Financial Planning, Retirement Plan, 401k, Investment Blog

Financial Planning, Retirement Plan, 401k, Investment Blog

Posts Tagged ‘mortgage’

The Double-Edged Sword of Mortgage Relief

Posted June 5, 2009 by Bernz

The financial news on television and in the newspapers is full of hopeful rhetoric on the help that is coming from the Federal government to assist homeowners who are struggling to save themselves from foreclosure. The purpose of the intervention, called the Homeowner Affordability and Stabilization Plan, is to keep people in their homes and stabilize the mortgage and real estate crisis that is affecting all investment markets.

This is good news for some homeowners but contains some risk for others. One way the programs tries to make home ownership affordable is to allow refinancing for homeowners who are current on their mortgages but do not have enough equity in their homes for a conventional refinance. This plan only applies to those who have their mortgages through Fannie Mae and Freddie Mac, so only a small fraction of at-risk homeowners will be able to take advantage of this plan.

The second part of the plan is for mortgage servicers to allow modification of the terms of the mortgage to ensure that homeowners can stay current on their payments. This is done mainly through interest rate reductions that are partially financed by the government. Each bank has some discretion as to how to manage these loan modification plans, but most require proof that the current mortgage terms are unaffordable to the homeowner. (more…)

Posted in Financial Education, Investing in Real Estate, Investing Strategies | No Comments »

Will the “Bad Bank” Plan Work?

Posted January 30, 2009 by Bernz

As discussions continue in the White House and on Capitol Hill about what the next steps should be in helping banks survive the current economic crisis, one idea that keeps floating to the top is the “bad bank” plan. The Treasury or the Federal Deposit Insurance Corporation would set up a new bank to buy up all of the so-called “toxic” assets carried by major financial institutions. This would allow all of the other banks to cleanse their balance sheets and give them the liquidity they need to continue operating, according to the theory.

The “toxic” assets include the bundled derivatives and mortgage-backed securities that got the banks into trouble in the first place. The complexity of the assets became so great that banks, regulators, and auditors were unable to place a value on them as they could no longer be directly tied to individual mortgages. As mortgage failures increased during the recent real estate collapse, the assets’ worth looked dismal. The market for them dried up and banks were left holding the proverbial bag.

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Posted in Debt, Financial Goals, Misc | No Comments »

Should you refinance your mortgage?

Posted December 23, 2008 by Bernz

The most common reason to refinance a home mortgage is to get a better interest rate and lower your monthly mortgage payments. You also might want to refinance your mortgage if you want to:
a) Convert from an ARM into a fixed rate mortgage or vice versa
b) Receive cash or equity to pay off other debts
c) Extend the life of your loan (i.e. from 15 to 30 years)

Here are some common questions and answers that will help you determine if refinancing is a smart financial decision for you.

Q: What are the costs involved in refinancing?
A: Typically you pay an application fee and closing costs. You may also choose to pay discount points if you’d like to buy down the interest rate.

Q: What does it mean to cash-out?
A: If you have enough equity in your property you can refinance your mortgage with a loan amount greater than your current mortgage. The difference in the amount is yours to keep and use as you see fit.

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Posted in Investing in Real Estate | No Comments »