The Difference Between an Adjustable and Fixed Rate Mortgage

The Difference Between an Adjustable and Fixed Rate Mortgage
By John Hirabayashi

When shopping for a new home, the options seem endless. You'll look at several houses before you make your decision, but your choices don't stop there. You'll also need to decide between an adjustable rate mortgage and a fixed rate mortgage. Both have pros and cons, so it's important to know the difference before you decide. Read on to find out more information on each type of mortgage so you can make the right choice for you.

A Fixed Rate Mortgage

If you opt for a fixed rate mortgage, you'll have the peace of mind of knowing your mortgage interest rates will stay the same for the entire length of the loan. This is beneficial if the housing market is unstable or crashes because it could save you thousands of dollars in interest over the life of your loan. The interest rate you begin with (determined by the market rates at the time you take out the loan) will be the same every single month until you pay off the debt.

An Adjustable Rate Mortgage

When you have an adjustable rate mortgage loan, your interest rates fluctuate depending on the market rates at the current moment. For instance, you may begin with an interest rate of 4% for the first five years of your loan. At the end of that five years, the rate may jump much higher depending on the current state of the market at that time. People planning to stay in the home for the entire length of the loan (usually 30 years) stand a better chance of saving a lot of money by having an adjustable rate mortgage and riding out any fluctuations - good or bad - throughout the years.

No Real Winner

It is difficult to say that one type of mortgage is better than the other. Which one works best for you depends on your specific needs at the time you purchase your home. If you're only planning to own the home for a short time, a fixed rate may be the best way to save as much money as possible. If you're planning to own the home for the entire length of the loan, an adjustable rate loan could keep more money in your wallet. If you're not sure what the future holds for you in terms of home ownership, choosing a fixed rate mortgage is the safer option.

More Information on Adjustable and Fixed Mortgages

If you're in the market for a new home, be sure to check with your local lending institution for more information on which type of mortgage is right for you. The experts there can help you determine whether an adjustable or fixed rate will be the most beneficial. Also keep in mind that these types of mortgages apply to refinancing as well, so be sure to get all the answers you need to make the right decision.

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What Is Rent to Buy? Everything You Need to Know!

What Is Rent to Buy? Everything You Need to Know!
By [http://ezinearticles.com/?expert=Yasmin_Ffion_Scott]Yasmin Ffion Scott

Rent to Buy is a worldwide scheme, designed for people wishing to live in their dream houses, which they intend to buy in a few year's time.

Rent to Buy is also known as Rent to Own, Let to Own or Lease to Buy. The scheme is designed to ease the transition between renting and buying and allow people to be able to afford to buy their own home quickly and hassle free.

Firstly, when you have found the right house that you want to Rent to Buy, you, as the Buyer, have to put down a deposit on the property. This deposit will be significantly less than most require, and you can put down as much as you want. The difference is: with a small deposit, you will have to pay more monthly rent towards the property, whereas with a larger deposit, you can look forward to paying a smaller monthly rate.

Now, you may be wondering what happens with the rent you pay towards this property that you intend to buy in several years. Basically, the rent you pay to the homeowner covers the mortgage they pay on the property, but it also includes a deposit towards your future mortgage on the property. So, when you can take out this mortgage and buy the property, you won't have to borrow as much, meaning that your interest rates and mortgage bills would be reduced significantly.

You negotiate the terms in your individual contract with the homeowner, and we help you manage this process from start to finish. Each contract differs depending on the buyer and homeowner individually.

Here is an example of a Rent to Buy:

Mike and Leah recently bought their first home with us, as recent graduates they both had a salary but needed another 2-3 years to be eligible for a great rate on a mortgage. However, they did have �2000 in savings and another �2000 loaned from their parents to put towards their first home.

They set their heart on a 6 year old, 2 bedroom, 2 bathroom property with a garden and driveway for 2 cars, situated on a large privately owned estate in Bridgend, South Wales.

This is the deal that was structured to suit their situation:

Purchase price: �119,995

Getting started money (deposit): �4,000

Monthly rent: �450

Monthly 'top-up': �150

Mike and Leah will build up their deposit using their 'top-up' payments and have 5 years to purchase the house outright.

Deposit

Year 1: �1800

Year 2: �3600

Year 3: �5400

Year 4: �7200

Year 5: �9000

If they wait 5 years to buy their home, they will have built up a �13,000 (�9000 top-up payment + �4000 down payment). So would only need an 89% mortgage.

If they exercised their in 2 years, they would have built up a mortgage deposit of �7600 (�3600 + �4000 down payment). So they would have built up a 6% deposit for their mortgage in only 2 years.

We hope we have explained this scheme fully, and that Rent to Buy is something that appeals to you.

Whatever your Rent to Buy or Rent to Sell needs, Homes With Options will help you. We will provide you with a scheme and contract to suit you, and we'll manage the process from start to finish. Find out more information on our website, or through getting in contact with us directly!

Live in your dream home today! Contact us: http://www.homeswithoptions.co.uk

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What Makes Mortgage Rates Rise and Fall?

What Makes Mortgage Rates Rise and Fall?
By [http://ezinearticles.com/?expert=James_DeLoney]James DeLoney

The first place to start when trying to understand how mortgage rates rise and fall is where the money to fund mortgages comes from. Mortgage money comes from a variety of sources, including deposits at banks, but most of the funds come from investors through what is collectively known as "capital markets." Capital markets are where investors go to purchase securities like Treasury notes, corporate bonds, or Mortgage Backed Securities (a package of home loans bundled together into one asset).

Mortgage Backed Securities, the main funding source for home loans, compete against other long-term securities like bonds and treasury notes for the same investment dollars. Since Mortgage Backed Securities compete against these other securities, lenders will adjust homes loan rates to make the return on Mortgage Back Securities competitive relative to other securities. The gold standard of long-term investment securities is the US Treasury Note.

30 year mortgages are traditionally priced using the yield on 10 Treasury notes. The reason for this is simple. US Treasury notes are backed by the "full faith and credit" of the United States, so they are the benchmark for many securities, including Mortgage Backed Securities.

Since home loans are competing for investment dollars with Treasury notes, in most cases when the yield on Treasury notes increases, lenders must raise mortgage rates in order to keep Mortgage Backed Securities competitive with Treasury notes. The opposite happens when Treasury note yields fall; lenders lower mortgage rates.

So if mortgage rates typically go up when Treasury yields rise, and down when yields fall, what makes Treasury yields go up or down? This is where things get extremely complicated, and the easy answer is that there are a multitude of market factors that determine the movement of Treasury yields. But for the sake of this discussion, let's boil down those market factors and try to make sense of when and why mortgage rates move.

Because most investors don't hold bonds until they mature, the current market value of bonds affects the bond yield. As bond prices increase, the yield decreases. So as the bond market improves, and bond prices increase, the Treasury note yield goes down. Since 30 year loan rates are pegged to 10 year Treasury notes, when bond and Treasury yields go down, mortgage rates go down.

So what makes bond prices go up or down? One major factor affecting bond prices is inflation. As a general rule, when economic times are good and employment is high, inflation tends to rise. Inflation is the enemy of long-term bond holders. The reason for this is simple. Bond holders are paid yearly interest, but the true value of these interest payments is reduced by inflation.

Typically, as the economy improves bond prices goes down as investors begin pricing inflation into the value of bonds and treasuries. Remember that we learned earlier that bond prices and bond yields moves opposite of each other. When bond prices go down, yield prices go up. So if mortgage rates track the yield on US Treasuries, when bond prices go down, mortgage rates go up.

Other factors that affect mortgage rates are employment, homes sales, and consumer confidence. Mortgage rates are more susceptible to economic activity than treasuries, mainly because the average home buyer may lose their job or be unable to make their mortgage payment, while the US Treasuries are considered the safest investment in the market. For this reason, jobs reports, Consumer Price Index, Gross Domestic Product, Home Sales, Consumer Confidence, and other data on the economic calendar can move mortgage rates significantly. http://www.jamesdeloney.com

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What Are Mortgage Points On Mortgage Loans?

What Are Mortgage Points On Mortgage Loans?
By [http://ezinearticles.com/?expert=Kate_Ross]Kate Ross

Since mortgage points can save you a lot of money, it is important for you to understand what they are and how they work.
The interest rate defines the amount of your monthly payments and thus, your monthly installments could be defined using 1% of your mortgage loan amount as a factor. That is exactly what a mortgage point is: the unit that describes how expensive or inexpensive the costs of a mortgage loan are and any variations are also computed in mortgage points.


  Different Mortgage Points

The interest rate charged for the loan can be minced into smaller portions and the reason for the raise or the reduction can be identified. Thus, whenever a variable reduces the interest rate by one point, we say it reduces the risk involved in the transaction. On the other hand, whenever a variable raises the interest rate by one point, it is said to be the reason for origination of risk.

For instance, certain points can be purchased. This actually implies a down payment on your loan that obviously reduces the interest rate you'll end up paying for your mortgage loan. These points are therefore discount points and the cost of them will vary according to the loan amount you have required when you applied for the loan. A Mortgage point is equal to 1% of the loan amount.


  Flexibility and Limits

There's a lot of flexibility when it comes to mortgage points. You can obtain mortgage discount points by paying in advance the equivalent to 1% of the total amount of the loan. Origination points are charged for administrative costs, closing fees and different fees and costs charged by the lender for a particular loan.

However, there are limits that cannot be bypassed. Your interest rate cannot be reduced or increased beyond reasonable boundaries. The limit depends on the type of loan and lender but on common mortgage loans it usually reaches around four points.
Each mortgage point can be divided into fractions and usually does as many variables only reduce or increase the interest rate half a point or a quarter of a point. Thus, you can purchase half a mortgage point too to obtain an interest rate reduction.


  Acquiring Discount Points

The benefits of acquiring discount points are variable and depend mainly on the length of the repayment program and your plans as regards to the property. If you plan to retain ownership of the property for many years, then, getting discount points is a smart idea because you can spread the payments over the whole life of the loan and get low monthly installments you'll be able to afford without sacrifices while you enjoy the property.

But, if you don't want to retain ownership of the property for such a long time, it makes no sense to put money down, when you will be selling the property in the near future and you could transfer the costs to the next owner by accepting a higher interest mortgage loan with no down payment that you won't have to repay in full.

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Kate Ross is a professional consultant at Speedybadcreditloans.com where she publishes <a target="_new" href="http://www.speedybadcreditloans.com/financial-articles.html">informative financial articles</A> about  Bad Credit Loans, Free Goverment Grants and Leasing, among other subjects.

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What Is Mortgage Terms?

What Is Mortgage Terms?
By [http://ezinearticles.com/?expert=Jim_Power]Jim Power

When looking at getting a mortgage, there are some terms
that you should familiarize yourself with so you know what
your mortgage lender is talking about. Below is a list of
the most commonly-used "mortgage phrases" and their
meanings to help you understand them better:


Adjustable Rate Mortgage (ARM) - A mortgage in which the
interest rate is adjusted periodically based on an index.

Appraisal - The determination of property value based on
recent sales information of similar properties.

Asset - Valuable items, encumbered or not, owned by a
person, corporation, or entity.

Biweekly Mortgage - Mortgage loan payments that requires a
payment twice monthly, yielding thirteen payments per year
instead of twelve. This significantly reduces the time a
principal is paid off.

Closing - Final arrangements to transfer title of property
as well as allocate charges and credits.

Closing Costs - Closing costs are fees paid by the borrower
when a property is purchased or refinanced. Costs incurred
include a loan origination fee, discount points, appraisal
fee, title search, title insurance, survey, taxes, deed
recording fee, and credit report charges.

Credit Report - A report to a prospective lender on the
credit standing of a prospective borrower. Used to help
determine creditworthiness. Information regarding late
payments, defaults, or bankruptcies will appear here.

Debt-to-Income Ratio (DTI) - The ratio of aggregate monthly
debt to aggregate monthly income.

Down Payment - Money paid by a buyer from his own funds, as
opposed to that portion of the purchase price which is
financed.

Earnest Money Deposit - A deposit made by a potential home
buyer to show that they are serious about purchasing the
property.

Equity - The difference between the current market value of
a property and the principal balance of all outstanding
loans.

Fixed-Rate Mortgage - A mortgage where the interest rate
does not change for the life of the loan.

Good Faith Estimate - An estimate of charges which a
borrower is likely to incur in connection with a loan
closing.

Gross Monthly Income - The total amount the borrower earns
per month, not counting any taxes or expenses. Often used
in calculations to determine whether a borrower qualifies
for a particular loan.

Interest Rate - The percentage of an amount of money that's
paid for its use over a specified time period.

Lender - The bank, mortgage company, or mortgage broker
offering the loan.

Loan - The principal, or amount of total borrowed money,
that is repaid with interest.

Loan Officer - An intermediary between lending institutions
and borrowers, loan officers solicit loans, represent
creditors to borrowers, and represent borrowers to
creditors.

Loan-To-Value Ratio - The relationship between the amount
of the mortgage loan and the appraised value of the
property expressed as a percentage. A LTV ratio of 90 means
that a borrower is borrowing 90% of the value of the
property and paying 10% as a down payment. For purchases,
the value of the property is assumed to be the purchase
price, for refinances the value is determined by an
appraisal.

Mortgage - A legal document that pledges property to a
creditor for the repayment of the loan, and is the term
used to describe the loan itself.

Mortgage Broker - A mortgage company that originates loans,
joining the borrower and lender for a real estate loan,
earning a placement fee.

Origination Fee - The fee imposed by a lender to cover
certain processing expenses in connection with making a
loan. Usually a percentage of the amount loaned.

Pre-Approval - A term used to mean that a borrower has
completed a loan application and provided debt, income, and
savings information that has been reviewed and pre-approved
by an underwriter.

Principal - The amount of debt, not counting interest, left
on a loan.

Purchase Agreement - A written contract signed by the buyer
and seller stating the terms and conditions under which a
property will be sold.

Refinancing - The process of paying off one loan with the
proceeds from a new loan, using the same property as
security.


You'll probably hear several of these phrases from your
mortgage lender when getting a loan. Whenever you don't
understand something, be sure to ask him or her to explain
it in layman's terms to be sure you understand the whole
mortgage process.

Jim Power is writer for the mortgage saving information site [http://mortagesave.com/] where there is more information to be found interest only mortgage [http://mortagesave.com/how-to-get-an-interest-only-mortgage/] can be found.

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What Are Mortgage Rates Based On? - Rates Are Based on Many Things

What Are Mortgage Rates Based On? - Rates Are Based on Many Things
By [http://ezinearticles.com/?expert=Reese_Evans]Reese Evans

What are mortgage rates based on? So many factors go into determining mortgage rates. It's one thing to come up with the rates we see listed at banks and in the paper but then it's a whole other equation to come up with a rate that is offered to you when you apply for your mortgage. That rate depends on several personal factors. It's not just federal agencies that are responsible for the increase or decrease of mortgage rates, it can depend on everyday people like us.

Short term loan rates that are based on the Prime rate, like car loans, credit cards and home equity loans are automatically lowered when the Feds cut rates. Longer term loans such as mortgages aren't because they are based on competing investment options, for instance investing in stocks rather than real estate.

When the Fed cuts rates, it send a signal to the stock market that the economy is doing well, making stocks more appealing as an investment. People start taking money out of the mortgage backed securities and bond market and put it into the stock market, thus lowering the demand for mortgage backed securities and bonds.

With people investing more in the stock market, the companies that issue bonds and mortgage backed security investments raise the rates to entice investors back into the fold with higher yields, essentially higher rates. The return on mortgage backed securities is based on the income stream from the payment on mortgage loans. In order to raise the yields/rates on mortgage backed securities, the actual rates on the underlying mortgages must rise. That is why mortgage rates can rise when the Fed cuts interest rates.

What are the mortgage rates based on that the lenders give you? They calculate this rate by adding interest onto some average lending rate. That added cost is known as the margin. This is how the lender makes their money and they are not going to tell you what the margin is. It's like not knowing the sticker price on a car so you can't negotiate. The best way to negotiate is to get quotes from several different lenders. They will look at your risk profile and come up with a rate for you. You can then determine which lender you want to work with based partially on their offered rate.

Mortgage rates are based on many other factors besides the security market. Your offered mortgage rate can depend on the mortgage amount, down payment amount, income, debt to income ratio, market value of property, FICO or other credit scores and the type of property.

Stop asking what are [http://www.real-estate-in-the-know.biz/general/what-are-mortgage-rates-based-on.html]mortgage rates based on and Get In The Know. Get information about buying and selling homes, different mortgage types and other real estate information at [http://www.real-estate-in-the-know.biz]Real Estate - Get In The Know

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Will the Bank Reject Your Short Sale Offer?

Will the Bank Reject Your Short Sale Offer?
By [http://ezinearticles.com/?expert=Michelle_O._Johnson]Michelle O. Johnson

In order for a short sale to go through, the bank needs to agree to it and they need to accept your offer. There are no real certainties when it comes to short sales, and it can be very difficult to predict exactly what the banks will do. Just because you put in a good offer does not mean that the bank will accept it. They might even decide they do not want to do any type of this at all. Still, most of the time, the reasons that a bank will reject an offer falls into several different categories. Understanding these and addressing them helps to reduce the possibility that the bank could reject your offer.

The Price

Banks like to make money, naturally. This means that, if the offer you put into the bank is too low, then the bank is likely to reject it. Although you can get good deals on properties going through short sales, you and your agent need to be realistic about the price you offer for the property. Agents should do comparative market analysis and come up with a reasonable offer that the bank is more likely to accept.

Incomplete Paperwork

Sometimes, the buyer will feel that everything is going fine with the short sale only to realize later that the bank rejects the offer due to a problem with the paperwork. Banks can lose documentation. In fact, it happens more often than banks might like to admit. It's a good idea to make copies of all documents, just so you have them in case the bank does lose them. Working with a professional agent versed in short sales can help to ensure a better chance of success in this regard.

Qualifications

The seller and the buyer both need to qualify for the sale. First, the seller needs to meet the bank's short sale requirements. These can differ based on the lender, but they usually require that the seller is behind on payments and underwater on the mortgage.

The buyer also needs to qualify to buy a home. The lenders will go through the credit history and all of the normal checks when it comes to buying a home. If the buyer does not qualify for some reason, the offer will naturally receive a rejection from the bank. By submitting a prequalification letter, it can help to gain credibility with the seller's bank, and improve the chance of the sale actually happening.

These are just some of the many reasons that the bank might eventually renege on the offer that you put forth. Banks can be very hard to predict, and going through a short sale without help is simply not a smart move. You really do need to have the help of an agent who has experience in the field of short sales. A good agent will let you know the process and make sure you are doing everything the right way to improve your chance of getting the short sale to go through.

Author Profile: Owner and Broker of Tri-State Realty, LLC, specializing in Property Listings, REO and Short Sale real estate in Maryland, Washington, D.C. and Virginia.

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What Does a Mortgage Broker Do and 8 Reasons Why You Should Use One

What Does a Mortgage Broker Do and 8 Reasons Why You Should Use One
By [http://ezinearticles.com/?expert=Brad_Kirwan]Brad Kirwan

A mortgage broker doesn't physically lend you money, the role of a broker is to aid borrowers in finding an appropriate loan, based on the borrowers specific requirements.

Brokers have a panel of lenders from which they recommend a loan. They have to become accredited with the lender to offer their products, and are required to keep up-to-date with their latest offers.

The loan you choose from a broker is the same loan a bank, building society, non-bank or credit union would offer you the borrower, directly.

Most brokers don't charge fees for residential loans, the lender pays a commission, and this does not affect the type of loan or the interest rate you receive.

A Mortgage broker must have all of the following to be able to give credit assistance:


Hold an Australian Credit Licence or be an appointed Credit Representative of an Australian Credit Licence Holder.
Hold a Diploma of Financial Services (Finance/Mortgage Broking Management).
Achieve 30 hours per year of Continuing Professional Development (CPD).
Hold Professional Indemnity Insurance.
Maintain an Internal Dispute Resolution procedure & register.
Hold External Dispute Resolution membership.
Hold Industry Body membership.
Fully disclose all commissions.


So now you know what a mortgage broker is, the following are 8 great reasons why using a broker for your next home loan may well be the smartest move to take.

Save you time

The choices available in the mortgage market can seem limitless and completely overwhelming. You can choose to research the subject, the lenders and their products yourself, or work with a broker, who already has that knowledge.

Save you money

Only use a broker that offers a free service, comparing hundreds of different home loans from various lenders, making it easier to find if there is a better home loan for you. All you have to do is ask your broker.

Give you choice

A good mortgage broker has a panel of over 30 Lenders and over 600 different loan types from which to choose.

Find the right loan

The best deal is not necessarily the cheapest rate. Your broker will look at your circumstances and future plans in-depth, this enables them to recommend a loan that is right for you. Having an appropriate loan which works for you can help you build wealth.

Help you avoid pitfalls

Many products seem to offer a great deal but they could have penalties, fees and charges you aren't aware of. Or, they may not offer the flexibility you need in the future. Your broker can help you avoid taking out a loan you might later regret.

They come to you

Brokers come to you, appointments are conducted in the comfort of your own home, or your office, at a time that suits you, days, evenings or weekends.

Do all the leg work

Your broker will prepare your application, submit your application and work with the lender throughout the process up to settlement.

And after settlement

This is where it all counts, your mortgage broker should continue their service after settlement of your loan with regular updates and reviews of your circumstances, your aims and goals can change and your loan needs may also change.

I have been helping people with their home and investment finances since 2004. I am based on the Gold Coast but no matter where you are in Australia I can assist you with all your home loan needs.
For more tips and articles visit our website blog at http://www.oceanhomeloans.com.au/blog

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