Archive for category Mortgage

During the current financial crisis, one of the greatest concerns of people is the direction that mortgage rates would take during the course of the year. While most predict that it will come down, based on current and past trends, there are some that suggest it might temporarily go up a little bit before coming down.

Although it is difficult to predict mortgage rates precisely, one can make a good guess based on recent events in the country in the financial sector.

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The idea of having your own home is a huge benefit; or rather a privilege on its own, but having mortgage tax benefits attached to it, make the thought even more lucrative.

Few homebuyers keep in mind that the interests they will pay on their mortgages are tax deductible. For the sake of the argument, if you take out a mortgage of $200 000, you will be able to deduct in the vicinity of $12 000 on your tax for the first year of payments made.

 Apart from that, you can deduct your private mortgage insurance as well now as part of your tax deductions. In addition, up to 2010, all mortgage holders may deduct mortgage insurance payments made since January 2007.

In the event where you are a first time home owner and had to pay points on your mortgage, part of these points are also deductible in the If you are a new home-buyer and you paid points on your mortgage, you can deduct a portion of those points during the matching year of purchase.

Another mortgage tax benefit applies to those first-time homebuyers who have a lower income than the average income for the area they reside in. First time homebuyers can make use of this type of assistance by deducting part of the interest paid on their mortgages every year. However, it is important to note that this credit will have a decreasing effect on the percentage of taxes you will be eligible to deduct from your taxes.

In addition to all of the above, it is important to take into account that there might be other tax benefits that could apply to your specific situation. It is advisable to speak to a professional tax consultant in this regard in order to obtain more informative details pertaining to your current situation.

You have made an offer on the house of your dreams, or at least the house that corroborates with your budget and financial capabilities. The only condition that is still to be met is securing a mortgage by making a mortgage application.

When it gets to a mortgage application one is not sure to which side of the coin you must look at. On the one side, with the current fiscal situation, banks and lenders are reluctant to provide loans as easy as it use to be with much stricter qualifying requirements than before. On the other side of the mortgage coin are the mortgage interest rates that are currently nearing an all time low which make it the ideal time to take out a mortgage at a fixed rate.

Whatever way you prefer to look at it, it is important to know what the lender looks at when assessing your mortgage application.

There are two key considerations involved:

Your financial ability

Your degree of commitment to pay off the mortgage.

1:Your Financial Ability

The first consideration is to establish your current personal fiscal abilities. This is done by confirming that you are in deed employed or have a secure income and investigate your total monthly income and expenditures.

If you are employed with the same employer for two years or more, lenders interpret it as to you being a low risk due to the stability reflecting through your employment term. The calculated monthly repayments will be accounted against your monthly income and expenditures as an indication as to wether you have the fiscal ability or not.

2:Degree of Commitment

Your previous credit record will portray your degree of commitment towards debt and how you act towards your financial commitments. Another defining factor relating to your degree of commitment is the way you will utilise the property and will reflect in a large way the risk you impose.

One must be cautious not to loose track of reality when you are soon to become a homeowner for the first time! By not familiarising you with all the facets on mortgages, entails the dangerous probability to involve serious inconveniences once you start paying back your mortgage.

Have a look at these important factors you need to know before indulging in this thrilling experience:

1.Owe less – Pay less.

Start by saving up in order to be able to pay a substantial down payment. The more you pay on a down payment, the smaller the mortgage will be you need to repay which obviously results in lower interest payments. Adding a few extra dollars on your monthly mortgage payments makes a tremendous difference on the long term.

2.Negotiate for lower interest rates

Very few people know or realise that they can actually negotiate for better interest rates on mortgages. Too often mortgage applicants assume that the proposed rate is a condition to the mortgage loan. Negotiate on a better interest rate as the proposed rate.

3.Broker’s fee

First time homebuyers can save many finance charges if they put in the effort first to familiarise them with the various methods on negotiations. The rate charged by the mortgage broker is just as negotiable as the interest rate. There is stiff competition between brokers. Once they know you have credibility to buy, they surely do not want you to get out of their hands. Make use of this advantage.

4.Be Sure!

When you are not sure about any aspect of the process, find professional assistance. If you are already dealing with a professional and do not feel comfortable, get the second opinion from a similar professional or ask questions until you get a satisfactory reply. The times spend or the lack thereof when obtaining a mortgage loan will serve you for the entire duration of the mortgage and is a mere fraction of what the implications will be if you have only asked.

Quoting off hand from the book “A History of Interest Rates,” published by Rutgers University Press, states that the average mortgage rate in 1945 was 4.7% and according to perceived trends that mortgage interest rates are following at the present moment, it is likely that we will see the US mortgage rate falling to the lowest rate since World War II.

In spite of the unsure economy experienced by citizens of the United States, many mortgage applications, and more specifically the re-financing of mortgages, has been made by consumers in the attempt to salvage their mortgage payment problems or foreclosure proceedings by making use of the reduced mortgage interest rates and as a result, the slashing of financing costs as well.

Unfortunately, regardless of dropping mortgage interest rates, is not enough to fan the flames of the residential property market. In a climate where job uncertainty and effective job losses are at the order of the day, it is unlikely that lower mortgage interest rates will spur consumers to invest in 20 to 30 year mortgage debt to buy residential property.

Seen from the mortgages financing side, with progressing job losses, dwindling stock markets, decreasing property values and recent home loan default figures banks are not too eager to flock out loans that easy as before, lower mortgage interest rates in spite.

Further more, if you look at the delinquency relating to mortgages it is estimated to be the highest since 1972. Home loans in foreclosure also reached an unprecedented 3,3%.

It is clear that in spite of the federal government’s attempts to lower mortgage interest rates and buying supplementary mortgage bonds of to the extent of $1.25 trillion, will not be enough to encourage consumer to buy residential property or plead a case for the consumer at the bank.