Archive for March, 2009

30 Year vs. 15 Yr fixed.

The amount of years of a mortgage is extremely critical for a couple of reason. First, it sets the length of the debt you are undertaking. Second, it defines the amount of interest you are going to pay over the course of the loan. These are huge issues when it comes to building equity.

The longer the Mortgage , the more total interest you are going to dish out. The trade off, of course, is you are going to have smaller monthly payments the farther you extend out the obligation. While this may sound like a good goal when you first get the Home Loan, it can backfire on you in the long run.

Most people focus on APR as a way to save money on Home Loan. This is a correct approach, but playing with the length of the loan is a better way to save money. If you can cut the payments in half by going with a shorter Home Loan, you can save huge amounts of money on the total APR repaid to a Home Financing lender.

The decision on the length of the Home Financing is relatively easy, but entirely dependent upon your financial ability. There is no absolutely correct choice. First, you need to determine if you can comfortably afford the higher payments that come with a 15 yr fixed term loan. In general, a 15 year mortgage will have payments 20 to 25 percent higher than a 30 year loan. Of course, you will pay the loan off faster, and build equity in the home quicker.

The modern Home Financing industry has a variety of different term length loan types. When applying for a Mortgage, take the time to check the different terms to see if you can find a loan that is perfect for your situation.

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History of Mortgages
A lot of people know what a Home Mortgage is because quite a few of them have gotten a Home Financing before But, do you know how the mortgage itself came about? Here is some basic history on the mortgage and where it came from:

In the beginning, a Mortgage was just a conveyance of land for a cost. The purchaser paid the seller a set rate, with no APR, and the seller would sign over the land to the buyer. Certain things were set that had to be completed before the land would be the property of the buyer, similar to today, but it was in the belief that the property would make money to pay back the seller. So, a Home Loan was written due to this fact, and the Home Financing remain in effect regardless if the property made money or not.

But agreement had a lot of disadvantages for the purchaser because the seller of the property, or the Mortgage lender who was holding the deed to the land, had absolute control over it and could do anything they wanted, which included selling it, not allowing payment, refusing payoff, and other issues which caused headaches for the purchaser, who had no legal rights at all. As time passed, and blatant abuse of the mortgage system, the courts began to protect the buyer’s claims to the land so that they had a strong footing to stand on when it came to owning their property. Eventually, they were allowed to demand the deed be free and clear upon the payoff of the property. There were still steps taken to ensure that the deed holder still had the ability to keep their interest safe and make sure that their money was paid.

In America, some states have created their own version of the Mortgage Loan , which is why they are referred to as “lien states”. In England and Wales, the Law of Property Act of 1925 created a close parallel to the U.S.’s stance on mortgages. In 1934, Home Financing began to be widely used again in the U.S., and the Federal Housing Administration(FHA) helped to lower the down payments on homes to make it easier for buyers to purchase a home. During that time, around 40% of population in the United Sates owned real estate. Currently, that number is closer to 70%, due to the lower interest rates.

Although Home Loan today have became many different forms, they are simply the same essential contract that they were in the beginning. Now, there are many more safeguards to help protect the buyer, seller, and lender. There are also many different methods to lock in a low interest rate, you just need to talk to your Home Financing lender about what the interest rates are now and what kinds of loans they offer to keep those interest rates low throughout the life of your loan.

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The home is the largest investment in most people’s lives. And almost always requires a mortgage because not many people have a few hundred of thousand stashed away to buy a house with cash.The most common way that people are taught to pay off their mortgage drains away at their net worth. The mortgage and financial industry wants people to pay on their mortgage for a long period of time and markets 30 year fixed interest mortgages to the public. This act is like the the tobacco companies advertising that smoking is cool, while knowing that the outcome is cancer and lethal. Yes, no term payments on your mortgage is like a cancer to your net worth. Here’s what needs to be done to pay off your mortgage sooner.

1. Make two payments every month. Rather than waiting till the first of each month, send your lender half of the payment on the 1st and the other half on the 15th of the month. This will save you 7 years of payments.

2. Send an extra payment once a year. Maybe you got a tax return after April 15. Send that . This is save you a few additional years.

3. Remember to call in and get rid of Mortgage Insurance payments. Yes, the PMI, common call Private Mortgage Insurance payments are eating away at your money. You might qualify to have it remove. Call your lender.