Mortgage Rates - Week of 09/21/2009

LONG-TERM RATES DOWN FOR THIRD CONSECUTIVE WEEK

Shorter-Term Rates Are Mixed

McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.04 percent with an average 0.7 point for the week ending September 17, 2009, down from last week when it averaged 5.07 percent. Last year at this time, the 30-year FRM averaged 5.78 percent. The last time the 30-year FRM was lower was the week ending May 28, 2009, when it averaged 4.91 percent.

The 15-year FRM this week averaged 4.47 percent with an average 0.6 point, down from last week when it averaged 4.50 percent. A year ago at this time, the 15-year FRM averaged 5.35 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.51 percent this week, with an average 0.5 point, up from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 5.67 percent.

The one-year Treasury-indexed ARM averaged 4.58 percent this week with an average 0.5 point, down from last week when it averaged 4.64 percent. At this time last year, the 1-year ARM averaged 5.03 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

“Interest rates for fixed-rate mortgages eased for the third consecutive week and remained at 3-month lows,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Interest rates for 30-year fixed-rate mortgages have averaged just above 5 percent through mid-September, which is roughly a percentage point below last year’s average and suggests that 2009 may reach a record annual low since the survey began in 1971.

“Low mortgage rates are aiding new home construction. Housing starts for single family homes have increased consecutively over the five past months ending in July, although starts eased slightly in August. Moreover, homebuilder confidence improved for the third straight month in September, with all four regions showing positive gains, according the National Association of Home Builder’s Housing Market Index.”

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

Making Home Affordable Program
Help for America's Homeowners
Please use the self-assessment tools provided on MakingHomeAffordable.gov to see if you are among the 7 to 9 million homeowners who may be able to benefit from Making Home Affordable.


Does Freddie Mac Own Your Loan?
Use our secure look-up tool to find out if Freddie Mac owns your mortgage

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In support of the Federal Making Home Affordable Program, Freddie Mac and Fannie Mae will offer two initiatives that will help keep more families in their homes, stabilize communities and assist homebuyers during this difficult time. Under the plan, eligible homeowners can:

Refinance your mortgage to a new, potentially lower interest rate, with additional flexibility to assist many homeowners who have previously had difficulty refinancing due to declining property values. You'll need to be current on your mortgage payments to qualify for this refinance.
Obtain a modification on your mortgage that can potentially reduce your monthly payment, or offer other alternatives that can help you keep your home. This program is for homeowners who are delinquent in their mortgage payments, in the foreclosure process, or are current on their payments but have recently experienced significant hardship. Significant hardship includes circumstances that may make it difficult for you to pay your mortgage going forward.
Through these and other options, the U.S. Treasury, Freddie Mac and Fannie Mae hope to help more troubled and current borrowers with critical solutions through these initiatives that will help stabilize home ownership for the nation's families and their communities.

How Can I Qualify?
Refinance
If you are a homeowner who is current on your mortgage payments but unable to refinance because your home value has decreased, you may be able to refinance to a lower rate, lower-risk loan through the refinance solution that is part of this program.

Loan Modification
If you are a homeowner who is behind in your mortgage payments, in the foreclosure process, or is current on your payments but have recently experienced significant hardship, you may be able to modify your loan to a lower rate through the Making Home Affordable Modification Program. Significant hardship is circumstances that may make it difficult for you to pay your mortgage going forward.

Examples of loan modifications through the program:

Borrower in imminent default
Delinquent borrower (not in foreclosure)
Delinquent borrower in foreclosure
What If I Can't Qualify?
If you are working with your lender to keep your home, known as retention, there are several options:

Reinstatement: Your lender may agree to let you pay the total amount you are behind, in a lump sum payment and by a specific date. This is often combined with forbearance when you can show that funds from a bonus, tax refund, or other source will become available at a specific time in the future. Be aware that there may be late fees and other costs associated with a reinstatement plan.
Forbearance: Your lender may offer a temporary reduction or suspension of your mortgage payments while you get back on your feet. Forbearance is often combined with a reinstatement or a repayment plan to pay off the missed or reduced mortgage payments.
Repayment Plan: This is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.
Loan modification: This is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable.
If you and your lender agree that you cannot keep your home, there are a number of liquidation terms you should understand:

Short Payoff: If you can sell your house but the sale proceeds are less than the total amount you owe on your mortgage, your mortgage company may agree to a short payoff and write off the portion of your mortgage that exceeds the net proceeds from the sale.
Deed-in-lieu of foreclosure: A Deed-in-lieu of foreclosure is a cancellation of your mortgage if you voluntarily transfer title of your property to your mortgage company. Usually you must try to sell your home for its fair market value for at least 90 days before a mortgage company will consider this option. A deed-in-lieu of foreclosure may not be an option if there are other liens on the property, such as second mortgages, judgments from creditors, or tax liens.
Assumption: An assumption permits a qualified buyer to take over your mortgage debt and make the mortgage payments, even if the mortgage is non-assumable. As a result, you may be able to sell your property and avoid foreclosure.
While refinancing is not necessarily a good option when facing foreclosure and can sometimes even be a predatory practice, there are instances where it may help. Talk to your lender to see if refinancing is an option for you.

Our refinancing calculator may be a valuable tool when talking with your lender about your options.

APPLICATIONS FOR PURCHASE AND FOR REFINANCING UP NICELY AS MORTGAGE RATES REMAIN UNDER 5 PERCENT
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.87 percent with an average 0.7 point for the week ending April 9, 2009, up from last week when it averaged 4.78 percent. Last year at this time, the 30-year FRM averaged 5.88 percent.
The 15-year FRM this week averaged 4.54 percent with an average 0.7 point, up from last week when it averaged 4.52 percent. A year ago at this time, the 15-year FRM averaged 5.42 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.93 percent this week, with an average 0.7 point, up from last week when it averaged 4.92 percent. A year ago, the 5-year ARM averaged 5.56 percent.
One-year Treasury-indexed ARMs averaged 4.83 percent this week with an average 0.5 point, up from last week when it averaged 4.75 percent. At this time last year, the 1-year ARM averaged 5.18 percent.The 1-year ARM has not been lower since the week ending September 29, 2005, when it averaged 4.68 percent.
(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)
“Mortgage rates rose slightly this week but still remained historically low,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Interest rates for 30-year fixed-rate mortgages have averaged below 5.0 percent for the last four weeks, which should keep homeowner affordability at record levels.
“Given these low rates, housing demand has strengthened. Conventional mortgage applications both for refinancing and for home purchases have increased over the past five consecutive weeks ending April 3. Since the end of February, applications for home purchases were up about 22 percent and nearly 129 percent for refinancing, according to the Mortgage Bankers Association.”
Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

MORTGAGE RATES FALL AGAIN THIS WEEK, HITTING ANOTHER RECORD-BREAKING LOW

McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.78 percent with an average 0.7 point for the week ending April 2, 2009, down from last week when it averaged 4.85 percent. Last year at this time, the 30-year FRM averaged 5.88 percent. The 30-year FRM has not been lower in the life of Freddie Mac’s weekly survey, which dates back to 1971 for the 30-year FRM.

The 15-year FRM this week averaged 4.52 percent with an average 0.7 point, down from last week when it averaged 4.58 percent. A year ago at this time, the 15-year FRM averaged 5.42 percent. The 15-year FRM has never been lower in the life of Freddie Mac’s weekly survey, which dates back to 1991 for the 15-year FRM.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.92 percent this week, with an average 0.7 point, down from last week when it averaged 4.96 percent. A year ago, the 5-year ARM averaged 5.59 percent. The 5-year ARM has never been lower in the life of Freddie Mac’s weekly survey, which dates back to 2005 for the 5-year ARM.

One-year Treasury-indexed ARMs averaged 4.75 percent this week with an average 0.6 point, down from last week when it averaged 4.85 percent. At this time last year, the 1-year ARM averaged 5.19 percent. The 1-year ARM has not been lower since the week ending September 29, 2005, when it averaged 4.68 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

“Mortgage rates followed other interest rates lower this week amid reports of slower economic growth” said Frank Nothaft, Freddie Mac vice president and chief economist. “The final estimate of economic growth in the fourth quarter was revised lower and personal incomes fell 0.2 percent in February, below the market consensus.

“On a positive note, pending existing home sales rose 2.1 percent in February, marking the second increase in three months as potential homebuyers are taking advantage of historically low mortgage rates and falling home prices. Serving as a spur to sales, housing affordability reached an all-time high in February 2009 since the series' inception in 1971, according to the National Association of Realtors®. By region, sales surged by nearly a third in the Northeast and Midwest, but fell in the West.”

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

Mortgage Rates Fall

CONTINUING SLOW ECONOMIC SIGNALS SEE MORTGAGE RATES FALL FOR ALL PRODUCTS THIS WEEK
McLean, VA – Freddie Mac (NYSE:FRE)

today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.04 percent with an average 0.7 point for the week ending February 19, 2009, down from last week when it averaged 5.16 percent. Last year at this time, the 30-year FRM averaged 6.04 percent.

The 15-year FRM this week averaged 4.68 percent with an average 0.6 point, down from last week when it averaged 4.81 percent. A year ago at this time, the 15-year FRM averaged 5.64 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.04 percent this week, with an average 0.6 point, down from last week when it averaged 5.23 percent. A year ago, the 5-year ARM averaged 5.37 percent.

One-year Treasury-indexed ARMs averaged 4.80 percent this week with an average 0.5 point, down from last week when it averaged 4.94 percent. At this time last year, the 1-year ARM averaged 4.98 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

"Mortgage rates followed bond yields lower this week as recent economic reports suggest the economy is still slowing, which reduces the future threat of inflation," said Frank Nothaft, Freddie Mac vice president and chief economist. "And consumer sentiment fell in February for the first time in three months to near its lowest level since May 1980, while industrial production slowed in January by more than the market consensus. In addition, the Federal Reserve lowered its growth forecasts for this year during its policy-setting meeting on January 27-28, noting a deeper contraction in the economy as the credit crunch tightens.

"Meanwhile, the housing market is not doing any better. New housing construction slowed to an all-time record low of 466,000 homes (annualized) in January since records began in January 1959. And although homebuilder confidence ticked up in February from a record low, builder expectations of sales over the next six months hit a record low since it was first published in January 1985."

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

Mortgage Rates Plunge AGAIN

CHICAGO 11:17am (MarketWatch) -- Mortgage rates for fixed-rate loans plummeted this week, after the Federal Reserve's actions to increase liquidity in the mortgage market, Freddie Mac's chief economist said on Thursday.

The 30-year fixed-rate mortgage averaged 5.53% for the week ending Dec. 3, down from 5.97% last week and 5.96% a year ago, according to Freddie Mac's weekly survey. The rate hasn't been lower since Jan. 24, when it averaged 5.48%.

The 15-year fixed-rate mortgage averaged 5.33% this week, down from last week's 5.74% average and 5.65% a year ago. The mortgage rate hasn't been lower since March 20, when it averaged 5.27%.

Rates on adjustable-rate mortgages didn't fall as much. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.77% this week, down from 5.86% last week and 5.75% a year ago. One-year Treasury-indexed ARMs averaged 5.02% this week, down from 5.18% last week and 5.46% a year ago.

To obtain the rates, the fixed-rate mortgages required payment of an average 0.7 point, while the 5-year ARM required an average 0.6 point and the 1-year ARM required an average 0.5 point. A point is 1% of the mortgage amount, charged as prepaid interest.

"After Federal Reserve actions to increase liquidity in the mortgage market, interest rates for fixed-rate mortgages took a dive," said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release. "This week's decline was the largest since the week of Oct. 23, 2008, and 30-year fixed-rate mortgage rates are now almost a full percentage point lower since the last week in October.

"The recent plunge in rates contributed to the nearly 150% jump in conventional mortgage applications over the Thanksgiving week, led by almost a 300% surge in refinances, according to the Mortgage Bankers Association. Roughly three out of four mortgage applications were for refinance transactions, up from around half during the prior week."

BREAKING NEWS!!! - Mortgage Rates Plunge

Mortgage Rates Plunge in Freddie Mac Weekly Survey

McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 5.93 percent with an average 0.7 point for the week ending September 11, 2008, down from last week when it averaged 6.35 percent. Last year at this time, the 30-year FRM averaged 6.31 percent.

Click here to read the full release.

Cash-Out Refinance Share Lowest In First Half Of 2008 In Three Years

Volume of Equity Cashed-Out Was $38 Billion in 2nd Quarter: One-Half Year Ago Amount

McLean, VA – In the second quarter of 2008, 66 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least 5 percent higher than the original mortgage balances, according to Freddie Mac's quarterly refinance review. The second-quarter share was up slightly from an upward-revised first quarter share of 58 percent. Taken together, the first six months of this year marked the lowest cash-out share since the autumn and winter of 2004-2005.

"Declining home values across much of the nation have curtailed the amount of home equity available to be cashed out by homeowners," noted Frank Nothaft, Freddie Mac vice president and chief economist.

"Homeowners benefited from the low level of mortgage rates that prevailed for much of the second quarter. On average, homeowners who refinanced during the second quarter lowered their coupon rate by about one-half of a percentage point," observed Nothaft. In the second quarter of 2008, the median ratio of new-to-old interest rate was 0.93. In other words, one-half of those borrowers who paid off their original loan and took out a new one decreased their first-mortgage coupon rate by about 7.5 percent.

"Nine percent of homeowners reduced their loan amount while refinancing during the first half of this year. This is the largest cash-in share since the summer of 2005. This may reflect more cautious underwriting by lenders, resulting in homeowners paying down their loan balance in order to receive more favorable loan rates and terms.

"Homeowners who refinanced last quarter had kept their previous loan for nearly three and a quarter years – about 10 months longer than loans refinanced in the first quarter. This means that many loans refinanced last quarter had the benefit of additional appreciation during 2005, and homeowners had built up more home equity," Nothaft commented.

"During the second quarter about $38 billion in home equity was cashed out through refinance of conventional loans made to prime borrowers, less than one-half the $79 billion cashed out during the same period in 2007. In total, about $68 billion in home equity was cashed out over the first six months of 2008, the least since the first six months of 2004," said Amy Crews Cutts, Freddie Mac deputy chief economist.

These estimates come from a sample of properties on which Freddie Mac has funded at least two successive loans. Transactions are further screened to verify that the latest loan is for refinance rather than for home purchase. The Freddie Mac analysis does not track the use of funds made available from these refinances.

Please see:
Quarterly Refinance Statistics

Notes:
1Higher loan amount refers to loan amounts that were at least 5 percent greater than the amortized unpaid principal balance (UPB) of the original loan. "Lower loan amount" refers to loan amounts that were less than the amortized UPB of the original loan.

2Ratio of new to old rate refers to the ratio of the interest rate of the new loan to the interest rate of the refinanced loan.

Avoiding Mortgage Fraud

Mortgage fraud is becoming increasingly common. Scam artists often target homeowners struggling to meet their mortgage commitments or anxious to sell their homes.

There is help available when facing financial problems or foreclosure, but make sure you are dealing with a reputable organization before getting involved. To protect your home and home equity and avoid falling victim to fraudulent schemes, recognize and understand the signs of mortgage fraud. Know how to report fraud to state and federal authorities so they can stop scam artists from preying on innocent borrowers.

Start by learning the motives behind mortgage fraud. They are generally classified into one of two categories:

Fraud for property or housing
Fraud for profit
Fraud for property
Fraud for property, also known as fraud for housing, generally occurs when a borrower wants to purchase a property they know they cannot afford. Borrowers are often aided by dishonest mortgage industry professionals who submit or encourage the submission of false information about the borrowers employment, income or assets in order to qualify for a loan.

Borrowers are often tempted to engage in this type of fraud by a strong desire for homeownership and the belief that no one will check the information. However, lenders detect fraud for housing schemes by thoroughly reviewing and validating documents and keeping diligent records. It is a federal crime to lie in connection with the loan application and these individuals may be at risk of criminal prosecution.

View a real example of fraud for property
Fraud for profit
Fraud for profit schemes often involve a group of people who defraud a prospective homebuyer or mortgage lender. For example, a dishonest mortgage broker may partner with a loan processor to create a fictitious credit profile, and with an appraiser to inflate the property value. Additionally, "straw borrowers," who falsely represent themselves, may be enticed to participate through the promise of financial gain.

Fraud for profit schemes are also attractive to criminal enterprises lured by the opportunity for greater profits, fewer dangers than those commonly associated with violent crime, and reduced sentencing or jail time. Illegal property flipping is the fraud scheme commonly employed.

View real examples of fraud for profit
Important Resources

If you are facing financial difficulties that are making it difficult to pay your mortgage, or if you feel you might be falling prey to a fraudulent scheme, the best solution is to talk to your lender or a reputable counselor. Also, be wary of individuals who promise to rescue you from financial difficulty or possible foreclosure.

Read more about common fraud schemes:
Foreclosure rescue scheme
Illegal property flipping

Breaking News - New FHA Guidelines!

Breaking News!!!

FHA Mortgage Limits

FHA 2008 Mortgage Limits Published: Read FHA Mortgagee Letter 2008-06 for the full details.

Effective March 6, 2008, HUD will offer temporary FHA loan limits that will range from $271,050 to $729,750 (Limits). Overall, the change in loan limits will help provide economic stability to America's communities and give nearly 240,000 additional homeowners and homebuyers a safer, more affordable mortgage alternative. The maximum amount of $729,750 will only be applicable to extremely high-cost metropolitan areas. Previously, FHA's loan limits in these very high-cost areas were capped at $362,790.

The Economic Stimulus Act of 2008 permits FHA to insure loans on amounts up to 125 percent of the area median house price, when that amount is between the national minimum ($271,050) and maximum ($729,750). The new minimum and maximum loan limits are based on 65 percent and 175 percent of the conforming loan limits for Government-Sponsored Enterprises in 2008, which is $417,000. The FHA used a combination of existing government data sets and available commercial information to determine the median sales price for each area. The change in loan limits are applicable to all FHA-insured mortgage loans endorsed with HUD’s publication of the increased loan limits today, and it lasts until December 31, 2008.

By increasing loan limits nationwide, FHA will provide much needed liquidity and stability to housing markets across the country. Already, as conventional sources of mortgage credit have been contracting, FHA has been filling the void. From September to December 2007, FHA facilitated more than $38 billion of much-needed mortgage activity in the housing market, more than $15 billion of which was through FHASecure - WE OFFER FHASecure - few lenders do, FHA's refinancing product. By focusing on 30-year fixed rate mortgages, FHA helps homeowners avoid and escape the risks associated with exotic subprime mortgage products, which have resulted in rising default and foreclosure rates.

"This is not an easy crisis to address, and there is no silver-bullet, but I know that we can help hundreds of thousands of people keep their homes, and we can calm the waters," said HUD Secretary Jackson.

In January 2009, FHA's maximum loan limit will return to $362,790, unless the U.S. Congress approves bipartisan legislation to permanently increase loan limits as part of the FHA Modernization bill, which is still awaiting final approval on Capitol Hill.

So Act Now Before This Program Runs Out - Ask our broker that contacts you about our FHASecure Loans...

Super Bowl Mortgages

How Jobless Rates Forecast the Super Bowl

At last the Federal Reserve is using its economic expertise to do something worthwhile: forecast the Super Bowl.

Michael Munley, an economist at the Federal Reserve Bank of Chicago, has calculated that the city with the lower unemployment rate has won the Super Bowl 16 of the past 22 times. That favors New England this year.

Mr. Munley recalls a theory I once propounded based on the movement of the Dow Jones industrial average from the end of November through the Super Bowl. In 1996, I said it had forecast 18 of the past 21 Super Bowl winners. Alas, since then it gotten five forecasts right, and six wrong, and I have abandoned that theory. (But as Mr. Manley notes, that theory also forecasts an New England win.)

Mr. Munley points out that this is only the third Super Bowl to feature two teams from the same Federal Reserve district, but does not note that in both of the previous cases — San Francisco over San Diego in 1995 and the New York Giants over Buffalo in 1991 — the team from the National Football Conference won. That would seem to forecast a New York Giants victory.

Owning Your Home - FREE & CLEAR!

There's nothing like owning your own home free and clear. That's a goal near to the heart of almost everyone who has ever held a mortgage. Oh, the things you could do without a mortgage payment!

Paying off a mortgage is a noble goal, and one that can serve you well in retirement. But hang on, there's no rush. Despite the claims that you can save a fortune in interest by paying off a mortgage early, spreading the payments out over 30 years can be much smarter than putting your extra dollars into additional mortgage payments.

The interest paradox
While it is very true that a shorter mortgage incurs far less interest than a longer one, simply paying off your existing mortgage faster might not save you as much as you think. The key factor is that you pay most of the interest in the early years. It takes eight years to pay down the first 10% of the principal when you amortize a loan over 30 years. The rest of what you've shelled out is interest. By the time you are halfway through a 30-year mortgage, you've paid 67% of the interest. By year 20, two-thirds of the way through the mortgage, you've paid 84% of the interest.

Starting to make accelerated payments halfway through a 30-year mortgage will save you very little in interest. It would be better to put those extra payments into a money market account until they are actually due. Let the bank pay you interest instead.

Another problem is the way some lenders handle additional payments. Not all lenders automatically re-compute the interest you owe if you reduce your principal faster than they expect. Instead, they follow their amortization table, which divides each payment into a set amount of interest and principal. So even though your balance is lower, the interest you are paying doesn't change. With this type of mortgage, an early payoff amounts to a long-term, interest-free loan to your mortgage company. Yikes!

The paradox is that even if you work it right and do save tens of thousands of dollars in interest, that decision could cost you far more in terms of lost opportunity. The real question is: What is the best use of your money?

Peak Home Loans can help to mortgage or refinance your home with good credit, fair credit, poor credit, and bad credit. We offer home refinancing and mortgages with any credit.

The anti-mortgage
Imagine if you will, an anti-mortgage account. Instead of sending a bunch of extra bucks to your mortgage lender every month, you send them to a broad-market index fund.

Let's look at what might happen with a $100,000 mortgage at 7%. You could pay it off in 30 years at $665 a month, or in 15 years at $899 per month -- and you'd save about $78,000 in interest with the 15-year option. But suppose you went for the 30-year option, sending $665 to the mortgage company and sending $234 to an index fund -- your anti-mortgage account. That's the same amount out-of-pocket every month, right?

Fast forward 15 years. Your mortgage has been paid down to $74,018 and you have $106,397 in your anti-mortgage account (assuming an average annual return of 11%). At that point, you could, if you chose, convert your anti-mortgage account to cash, pay the capital gains taxes due, and use what's left to pay off your mortgage. Assuming a federal capital gains tax of 20% and a state capital gains rate of 5%, you'd even have about $5,000 left over -- but don't spend it, you'll be needing new carpet soon.

The anti-mortgage account gives you options. You could cash it in and pay off your mortgage early if you prefer, or you could keep saving and building up your net worth as you pay down your mortgage. Or you could do any of the myriad other things that cash money is good for.

The value of cash:
There are two common reasons people cite for paying off their mortgage early: To provide a safety net in case they lose their jobs and to reduce income needs in retirement. The prospect of losing your home because you can't make the mortgage payments is scary -- no doubt about it. And the prospect of devoting most of your retirement income to a monthly mortgage isn't much better. But let's look what happens if you choose to invest instead.

Investing lets you build up a portfolio of securities that are easily converted to cash. Cash can make a lot of mortgage payments if you're collecting unemployment. Cash will also make car payments and buy groceries. Of course, if your house were paid for, you could always raise cash by taking out a new mortgage, except, oops, you're out of work. Bad timing. You might be able to get a mortgage, but not a very big one and not at very favorable rates. To get a decent mortgage loan, you need more than a lot of equity in your home: You also need regular income, which makes owning your home less useful in an emergency than you might think.

Here's an even better idea: Use the earnings from your investments to make your mortgage payments. Yep, that's right. Once your anti-mortgage is big enough to pay off the mortgage at one time, you can use the earnings from the account to make the monthly payments -- and keep the cash!

Here's how. Remember the example above where you ended up with an anti-mortgage account worth $106,000 after 15 years? Let's assume you retired at that point and don't want the burden of mortgage payments. Who could blame you? You could cash out your anti-mortgage account and pay off the mortgage, OR you could keep your money in the index fund and simply withdraw enough every year to make your mortgage payments. If you pull $10,600 out of the account each year, that will cover your mortgage payments and the capital gains taxes on the withdrawals.

Here's the best part: By the time the 30-year mortgage is paid off, your investment account will have dropped a grand total of $2,000. (Again, we are assuming an 11% average rate of return.) Talk about having your cake and eating it, too! By saving the extra payments instead of sending them to the mortgage company for the first 15 years, you've built up an anti-mortgage account, used the earnings from it to make your mortgage payments for the next 15 years, and after 30 years, you're left with $104,000 in cash.

Don't believe us? Take a stroll over to our Personal Finance area and play around with our mortgage calculator and savings calculator. Run some scenarios and see what happens. You may also want to check out our Home Center, which has more calculators and information about mortgages. Then let's discuss a few more reasons not to pay off your mortgage, and a few reasons why you might want to consider it.

Peak Home Loans can help to mortgage or refinance your home with good credit, fair credit, poor credit, and bad credit. We offer home refinancing and mortgages with any credit.

A word about investment returns
We just compared paying off a low-interest mortgage ahead of schedule with investing the additional payments in an index fund. We assumed an annual return of 11% for the index fund. In a sense that's like shooting fish in a barrel -- if you have a loan at 7% and an investment bringing in 11%, it's pretty obvious that you will do better by investing than by paying off the loan early. The problem is that while mortgage rates are clearly spelled out and fixed (except for adjustable-rate mortgages), stock market returns are not. In essence, our entire argument rests on the performance of the stock market.

So where did that 11% come from, anyway? Did we just pick it out of the air? No, 11% is the average annual return (CAGR) for the S&P 500 over the period from 1926 to 2000.

We used the S&P 500 as our benchmark for two reasons: 1) The 75-year history gives us confidence in our expectations of its future performance, and 2) virtually anyone can duplicate the S&P 500's future performance simply by investing in a well-managed S&P 500 index fund. (If you decide to invest in other mutual funds, stocks you pick yourself, or pork bellies, all bets are off.) Estimating the S&P 500's future performance is the key. We know that its average return has been just a shade over 11% over the last 75 years, but we don't know how it will do next year.

We don't even care.

Next year's market performance is disturbingly unpredictable. But over 30 years, the span of a typical mortgage, the average return of the S&P 500 has been relatively consistent -- and always higher than fixed-income investments. All the depressions, recessions, crashes, crises, booms, bubbles, and busts simply balance each other out if you wait long enough.

Warning: statistics ahead! During the history of the S&P 500 there have been 46 30-year periods starting with 1926-1955, 1927-1956, etc, and ending with 1971-2000. The average annual returns for those 46 periods ranged from 8.5% to 13.7%, forming a nice bell curve with the mean at 11%. Of course, you won't average exactly 11% per year from your index fund over the next 30 years, but based on the past performance of the S&P 500, you have a 98% chance of getting more than 7% and an 83% chance of getting better than 9%. Your most likely average return will be between 10% and 12%.

Feel better? If the statistics didn't do it for you, just hang on to this thought: The worst average annual return by the stock market over a 30-year span was 8.5%.

Peak Home Loans can help to mortgage or refinance your home with good credit, fair credit, poor credit, and bad credit. We offer home refinancing and mortgages with any credit.

Reasons to prepay
Even with the odds greatly in favor of investing versus an early mortgage payoff, for some people the bottom line is not the only consideration. Let's look at some legitimate reasons one might choose to pay off a mortgage early and then discuss the best way to go about it should you decide that an early mortgage payoff is in your best interest.

Guaranteed returns
When you invest in stocks, your return is not guaranteed, but paying off a mortgage early gives you a solid, tangible return on your money. If you are looking for a guaranteed return, accelerating your mortgage payments gives you that, while index investing can't. Of course, with a low-interest mortgage, the return isn't very high (if you have a high-interest mortgage, refinance.)

Forced savings
Some people just won't save, but they will make the mortgage payment. You do what you have to do to increase your wealth over the years. (You might also consider automatic investment plans. Most mutual fund companies will gladly pull a fixed amount out of your bank account each month and invest it as you have specified. The money's gone before you miss it.)

Emotional satisfaction
Sure, that's a legitimate reason for paying off a mortgage early -- as long as you understand how much you are potentially giving up.

Guidelines for accelerated payoffs
Most of the pay-off-your-mortgage-early debate is emotional: The desire to own your very own piece of the Earth that no one can take from you, or the fear that investing will not provide the kind of return you expect. If those emotions are winning the argument in your mind, first argue with yourself some more. But if you end up deciding to pay off your mortgage early, here are some guidelines for making the payoff process work in your favor:

1) Make sure your other cash needs are funded first: retirement accounts, college funds, etc. Sinking all your spare cash into your home is under-diversification at its worst.

2) Start early. Making regular payments for five years on a 30-year mortgage then switching to a 10-year mortgage will cost you far more in interest than starting out with a 15-year mortgage. If you are well into a 30-year mortgage, run the numbers to make sure that you understand just how little you will really save.

3) Talk to your lender. To actually save money on interest, you need a "simple interest" mortgage where each month's interest is calculated based on the declining balance, or you need to re-amortize the mortgage based on a faster payment schedule. Lenders may charge to re-amortize so ask how much that costs, too.

Peak Home Loans can help to mortgage or refinance your home with good credit, fair credit, poor credit, and bad credit. We offer home refinancing and mortgages with any credit.

Tax considerations
It may seem like we've saved the most important point for last, but actually tax considerations are not a driving factor in this debate. Tax savings are icing on the cake for those who pay off their mortgages slowly. If you work it right, paying off a mortgage quickly reduces the interest you pay, but that also reduces your mortgage interest deduction. While it's silly to spend money just to get a tax deduction, it's also silly to give up a tax deduction unless you net more money somewhere down the road. In this case though, we've seen that the investing option is likely to put more money in your pocket even before we consider the tax break, so what was the point of giving up that tax deduction again?

A second consideration is that while we used 20% as our federal capital gains tax rate in the examples in Part 1, investments made after Jan. 1, 2001 and held for more than five years will qualify for the new extra long-term capital gains rate of 18% (8% for those in the lowest tax bracket), making long-term buy-and-hold investments even more attractive.

Speaking of capital gains, the first $500,000 in capital gains on the sale of a principal residence can be tax free, so doesn't that make paying down the mortgage a better deal? Nope. The capital gain is the increase in the value of the home when you sell it. You subtract your net proceeds from the cost of the home to find your capital gain. The mortgage balance doesn't affect the capital gain in any way.

All tax considerations favor paying off your mortgage slowly and investing the difference.

Convinced?

If you find yourself still on the fence, try using our mortgage payment and savings calculators to compare the net effect of investing versus making additional mortgage payments for your particular situation. Visit our Home Center for more calculators, information on mortgages, and other abode-related goodies. And the Buying a Home discussion board is a great place to bounce ideas off Fools who've "been there."

If you are considering refinancing a home, a home equity loan, or purchasing a home, simply click APPLY NOW and select the Type of Loan desired?

Thank you,
Peak Home Loans

Is A Reverse Mortgage Right For You? Here's A Calculator To Help You Decide.

If you are one of the millions of Baby Boomers whose retirement years are quickly approaching, you may be thinking of a reverse mortgage as a way to fund your future while allowing you to stay in your home. But getting a handle on just how much financial security a reverse mortgage can mean may seem like the kind of math normally reserved for a Ph.D. in advanced calculus, unless you are smart enough to simply use a reverse mortgage calculator.

With Internet access, you will easily find your way to one of the dozens of online lenders offering reverse mortgage calculators on their websites. Extremely user friendly, these reverse mortgage calculators demand no more input than a reasonable estimate of your house's market value. Reverse mortgage calculators are ideal tools for providing the information you need to decide if it will be in your best financial interests to take out a reverse mortgage.

AARP Can Help

If you're a member of the American Association of Retired Persons, or AARP, you may know about reverse mortgage calculator at www.aarp.org. You don't have to belong to AARP to access the calculator, and in fact it is the most widely used of all the online reverse mortgage calculators.

The AARP reverse mortgage calculator will ask you first to enter input on the ages of both yourself and you spouse, your home's approximate worth, and you zip code. Deciding to supply this data will start you on your way to either proceeding with, or passing on, an application for a reverse mortgage.

Good Data In, Good Data Out

Try to be as precise as possible when you enter your home's value, because the information the reverse mortgage calculator provides will depend on your data. The financing of a reverse mortgage is entirely different from that of the mortgages you are used to, and some reverse mortgage calculators will ask you not only your home's present market value, but for the amount you may still owe on an existing mortgage.

The most advanced reverse mortgage calculators process detailed data, including the total amount you would like to get with a reverse mortgage, and if you would like it as a credit line, in monthly installments, or as a single cash payment. It will even ask if you would like some combination of the three!

Once you input all the data, the reverse mortgage calculator will tabulate your information and produce a reasonable accurate response letting you know what taking out a reverse mortgage will do for your financial prospects.

But you need to accept the fact that reverse mortgage calculators, as amazing as they may be, are only good for approximating reverse mortgages according to national averages for reverse mortgages, and that what you can really expect will be greatly influenced by the interest rates where your home is located.

Clarifying The Picture

When you have computed a ballpark figure with a reverse mortgage calculator, you should head for a local lender and discuss what adding the various reverse mortgage fees will do to your final figures. Each reverse mortgage will have application, closing, origination, and continuing loan service fees attached, and those you do not pay up front will be included in your loan balance. So they will be accumulating interest charges for the duration of your reverse mortgage loan.

House Hunting - Is Time To Start?

Once you know how much money you can borrow and have an estimate of your closing costs, you'll know the price range you can afford. You might already have your "dream home" in mind. Perhaps you want to settle down in a particular neighborhood, or maybe you just need more space for your growing family.

Even if you know exactly what you're looking for, the house hunting process can be overwhelming. It takes time.

The First Step – A Reality Check:
It’s fun to look at houses. And this part of the process is very exciting, but don't let your excitement rule the house-hunting process.

Stick within your budget – don't look at homes above what you can afford – even if it's "just a little" more.

Don't let your heart rule over your head. You may fall in love with a property, but if it is beyond your means, it is not the right house for you.
Be flexible. Don’t be disappointed if the houses in your price range differ from your dream. Buy the home you can afford rather than the home that "has it all."

Compare what you'd like to have with what you really need.

Some good house-hunting tips:
Take pictures inside and outside the home.
Bring a spouse, family member, or friend.
Make sure the house fits into your budget.
Ask about utility and maintenance costs.
Think of commuting time and costs.
Consider your monthly budget – can you afford the renovations and maintenance that you'll need to do?

Don't make a "spur-of-the-moment" decision.
Additional tips to make the house-hunting process easier:
Concentrate on a few neighborhoods.

Decide what's most important to you about the neighborhood you want. This can greatly narrow down your search.

Find a real estate agent. They'll have many more listings than you can find on your own.

Compare homes. Make sure you know what you would get and what you would miss in each house before you make a decision.

Every Single Thing You Wanted To Know About Bankruptcy

What Is Bankruptcy?

Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.

A decision to file for bankruptcy should be made only after determining that bankruptcy is the best way to deal with your financial problems. Bankruptcy is a difficult and personal decision, but it is a choice that may help if you are facing serious financial problems. Although bankruptcy can help with some financial problems, its effects are not permanent. If you choose bankruptcy, you should take advantage of the fresh start it offers and then make careful decisions about future borrowing and credit, so you won't ever need to file for bankruptcy again!

Peak Home Loans can help to refinance your home with a bankruptcy, a foreclosure, good credit, fair credit, poor credit, and bad credit. We offer bankruptcy refinance and mortgages with any credit. Click here to learn how. Refinancing with a bankruptcy is our specialty.

What Can Bankruptcy Do for Me?

Bankruptcy may make it possible for you to:

Eliminate the legal obligation to pay most or all of your debts. This is called a "discharge" of debts. It is designed to give you a fresh financial start.
Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)

Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.

Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.

Restore or prevent termination of utility service.

Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.

What Can't Bankruptcy Do for Me?

Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:

Eliminate certain rights of "secured" creditors. A "secured" creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt.

Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, most student loans, court restitution orders, criminal fines, and some taxes.

Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.

Discharge debts that arise after bankruptcy has been filed.

If the creditors have stopped asking and started threatening. You’re worrying that the car might not be in the driveway when you go out in the morning. Maybe your mortgage holder has used the “f” word: foreclosure. How can you save your assets?

Bankruptcy is a federal legal process for debt management available to most individuals and businesses. Successfully completing a bankruptcy case allows individuals and businesses to either eliminate or reorganize most of their debt. The bankruptcy laws are contained in 11 U.S.C. Sec. 101 et seq.

Peak Home Loans can help to refinance your home with a bankruptcy, a foreclosure, good credit, fair credit, poor credit, and bad credit. We offer bankruptcy refinance and mortgages with any credit. Click here to learn how. Refinancing with a bankruptcy is our specialty.

How will the new bankruptcy laws effective October 17, 2005 affect me? The New Bankruptcy Laws Will Affect Your Rights!

On April 20, 2005 President Bush signed into law a new set of bankruptcy statutes. Some of the provisions took effect immediately, but most changes will become effective on October 17, 2005.

Under the new bankruptcy law, it may be more difficult for some people to eliminate their debts through Chapter 7. But, some people will benefit by waiting to file until the new law goes into effect...

When should I consider bankruptcy?

You should consider bankruptcy when:

* you've been unemployed for several months and your prospects are questionable;
* it becomes evident you cannot pay your bills as they come due;
* you start considering using your VISA card to pay your MasterCard;
* you receive a letter from your mortgage company threatening foreclosure;
* you fear your car will be repossessed;
* your car HAS been repossessed;
* you're considering a home equity loan to consolidate your bills;
* you're considering cashing in your 401(k) or your IRA;
* you're worried about protecting other assets;
* a creditor is threatening or has filed suit;
* you have significant IRS debt;
* you just can't abide any more collection letters and phone calls;

Many people are under the mistaken impression that bankruptcy will strip them of their assets. In the vast majority of cases, however, those who file bankruptcy keep all of their assets. In fact, assets like your home, car, pension fund and IRA are protected from your creditors if you file bankruptcy. Therefore, it is vital that you consult with a bankruptcy attorney before selling, transferring or cashing in any assets.

Are there alternatives to bankruptcy?
Of course. Some people have successfully managed their finances through nonprofit credit counseling centers like Consumer Credit Counseling Services of Greater Dallas, Inc. Among other services, CCCS intervenes with creditors to set up more manageable payment plans. Creditor participation in CCCS payment plans is entirely voluntary. CCCS cannot guarantee that a creditor will accept a payment proposal or protect you from further collection efforts.

Sometimes a payment plan can be negotiated directly with a creditor. Obtaining loan extensions, compromises and workout agreements require negotiation skills and experience. These alternatives may alert your creditors to the existence of nonexempt property that the creditor could reach and can involve considerable expenses.

You also have the option of doing nothing, which may entail certain risks. Creditors can obtain court judgments on the debt and then attempt to collect the judgment. Some states allow creditors to satisfy their judgments out of the debtor’s property, including bank accounts and certain personal property. If you sell real property after the judgment is filed, you will most likely have to satisfy the judgment out of the proceeds of the sale. Judgment creditors cannot, however, foreclose on your homestead to satisfy the judgment, and they cannot garnish your wages.
Peak Home Loans can help to refinance your home with a bankruptcy, a foreclosure, good credit, fair credit, poor credit, and bad credit. We offer bankruptcy refinance and mortgages with any credit. Click here to learn how. Refinancing with a bankruptcy is our specialty.

What kinds of bankruptcy are available?

There are five kinds of bankruptcy:

Chapter 7 – also known as “straight” bankruptcy
Chapter 9 – reorganization for municipal entities
Chapter 11 – reorganization for businesses and for individuals with excessive debt
Chapter 12 – reorganization for family farmers
Chapter 13 – reorganization for individuals with a regular source of income

Most individuals and couples file either a Chapter 7 case or a Chapter 13 case.
How long does a bankruptcy case last?

A Chapter 7 straight bankruptcy case usually lasts 6 months or fewer, unless the case is complicated.

A Chapter 13 case will usually last from 3 to 5 years, depending on the repayment plan approved by the court.

Do I need an attorney to file bankruptcy?

No, but the process can be intimidating, and complications can cause dire results. The bankruptcy courts and trustees are not allowed to give legal advice and can only provide limited assistance in completing the extensive paperwork that must be filed. In addition, creditors may initiate litigation in order to settle their claims. It is very difficult for a person unfamiliar with bankruptcy law to consider all possible outcomes and achieve the desired result.

An attorney will help you evaluate which type of case is best for you. Factors to consider include the type of debts you owe (e.g., secured, unsecured, taxes, non-dischargeable, contingent) owe and type of property you own (exempt, nonexempt, real, personal).

What is a Chapter 7 bankruptcy?

The bankruptcy laws are designed so that all debtors emerge from bankruptcy with sufficient assets to make a fresh start. These assets are called exempt property. Chapter 7, also known as “straight” bankruptcy, requires that you turn over all nonexempt property to a bankruptcy trustee, who then converts it to cash for distribution to your creditors. In most cases, you then receive a discharge of all dis-chargeable debts.

Who can file a Chapter 7 bankruptcy petition?

Almost any individual, partnership, or corporation can file a Chapter 7 bankruptcy petition. The debtor must reside, have a domicile, a place of business, or property in the United States. You can file a Chapter 7 bankruptcy petition regardless of whether or not you are employed.

If you filed bankruptcy before, your right to a discharge may be affected. An attorney can help you evaluate your right to file another case.

What is a Chapter 13 bankruptcy?

When you file a Chapter 13 case, you agree to pay over to the Chapter 13 trustee a portion of your disposable income each month for 3 to 5 years. The disposable income is the money you have left over after your necessary expenses are paid. These payments are used to pay your creditors. Usually, your assets are not affected. Only your future income is paid to the trustee.

Under certain circumstances, it will not be necessary to pay your creditors the entire debt owed. Chapter 13 provisions allow for a discharge of certain debts before they are paid in full. It may also be possible to renegotiate a more favorable loan rate or payment amount on car payments or other secured debt.

Who can file a Chapter 13 bankruptcy petition?

Individuals may file Chapter 13 bankruptcy petitions if they:

(1) reside, have a domicile, a place of business, or property in the United States, or a municipality;
(2) have a source of regular income; and
(3) on the date the petition is filed owe less than $290,525* in non-contingent, liquidated, unsecured debts and less than $871,550* in non-contingent, liquidated, secured debts.
*These amounts are subject to change.

Corporations and partnerships may not file a Chapter 13 bankruptcy petition.
If you filed bankruptcy before, your right to a discharge in a succeeding case may be affected. An attorney can help you evaluate your right to file another case.

Peak Home Loans can help to refinance your home with a bankruptcy, a foreclosure, good credit, fair credit, poor credit, and bad credit. We offer bankruptcy refinance and mortgages with any credit. Click here to learn how. Refinancing with a bankruptcy is our specialty.

Does a spouse have to file bankruptcy, too?

No. But, not in community debt states - which most states are. Generally, each spouse is liable for the other’s debts. Therefore, if one spouse discharges debt through bankruptcy, the creditor may turn to the other spouse for payment.

Will the bankruptcy stop bill collectors from calling?

Yes. A provision of the Bankruptcy Code called the automatic stay prevents bill collectors from taking any action to collect debts. Once a creditor or bill collector becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts.

After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks. Creditors will also stop calling when you inform them that you filed a bankruptcy petition and supply them with the "docket number" for the case. In some cases, you or your attorney should contact the creditor immediately after filing the bankruptcy petition, especially if a lawsuit is pending or if repossession of cars or personal property is imminent.

A creditor may be liable for court sanctions if it continues to use collection tactics once informed of the bankruptcy.

Once the bankruptcy is filed, your attorney will assume all responsibility for communicating with your creditors.

Will bankruptcy stop a wage attachment?

Yes, including IRS wage attachments.

Will bankruptcy stop a foreclosure proceeding or prevent repossession of my car?

Temporarily, yes. However, the lender is entitled to apply to the court for permission to continue foreclosure proceedings or repossession. This is called requesting relief from the automatic stay. If you file a Chapter 7 case, you may be able to arrange with the creditor to catch up the payments. If you file a Chapter 13 case, the past due payments can be included in the Chapter 13 and paid over time. Often, a Chapter 13 is the better choice for debtors facing foreclosure or repossession.

If my car has already been repossessed, can bankruptcy help me get it back?

Yes. But you must act quickly. If you file a Chapter 13 case and your car has not yet been sold by the creditor, the creditor will be required to return the car to you.

Will bankruptcy stop an eviction, or unlawful detainer, action?

Sometimes it will, but it is usually not a good idea. The owner is entitled to possession of his property and at best you will only gain a short delay. Filing a Chapter 7 solely to avoid an eviction might be considered an abuse of Chapter 7. If the Bankruptcy Court finds that this is true, then the court can immediately dismiss the bankruptcy and impose other legal and monetary sanctions on you. If, however, you are substantially behind in your other bills, and eviction is only one of your financial concerns, a bankruptcy attorney may be able to help you.

Will bankruptcy stop a lawsuit?

Bankruptcy stops most civil lawsuits, including most IRS proceedings. Divorce and criminal cases are rarely stopped because of a bankruptcy case.

Will bankruptcy remove a lien?

Under some circumstances, once the bankruptcy proceedings have started, a special motion can be filed to remove certain liens.

Peak Home Loans can help to refinance your home with a bankruptcy, a foreclosure, good credit, fair credit, poor credit, and bad credit. We offer bankruptcy refinance and mortgages with any credit. Click here to learn how. Refinancing with a bankruptcy is our specialty.

Is it true I can cancel all debts by filing bankruptcy?

The underlying policy of bankruptcy law is that the honest debtor who is in debt beyond her ability to repay the debt should receive a fresh start through the discharge of debts. A discharge is a release from personal liability for certain debts.

However, some debts must still be paid. These are known as non-dis-chargeable debts. Generally speaking, they include taxes less than three years old; spousal and child support; debts arising out of willful misconduct or malicious misconduct by the debtor; liability for injury or death from driving while intoxicated; non-dis-chargeable debts from a prior bankruptcy; student loans; criminal fines and penalties.

In many cases, debts that cannot be discharged in a Chapter 7 case may be discharged in a Chapter 13 case.

Secured debts also may be discharged, but the secured creditor is entitled to get back the collateral or its value. Debtors can avoid this result by continuing to pay their secured loans during bankruptcy and entering into an agreement with the creditor to continue paying the note after the bankruptcy is over, if necessary.

Must I list all my creditors?

Yes, even debts owed to relatives and friends and debts you intend to repay after bankruptcy. If you intentionally omit a creditor from your schedules, you have committed perjury. However, sometimes a creditor is overlooked or not known to exist at the time the schedules are filed. Generally, you may amend your schedules at any time during the bankruptcy proceeding to add an additional creditor.

If you accidentally omit a creditor, and the creditor does not otherwise learn about your bankruptcy case in time to participate in the proceeding, the debt owed to that creditor might not be discharged.

If I am divorced, will bankruptcy eliminate my obligation to pay community debts?

In general, you will be discharged from all dis-chargeable community debts. In some circumstances you may still be liable to your spouse if she or he pays the debt.

Is alimony dis-chargeable?

Alimony, maintenance and child support payments generally are not dis-chargeable. A few technical exceptions exist. In addition, the Bankruptcy Code provides that certain other divorce related obligations, such as payments to others, hold harmless provisions and property settlement obligations are not dis-chargeable if the debtor has the ability to pay them and the detriment to the spouse outweighs the benefit of the discharge to the debtor. In order to take advantage of these provisions, the spouse must obtain an order from the bankruptcy court declaring the debt non-dis-chargeable.

Can I discharge student loans?

Generally, student loans are not discharged in bankruptcy. There are two exceptions to this general rule.

1. The student loan may be discharged if it is neither "insured or guaranteed by a governmental unit" nor "made under any program funded in whole or in part by a governmental unit or nonprofit institution."

2. The student loan may be discharged if paying the loan will "impose an undue hardship on the debtor and the debtor's dependents."
Whether an exception applies depends on the facts of the particular case and may also depend on local court decisions. If a student loan falls into one of the two exceptions, discharge of the loan may not be automatic. You may have to seek a bankruptcy court order declaring the debt discharged.

Can I dis-charge taxes?

In most instances, taxes owed to the federal government are not discharged unless they are more than 3 years old. If you have employees and owe income tax on your employees’ earnings, those taxes are never discharged. Interest and penalties on those taxes may be discharged under certain circumstances.

Taxes that are not discharged in a Chapter 7 case can often be paid through a Chapter 13 plan.

Can I keep any credit cards?

Under some circumstances you may be able to keep some credit cards if the creditor agrees. There are many factors that must be considered. Some of those include the credit card balance at the time of the bankruptcy, what the credit card company is willing to do and your ability to pay the present and future credit card debt.

Will bankruptcy affect my job?

Bankruptcy petitions are public records. However, under normal circumstances, it will not know you filed a bankruptcy petition. If your employer or landlord is a creditor it must be listed as a creditor on the bankruptcy paperwork and receive notice of the bankruptcy proceeding. In some cases, Chapter 13 debtors are required to make payments through wage garnishment and the employer will learn about the bankruptcy.

Your employer cannot fire you for filing bankruptcy. The Bankruptcy Code prohibits employers from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dis-chargeable debt.

Do I have to list all of my assets?

Yes. Your assets include your personal property, any real estate you have an interest in, your right to receive something from a contract, debts that people owe you, and many other types of property.

If you knowingly and fraudulently conceal an asset from the court, you have committed a felony and can be fined or imprisoned or both. In addition, the court can deny your discharge, or dismiss or convert your bankruptcy case.
Peak Home Loans can help to refinance your home with a bankruptcy, a foreclosure, good credit, fair credit, poor credit, and bad credit. We offer bankruptcy refinance and mortgages with any credit. Click here to learn how. Refinancing with a bankruptcy is our specialty.

What happens to my personal property, real property and other assets?

You are required to file a schedule with the court describing all of your assets. Certain property is either excluded from the bankruptcy or exempt, and you will be able to keep that property. Often, all of your assets can be protected.
If you have property that is not exempt, that property or its value, must be turned over to the bankruptcy trustee, who will sell it and distribute the proceeds to your creditors.

In some states, debtors may choose the exemption list or the Federal exemption list. Each of these lists allows the debtor to exempt an amount of real and personal property, but the lists are not identical. For instance, some states allow a debtor to exempt a homestead without regard to its value, but the Federal list allows only a limited homestead exemption. On the other hand, the Federal list may allow you to exempt some property, like cash, that some states do not provide for. Which one you use depends on the nature of your property and the debt you owe on that property. An attorney can help you analyze your assets and debts to determine which exemption list is right for you.

In many cases you can retain your home and automobile. If you are behind in making payments on a loan secured by a home or automobile or the home or automobile has equity in excess of what you are allowed to exempt, you might consider filing a Chapter 13 petition. You can then develop a plan for repaying your creditors without necessarily liquidating assets.

Even in bankruptcy, the secured creditor is entitled to get back the collateral or its value. Debtors can avoid this result by continuing to pay their secured loans during bankruptcy and entering into an agreement with the creditor to continue paying the note after the bankruptcy is over, if necessary.

Will I have to go to court?

About 4 to 6 weeks after filing the bankruptcy petition, you will have to attend a hearing presided over by a bankruptcy trustee. This hearing is called the First Meeting of Creditors. The trustee is not a judge, but an individual appointed to oversee bankruptcy cases. At the First Meeting of Creditors the trustee will ask you questions under oath regarding the content of your bankruptcy papers, your assets, debts and other matters. Creditors will also be permitted to ask questions, although in the majority of cases creditors do not attend the First Meeting of Creditors. After the initial meeting you normally will not return to court. However, if a creditor or the trustee files a motion or an adversary action you may have to appear in court with your attorney.

What should I do to prepare for filing bankruptcy?

First, you should consult with an attorney. An attorney can help you plan for the bankruptcy, decide when to file a bankruptcy petition, or even avoid filing for bankruptcy. If you decide to file a bankruptcy petition:

Stop using your credit cards. If you charge up your credit cards knowing that you’re going to file bankruptcy, the debt may not be discharged. Also luxury purchases over $1,150 and cash advances totaling more than $1,150 within 60 days before the bankruptcy filing are not dis-chargeable.

Don’t transfer your assets to friends, family and business associates to protect the assets from your creditors. The transfer may be considered a fraudulent conveyance. If it is, you may lose both the property and your right to a bankruptcy discharge. Instead, consult an attorney. There may be legitimate ways to save the property.
Don’t destroy any business or financial records. You can lose your right to a bankruptcy discharge as a result.

Carefully choose the creditors you pay. Some creditors, such as landlords, secured creditors, and some utilities should be paid under most circumstances. If you pay a credit card debt that eventually will be discharged, you may be throwing money away. Your attorney should advise you on what debts should and should not be paid while you prepare to file a bankruptcy petition.

What if someone who owes me money files bankruptcy?

If you are listed as a creditor in the case, you will receive notice of the bankruptcy from the court in which the case was filed. Review the notice carefully, as it will tell you whether or not you should file a claim in the case. If the notice indicates that you should not file a claim, the court does not expect that there will be any money to pay to creditors. If the notice instructs you to file a claim, generally you must file a proof of claim in order to be paid. Be mindful of all deadlines for filing claims. If you fail to file a claim by the date indicated on the notice, your rights will be significantly affected.

It is not necessary to hire an attorney to file a claim for you. You can obtain a proof of claim form from any bankruptcy court and most office supply stores. Fill out the form completely and attach any supporting documents you have that would help prove that the debtor owes you money. These may include loan agreements, promissory notes, IOUs, credit applications. In addition, you must also attach copies of statements, account ledgers or computer printouts showing how much the debtor owed you as of the date the bankruptcy was filed. Do not include any interest that accrued on the debt after the date the case was filed unless you have a security interest in personal property of the debtor.

You can file the claim in person, or you can send the claim to the address indicated on the notice. Be sure to include a copy of the claim and a stamped self-addressed envelope so that the court can return a date stamped copy to you. Also send copies to the debtor’s attorney and to the trustee.

If the debtor or the trustee disagrees with your claim, they will file an objection to it and the objection will be set for a hearing. If you choose to contest the objection, it is strongly advised that you contact an attorney to help you protect your rights. An attorney familiar with bankruptcy law will understand your options and will help you to maximize your return.

My employer filed bankruptcy. How do I get paid?

If you are a union employee, contact your union. Often unions will represent the employees in the bankruptcy proceeding. If not, file a proof of claim for any unpaid wages, vacation benefits, etc. owed from before the date of filing. Up to $4,000 (this amount will increase periodically - make sure you check a current version of the Bankruptcy Code) of the amount owed to you for services performed within 90 days of the date of the bankruptcy, or the date your employer closed its doors, whichever occurred first, is a "priority claim" under the Bankruptcy Code. The rest of the amount owed you is a general, unsecured claim. Priority claims will get paid before general unsecured claims.

Peak Home Loans can help to refinance your home with a bankruptcy, a foreclosure, good credit, fair credit, poor credit, and bad credit. We offer bankruptcy refinance and mortgages with any credit. Click here to learn how. Refinancing with a bankruptcy is our specialty.

How can I learn more about bankruptcy?

In addition, the Administrative Office of the US Courts publishes a booklet called “Bankruptcy Basics.” You can read or print this booklet online by clicking here.

Local public law libraries also have information that will help you learn more about the process.

If you are considering refinancing a home, a home equity loan, or purchasing a home, simply click APPLY NOW and select the Type of Loan desired?

Avoiding Foreclosure

The last thing any homeowner wants to think about is losing the family home. No one expects to lose their house to foreclosure, but by understanding the foreclosure process and what may lead up to it, you can be in a better position to recognize and address potential problems that may impact your ability to make every mortgage payment on time.

What is foreclosure?
In the contract you signed when your mortgage lender loaned you money to buy your house, you agreed that if you can’t repay the loan, the lender can foreclose to take ownership of the house.

If you do not pay your monthly mortgage payment, you are technically in default on your mortgage. State laws vary, but generally, a loan that is as little as 90 days delinquent can be considered in foreclosure.

Your lender may send you a notice indicating that they are starting foreclosure proceedings, but don't wait; take steps to prevent a foreclosure as soon as you realize you are having trouble paying the mortgage!

Learn to recognize the warning signs of foreclosure.
Know what early steps you can take to avoid foreclosure.
If you are in the midst of a foreclosure, know the dos and don'ts.
Know where to get help in dealing with issues that could lead to foreclosure.

Have a Plan B.
Don't wait until you're in a financial predicament before assessing your options. The time to develop a backup plan is not when things have gotten so bad that you are facing foreclosure, but when things are going well and you can prepare for the unexpected "what if's" that happen in life.

FREE Mortgage Calculators

These FREE calculators are offered by Peak Home Loans. Please link to this page by using the link below the calculators and return whenever you need a mortgage calculator.

Preparing For Homeownership

• Rent vs. Buy
  Understand the financial differences between renting and homeownership.

• Tax Savings
  Learn about the potential tax savings with homeownership.

• How Much Can You Afford?
  Research how much house works within your budget.

• How Much Can You Borrow?
  Learn how much money you might be able to borrow.

All About Mortgages

• Fixed or Adjustable-Rate?
  Understand the financial differences between the fixed- and adjustable-rate mortgage.

• Adjustable-Rate Mortgage Calculators
  Find out how much monthly mortgage payments might be with an adjustable-rate mortgage.

• 15-year or 30-year Term?
  Learn how a different term affects your mortgage payment and overall cost of the loan.

• Down Payments
  Research how much of a down payment you should consider.

• Closing Costs
  Estimate what your closing costs might be.

Home Refinancing

• Refinancing Costs
  Understand what your refinancing costs might be.

All About Home Foreclosures

FORECLOSURE! If you don't pay your monthly mortgage payments over a period of time, the mortgage company can foreclose. This means you will lose title to your property and may be evicted from your home.

A foreclosure becomes part of your credit report and may adversely affect your ability to obtain credit in the future. To avoid possible foreclosure, it is helpful to have money saved to cover several months of your housing costs in case of an unexpected emergency, like job loss, divorce or separation, serious illness, or the death of a loved one.



Peak Home Loans can help to refinance your home with a foreclosure, a bankruptcy, good credit, fair credit, poor credit, and bad credit. We offer foreclosure refinance and mortgages with any credit. Click here to learn how. Refinancing with a foreclosure is our specialty.

What if You Cannot Pay Your Mortgage?

1. Call your mortgage company now!
As soon as you realize that you are unable to make your payments, talk about your circumstances with the mortgage company to which you send your monthly mortgage payment. Your options to retain your home are most effective when you are only one or two payments behind.

Too many people in financial trouble wait until the last minute to call their mortgage company. Some hope their problems will quickly resolve themselves. Others worry the mortgage company will rush to collection or foreclosure. The truth is: the longer you wait, the greater your chance of losing your home. If you are unable to make your mortgage payment, don't delay–call your mortgage company immediately. In a significant number of all foreclosures, the borrowers did not return their mortgage company's calls or written invitations to discuss payment options.

Depending upon your situation, your mortgage company may be able to provide you with temporary financial relief. Here are a number of alternatives to discuss with your mortgage company.

Forbearance is an agreement to temporarily let you pay less than the full amount of your mortgage payment, or pay nothing at all, during the forbearance period. Mortgage companies may consider forbearance when you can show that funds from a bonus, tax refund, or other source will let you bring the mortgage current at a specific time in the future.

A reinstatement occurs when you pay your mortgage company the total amount you are behind, in a lump sum, by a specific date. This is often combined with forbearance.

A repayment plan is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.

A loan modification is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable.

Common loan modifications include:

* Adding missed payments to the existing loan balance
* Making an adjustable-rate mortgage into a fixed-rate mortgage
* Extending the number of years you have to repay

Peak Home Loans can help to refinance your home with a foreclosure, a bankruptcy, good credit, fair credit, poor credit, and bad credit. We offer foreclosure refinance and mortgages with any credit. Refinancing with a foreclosure is our specialty.

2. Contact A Non-Profit Housing Or Credit Counseling Agency
Non-profit housing and credit counselors can help you analyze your financial situation. They also can help you organize a budget to pay your mortgage and other monthly expenses–without your mortgage company's direct involvement. Finally, these agencies can help you find and take advantage of local services or programs that provide financial, legal, medical or other support.

You can find a credit counseling agency in your local phone book or by contacting the U.S. Department of Housing and Urban Development (HUD) at (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern time. You can find a list of HUD-approved agencies on their web site.

What If You Can No Longer Afford to Keep Your Home?

If you cannot or do not want to keep your home, your mortgage company can work with you to avoid foreclosure. This can help reduce the negative effect on your credit reputation. There are several different ways this might occur depending upon your financial circumstances:

An assumption permits a qualified buyer to take over your mortgage debt and pay the mortgage payments, even if the mortgage is non-assumable. As a result, you may be able to sell your property and avoid foreclosure.

If you can sell your house but the sale proceeds are less than the total amount you owe on your mortgage, your mortgage company may agree to a short payoff and write off the portion of your mortgage that exceeds the net proceeds from the sale.

Your mortgage company may agree to a deed-in-lieu of foreclosure if you agree to voluntarily transfer title of your property to your mortgage company in exchange for cancellation of your mortgage debt. In most cases, you must attempt to sell your home for its fair market value for at least 90 days before a mortgage company will consider this option. This option may be unavailable if there are other liens on your home, such as judgments from other creditors, second mortgages, or tax liens.

Peak Home Loans can help to refinance your home with a foreclosure, a bankruptcy, good credit, fair credit, poor credit, and bad credit. We offer foreclosure refinance and mortgages with any credit. Click here to learn how. Refinancing with a foreclosure is our specialty.

Predatory lenders often target people in financial distress. They try to panic you into high cost mortgages, making financial problems worse and increasing your risk of losing your home. Beware of Scam Artists.

Predatory lenders usually offer loans with:

* High interest rates
* Broker fees
* Unnecessary costs like pre-paid life insurance
* Unaffordable repayment terms

Here are some tips to protect you from predatory lenders:

* Be suspicious of anyone who offers you "bargain loans," whether they mail, fax or e-mail an offer to you, call you on the phone, or come to your door.
* Beware of promises of "No Credit? Bad Credit? No Problem!" and offers that are only "good for a very short time".
* Avoid lenders who encourage you to borrow more than you need or more than the value of your home.
* Beware of terms that change at the last minute or offer next-day approval based on prepayments or up-front fees.
* Do not sign anything you do not understand. It is your right and duty to ask questions.
* Beware of phony credit counseling agencies charging high fees for financial counseling services you can get for little or no charge through non-profit agencies. You can find a list of HUD-approved agencies by visiting their web site.

REMEMBER: Anything that sounds too good to be true usually is! If you suspect a predatory mortgage company is targeting you, call your local office of consumer affairs, the Federal Bureau of Investigation, an approved credit counseling agency or your local Don't Borrow Trouble campaign.

Peak Home Loans can help to refinance your home with a foreclosure, a bankruptcy, good credit, fair credit, poor credit, and bad credit. We offer foreclosure refinance and mortgages with any credit. Click here to apply. Refinancing with a foreclosure is our specialty.

Click to visit Peak Home Loans.

Adjustable Rate Mortgages Explained

Adjustable-rate mortgages (ARMs) are loans with interest rates that change. ARMs may start with lower monthly payments than fixed-rate mortgages, but keep the following in mind:

Your monthly payments could change. They could go up--sometimes by a lot--even if interest rates don't go up. Your payments may not go down much, or at all--even if interest rates go down. You could end up owing more money than you borrowed--even if you make all your payments on time. If you want to pay off your ARM early to avoid higher payments, you might have to pay a penalty. You need to compare features of ARMs to find the one that best fits your needs. See the Mortgage Shopping Worksheet.



This handbook explains how ARMs work and discusses some of the issues that borrowers may face. It includes ways to reduce the risks and gives some pointers about advertising and other ways you can get information from lenders and other trusted advisers. Important ARM terms are defined in a glossary. And the Mortgage Shopping Worksheet can help you ask the right questions and figure out whether an ARM is right for you. Ask lenders to help you fill out the worksheet so you can get the information you need to compare mortgages.

What Is an ARM?
An adjustable-rate mortgage differs from a fixed-rate mortgage in many ways. With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an ARM, the interest rate changes periodically, usually in relation to an index, and payments may go up or down accordingly.

Shopping for a mortgage is not as simple as it used to be. To compare two ARMs with each other or to compare an ARM with a fixed-rate mortgage, you need to know about indexes, margins, discounts, caps on rates and payments, negative amortization, payment options, and recasting (recalculating) your loan. You need to consider the maximum amount your monthly payment could increase. Most important, you need to know what might happen to your monthly mortgage payment in relation to your future ability to afford higher payments.

Lenders generally charge lower initial interest rates for ARMs than for fixed-rate mortgages. At first, this makes the ARM easier on your pocketbook than a fixed-rate mortgage for the same loan amount. Moreover, your ARM could be less expensive over a long period than a fixed-rate mortgage--for example, if interest rates remain steady or move lower.

Against these advantages, you have to weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It's a trade-off--you get a lower initial rate with an ARM in exchange for assuming more risk over the long run.

Here are some questions you need to consider:
Is my income enough--or likely to rise enough--to cover higher mortgage payments if interest rates go up?
Will I be taking on other sizable debts, such as a loan for a car or school tuition, in the near future?
How long do I plan to own this home? (If you plan to sell soon, rising interest rates may not pose the problem they do if you plan to own the house for a long time.)
Do I plan to make any additional payments or pay the loan off early?

Lenders and Brokers
Mortgage loans are offered by many kinds of lenders--such as banks, mortgage companies, and credit unions. You can also get a loan through a mortgage broker. Brokers "arrange" loans; in other words, they find a lender for you. Brokers generally take your application and contact several lenders, but keep in mind that brokers are not required to find the best deal for you unless they have contracted with you to act as your agent.

The Basic Features Of An ARM
The initial rate and payment amount on an ARM will remain in effect for a limited period of time--ranging from just 1 month to 5 years or more. For some ARMs, the initial rate and payment can vary greatly from the rates and payments later in the loan term. Even if interest rates are stable, your rates and payments could change a lot. If lenders or brokers quote the initial rate and payment on a loan, ask them for the annual percentage rate (APR). If the APR is significantly higher than the initial rate, then it is likely that your rate and payments will be a lot higher when the loan adjusts, even if general interest rates remain the same.

The Adjustment Period
With most ARMs, the interest rate and monthly payment change every month, quarter, year, 3 years, or 5 years. The period between rate changes is called the adjustment period. For example, a loan with an adjustment period of 1 year is called a 1-year ARM, and the interest rate and payment can change once every year; a loan with a 3-year adjustment period is called a 3-year ARM.

Loan Descriptions
Lenders must give you written information on each type of ARM loan you are interested in. The information must include the terms and conditions for each loan, including information about the index and margin, how your rate will be calculated, how often your rate can change, limits on changes (or caps), an example of how high your monthly payment might go, and other ARM features such as negative amortization.

The Index
The interest rate on an ARM is made up of two parts: the index and the margin. The index is a measure of interest rates generally, and the margin is an extra amount that the lender adds. Your payments will be affected by any caps, or limits, on how high or low your rate can go. If the index rate moves up, so does your interest rate in most circumstances, and you will probably have to make higher monthly payments. On the other hand, if the index rate goes down, your monthly payment could go down. Not all ARMs adjust downward, however--be sure to read the information for the loan you are considering.

Lenders base ARM rates on a variety of indexes. Among the most common indexes are the rates on 1-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR). A few lenders use their own cost of funds as an index, rather than using other indexes. You should ask what index will be used, how it has fluctuated in the past, and where it is published--you can find a lot of this information in major newspapers and on the Internet.

To help you get an idea of how to compare different indexes, the following chart shows a few common indexes over an 11-year period (1996-2006). As you can see, some index rates tend to be higher than others, and some change more often. But if a lender bases interest-rate adjustments on the average value of an index over time, your interest rate would not change as dramatically.

To determine the interest rate on an ARM, lenders add a few percentage points to the index rate, called the margin. The amount of the margin may differ from one lender to another, but it is usually constant over the life of the loan. The fully indexed rate is equal to the margin plus the index. If the initial rate on the loan is less than the fully indexed rate, it is called a discounted index rate. For example, if the lender uses an index that currently is 4% and adds a 3% margin, the fully indexed rate would be

Index 4%
+ Margin 3%
----
Fully indexed rate 7%

If the index on this loan rose to 5%, the fully indexed rate would be 8% (5% + 3%). If the index fell to 2%, the fully indexed rate would be 5% (2% + 3%).

Some lenders base the amount of the margin on your credit record--the better your credit, the lower the margin they add--and the lower the interest you will have to pay on your mortgage. In comparing ARMs, look at both the index and margin for each program.

No-Doc/Low-Doc Loans
When you apply for a loan, lenders usually require documents to prove that your income is high enough to repay the loan. For example, a lender might ask to see copies of your most recent pay stubs, income tax filings, and bank account statements. In a no-doc or low-doc loan, the lender doesn't require you to bring proof of your income, but you will usually have to pay a higher interest rate or extra fees to get the loan. Lenders generally charge more for no-doc/low-doc loans.

Interest-rate caps
An interest-rate cap places a limit on the amount your interest rate can increase. Interest caps come in two versions:

Periodic adjustment caps, which limit the amount the interest rate can adjust up or down from one adjustment period to the next after the first adjustment, and
lifetime caps, which limit the interest-rate increase over the life of the loan. By law, virtually all ARMs must have a lifetime cap.

Let's suppose you have an ARM with a periodic adjustment interest-rate cap of 2%. However, at the first adjustment, the index rate has risen 3%. The following example shows what happens.

Examples in This Handbook
All examples in this handbook are based on a $200,000 loan amount and a 30-year term. Payment amounts in the examples do not include taxes, insurance, condominium or home-owner association fees, or similar items. These amounts can be a significant part of your monthly payment.

In this example, because of the cap on your loan, your monthly payment in year 2 is $138.70 per month lower than it would be without the cap, saving you $1,664.40 over the year.

Some ARMs allow a larger rate change at the first adjustment and then apply a periodic adjustment cap to all future adjustments.

A drop in interest rates does not always lead to a drop in your monthly payments. With some ARMs that have interest-rate caps, the cap may hold your rate and payment below what it would have been if the change in the index rate had been fully applied. The increase in the interest that was not imposed because of the rate cap might carry over to future rate adjustments. This is called carryover. So at the next adjustment date, your payment might increase even though the index rate has stayed the same or declined.

The following example shows how carryovers work. Suppose the index on your ARM increased 3% during the first year. Because this ARM limits rate increases to 2% at any one time, the rate is adjusted by only 2%, to 8% for the second year. However, the remaining 1% increase in the index carries over to the next time the lender can adjust rates. So when the lender adjusts the interest rate for the third year, the rate increases by 1%, to 9%, even if there is no change in the index during the second year.

In general, the rate on your loan can go up at any scheduled adjustment date when the lender's standard ARM rate (the index plus the margin) is higher than the rate you are paying before that adjustment.

Lifetime caps
The next example shows how a lifetime rate cap would affect your loan. Let's say that your ARM starts out with a 6% rate and the loan has a 6% lifetime cap--that is, the rate can never exceed 12%. Suppose the index rate increases 1% in each of the next 9 years. With a 6% overall cap, your payment would never exceed $1,998.84--compared with the $2,409.11 that it would have reached in the tenth year without a cap.

Payment caps
In addition to interest-rate caps, many ARMs--including payment-option ARMs--limit, or cap, the amount your monthly payment may increase at the time of each adjustment. For example, if your loan has a payment cap of 7½%, your monthly payment won't increase more than 7½% over your previous payment, even if interest rates rise more. For example, if your monthly payment in year 1 of your mortgage was $1,000, it could only go up to $1,075 in year 2 (7½% of $1,000 is an additional $75). Any interest you don't pay because of the payment cap will be added to the balance of your loan. A payment cap can limit the increase to your monthly payments but also can add to the amount you owe on the loan. (This is called negative amortization.)

Let's assume that your rate changes in the first year by 2 percentage points but your payments can increase no more than 7½% in any one year. The following graph shows what your monthly payments would look like.

While your monthly payment will be only $1,289.03 for the second year, the difference of $172.69 each month will be added to the balance of your loan and will lead to negative amortization.

Some ARMs with payment caps do not have periodic interest-rate caps. In addition, as explained below, most payment-option ARMs have a built-in recalculation period, usually every 5 years. At that point, your payment will be recalculated (lenders use the term recast) based on the remaining term of the loan. If you have a 30-year loan and you are at the end of year 5, your payment will be recalculated for the remaining 25 years. The payment cap does not apply to this adjustment. If your loan balance has increased, or if interest rates have risen faster than your payments, your payments could go up a lot.

Types of ARMs

Hybrid ARMs often are advertised as 3/1 or 5/1 ARMs--you might also see ads for 7/1 or 10/1 ARMs. These loans are a mix--or a hybrid--of a fixed-rate period and an adjustable-rate period. The interest rate is fixed for the first few years of these loans--for example, for 5 years in a 5/1 ARM. After that, the rate may adjust annually (the 1 in the 5/1 example), until the loan is paid off. In the case of 3/1 or 5/1 ARMs. The first number tells you how long the fixed interest-rate period will be and the second number tells you how often the rate will adjust after the initial period.

You may also see ads for 2/28 or 3/27 ARMs--the first number tells you how long the fixed interest-rate period will be, and the second number tells you the number of years the rates on the loan will be adjustable. Some 2/28 and 3/27 mortgages adjust every 6 months, not annually.

Interest-only ARMs
An interest-only (I-O) ARM payment plan allows you to pay only the interest for a specified number of years, typically between 3 and 10 years. This allows you to have smaller monthly payments for a period of time. After that, your monthly payment will increase--even if interest rates stay the same--because you must start paying back the principal as well as the interest each month. For some I-O loans, the interest rate adjusts during the I-O period as well.

For example, if you take out a 30-year mortgage loan with a 5-year I-O payment period, you can pay only interest for 5 years and then you must pay both the principal and interest over the next 25 years. Because you begin to pay back the principal, your payments increase after year 5, even if the rate stays the same. Keep in mind that the longer the I-O period, the higher your monthly payments will be after the I-O period ends.

Payment-option ARMs
A payment-option ARM is an adjustable-rate mortgage that allows you to choose among several payment options each month. The options typically include the following:

a traditional payment of principal and interest, which reduces the amount you owe on your mortgage. These payments are based on a set loan term, such as a 15-, 30-, or 40-year payment schedule.

an interest-only payment, which pays the interest but does not reduce the amount you owe on your mortgage as you make your payments.
a minimum (or limited) payment that may be less than the amount of interest due that month and may not reduce the amount you owe on your mortgage. If you choose this option, the amount of any interest you do not pay will be added to the principal of the loan, increasing the amount you owe and your future monthly payments, and increasing the amount of interest you will pay over the life of the loan. In addition, if you pay only the minimum payment in the last few years of the loan, you may owe a larger payment at the end of the loan term, called a balloon payment.

The interest rate on a payment-option ARM is typically very low for the first few months (for example, 2% for the first 1 to 3 months). After that, the interest rate usually rises to a rate closer to that of other mortgage loans. Your payments during the first year are based on the initial low rate, meaning that if you only make the minimum payment each month, it will not reduce the amount you owe and it may not cover the interest due. The unpaid interest is added to the amount you owe on the mortgage, and your loan balance increases. This is called negative amortization. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Also, as interest rates go up, your payments are likely to go up.

Payment-option ARMs have a built-in recalculation period, usually every 5 years. At this point, your payment will be recalculated (lenders use the term recast) based on the remaining term of the loan. If you have a 30-year loan and you are at the end of year 5, your payment will be recalculated for the remaining 25 years. If your loan balance has increased because you have made only minimum payments, or if interest rates have risen faster than your payments, your payments will increase each time your loan is recast. At each recast, your new minimum payment will be a fully amortizing payment and any payment cap will not apply. This means that your monthly payment can increase a lot at each recast.

Lenders may recalculate your loan payments before the recast period if the amount of principal you owe grows beyond a set limit, say 110% or 125% of your original mortgage amount. For example, suppose you made only minimum payments on your $200,000 mortgage and had any unpaid interest added to your balance. If the balance grew to $250,000 (125% of $200,000), your lender would recalculate your payments so that you would pay off the loan over the remaining term. It is likely that your payments would go up substantially.

More information on interest-only and payment-option ARMs is available in the Federal Reserve Board's brochure titled Interest-Only Mortgage Payments and Payment-Option ARMs--Are They for You?

Consumer Cautions
Discounted interest rates. Many lenders offer more than one type of ARM. Some lenders offer an ARM with an initial rate that is lower than their fully indexed ARM rate (that is, lower than the sum of the index plus the margin). Such rates--called discounted rates, start rates, or teaser rates--are often combined with large initial loan fees, sometimes called points, and with higher rates after the initial discounted rate expires.

Your lender or broker may offer you a choice of loans that may include "discount points" or a "discount fee." You may choose to pay these points or fees in return for a lower interest rate. But keep in mind that the lower interest rate may only last until the first adjustment.

If a lender offers you a loan with a discount rate, don't assume that means that the loan is a good one for you. You should carefully consider whether you will be able to afford higher payments in later years when the discount expires and the rate is adjusted.

Here is an example of how a discounted initial rate might work. Let's assume that the lender's fully indexed one-year ARM rate (index rate plus margin) is currently 6%; the monthly payment for the first year would be $1,199.10. But your lender is offering an ARM with a discounted initial rate of 4% for the first year. With the 4% rate, your first-year's monthly payment would be $954.83.

With a discounted ARM, your initial payment will probably remain at $954.83 for only a limited time--and any savings during the discount period may be offset by higher payments over the remaining life of the mortgage. If you are considering a discount ARM, be sure to compare future payments with those for a fully indexed ARM. In fact, if you buy a home or refinance using a deeply discounted initial rate, you run the risk of payment shock, negative amortization, or prepayment penalties or conversion fees.

Payment shock
Payment shock may occur if your mortgage payment rises sharply at a rate adjustment. Let's see what would happen in the second year if the rate on your discounted 4% ARM were to rise to the 6% fully indexed rate.

As the example shows, even if the index rate were to stay the same, your monthly payment would go up from $954.83 to $1,192.63 in the second year.

Suppose that the index rate increases 1% in one year and the ARM rate rises to 7%. Your payment in the second year would be $1,320.59.

That's an increase of $365.76 in your monthly payment. You can see what might happen if you choose an ARM because of a low initial rate without considering whether you will be able to afford future payments.

If you have an interest-only ARM, payment shock can also occur when the interest-only period ends. Or, if you have a payment-option ARM, payment shock can happen when the loan is recast.

The following example compares several different loans over the first 7 years of their terms; the payments shown are for years 1, 6, and 7 of the mortgage, assuming you make interest-only payments or minimum payments. The main point is that, depending on the terms and conditions of your mortgage and changes in interest rates, ARM payments can change quite a bit over the life of the loan--so while you could save money in the first few years of an ARM, you could also face much higher payments in the future.

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40 Year Mortgages?

40-Year Mortgage Rates: Lower Payments, Less Equity...

For years, the standard in the mortgage lending industry was a 30-year fixed rate loan. As opposed to other, shorter term mortgages, the low payments of a 30-year option was attractive to first-time homebuyers and those wishing to get much more house for their dollar. Yet as times change, home values have increased and mortgage companies have continued to change their services to suit their clientele. Now, savvy home buyers are choosing an even more cost-effective financing alternative: the 40-year mortgage.

There are two types of 40-year mortgages: the 40-year fixed rate mortgage and the 40-year adjustable rate mortgage, or ARM. There is a wide selection of 40-year ARMs available; lenders offering 40-year loans can provide more information.

The primary benefit of a 40-year fixed rate mortgage is lower payments, which means that it opens up the possibility of home ownership to a much larger demographic. Thanks to new 40-year mortgage programs, renters are finding that they can more easily become homeowners; homeowners wishing to upgrade to a new home are discovering that they can now afford much more; and those who may have a difficult time qualifying for a shorter term loan may find that the 40-year fixed rate mortgage is something that they can qualify for, based on the standard mortgage industry requirement of a low debt-to-income ratio.

The downside to 40-year mortgages is that because they are for a longer term, borrowers end up paying more interest. In other words, you'll be paying more for a home financed with a 40-year fixed rate mortgage in the long run than you would with a 30-year term loan?10 more years worth of interest, in fact.

More interest means less equity. Since more interest is attached to the loan, each monthly payment will contribute less to the principal than it will to the amount of the interest. Therefore, the longer the mortgage period, the longer it takes to build equity in your home.

However, since the majority of homeowners pay off their home loans early, it's possible that a borrower wouldn't have to pay interest on the entire term of the loan anyway. That often makes 40-year fixed rate mortgages good alternatives for people who are only planning on owning their home for a short time or who are buying homes in an area that is appreciating rapidly.

40-year mortgage rates are calculated based on current market standards.

Generally speaking, 40-year mortgage rates run about one-quarter to one-half of a percentage point higher than a 30-year fixed rate loan.

Likewise, interest rates for 40-year adjustable rate mortgages also vary, yet they are established with an introductory rate which lasts from 3 to 10 years, and then adjusts annually afterward based on the market.

The best way to find out what the current rates are is to use a 40-year mortgage calculator. We offer one on our website, just click here. Thank you.

Where to Find 40-Year Mortgages?

40-year mortgage companies were few and far between up until June 2005 when Federal lending program Fannie Mae began buying 40-year loans. Before that time, taking on a 40-year mortgage was too high of a risk for lending companies. Yet now, thanks to Fannie Mae, there are several 40-year mortgage companies who are willing to offer these attractive long-term loans.

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Top 5 Mistakes People Make When Refinancing Their Home

1. Choosing a home loan lender for the wrong reason (i.e., the lowest rate, your existing lender.)
People choose home loan lenders for all the wrong reasons. Getting a low rate is important, but it's not the only consideration. Lenders may offer the lowest rate but charge extra fees (loan fees, origination fees, copy fees) so that in the end you'll pay more for the refinanced home loan even though your rate may be lower. The only way to protect yourself is to wait for the Good-Faith Estimate (GFE) which should list all the closing costs. Compare the GFE's from a number of home loan lenders.
But comparing GFE's is not the only story when you want to refinance your home. If time is important, you want to choose a mortgage company that is capable of acting quickly. Ask each company to give you their average closing time for loans similar to yours.
Ask around among your trusted friends. Find out who refinanced lately and ask them what they thought of the company. Don't assume that your existing home loan lender is any better than a new lender. Since most home loans are sold in the secondary market, everyone has to meet certain criteria, and your existing lender will probably require the same documentation as a new lender. However, once you have a commitment from a new lender, it doesn't hurt to ask your existing lender to beat it. Often times they will. We will get you the best rate available.

2. Not getting everything in writing about refinancing your home loan.
Get everything in writing. No matter what the Loan Officer tells you, ask him to confirm it in writing. Don't believe someone when they tell you that your refinance rate is guaranteed. Get it in writing.

3. Not knowing the appraised value of your home.
Many people go ahead and try to refinance their home without knowing the true value. There are many places you can get an estimate of the true value of your home for purposes of refinancing. Many realtor sites have home value estimators on their site. For the price of listening to a mortgage company try to sell you a mortgage, you can get an approximate value for your home.
Check the recent sales in your neighborhood and try to find a comparable house in a comparable location. Or you can ask the appraiser to do a drive by and give you a verbal estimate of the value of your home. If it's in the right ballpark, you can order a thorough appraisal. Know the value of your home before you seek to refinance your home loan.

4. Not doing the math when refinancing your home loan.
Do the math. Refinancing your home has a cost. You need to see what the cost is, and then determine how long you are going to stay in your home. For example, if you are going to stay in your home for 5 more years, and the cost of refinancing your home is $5000, you need to save at least $1000 a year in order for the deal to make sense. If you only save $50 a month as a result of refinancing (that's $600 a year), you'll be loosing money.

5. Not considering a 2nd Mortgage.
When you refinance your home, you are refinancing the total amount. Suppose you have a home that is now worth $400,000, and you only owe $250,000 on the home and you want to take out $50,000. If you refinance and take out $50,000 in cash your new loan may be for $310,000, ($250,000 owed + $50,000 cash out + a total refinance cost of 3% or $10,000). It may be better to take out a 2nd mortgage for $50,000 and pay a slightly higher interest rate and slightly higher points, but only have a basis of $50,000 instead of the $310,000.

refinance my mortgage

Refinancing Your Home

To Refinance Your Home means getting a new mortgage and using some or all of the proceeds to pay off the old mortgage - even bad credit refinance, poor credit refinance or fair credit refinance.



Homeowners may home refinance their mortgage for several reasons:

To take advantage of lower interest rates and lower your monthly payment.
If interest rates have gone down since you got your original mortgage, you could save money over the life of your loan, while reducing your monthly mortgage payment.

To switch mortgage types.
You may want to switch from a variable to a fixed interest rate, or vice versa. If you have a balloon/reset mortgage, you must either pay the mortgage in full at the end of the 5- or 7- year term, contact your Service Provider (the organization to which you send your monthly mortgage payments) to start procedures to reset your mortgage to a fixed-rate of interest, or refinance with a new mortgage.

To shorten mortgage terms.
You may want to refinance to shorten the term of your loan. This would allow you to pay less interest over the life of the loan because the money is borrowed for a shorter period of time, and more quickly builds up equity in your home.

To get "cash out."
Some lenders will let you borrow more money than the balance of your original mortgage, based on the equity you have in your home. A portion of the money left after the original mortgage is paid off goes to you to use for things like paying for a child's education or home remodeling. However, remember that you'll have a new mortgage, at a higher amount, that will eventually need to be paid off.

Peak Home Loans can help to mortgage or refinance your home with good credit, fair credit, poor credit, and bad credit. We offer home refinancing and mortgages with any credit. Click here to learn how.

Home Refinance Programs:

Fixed Rate Loans - Both interest rate and payment remain the same over the term of the loan. Loans can be amortized over the following terms: 10, 15, 20, 25, 30, and 40 years. The advantage of a fixed rate program is that it allows you to get a fixed rate, over a specified period, without being concerned about market fluctuations. This type of financing is recommended for borrowers who intend to stay in their house for a long period of time.

Fixed Rate Balloons - Both interest rate and payment remain the same until the loan is due. Typically, the entire loan amount is due in either 3, 5, or 7 years. The advantage of balloon programs is that they tend to have the lowest rates, due to the fact that the entire balance must be paid off or refinanced at the end of the term. This type of financing is recommended for borrowers who know they will be leaving their current house in either 3, 5, or 7 years.

Adjustable Rate Mortgage (ARM) - Both interest rate and payment remain the same for a fixed time period, usually 1, 3, 5, 7, or 10 years. At the end of that period the rate can rise at fixed intervals. The amount the rate can rise, or margin, is predetermined (normally 1/2% to 2% per rise). The intervals are normally 1, 3, 6, or 12 months. Typically there is a cap on the margin, which determines the highest the rate could ever go. The advantage of an ARM is that it allows you to get a lower rate, for a known period of time, while you watch the market to see if and when fixed rates get better. Some feel that although they may have gotten a better rate with a balloon, an ARM will adjust at the end of the "fixed period", whereas a "Balloon" has to be refinanced or paid in full. ARMs are recommended for those borrowers who intend to stay in their house for a fixed period and have taken the time to factor in the margin, to determine that they would not be better off with a Fixed Balloon or even a Fixed Rate.

Buydown - Both rate and payment remain the same for a fixed period, at the end of which, the rate and payment increase. The rate and payment may increase once, twice, or even three times, depending on whether the Buydown is a 1/1, 2/1, or 3/1. The percentage of increase, as well as number of increases is predetermined. Once all of the increases have occurred the new rate and payment remain fixed for the term of the loan. Also, lenders will typically charge a fee to "buy the rate down" for the first 1, 2, or 3 years of the loan. The advantage to a Buydown is that it offers a lower rate and payment during the first few years of the loan. Buydowns are recommended for those borrowers who are having trouble qualifying for a Fixed Rate Loan or those who need a more affordable payment at present.

Peak Home Loans can help to mortgage or refinance your home with good credit, fair credit, poor credit, and bad credit. We offer home refinancing and mortgages with any credit. Click here to learn how. We specialize in bad credit refinancing, poor credit refinancing, & fair credit refinancing - bad credit refinance, poor credit refinance & fair credit refinance.

Home Refinance Loan Types:

Conforming - Conforming loans refer to loan amounts that conform to government service standards as determined by Fannie Mae & Freddie Mac (the original government agencies, set up in the early 1940's, established to help people finance new homes). Conforming loans range in amount form $1 to $275,000. Although not all conforming loans are serviced by these government agencies, the mortgage industry has adopted the term to express loan amounts in this range.

Jumbo (Non-Conforming) - Jumbo loans refer to those loan amounts outside of the "conforming" range or, above approximately $300,000 (different from state to state.)

Government Loans - Government loans refer to those loans that are guaranteed by one of two federal agencies. The two types of government loans are: Federal Housing Administration (FHA) loans, and Veterans Administration (VA) loans. The advantage of financing using FHA loans are that they are easier to qualify for and allow a borrower to finance more of the loan amount than non-government loans. Whereas with a Conforming loan a borrower may only be able to finance 80% of the loan amount, a FHA loan allows a borrower to finance 97% of the loan amount. FHA loans are recommended for those borrowers who are first-time buyers, have little money to put down, have a short credit history, or are having trouble qualifying for a Conforming loan. The two main advantages of financing using VA loans are that the VA allows borrowers to finance 100% of the loan amount, and that, the VA only requires proof of veteran status to qualify for the loan. The only drawback to government loans is that mortgage insurance is required at all loan to values (LTV), unlike Conventional and Jumbo loans where payment of mortgage insurance is determined by the amount of equity a borrower has in his home. WE ARE VA AND FHA FRIENDLY! See our FHA and VA Government-Backed Loans page.

Investment Properties (Non-Owner Occupied) - These types of homes are normally acquired specifically for investment purposes or are owned as a result of moving to a new house without selling or being able to sell the old house. Financing for investment properties can be achieved using any of the above described programs. Typically, the rates for financing on investment properties are higher than owner occupied homes and the LTV's allowed are lower, due to the fact that default rates tend to be higher on these types of loans.

B, C, D Credit - Just because your credit isn't perfect does not mean you can't obtain financing. Most, if not all of the above described programs can be utilized even if a borrower does not have perfect credit. In these cases the rates will be higher and LTV's allowed will be lower. Most lenders have special divisions specifically created for the marketing and sales of sub-prime products. Also, most lenders will offer special limited programs as incentives, when they recognize an area where there is a need.

No Document or Low Document Loans - In certain situations it is either difficult or impossible for potential borrowers to show a lender their income on paper. In these instances any of the above described programs can be used, but under circumstances called NIV or No Income Verification. All of the other program parameters must be met, however, in the case of income, a borrower may only be required to show a operating license or business license and/or limited income information. With this type of financing, rates offered tend to be slightly higher. This type of financing is recommended for self-employed borrowers or borrowers who have difficulty showing their income on paper, for one reason or another.

Cash-Out Refinances - Occasionally, when refinancing a first trust, a borrower wants to "cash out" some of the equity that has been built into the loan. Under specific conditions, established by the lender, a borrower can actually receive a check for an amount of money that meets those conditions. Cashing-Out is not normally limited to any type of loan program, it can be done with most of the described programs.

Peak Home Loans specializes in bad credit refinancing, poor credit refinancing, & fair credit refinancing - bad credit refinance, poor credit refinance & fair credit refinance. Click here to learn how.
Credit Not So Great? Poor Credit? Bad Credit? No Problem for Peak Home Loans, We Can Help!

Why let past credit problems or uncontrolled debt prevent you from getting the home loan you really want? Have you been continually turned away from banks and lenders because you have made previous credit mistakes? We can help find anyone, regardless of their past credit history, or lack of credit history, own a home of their own, get a home equity loan, or refinance their existing home. Don't worry if you haven't had the best luck in keeping your credit clean. We understand that things happen. We will still get you the loan you want the most with rock-bottom rates. Please click here for bad credit solutions.

refinance my mortgage