Why doing a loan mod on your home may be stupid! If someone could provide you with information that would put you in a position to make the best financial decision for your family 2 years, 5 years, and even 10 years down the line, would you make it? Remember this answer, because I'll be asking the same question again at the end of this article. My hope is that this article will bring to light a perspective that you haven't considered when comparing a loan mod to short sale or foreclosure.
Consider two homeowners: Alan and Bob. Alan and Bob are neighbors with the same floorplan. They also purchased their homes at the exact same time in 2006 for 400k. Today their home is worth... 200k. The economy hits both of them hard, but the two of them respond quite differently. Please pay close attention to these two examples and try to follow the math:
FHA also has another wonderful product that not a lot of borrowers take advantage of called a 203k loan. A 203k loan is an FHA insured mortgage that allows borrowers to include the cost of renovating a house into the initial loan amount. The loans will work for one to four units of residential space as long as the borrower intends to live in one of the units. An example of a 203k loan would be a young couple looking to buy a home for the first time.
In fixed rate products, the rate is fixed, and does not vary, even if the BoE interest rate fluctuates. The benefit of a fixed rate mortgage deal is that you know from the start what your monthly remortage repayments will be, and you've got the security that these monthly repayments will stay fixed for a fixed period.
Most lenders have got fixed rate deals for length between 3 and 10 years. The shortcoming of fixed rate deals is that your mortgage doesn't benefit of a drop in the Bank of England interest rate, like the one we have seen recently.
Bob has built $170,000 equity into his home. Alan is no longer negative, but has $0 equity
However, if the borrower uses an interest only mortgage to qualify for a large, pricy home that they cannot afford, then it becomes a bad financial tool. The borrower will not be paying back any of the loan's principal amount and therefore not building up any equity in the home.
Do you value the safety of fixed payments and are ready to accept that this might lead to higher mortgage interest? In that case, a fixed rate mortgage deal could be the best choice for your situation. Would you like to get the lowest possible interest rate, but know that this could give you higher repayments if interest rates increase? Then variable rate deals might be a good option for you.
Consider two homeowners: Alan and Bob. Alan and Bob are neighbors with the same floorplan. They also purchased their homes at the exact same time in 2006 for 400k. Today their home is worth... 200k. The economy hits both of them hard, but the two of them respond quite differently. Please pay close attention to these two examples and try to follow the math:
FHA also has another wonderful product that not a lot of borrowers take advantage of called a 203k loan. A 203k loan is an FHA insured mortgage that allows borrowers to include the cost of renovating a house into the initial loan amount. The loans will work for one to four units of residential space as long as the borrower intends to live in one of the units. An example of a 203k loan would be a young couple looking to buy a home for the first time.
In fixed rate products, the rate is fixed, and does not vary, even if the BoE interest rate fluctuates. The benefit of a fixed rate mortgage deal is that you know from the start what your monthly remortage repayments will be, and you've got the security that these monthly repayments will stay fixed for a fixed period.
Most lenders have got fixed rate deals for length between 3 and 10 years. The shortcoming of fixed rate deals is that your mortgage doesn't benefit of a drop in the Bank of England interest rate, like the one we have seen recently.
Bob has built $170,000 equity into his home. Alan is no longer negative, but has $0 equity
However, if the borrower uses an interest only mortgage to qualify for a large, pricy home that they cannot afford, then it becomes a bad financial tool. The borrower will not be paying back any of the loan's principal amount and therefore not building up any equity in the home.
Do you value the safety of fixed payments and are ready to accept that this might lead to higher mortgage interest? In that case, a fixed rate mortgage deal could be the best choice for your situation. Would you like to get the lowest possible interest rate, but know that this could give you higher repayments if interest rates increase? Then variable rate deals might be a good option for you.
About the Author:
Hi readers my name is Harris Smith, thanks for reading this article I hope I will be useful to find home equity line of credit . Free advice for Debt Consolidation, debt problems and free debt solutions for credit cards.
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