The Mortgage Manifesto!

Has your mortgage been “sold”?

Have you ever been surprised by a letter you receive in the mail instructing you that you are now to make your house payment to another lender and/or loan servicer? It happens often and if it hasn’t happened to you already, chances are it will.

If the lender you originally obtained your mortgage loan from has any knowledge that they may sell your loan and hand-you-off to someone else anytime in the future, they are required by laws to let you know this at closing.

Those that may purchase your mortgage could be any type of financial institution, a bank or credit union or another mortgage banker of investor. There are companies that specifically go out to buy mortgages in order to make money off of the ownership of your mortgage. Many homeowners have found that their mortgage passed through the hands of a number of investors or mortgage servicers over the life of their loan.

How to Save Thousands of Dollars on Your Mortgage!

The dream of owning a home is becoming very allusive these days. Although everyone would like to have a home that is paid for free and clear, many people are forced to assume mortgages that will be paid over 25 or 30 years into the future.

Everyone is constrained to a certain degree by their budget. Yet there is a way to pay off the existing mortgage on your home quicker and save money in the process.

Almost all mortgages have built into them an Accelerated Payment Clause. This allows the borrower to pay more than the minimum amount of the monthly mortgage payment.

To do this you simply remit more to the lender than the usual mortgage payment every month. The benefit to this is that every extra dollar paid against the mortgage will lower the outstanding balance of the mortgage. This increases the equity in your home faster over time. Also, by lowering your outstanding balance, you will save on interest charges.

Effectively Using Lease Options-continued

Important Tips When Buying With Lease Options
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When purchasing property via "For Sale By Owners" (in other words, no real estate agents), always buy the property on a Land contract or a Contract for Deed. Both of these contracts are used when selling property between two parties without a real estate agent. Sit down with a real estate attorney and have them go over the details with you for a land contract.

If the seller offers a lease option to you, turn the offer down. Here's why. A lease is another word for renting their property, which means you don't own it.

If you are simply a renter of the property, the seller only needs to get a court order of eviction and your out of the property. If however you are the owner of the property, the seller will most certainly have to induce what is called a judicial foreclosure. The difference is probably $10,000 dollars or more in attorney fees, court fees and between 8-12 months time for processing.

A judicial foreclosure is very costly and time consuming for the seller, and would probably force him to negotiate more favorably towards you. All the while, the property is in a period of Stay, of course you are still required to pay the seller and follow through with your end of the contract. However nothing can be put into action until after the foreclosure is completed. Wow, that's a very important point.

Know that this has happen and the people ended up staying in the home mortgage free! They didn't fulfill their end of the contract by paying the seller their monthly mortgage payment like they should have, yet the seller couldn't do anything until the pending foreclosure had been resolved. Not even get the buyer to pay their monthly mortgage payment to them!

These are the extreme's. But it would be in your best interest to see that you are considered an owner then a renter.

Tips for Investing in Real Estate

Beginning a hobby or career in real estate investing doesn't have to be so complicated or such hard work if you will only begin with what you have, right where you are at this moment.

Look for someone who really needs to sell their home and solve their problem. One of the fastest solutions if they are about to lose the house is to take over their payments on a subject-to contract. By giving them some walking money, they can afford to move and still have the cash to rent another home.

Then, clean up the property, lease it out to a future buyer on a rent-to-own basis which is called a Lease/Option. You get to collect an up-front, non-refundable deposit. Three to five percent of the future purchase price is a good figure to shoot for. You can actually do this every month and make some additional cash, or concentrate on this method as a full time lifestyle.

Have the renter/buyer sign a contract. You pocket the difference between what you're paying the original owner and the amount you're collecting from the new renter/buyer. The spread is higher on nice, expensive homes in great neighborhoods, so don't be afraid to search in these areas.

This is a good method of collecting extra cash flow every month. There is no limit to the number of these deals you can do other than your time and effort.

Call on every "For Rent" ad in the local paper and just ask if they would be willing to sell the property in a couple of years if you sign a long-term lease. If you get a yes, negotiate a fair purchase price, sign a contract and find a renter/buyer. It really is that simple. Of course, you want to have a lawyer check out the contracts on the first deal to protect both parties.

Try to get at least $150 more per month than you are paying. Also get a minimum of $1000 above and beyond what you have paid out as the option deposit. You don't want to be working for free, do you?

Let's look at some figures from actual lease/options. A couple were behind on their notes because he lost his job, and she didn't make enough to pay all the living expense. The stress was causing marital problems and they wanted to sell, but the house stayed on the market for six months with no takers.

12 ways to pay for your home improvements -final

8. Do's and don'ts of credit-card financing

Financing a renovation with plastic can have advantages, and serious risks. On the positive side, many credit cards offer airline miles, cash back or other incentives for charging up large sums. If you are looking at tens of thousands of dollars, a 1-percent cash-back offer could mean hundreds of dollars rebated to you just for swiping your card.

If you want to use credit cards to take advantage of a teaser rate or a points program, one less risky way would be to apply for a HELOC before charging up a large balance. That way you don't have the high credit balance pulling down your credit score when you are applying. This method is risky, though, because if you are so much as an hour late on your payment, the bank could charge you interest retroactively for the entire term, wiping out whatever benefits you were able to eke out.

The serious drawback comes when you fail to repay the entire balance at the end of the grace period. While getting a $100 rebate check is nice, annual interest rates of 18 percent or higher quickly erode and eliminate any headway your cash-back offer might give. That should not be the long-term financing vehicle that you use. Credit card money is very expensive. You are typically much better off getting a home equity line if you are looking for a way to carry a balance.

9. Squeeze money from home improvement stores

You can often find very attractive promotions through home improvement centers, 5 percent to 10 percent off a major purchase from The Home Depot or Lowe's, or zero interest for a year on windows from Sears.

Those promotions are meant to drive up sales. As long as you follow the rules to the letter, they make sense. But, just like with credit-card offers, a missed or late payment, even by a day, could set off retroactive interest rate that wipes out the benefit and more. Also like credit cards, it is often a good idea to have a refinancing method lined up before you commit to the charge. That way you aren’t stuck with an expiring promotion and no way to pay it off.

10. Watch out for loans from a contractor, family member or other private party. Some contractors will "help you out" by offering to front money for repairs, but be careful, as that contractor loan, as with any private-party loan, is an incredibly risky proposition. That's because commercial lenders use standard documents and would be less likely than a private lender to slip in onerous clauses.

If you are borrowing from family, make sure you know what you are getting into. While many families get along just fine, introduce money into the equation and you could be putting your relationships at risk. Think hard about these options.

12 ways to pay for your home improvements continued.

1. Take out a home equity loan

Also known as a second mortgage, home equity loans are made against the value of your home. The bank uses the equity in your home as collateral and puts a lien on your home. Interest rates, normally fixed, are often higher than on a first mortgage. Fees and closing costs are relatively high, too, although they are lower than with a refinanced mortgage. Fees and closing costs, too, are relatively high compared with other options.

One drawback is an 80 percent loan-to-value ratio. If your house is worth $250,000 and you owe $190,000 on your first mortgage, you could borrow just $10,000 before hitting that cap. If you want to make $40,000 in upgrades, you would have to go with either a higher-interest loan or look for another option. Yet the interest you pay on the first $100,000 of your home equity loan may be tax deductible. (To be tax deductible, the IRS says you need to use the money exclusively to pay for home improvements, and you must itemize.)

Home equity loans work best for amounts you consider medium to large and that require more than 10 years to pay back. They also typically don't carry a prepayment penalty, so if you get a bonus or other windfall, you usually can pay it back early.

2. Consider a home equity line of credit

A home equity line of credit (HELOC) is a cross between a home equity loan and a credit card. In fact, many banks give you a credit card which you then use to access the money in your equity line. Like a home equity loan, the interest on the first $100,000 you borrow may be tax deductible.

The bank sets a "draw" period during which you can take money from the line, usually between five and 10 years, and another span during which you must repay, typically 10 to 15 years. HELOCs allow you to repay your loan and then borrow again as you need it during the draw period. The bank only charges closing costs once, upon opening the line. During your draw period you pay back only accrued interest. After the draw period ends, you must repay both principle and interest. The primary drawback of a HELOC is that the borrower is at the mercy of interest rate movements. When rates go up, so do the monthly payments. The option to pay interest only, though, may tempt some borrowers to take on more risk.

A HELOC makes sense for short- to mid-term loans and especially when you need to withdraw money over a span of many months. They also make sense if you believe interest rates will fall over the next year or two.

3. Refinance your existing mortgage

Home values in some real estate markets have doubled during the past few years, inspiring homeowners to take on big renovations. Because mortgages are paid over 15, 30 and in some cases 40 years, monthly payments are spread over a much longer period and are thus lower than a shorter-term HELOC or a home equity loan. And since your home is used as collateral, interest rates are typically some of the lowest you can find.

Lower interest rates and lower monthly payments might make a larger project possible, but they also mean you will be paying interest longer and thus the financing will cost you more in the long run. The biggest danger with a refinance is when real estate values fall. If you borrowed against the full value of your home and prices fall in your area, you may end up with a more expensive loan than your home is worth.

12 ways to pay for your home improvements

So many projects… and there are also many ways to finance a home makeover and remodel.

There are a couple important questions to ask with regards to funding, when determining if you should tackle a remodel project: How much will it cost, and how long do I want to pay for it? Answering those questions will make it easier to choose between a home equity line, cash-out refinancing and using credit cards. If what you are going to finance can be paid off in a year or two, then credit cards, or other simple financing solutions make sense. Can you pay this short term financing off quickly with a tax refund or other source? If it will take you 5, 10, 15 years to pay it off, then a home equity or full refinance will make more sense. Once you determine this, then you can decide what option is best."

Financing can be short to long term. Within your desired time-frame, there are several choices, each with their own advantages and drawbacks. Choosing between financing methods is generally easy, as long as you have equity in your home. Credit strength and time also play a part.

There are no hard and fast rules of thumb. It takes an honest assessment of one's financial situation, not some fancy formula. Borrowing a relatively small amount, for instance, can mean different things to different people. You might be better off with short-term or intermediate financing. Short-term financing can include opening a home equity line of credit (HELOC), using cash from savings, a credit card or a home improvement center promotional offer, a construction loan from a bank and/or even a loan from your 401(k) or life insurance policy.

Here is a checklist to consider:

The best thing to do is look for a loan that will cost you the least in interest and allow you to pay it off in as fast a time-frame as comfortably possible, giving preference to tax ‘write-off’ loan options (most loans tied to the property).

Some of the different options as well as pros and cons of each choice are as follows:

1. Home equity loan

2. Home equity line of credit

3. Refinance existing mortgage

4. Construction loan

5. Savings

6. Hybrid savings-equity loan

7. Personal loan or line of credit

8. Credit-card financing

9. Store financing

10. Contractor or private party loans

11. Cash-value life insurance

12. 401(k)

More to come in the next few days about each catagory

Is Free and Clear Home Ownership a possibility?

The dream of owning a home can seem for many, becoming more and more allusive these days. Although everyone would like to have a home that is paid for free and clear, mots of us will have to assume that we will be paying a mortgage for the next 25, 30 and now even as long as 40 years into the future.

Everyone is constrained to a certain degree by their own budget. But, there are ways to pay off your mortgage more quickly and save money in the process.

Almost all mortgages have built into the terms, a payment accelleration clause. This allows borrowers to pay more than the minimum monthly payment: Read on...