It seems that wherever you encounter a mortgage advertisement, be it a TV, radio, Internet, billboard, or newspaper ad, there is mention of a curiously low payment loan program (sometimes, but not always as it should be, accompanied by a disclaimer). Sometimes the ad will specify that the rate is 1%, or in that range, sometimes it will just focus on loan amounts and payments. I suppose the minds behind these ad campaigns are betting that they can arouse concern among borrowers that their rate/payments are inordinately high, so the average Joe or Jane will call in saying, "how can I get me one of them?".

Well folks, as we have all heard before, there is no free lunch, and if it seems to good to be true it probably is. This loan product is known as the Option ARM (adjustable rate mortgage), pick-a-pay ARM, and also goes by a variety of other names depending on the lender. Regardless of the name, let's look at how this product works, and determine if, when, and for whom it is an appropriate form of financing.

The Option Arm typically has four monthly payment options:

1)The "start" rate offers the minimum payment, which is otherwise known within the industry as the "teaser" rate.

2)The "interest only" payment option offers a way to make a low payment, but the principal is not being paid down as in a fully amortized loan.

3)30-year amortized payment. This is based on the fully indexed rate.

4)15-year amortized payment. Also based on the fully indexed rate, this option would be the highest payment option in any given month. This choice has the greatest impact on paying down the principal on your loan, which is necessary at some point.

With payment option #1, which is the payment the ads highlight, a borrower may experience "negative amortization", which means the principal balance increases. If a borrower goes into the loan expecting that the "teaser" rate and payment is all that is required, they will be in for a rude awakening when they come to understand the actual terms of this loan program. I am not saying that this loan program does not have its time and place. Allow me to give you an example of an individual for whom the Option ARM may be appropriate. In the South Florida region where I am currently located, many businesses are seasonal and tend to be much busier during the main tourist season. Let's say you own a restaurant that is very busy for half the year, and business drops off significantly during the slow months. The Option ARM may be a good choice for you because during the months when cash-flow and liquidity may be low you can make the minimum or interest only payment. Then when business is swift you can choose the higher payment options to make sure you avoid negative amortization. But is this loan product suitable for Grandma and her fixed income? Probably not. Nonetheless, many lenders and brokers constantly tout these products and lots of mortgage companies urge their employees to push this loan program.

Why? The way lenders pay commission on the Option ARM. Very often, advertisers and loan representatives (LR) will try to direct your focus to the low payment, and not on the true cost of your loan. Your true rate is based on one of several indexes plus the "margin" attached to your loan. This is known as the "fully indexed rate". The index is typically the LIBOR, COSI, CODI, COFI, MTA, etc. .... and generally is subject to change on a monthly basis. The index value will fluctuate over time. The other component of the "fully indexed rate" is the margin. What most borrowers don't know, and most LR's don't offer to explain, is how the margin works.

Secret: The higher the margin is that is attached to your loan, the higher is the commission that the lender pays to the LR in the form of a Yield Spread Premium (YSP). Many LR's love to sell this product because borrowers, who often are not aware of the "margin" and how it impacts their loan, don't ask about it. LR's routinely slap on the highest available margin made available by the lender, and generate a 3% YSP ( percentage of the loan amount ) without having to bother explaining it to the borrower, who is focused on that "teaser" rate and payment. This is also how LR's manage to get you that miracle loan that features the low payment, no appraisal fee, and no closing costs. And consumers love to bite on the bait, which is why big budget advertisers focus on enticing people with the low (minimum) payment feature.

The bottom line is that your fully indexed rate consists of an index, which moves, and the margin, which remains the same. The higher the margin, the higher the fully indexed rate. See why LR's love this product? I'm not going to get any holiday cards from LR's for shedding light on this subject, but my responsibility is to you the consumer, and not to unethical practitioners who hurt their customer and mar the reputation of those of us in the lending industry who operate with integrity.

Sub prime mortgages have been the cause of a global financial crisis that started in the US in the late 2006. Sub-prime mortgages are just one of the many varieties of sub prime loans that are provided for diverse needs.

In essence, a sub-prime mortgage is one that is provided to people who do not have a good credit history. People with a poor credit history will not be able to avail a mortgage from a regular bank because they may not be able to repay the debt that they avail. Such borrowers have a FICO score that is less than 620. However, sub-prime mortgage providers provide loans to such risky classes of people. The mortgages are also called as Near Prime, B-Paper or second-chance lending. Mostly, people who are self employed and those who have a bad credit history fall into this category. The name comes from the fact that it refers to property whose papers cannot be sold in the primary markets.

Since the mortgage is provided to people with a bad credit history, sub prime mortgages are risky to both the lender as well as the borrower. The lender has to take a certain amount of risk because they are not sure how the borrower will pay back the mortgage. On the other hand, borrowers will have to pay higher interest for the mortgage that is availed. The higher interest is charged in order to sideline the higher risk.

The sub prime market is also believed to be influenced by non-competitive business practices. For example, sub-prime mortgage lenders have been accused of providing sub prime loans far in excess of what can be repaid by borrowers. This often results in people losing their assets to sub-prime lenders when they are not able to meet repayment obligations. Since sub-prime mortgages are provided as a secured loan, people who are not able to repay a mortgage will often find their assets being claimed by sub prime vendors when repayment defaults.

There are many factors that affect the interest rate on a mortgage. Some of these factors may be under the control of the borrower, while some are not under the direct control of the borrower.

One of the basic factors that affect the interest rate of mortgages is the discount rate of the Federal Reserve. The Federal Reserve changes this rate according to the compulsions of the economy and also in response to government policies. When the Federal Reserve changes the discount rate, it affects the rate at which it offers short term loans to other banks. Therefore the final interest rate that banks charge depends on the Federal discount rate. Therefore, when it comes to the borrower, there are many factors that affect the rate. Interest that is charged on loans may fluctuate during the period of the loan.

Another factor that affects the interest rate of a loan, but which can be controlled by the borrower, is the FICO score. The FICO score is essentially the credit history of the borrower that is condensed into a single number. Companies called Consumer Reporting Agencies (CRAs) gather and sell information about where a borrower works and lives, how he or she pays bills, and whether they have been involved in legal cases related to financial issues. Potential lenders can access one's credit report from such agencies that rate customers based on the FICO score. Therefore it is essential that one has a good FICO score in order to avail a better mortgage offer from a mortgage company.

There are also other factors such as competition that affect the rates at which lenders charge borrowers. For example, competition may be an important factor that determines the rate of interest of a loan. Higher competition may coax lenders to offer a loan at a lower rate. Therefore it is a good practice to shop around for loans before one finalizes a particular loan product.

Yes it's true, we have lost a lot of good men and women due to the recent slow down in the real estate market. If homes are not selling, then there are no loans being made. Your eight year run of good luck and great business cycle has run its course. There are two things you can do. For those lucky few seasoned veterans, you will probably be fine. It's just time to tighten up the belt, cut expenses and hang in there for the next 5 years and the real estate market will come back, which means the loan industry will make a come back too. It's been that way for the last 30 years. This business goes through up and down cycles.

The second thing you can do is jump ship and get out. If you haven't got out yet, get out NOW, run, don't walk and get the heck out of there. What I am finding is that most mortgage brokers are jumping ship like people on the Titanic. The problem is people are scrounging just to find a job to pay the bills.

I know and you know that this is just temporary until you find your stride again. I admire those who do what they have to do to make things work. If that is you, then you obviously are person who can roll up their sleeves, sometimes, even swallow some pride, but the point is, you do what you have to do to pay the mortgage bill, to put food on the table and continue on with life. When you get lemons, you make lemonade. If this sounds familiar, then I am talking to you. I'm talking to you right now because up until now, you haven't been shown another way.

When you are down, the only place you can go is up. This is the time when you might need to do some soul searching. This is the time where you might need to be receptive to new ideas. This is the time in your life that you will thank me for sharing one the world's greatest secrets for making money.

The reverse mortgage leads the way in opportunities for the senior facing an unclear retirement. In this article I will explain exactly what reverse mortgages are, and who can benefit from them.

Let's say you no longer have the ability to earn a steady income. Yet, you are troubled to think that maybe Social Security or your own savings will not be enough to sustain you after retirement. Or, even if it is, you don't want to worry about counting and pinching pennies during the last years of your life. If you're a homeowner then there may be a much better option.

If you're 62 years old, have equity in your home, and little to no mortgage debt against it, then you should familiarize yourself with a reverse mortgage. Lead the life you deserve by using the equity of your home as collateral against the loan. A reverse mortgage loan is a special type of loan for the retiree, because you're not required to pay it back in monthly payments.

When are you required to pay back? When your home is sold. Typically, this won't happen until you either need to move to an assisted living care facility or you die. In either circumstance, you'll not have to worry about the loan being paid off. That's because the proceeds of your home will go towards your loan, so you don't need to worry about having to pay for anything out of your pocket.

As a bonus, if the value on the home has went up dramatically then what is left is yours or to be given to your heirs. If you can't cover the difference with the amount your home was sold for, then the bank is forced to cover the difference. Because of these unique parameters on the loan, a reverse mortgage leads the list of options for the homeowner who is retiring.

Once you receive your reverse mortgage loan you're only required to first pay off your mortgage, if you have one, before doing anything else. Then, with the balance you can spend it any way you wish. You also receive your loan a number of different ways - one lump sum, monthly installments or draw against it whenever you need.

I just talked to my neighbor who came to California from Minnesota two years ago and he got caught up in the real estate investing and became a mortgage broker. Last year, he was on the biggest high I've ever seen. I just talked to him last week and he is trying to dump his properties and move back to Minnesota. The problem is he is upside down on every property and all he can do now is rent them out and take a monthly loss and wait it out. The only problem is that it will be 5 to 6 years before the market comes back. He obviously didn't get my memo about the real estate industry cycles.

I really feel for the guy because he thought that the market would go up for ever. You see, he's from Minnesota and the mid west doesn't cycle as hard as the east coast or west coast. When we in California are on a high, the rest of the country see a modest increase and when we are in a low, the rest of the country see a modest dip. But in California, we have mud slides, fires and earthquakes and the real estate and mortgage industry is having all three right now at the same time and will continue this trend for the next 5 years.

Just so you know, I do not have a crystal ball in my hand, but I have watched the real estate and mortgage industry for the past 30 years and one thing is for sure is that they are in a decline and will continue to be for the next 5 years. Let's look at some facts.

In the early 70's there was a low, the late 70's there was a boom, in the early 80's there was a low, in the lat 80's and into the 91, there was a boom, in 95 or 96', we were at a low again and from the late 90's to the mid 05's, there was a boom. Ask yourself this....What's next? A LOW! Of course. It has to.....The market has to correct itself. It's been this way for 30 years and will continue this trend for the next 30 years.

The process of buying a house can be a long and laborious process.

Countless visits to estate agents, visits to unsuitable properties and the general insecurity that comes with committing to, and moving into a new property.

But a growing band of top-end buyers are turning to property search agents in order to eliminate the traditional trek around houses.

The service of a property search agent doesn't come cheap, with retainer fees ranging from £500 to £3000 as well as a percentage commission payment.

But the services they offer can be invaluable to some buyers, allowing the opportunity to gain advice on the local housing market to find properties within their mortgage budget, as well as helping potential buyers to locate properties that might not find their way onto the open market.

Such services can also help buyers to save a little money on the value of the property, as well as allowing more time to sort out other details including mortgages.

Most property finders have a two-tier charging structure, usually involving a sign up fee and a commission payment upon a successful purchase.

Property finder services can be useful in helping to search the market at difficult periods, especially when prices are rising and mortgage rates are increasing.

For those considering hiring a buying agent, it's important to select those specialising in the local area. Most will advertise in the local paper or have a company website.

If you'd rather not hire a property buyer, there are other methods which could help you locate hard-to-find properties within your price range.

One of these methods involves signing up for a property auction alert service, which can deliver e-mail alerts of properties for sale at auction in set areas, as well as detailed analysis of previous properties on sale and their sale prices in that area.

After spending a lot of time struggling against mortgages, credit card debts, and many other types of loans, one now can simply overcome all of these obstacles and threats using refinancing, the process of paying off one loan with the proceeds from a new loan secured by the same property. What we are going to tackle in this article is the Pros and Cons of Refinancing.

Refinancing can be considered a means with which a person replaces his/her current loan with a new loan in order to save money. The loan can be of any type. It can be any consumer debt or a credit card debt or a mortgage.

Many people shelter to refinancing nowadays because it has many pros:

As it helps people to reduce interests, risk, and periodic payment obligations by either lowering the interest rate owed on the loan or extending the period of loan. Also everyone looks for refinancing in order to be able to achieve equity faster.

There are too many individuals who are "house rich and cash poor." What value is it if your house is paid off in full, but you do not have any liquid cash to support? Keep in mind that your house will no doubt appreciate over the next few years. It will do so whether or not you have a large or a small mortgage. The more equity you have in your house will put more money in your pocket when you sell it, but while you are living in the house it is only "dead equity."

In essence refinancing can be used to transform available equity in one's house into ready cash, available for other purposes or expenses.

Refinancing an adjustable-rate mortgage into a fixed-rate one, ensures a steady interest rate over time, by removing the risk that interest rate might increase terribly.

As no one is perfect, also there is not good thing without some risks and cons:

Lenders sometimes offer no-cost refinancing, charging you zero points for your mortgage loan. Generally, you will pay a higher interest rate than on an otherwise comparable mortgage with points, and you'll still have to pay the other costs associated with the loan. there are also closing and transaction fees typically associated with refinancing a loan or mortgage. In some cases, these fees may outweigh any savings generated through refinancing the loan itself.

Some sub prime lenders charge excessively high fees, but you can screen these out by comparing mortgage rates.

All you need is to determine the goal behind seeking a refinancing, collecting information about several lenders options and then work on your refinancing.

Finally it became apparent that refinancing, as having lots of advantages it also has disadvantages and risks. You should pay great attention that some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan, depending on the type of loan used to refinance the existing debt.

So you have to be careful and Calculate the up-front, ongoing, and potentially variable costs of refinancing while making a decision on whether or not to refinance and you have to Check your mortgage agreement to see whether it contains a prepayment penalty, and try to avoid prepayment penalties in any refinanced mortgages.

Consumers all across this great nation are bewildered by difficulties and restrictions that come with refinancing your mortgage these days. With less options available for cash out, many borrowers are forced to refinance their $500,000 mortgage when they only need $40,000 cash out. Just last year, you could get cash quickly with a home equity loan or credit line. Unless you are exhaling equity, most lenders will require a full mortgage refinance for any type of cash out. If you have more than 20% available equity in your home, then you can get a 2nd mortgage without refinancing your 1st mortgage, but with the declining home values lately...Who has equity in their home.

It is easy to get confused but there is nothing wrong with getting home financing advice from several loan officers and financial advisors. Another dilemma for many bad credit homeowners is fixed rate refinance loans that offer cash back. Millions of consumers have their adjustable rate loans set to adjust in the next twelve months, but the mortgage lenders simply do not have loan programs to refinance these borrowers with. It look like this next year will break records for home loan defaults, foreclosures and personal bankruptcies.

FHA has offered some good refinancing options for people with bad credit, but because of the loan limits in high cost regions, only a fraction of homeowners will qualify for a FHA refinance loan. According to loan officer Brendon Daly, "homeowners must address the following questions before refinancing their home.

1. Does you Loan-to-Value qualify you for mortgage refinancing?

2. Does your credit score meet lender requirements for refinance loans?

3. Can you document your income to meet Debt-to-Income requirements from underwriters?

Mr Daly warns homeowners to know their qualifications before applying for a refinance or home equity loan online. It is a good idea to discuss your goals, qualifications and budget with a loan officer who has experience. The home financing market is changing, so you need to align yourself with financial advisors who will not waste your time or money.

With increasing mortgage rates and decreasing home values, its not easy to take out a home equity loan or refinance your existing mortgage to simply get cash out. Bottom line you better have money in the bank and solid cash flow each month, because it is not a good time to sell your home.

Most homeowners realize they will pay about twice the purchase price of their home on a traditional mortgage - a mortgage that will take about 30 years to pay off.

Introducing a way to break that cycle of financial drain-the Money Merge Account. Developed by a team of financial experts with years of experience in the mortgage industry, the MMA rapidly reduces the principal of your mortgage, practically eliminating the interest from accruing on your loan. Your 30-year mortgage can now be paid off in about 8 to 11 years, with no change to your lifestyle or refinancing of your existing mortgage.

The Money Merge Account is not a bi-weekly payment or debt roll-down system. It's an entirely new approach that gives homeowners flexibility with their money and complete financial freedom.

A side-by-side comparison of a traditional mortgage repayment shows the savings potential using the MMA system. A 30-year, $136,000 mortgage at 5.25%, when paid through conventional monthly payments, will result in a 30-year total repayment of $270,784 - nearly twice the cost of the home. The MMA program can repay the same mortgage in 11.3 years with a total repayment of $181,217. An incredible savings of $89,566 is realized on the same income, with the same mortgage, at the same interest rate, and without any changes to your standard of living. MMA is simply one of the fastest ways to repay a mortgage and be on your way to financial freedom.

The Money Merge Account consists of three major components:

1. Your Existing Primary mortgage

The existing mortgage on your home is the foundation for the Money Merge Account.

2. An Advanced Line of Credit (ALOC)

The MMA Program uses an advanced equity line of credit as a vehicle or a tool to drive the program. The equity line of credit must have the capacity to operate similarly to a primary checking account and be set up with an open-end interest calculation (rather than a closed-end interest calculation). Combined with the MMA's web-based system, this creates a formula in which the money in your line of credit account generates an interest cancellation on your primary mortgage.

3. MMA software

The online MMA system makes a connection between your bank account, the advanced line of credit, and your primary mortgage. Each time you deposit income into your account, it registers as a decrease to your mortgage balance. By decreasing your mortgage balance, you now lower the balance on which interest accrues. By decreasing the balance on which interest accrues, you increase the portion of your monthly payment which is credited toward your principal pay down. The algorithms in the proprietary MMA system are systematically programmed to create the highest interest savings possible in the least amount of time.