The Internet makes it easy to shop for a new mortgage. You should know that Internet Mortgage lenders are just as guilty of overcharging homeowners for their mortgage loans as Banks and traditional mortgage companies. Here are several tips to help you avoid paying too much when refinancing your mortgage with an online lender.

The Internet is an excellent tool for refinancing your mortgage; you can easily compare loan offers for dozens of online lenders. When you compare online mortgage lenders, you will find they come in two varieties: the first type is a list broker and the second a retail lender or mortgage broker.

List brokers have nothing to do with mortgage loans. They simply put up a flashy website and drive customers to it while collecting their names and contact information. This information is then sold to as many mortgage lenders as possible, enabling the list broker to collect a fee. Retail lenders and mortgage brokers are more familiar; these are the same types of lender that operate offline, but have established an online presence. The advantage of using an online lender is the convenience, speed of processing, non-commission driven customer support, and lower interest rates. Online mortgage lenders like to tell you that they have lower overhead than traditional mortgage lenders and the savings are passed on to you. This is slick marketing at its finest; their overhead has nothing to do with the interest rate you qualify for.

How much can you save by refinancing your mortgage with one of the big names in online mortgage loans? It depends on how much time you have invested comparison shopping for the most competitive mortgage offer. If you read the fine print on their websites you will find they are simply acting as brokers in many of the sates they operate. If your home is in one of these States you will be charged a “co-broker fee” or “Computerized Loan Origination Fee” of as much as $800 just for filling out a form on their website. These sites do not guarantee their interest rates and you will simply be handed off to another lender.

Applying for a home loan for first time mortgage borrowers can be a daunting and confusing task. An alphabet soup family of words is used: FHA, HUD, VA, and more can describe a loan, an agency, or some other plan. How do you know which one is right for you? Well, for starters the Federal Housing Authority of FHA doesn't issue loans, but they do back them. With this in mind, many savvy mortgage companies gear their businesses to helping you obtain these loans especially if conventional financing it out of the picture. Should you work with an FHA lender? Sure, especially if you want to jump into the housing market with some government assistance.

The big advantage in an FHA back mortgage is that the risk of lending money to you is transferred from the lender to the FHA. If you have bad credit, no credit, or simply not enough money to put down on a home, you may still qualify for an FHA backed loan whereas a traditional loan not backed by the FHA could cause you to be turned down.

When visiting a mortgage broker or shopping online for a broker who has FHA experience, you will quickly learn a few things about these types of government backed loans:

Down payments can be extra low, as little as 3% of the home's value versus 5% through conventional loans. In addition, the FHA can require the seller to pay for part of your closing costs while allowing most of the remaining closing costs to be wrapped in the loan. This is particularly helpful for the person who has no spare cash to pay beyond the down payment. You won’t be required to take out private mortgage insurance either which always adds to the cost of a loan.

Another feature of an FHA backed mortgage is that even the 3% figure can be funds that were borrowed or gifted from a relative or friend. Thus, if you don't even have a dollar to put down on a home, then other people's money can come to the rescue.

Yes, check with a mortgage company familiar with the FHA and how this particular program works. A home that wasn't affordable to you conventionally could now be within your reach thanks to the help of a qualified mortgage professional who is familiar with the ins and outs of the FHA.

Many home buyers close their loans, make their payments and don't think about their mortgages again. They don't consider refinancing when they should. If you are among these inattentive homeowners, here are four truths about mortgage refinancing that may surprise you.

Truth #1 – Mortgage Refinancing can save you money. If interest rates have dropped since you got your original loan, refinancing can reduce your monthly payment. When you refinance, you can also choose to shorten your loan term, meaning you will pay less money in interest over the life of the mortgage.

You could also save money by switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. The interest rate on an ARM is based on an index such as the LIBOR or the U.S. Treasury Bill. If they go up, so do your payments. By refinancing to a fixed-rate mortgage, you can prevent payment increases. (Your monthly payment might still increase due to changes in property taxes or insurance, but your principle and interest amounts will stay the same.)

If your original mortgage was for more than 80 percent of your home’s value, you are paying private mortgage insurance (PMI) as part of your monthly payment. As the value of your home increases and the principle on your mortgage decreases, you can get rid of PMI by refinancing for less than 80 percent of your home’s value.

Truth #2 – Mortgage Refinancing is a smart way to access your equity. In the second quarter of 2006, 88 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least five percent higher than the original mortgage balances. Homes refinanced during this time had appreciated 33 percent on average since the original mortgage was taken out. The median age of the mortgage was 3.2 years.

“Borrowers who are looking for an inexpensive way to finance home improvements or business investments, or to consolidate high cost debt, are turning to cash-out refinance,” said Amy Crews Cutts, Freddie Mac deputy chief economist. “These borrowers are often willing to refinance into higher rates on their first lien mortgages. . . This is the second consecutive quarter in which the median refinance borrower increased the rate on their first lien mortgage.”

Truth #3 – Mortgage Refinancing is still very popular. According to Frank Nothaft, Freddie Mac chief economist, “The staying power of refinance activity has been much stronger than we initially thought . . . borrowers are reacting to both incentives to cash out home equity through refinance and incentives to change their mortgage as they hit an interest rate adjustment.

It can provide you with additional finance for any purpose you may think of by securing a loan for you. This will provide you with competitive interest rates and low monthly payments so you can enjoy cheap financing. In order to understand how home equity loans work, you need to be familiar with certain concepts. Mainly, you should know what equity is and how it is calculated. Then, you’ll be able to understand why home equity loans provide such benefits and the risk that requesting this kind of loans implies.

Defining Equity

Equity is the difference between the value of an asset and the amount of debt that it secures. It is the remaining value of a property when the property’s value exceeds the amount of debt that the asset guarantees. This equity can be used to secure another loan. Just like a home is used as collateral for a home loan, the same property (specifically its equity) can be used as collateral for a home equity loan or line of credit.

It is necessary to note that the value of the property to take into account is the appraised value of the asset (the current value) and not the purchase price of the property. The value that is taken into account is the amount of money you could get if you were to sell the property in the market.

Calculating Equity

In order to calculate equity you need to subtract any mortgages or liens hold against the property to the appraised value of the asset. For example: If you own a house worth $100,000 which has a mortgage loan with $60,000 of outstanding debt, the equity on your home is equivalent to $40,000. This remaining amount can be used to secure another loan.

Bear in mind that mortgages are not the only debts that can be subtracting value from your property, outstanding home equity loans, other liens and judicial embargos can reduce the amount of usable value of the asset. In order to correctly calculate the equity you need to consider all the above when subtracting the overall debt held against the property.

Benefits of Home Equity

Home equity loans provide low interest rate financing compared to unsecured loans. The interest rate charged for home equity loans rarely exceeds 12% while the interest rate charged for unsecured loans can usually reach 18%, 20% or even more. The secured nature of home equity loans keeps interest rates low by reducing the risk involved in the lending process.

Home equity loans also offer higher loan amounts and longer repayment programs. This combination provides great flexibility as you can request significant amounts and obtain low monthly payments by extending the loan length. When it comes to unsecured loans not only you can’t obtain high loan amount but you can’t repay it throughout long repayment programs either.

Risk of Repossession

The main concern that equity loans imply is that given that the loan is secured with your home, if you default on the loan you risk repossession of the property. Thus, whenever considering requesting a home equity loan, you should make sure that you’ll be able to repay the loan and that you put away some savings for unexpected expenses that otherwise may compromise loan repayment.

If mortgage payments are suddenly higher, the most probable aspect to blame would be the ever-rising mortgage interest rates. The reason is that since 2004 the Federal Reserve Board has raised the fed-funds rate, which influences mortgage interest rates, 17 times.

In recent years, many people have taken advantage of near-record-low interest rates while scooping for real estate properties. In order to make mortgage payments even lower, many signed up for variable-rate home mortgage refinancing options.

One of the benefits of variable is that you get an extra-low interest rate for the first few years of the loan, and then, often every year, it gets reset to reflect the actual market movements in interest rates. For a “5-1” variable-rate mortgage scheme, the loan is fixed at a low introductory rate for five years and then begins floating in relation to interest rates each year after that. However, if the market interest rates surge up, the rate of your own will consequently rise, albeit caps for regulating rates from rising too much are in place.

The risk is that one could end up paying 10% or more on a home mortgage refinancing in later years. This is not quite apparent in fixed-rate home mortgage refinancing wherein one’s loan will be locked at a rate, say 6.25%, until the whole loan is paid. The risk is not at all senseless—that is if you plan to leave the home after a few years, variable-rate home mortgage refinancing can make a lot of sense. You get an extra-low rate initially, and you are not likely to be around if and when rates escalate.

Not everyone is fortunate enough to figure out such a trick. Some are blinded by the chase of the cheapest rates out there, grabbing variable-rate mortgages for the really low introductory rates that these offer despite planning to stay in their new home. So now that the tide seems to be turning, and rates are rising, the potential heartache for a lot of people is looming. According to a report from ACORN, the national community advocacy group, about 75% of subprime home loans were variable-rate mortgages.

Many people have opted for even riskier home loans than ordinary variable-rate mortgages. Some signed up for interest-only loans and negative-amortization loans, and according to a Los Angeles Times article, "substantial numbers of borrowers using interest-only and payment-option loans have modest incomes and could already be stretched financially."

There are some suggestions that can mitigate such risks. The most reasonable would be to switch to risk-averse options such as 15-year or 30-year standard amortization schemes. Another practical tip suggests switching to an interest-only mortgage option if full payments are currently not feasible. The positive feature about interest-only payments is that these would not result in still-higher principal debt balances to pay off later.

Sandra Block offered some beneficial advice to potential borrowers in a USA Today article. She explains, "Look for lenders that have raised their borrowing limits for conforming loans. Rates on conforming loans, which are loans that lenders can sell to Fannie Mae and Freddie Mac, are a quarter to three-quarters of a percentage point lower than those for jumbo loans."

The most important advice for all is to never stop learning. By researching more information about mortgages, and home-buying process in general, one would be at a better position in getting the most suitable home mortgage refinancing deal, which mitigate the risk of frustration in due time.

Refinancing your mortgage can save you money, get your hands on cash, and help you take control of your finances, if done correctly. There are a number of common mistakes homeowners make when refinancing their mortgages that cost them thousands of dollars. Here are the basics of refinancing your home loan to help you avoid costly mistakes.

Refinancing to Save Money

If your financial situation has improved and you qualify for a better interest rate than you did when you purchased your home, you could save money by qualifying for a lower interest rate. This lower interest rate could also reduce your monthly payment amount; however, there are ways to lower your payment even you cannot qualify for a lower interest rate. If you purchased your home with a risky Adjustable Rate Mortgage (ARM) or have Private Mortgage Insurance, refinancing to a fixed rate loan could ease your peace of mind and help you lose the Private Mortgage Insurance.

Refinance and Get Cash

Refinancing your primary mortgage and taking cash back is generally more affordable than other home equity options. You will qualify for a better interest rate refinancing than you will with a second mortgage or home equity line of credit. To borrow against equity when refinancing, you simply borrow more than you owe on your existing mortgage and will receive the cash back at closing.

Consolidate Your Debt

Mortgage refinancing is a convenient way to consolidate your higher interest debts into one payment. By taking cash back when refinancing you can pay off your other debts and have just one payment. When you refinance to consolidate your bills it is important to understand that refinancing does not eliminate your debt; consolidating only restructures your debts, making them easier to pay back.

You can learn more about refinancing your mortgage while avoiding costly mistakes by registering for a free mortgage guidebook.

If you are a homeowner in the process of refinancing your mortgage, doing your homework will save you thousands of dollars. Before you can make sense of mortgage offers and determine which offer is a better loan, it helps to understand how mortgage lenders operate. Here are the basics of mortgage markets and the different types of lenders you will encounter refinancing your mortgage.

There are two basic markets in the mortgage industry. The first is the Primary Market, where the borrower obtains their mortgage from the loan originator. The Secondary Mortgage Market is where lenders buy and sell debts that are pooled and insured. How does this affect you, the homeowner? The value of your mortgage on the secondary market is determined by how much the loan’s originator overcharged you. Profits on the secondary market are icing on the cake for mortgage lenders.

Back to Primary Mortgage Lenders: these are your banks, credit unions, mortgage banks, internet portals, and home builder/Real Estate Company owned lenders. When you apply for your mortgage you are dealing with retail mortgage lenders. These lenders have one goal for your loan: overcharge you as much as they can, and if possible without your knowledge. Banks and mortgage banks have an advantage as they are exempt from all the disclosure laws in the United States that protect homeowners. This is why you should never take out a mortgage from your bank.

The Secondary Mortgage Market includes pseudo-government for profit companies Fannie Mae, Freddie Mac, and Ginnie Mae. These organizations regulate the mortgage industry for the government and create mortgage based investments from secured debts. There are also investors in the secondary market that purchase debt from primary lenders looking for a return on their investment. You may be asking yourself, “Why do I need to know any of this?” The answer is simple, your mortgage loan is like any other product you purchase. If you neglect to shop around you will not find the best price.

You can learn more about shopping for the most competitive mortgage loan and not overpaying the loan originator by registering for a free mortgage guidebook

The popularity of Option Adjustable Rate Mortgages has skyrocketed over the last year, mainly because of their ease of qualification. These loans come with the flexibility of multiple payment options allowing homebuyers with very tight budgets to purchase homes. The problems arise because homeowners don’t understand how the loans work and lose their homes at foreclosure when they can no longer afford the payments.

Option loans are a mortgage with an adjustable interest rate that offers the borrower four payment options. The first option is a normal payment based on thirty year amortization. The second option is based on fifteen year amortization; the third option is an interest only payment, and finally a minimum payment option that does not cover all interest due that month. It is the fourth payment option that gets homeowners into trouble.

When you make payments based on the minimum payment amount you are not paying enough to cover the interest due that month. The amount of unpaid interest is added to the outstanding loan balance. This growing mortgage loan is a phenomenon called “negative amortization.” When your loan balance reaches 125% of the original balance, your lender will terminate the option agreement and the payments skyrocket.

Because these option loans are so easy to qualify, many homeowners with poor credit find they are unable to refinance the loan after reaching 125% of their loan balance. When this happens and they fall behind on the mortgage payments the lender will foreclose and take their home. According to the government, mortgage foreclosures are at record highs because of option mortgage loans.

If you are a homeowner with an option mortgage, how can you keep your mortgage afloat? First, avoid making the minimum payment and your loan will not be negatively amortized. If you find yourself unable to make your payments, contact your lender and ask for help. The mortgage lender may grant you a forbearance of several months, allowing you to get your finances in order or even refinance the loan to give you an affordable payment. It is important to ask for help before you get in trouble; you’ll find lenders are much more accommodating when you come to them before a problem arises.

You can learn more about your mortgage options, including common mistakes to avoid by registering for a free mortgage guidebook.

Selling you house privately can be an excellent way of ensuring a fast sale.

In order to attract buyers, you will need to value the property at the right price. If you set the price too low you may give the impression that the house is of poor quality. To high and potential buyers may never show interest.

If you have ever sold a house through an estate agent you may believe that it is the agent who sets the value of the property.

This is not true. While the agent will set the asking price, the true value of the property will be the highest price that a buyer is willing to pay.

If you are selling your house privately, you will be required to set the asking price in much the same way that estate agents do. However while an estate agent will be able to use their expert knowledge of the local market, you may be required to do some research.

A good place to start is the local property papers. Estate agents will dominate almost every page with advertisements for properties they have for sale in your area.

This should help you decide on an asking price that, as you know, may not necessarily be the true value of the property. The property’s actually value will be the final selling price.

Additionally you could peek through the shop windows of local estate agents to research the properties they have advertised there. If you are bold enough, you could even pretend you are a buyer and venture inside for a casual chat and pick up some brochures of properties for sale that are similar to yours.

The brochures should contain photographs, floor plans, and written specifications of each property. This should help you find properties that are similar to yours and could provide an excellent tool for setting the asking price of your house.

You could also review property websites. Again they will be dominated by estate agents, but the different search parameters available will help you to locate properties and asking prices of houses that are almost identical to yours.

Employing the services of a qualified surveyor is also an excellent idea. They will utilise their expert knowledge to provide you with an unbiased valuation of your property.

Finally you can check any one of several websites that contain the details of properties that have recently sold. Find details of properties that are similar to yours and within your local area. This should give you a good indication of what final value to aim for during negotiations.

Locking in your mortgage interest rate is how loan originators guarantee an interest rate. The purpose of the lock is to allow you time to close on the loan at the interest rate you agreed. If you are unable to close before the rate lock expires, the mortgage lender could charge you a higher interest rate for the loan. Here are the basics of mortgage rate locks to protect you when refinancing your mortgage loan.

Wholesales mortgage lenders use a rate sheet listing the current day’s published mortgage interest rate. The day your rate is locked it can only be based on the current day’s interest rate. You can only lock your interest rate from the time this rate sheet is issued each morning until the close of business, which is typically 4pm in the lender’s time zone. The duration of the lock will be specified in your loan documents and must allow you enough time to close on your new mortgage. If your lock expires prior to this you will pay dearly for not closing in time.

Before you agree to a lock period, find out what the loan originator’s time frame is for completing your loan. If it will take 15-20 days to complete, a 30 day interest rate lock will be sufficient. This timeframe assumes there will not be complications when the lender is completing your loan. Locking in the right interest rate is crucial when refinancing your mortgage. The discussions you have with the lender are meaningless until you have that interest rate guaranteed in writing. Interest rates change on a daily basis and that 5% loan interest rate you discussed could easily turn into a 6% mortgage in as little as 72 hours.

Trusting your mortgage representative to do the right thing with your interest rate is a big mistake. Your mortgage originator is only concerned with padding the interest rate with as many points as possible to collect a bonus for Yield Spread Premium or YSP. YSP basically means the more you pay, the more the originator receives as a bonus. This is the bait and switch you hear about with mortgage loans. The longer the mortgage lender can put off guaranteeing you interest rate, the more they can raise it when you are one week away from closing. Would you really forego the closing over a .25% increase in your interest rate? Did you know this .25% means an additional bonus for your mortgage originator of 1% of your loan amount? This is a lot of money changing hands just for overcharging you on your new mortgage loan.

Most homeowners don’t know what the lender is doing; they don’t recognize delay tactics and blindly agree to pay .25% to .50% or more while their loan originator takes advantage of them. If you don’t want to be taken advantage of when refinancing your mortgage loan, register for a free mortgage guidebook.

Yield Spread Premium sounds scary, but it’s just a fancy name for what your loan originator overcharges you to collect a bonus from the wholesale lender. Yield Spread Premium or YSP, is easy to spot when you know what to look for. Here are the basics to help you recognize YSP and avoid lining your loan representative’s pockets at your expense.

The first step to avoid overpaying for your new mortgage interest rate is to check out the going rates across the market. For every .25% the loan originator overcharges you, that person’s bonus or YSP is 1% of your loan amount. If your actual interest rate is 5.5% at the time your guarantee is written but the person you are dealing with tells you they can guarantee 6%, you know they are overcharging you .5% in Yield Spread Premium.

How can you tell what the going rates are across the mortgage market? Every Friday Fannie Mae publishes the yield for their mortgage backed securities on their website. This information can be found under “Fannie Mae Weekly Yield” and you can use this gauge the going rate across the market. Knowing this information is much like knowing the bluebook value of a car you are purchasing. It is much more difficult for the dealer to overcharge you when you know the wholesale value of the car.

You can learn more about refinancing your mortgage without paying too much by registering for a free mortgage guidebook.

Mortgage lenders and brokers use interest rate lock guarantees to insure you have time to close on the mortgage without the interest rate changing. How do you know the guarantee the loan originator gives you is the same the interest rate quoted by the wholesale lender? Loan originators commonly inflate their interest rates to receive an additional commission from the wholesale lender. Here are several tips to help you understand the interest rate guarantee provided by your loan originator.

There are two types of rate lock guarantees when you take out a mortgage loan. There is the written guarantee your mortgage company provides you and the guarantee the wholesale lender provides your mortgage company. These two guarantees may not be for the same interest rate. Your mortgage company may be adding a premium to the interest rate they are quoting you; mortgage companies commonly do this because they are paid a bonus for overcharging you on this rate.

When you receive a written rate lock from your mortgage company there are a several things to look for on this document. Make sure the interest rate, loan amount, lock date, expiration of the lock, and any points are all what you agreed. This rate lock means that your interest rate is only guaranteed with the mortgage company originating your loan. How do you know if the interest rate quoted by the wholesale lender has been marked up by the mortgage company? Ask them for a copy of the guarantee from the wholesale lender. Some loan originators stall or even refuse when you ask them for this guarantee; they are afraid you might find out they have marked up the interest rate. You can learn more about refinancing your mortgage without overpaying by registering for a free mortgage guidebook.

An analysis conducted recently in the UK prompted the article, as it identified that fee-free UK mortgage offers are more expensive than deals with an application fee for consumers with a mortgage of £57,000 or more. This is because the interest rate is usually higher. With the average new mortgage loan now at just below £140,000, opting for a fee-free mortgage deal could cost many borrowers dear.

Fee-free UK Mortgages Comparison

Example 1a: - Based on a mortgage of £56,000 and someone taking out a two year fixed rate of 4.47%, they would end up paying £5,005 in interest in the first two years. Add the lenders fees of £1,499 and the overall cost is £6,505

Example 1b: - Again, based on a mortgage of £56,000 and someone taking out a two year fixed rate of 5.35% but fee free, they would end up paying £5,992 in interest in the first two years.

Using the same situation as above but based on the average new UK mortgage of £138,000, the figures work out as follows:

Example 2a: - A borrower taking out a two-year fix at 4.47% and paying fees would pay £13,838 over the two years.

Example 2b: - The same borrower taking out a 5.35% two-year fix and not paying fees, would cost £14,766.

It all goes to show that the bigger the mortgage, the more money you will save by choosing the low-interest option mortgage with a fee, rather than a fee-free UK mortgage deal. From this comparison, you should be aware that fee-free mortgage deals are not what they are cracked up to be. Using the services of a whole of market UK mortgage broker can pay dividends here as they will do their homework and expose any pitfalls of such mortgage deals.

Home improvement loans are the ideal option for anyone who wants to add looks and value to their home by adding some rooms, going in for fitted bathrooms and kitchens or undertaking rewiring/plumbing related activities. The ideal home improvement loan must ensure that the home improvements are in accordance with the borrower’s needs and also that it does'nt cost a borrower more than expected. The cost of a home improvement loan depends on the rate of interest that the lender charges which is again dependent on the collateral offered by the borrower.

Home improvement loan rates could also depend on the credit ratings of the borrower. If a borrower is credit challenged he/she may not enjoy competitive interest rates. However, increased demand and competition have resulted in a multitude of options for a borrower to choose from irrespective of his credit or income challenges. Online lending services have further simplified the lending process. Borrowers can now source the most competitive home improvement deals from the confines of their home or office.

When a borrower avails home improvement loans, he/she is required to pay interest only while the home improvement is in progress. The borrower then makes full monthly payments on the principle amount and interest, where monthly payments are calculated on the amount of money borrowed, interest rates and the loan term.

What can a home improvement loan be used for?

A borrower can avail a home improvement loan for various reasons including:

•Home extension

•Double glazing

•Centralized air conditioning or heating

•Fitted bathrooms and kitchens

•Fireplaces

•Swimming pools

•Rewiring or plumbing

Before availing a home improvement loan, it is advisable to seek specialist advice and get as many quotes as possible. This gives the borrower a chance to compare various deals and choose one that suits his/her needs the most. A borrower can obtain home improvement through secured and unsecured forms. Secured home improvement loan guarantees a large sum at low interest rate with comfortable repayment options. You simply need to place some property as collateral. On the other hand, an unsecured home improvement implies minimum risk for the borrower because there is no need for collateral. However, these loans come with slightly higher interest rates and strict repayment terms.

Go ahead and bring comfort home with the convenience of home improvement loans.

Getting commercial real estate loans approved is almost always complex and frequently difficult. Business borrowers need to realize that there are several commercial mortgage loan situations which can be especially difficult to get approved. Examples of eight difficult business loan situations are described to illustrate two key points: (1) these difficulties are not uncommon; and (2) these difficulties can be overcome in most cases.

Difficult Commercial Mortgage Loan Situation Number 1:

A commercial loan that needs to be closed in 60 days or less. It is not unusual to discover that a traditional lender considers six to nine months "normal" for commercial loan underwriting. Obviously this will act as a severe constraint if a commercial borrower is trying to buy a property that the seller wants to close in two to three months. If quick funding is essential, the commercial borrower should contact a non-bank business lender where most commercial loans will close in 45 to 55 days.

Difficult Commercial Mortgage Loan Situation Number 2:

A commercial loan that won't work without long-term financing. What is long-term financing for a commercial loan? Some commercial lenders view 3-5 years as the longest period before a commercial loan will be subject to a balloon payment. If that sounds short-term instead of long-term, most non-bank business lenders can arrange 25-year to 40-year commercial real estate loans for commercial properties. Longer-term financing will often be the critical difference that facilitates a successful business investment (especially because mortgage payments will be reduced dramatically).

Difficult Commercial Mortgage Loan Situation Number 3:

Providing financial data to a commercial lender after the loan is closed. Some commercial loans will have covenants stipulating that the lender must receive financial data even after the loan closing and that the loan can be recalled (forcing the borrower to repay early) if the audit of this data is not satisfactory to the lender. In stark contrast to this, commercial loans via non-bank commercial lenders based on Stated Income will not require business plans or income verification either before or after the loan is closed.

Difficult Commercial Mortgage Loan Situation Number 4:

Borrower is self-employed or income is paid on a commission, bonus or incentive basis that is somewhat erratic and difficult to document properly. Non-bank commercial lenders using a Stated Income business loan program will not require tax returns or any income verification. They also will not require commercial borrowers to sign IRS Form 4506 (which authorizes the lender to obtain tax returns directly from the IRS), a form routinely required by many commercial lenders.

Difficult Commercial Mortgage Loan Situation Number 5:

A borrower wants to refinance a commercial property and use $500,000 to $1 million from the proceeds to buy another property. Most commercial lenders will restrict the maximum cash that can be taken out of a refinancing, with a normal limit of $100,000 to $250,000. It is also not uncommon to encounter restrictions on the use of the cash. With a commercial loan via most non-bank commercial lenders, the commercial borrower could receive unrestricted cash up to one million dollars and use the proceeds without restrictions.

Difficult Commercial Mortgage Loan Situation Number 6:

A borrower wants to use a substantial amount of subordinated debt (a seller second or other secondary financing) to reduce the amount of cash needed to purchase a commercial property. Many commercial loans will not permit a seller second or other forms of subordinated debt. With a commercial loan via most non-bank business lenders, a commercial borrower can obtain Combined-Loan-to-Value (CLTV) ratios up to 95% with subordinate financing (including seller seconds).

Difficult Commercial Mortgage Loan Situation Number 7:

Sourcing and Seasoning of assets or ownership. For a purchase, commercial lenders will frequently want documentation about where the down payment is coming from (the source, so having limitations about where the funds are coming from is called sourcing). Commercial lenders will frequently have requirements stipulating that the down payment funds must have been in a specific account for a specific period of time, often 3-6 months or longer (this is called seasoning because it is tantamount to requiring that the funds have matured by being in the same place for a while). Seasoning of ownership is similar to seasoning of funds, except this requirement involves the minimum time someone has owned a commercial property before they can refinance the property. Most non-bank commercial lenders do not have any requirements or limitations involving either sourcing/seasoning of funds or seasoning of ownership.

A recent survey indicates that homeowners are worried about rising interest rates, but they plan to refinance if necessary.

In the third annual homeowners study by Wells Fargo, one in seven respondents was holding an adjustable-rate mortgage (ARM).

Eighty percent of these homeowners were concerned on varying levels about future rate increases.

Over half of the ARM borrowers said that they could refinance their loans if necessary. Only 20% said that they were prepared for rising rates and had no plans to change their loan products.

Well's Fargo found that homeowners are looking forward to rising home price appreciation, despite the slowing of price increases across the country.

Ten percent said that they believe their homes will increase significantly in value over the next few years. Fifty-three percent said they will see "a little" appreciation, while 27% expect no change.

Over 70% of the respondents said that they consider the equity in their homes as their most important investment.

According to Freddie Mac's latest mortgage rate report, the interest rate on a 30-year, fixed rate mortgage averaged 6.40% last week. That is an increase of 0.25% year-over-year.

Doreen Woo Ho, president of Wells Fargo's consumer credit group, said that "while rates are higher than a year ago, they are still low by historical standards."

She continued to point out that, surprisingly, younger homeowners are the ones that tend to view their homes as both an investment and a place to live.

What is a mortgage?

A mortgage will give you a specific sum of money for a fixed tenure like 15 years or 30 years at a particular rate of interest, against the value of your house. It is an agreement between the lender and the house owner who pledges the house as security. By taking a mortgage you give the lender a document that protects his interests in your property. The county records the lien and you retain the title to the property. There can be no change of ownership until you repay the debt and get back the lien. However, if you default on the debt, the lender can sell the property to get back his loan.

Different types of mortgage

You can take a mortgage at a fixed rate of interest or an adjustable rate of interest. In a fixed rate mortgage, you pay the same sum of money towards interest throughout the tenure of the mortgage. An adjustable rate of interest you may have to pay a variable rate of interest during the tenure of the loan. This means the monthly installment may increase or decrease, so you must always have a particular liquidity in your account to pay this installment. The monthly installment also depends on the amount of down payment you make in the beginning of the mortgage. The greater the down payment, the smaller will be your monthly installments. Another important factor in a mortgage is its length. A shorter length means larger monthly installments and a longer length means smaller monthly payments. However, in a longer tenure mortgage you end up paying more money towards interest repayment and not repayment of the principle amount. Based on the above considerations and your financial obligations over the next few years, you will need to consider carefully the amount of the mortgage, its tenure and the rate of interest. Moreover, you must do some research and shop around for the best interest rates possible.

Benefits of going for a mortgage

You can re-mortgage your house to tide you over an impeding financial emergency. It can help you finance your child’s college education. It can provide funds for home improvement or any medical emergency.

Mortgage calculators

As explained above you need to work out the monthly installment under different scenarios. It is a tedious process and you can use mortgage calculators available at different websites related to home finance. This will calculate the monthly installment for you quickly. Here is an example of a mortgage calculator for a fixed interest mortgage. You enter the mortgage amount; say $10,000, the annual interest rate of 6.5% for a fixed interest mortgage for 30 years. The calculator will give you the amortization schedule for every month of those 30 years. It details the repayment of interest, principle, and balance for all 12 months of those 30 years.

Similarly consider an adjustable rate 30 year mortgage, for a loan of $100000, when the house appraisal value is $125000. The calculator adds the property taxes, property insurance, state, federal taxes, and the initial interest rate. You must specify the number of months before the interest rate can change, the band within which interest can vary as per your budget, the maximum & the minimum interest rate, and the index rate change per adjustment, the margin and the index rate, as well as the months between index adjustments. Other parameters that can change include a rise in interest rates or a fall in interest rates. You can now imagine the number crunching involved in manual calculations, because of which it is advisable to use an online mortgage calculator.

Study this comparison between a short –term and a long-term mortgage for a loan amount of $100,000.The short-term loan is for 15 years and the long-term loan is for 30 years. The mortgage calculator will calculate your monthly installments including property taxes, state and federal taxes, origination fees and upfront costs. It will calculate the savings you can make and then you can decide on the tenure of the mortgage.

How not knowing your monthly payment for a mortgage can hurt you

As is clear from the above discussion, a mortgage involves several variable factors. You must decide the amount of mortgage you require based on your future commitments. If you have a steady source of income, you can go for a variable rate mortgage, as you are not short of funds. However, if you have no steady income, it is best to go for a fixed rate mortgage as you can arrange for a fixed sum by the due date of payment. Therefore, it is best to work out your monthly installment for each scenario based on your financial strength and expected future income. Since you have to make monthly payments over a long duration, it is best to provide for them in advance. If you default on your monthly installment, it can harm your credit rating and hamper chances of future credit. Think hard about all the parameters discussed above and only then go for a mortgage if you can service it over 15 to 30 years as the case may be

Basic principle of a mortgage is very simple: you borrow money to buy a house and pay back the loan with interest. However, nowadays there are so many products available that it can be mind-boggling. Here’s a guide to methods of repayment and interest rates.

Methods of repayment

Repayment mortgage: with repayment mortgages, also known as capital and interest loans, you repay a little of the capital with every repayment, along with interest, gradually paying more and more until the loan is paid off at the end of the term.

Interest-only mortgage: you don’t pay any of the capital in your monthly repayments with this type of mortgage. Instead, all your repayments are towards the interest only. You’ll need to set up a separate savings or investment fund, e.g. and endowment policy, for repaying the capital as a lump sum at the end of the mortgage term. If the fund doesn’t accumulate enough capital to repay the mortgage at the end of the term, you will need to pay the shortfall.

Interest rates

Standard variable rate: the rate of interest that you pay fluctuates depending on the lender’s current rate, which is normally linked to the base rate set by the Bank of England. So if interest rates are high, your mortgage repayments will increase. Conversely, if they are low, your repayments will be lower. Normally there aren’t any charges for repaying lump sums without penalty.

Tracker: tracker rates are another type of variable rate loan where the lender ‘tracks’ the rate at a set amount above or below the Bank of England base rate and it increases or decreases in line with base rate changes.

Fixed rates: the interest is set at one rate for a specified period of time, normally before changing to the lender’s standard variable rate. This can be good for helping you to budget in the first few years of your mortgage, or if you think interest rates are likely to fall during the fixed rate period, but you could end up paying over the odds if the base rate is low during this period. Some fixed rate products charge penalties for leaving so check exactly what the terms and conditions are before you sign up.

Capped rates: these are variable but specify a maximum level (‘cap’ or ‘ceiling’) that you’ll pay, so you will pay less if the base rate is lower than this. Normally the capped rate applies only for a fixed period, after which you’ll move to the lender’s standard variable rate. In this way you can benefit from reduced repayments if interest rates are low, with the security that they can’t go above a certain level. It can be useful for helping you to budget in the first few years of your mortgage.

Collared rates: the opposite of capped rates – they are variable but won’t go below a certain level (‘collar’ or ‘floor’). Collared rates are normally used along with a capped rate or tracker. If rates are lower than the collar, you could lose out.

Discount rates: some lenders give discounts from their standard variable rate for a fixed period as a special offer. You should check that you’ll be able to afford to repay the increased rate at the end of the fixed discount period.

Standard variable rate with cashbac: you’ll receive a sum of money when you take out the loan, which can be good if you don’t have any cash to spare for furniture, décor or home improvements. If interest rates don’t rise too high, it may be a good deal, but if they do you could be paying back a great deal more.

Important points to bear in mind

Your home is provided as the lender’s security for the loan, so if you’re not able to keep up repayments you may have your home repossessed.

Before you sign up to any deal, always check the terms and conditions of the mortgage. Check whether there are any penalties for leaving or paying off early, or whether you can contribute lump sums if you wish. Also check for other hidden charges and ask what will happen in the event that you are unable to repay