First Mortgage Buyer

Often, the argument of Renting vs Buying comes up and both sides of the debate bring up some very important points. However, in the end, no argument should be taken at face value and instead each person should take the time to evaluate whether renting or buying is best for them.

Why Some People Like Renting

One of the main reasons that many like renting is that if something breaks, you can just call up your land lord and let them worry about it. For example, if the Air Conditioning needs to be replaced, it will come out of the land lords pocket and not yours. This means that you are not reliant upon your own funds or time to fix a problem and instead can simply pick up the phone.

Not only, do you not need to worry about things breaking, but basic home care is seldom the concern of a renter. This means you don’t have to worry about replacing the roof or a tree falling on the home. Instead, usually the biggest upkeep a renter might have to worry about is mowing the lawn.

Another reason many people prefer renting is that it offers more freedom than owning a home does. This is to say, if you want to pick up and move to a different city or even country, you can do so, with little or no consequence. In the worst case scenario, you might be breaking your lease, in which case you would loose your deposit, but aside from this, there are very few ramifications for leaving. This can be especially important when you are young and have not settled down yet.

When you purchase a home, you are also in some regards at the whims of the market. For example, home prices have been dropping for the past year or so and many people now owe more than their home is “worth.” This isn’t necessarily a problem, but if you do decide to sell your home when the value is low, you will loose money. Home values and property values is not something a renter has to worry about.

Buying a home is also a big commitment financially and since most people don’t have the money to buy the home upfront, they must use a mortgage. This means that you not only owe your lender a great deal of money over the course of a long time, but you also end up paying a great deal of interest on the home.

Why Renting isn’t Always Right

Renting offers some advantages, but it also has some downsides. One of the biggest downsides is that at the end of your lease, you don’t have anything to show for all the money you spent. In some regards, it is really money down the drain, as you see no return on the money you spend renting. This differs from owning a home, where each of your payments is going towards the principal of your loan.

Of course, being that most mortgages are for 30 years, much of the money you spend on your home is going towards interest, so this point is arguable. However, in most cases, when you decide you are done with your home, you can sell it and at least get some, if not more, of your money back. This can not be said of renting, in that when you walk away from your rented home, you will have nothing, except perhaps your deposit.

Another disadvantage to renting is that you are at the whim of the landlord. There are of course a number of renter’s rights, so there is some protection, but in the end, if your landlord wants you out, you will end up out.

Also, by renting, you loose a great deal of your privacy. It is not uncommon for the landlord to send someone over every month to check your filters, fire alarms, and ensure the apartment is in good repair. If they decide something needs to be fixed or replaced, there is little you can do to avoid them coming into your home. This is not the case when you own your own home and are, in effect, your own landlord.

Knowing when to Buy and When to Rent

Ultimately, whether renting or buying is best for someone, greatly varies from person to person. What is an advantage to some, might be a disadvantage to others, so it is very important to analyze your current financial and personal situation, to determine what is best for you.

A big part of this decision also comes down to analyzing the current housing market and knowing when to act. For example, house prices are currently at an all time low, as are interest rates. Compared to a few years ago, you can get much more bang for your buck, so it could be a very good time to buy a home. It could be that house prices and interest rates will continue to go down, but they are currently lower than they have been for many years and eventually, the prices will go back up. Knowing when to get your money in, is a big part of deciding between renting vs buying.

When purchasing a home, few homeowners have enough money to buy the home without using a mortgage. Mortgages, which are a special type of home loan, have been used for hundreds of years, but today’s mortgages are much different from those used in the middle ages.

One of the biggest differences between modern mortgages and those of the past is that today, the person who takes out the home is actually considered the homeowner. In times past, the person who held the mortgage, which was often a member of nobility, was considered the homeowner.

Until the person had paid off their home, they not only did not own it, but had very few rights. This began to change in the twentieth century and has gradually moved towards more rights for the homeowner. However, even though today the bank is not considered the homeowner, they do have a lien on the home, so in someways, the change is more of a symbolic one.

Start by Checking Rates at Your Bank

There are many places to get a mortgage, although in today’s housing market, many lenders are being much more conservative in who they offer loans to. One of the best places to start when looking for a mortgage is your own bank.

Your banks don’t always have the lowest rate, but because you already do business with them, they are often going to be able to give you an answer much more quickly and might be willing to overlook less than perfect credit. Also, in many cases, you can find out whether you qualify for a mortgage at your own bank without having to pay an application fee.

When starting to look for a mortgage, starting with your own bank will give you a very general feel of what types of rates to expect, as well as whether you will likely be able to receive a loan from other sources. It is important, however, to not only focus on your bank as the only option, but instead it is essential to use their offer as a basis of comparison against other loan sources.

Mortgage Brokers: A Useful Tool, but Be Careful

Usually, checking out the rates of a mortgage broker is the next step. A mortgage broker is an individual that has relationships with one or more lenders, but is not directly associated with them. Instead, the mortgage broker gets a cut from all mortgages they sell, which is referred to as their points.

Sometimes, mortgage brokers, especially those who are associated with more than one lender, have access to some great deals, but it is important to always remember that they only get paid if you take the loan. Since a mortgage brokers salary is commission based, there is almost always some form of bias associated with their suggestions. For example, it is not uncommon for some lenders to offer special bonuses to brokers if they sell a certain loan, so this will affect what type of loan they push.

Of course, this in no way means that all mortgage brokers are acting solely in their own best interest, but there is the risk of a conflict of interest that all prospective homeowners should be aware of.

When buying a home, few individuals have enough money upfront to purchase the home. As a result, the majority of homeowners use a special loan called a mortgage to purchase their home. Mortgages are long-term loans, usually between 15 and 30 years long, which include the principal and an interest rate.

The principal of a mortgage is the term used to describe the total amount of the mortgage. For example, if you used a mortgage to purchase a $150,000 home with no down payment, the principal of the mortgage would be $150,000.

The interest rate of a mortgage is the way the bank or other loan holder makes their money. When you take the time to consider how much interest you pay on a home, it can sometimes cover the cost of the home several times, but this is the cost of not having enough money to buy the home upfront without a loan.

Fixed Rate Mortgages vs Adjustable Rate Mortgages

Depending on the type of mortgage, the interest rate is either fixed or adjustable. In a fixed rate mortgage, the interest rate remains the same for the entire length of the loan.

In an adjustable rate mortgage, the interest rate is adjusted, using the current interest rates as a metric, periodically over the course of a loan. Most adjustable rate mortgages have an interest rate that is adjusted once every 2 or 3 years, although this can vary, with some being adjusted every year and others only being adjusted once every 5 years.

Typically, an adjustable rate mortgage offers a lower initial interest rate and if the market is not preforming well, it is even possible for the interest rate to be lowered when it is adjusted, although this is not something you would want to bank on. Instead, it is a good idea to plan for the interest rate of an adjustable rate mortgage(ARM) to increase each time it is adjusted.

One very important part for prospective homeowners to consider when evaluating an ARM is how frequently the interest rate is adjusted, how much the interest rate can be adjusted each period, and how much the interest rate can be adjusted over the entire course of the mortgage.

Fixed Rate Mortgages, on the other hand, usually have a slightly higher interest rate, but offer the advantage of remaining the same for the entire length of the mortgage.

The Importance of Using Amortization Tables

When evaluating options and trying to find the best deal on a mortgage, it is important to view an amortization table for the mortgage. An Amortization Table breaks down each payment for the entire length of the mortgage, showing how much the payment is and how much of the payment is going towards interest.

Over the course of the mortgage, the first several years go towards paying the interest of the mortgage. So, for several years, the overwhelming majority of each months payment is going towards interest. After about 5 to 10 years, this reverses and more of each payment is going towards the principal of the mortgage. By looking at an amortization table, you can tell when this switch will occur.

Using an online Amortization Table Generator, which most banks offer on their websites, can be an excellent tool not just for understanding the loan itself, but also for seeing how things like extra payments can affect the amount of interest you pay over the course of the loan.

On Friday, President Obama signed the Worker, Homeownership and Business Assistance Act of 2009, which extends the First Time Home Buyer Tax Credit, as well as offering more benefits to the unemployed and creating a tax credit for existing home owners that would like to purchase a new home.

The Worker, Homeownership and Business Assistance Act of 2009 passed the Senate two weeks ago and was sent to the House of Representatives, where it was quickly approved. This new law extends the $8,000 first time home buyers tax credit and the existing homeowners tax credit until April 2010. One of the key components of this tax credit is that it does not need to be paid back and is instead a one time payment from the Government.

Under the law, most of the old requirements remain the same, but there have been some changes:

• The Income Level has been raised, so now people who make up to $125,000, or $225,000 for married couples, can now take advantage of the tax credit.
• A Cap has also been added on the total price of the home, restricting the tax credits to purchase of homes priced $800,000 or less.
• Existing Homeowners can now take advantage of the credit as well, but will only be able to receive up to $6,500.

These new changes come into affect on November 06, 2009 and can be applied to homes purchased on or after this date. Worker, Homeownership and Business Assistance Act of 2009

Like the old tax credit, homeowners will still be able to file amended tax returns, so that they can receive the tax credit without having to wait until April.

Part of HR 3548 , the Worker, Homeownership and Business Assistance Act of 2009, also is intended to help reduce fraud, by making it easier for the IRS to detect fraudulent claims.

Changes to Unemployment

In addition to changing the tax credit for new homeowners, HR 3548 also extended Federal Unemployment Benefits for those whose benefits are about to expire.

The Worker, Homeownership and Business Assistance Act of 2009 extends everyones Federal Unemployment Benefits for 1 week and anyone living in a state with more than 6% unemployment will be eligible for an addition 13 week extension.

An additional extension was also added, which provides an additional 6 weeks for anyone living in a state with more than 8.5% unemployment. However, with the way the law is worded, those on unemployment must take the 13 week extension first, before they can apply for the 6 week extension. As a result, it will not be possible for anyone to take advantage of the 6 week extension, unless congress decides to renew the legislation. In this regards, this provision of the law was outdated even as it was signed by President Obama.

Other Changes

In addition to changing the tax credit for homeowners and unemployment benefits, the law also requires anyone who prepares or expects to prepare more than 10 tax returns a year to submit them electronically.

The mortgage is a popular lending tool used by people who would like to buy a home, but do not have enough money to purchase the home outright. It is actually a very old type of loan, which has been used for thousands of years. For the purposes of this article, however, we will be discussing modern mortgages and specifically the Adjustable Rate Mortgage.

What is an Adjustable Rate Mortgage?

Traditionally, the 30 year fixed rate mortgage has been the standard type of mortgage, with Adjustable Rate Mortgages, or ARMS, actually being rather new. An adjustable rate mortgage differs from other mortgages in that the interest rate of the loan varies, or is adjusted, multiple times throughout the length of the loan. So, rather than having a fixed interest rate the entire length of the loan, with an ARM, the interest rate will be adjusted every few years.

How frequently the interest rate is adjusted varies, but it is usually adjusted 2, 3 or 5. Some subprime ARMs adjust more frequently, but usually the rate is not adjusted more than once every 2 years. When it comes time to adjust the rate, the bank will look at the current market values and use this to either raise or lower your interest rate.

A standard ARM will have a set limit of how much the interest rate can be raised each adjustment, as well as how high the interest rate can be raised in total over the length of the loan. Most Adjustable Rate Mortgages can only be adjusted by 1% each time, although this can vary.

When planning for an Adjustable Rate Mortgage, it is a good idea to assume that the interest rate will be raised each time by the full amount, although this is not always the case. For example, during the current housing market crash, most people with ARMS should have seen their interest rate lower, but this is not the norm.

Advantages of Adjustable Rate Mortgages

One of the main advantages of using an Adjustable Rate Mortgage is that the initial interest rate is usually lower than that of a fixed rate mortgage. For instance, it is not uncommon for an ARM interest rate to be 1% lower than the comparable fixed rate mortgage offered by the lender. This means that for the first two periods of adjustment, an ARM should cost less than a standard fixed rate mortgage. Of course, after three adjustment periods, the interest rate is usually higher than that of a fixed rate mortgage.

This low initial rate is one reason that ARMs are so popular, because it gives the homeowner some breathing room to get more equity into the home or otherwise save money. The downside to this is that eventually the rate will rise, so if you haven’t paid the house down any by this point, it can become more expensive.

The Role of the ARM in Subprime Lending

The Adjustable Rate Mortgage also had a role in the current housing market situation, with a number of subprime ARMs being offered. These subprime mortgages often had much shorter adjustment periods, no limit on how high the rate could climb, and would raise more than 1% at a time. As a result, these loans quickly became unfordable. Another problem was that many included terms that resulted in a drastically increased interest rate after only one missed payment.