time, especially with rising rates, it can be counter-productive. You may have gone in for an adjustable-rate mortgage when you bought your home. But you are wiser with time and experience. Refinancing is one way to get out of an ARM and opt for the more sensible fixed-rate mortgage.

3. Lower other interest costs

Refinancing your home mortgage can provide a way of streamlining your other, more expensive debts like unsecured credit card debts. Credit card debt is significantly more expensive than mortgage debt. By refinancing, you can take the pressure off the credit card debts that may be choking your monthly cash flow situation. By opting for this, you can lower your overall interest cost and ensure a smoother monthly cash outflow.

4. Restructure your mortgage term

Even if you have carefully planned your initial mortgage, it is likely that your situation may have changed over time. Refinancing can allow you to adjust for such changes by changing the term of your payment. Loan length is usually determined by two variables: how much monthly payment you can afford and how long you plan to own your home. If you have a generous cash flow, you may choose a smaller mortgage period e.g., 15 years and save on the total interest. On the other hand if you intend to sell the house soon, you may not want to lock up too much cash and may choose a longer term. Whatever your considerations, the changed situation may warrant a new mortgage term that suits your new cash flow and plans better.

Check out the above list to determine if refinancing can benefit you in any way. Refinancing can truly ease your financial woes and allow you more money in the pocket.

“Fix and Flip” Deals

Investors in real estate make mega bucks by using the “Fix and flip” routine. Quite simply “fix and flip” refers to a three step procedure in handling real estate deals. Buy—renovate—sell for profit. In the basic “fix and flip” scenario, you buy a house, fix it up, and then sell it immediately for profit. Profit means your selling price must be higher than your buying price and the cost of renovation put together.

So, what happens to the investment if there’s a slump in the market? Some investors can lose out on the “flip” in a slowing market. However, with some smart thinking, there are always ways to make money with “fix and flip” in any kind of real estate market.

Estimate “Fixing” costs accurately

One of the key elements of your “fix and flip” profit will depend on an accurate estimation of what it will cost you to renovate the house. Renovation projects typically run over the schedules and over the budget. So keep a generous margin of safety while budgeting.

Estimate “Flip” time accurately

The other key element to assess is the condition of the real estate market. You can make money by “fix and flip” even in a slowing market as long as you can hold on to the property for a while. Remember not to set yourself very restrictive timelines for selling the house. If you can hold on long enough, you will end up with a profit.

Lease with option to buy

In this case, you’ll amend the typical “fix and flip” so you lease the property with an option to buy. Obviously, it’s important to ensure that your monthly mortgage payment is being covered by the rent accrual. At the time of selling, you don’t have to pay any brokerage fees to a real estate agent since your renter is your automatic buyer also.

Many lenders will be able to help you finance a “fix and flip” property. These offers typically finance both the buying price and the funds required for renovations. But making money on the deal is your baby. If you have accurate cost and time estimates, the returns can be well worth the effort!

Choosing the Right Mortgage Refinance Option

Mortgage loans offer two options: a FRM (fixed-rate mortgage) or an ARM (adjustable-rate mortgage). Fixed rate mortgages provide security and predictability. On the other hand, adjustable rate mortgages can offer the potential for savings, especially if interest rates go down. How do you decide which of these options is best for you? A coin toss may not be the way to take such an important decision. Read this article to dispel the uncertainty about ARMs and FRMs so you can take an informed decision and streamline your financial outlook.

Fixed rate mortgages vs. Adjustable rate loans

Fixed rate mortgages have the same fixed interest rate for the entire duration of the loan. Whether the interest rates go up or down, you don’t have to worry because your rate will remain the same throughout the tenure of your loan and you can plan your cash flows better. On the other hand, adjustable rate mortgages are tied to a benchmark index. As the market rates fluctuate, the benchmark changes and if affects the rate you have to pay every month. There are many ways in which ARMs can vary, but the most important variables are:

·         The tenure of the initial rate

·         The frequency and range of adjustment of the interest rate

Predictability vs. savings

Adjustable rate mortgages often offer a low opening rate that can remain in place for three to seven years. On the other hand, fixed rates offer you the security of knowing that your monthly outflow will never change, whatever happens to the market interest rates. In order to decide which option works best for you, consider the following factors:·         Your risk-taking appetite·         Your planned duration for owning your homeHere’s how it works. If you are buying a home for the long haul, fixed rate may be better for you. For someone planning to sell their home in lets day five years, the adjustable rate option can offer a low opening rate and they can sell before the rate is revised. It is possible to calculate what your ARM and FRM refinance rates and payments will be by using an online calculator.However, the factor that will ultimately outweigh any other considerations if your appetite for risk. Even if you are fairly certain that you intend to sell or refinance in a few years, there is a risk involved in the ARM option. You may prefer to pay a little more in the FRM option for the predictability, security and peace of mind it affords. Bottom-line, you don’t need to flip a coin to decide which option suits you best! While FRM and ARM offer their own set of advantages, you probably know which is the clear winning option for you!

How to find the best mortgage rates In the present day, there is a lot of competition in the mortgage market and borrowers can shop around for the lowest mortgage rates. Whether you are interested in getting a mortgage or refinancing an existing one, many different types of mortgages are available and you need to look for a solution that meets your specific requirements.  

You can opt for mortgages with fixed interest rates or variable interest rates. Borrowers who opt for mortgages with fixed interest rates have to pay a fixed rate of interest for the entire term of the mortgage. Those who choose mortgages with variable interest rates have to pay mortgage rates that vary, as the interest rates in the market go up and down.  Those who opt for mortgages with variable interest rates are usually offered lower interest rates initially, than those who opt for mortgages with fixed interest rates. On the other hand, if you opt for a home loan with variable interest rates, it is not easy to predict if the mortgage rates will go up or down in the future. 

With fixed-rate mortgages, you can be certain that the monthly payment will not change over the term of the loan. It is preferable to opt for a fixed rate when the interest rates are low, so you can lock the lower rates for the entire term of your loan. Some borrowers prefer to opt for a 30-year term to have a lower monthly payment, while others prefer a 15-year payment because it allows them to pay off the mortgage much earlier. A shorter term reduces the total amount of interest payable, but you need to be sure that you can afford the higher monthly payments. 

Once you have decided about the type of mortgage that will suit you, start researching the lowest mortgage rates available, in the local newspaper and on the Internet. Mortgage rates can fluctuate, so you will have to keep in touch with the latest figures. The websites of lenders will provide their current mortgage rates and their different plans. You can also find a comparison of the interest rates of different mortgage lenders on some websites  

It is preferable to approach a bank where you already have an account, because you will be offered better terms and mortgage rates. Tell the loan officer of the bank about your plans and ask for advice about a suitable mortgage solution. Negotiate with lenders and ask them if they will offer lower mortgage rates or give a better offer than other lenders.  If you are not comfortable with approaching different lenders to ask about mortgage terms and interest rates, you can consider signing a contract with a mortgage broker to act as your agent.  

Compare the fees of different brokers before you select one. It may seem like an additional expense, but mortgage brokers can tell you about the mortgage plans offered by different lenders and suggest a suitable solution for you.  The interest rates offered are an important consideration, but don’t forget to ask lenders about other charges like points and fees that you may be required to pay. Ask mortgage lenders to give you their offers in writing and to submit quotes for the same type of loan, loan amount and loan term, so you can compare them.  According to the U.S. Department of Housing and Urban Development (HUD), if you take time to shop, compare and negotiate, to get the best mortgage deal, you may be able to save thousands of dollars over the term of the loan.  

The facts about mortgage refinancing

Home owners use mortgage refinancing to get a new home loan to repay an existing home loan. They usually decide on mortgage refinancing because they are able to get a lower rate of interest or a special deal, which is not available on the existing home loan.  Before you apply for mortgage refinancing, you must bear in mind that it may not always be in your best interests. If you are already facing financial problems, mortgage refinancing may not be suitable for you. 

According to the U.S. Department of Housing and Urban Development (HUD), at times refinancing your mortgage can save you money. Refinancing may help you to lower your monthly payment, pay less interest or reduce the term of your loan, but you need to be sure that mortgage refinancing is right for you.   Home loan borrowers are often taken in by home loan providers, who try to convince them to refinance their home loans, by offering benefits like drastically reduced monthly payments. 

Borrowers are usually asked to make an up-front payment in order to refinance their home loans. The home loan must last for a certain period, for the reduction in monthly payments to exceed the up-front payment made to get mortgage refinancing. Such trade-offs usually result in a financial loss to the borrower, in the long term.     Some home loan borrowers decide to apply for mortgage refinancing only to raise money, but they may end up paying a very heavy price for this. You need to carefully consider if there is really a critical need for the money and whether it can be raised more economically from some other source.  

Home loan borrowers may decide on mortgage refinancing by paying an up-front amount, because they want to change from an adjustable interest rate to a fixed interest rate. This may be because borrowers tend to attach a lot of value to locking the rate of interest.  Whether mortgage refinancing for this reason will be beneficial in the long term or not, depends on whether the interest rates go up or decline. 

Home loan borrowers often lack access to accurate and complete mortgage refinance information. Due to this, their decisions may not always turn out to be the right in the long term. Borrowers need to seek accurate and complete mortgage refinance information from reliable sources, for better decision making. Borrowers often get taken in by lenders and sign mortgage refinancing deals that will leave them poorer in the long run. People who refinance may not fully understand the terms of the mortgage refinancing deal they are signing.  

Some lenders are known to use predatory lending techniques and to target borrowers with low credit scores. Borrowers get taken in by the aggressive selling of the lenders and are stuck with mortgage refinancing deals due to which they lose money and risk foreclosure. Borrowers need to verify mortgage refinance information provided by lenders and discuss their plans with relatives, friends and co-workers, before the make a decision. It is worth taking time to research your options and to obtain mortgage quotes from several lenders, because mortgage refinancing is an important decision that will have long-term effects on the future of your family.  You can find plenty of mortgage refinance information on the Internet and can also get free mortgage quotes, which will help you to educate yourself and find the best deals available.  

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