A Mortgage Loan is offered on mortgage property which can range from personal mortgage property to commercial or real estate properties.
Properties are kept under mortgage as a security for paying off a loan. It can be noted in this context that the term “mortgage” and “mortgage loan” is used synonymously and is often interchangeable.
Technically speaking, a mortgage is defined as the conditional pledge to ones’ property secured against the performance of an obligation or the repayment of a debt. According to investment and economic parameters it is debt instrument secured by forwarding any commercial or real estate as collateral which gives the creditor conditional ownership over the asset which can be discharged only upon repayment of the loan amount.
Mortgage loans are generally availed of in cases of acquiring residential or commercial properties where the initial value is very high. Mortgage loans are lower priced than other loans as value of the property reduces the risk for the loan provider. In other words, a mortgage loan is secured against the property intended to be bought on the part by the borrower. Mortgage properties usually entail certain restrictions on the use or disposal of the property such as paying any outstanding debt before selling the property. Investing in mortgage properties through loans has become the accepted practice in the developed countries such as the USA and UK.
Some important participators in the context of mortgage loans are:
The Creditor is an individual or institution who has legal rights to the debt secured by the mortgage and often makes a loan to an individual of the purchase money for the property. In terms of institutions, the creditor can be banks, insurers or other financial institutions. He maybe called as mortgagee or lender.
The Debtor is the person who takes the mortgage loan from the creditor and must meet the mortgage conditions imposed by the creditor in order to avoid the creditor enacting provisions on the mortgage to recover the debt. Usually a debtor can be an individuals,
landlords or businesses. The debt issued on the mortgage is also referred to as hypothecation which will use the services of a hypothecary to assist in the process. He is also known as mortgagor, borrower or obligor. Some other terms in this context may be noted as conveyance or the legal document facilitating the transfer of ownership of unregistered land, a freehold meaning the ownership of land and the property, the title recording the ownership of the property and land and a mortgage deed which specifies that the mortgagee or creditor has a legal charge over the ownership of the property. This essentially signifies the transfer of conditional ownership or interest over the asset.
Some of the common types of mortgage rates are: Adjusted Rate Mortgage
Fixed Rate Mortgage
Prime Rate
The FRM rates on mortgages remain the same over the tenure of the debt which with interest rates a bit higher than 30 year treasury bonds at the time the mortgage is issued. The debtor is required to pay the interest on the mortgage or the mortgage rate and a little bit of the principal with the interest on the principal falling over time. In case of the ARM, the mortgage rate may change in response to the Treasury Bill rate or the Prime Rate. ARM is structured so as to follow market rates with a maximum ceiling rate which cannot be exceeded. ARM’s generally start with lower mortgage rates in order to accommodate future risks out of interest rate fluctuations. Some of the prevailing mortgage rates in the USA are 5%-5.5% for 30 year or 15 year FRM’s, 6% for 30 year fixed jumbo mortgage rates and around 5.5% for ARM.
Mortgage rates can also be “Prime” in nature. Prime rates are the lowest interest rates offered by mortgage companies to their most credit-worthy borrowers.
Lastly, it can be noted in this context that home loans or home mortgage loans is gaining increasing popularity in India with the Home Financing sector contributing to the immense growth of the mortgage financing industry in recent years. The mortgage rates are set on a fixed or floating rate basis varying between institutions in the range of 12.5% to 16% with loans being offered for 15 years although some of the mortgage companies extend the mortgage tenure up to 20 years or more. The leading mortgage loan providing banks in the case of India are HDFC, ICICI and SBI.
In case of the USA the top mortgage companies can be named as Fannie Mae, Ginnie Mae, ABN AMRO and Countrywide Financial.
Source
Tuesday, June 15, 2010
Monday, March 15, 2010
Keep mortgage loans in the family
Low-interest intra-family loans can be the best way for parents to help their children purchase a property.
The strategy makes the purchase more affordable, increases the size of the home a cash-strapped purchaser can afford, and helps the parent leverage his gift to reduce a taxable estate.
The parent must charge interest at a market rate on family loans, says Ken Kilday, an adviser with USAA Wealth Management, or face IRS penalties. But parents can then take the $13,000 to $26,000 for a couple — the amount that can be gifted without eating into the gift exemption and applying it annually toward paying off their child’s loan.
Kilday also suggests that parents put in their will that upon their death, the loan be fully forgiven.
Source
The strategy makes the purchase more affordable, increases the size of the home a cash-strapped purchaser can afford, and helps the parent leverage his gift to reduce a taxable estate.
The parent must charge interest at a market rate on family loans, says Ken Kilday, an adviser with USAA Wealth Management, or face IRS penalties. But parents can then take the $13,000 to $26,000 for a couple — the amount that can be gifted without eating into the gift exemption and applying it annually toward paying off their child’s loan.
Kilday also suggests that parents put in their will that upon their death, the loan be fully forgiven.
Source
Sunday, February 28, 2010
How to find the best mortgage for 2010
Will 2010 be the year that more borrowers manage to take advantage of rock bottom interest rates? We look at how to find the best mortgage for the year ahead.
Savings have been squeezed, wages have been frozen, jobs have been lost, energy bills are rising, and tax-increases loom large on the horizon.
Makes depressing reading, doesn't it? By now, we're all painfully aware of the wounds inflicted by a recession-tainted year – and that they will take some time to heal too.
But for homeowners, a glimmer of light flickers amid the gloom: rock-bottom interest rates have meant that, for some, mortgage repayments have become significantly cheaper.
Most on standard variable rates and all on tracker home loans tied to the Bank of England's 0.5% base rate have seen monthly bills shrink, shrink... and shrink some more.
Some lucky borrowers even celebrated a 0% rate in 2009 because their existing deals had promised to undercut the base rate.
Those on fixed rate mortgages have not seen rates fall, but some canny and financially secure households have used them to their advantage.
By furiously eating away at their outstanding debt, through overpaying on their mortgages instead of ploughing earnings into poor-value savings accounts, they have substantially boosted the return on their extra cash.
But the big question for homeowners, whether you are thinking of remortgaging or moving home, is: when is the right time to grab a new deal?
Source
Savings have been squeezed, wages have been frozen, jobs have been lost, energy bills are rising, and tax-increases loom large on the horizon.
Makes depressing reading, doesn't it? By now, we're all painfully aware of the wounds inflicted by a recession-tainted year – and that they will take some time to heal too.
But for homeowners, a glimmer of light flickers amid the gloom: rock-bottom interest rates have meant that, for some, mortgage repayments have become significantly cheaper.
Most on standard variable rates and all on tracker home loans tied to the Bank of England's 0.5% base rate have seen monthly bills shrink, shrink... and shrink some more.
Some lucky borrowers even celebrated a 0% rate in 2009 because their existing deals had promised to undercut the base rate.
Those on fixed rate mortgages have not seen rates fall, but some canny and financially secure households have used them to their advantage.
By furiously eating away at their outstanding debt, through overpaying on their mortgages instead of ploughing earnings into poor-value savings accounts, they have substantially boosted the return on their extra cash.
But the big question for homeowners, whether you are thinking of remortgaging or moving home, is: when is the right time to grab a new deal?
Source
Monday, February 15, 2010
BAD CREDIT HOME LOANS – REFINANCE YOUR MORTGAGE IN LAS VEGAS, NEVADA
Las Vegas, Nevada has seen a steep decline in home prices. Unfortunately, one of the reasons for this decline is the amount of bad credit home loans. Many bad credit borrowers purchased homes they could not afford prior to 2007; they have subsequently lost their homes in the recent years. If you are in a good financial position to refinance your mortgage in Las Vegas, Nevada you could greatly lower your monthly payment.
At the present time the 30 year fixed mortgage rate is right at 5%. If you have equity in your home and a good credit score, above 740, you could greatly benefit by going to the refinance process today. If you can save one full percentage point on your mortgage then you will end up saving money over the course of your home loan.
There are many mortgage lenders who are currently advertising low mortgage interest rates. At the beginning of the year these mortgage lenders step up their marketing program as they know many people are looking to refinance. It should not be difficult to find a mortgage lender in Las Vegas, Nevada that can help you refinance your current mortgage.
It is a very good idea to contact several lenders and see which lender will work best with you. Every financial situation is unique and each mortgage lender has experience with different situations. You will want to work with a lender who understands where you are financially and can help you get the lowest mortgage interest rate possible.
Source
At the present time the 30 year fixed mortgage rate is right at 5%. If you have equity in your home and a good credit score, above 740, you could greatly benefit by going to the refinance process today. If you can save one full percentage point on your mortgage then you will end up saving money over the course of your home loan.
There are many mortgage lenders who are currently advertising low mortgage interest rates. At the beginning of the year these mortgage lenders step up their marketing program as they know many people are looking to refinance. It should not be difficult to find a mortgage lender in Las Vegas, Nevada that can help you refinance your current mortgage.
It is a very good idea to contact several lenders and see which lender will work best with you. Every financial situation is unique and each mortgage lender has experience with different situations. You will want to work with a lender who understands where you are financially and can help you get the lowest mortgage interest rate possible.
Source
Thursday, January 28, 2010
BANK OF AMERICA REFINANCE MORTGAGE RATES – HOME LOANS STEADY
Bank of America refinance mortgage rates have been very steady in January after a volatile December. If you are looking for Bank of America home loans you are going to find a 30 year fixed mortgage rate around 4.9%. You must understand that this interest rate is for well-qualified homeowners who have a good credit score and have not missed bill payments in the recent past.
Bank of America has done a great job of marketing their home loans division. If you watch any financial network or news network on television you are going to see a commercial for Bank of America home loans within 30 minutes. The amount of money spent on marketing is likely to bring many new customers to Bank of America. How much money they will make in profit off this has yet to be determined.
After the purchase of Countrywide, Bank of America holds the most mortgages of any lender in the United States. Many of these mortgages are considered bad loans because Countrywide had great exposure to subprime mortgages. With this being the case Bank of America is having to work very hard to continue to make a profit.
Bank of America has gone through many changes over the last six months including a new CEO. Something the Bank of America has been scrutinized for is the current home loan modification program. At the present time a very small percentage of Bank of America home loans have been modified to lower monthly mortgage payments. Bank of America has publicly stated that they are going to work harder to make this program successful.
Source
Bank of America has done a great job of marketing their home loans division. If you watch any financial network or news network on television you are going to see a commercial for Bank of America home loans within 30 minutes. The amount of money spent on marketing is likely to bring many new customers to Bank of America. How much money they will make in profit off this has yet to be determined.
After the purchase of Countrywide, Bank of America holds the most mortgages of any lender in the United States. Many of these mortgages are considered bad loans because Countrywide had great exposure to subprime mortgages. With this being the case Bank of America is having to work very hard to continue to make a profit.
Bank of America has gone through many changes over the last six months including a new CEO. Something the Bank of America has been scrutinized for is the current home loan modification program. At the present time a very small percentage of Bank of America home loans have been modified to lower monthly mortgage payments. Bank of America has publicly stated that they are going to work harder to make this program successful.
Source
Monday, December 28, 2009
Mortgage lending bounces back: BoE
Mortgage lending bounced back during August after being negative for the first time on record during July, according to the latest figures from the Bank of England (BoE).
Net lending - which does not take into account redemptions and repayments - rose by £0.7bn in August- the highest level since February.
The rise comes after homeowners repaid £203m more than was advanced during July. However the twelve-month growth rate continued to fall by 0.1% to 0.8% and the three-month annualised growth rate remained at 0.2%.
Within total secured lending, secured lending by banks excluding the effects of securitisations increased by £2.7bn, above the £2.3bn increase in July.
The number of house purchase approvals stood at 52,317, in line with the July figure and above the previous six-month average. However, both remortgaging approvals and loans approved for other purposes fell.
Remortgaging approvals dropped to 29,059 from July's figure of 33,880 and loans approved for other purposes totalled 26,256.
Simon Rubinsohn, chief economist at Royal Institution of Chartered Surveyors (RICS) said it is re-assuring the negative reading recorded in July proved to be a one-off.
He added: "Mortgage demand is continuing to grow relatively strongly. However, it is not just the scarcity of mortgage finance which is making it difficult to satisfy this demand. The lack of appropriate properties on the market is compounding the problem by leaving prospective buyers with little real choice in some parts of the country."
Source
Net lending - which does not take into account redemptions and repayments - rose by £0.7bn in August- the highest level since February.
The rise comes after homeowners repaid £203m more than was advanced during July. However the twelve-month growth rate continued to fall by 0.1% to 0.8% and the three-month annualised growth rate remained at 0.2%.
Within total secured lending, secured lending by banks excluding the effects of securitisations increased by £2.7bn, above the £2.3bn increase in July.
The number of house purchase approvals stood at 52,317, in line with the July figure and above the previous six-month average. However, both remortgaging approvals and loans approved for other purposes fell.
Remortgaging approvals dropped to 29,059 from July's figure of 33,880 and loans approved for other purposes totalled 26,256.
Simon Rubinsohn, chief economist at Royal Institution of Chartered Surveyors (RICS) said it is re-assuring the negative reading recorded in July proved to be a one-off.
He added: "Mortgage demand is continuing to grow relatively strongly. However, it is not just the scarcity of mortgage finance which is making it difficult to satisfy this demand. The lack of appropriate properties on the market is compounding the problem by leaving prospective buyers with little real choice in some parts of the country."
Source
Tuesday, December 15, 2009
Mortgage approvals dip in August
The number of mortgage approvals for homebuyers dipped slightly in August, but net lending rose to its highest level since February, according to Bank of England figures published today.
A total of 52,317 mortgages were approved for house purchases during the month, down from 52,404 in July but above the previous six-month average of 45,787.
Net lending on mortgages, which takes into account repayments and redemptions, rose by £1bn in August after falling into negative figures in July when repayments outstripped borrowing for the first time since records began. The number of approvals for remortgaging continued to fall from 33,880 in July to 29,059, and was lower than the previous six-month average of 32,130.
Commenting on the figures Howard Archer, chief economist at IHS Global Insight, said: "While housing market activity has been lifted by the still significant fall in house prices from their 2007 peak levels and low mortgage interest rates, the upside continues to be limited by unfavourable economic fundamentals and tight credit conditions.
"At 52,317 in August, mortgage approvals for home purchases were still well below the average monthly level of 93,400 reported by the Bank of England since 1993. Mortgage approvals above 70,000 to 80,000 are generally seen as consistent with rising house prices."
Brian Murphy of the Mortgage Advice Bureau said the fall in approvals for purchases reflected "normal seasonal activity". "The fall in remortgage numbers are due to a combination of factors – seasonality, the lack of products on the market and fixed rates that still remain unattractive at higher loan-to-values (LTVs).
"For many homeowners the monetary advantage they might gain from switching from a lender's standard variable rate (SVR) to a fixed-rate product is not compelling enough to remortgage. Standard SVRs are around 4.6% at the moment and the typical two- and five-year fixed rates can't match this, unless homeowners are able to remortgage at 60%-65% LTV."
Separate statistics published today by the Building Societies' Association (BSA) showed that repayments continued to outstrip borrowing in the mutual sector. Consumers repaid £655m more than they borrowed in August, the BSA said.
Gross lending by UK building societies in the month stood at £1.5bn, while mortgage approvals totalled £1.3bn.
Adrian Coles, BSA director general, said: "Gross lending was subdued in August but appears to be at broadly similar levels to recent months after seasonal factors are adjusted for. However, the market remains very depressed compared to previous years.
"Despite signs of a modest improvement in market conditions in recent months, activity will not return to normal levels until funds for mortgage lending are more widely available to building societies and other lenders."
Meanwhile, the Bank of England's statistics also showed that repayments outstripped borrowing on net lending through credit cards, loans and overdrafts for the second month in a row as consumers continued to concentrate on clearing debt. Borrowers paid back a record £309m more than was lent in unsecured loans during August.
Source
A total of 52,317 mortgages were approved for house purchases during the month, down from 52,404 in July but above the previous six-month average of 45,787.
Net lending on mortgages, which takes into account repayments and redemptions, rose by £1bn in August after falling into negative figures in July when repayments outstripped borrowing for the first time since records began. The number of approvals for remortgaging continued to fall from 33,880 in July to 29,059, and was lower than the previous six-month average of 32,130.
Commenting on the figures Howard Archer, chief economist at IHS Global Insight, said: "While housing market activity has been lifted by the still significant fall in house prices from their 2007 peak levels and low mortgage interest rates, the upside continues to be limited by unfavourable economic fundamentals and tight credit conditions.
"At 52,317 in August, mortgage approvals for home purchases were still well below the average monthly level of 93,400 reported by the Bank of England since 1993. Mortgage approvals above 70,000 to 80,000 are generally seen as consistent with rising house prices."
Brian Murphy of the Mortgage Advice Bureau said the fall in approvals for purchases reflected "normal seasonal activity". "The fall in remortgage numbers are due to a combination of factors – seasonality, the lack of products on the market and fixed rates that still remain unattractive at higher loan-to-values (LTVs).
"For many homeowners the monetary advantage they might gain from switching from a lender's standard variable rate (SVR) to a fixed-rate product is not compelling enough to remortgage. Standard SVRs are around 4.6% at the moment and the typical two- and five-year fixed rates can't match this, unless homeowners are able to remortgage at 60%-65% LTV."
Separate statistics published today by the Building Societies' Association (BSA) showed that repayments continued to outstrip borrowing in the mutual sector. Consumers repaid £655m more than they borrowed in August, the BSA said.
Gross lending by UK building societies in the month stood at £1.5bn, while mortgage approvals totalled £1.3bn.
Adrian Coles, BSA director general, said: "Gross lending was subdued in August but appears to be at broadly similar levels to recent months after seasonal factors are adjusted for. However, the market remains very depressed compared to previous years.
"Despite signs of a modest improvement in market conditions in recent months, activity will not return to normal levels until funds for mortgage lending are more widely available to building societies and other lenders."
Meanwhile, the Bank of England's statistics also showed that repayments outstripped borrowing on net lending through credit cards, loans and overdrafts for the second month in a row as consumers continued to concentrate on clearing debt. Borrowers paid back a record £309m more than was lent in unsecured loans during August.
Source
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