Option ARM loan- Whether to own a home or to dispose it!


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An Option ARM loan is the type of mortgage loan in which the borrowers can choose their payment options. And the interest rates are adjustable. You are free to opt for either a fully amortizing payment, a minimum payment or payments towards interest amount according to your budget for a particular month. The option ARM loans are referred to as ‘Payment option ARM’, ‘Cash-flow loans’, ‘Pick a payment loans’ or ‘1% mortgage loans’. The loans can be used only if you need flexibility in the terms and payments.

It is not however, advisable to take this loan for the purpose of purchasing a more expensive home than you could afford. While the flexibility of the loans is quite impressive, option ARM loans can be very risky. If you are not able to make bigger payments, you will not be able to build equity in your home. It is natural for anyone to choose smaller payment. You will owe more on the house by the end of the month than at the beginning of the month. This will also extend the period of repayment. It is not possible to keep paying small amounts forever. You are required to make more towards the personal loans with bad credit amount gradually to settle the loan completely.

The risks associated with the offer

Due to negative amortization, you owe more on your home, say 120% or so. Every 5 years or so, your loan will be recast and you can see that the guaranteed minimum payment gets increased sharply. You are sure to be in trouble if you are not able to manage the increased amount of monthly payments. You will end up selling the house to settle the debts. By this time, your loan balance would have been greater than the value of the home due to negative amortization. You will be in a position to write a check to completely settle the debts due to option ARM loan.

In some of the option ARM loans, there is a cap on the rate of interest to set some limit to keep it from getting high. By this plan, the borrowers will be certain that their payment will not go beyond certain level. There are options to pay the monthly payment and pay extra amount for covering the interest to avoid negative amortization. The personal loans no credit check is preferred by many due to the low monthly payments. Many homeowners feel that with lower monthly payment, they can make additional interest payments whenever possible, to minimize the balance of the loan. This can be considered good choice if the homeowners are confident of making more payments in future to settle the loan.

If it is not possible to afford the increased monthly payment amount as necessary, there is the risk of losing the home. The owners who occupy their homes benefit from option ARM loans as the value of the home is almost always appreciating. Those who do not have regular fixed income also benefit from this loan that has payment options associated with the loans. Whether the ‘option ARM loan’ will be advantageous to you or not, can be understood by making calculations as to your needs, income and affordability to make repayments as agreed. A discussion with financial experts will help you make your decision and enjoy the benefits in option ARM loans.

Houses Bought As-Is for ALL CASH! Fast Closings!

Home: Abode and Intrinsic Equity-Based Asset

Houses Bought As-Is for ALL CASH! Fast Closings!

Home, the comfortable, warm and protective abode – to most of us – is the single biggest asset we have!

Home is what backs you up when you need to borrow money, making it one of the greatest advantages of owning it in the first place. During the pre- recession years, there was a major boom in the amount of people looking to use their homes to get access to extra money when they needed it most. One of the ways they did this was through second mortgages and equity lines of credit.

Second mortgage loans are loans made in addition to the first mortgage, and they are usually based on the equity a borrower has built up his/her home. The most common uses for second mortgages and equity loans were to fund home renovations, college education for children and extended medical expenses, although some borrowers had a tendency to abuse the process by refinancing multiple times due to the rapid increase in property values during that period.

Processing of secondary loans and lines of credit was much simpler then and would be today for the same reason, if there was enough equity in homes based on today’s values; and that is since the borrower would have already gone through the mortgage borrowing process once, the underwriting required to get a second mortgage would not be as tense an experience for the borrower.

The cost of these types of transactions will be lower than when the borrower applied for the original mortgage loan. Provided there is enough equity in the home to support a secondary financing, the upfront costs to a borrower seeking this type of financing would be greatly reduced because there is no need for a down payment; the loan amount is much smaller making a percentage of the loan amount proportionately less; and – although the interest rate will be higher in most cases – the amount paid in interest over the life of the loan is much less due to the shorter term (usually 10 to 15 years).

One thing to keep in mind when considering a second mortgage is not take a second mortgage unless payments on the original mortgage balance were made on time for a considerable amount of time. Since the prospects for obtaining a “piggy back” 100% LTV (Loan to Value) mortgage loan are near to non-existent in this post-recession economy.

When a borrower obtains a second mortgage loan the lender places a lien on the primary residence of that borrower (second mortgages on properties other than the primary residence are doubtful). This lien will be recorded in 2nd position after the primary or 1st mortgage lender’s lien, hence the term second mortgage. Second mortgages aren’t for everyone, though.

Borrowing more than 80% of the home’s value for a first mortgage will subject the borrower to private mortgage insurance. The monthly payments will obviously also be a factor. However, it is not recommended that a homeowner (or home buyer for that matter) attempt to obtain 2nd mortgage financing with an above 80% LTV ratio. This will lead to excessive costs if there is such a loan type available.

Proceeds from a second mortgage loan can be used for just about anything these days. Many consumers take out 2nd mortgage loans to consolidate debt, do home improvements or provide a college education for their children, as others did in past years. Whatever a second mortgage borrower decides to do with the loan proceeds it is important to remember that defaulting on the payments can lead to foreclosure and eventual loss of the home.

So an individual making application for a second mortgage would want to make sure that s/he is taking the loan out for a worthwhile purpose. A secondary mortgage loan can be of great help to the borrowers, although the borrower must take steps to ensure that s/he does not squander away the advantages (or proceeds) of the second mortgage, when available.


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How to Negotiate a Mortgage Loan Modification with Your Lender


Houses Bought As-Is for ALL CASH! Fast Closings!

Mortgage modification can be defined as a process in which the mortgage terms are modified in a manner outside the contracts original terms of agreement between lender and borrower. This change in terms is on the basis of either the borrower’s inability to process the payments as per the mortgage or the mandate of the government to the lenders. The borrower may be late, bankrupt or in foreclosure when applying for the modifications.

Mortgage modification can benefit the borrower in many ways. The interest rate is reduced. Principal, late fees and other penalties are reduced. The term of loan is lengthened. The monthly income is capped to household income percentage. Mortgage forbearance program is adopted. Modifications are made at the lenders discretion. The lender offers better terms with the motivation and expectation of the borrower being able to afford payment which is lower. This is more valuable than proceeds of foreclosure sale.

Mortgage modification program offered by the government may be voluntary for the lender but there are incentives for participation for the lender. A mortgage modification program can also be mandatory where the lenders are required to modify mortgages in a manner that meets the criteria with regard to borrower, property as well as the history of loan payment. One of the federal mortgage modification plans is the home Affordable Program of Modification. This plan helps the struggling homeowners who are at foreclosure risk. This is done with the help of lenders by lowering the monthly mortgage payments. If one fails to meet the mortgage payments, one should not hide it from the lender who should be approached for assistance. The mortgage company will prefer to offer modification than commencing the proceedings of foreclosure which is costly for them.

A few steps have to be taken to negotiate a loan modification with a lender. It is important to know the state of ones finances before the lender is contacted. Find your monthly income, how much payments are done in bills and areas where the costs can be cut. A financial analysis should be done with the help of nonprofit counseling service. The counselor can help in negotiating with the lender. A good place where one can start is the consumer credit counseling.

The lender should then be contacted with ones needs, explaining the situation and the help one provide in a situation. Decide on a solution to the lenders query on how one can pay the loan eventually. An initial proposal should be submitted. If the financial strain is temporary, the lender can be requested for forbearance, or postponing the payments until the recovery of finances which may take a few months.

If one is not able to pay higher monthly payments, one can request the lender to grant a loan modification. One will then be required to provide complete financial history with details of income as well as the monthly expenses. It would be ideal if one has some kind of cushion in the income in order to justify the modification of the mortgage loan, if the lender changes the mortgage with fixed rate mortgage. On should show and explain the lender that fixed rate mortgage can be paid comfortably through extra income attend through a second job. This will result in easily being granted the modification of mortgage.

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