Category Archives: Business

Link

Borrowers with adjustable rate mortgages could lose big – By Terence Loose

https://homes.yahoo.com/news/ARMs-lose-money-223146070.html

As you probably know, adjustable rate mortgages have lured aspiring homeowners with their attractively low interest rates. How low? Well, for the initial period of often five to seven years, they usually fall below the interest rate of a 30-year, fixed-rate mortgage. As a result, you would likely have a low monthly payment.

However, after that honeymoon period, ARMs adjust according to a predetermined index. In short, if interest rates go down, so does the rate on your ARM. But if they go up, your interest rate – and typically your monthly payment – rises, too, which is cause for concern.

Of course, ARMs do make sense for a lot of people. So read on for information that will help you decide whether to hold onto your ARM or look for new money-saving opportunities.

Interest Rates Will Likely Go Up

Since the interest rates on ARMs adjust after a set period of time, knowing where interest rates are headed would be helpful. But how can you tell where rates are going?

Well, in July 2014, the Federal Reserve confirmed that it would end what’s known as quantitative easing (QE4) in October. This decision will most likely increase interest rates. Here’s the simple version of why:

Beginning in January of 2013, in the QE4 program the Federal Reserve bought $85 billion worth of U.S. Treasury notes from U.S. banks every month, tapering off that amount beginning late last year. By buying these notes, QE4 increased the money that banks had to lend, increasing their competition for borrowers and therefore lowering interest rates.

Hence, when QE4 ends, rates will rise, says Jim Duffy, a senior loan officer with Primary Residential Mortgage, Inc.

“There’s absolutely no doubt that rates will rise once [the Fed] ends the stimulus. Rates only have one way to go when the Fed stops buying altogether, and that’s up,” Duffy says.

So how high will rates go? The Mortgage Bankers Association (MBA) projects rates reaching 5 percent for 30-year fixed rate mortgages by the second quarter of 2015. For comparison, as of September 11, 2014, the average interest rate for a 30-year, fixed-rate mortgage stood at 4.12 percent, according to Freddie Mac, one of the nation’s largest mortgage lenders.

But even a small jump in rates can have a huge affect on your ARM – and your wallet. Now, every situation is unique, but consider that a typical adjustment rate cap (the most your rate can adjust every adjusting period, usually each year) is 2 percent, according to HSH.com, the nation’s largest publisher of mortgage and consumer loan information.

We’ll assume that rates won’t rocket up by 2 percent a year and use half of a percent instead, along with a lifetime cap of 12 percent. This example shows how the monthly payment changes over the life of a $200,000 5/1 ARM that adjusts annually after year five, starting at a 3 percent interest rate.

Year       Interest Rate                     Monthly Payment

1 – 5        3 percent                             $843

6              3.5 percent                         $890

10           6 percent                             $1,119

15           8.5 percent                         $1,327

20           11 percent                          $1,499

22           12 percent                          $1,553

Again, every situation is unique, so if you have an ARM, you should check the terms of your contract, but as you can see, things can get expensive fast.

Fixed Rates are Still Historically Low

The big attraction of ARMs, of course, is the very low initial interest rate. But that can blind many to the fact that even after the past year or so of rising rates, 30-year fixed-rate mortgage rates are still extremely low, historically speaking, says Ellen Davis, a senior mortgage banker for Corridor Mortgage Group in Columbia, Maryland.

She says that while every case is unique, this is a very good reason to lock in a rate for 30 years by refinancing an ARM. It provides peace of mind that if rates do go up higher and faster than expected, you’re still okay, Davis explains.

“Right now fixed rate loans are amazingly low, so refinancing might make [homeowners’] current payment a bit higher [than an ARM] but give them the security of knowing that the mortgage payment will not change,” she says.

And history does show that anything can happen. If you need proof, check out the average 30-year fixed-rate mortgage interest rate for July 1 of every decade from 1974 till now, according to the Federal Reserve’s historic data.:

July 1, 1974: 9.28 percent

July 1, 1984: 14.67 percent

July 1, 1994: 8.61 percent

July 1, 2004: 6.06 percent

July 1, 2014: 4.13 percent

How does that 30-year, fixed-rate mortgage look now? We thought so. And that’s without even showing you the 17.6 percent interest rate from 1982.

Fixed Rates Insulate You Against Inflation

A certain amount of inflation can be a good thing, which is why the Fed made one of its goals to stimulate it. For instance, slight inflation increases the value of things like your house. Of course, inflation also means the price of everything in your house, from the beer in the fridge to the couch you enjoy it on, also goes up.

But when you buy or refinance your home with a 30-year fixed-rate mortgage, you are essentially hedging against inflation, says Ian Aronovich, co-founder and CEO of GovernmentAuctions.org, a company that gives home buying and mortgage advice.

“As money loses it purchasing power, as has been the case for a while, it makes sense to take out a 30-year mortgage since you will be repaying it with dollars that are in all likelihood going to be worth less than they are when you bought the home,” he says.

Duffy says this helps offset other home and life expenses, too. If inflation does take hold, then as other things around the household eat up more and more income, it’s going to be very helpful to have a fixed rate and a fixed payment for housing, he says. As a result, people can control expenses, still put money away, and save for retirement.

“So you’re insulating your mortgage payment from inflation,” he says.

With an ARM, that insulation is not guaranteed, since your interest rate can rise along with everything else, notes Duffy.

ARMs Do Make Sense for Some

There’s a reason ARMs exist: They are a good product for some. In fact, our experts have identified three common situations in which an ARM might make a lot of sense.

The first is if you believe interest rates will go down in the future. Then, your rate will adjust down, not up. But we’ve already outlined why that’s unlikely.

The second situation when an ARM makes sense, says Davis, is if you plan to sell your home before the initial fixed-rate period of your ARM expires, or even soon after.

“Not all ARM holders should refinance. If their current ARM payment is low and they know that they will be moving within a certain period of time, that is a big part of the decision making,” she says.

The third scenario where an ARM may make sense is if you plan to refinance a home after you do some improvements, says mortgage broker Gloria Shulman, founder of Centek Capital in Beverly Hills. In that case, an ARM’s extremely low initial interest rate could save you a lot of cash, which you can use to fix up the home.

“For example, if you are buying a house you plan to renovate, it makes sense to apply for an ARM that can be refinanced when the house is worth exponentially more after you finish the work,” she says.

 

Link

Can Space Tourists Get Life Insurance? by Aaron Crowe

Astronaut

The Oct. 31 crash of a Virgin Galactic rocket that killed a pilot hasn’t stopped the company from continuing its quest to offer space tourists a chance to see the Earth from above, giving potential riders a chance to reconsider their life insurance options.

While life insurance might be the furthest thing from any space tourist’s mind, a loophole that allows current life insurance policyholders to retain such coverage if they fly into space remains, though the insurance industry may look to close it.

Skydivers, pilots and people with other high-risk jobs or hobbies must buy extra coverage on their life insurance policies. Space tourists, however, who either already have life insurance or are applying for a policy don’t have to mention their upcoming trip to space because insurers either don’t ask about space tourism or don’t exclude it from coverage.

The loophole means they’d likely have to pay if the policyholder died on a space trip.

There are little or no established life underwriting guidelines specifically for space flight, and such activity would probably be covered under common aviation clauses and exclusions, says Rob Drury, executive director of the Association of Christian Financial Advisors.

“For a life insurance company to deny coverage for space travel would require a specific exclusion of such activity,” Drury says. “If the current treatment of aviation activities is an indication, the greater likelihood is that a proposed insured would be underwritten at a higher risk class.”

Once a policy is issued, death benefits must be paid for any death regardless of cause, unless there is a finding of fraud, misrepresentation, or suicide within the policy’s contestability period of the first two policy years in most states, he says.

Coverage is provided by omission, meaning the underwriter doesn’t ask about an applicant’s plans to fly into space.

“If someone wants to run the bulls at Pamplona, his insurer might not like it, but they must pay in the event of death if the activity isn’t specifically excluded,” Drury says.

Astronauts are rated at $10 per $1,000 of coverage in addition to their approved rate based on amount of coverage, age and other factors, says Ellen Davis, president of Life Health Home Insurance Group. Space tourists can’t buy coverage yet, Davis says.

However, if the insurer doesn’t ask an applicant about space travel, then it would be covered under travel outside of the United States, she says.

Virgin Galactic’s SpaceShipTwo crashed during a test flight. The craft is designed to carry six passengers on two-hour suborbital flights that offer a few minutes of weightlessness. The company announced after the crash that it plans to continuing selling tickets at up to $250,000 per seat.

The good news is that while flying in a rocket sounds risky, even for insurers, not many people have died riding into space. No one has died in suborbital manned flights. There have been three fatal orbital space shots, including the space shuttles Challenger and Columbia with 14 deaths, and a Soyuz flight that killed one person.

Mention that to your underwriter next time you’re applying for insurance as a space tourist.

Aaron Crowe is a freelance journalist who specializes in content about personal finance and insurance.

To Link To This Page
<a href=”https://www.termlifeinsurance.com/can-space-tourists-get-life-insurance”>Can Space Tourists Get Life Insurance?</a>

What Is A VA Loan?

The VA Loan became known in 1944 through the original Servicemen’s Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation’s economy.With more than 25.5 million veterans and service personnel eligible for VA financing, this loan is attractive and has many advantages. Eligibility for the VA loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses.

VA will guarantee a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $417,000. Generally, the reasonable value of the property or the purchase price, whichever is less, plus the funding fee may be borrowed. All veterans must qualify, for they are not automatically eligible for the program.

VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.

Why Do Mortgage Interest Rates Change? Part II

If the demand for credit reduces, then so do interest rates. This is because there are more people who are ready to lend, sellers, than people who want to borrow, buyers. This means that borrowers, buyers, can command a lower price, i.e. lower interest rates.

When the economy is expanding there is a higher demand for credit so interest rates go up. When the economy is slowing the demand for credit decreases and thus interest rates go down.

 This leads to a fundamental concept:

Bad news (i.e. a slowing economy) is good news for borrowers as it means lower interest rates.
Good news (i.e. a growing economy) is bad news for borrowers as it means higher interest rates.


Another major factor driving interest rates is inflation. Higher inflation is associated with a growing economy. When the economy grows too strongly the Federal Reserve increases interest rates to slow the economy down and reduce inflation.

Inflation results from prices of goods and services increasing. When the economy is strong there is more demand for goods and services, so the sellers and producers of those goods and services can increase prices. A strong economy therefore results in higher real-estate prices, higher rents on apartments and higher mortgage rates.

Also lenders naturally want to see a positive return on their money as their reward for lending it. This leads to the concept of the “real” rate of return. This is typically 3% per year. If inflation is 4 % per year, lenders will want to earn 7% per year on their money.

Likewise, if prices are rising rapidly, people are inclined to borrow “today’s” money so as to repay it with “tomorrow’s” money, which will be worth less.

Mortgage rates tend to move in the same direction as interest rates. However, actual mortgage rates are also based on supply and demand for mortgages.

 There is usually an almost fixed spread between A credit mortgage rates and treasury rates. This is not always the case. For example, bank failures in the Far East in the late 90s caused mortgage rates to move up while treasury rates moved down as fearful investors fled to the safety of the treasury bonds and notes.

Bonds Rates

There is an inverse relationship between bond prices and bond rates. This can be confusing. When interest rates move up, bond prices move down and vice versa. This is because bonds usually have a fixed price at maturity––typically $1000. The bond will start off being sold for the face value, $1000 and at a set interest rate. If interest rates go down, then this bond will go up in price so that these bonds will remain fairly priced compared with current bond offerings. Obviously the longer before the bond matures for the face value, $1000, the greater the price premium will be to enjoy that higher than current yield for the rest of the bond’s term.

The inverse also applies. If interest rates move up, the bond seller will have to reduce his price to offer a similar yield to current bond offerings.

Questions? Contact us at info@mortgagelinkhome.com or visit our web site at www.mortgagelinkhome.com

Goldline Award: Most Dependable

Press Release


Ellen Davis, Mortgage Link, Inc. Selected as One of The Most Dependable™ Mortgage Brokers of the Washington D.C. Area

Gaithersburg, MD August 15, 2007: Ellen Davis, Mortgage Link, Inc. has been selected by Goldline Research as one of the Most Dependable™ Mortgage Brokers of the Washington D.C. Area. The list of the Most Dependable Mortgage Brokers of the Washington D.C. Area is scheduled to be published in the September issue of The Washingtonian Magazine.

“I am very honored to have been chosen as one of the Most Dependable™ Mortgage Brokers of the Washington D.C. Area,” said Ms. Davis. “In this industry, credibility and dependability are key factors for success. I strive every day to provide my clients with the most accurate and timely information available. Buying a home is a huge investment, and for most people, it is one of the biggest commitments they will ever make. It is inconceivable to me to be anything less than completely motivated and dependable with so much at stake. That means every time I work with a client I am there for them, holding their hand, throughout the entire process.”

“We are pleased to have Ellen Davis, Mortgage Link, Inc. on this list” said Ryan Kluft, Publisher of Goldline Research. He also said, “She exceeded all of our industry criteria and had outstanding client references.” Over 2,000 Mortgage Brokers were contacted regarding the list and the response was overwhelming.

Ellen Davis is committed to providing the most comprehensive mortgage solutions to her clients with the highest degree of trust, knowledge, respect and convenience.

Whether you are buying a new home, refinancing your current mortgage or consolidating debt, Ellen will provide you with professional, responsive, involved, dependable and ethical service. Serving Maryland, District of Columbia, Virginia, Delaware, Pennsylvania, North Carolina, South Carolina and Florida, your financial needs are addressed, creating a solution to reach your goals. With access to thousands of mortgage products from more than 150 investors, Ellen can customize a loan to fit your budget and meet your individualized financial goals.

Goldline Research is a list research and publishing company specializing in investigating the credibility and performance of companies in a variety of professional services industries for selective inclusion in their published The Most Dependable™ lists. Goldline Research works closely with leading professionals in professional services industries to develop criterion for each industry, which forms the basis for its selection process. Goldline Research’s lists have appeared nationwide for over 4 years in a wide variety of print publications such as Southwest Airlines SPIRIT Magazine, Texas Monthly, San Diego Magazine, United Hemispheres Magazine, Delta Sky Magazine, Forbes, LA Magazine and Phoenix Magazine. In order to be selected to a Most Dependable™ list, firms must meet all of Goldline Research’s industry criteria, have no consumer complaints, lawsuits or disciplinary actions and provide client references that are checked and scored based on a proprietary scoring system.”

The Sandwich Generation: Part 1

Juggling Family Responsibilities

At a time when your career is reaching a peak and you are looking ahead to your own retirement, you may find yourself in the position of having to help your children with college expenses while at the same time looking after the needs of your aging parents. Squeezed in the middle, you’ve joined the ranks of the “sandwich generation.”

What challenges will you face?

Your parents faced some of the same challenges that you may be facing now: adjusting to a new life as empty nesters and getting reacquainted with each other as a couple. However, life has grown even more complicated in recent years. Here are some of the things you can expect to face as a member of the sandwich generation today:

  • Your parents may need assistance as they become older. Higher living standards mean an increased life expectancy, and you may need to help your parents prepare adequately for the future.
  • If your family is small and widely dispersed, you may end up as the primary Want to share your ideas? Post a comment, or send me an email!caregiver for your parents.
  • If you’ve delayed having children so that you could focus on your career first, your children may be starting college at the same time as your parents become dependent on you for support.
  • You may be facing the challenges of “boomerang children” who have returned home after a divorce or a job loss.
  • Like many individuals, you may be incurring debt at an unprecedented rate, facing pension shortfalls, and wondering about the future of Social Security.

What can you do to prepare for the future?

Check in tomorrow for some ideas about what you can do to be ready for whatever comes your way.

Ellen

Want to share your ideas? Post a comment, or send me an email!

Buying a Home! (Part 3)

Making the Offer

Once you find a house, you’ll want to make an offer. Most home sale offers and counteroffers are made through your realPhoto by Deb Duncan
estate agent. All terms and conditions of the offer, no matter how minute, should be put in writing to avoid future problems. Typically, your real estate agent will prepare an offer to purchase for you to sign. You’ll also include an earnest money deposit which shows the sellers that you are serious about buying their home. If the seller accepts the offer to purchase, he or she will sign the contract, which will then become a binding agreement between you and the seller. For this reason, it’s a good idea to work with a real estate agent that you can trust.

Check out our list of Referral Partners at my web site, Mortgage Link, to find realtors we recommend and trust.

Other Details

Once the seller has accepted your offer, you, your real estate agent, and I will get busy completing procedures and documents necessary to finalize the purchase. These include finalizing the mortgage loan, appraising the house, surveying the property, and getting homeowner’s insurance. Typically, you would have made your offer contingent upon the satisfactory completion of a home inspection, so now’s the time to get this done as well.

The Closing

The closing meeting, also known as a title closing or settlement, can take an hour to two hours to complete–but when it’s over, the house is yours! To make sure the closing goes smoothly, some or all of the following people should be present: the seller, the closing agent (a real estate attorney or the representative of a title company), and both your real estate agent and the seller’s. At the closing, you’ll be required to sign the following paperwork:

  • Promissory note: This spells out the amount and repayment terms of your mortgage loan.
  • Mortgage: This gives the lender a lien against the property.
  • Truth-in-lending disclosure: This tells you exactly how much you will pay over the life of your mortgage, including the total amount of interest you’ll pay.
  • HUD-1 settlement statement: This details the cash flows among the buyer, seller, lender, and other parties to the transaction. It also lists the amounts of all closing costs and who is responsible for paying these.

In addition, you’ll need to provide proof that you have insured the property. You’ll also be required to pay certain costs and fees associated with obtaining the mortgage and closing the real estate transaction. On average, these costs total between 4 and 5 percent of your mortgage amount in the Metro DC Area, so be sure to bring along your checkbook and driver’s license.

Thinking about buying a home or do you just want to know how much your current home is worth? Email me to request a CMA Report today.

Ellen

Today’s Vocabulary Lesson (and the last one!)

Title: Ownership of a property. A clear title is one without any outstanding liens or encumbrances. A cloud on title refers to any outstanding liens or encumbrances which could impair the title.

Title Insurance Policy: A policy designed to protect the buyer or lender after closing from financial losses arising from any defects in the title that may have occurred prior to purchase.

Title Search: A check of public record to disclose the past and current facts regarding ownership of a particular piece of property.

Transfer Tax: In some areas city, county or state taxes imposed when property passes from one person to another.

Truth-In-Lending: Federal law that requires lenders to disclose the terms and conditions of a mortgage, including the APR, based on certain charges incurred by the borrower. If the charges were $0, the APR would be equal to that actual interest rate on the loan.

Underwriting: The process of evaluating a loan application to determine the risk involved for the lender.

That’s it, that’s all I have. You are now one step closer to being a savvy mortgagor! For more mortgage information, go to my web site at Mortgage Link!

Ellen

Buying a Home! (Part 2)

Should You Use a Real Estate Agent?

A knowledgeable real estate agent or buyer’s broker can guide you through the process of buying a home and make the process much easier. This assistance can be especially helpful to a first-time home buyer. In particular, an agent or broker can:

  • Help you determine your housing needs
  • Show you properties and neighborhoods in your price range
  • Suggest sources and techniques for financing
  • Prepare and present an offer to purchase
  • Act as an intermediary in negotiations
  • Recommend professionals whose services you may need (e.g., title professionals, inspectors)
  • Provide insight into neighborhoods and market activity
  • Disclose positive and negative aspects of properties you’re considering

Keep in mind that if you enlist the services of an agent or broker, you’ll want to find out how he or she is being compensated (i.e., flat fee or commission based on a percentage of the sale price). Many states require the agent or broker to disclose this information to you up front and in writing.

Photo by Deb Duncan

Choosing the Right Home

Before you begin looking at houses, decide in advance the features that you want your home to have. Knowing what you want ahead of time will make the search for your dream home much easier. Here are some things to consider:

  • Price of home and potential for appreciation
  • Location or neighborhood
  • Quality of construction, age, and condition of the property
  • Style of home and lot size
  • Number of bedrooms and bathrooms
  • Quality of local schools
  • Crime level of the area
  • Property taxes
  • Proximity to shopping, schools, and work

Drop me a note for some expert advice on what to look for in a home and what you should avoid like the plague!

Ellen

Today’s Vocabulary Lesson

Second Mortgage: A loan issued on property that is already encumbered by an existing mortgage (ie: the first mortgage). The second mortgage is subordinate to the first.

Secondary Mortgage Market: The market wherein home loans are sold by the lender after closing to Fannie Mae, Freddie Mac or a variety of other institutional investors.

Survey: A map prepared by an engineer or surveyor charting a particular piece of real estate.

Go to the Mortgage Glossary at Mortgage Link to see the rest of the alphabet!

Ellen