Should I Refinance?

When do you know that refinancing might be in your best interest? Since your home and your mortgage are your largest investments, it is very important to stay on top of appreciation trends, market changes, and other important issues, because unltimately your home can become the most startegic investment that you own. Let’s face it the home is the biggest investment most American’s make. Should you refinance now? Ask yourself the questions below…and then consider

Factors To Consider

Are Rates Lower? Is My Payment Changing? Is My Home Appreciating? Do I Have a 2nd Mortgage? Do I Have Other Debt? Am I Having Trouble Making My Payments? Are Rates Lower Than My Current Rate?

Don’t sell your self short by having tunnel vision when it comes to refinancing. One of the largest misconceptions about refinancing is that there needs to be large swings in interest rates in order to make it worth your while. In reality, interest changes as low as 0.25% can trigger a smart refinance. As a homeowner, it is important for you to be aware of flucuations in the market, and at any time that the prevailing rates seem to be lower than your existing rate, it is time to inquire about refinancing. Notice I said, it is time to inquire. There are many factors that ultimately determine how wise a refinance may be, and believe it or not, the rate is only one of many. Another very important factor is how much longer you plan to remain in the property. If you are planning to sell within the next year or two, then refinancing may not be a smart move for you. However if rates are lower, and there is that possiblity that you might remain after two years, then it doesn’t cost you anything to inquire.

There is no set amount that rates have to come down to make refinancing a good thing. Each individual situation is different, and subject to it’s specific analysis. Sometimes, the solution is to do nothing, but even then we know that the market will continue to change.

Is My Payment Going To Change?

There are only two things that can make your payment change. First, and most common, is that there is an adjustment to the amount of escrows that are being collected to pay for your taxes and insurance when those bills come due. Small changes in those annual bills result in small changes in your monthly payments, however, big changes can become devastating. Let’s assume that two years ago, your taxes were $3500 per year, and this year you get the bill and they have increased 40% (remember your home is going up in value) to $4900 per year. All year when you made a mortgage payment, a prtion of that payment was being deposited to pay this years taxes at $3500, or $292 per month. But when the tax bill comes at $4900, the lender HAS to make that payment on your behalf. What happens next can become truly devastating for some families. The increase in taxes was $1400 per year, or $117 per month, so you would expect the lender to increase the escrow portion of your payment by $117 per month, right? Guess again! The lender will increase your payment by at about $234 per month, or TWICE THE AMOUNT OF THE INCREASE! Why? When the tax bill came it was $4500, and they had been collecting enough funds in escrow for taxes to pay a tax bill of only $3500. So in essence, they have loaned you the $1400 increase in order to pay the bill, and are giving you 12 months to repay them, while simultaneously increasing the amount that they are collecting so that they can now pay $4500 when the bill comes the following year. If your payment is about to increase by even $100 a month, it’s definitely time to review your current situation for refinancing.

The second most common reason for your payment to increase is directly relative to the terms of your current mortgage. Adjustable Rate Mortgages have a predetermined time when the interest rate will adjust, and when the rate adjusts, if it goes up, then so does your payment. On a $200,000 loan amount an increase of only 1% would cause your payment to increase over $125 per month. If you currently have an Interest Only Mortgage, then there will come a time when the Interest Only period will expire, and this will definitely increase your payment. The payment on a $200,000 6% Interest Only Mortgage is $1000 per month, but if the Interest Only period was 5 years and now expires, the mortgage would then convert into a 25 year mortgage (the remaining term of the 30 year mortgage), causing your mayment to increase from $1000 per month to $1288 per month, an increase of $288 per month! Wait, what if your Interest Only Mortgage was also an ARM and it is scheduled to adjust at the same time? Assuming it only went up 1%, then instead of $1000 per month, your payment would jump to $1413 per month. But wait, what if your taxes went up at the same time? Now instead of $1000 per month, your payment will increase by $647 per month, a 64% increase! Now is definitely the time to review your situation.

Is My Homes Value Appreciating?

This may be the most important factor considering what your goals are. It’s really not being a nosy neighbor When you call about a home for sale in your neighborhood. It’s actually a great way to stay up to date on what is happening in your specific market. Or you can find a good Realtor or Loan Officer to help you find out your homes value. Keep in mind that your home is one of the largest investments that you will ever make. If you owned $200,000 in Wal-mart stock, I’m pretty sure that you would be checking on it’s price everyday. Homes almost always appreciate in value over time, but how mich is dependent on other homes in your area that are selling today.

With a conservative level of appreciation, your home may go up in value as much as 10% per year. In a hot market, appreciation could be as much as 40% annually. How much has your home gone up in value? www.zillow.com will give you an broad estimate. Your favorite Realtor will be more than happy to offer an opinion, because they know that quite often, once a homeowner realizes just how much their home has increased in value, they utilize that increase in equity to buy a newer bigger home.

If your home has appreciated in value, other reasons that might make a refinance a smart thing might be if your are currently paying Private Mortgage Insurance or if you have a second mortgage. If your original loan amount exceeded 80% of the purchase price when you bought your home, then most likely you are paying Private Mortgage Insurance, or PMI. This expense, which protects then lender from you not making your payments as agreed, and is not tax deductible, can be removed through a refinance if the current value of your home has appreciated as little as 10-20% since you became the owner. As we have seen, even in a conservative market (10% appreciation), owning your home as little as two years could save you hundreds of dollars per month by being able to refinance out of Private Mortgage Insurance obligations. If you purchased your home with a Combo Loan (an 80% first mortgage and then a simultaneous 2nd mortgage), then you are paying a much higher rate on your second mortgage. Appreciation in your property could allow you to refinance now and combine both mortgages into a single lower payment, and still not have to pay PMI.

In summary make sure you analyze your over all goals for refinancing and market conditions. Over looking any one thing can hurt you in the Refinance game.

A growing recognition that the Obama Administration’s Home Affordability and Stability Program (HASP) is not working in its current design has fingers pointed all over Washington D.C. trying to place blame on mortgage servicers, investors and the administration itself. At hearings this week in Washington, comments ranged from encouraging to total frustration as expressed by Senator Jeff Merkley (D-Ore.) who said, “It’s just hard to explain to the working families in America how it is we could move so fast with extraordinarily complicated deals with the huge financial institutions, and we are moving so incredibly slowly, mired in paperwork, in rules, in talking to banks back home.”

With predictions for 3.5 million foreclosures by the end of this year and 9 million by the end of 2012, the fact that the program has initiated less than 150,000 loan modifications as it enters its fifth month has industry experts trying to figure out what went wrong and what can done to fix it. While there isn’t yet a full spectrum solution to the issue, the problems of the program have become well defined. They include:  

1)    When the program was announced in February, there was little to motivate lenders and servicers to hire staff, provide training to processors in the nuances of the program’s guidelines, and build infrastructure to support the flood of requests. While it’s true that the plan provides incentive payments to lenders and servicers, at $1,000 per year for a successful loan modification, the incentives aren’t enough to offset the costs of implementing a full scale department which, in effect, generates only losses.

2)    Executing loan modifications results in recordable losses for lenders and investors. In the Spring Congress, hearing the pleas from the mortgage industry, ended the long standing requirement that mortgages be marked to market periodically to reflect losses on the books of lenders and investors. If loan modifications were being handled quickly and efficiently the resulting losses would leave many in the industry short on capital requirements and/or struggling for survival.

3)    Investors, even with the passage of the safe harbor bill, can still stand in the way of modifications. Congress passed the bill in May to give servicers more freedom in choosing the concessions they grant in a loan modification and to protect them from lawsuits served by the investors that actually own the mortgages. The problem is that the pooling and stripping of mortgages by insurance companies, pensions and Wall Street institutions can make determining who owns what a job in itself. Even when ownership is clearly defined, servicers and their investors are trying to avoid adversarial relationships as much as possible so getting a sign off on loan modifications can either bog down the process or result in non-approval of the loan modification.

4)    The defeat of the cramdown provision in the administration’s foreclosure initiative, which would have allowed judges in bankruptcy court to decide on principle reductions, gives lenders and investors the last word on a modification. Had the provision passed, the threat of having principle balances reduced by an uninterested third party would encourage more approvals and greater concessions in loan modifications. “You have got to have some leverage, something to hold people’s feet to the fire,” said Center for Responsible Lending spokeswoman Kathleen Day. “If you tell the industry this [judge] can do the loan mod if you don’t, that is going to get their attention.” Defeated in the Senate, revisiting cramdowns is seen as a political nonstarter but other actions like the threat of the repeal of certain tax advantages could prove to be a motivator for getting loan modifications done.

5)     The program is now being criticized for being too complex and for not strongly emphasizing principal reductions. There is talk now of abandoning the original guidelines and replacing them with blanket programs intended for any one that originated a mortgage that they clearly couldn’t afford between 2005 and 2008. The simplified plan would focus on principle reductions to bring home values closer to the principle balances of the mortgages on the properties. Despite its simplification, the tentative design of that plan has its own issues as well. The first is that statistics are already showing that buyers that clearly couldn’t afford their homes have already been foreclosed. The second is that a massive round of write-downs on properties and mortgages would devastate the financial industry.

6)    The program is fighting the wrong battle. According to Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies, the original plan was well designed for the issues that started crisis but the cause behind most foreclosures has now changed. The original targets of the program including stated income, negative amortization, and other loans that buried homeowners have largely run their course while growing unemployment is now the fuel behind foreclosures occurring on prime, jumbo prime, and fixed interest loans. “The issues have changed, and in some ways the solutions haven’t kept up with the problems,” Retsinas summarized. “The most effective intervention would be to put people back to work.”

Another mistake made by the administration was the dismissal of private efforts by law firms that negotiate loan modifications on behalf of homeowners. By encouraging homeowners to take on the labor intensive and complex task of doing home loan modifications on their own the administration put thousands of people in a position where they were negotiating terms on mortgages that they didn’t understand in the first place. With untrained and overworked processors on the other end of the phone it’s no wonder many loan modifications never got off the ground.

Majority of the population is involved in business today. Business requires capital investment. It is not that easy to run a business without sufficient finances. If you face a situation where you require money urgently, you tend to borrow from outside. Borrowing money from relatives could be embarrassing. Now who can provide you such a huge amount? If you think of taking a loan, you are on the right move.

As you want to invest money into your business, therefore opting for business property loans will be a wise decision. These loans can help you meet the urgency of money.

Business property loans are designed for the entrepreneurs, who want to expand or improve the existing business, raise the operating capital, purchase an asset for the business or start up new projects.

As the name suggests, business property loans are secured against a property. The security can be a worthwhile asset of the entrepreneur. It can be the equity in home, car, business premises or bank statement. The lender has the authority to seize the borrower’s property if the repayments are not made on time.

The borrower has the freedom to draw money ranging from £10000 and £10million. The amount however differs from lender to lender. The rate of interest and monthly installments are decided according to the income and repayment capacity of the entrepreneur.

Business Property Loans are also available for entrepreneurs who are going through adverse financial crisis. If you have witnessed the problem of arrears, defaults, County Court Judgments or bankruptcy, opting for the loan will help you overcome the crisis. If you make a judicious use of the loan by using it for debt consolidation you can not only clear off your multiple debts but also improve your credit score.

While applying for business property loans certain documents are to be presented for the valuation of property. Details like business profile, nature of business, length of ownership, and current income are also important in the approval of business property loans. If the entrepreneur is planning to start up a new venture, he must discuss the business plan with the lender and how will it help him repay the loan.

Numerous lenders offering business property loans exist in the market. Approaching local banks and financial institutions is quite a messy affair. They demand lot of time and efforts. Plenty of documentation work is also there.

An alternative to these physical lenders is the provision of hassle-free online lenders. Online lenders facilitate the entrepreneur with a speedy loan approval. A simple online loan application needs to be filled up. The borrower need not worry about the confidentiality of the information given by him in the application form. It remains secured.

Make best use of your property and avail easy finance. Business property loans

are there to ease your financial pressures.

When you invest in a piece of commercial estate, you generally have to take out a mortgage to pay off the cost, just like with a residential purchase. Yet, the factors determining whether or not you will be approved for an investment property loan are somewhat different and the requirements are more demanding. Commercial mortgage lenders will look at several financial aspects including a property appraisal, a credit check, the down payment, and the Debt Service Coverage Ratio.

A property appraisal is required to determine the market value of the commercial building and accompanying land. The appraisal keeps the lender from inadvertently loaning you more money than the real estate is worth, thereby reducing the risk of loss for the lender. Appraisals are also conducted during residential home purchases, but the price-deciding factors are different. A commercial property’s value is based not only on the condition of the roof, the plumbing, and other systems, but also on the size, location, and accessibility of the place.

With an investment property mortgage loan, you will also need to demonstrate a good credit record. Of course good credit is a plus in residential mortgages, but because commercial properties generally cost much more than the residential properties, the credit requirements tend to be more stringent. In addition, checking your credit history and score, lenders will want plenty of income and asset documentation to make sure you will be able to make your mortgage payments. If it is your own business that will occupy the business space, the lender will want the proof of the profitability of your venture.

Down payments are another determining factor in whether or not you will be approved for a commercial property loan. In the residential world, borrowers can often get away by contributing very little and sometimes even nothing up front in the form of a down payment. The big price tags on official and business properties, however, makes lenders very cautious as the risks are much greater. Large down payments are usually required for an investment property mortgage loan, with the minimum being 20 percent of the price. In many cases though, the average seems to be a down payment of 30 to 45 percent. You are then provided with the loan of the remaining amount of the purchase price. The amount you are loaned compared to the actual price is called the Loan to Value ratio (LTV) and is a very commonly used percentage in the mortgage world.

Finally, you will be approved for a mortgage based on the Debt Service Coverage Ratio (DSCR) of the commercial real estate. This is the amount of money the realty generates each month from rents and other fees (the net cash flow) versus the amount of the monthly mortgage payment (the debt service.) This ratio helps lenders to determine how much you can reasonably afford to pay on your commercial property loan each month. Most like to keep the ratio between 1.1 and 1.4. A ratio of 1.4 means that for every dollar you pay in mortgage payments, your property should be generating $1.40. Your revenue would therefore be larger than your debts, and you would theoretically be able to repay your loan.

Certain commercial lenders may have additional loan requirements, which are not listed here, but the basics remain the same for all. Be sure to shop around and ask each lender how he or she determines its approval. You can be competitive in the commercial property loan market by doing your homework and coming fully prepared to the negotiating table.