Oct 2, 2013 | Mortgage Tips
When you have been researching your different options for a mortgage on your home, you might have heard of an “Interest-Only Mortgage”. What exactly does this type of mortgage mean and how does it work?
Usually when you take out a loan, you must pay back the capital debt (the amount you borrowed) and the interest on that debt. An interest-only mortgage offers a cheaper option for purchasing a property, because you will only be making payments on the interest and not the capital.
Compared to a repayment style mortgage where you are paying down the principle of the loan, an interest-only mortgage will have much lower monthly payments.
However, when you reach the end of the mortgage term with an interest-only mortgage, you will not have paid off any of the original principle of the loan. This means that you will still not be any closer to owning the home than when you started, whereas with a repayment mortgage you would be in full possession of the property.
You will reach the end of the loan term, still owing the lender $250,000 or whatever the value of the house was. Also, if you do not pay off that lump sum at that point, the lender will charge you interest on the entire loan for the full time.
From the description of how it works, it seems like there would never be a good situation for taking out an interest-only mortgage. However, if you are stretched financially and you are desperate to get onto the property ladder it might be a viable option. Some people take on an interest-only mortgage so that they can buy their first home, then when their income goes up they switch to a repayment mortgage.
These types of mortgages are often used by buy-to-let investors, who are able to claim their tax back against the mortgage interest. If this is your goal, you might find this strategy advantageous.
To find out more about mortgages and determine the best option for your needs when buying a home, contact your trusted mortgage professional.
Oct 1, 2013 | Around The Home
Making the decision to build a home might be one of the biggest you make in your life. You’ve found the perfect plot of land and have a vision of what type of home you want, but you need someone to bring your dream to life.
That means it’s time to start interviewing architects.
Hiring an architect isn’t as simple as just calling up a few and seeing who might have the time.
You’ll want to ensure you choose a professional that understands your design aesthetic, communicates well, can design on budget and has an upstanding reputation.
Below are a few key questions to ask when deciding whom to hire.
Do You Have A Specific Design Style?
When interviewing architects, be sure to ask each one if they have a specific aesthetic and if you can see a portfolio of his or her work. While most are adaptable, they usually all have design themes that recur in their projects.
Whether you want a minimalist structure or LEED certified construction, you’ll want to know they have the experience.
What Is Your Fee?
You’ll need to inquire whether they charge a flat fee for their designs or a percentage of the total building cost. Most architects charge a percentage of the overall cost of your home, usually ranging from 5-20 percent.
This is important to know because it means that for every floorboard installed, you’ll need to add on the architect’s additional percentage.
Do You Provide Project Management Services?
There are many services that architects should include within their contract, such as checking the contractor’s work, making adjustments as the construction moves forward and obtaining lien waivers.
Get a list of what each architect you interview includes in his or her fee. Additional charges can add up and might play a part in who you choose.
Interviewing architects and finding the right professional can make all the difference when it comes to building exactly what you want. One you work well with can make the construction experience extremely pleasant, while a negative relationship can leave you hating your new home.
So do your research and be sure to get references.
Sep 30, 2013 | Legislation
You may have heard the Consumer Finance Protection Bureau (CFPB) has made new rules regulating the mortgage industry. No one, including the CFPB, is quite sure when the new rules will take effect, but the industry has been assured that it will be in 2014.
One of the most noticeable changes that real estate agents, loan officers and buyers and sellers will see is a new form. The good old Housing and Urban Development Form-1, known to most as the “HUD-1” or Settlement Statement is going the way of the dodo bird. (more…)
Sep 30, 2013 | Housing Analysis
Last week brought a variety of housing related news. Highlights included the S&P/Case-Shiller Home Price Index for July, which showed a 12.40 percent year-over-year increase in national home prices. This was up from 12.10 percent in June.
The FHFA Housing Price Index reading traces home prices on properties securing mortgages owned or backed by Fannie Mae and Freddie Mac. The year-over-year reading for July showed an increase of 8.80 percent as compared to a year-over-year reading of 7.80 percent in June.
Rising mortgage rates and rising home prices have caused some buyers to leave the market, while others are jumping in before mortgage rates move higher. Pent-up demand for homes and short supplies of homes for sale are expected to sustain buyer interest and home prices.
The Consumer Confidence Index for September fell to 79.70 percent for September as compared to August’s reading of 81.80 percent, but was slightly higher than the expected reading of 79.50 percent.
Sales Of New Homes Surpass Expectactions
Sales of 421,000 new homes in August surpassed expectations of 420,000 sales and the revised number of 390,000 sales of new homes in July. A short supply of existing homes for sale is attracting buyers to new homes.
Freddie Mac’s weekly Primary Mortgage Market Survey provided good news as average mortgage rates fell. The average rate for a 30-year fixed rate mortgage was 4.32 percent as compared to last week’s 4.50 percent.
The average rate for a 15-year fixed rate mortgage was 3.37 percent as compared to last week’s reading of 3.54 percent. Discount points were unchanged at 0.70 percent. The average rate for a 5/1 adjustable rate mortgage was 3.07 percent, which was four basis points lower than last week. Discount points were unchanged at 0.50 percent.
Pending home sales fell by 1.60 percent in August as compared to July; the National Association of REALTOR cites higher home prices and mortgage rates along with depleted supplies of available homes as reasons for fewer signed contracts in August.
The West reported a drop of 1.60 percent in pending sales and the Midwest reported 1.40 percent fewer pending sales in August. The Northeast came out ahead with 4.00 percent more pending home sales in August.
Weekly jobless claims were reported at 305,000 new jobless claims as compared to expectations of 327,000 new jobless claims and the prior week’s reading of 310.000. The Federal Reserve recently cited the national unemployment rate of over seven percent as a clear indication that employment levels are not recovering quickly.
Next Week’s Economic News
While few housing and mortgage related reports are set for release next week, the calendar should provide indications of overall economic conditions. On Tuesday, Construction Spending for August will be released. Wednesday brings the ADP employment report for September. This report tracks private sector jobs.
Thursday brings Freddie Mac’s PMMS report of average mortgage rates and the weekly jobless claims report.
The federal Non-farm Payrolls and National Unemployment Reports for September are set for release on Friday.
Sep 27, 2013 | Around The Home
Weather patterns across the United States seem to be getting more and more erratic. From tornadoes and earthquakes to flash floods and wild fires, there are many natural disasters that can quickly consume your home without warning.
Because you never know when disaster might strike, it’s best to be prepared.
Disaster insurance is the only precaution you can put in place to ensure compensation for your belongings and get your life back to normal as soon as possible. Below are the tips to take before misfortune strikes.
Create An Inventory
Most insurance agencies prefer if you include photographs of every room, including the insides of closets and cabinets. Shooting a video is even better. Then you can include audio of how much things cost or if they’re one of a kind.
It’s also a good idea to create a spreadsheet with a list of major items and their value by room. Be sure to email these to yourself, so that you can access them anywhere.
Double-Check Your Coverage
Once you’ve inventoried your possessions, then ensure you have enough coverage. Also, speak with your agent to see if there are any supplemental disaster insurance policies he or she would recommend for your region.
Tips To Do After A Disaster Does Strike
Contact Your Insurer Immediately
Call your agent as soon as possible and be prepared for mountains of paperwork. Be sure to ask for the claim number for your region and use it on all paperwork and in every conversation. This will help expedite your claim.
Secure Your Property
It’s your responsibility to ensure your property is secure after the disaster. Be sure to take photographs and video and then cover or stabilize any vulnerable points. You don’t want the insurance agency to have any discrepancies when determining if the damage was done during the disaster or afterward.
Keep A Correspondence Record
You are going to be completely overwhelmed after such an unfortunate event, but it’s important to maintain your wits. Keep a log of every conversation you have with insurance agents. Log the time, name, phone number and the key points of the conversation. This will help minimize the he-said-she-said accusations that can arise during these hectic times.
Hopefully you’ll never have file a disaster insurance claim. However, if you do, it’s best to be as prepared as possible. Create an inventory of your possessions and make sure you have the appropriate coverage. Then if mayhem strikes, you’ll be that much closer to putting your life back together.
