Mortgage Rate News

One way you can pay off your mortgage faster, and save money in mortgage interest charges, is to arrange biweekly payments. These are payments in which you make half your mortgage payment every two weeks. Here’s how it works:

Because the calendar does not have a set number of days for each month (ranging from 28 to 31 days each), there aren’t a set number of weeks, either. There are 52 weeks in year. This means that if you are on a biweekly schedule, making a payment every other week, you will make 26 payments in a year. Divide that by 2, and you get how many “monthly” payments you will be making: 13. But there are only 12 months in a year. So by making your mortgage payments on a biweekly schedule, you are actually making an extra payment each year.

The main benefit of such a practice is that you can knock off between 5 and 8 years of your mortgage term (depending on when you start) simply by switching to biweekly payments. And you will save thousands – probably even tens of thousands – of dollars in mortgage interest charges. You will also build equity (or “ownership”) in your home faster, since you will be putting more toward the principal each year.

Some things to watch out for with mortgage biweekly payments

As always, there are some caveats to paying off your mortgage faster with biweekly payments. First of all, you should find out if you will end up with a pre-payment penalty. Most of the time, your savings will still be greater than the penalty, but it is a good idea to make sure.

Another thing to be aware of is the fact that some mortgage lenders charge a fee to set up a mortgage on biweekly payments. Again, the savings are usually worth the fee, but you should carefully weigh your options to makes sure. Related to that enrollment fee are transaction fees. Some mortgage lenders charge a transaction fee every time money changes hands. So you might find yourself slapped with fee each time you make a payment

Thoroughly check your mortgage lender’s policies on mortgage loans with biweekly payments. Then see if such an arrangement will work for you.

Tags: paying off mortgage, paying off mortgage faster, mortgage loan blog, mortgage biweekly payments,
mortgage interest, mortgage lenders, prepayment penalty

On Monday, a bill designed to curb predatory lending practices was introduced to the U.S. House of Representatives. This bill is designed to hold mortgage lenders more accountable for whom they approve for home mortgage loans. The idea is to stop the practices that lead to such loans as 125% equity home loans, and practices, such as inflating an applicant’s income to get a higher loan amount and allowing 50% debt-to-income ratio applicants to receive home mortgage loans, that result in almost-inevitable foreclosures. MarketWatch reports on the predatory lending bill, introduced by Barney Frank, D-Mass.:

The bill creates a national standard for originating mortgages that will cover every mortgage originator, Frank said, including what he called a “common sense” approach to writing loans.

“People should not be loaned money beyond what they can be expected to pay back,” Frank told reporters on a conference call Monday morning. The bill calls for states to adopt rules that would cover originators and contains a fallback federal law if states don’t come through.

At a time when many loans to borrowers with poor credit are set to readjust to higher interest rates, Frank’s bill also imposes some new liabilities on investors that securitize such loans.

In addition to requiring mortgage lenders to make good faith assessments as to whether or not someone can pay back their home mortgage loan, the bill also protects the right of a borrower to sue the lender, although there are no provisions regarding class action lawsuits.

Predatory lending has been blamed for many of the foreclosures, as well as being a main factor in the current credit market crisis resulting from the subprime lending crash. More accountability for mortgage lenders could lead to sounder lending practices. This would limit the number of people eligible for home mortgage loans, as well as make it harder for people to buy more house than they can afford.

Tags: predatory lending bill, home mortgage blog, home mortgage loans, Barney Frank,
mortgage lenders, home loans, U.S. House of Representatives

One of the concerns right now with home mortgage loans is how difficult some might find it to get one. In these cases, financing a home sometimes takes a little more interesting turn. Seller financing can allow someone to buy a home, making payments to the seller. But this can be risky for the seller, since he or she is responsible for foreclosure if the buyer defaults. Simultaneous closing can be a way to limit the risk to the seller.

Simultaneous closing

A simultaneous closing is so named because two different transactions take place on or close to the same day. These are transactions regarding the same mortgage loan. In the first transaction, financing for a home is arranged between the seller and the buyer. The seller agrees to finance the home mortgage. The second transaction is when a note investor agrees to buy the mortgage from the seller. The note investor pays cash for the mortgage, and it is no longer the seller’s responsibility. The buyer now makes payments to the note investor. The seller should understand that the note investor will then get the benefits of interest paid on the mortgage.

Difficulties to simultaneous closing

There are some difficulties associated with simultaneous closing. Some title companies are unaware of how to handle such transactions, and this can create problems. Also, a lawyer might be a good idea. Additionally, due to credit market issues, there might be some difficulty in finding someone willing to act as a note investor. This problem might be solved if you find a buyer that JUST misses the more stringent standards now being employed by many mortgage lenders.

Benefits of simultaneous closing

Most of the benefits to this mode of financing a home have to do with speed. It allows you to find more “qualified” buyers for a home, and this means you can sell the home faster. And if you can find a note investor, all of the drawbacks and risk involved in seller financing can be eliminated.

Tags: seller financing, simultaneous closing, home mortgage loans, mortgage loan blog,
interest mortgage, financing home, benefits simultaneous closing