Mortgage leads loans Rates

There is an untapped reserve of cash in our homes; it’s the equity we’ve built into our homes over the life of the mortgage, or simply in owning our own home. If you’re looking for a great financial tool, learning to use the equity in your home to its fullest extent is something we Americans aren’t very good at accomplishing. Fear of a loss is the number one reason we don’t utilize our equity asset. But, if you will take the time to nvestigate many of the investment options available to us, the risk is minimal, and the return is great.

Especially now during this period of extremely low interest rates, your home’s cash equity could be earning you a return of 18-20% in certain investment funds. Even if you borrow money in order to cash out the equity, you’re making money. The interest you pay is substantially less than the interest you’re earning.
Why are we so reluctant to take out a second line of credit, or increase our mortgage balance through refinancing? Many of today’s homeowners reaching retirement age do not fully understand all their investment options, nor do they understand how investments like growth funds work. They are very reluctant to try anything that is beyond the sure bet of a certificate of deposit. In so doing, they are missing a tremendous opportunity to earn a greater return on their money, and let their money work for them.

Take a look at your 401k, where are your investments? Are they earning 5-8-10%? Unless you’re ready to retire, your 401k should earn at least 6-8% on your investment. Your home is earning you nothing on your investment, at least, not in the sense that the money must stay in the home in order for the home to increase in value. Quite honestly, your home will appreciate in value if you do nothing but maintenance work and live in it. Your equity you have in your home, can earn you up to a 15% return, while you still are fairly safe with your principal investment.

Speaking of 401k investments, are you investing the maximum each year in your 401k? If you’re self-employed, are you making use of the SEP retirement options that reduce your tax liability? If you’re not, you should really consider the equity in your home as an investment option for adding to your 401k, or establishing an SEP that will allow you to invest your money in profitable and fairly safe global and growth funds. There are still many excellent opportunities in the stock market. There are segments of the market that are experiencing phenomenal and stable growth. The overseas markets, the domestic real estate markets, and the energy markets are growing, and are expected to see sustained growth. Put your money to work for you, especially if you are several years away from retirement.

Another retirement option that involves a mortgage loan is the reverse mortgage. This however, is not a way to build retirement savings; it is a way to simply access the equity you’ve built in your home, so that your monthly income levels are adequate to sustain your most vital needs. Food, clothing, heat, and medicines are a must as you reach or near retirement age. Many times, the elderly are not as prepared financially as they anticipated that they would be. How can they supplement their monthly incomes? The reverse mortgage is the answer to many older citizens’ financial needs. The reverse mortgage allows a person to withdraw a monthly sum against the equity they’ve built into their home. The interest payments are deferred until death, and the homeowner doesn’t have to worry about making a monthly payment, or borrowing money. They are able to use the money they’ve already put into their home, just when they need it most.

If you are past the age of 40, and you haven’t taken the time to consult with a financial analyst, I would recommend that you seek out one that you can trust and that you are comfortable in discussing your financial affairs with, and begin to look at your retirement options, your retirement needs, and your ability to meet those needs, based on your current income and savings. What you may find is that you aren’t near as prepared for retirement as you thought. The monthly income needed will probably greatly exceed your anticipations. But, if you own your home, you may have just prepared more than you think!

In case you haven’t noticed the mortgage market and the real estate market have been blazing a trail into the record books. Never before has there been such explosive, sustained growth of these two markets. The key factor here is that one seems to feed off the other. Is this a good thing, or are the two markets headed for a collapse?

You have analysts that will argue for either side. But, you need to have a better understanding of how this process works, and what elements have come together to allow this kind of growth, before you can accept or disprove either argument. What has happened to spur this kind of growth? Well, there are several key factors that managed to come together at precisely the right time, some of them attributable to natural disaster that has generated a booming market.

The first contributor was the falling interest rate that has leveled out around 6 – 7%; the second great contributor has been the increase in mortgage loan options. There are mortgage products out there to fit every type of buyer. The third contributor, (and this one is purely from nature) was the horrific hurricane seasons of the past couple of years, including the season we had this year.

How have all these elements come together to generate growth? Here’s exactly how: lower interest rates meant cheaper monthly payments, refinancing options were open, and people could afford to buy bigger homes for less. Add to that mix a more varied loan market, and you have an increase in buying, selling, and building. If you also throw in the fact that hurricanes destroyed massive quantities of homes along the coast, and most will rebuild, you have a burgeoning real estate and housing growth market.

We have also managed to create an environment very conducive to investment, construction, and resort development. Now, if you factor in a booming market for investors, you have a prime situation for increases in real estate value, increases in construction, and increases in mortgage loans.

How does the average citizen ready to buy or build a home interpret all this information? Well, it creates a wonderful situation for the homeowner looking to sell a home, simply because the value of the home should show a tremendous increase over the purchase value, especially if you’ve owned the home for more than 10 years. However, if you’re buying or building, you’re not going to like the situation. Why? Because home prices are up, thanks to the rising real estate prices, and so are is the price of building materials, needed to build a new home. We can attribute much of this to high gas prices and hurricanes. The good news, in all this, is the low interest rates. You can still borrow at an extremely affordable interest rate.

For the consumer shopping the market, you need to really educate yourself about the rising costs of real estate, the local values in your community, and what mortgage products would most benefit you, when you consider your individual objectives. If you’re like most, you aren’t buying your home for an investment, and you aren’t buying with the intent to sell in a few short years. In the market of today, it would be a wise choice to meet with a financial advisor; someone that has a background in finance, and can help you to clearly define your objects, and choose a mortgage that will reflect those objectives.

Many of the individuals, who are the doomsayers, seem to think that the market can’t sustain this type of growth. That is has occurred too quickly, and like the bubble of the stock market, will burst, leaving many homeowners and mortgage lenders “holding the bag” so to speak. But, you also have many of the intellectuals that say the real estate market was due a burst of growth; that it is normal, healthy, and we should have no trouble sustaining this type of growth. Whatever the end result, right now, the real estate market and the mortgage market are hot items; if you own real estate, you’ve hit the jackpot. If you’re looking to buy, get ready to pay.

Let’s first define what private mortgage insurance actually is, and why you might be required to purchase the insurance. Private mortgage insurance is an insurance purchased to protect the lender, not the borrower. The borrower however pays for the mortgage insurance, and this is provided to the lender instead of the 20% down payment normally required when purchasing real estate. The insurance provides the difference between the fair market value of the home and the actual price a lender may be able to sell the property for, in case of a default on the loan. Normally, the lender will require a 20% down payment and forgo the private mortgage insurance option. However, under certain circumstances if the buyer has an excellent credit rating, is well known to the lender, and is deemed to be low risk, private mortgage insurance may be an option offered by the lender.

The current mortgage market is flooded with such varied products as the interest only loan and the 125 loans and private mortgage insurance seems to be a thing of the past. You rarely encounter a situation when the buyer is required to purchase the private mortgage insurance; those situations most likely to continue to require the purchase of the private mortgage insurance are those where the lender is a traditional lending institution. Mortgage companies have long since ceased requiring borrowers to purchase private mortgage insurance.

Mortgage investors, such as the Fannie Mae and Freddie Mac programs, have recently come to the aid of the borrower by introducing an option to the primary mortgage market that allows borrowers to pay as little as 5% down and purchase only enough mortgage insurance to cover 25% of the loan; this creates a potential citing situation for the borrower. The borrower may pay a slightly higher interest rate in order to lower the cost of insurance that the advantage lays here: mortgage interest is fully tax deductible, private mortgage insurance is not.

There’s another option, also regulated by the federal government and passed into law in 1999, known as the Homeowners Protection Act of 1998 established rules for regulation of private mortgage insurance requirements once a homeowner reaches a level of 20% equity. What the law requires, in layman’s terms, is that a lending institution must notify you once your equity levels reach 20% of the appraised value of the home. Once you the kind of 20% equity level, you must be given the option to drop private mortgage insurance. If this proposal had passed into law some 20 years ago, it would have been met with great resistance among the lending community; today, the interest only loan and loans that offer mortgages in excess of the appraised value of the home overshadow the effect of the 1998 homeowner’s act.

The regulations passed into law by the 1998 Homeowner’s Act do not affect FHA or VA loans, and many of the Fannie Mae and Freddie Mac programs have additional stipulations and requirements in addition to the 1998 law. Also, your state laws and regulations may also affect your insurance requirements. Due to the recent increases in real estate pricing, and as a result the increased level of a mortgage borrowing requests, Fannie Mae and Freddie Mac have increased their loan limits and private mortgage insurance limitations. They even the secondary market has a need for the private mortgage insurance requirements, thanks to the booming real estate economy.

Many homeowners seem to mistake the private mortgage insurance purchased in order to secure the loan, with that of the homeowner’s liability insurance. Lenders are responsible for making clear the distinction between private mortgage insurance purchased to protect the lender versus the homeowner’s liability insurance purchased to protect the homeowner. Both forms of insurance will need to be purchased, and the borrower will be responsible for payment of both insurance premiums.

The Homeowner’s Act of 1998, served as a way for the borrower to decrease their monthly mortgage payment, once the 20% equity level have been established; this seems like a small contribution when you examine the mortgage products offered today, that do not require the borrower to establish any equity.