Calculating for a second mortgage
Planning for a second mortgage loan can take some work.
When a lender gives you money and places a lien against your home for that amount, it is called a second mortgage. Because the lender uses your home as collateral for the loan, you will probably be given an amount that is much larger than any credit card’s limit and an interest rate that is much lower than any credit card’s rate (more money + a lower interest rate). Second mortgages generally offer fixed interest rates, so you’ll never have to worry about your rate going up.
Keeping that in mind, one may sometimes find it useful to utilize a second loan in order to obtain a bi weekly mortgage.
US Senate Moves to Block Bids On Foreclosures
HudAuctionwatch, a Hud foreclosure site, has an interesting bit regarding the future of hud auctions.
According to the article:
U.S. Senator Charles Schumer is seeking to stop HUD foreclosure home sales to investors. He says that the investor “loophole” is causing communities such as Rochester to deteriorate.
Should investors be blocked from HUD bidding, housing prices would likely increase as investors moved to other low priced inventory. This may benefit those with equity build from bi weekly mortgage payments.
Banks Stop Issuing Credit
The current housing disaster is not fed by the lack of home sales. Rather, it’s due to the lack of funding banks are issuing to potential buyers. Denying such buyers the opportunity to purchase a home is causing prices to plummet, and doing some heavy damage to our economy.
‘Banks are not lending for one of two reasons 1. They are unable (Bank balance sheets are too impaired with non performing loans). 2. They are unwilling (Banks do not see any risks worth taking). ‘
Those in need of a loan should consider building equity by use of a bi weekly mortgage program.
Feds Open Subprime Mortgage Probe, Warn 14 Companies
Fourteen companies have been given a heads up to start burning documents and covering up their illegal actions from the past with today’s announcement that the Federal government would be expanding its inquiry into 14 companies.
Federal investigators have opened criminal inquiries into 14 companies as part of a wide-ranging investigation of the subprime mortgage crisis, The Wall Street Journal reported on its Web site Tuesday. None of the 14 companies were named in the report
This move will likely make it harder to get a mortgage, as companies act to issue only the safest of mortgage loans. Those looking to buy a new home may need to consider a bi weekly mortgage in order to afford such.
Subprime Disaster for Chinese Banks
The British publication, the Guardian, has some dire predictions for China:
They quote from Reuters:
Earnings at Chinese banks will probably be hit this year by the snowballing U.S. subprime mortgage crisis and Beijing’s moves to cool the economy, the president of the country’s sixth-biggest bank said on Monday.
“We have to be very realistic: we are facing many challenges this year which are not only from home but also abroad,” China Merchants Bank Co <600036.SS><3698.HK> President Ma Weihua told Reuters in an interview.
The bank, China’s biggest non-state lender, made some U.S. subprime-related investments in 2004 and sold them two years later for 13.4 percent returns.
But the country’s bigger, state-owned banks could suffer.
Bank of China <3988.HK> may suffer a 2007 loss because of a big write-down on billions of dollars of U.S. subprime-related investments, the South China Morning Post reported on Monday, sending Hong Kong-listed shares in the lender tumbling 6.4 percent.
Investing in one commodity is the worst possible investment, any good investor will recommend diversifying one’s investments so as to avoid keeping all of one’s eggs in one basket.
That so many companies are now hurting from Sub prime gone bad shows a lack of diversification. One method consumers can utilize to enable personal diversification is to make a bi weekly mortgage plan which enables them to put some investment money in their own property.
Bi-Weekly Mortgage Opportunity
Often firms offer the opportunity to pay off a mortgage early in the form of bi weekly mortgage payments, but do so at an extreme cost to the consumer. Such plans must be carefully evaluated prior to selecting one.
Your mortgage lender may offer you the option of making extra payments towards your mortgage principle in return for paying certain fees. Avoid this!
Paying fees for the right to make extra mortgage payments is illogical and bad business. Why should a bank charge you for the priviledge of paying them back the debt they lent you faster than normal.
Consumers are often persuaded to pursue such a fee-laden plan because of prepayment penalties. Due to their own ignorance while purchasing their home they now worry that they cannot pay down their mortgage without paying fees of some sort. Often there are more logical options (such as saving the money you wish to pay down your mortgage with in a high yield savings account or CD)
Another option is to simply communicate with your lender and refuse to pay any fees for making extra payments towards the principal. Asking for a supervisor may help you get past the usual ‘no’ people, and get permission to get that mortgage loan paid off.
Remember, while a bi weekly mortgage option can be beneficial for reducing a loan’s life, it can also be a trap used by a lender to extract as much money as they can out of the borrower.
Are We Having Fun Yet?
Those not using a bi weekly mortgage plan may be seeing their equity dry up faster than they can blink in certain housing markets. FxStreet writes:
The amount of equity homeowners hold in their homes slipped in the third quarter to the lowest level on record, just above 50 percent, according to a report from the Federal Reserve Thursday.
In its quarterly U.S. Flow of Funds Accounts, the central bank reported that homeowners’ percentage of equity dipped to 50.4 percent from 51.1 percent from the previous quarter. On average, housing is Americans’ single largest asset.
Economists expect this figure, equal to the percentage of a home’s market value minus mortgage-related debt, to tumble even further as falling home prices eat into equity. It could easily drop below 50 percent by the end of next year, some experts say, marking the first time homeowners will owe more than they own since the Fed started recording the data in 1945.
No one likes to see their home losing money, sadly the government is going to do little to help those that truly need a bailout.
Do Biweekly Mortgage Payments Lead To Mortgage Acceleration?
Many homeowners wonder if making bi weekly mortgage payments can reduce their loan amount. While such a method does in fact lead to the making of one extra yearly payment, this is a result of the calendar year rather than true acceleration of a loan.
Some mortgage lenders do in fact offer bi weekly mortgage plans, but they rarely credit the consumer for the interest saved, or they charge extra for the right to make extra payments.
Often, it ends up being cheaper for the consumer to just save their spare money and apply it to the loan principle whenever possible.
The Herald Tribune offer some insight in this regard:
While it is convenient for you to make a monthly payment every four weeks, you won’t benefit if your lender does not have a program that accepts payments on a four-week schedule. I have never seen a four-week payment plan.
When you make the payment due Dec. 1 on Oct. 26, the lender will credit your payment as of Dec. 1, when it is due, not on Oct. 26. You will not shorten the life of your mortgage doing this, and you will give up the interest earnings on your advance payments. The interest on the money from Oct. 26 to Dec. 1 will be earned by the lender rather than by you.
Many lenders have biweekly payment plans under which borrowers make half the monthly payment every two weeks. They are especially convenient for people like you who are paid biweekly. If you pay half the monthly payment every two weeks, over the course of a year you make 26 half-payments, which is the equivalent of 13 full payments.
Most biweekly programs credit payments monthly, while a few credit payments biweekly, which is worth a little more to the borrower. Crediting payments every two weeks means that the balance is reduced every two weeks, which saves a little interest within each month. You can see exactly how much interest you will save, and the difference in pay-off period, by entering the same mortgage in calculators 2b and 2bi on my Web site (mtgprofessor.com), and comparing the results.
As an illustration, a 30-year, 6 percent mortgage will pay off in 297 months if the biweekly payments are credited monthly, and in 294.5 months if payments are credited biweekly.
Those looking to pay down their mortgage loans may find themselves doing better through the use of a calculator, or better yet, a mortgage adviser service.
Bond Insurance Gets Shorted
StockMarketImplode has started to ask some tough questions regarding the financial stability of this nation, particularly regarding the bond’s market.
While the stock market is all giddy over the prospect of of a rate cut another monster has come up from the slimy depths. Bond insurer MBIA just had it’s debt cut by Moody’s and is down a wop ping 16% intraday.(Link 1). Fellow bond insurer Ambac ABK is down in sympathy. The market will get it’s rate cut fix, but that won’t fix a thing that’s really wrong. In the ponzi scheme that is Wall Street companies raise cash by issuing bonds. They pay off those bonds with the issuance of more bonds and on it goes. And as long as it goes on everyone will think all is well and wonderful being none the wiser.
While some homeowners have been exploring honest tricks to pay down their homes like bi weekly mortgage payments, it seems that those dealing in the bonds market have been less than honest.
No wonder our economy is hanging by a thread. Hopefully the government will start regulating rather than looking the other way.
Foreclosures to Result in Major Economic Loss
An article published by CBS News talks about the billions of dollars projected to be lost in economic activity next year. According to the article:
- Rising foreclosures will lead to billions of dollars in lost economic activity next year in major U.S. cities, but homeowners and financial institutions have the ability to work together to contain the effects, said a report released Tuesday.
- Prepared by forecasting and consulting firm Global Insight, the report said weak residential investment, lower spending and income in the construction industry and curtailed consumer spending because of falling home values will combine to hold back the nation’s economic activity.
- The biggest losses in economic activity are projected for some of the nation’s largest metropolitan areas. New York is expected to lose $10.4 billion in economic activity in 2008, followed by Los Angeles at $8.3 billion, Dallas and Washington at $4 billion each, and Chicago at $3.9 billion.
An estimate of losses, though quite discouraging, is good because it can help us know how to prepare ourselves against the storm to come. What’s great about this article is that it gives the facts as they are, neither glossing over them nor over dramatizing them. It’s nice to see figures, to know exactly what we’re facing. Such a desire to understand whats coming leads many to embrace plans for a bi weekly mortgage.