Archive for May, 2007
Buying Virtual Real Estate Is Neither Easy Or Cheap
May 31st, 2007
In our of articles about Second Life, the enormously popular make-believe on-line universe, we come back to the question of whether one can or WHY on earth they would own virtual real estate.
Anshe Chung would probably give you a loud and clear "yes." Chung is the avatar of a Chinese-born teacher living in Germany who claims to own about a million dollars in virtual land in Second Life; land that she buys, sells, leases, and employs several people to help her manage...
Cash Out Mortgage Refinancing Basics
May 31st, 2007
Cash out mortgage refinancing is the process of borrowing more than you owe on your existing loan and keeping the difference. For many homeowners cash out refinancing is an affordable alternative to a second mortgage or a home equity line of credit.
Suppose for example you owe $100,000 on a $200,000 mortgage and want $25,000 to make repairs to your home. You could refinance your mortgage for $125,000 and the remaining $25,000 will be paid to you at closing. You can use this money for any reason; many homeowners use the money to make repairs, pay for a child’s education, or even consolidate bills. The advantage of cash out mortgage refinancing is that you will qualify for a lower interest rate because your home is secured by only one loan.
When you borrow against your equity using a second mortgage or home equity line of credit your home is secured by multiple loans which represent a greater risk for the lender. The greater risk you pose, the higher your mortgage rate will be and the more expensive your loan becomes.
Keep in mind that cash out refinancing borrows against your equity by replacing your first mortgage. Home equity lines of credit and second mortgages are an additional loan secured by your home just like your mortgage. If you fall behind on the payments for your home equity loan you could lose your home just as quickly as if you fell behind on your mortgage payments.
Mortgage Rates Surge While Applications and Refinancing Weak
May 30th, 2007
Maybe it is just temporary, but it looks like the worm - that is the mortgage interest rate version of it - has finally turned.
Freddie Mac's Primary Mortgage Market Survey for the previous week had some pretty heart-stopping data for those who may have hoped for continued low rates. However, this is similar to a pattern begun just about a year ago when rates moved into the high 6.80 percent range over a three month spring and summer period only to reverse and achieve a long term run in the 6.06-6.20 percent range. Who knows where it will go this time...
How to Find the Perfect Mortgage When Refinancing
May 30th, 2007
If you’re in the process of mortgage refinancing, comparison shopping will only get you so far. Most homeowners that focus their energy on comparison shopping simply end up with the best of the worst loan offers they consider. Here are several tips to help you negotiate for a mortgage rate that does not include Yield Spread Premium when refinancing your mortgage.
What is Yield Spread Premium?
Mortgage companies and brokers are (over) compensated for their work in several ways. There are the origination fees (also called origination points) you pay directly to the mortgage company or broker, plus lender paid compensation that is passed on to you in the form of a higher mortgage rate. Many people think that because this compensation is “lender paid,” it can’t be a bad thing right? That’s where Yield Spread Premium comes into the picture.
When you apply for mortgage refinancing with a mortgage company or broker, the lender behind the loan approves you for a specific, wholesale mortgage rate. Your mortgage broker knows this interest rate; however, they mark it up for a commission. For every quarter percent you agree to overpay your mortgage broker is paid one percent of the loan amount by the lender.
Here’s an example. Suppose you are refinancing your home with a $150,000 mortgage at 6.75%. The broker charges you an origination fee of one percent or $1,500. What your mortgage broker isn’t telling you is that you were approved for a 6.25 % interest rate. Because your mortgage broker marked up your rate the wholesale lender paid them 2% of your loan, or $3,000. In this example the broker walked away with $4,500 and you got stuck paying too much mortgage interest.
Can You Avoid Paying Yield Spread Premium?
Homeowners who learn how to negotiate when comparison shopping for a new mortgage can avoid paying this markup. When you contact local mortgage companies and brokers try and deal with the owner of the firm. Tell this person you understand how Yield Spread Premium works and will not pay it when refinancing. Offer to pay a reasonable origination fee for their services; any honest mortgage broker would agree to these terms. You can learn more about refinancing your mortgage while avoiding costly mistakes with our free video tutorial.
,There is some additional news and a bit of a sidebar to the story about the 60 Minutes feature on Redfin a week or so ago and the strong reaction of the National Association of Realtors to that story. The run-up can be .
Adjustable Rate Mortgage Refinancing
May 27th, 2007
In recent years homeowners had little choice when refinancing their loans beyond the traditional 30 year fixed interest rate mortgage. Today, Adjustable Rate Mortgages offer a variety of choices for every financial situation. Personal finances in the United States are different today than in the past; homeowners move and change jobs much more frequently than before.
Traditional mortgage loans no longer meet the needs of many homeowners. In addition to offering greater flexibility, Adjustable Rate Mortgages offer lower interest rates than their fixed rate counterparts. Here are several reasons for choosing an Adjustable Rate Mortgage when refinancing your home loan.
1. You plan on moving soon.
2. The change in your financial situation is only temporary. Hybrid Adjustable Rate Mortgages offer the savings of and Adjustable Rate Mortgage plus the safety of a fixed rate loan.
3. You’re counting on higher income in the future. If you know a promotion or a better paying job is on the horizon, refinancing with an Adjustable Rate Mortgage could help you bridge your finances until that higher paying job arrives.
4. You’re a real estate investor that fully understands the risk of an Adjustable Rate Mortgage loan. Investors flipping houses benefit from the lower payments offered by Adjustable Rate Mortgages.
If your Adjustable Rate Mortgage is scheduled to reset soon you might consider refinancing before this happens. You have the option of choosing a fixed rate mortgage or another Adjustable Rate Mortgage. Refinancing with this type of loan allows you to take advantage of the introductory period while avoiding higher payments when your loan resets.
,Existing Home Sales Were Down 2.6 Percent In April
May 25th, 2007
On Thursday the Census Bureau and the Department of Housing and Urban Development released figures for in April that showed a big increase in sales and a drop in both median and average home sale prices. Media coverage has speculated that the both outcomes were a result of price cuts by builders in an attempt to get product moving and inventories reduced.
On Friday the National Association of Realtors released its report on the April sales of existing homes. The data showed a...
New Home Sales Jump In April
May 24th, 2007
According to figures released on Thursday by the Department of Housing and Urban Development and the U.S. Census Bureau, new house sales in April showed the first improvement of the year, and a substantial one at that.
The National Association of Realtors is expected to release figures for April sales of existing homes at the end of the week.
Mortgage Rates Move Up On Inflation Worries
May 24th, 2007
According to Frank Nothaft, vice present and chief economist of Freddie Mac, "Mortgage rates inched up this week following the Federal Open Market Committee statement reiterating that the predominant concern remains the risk that inflation will fail to moderate as expected. However...
Never underestimate Sir Richard Branson.
The mega-millionaire Brit has been an innovator from the beginning of his career and now it is hard to remember exactly when and where that started because his company, Virgin, is into so many industries and Sir. Richard himself seems to be everywhere. Now Virgin is officially in the mortgage business.
But it is a mortgage business with a real twist...