Archive for the ‘Mortgages’ Category:
Written on March 1st, 2010 by CleanedUpCreditno shouts
Many people wonder if they should increase their principal monthly payment on their home mortgage loan or not. The answer really depends on your individual financial situation. Can you afford to throw more money toward your principal, or is that money better allocated to high interest credit card debt, loan debt, or some other kind of either revolving credit or high APR credit?
Many times the answer is yes. How can you get ahead if you’re paying down your mortgage, but you’re not paying down those debts that are really high in interest, and by the way, not even tax deductible like mortgage interest at least is, then you are in fact not paying down the right debt.
You always have to consider that, although that mortgage interest amount stares you in the face every year when you go to do your taxes, and it’s usually an unearthly, staggering amount to most of us in relation to what we make, you still might be better off paying off other things with that money first.
For our personal situation, decided to not really accelerate my mortgage payments by adding more to the principal amount every month, until we really paid down some of the higher interest debt we had on credit cards. We decided to combine our balances on a few high interest credit cards that my husband had left over from his broke college student credit card abuser days when he used them for everything, and put them on a better low apr balance transfer credit card, and we also saved up to pay off some of the other smaller balances.
If you are in a situation though where you don’t owe any significant credit card debts or other higher interest debts, then you really should consider even putting down a little bit more principal on your mortgage every month, just so that you can have the peace of mind that you are going to pay your mortgage off years earlier.
The estimate is that if you can make one extra payment a year, or divide that one extra payment by twelve months, and add that much more to each monthly installment as an additional principal payment, you can usually take 7 years off your mortgage right off the bat. That’s pretty awesome.
And that’s definitely an incentive to start putting that extra cash on your mortgage every month, but remember the rule of only putting extra cash on if you do not have other higher interest debt that is not tax deductible first, that’s the key to truly getting ahead.
Written on February 11th, 2010 by CleanedUpCreditno shouts
For the first time in credit card history, it seems that more and more consumers are opting to pay their credit card bills first, even before they pay their mortgage payments. The reason may be the increasing mentality and feeling of many homeowners that paying their mortgage is futile when so many other homeowners are under water.
They may feel an increased sense of camraderie, which makes it seem more “ok” to blow off the mortgage payment, or perhaps it’s just more the sense that they may be getting help from the government to pay their mortgage.
Most likely though, more and more people are finding that they are under water when it comes to their mortgage, or the other cleverly termed “upside down” in their mortgage, which means they owe more than their house is worth. This truth is actually causing a huge home abandonment rate, where people just up and leave to go rent somewhere, and letting their homes go into foreclosure. There sure are a lot of people who are going to have bad credit after the fallout is over.
This seems to be the new plight of this decade, as home prices continue to fall and people continue to default on their mortgages at record rates, and the promised government help is slow and incomplete at best.
Because of this mentality, it has been shown that a lot of homeowners who are in financial dire straits, are opting to pay credit card bills before they pay their mortgage. This may also be in part because a credit card bill may seem more affordable and doable than a mortgage bill, since usually a mortgage bill is going to cost ya a lot more than a credit card bill.
I’ve found that lately I’ve been sort of obsessed about my home’s value falling too. But I try not to think about it that way. I’m in my home for the long haul, God willing and job willing, so I try to still view it as a long term investment that will eventually go up in value again after this whole disaster is over.
Written on February 5th, 2010 by CleanedUpCreditno shouts
So, the whole refinance saga is over for us. Did we get a great deal? Not really that great. I was hoping for a half point lower interest rate, but ended up not only getting a quarter point higher than what I wanted, I also ended up paying “points” to the tune of $3,000 in the end to get that lower interest rate. Makes you wonder how much money these mortgage financing companies are making off ridiculous reasons for fees like this.
And I also wonder how accurate the statement is that these points make up for the increased risk they take on that you may not pay your mortgage because your credit isn’t of a certain caliber to get the lower interest rate sans points. But touche, I supposed we buy homes, and this is the price we pay for the right to live the American dream without paying all cash up front for large ticket items like homes, right?
You really have to carefully weight whether refinancing is worth it for your situation. What you want to be fully aware of going in is that you are going to get quite a few closing costs and fees rolled into the principal balance of the new mortgage, so while this is good that you don’t have to pay many of these fees up front, the new, higher principal balance may be a shock to your system, especially when you had grown used to seeing that lower balance on your old mortgage statements.
Make sure you ask for a specific amortization schedule how much of each payment goes toward principal and how much toward interest also. Don’t be dazzled by a lower interest rate when in fact you could be digging yourself into deeper debt, and a longer loan payoff, in exchange for a payment that might only save you a hundred or a few hundred bucks. Is it really worth it, and is it in line with your future payoff goals if you like to pay things off early?
Also, as I said, when you close, pay close attention to the closing costs. Were you charged points for your interest rate? Honestly, I was, and I was not aware of it until the Title company sat down with us to close the deal and I saw that we were charged three thousand dollars to get a quarter point lower. It may have been worth it, but that’s three more grand we now have tacked on to our principal balance – youch! It’s a good thing this stuff is tax deductible, that’s about the only reason I can handle it. Even with that in mind, still look at the big picture and see if it’s worth it for you.
Written on January 20th, 2010 by CleanedUpCreditno shouts
I have seen the destruction that our mass delusion with what we think we can afford has done to people who have been driven out of their homes because they flat out cannot afford the mortgage payment first hand. It seems that this mass delusion happened all at once to the American people, and that we really didn’t quite understand or grasp the true consequences of our borrowing actions until it was too late.
Such is life though, and as they say hindsight is always 20/20. Well, now we know, and I hope that we don’t fall into this same trap again, but I still see residual problems with the “house poor” phenomena with a lot more frequency than I would have hoped for to be honest. As a matter of fact, I have to watch myself, because I started to get caught up in the frenzy of home improvement myself over the past few months. I’ll explain why in a bit.
When this really hit home for me was when a coworker of mine was showing me a million dollar home that she had her eye on for almost two years online .Of course, this was a dream home, a fantasy that she knew she could not afford, but nonetheless, it was fun to pretend like she was shopping, and it was fun to look at it. We oggled the home online for a few minutes, marvelling over the woodwork, the full finished basement with a kitchen, the brand newness of everything, and the luxury feel.
People really get sucked into this stuff, and I see why, because I do too. But too many people have been caught up in this frenzy of home improvement that is only made worse by watching shows like “My House is Worth What” on HGTV and all the improvements that people do, and having realty experts come in and tell you your home isn’t good enough because it doesn’t have granite countertops of stainless steel appliances. I felt like Susan Powter when I wanted to say “Stop the Insanity”.
Don’t get me wrong, I love my home and I want to do so many things to it it’s ridiculous. But you have to know when to stop. Don’t go getting a second mortgage loan just to finance new amenities when it may not even be a good investment. Really look at your budgets, and make sure your mortgage is affordable and whether you can really live without that home improvement before jumping into more debt for your home. Don’t get caught up in the keeping up with the Joneses crap in other words, you could be seriously sabotaging your family’s future wealth and security.
Written on January 2nd, 2010 by CleanedUpCreditno shouts
The more I get into this refinancing thing with our home, the more I see how the banks really have several up on average Joe Consumer when it comes to emptying your wallet for seemingly easy services. Since we’ve been involved in refinancing our home, first to combine two mortgage and now only to refinance one since we were turned down for an FHA combined loan due to my income not being “sustainable” since it went down from 2007 to 2008, it really hasn’t been a pleasant experience.
In fact, it has opened my eyes to how big of a racket it is and how much money the mortgage companies make off of us well intentioned folks who want a better deal on our mortgage interest. First, there are the closing costs, which in my opinion are exorbitant in relation to the amount of service they are actually offering. You usually will pay several thousand dollars in closing costs alone.
The fact that people still do it in the face of those fees does show you however, how beneficial a refinance can be over the long term. It can literally save you tens of thousands of dollars, depending on your situation of course, but if it doesn’t, these fees can definitely be a deterring factor in your decision. The first fee we paid, which by the way, you don’t get back even if you’re turned down for the mortgage, is the appraisal fee, which was just over three hundred bucks.
Not to sound like a total whiner, but the $300 we paid was for a woman to come to our home for literally five minutes, do a cursory check around the house and ask only minor questions about it, ignoring key points of the house and entire rooms that I felt would have added value, and working up an appraisal after she left. Three…….hundred……dolllars….for this crap. Sorry, I’m not convinced I wasn’t had on that one.
Then there’s PMI. Don’t even get me started on this money trap. You have to pay insurance to insure that you won’t default on a loan. And it’s a lot of money, and you have to pay it for a long time. It’s money you’ll never see again in your life. You’ve literally flushed it down the toilet. ‘Nuff said on that.
I just wrote another $200 check to the title company. This was for the “resubordination” of the secondary loan. Because this secondary mortgage loan will stay intact, and we will now be refinancing – with the same company who had our primary mortgage all along, nonetheless, we have to pay to do something called resubordinate. Are you kidding me? These banks are racking up money for nothing left and right from us consumers, and they needed bailed out? It’s enough to make you scream! Okay, I’m done getting on my soapbox for now.
Written on December 21st, 2009 by CleanedUpCreditno shouts
Well, we’re still in the process of trying to combine our two mortgages. Long story short, we have a primary and secondary mortgage, to avoid paying the PMI. The secondary (subordinate) loan is through Citibank, and usually, when you have a secondary mortgage, you are subjected to a higher interest rate. Fair enough, since you are basically paying for the priveleg of not having to pay PMI, and they are admittedly taking on a larger risk to finance a chunk of your home.
We have wanted to combine the loans into one for a while now, so that we can get a better, single lower rate and just make one mortgage payment instead of two. This has obviously proved very challenging for us, or else this story would have had a happier ending by now. We thought we may have had the deal locked in, came up with an extra couple thousand dollars to cover the gap between the value of the home and the new loan amount, and then we found out that the FHA is not willing to accept my self employed income, because – get this gem – my income WENT DOWN from 2007 to 2008.
Now, here’s what gets me. Do you know anyone who is self employed whose income went UP from 2007 to 2008? If you do, let me know what they’re selling, because I need to get in that business! My point is, almost everyone’s income went down in 2008 if you are self employed, especially if you are in sales of any sort, we had the biggest economic disaster we’ll probably see in our lifetimes in 2008, and they come up with that excuse to not finance my loan?
Not to mention, we’ve paid on time every single month with our current two mortgages, and we’ve also always paid more than we needed to, which you would think counts for a lot in the day and age when people are missing months of mortgage payments. But no, it apparently does not, and they passed up a perfectly good loan risk because of this lame, awful excuse.
Allow me to vent about this, because this is, in my opinion, a perfect example, of how a government agency that is supposed to make things better for US citizens, the FHA, and help people get in homes and get better interest rates, and generally “get ahead”, and not to mention charge you UFPMI, which is a large chunk of nonrefundable money you pay at the start of the loan, and they cannot help someone who is a great risk, who hasn’t missed a payment?
I shudder to think how hard it is for people who actually have serious problems and need help….
Written on December 4th, 2009 by CleanedUpCreditno shouts
Oh, the joys of learning about refinancing. I can’t tell you how many acronyms there are to know, and how confusing it all is. Honestly, it’s a wonder that any homeowner ever gets ahead, the way the home lending systems are set up. You pay so much interest, and you pay it all up front, that many times by the time you are done paying off your house, you’ve paid almost double the actual sales price of the house. And you thought revolving credit card interest was bad!
The tricky part with traditional loans is that they pile most of the interest on the front end, in case you do end up paying it off early, which many people do, instead of carrying their mortgage to the full 30 year term. The lenders cover themselves from not recouping that interest by essentially jamming it all upfront, since they know that usually the loans are not accelerated so much during those first years.
However, there are some of us who are fortunate enough to pay quite a bit more principal during those first years of the loan, and this puts us in a better position. Ultimately though, it is all tax deductible, so you are gaining benefit by owning a home in the end. And, it is ultimately the biggest investment you will make in your life – or most of us at least.
What I’ve learned about the traditional FHA loan now, since we are refinancing our home and it only qualifies to go FHA since they are streamlining two loans for us (I think this is one in the same as combining, but I’m not sure), is that they not only charge you a monthly PMI (Mortgage Insurance) for the first two years or 20% of the value of your home is paid off, but they also charge you what’s called UFMIP, which is Up Front Mortgage Insurance Premium. Yep, they get you twice, and it’s quite steep. For example, our loan is going to be for about 300k, and the UPMIP we have to pay is 5k.
And you don’t get that money refunded either. You can however, ask your accountant if they can amortize it over the period it is paid, so that you can at least get some tax benefit for paying this large sum. I was pretty bummed when I learned how much money we actually have to spend to get a “better deal” in the long run, and I realize that I really don’t feel sorry for the banks, they are really making money hand over fist when it comes to loaning people money for homes, there are just so many thousands of dollars in expenses that you don’t realize are there until you go to refinance…..
Written on November 28th, 2009 by CleanedUpCreditno shouts
Thousands of desperate homeowners looking for reprieve from mortgage payments that they cannot afford, whether it’s due to hardship caused by reduced pay or layoff, or due to predatory lending, have been clamoring to the major mortgage companies for new government incentivized programs that offer lowered interest rates and payments, as a mean to avoid foreclosure. However, many of them have been turned away or discouraged by slow response times because of short staffing and slow processes from the banks, who are just as caught off guard by this whole mess as we are, and can’t seem to keep up with the demand.
The banks are still also careful to say that these programs are not an entitlement, but rather they are somewhat of an olive branch of goodwill, and they should not be judged so harshly for being a bit slow when there are always unforseen complications when any new program gets underway. Many times in these programs, homeowners may get a reduced interest rate as low as 2%, or they may get a trial period of reduced interest and reduced payments, only to have to jump through more hoops to extend this period at a later date.
However, there is finally some progress showing in the number of people who are being helped by these government backed programs, which were essentially instituted to prevent thousands of foreclosures that would have otherwise occurred with bank and government intervention. In the end, the program is a good thing, however there are many consumers who only end up frustrated when they go through the process and find that they are not eligible for various reasons, or that they cannot seem to get through the lengthy process soon enough to help their precarious situation.
The largest bank that is affected by the government programs, and therefore the one that is also the most inundated with customer requests for help, is Bank of America. They say that they have a hard time even keeping up with the demand, and that because it is still a new program, there are unforseen hurdles and complexities that they could not have anticipated, but that they are doing their best to expedite the help for customers who are truly in need, and that they are not totally to blame for what is perceived as slow or monotonous response times and resolutions to many homeowner’s requests.
I’m wondering what the guidelines are exactly that qualify a homeowner for this type of help, it seems that homeowners are turned away for making too much money or getting laid off recently a lot, so I’m sure there is some sort of calculation that they use to determine who is most at need.
Written on November 25th, 2009 by CleanedUpCreditno shouts
I’ve mentioned a couple times before that we are in the process of trying to combine our primary and secondary mortgage loans into one and refinance the whole thing, so now I want to follow up and tell you about the latest developments, which arent’ really what I had hoped for, but then again millions of other people are going through this exact same process and disappointment right now due to the value of home prices.
To make a long story short, we are one of the millions of homeowners who are what is called “upside down” on their mortgage, meaning that we owe more on our home than it is worth. This is all set by the current market value of your home, and that is determined by an appraiser who comes in and appraises what he or she thinks the value of your home is at that time. Well, our appraiser happened to appraise our home at about twelve thousand dollars less than what we paid for it, which puts us under what we need the home to have in equity so that we can refinance without having to fork over more cash to get us up to the equity we need for the bank to refinance our whole loan.
When this happens, it’s really hard not to focus on the obviously negative part of it, which is that your home is worth less than what you bought it for, no matter how long you’ve owned your home this can come as a blow to your ego and your wallet. However, what you have to consider is how the refinance may help you pay off your home a lot sooner in the future, and how the monthly savings will really add up and will ultimately pay for that chunk of change you had to put down.
The way it was explained to me, we would have to put down five thousand dollars (yeah, I know), to be able to combine the loans and get our equity where we need it, however, we would essentially recuperate that five grand in the next 12 months because of the monthly savings we are able to enjoy, which is a good enough gamble that I feel ok about it. Sure, this stinks because I have to take the five grand out of savings, and that was meant to be put into a savings/retirement account, but I also have to consider the substantial long term savings this will afford us.
Written on November 16th, 2009 by CleanedUpCreditno shouts
I’ve been talking a lot about mortgages and refinancing, sorry if the topic is getting boring but it seems to be consuming my thoughts these days as we wait to see if we can get a combined FHA loan for our current primary and secondary mortgage loans that we got just two years ago. Why are we trying to refinance this soon? Well, a quick recap : We bought our first home and we decided that rather than put a downpayment on the new house, we would use the money we had saved up to buy furniture that we really needed as we didn’t have anything but shabby hand me downs to start with.
We decided, further that we would, instead of not making a downpayment and paying the PMI (mortgage insurance that’s mandatory until you pay off about 20% of your loan), we would instead pay a secondary mortgage that made up the downpayment. Now that we look back, obviously, we didn’t make the smartest move, but a lot of first time buyers I’m sure, find themselves in that boat. Now we are looking at refinancing what we still owe on the home, which by the good graces of me being able to make extra principal payments is a whopping 15K less than what we paid for it. The problem? The house may not appraise for what we need it to to get the combined FHA loan.
Which brings me to the current topic. We had our home appraised recently by the mortgage appraisal company, which I think contracts from the bank to say yay or nay on whether a house meets the minimum appraisal value for specific loan requirements. We had the appraiser out on Friday, and it was much different than I expected. In other words, I was a little mad that I spent four hours cleaning the house and fretting about how the lawn wasn’t mowed, as the woman who came and did the appraisal did such a quick one that before I knew it, it was over.
Here’s how it went. She came by, I saw her out in the yard taking some notes before she came in. She came in, took some photos, and asked a few questions. Questions like how many water heaters there were, whether we had septic or sewer, well water or city, and if we had made any improvements to the home since we moved in. I told her other than digging up the septic tank and elevating it so it was easier to work on, no.
She took note of how many rooms there were, how many bathrooms, and that was about it. She barely even walked in some of the rooms, so I think the point of this appraisal was more of a VERY general ballpark for a mortgage refinance. If I’d have known, I would have never cleaned the house! 
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