Loan modification are become more and more common, with the rising foreclosure rates in the United State, until recently mortgage companies have been reluctant to provide help to people facing foreclosures by utilizing a mortgage modification program. Lenders are starting to use them more often not with the huge influx in homeowners that are in jeopardy of losing their home to a foreclosure.

A loan modification (or also called a mortgage modification) allows borrowers the opportunity to re-negotiate the terms of their mortgage loans, thereby reducing the required monthly payment. This option gives people facing a financial hardship the chance to save their home from a foreclosure. Establishing a new payment plan trough a successful loan modification will help you stop home foreclosure.

Lenders and borrowers have many reasons to work through this hard situation together, and establish a suitable plan that works for all parties involved. Selling you home may not be an option, especially with today’s market conditions and the circumstances that have causes this unfortunate situation to begin with. Therefore, if your home is to be saved from foreclosure, you and your lender will have to work together.

Loan modifications are often times a reasonable solution to prevent foreclosure. By negotiating a new payment, structure lenders still get their money and the borrower is able to keep their home. However, negotiating a loan modification is not that simple. Successful loan modification will require documentation to prove your current financial position with the lender. This information is also use to verify your ability to pay the new loan if the bank is willing to work with the homeowner.

While not all banks offer this type of solution, it never hurts to talk to them and find out. Who knows, it may be just what you need to prevent losing your home to a foreclosure. Lenders are starting to work more with borrowers facing foreclosure in this difficult time, lenders do not want your home, they are in the business of lending money not property management, and with the close to two million homes in foreclosure lenders are running out of options as well. Qualifications for this type of solution, may be difficult and time consuming, but keep in mind what your goal is. Protect your most valuable asset, stop foreclosure and save your home with a loan modification.

Here is more information about Loan Modification – How to Lower Your Monthly Payment And Interest Rate Fast

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You may have heard this term before. So what are they? According to finance glossary of MortgageLoan.com, exotic mortgage is a term used to describe any nontraditional mortgages. These mortgages allow homeowners to be able to afford high-priced homes. Buyers are sometimes allowed to defer principal or interest payments to a later date. These mortgages are historically risky for both the borrower and the lender.

The followings are the latest and most exotic mortgages.

The 40-Year Mortgage

This is similar to a 30-year fixed rate mortgage, except the payment is being stretched over an extra 10 years. The lender will charge a slightly higher interest rate, as much as half a percentage point.

A 40-year mortgage gives you lower monthly payments than a 30-year loan, while allowing you to lock in today’s interest rate. But by extending the length of the mortgage, you are increasing the amount of interest paid on the loan.

These mortgages are best suited for first-time home owners who don’t plan to live in the home for more than a few years. If they can’t afford the higher payment of a 30-year mortgage, the 40-year may give a good start to home ownership.

The Portable Mortgage

This mortgage program allows a home buyer to lock in a low interest rate and then take the rate with them to their next home in a few years. A second mortgage can be used if the buyer needs to borrow more money for the new home.

When interest rates are low – and looking to rise – locking in a rate for the next 30 years is attractive. But interest rates for portable and second mortgages are higher than for standard loans. You may be looking at paying ½ to ¾ a percentage point more than on a typical 30-year fixed-rate mortgage.

This product is good for those who know they will move in a few years, but still want to lock in a low rate.

The Interest-Only Mortgage

With an interest-only mortgage, the lender allows the borrower to pay only the interest for the first so many years of a mortgage. After the grace period, the loan essentially becomes a new mortgage with the interest and principal being stretched only the remaining years. For example, you may pay no principal for the first ten years, and then pay the principal and interest for 20 years.

This gives you a smaller monthly payment during the interest-only repayment period, and during this time, all the money being paid is tax deductible. But if home prices don’t rise, your equity won’t build during the interest-only years. When your principal-payment period begins, the monthly payments will jump significantly. Most of these loans feature variable interest rate, which puts you at risk for even higher monthly obligations.

This type of mortgage is great if you know for sure that your income will rise significantly in the next few years. Interest-only loans are also a good fit for professionals who receive large bonuses as part of their pay. They can pay interest during most of the year and then put the bonus towards the principal.

The Negative Amortization Mortgage

This interest-only type of mortgage allows a buyer to pay less than the full amount of interest. The difference between the full interest payment and the amount actually paid is added to the balance of the loan. Please refer above for more information.

This gives you the option of a much smaller monthly payment during the first years of a loan. But, this is probably the most risky mortgage available. If the value of your home falls, you will easily be upside down in your load. You would owe more money on the house than it is worth.

These loans are great for those with large cash reserves who need to make lower payments during certain parts of the year, but can pay off the difference in large chunks at other times.

The Piggy Back Mortgage

This is actually two mortgages, one on top of the other. The first mortgage covers 80% of the property’s value. The second covers the remaining balance at a slightly higher interest rate.

In most cases, borrowers choose a piggy-back mortgage because it allows them to put less than 20% down and still avoid paying private mortgage insurance. The money that would be used towards private mortgage insurance is now tax deductible as interest paid.

Homeowners should expect to pay a higher interest rate on a second mortgage. The rates you pay vary greatly depending on your credit score. Since the borrower has very little equity in the home, there is the fear of the home losing value and the borrower owing more than they can sell it for.

Piggy-back mortgages are a good fit for young professionals with reasonably high salaries, but no savings.

103s and 107s

You may not need to save for a down payment at all. You could borrow 3% or 7% more than your home is even worth. These loans give you the option of borrowing money needed for closing costs and moving costs. You can include it all in the mortgage. The interest rates for these mortgages are high. You run the risk of negative equity if your home loses value.

If you have large cash reserves that work better for you in the stock market than in investing in your home, you may want to look at this type of mortgage.

Home Equity Line of Credit

These aren’t just for those who own a home. They are commonly known as HELOCs, and they can finance an original home purchase using a credit line instead of a traditional mortgage. HELOCs are variable-rate mortgages tied to the prime rate. If you use this mortgage as your first mortgage, all of the interest is tax deductible. You simply make a down payment, and the HELOC pays the remainder. You can usually use one for up to 90% of the home’s appraisal value. For a higher interest rate, you may qualify for 100%.

HELOCs can offer more attractive interest rates. You can also use the equity you build in your home at any time. HELOCs are usually structured for 10 to 20 years, instead of 30. The interest rate is variable, which means that your payment can rise at any time.

If you want to pay off your home quickly, but need the ability to access your equity at any time, you might consider a HELOC as your primary mortgage.

The Flex-ARM Mortgage

This is a cross between a hybrid ARM, which offers a low fixed interest rate for the first five to seven years and then adjusts annually, and a negative amortization loan. Each month you receive a coupon that gives you four possible payment options:

• negative amortization,
• interest-only payment,
• 30-year fixed, and
• 20-year fixed.

The homeowner decides how much he wants to pay. The bank handles all of the calculations for you. But if not used wisely, you could owe more on your mortgage than your home is worth.

A Flex-ARM is good for those who prefer to have options. The borrower should have large cash reserves for when the mortgage payments enter the later part of the loan. Like interest-only loans, they are great for those who receive bonuses during the year.

Short-Term Hybrids

These mortgages are much like traditional hybrid ARMs with fixed-rate periods and then interest rate that floats. But the fixed portion on a short-term hybrid is for a very limited time, for example, six months to a year. Lenders offer very competitive rates on these mortgages.

The interest rates are very low for the fixed portion of the loan, making the initial monthly payments relatively small. But six months or a year is not a very long period of time, but rates can change dramatically in just that amount of time.

People who plan to flip a house or move in a very short period of time are good candidates for a short-term hybrid ARM.

Loan Modification Mortgage

This mortgage allows you to change your terms whenever you want, all you have to pay is a $1,000 closing cost for every million dollars borrowed. No paperwork is necessary; all you have to do is make a phone call. You can expect to pay about 3/8th of a percentage point higher interest rate.

People who like to follow interest rates can call and have their rate changed when interest rates are down. But borrower’s must take into consideration the closing fees charged each time they modify their mortgage. Many customers with this type of mortgage have financial planners who manage the mortgage.

Click here for more about Loan Modification, How to Lower Your Monthly Payment And Interest Rate Fast

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Most people think a good way to avoid foreclosure is to refinance the mortgage and start over. In fact, it is not that easy, since most people cannot refinance. Yes, stopping foreclosure with home refinancing is not easy. You will run into all kinds of mortgage brokers and lenders out there who will tell you what you want to hear and waste your time. Time is something you can’t afford to waste when you are trying to avoid foreclosure. You only have about 4-8 months after missing your first mortgage payment until you lose your house. The foreclosure process varies by state and lender.

Who can refinance to avoid foreclosure?

You need equity in your home. Depending on how far you are in the process, you need at least 10% to 25% equity in your property. The farther you are in the foreclosure process, the more equity you will need. If you are more than 2 payments behind and you don’t have at least 25% equity, it is almost impossible to refinance. Make sure when you are calculating the equity you factor in all the late fees and legal fees.

Speaking of how far along you are in the foreclosure process, that makes a huge difference when refinancing. Once you are more than 90 days late on your mortgage, everything changes. The rate will dramatically change if you can even refinance at all after that point. That is why it is so important to pick the right mortgage broker or lender because if they are not experienced in these types of loans, they can take too long and you will pass the point of no return.

Some private party lenders may be able to refinance you to avoid foreclosure. These are typically known as hard money lenders. They decide if they will lend you the money personally. There are no underwriting guidelines. It is a case by case basis. These can be very expensive. The rate and fees will probably be so high you won’t be able to afford it.

That brings up an important point. Even if you can refinance, what is your new payment going to be? If you are having trouble making the payment now, the payment is guaranteed to be more because you are trying to avoid foreclosure by refinancing. Any loan you get will be expensive.

If you do not have equity in your property do not even consider refinancing your home to avoid foreclosure. You will end up wasting valuable time and money to find out no one can help you. I hope this article has helped you to learn something about stopping foreclosure and realize that very few people can help stop foreclosure.

Please be aware of loan scams, learn more at http://www.preventloanscams.org/

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What Is Jumbo Mortgage Loan?

In basic terms, if a home loan for property in the continental United States exceeds a certain limit for conforming home loans, it is considered a jumbo mortgage loan, whether the funds are used to purchase a new home or to refinance an existing mortgage. This limit for conforming loans is determined by Freddie Mae and Fannie Mac, government sponsored entities that are the two largest players in the secondary home loan market in the United States. Therefore, jumbo loans are sometimes referred to as non-conforming loans.

Currently (as of 2010), a jumbo mortgage loan is a loan more than $417,000. This conforming loan limits typically changes each year, but general conforming loan limits for 2006 to 2010 are identical. For residents of Alaska, Hawaii, Guam, and the U.S. Virgin Islands, mortgages are not considered to be jumbo loans until they exceed $625,000. Source : http://www.fanniemae.com/aboutfm/loanlimits.jhtml

The approval process of jumbo mortgage loan is the same for conventional loans for most lenders. However, not all lenders offer jumbo mortgage loans. So, if you are planning to apply for a jumbo mortgage loan, it is important to disclose your intent to your loan officer in advance.

Unfortunately, the interest rate for a jumbo mortgage loan is typically 1/4% higher than a conventional loan but this does vary and the difference seems to be less year after year. Since brokers are typically compensated based on the amount of the loan and a jumbo mortgage loan is a larger amount than a conventional, you should feel comfortable negotiating the loan rate with your broker or lender. A good mortgage broker is happy to discuss fees and in most cases appreciates it. This way there are no surprises or concerns after escrow closes.

Anytime you start the loan process whether refinancing or purchasing a home, you are recommended to do your home works on the following steps:

1. Review current mortgage rates on the internet and get a feel for the current market. Interest rates change frequently so this step just gives you an idea. When looking over rates make sure you are reviewing jumbo mortgage loan rates as there is a rate difference.
2. Assess your loan needs and the amount you think you need
3. Ask family or friends for a reference of a mortgage broker
4. If you cannot find a referral, you should proceed cautiously and develop a list of questions for your prospective mortgage broker.
5. Questions you should ask include: how long have you been doing mortgage loans, are you full-time mortgage broker, how do you price your jumbo mortgage loans, and what education do you have. Asking these questions will give you a good first impression of the mortgage broker.
6. Determine if you need to pre-qualify for a loan
7. Complete the loan application thoroughly and accurately

If you work with an experienced mortgage broker, the process will be very painless as the mortgage broker will anticipate problems and deal with them proactively.

By following the steps in this article, you are well on your way to getting a great jumbo mortgage loan and will build a long-term trusting relationship with a mortgage broker.

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This is the scenario that is sweeping across America!

The banks made it way too easy over the last few years to get more money out of our homes. Property values kept rising, the real estate market was booming and every homeowner was sitting on a gold mine. This was sure to lead to disaster and it has.

Now with the market declining and home values taking a dramatic plunge, most homeowners are sitting on over inflated mortgages and under valued homes.

The unfortunate part is that a lot of people can no longer afford their mortgage. They are facing the possibility of foreclosure and losing their homes is a very real threat.

The good news is that the banks are realizing this and are now giving homeowners options. Otherwise, the banks will be sitting on all of these homes after foreclosure and will be stuck paying the property taxes and insurances until they sell. Factor in the foreclosure costs, attorney costs, and marketing this is not in their best interest.

One option that is being offered is called a short sale.

This is where the bank allows you to sell your home at or below the current market value in order to get a quick sale, regardless of what you owe. Let’s say that your mortgage is $180,000, but similar homes in your area are selling for $150,000. You can ask for $150,000 and can even possibly take lower bids.

The bank in turn will take a loss on the home, since the sale will not cover the full mortgage, but they will not be stuck with the home. As far as the homeowner, they just walk away after the sale, free and clear.

It is suggested that you hire a real estate agent that is knowledgeable on short sales and preferably has had some experience and success with them. This is in your best interest, since they know the ins and outs and the paperwork involved. Not to mention, since you are already walking away with no money and this option will not cost you anything, it really is a no-brainer.

That’s right, not only does the bank take a loss on the home, but they also negotiate and pay the real estate agent fees.

Now there are disadvantages, and it is not as wonderful as it sounds. Your credit will suffer, just not as much as a foreclosure. It is estimated that your credit can drop 80-100 points with a short sale. However, it will drop over 200 points with a foreclosure.

You will not be able to buy a new home for up to 3 years with a short sale. However, if your payments have never fallen behind 30 days late and the lender does not require that you pay back the loan, Fannie Mae guidelines may allow you to buy another home immediately. With foreclosure, if the house is your primary residence, you may be eligible to buy a new home in 5 years (with restrictions) to 7 years (without restrictions).

Obviously, with this in mind the best solution would be to catch up your mortgage and then to make on time payments. Since this option is not viable for many people, I would seriously look into a short sale before it is to late.

Just remember that the mortgage company is not the enemy and not to be afraid of them. They are willing to help; you may just have to talk to several people until you find someone to work with. Ask if they have a loss litigation department. These are the people that are ready to and able to help you.

For example, if you take a mortgage at 8% interest for $125,000 for 30 years, you will pay over $205,000 in interest, for a total of $330,000. And your home may not appreciate by that much — your $125,000 cost you $330,000.

You can see why you need to shop wisely for your mortgage.

All mortgages are not created equal. There are so many mortgages on the market right now that they can become a little confusing. You have to do your homework to find the right mortgage type, the right bank or mortgage company and the right terms.

One of the best places to start your search is on the Internet. You can use a mortgage calculator to see how much of a mortgage you can afford and what you could qualify for. You can compare different loans and lenders, search for the lowest rates and even apply online.

You have to make decision mainly on two things:

• how much you can afford
• what type of mortgage you want

Basically, there are two types of mortgages:

Fixed Rate Mortgage
Fixed rate mortgages are traditional loans with fixed interest rates over the life of the loan. The length of repayment may be anywhere from 10 to 30 years. Your monthly payment for interest and principal will never change, but if you have your insurance and taxes in escrow, you may see a slight change over time. Downpayments usually run 20%, but you could pay as little as 5% down with certain loan programs. Fixed rate mortgages offer predictable payments and are especially nice if you take the mortgage out during a low interest rate period.

Adjustable Rate Mortgage
Adjustable rate mortgages (ARMs) start out with a low interest rate, but the rate and payments may go up or down depending on the market interest rates. Most ARMs are adjusted every year, but there are some out there that adjust more frequently. The mortgage usually is capped for how much the interest rate can be raised each time and over the life of the loan. For example, you may take out a ARM that has a 2/8 cap. This mortgage can adjust only 2 points at the maximum each year. Over the life of the loan, the mortgage can only go up by a total 8 points. If your interest starts out at 7%, the second year it could increase to 9%, and increase each year thereafter until it reaches a maximum of 15%. That is if rates continue up. The interest rate could also go down.

ARMs are great for those who want more of a house, knowing their income will go up in the next few years. But be aware that when rates go up, the payment amounts go up. You need to make sure you could make the payments if the mortgage was to reach it’s peak rate.

There are also balloon mortgage and jumbo loan available out there. Balloon mortgages are good for those who know they will be moving in a few years. Jumbo loans are a larger than average loan for those who want to borrow more than the average mortgage amount set by Fannie Mae or Freddie Mac. There are also option ARMs that allow you to pay only a minimum payment amount for a certain period of time. These loans all come with more risk and must be thought out carefully. More options of mortgage can be called as “exotic mortgage”, a term use to to describe any nontraditional mortgages that allow homeowners to be able to afford high-priced homes. These mortgages are normally risky for both the borrower and the lender. (Read more about Exotic Mortgage Loan Options)

You can find many articles and educational tools online or even a financial advisor that will help you determine the best mortgage for your financial situation. In general, you want to take out as small a mortgage as necessary, find the lowest rate possible and consider how your future could affect your ability to repay a mortgage.

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Refinancing a mortgage simply means replacing an old mortgage with a new one or paying-off old mortgage and taking out a new loan on your home.

Having a low interest rate, the refinance mortgage loan is a good choice for those who want to pay back the whole debt in a short term. In addition, a refinance mortgage loan is an ideal opportunity to pay off the debts for those who are no more able to fix their mortgage loan.

Refinance is basically performed using a second mortgage loan which has both incontestable benefits and some significant disadvantages that should also be taken into consideration. Thus, in case the second mortgage loan is not compensated for, you just lose the property. So, before deciding on mortgage refinance one should determine the affordable interest rate. On the other hand, the interest rates of the second mortgage loans are usually fixed so that borrowers could save their money. Besides that, mortgage insurance isn’t required, if mortgage payments are performed in two steps – a first mortgage loan and a second mortgage loan.

When Do You Need to Refinance Home Mortgage?

There’s no simple answer to this question. It would depend on your current financial situation, priorities and preferences. Basically, you need to refinance your home mortgage if you can save money by so doing. This can come about in two ways.

• Lower interest costs:

If you are refinancing to a loan with a lower interest rate than your current mortgage, then you can conceivably save on interest rate payments and therefore be able to make more payments towards the principal, increase your equity at a faster rate and pay your loan much earlier than you expected to do so.

For example with rough calculation, if the current annual rate of interest of your mortgage is 8.25%, your monthly interest rate is around 0.6781%. If your current mortgage balance is $80,000 and you have an interest-only mortgage, then you’re expected to make an interest payment of around $542.48 monthly.

You will save money on interest payments if you manage to refinance to a lower rate. If you manage to obtain a mortgage refinance loan with an interest rate of only 6%, for example, your monthly interest charge will become only $394.52. This is a savings of around $147.96 every month on an interest-only payment scheme.

• Lower future interest costs:

If you have a mortgage with an increasing variable rate of interest, then you can gain savings on future interest rate payments through refinancing your mortgage with a fixed-rate loan program. By doing this, you will be able to keep your mortgage interest rate – and thereby your interest costs – at a constant level.

Of course, current and future savings aren’t the only considerations when deciding to refinance. You should also weigh your savings with the costs of refinancing. When you refinance, you will also pay various loan processing fees as well as the origination fee. Compute the costs of a mortgage refinance and compare it with your projected savings. Refinance only if your savings will be greater than the costs.

Visit this Mortgage Refinance Calculator for easy mortgage refinancing calculation.

Mortgage refinance can be very helpful and effective for borrowers if they are aware of some mortgage tips. Whatever refinance mortgage loan is chosen – with fixed interest rates or with variable interest rates – one has to study all the connected data to prevent mistakes which may lead to the loss of real estate. It is also important to find appropriate mortgage loan rates and interest rates among a great variety of mortgage loan companies and lenders. Take the advantage of the Internet for picking the best type of mortgage refinance possible.

Mortgage calculators help to determine the affordability of potential homeowners, give a notion about how much banks are ready to lend, show the amount of monthly payments and calculate its ratio to the borrower’s monthly income. In addition, most online mortgage calculators are free and easy to use without special skills or training. However, there still exist some difficulties, generally connected with mortgage terminology. Thus, such term as “amortization”, meaning the duration of the loan, is often misunderstood. Another example is “refinancing” which stands for a change of loan for the purpose of saving money. One should also understand the meaning of the “interest rate” that is determined by the national bank. Usually the shorter the duration of loan is, the lower interest rate is set.

The invention of online mortgage calculator has considerably simplified the process of refinancing. It doesn’t take much time to know the benefits and possible risks of the deal.

You can use the mortgage refinancing calculator in below link to know at once whether the new mortgage loan will save money and worth doing or not. Just insert the actual and the potential information about the mortgage loan including current payment data into the blank fields on the upper section. These include principal balance of your mortgage, monthly mortgage payment, interest rates (in percentage i.e 5% or 0.05), period and closing costs. Click “compute” button and the results will appear on the lower section and the remark box on the bottom.

Click here to use Mortgage Refinance Calculator

A mortgage refinance calculator clears up the necessity of refinance mortgage loan showing how much money will be either saved or lost. And at last, a mortgage refinance calculator figures out the profitability of each separate mortgage refinance option.

Consequently, this calculator is absolutely indispensable for those who intend to take out a new loan and to save money on the mortgage. It occurs that, after using this calculator, potential homeowners may decide to refinance mortgage, as the monthly payments turn out to be too high.

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Conforming Loan Limits

First thing you need to understand is loan limits. If your mortgage loan amount exceeds a specific amount, known as “conforming loan limit”, it is considered a jumbo loan which holds interest rate. The limit typically changes each year and differentiated by counties and location (high cost areas).

Loan limits for mortgages originated in 2009 are set under the provisions of the American Recovery and Reinvestment Act of 2009.  Learn more about Conforming Loan Limit at Official site of Federal Housing Finance Agency here.

Fixed Loans

• 30 Year Fixed Mortgage Rates

This loan program is fixed for 30 years. Your interest rate will not change for 30 years. This is ideal for people who plan to stay at their present property for a long period of time.

• 20 Year Fixed Mortgage Rates

Fixed for 20 years. Your payment will be higher than 30 year fixed loan because of the shorter loan period. Interest rate will not change for 20 years.

• 15 Year Fixed Mortgage Rates

15 year fixed loan has a loan term of 15 years and will not change during this period. Your monthly payment on this loan program will be much higher than 20 years fixed or 30 years fixed. Use this loan program if you plan to sell your home in 5-8 years. Interest rate will not change for 15 years.

Adjustable Rate Mortgage (ARM)

ARM Loans are fixed for a certain period of time, where after that period ARM loan becomes an adjustable loan. How do they work?

Each ARM Loan Program has the following options:

• Index: Most common index-LIBOR

• Margin: Is given to you by your lender, and it is the difference between the index rate and the interest charged to the borrower

For example 5/1 ARM. This loan is fixed for 5 years after which in 6th year it becomes an adjustable loan. Your loan officer will tell you what your index is and what your margin is. Usually 5/1 arm is tied to 1-year treasury index and margin is around 2.00%-3.00%

Your index + margin = Fully Index rate. Your new note rate (interest rate) after 5th year.

What about the 6th year? What would your payment be?

Let’s say that your loan officer told you that your margin is 2.5% with 1 year treasury index. You will have to look up 1 year treasury index for a specific month.

Say 1 year treasury as of August 2009 is 4.7%, and you know that your margin is 2.5%. Therefore you new interest rate is 1 year treasury 4.7% (index) + 2.5% (margin) = 7.2% for the beginning of 6th year.

Index rate are move on monthly basis, therefore your payment may fluctuate each month. In most cases banks wills end you a statement advising you that your rate will change.

• To protect consumers from high index rates, lenders implemented a CAPS.

An example of this is a 2/6 cap, which allows the interest rate on your ARM loan to go up or down by no more than two percent every adjustment period, and has a total limit of six percent for cumulative changes. Therefore a 2/6 cap on a 5% ARM will allow a maximum rate (6 + 5%) of no more than 11%.

In some cases you will see 2/2/6, which means 2% adjustment with 2-year prepayment penalty and total of six percent of cumulative changes.

• With an ARM you can have either a fixed rate or you can choose an Interest Only structure loan.

1/1 ARM Mortgage Rates – 1 year ARM (Adjustable Rate Mortgage) is fixed for 1 year and in 2nd year it becomes an adjustable.

3/1 ARM Mortgage Rates  – 3 year ARM (Adjustable Rate Mortgage) is fixed for 3 years and in 4th year it becomes an adjustable.

5/1 ARM Mortgage Rates  – 5 year ARM (Adjustable Rate Mortgage) is fixed for 5 years and in 6th year it becomes an adjustable.

7/1 ARM Mortgage Rates  – 7 year ARM (Adjustable Rate Mortgage) is fixed for 7 years and in 8th year it becomes an adjustable.

10/1 ARM Mortgage Rates  – 10 year ARM (Adjustable Rate Mortgage) is fixed for 10 years and in 11th year it becomes an adjustable.

Interest Only Loans

For example, if a 30-year fixed-rate loan of $100,000 at 8.5% is interest only, the payment is .085/12 times $100,000, or $708.34. This is an example of interest only payment.

Each loan payment consists of Interest and Principal. Here you will be paying an interest each month and your principal will be adding to your balance, thus increasing it. You may also pay both principal and interest.

If a lender offers you an Interest only Loan these loans are tied to an index just like ARM loans.

MTA Index

The MTA index generally fluctuates slightly more than the COFI, although its movements track each other very closely.

• 1 Month MTA ARM Mortgage Rates
• 3 Month MTA ARM Mortgage Rates
• 6 Month MTA ARM Mortgage Rates
• 12 Month MTA ARM Mortgage Rates

COFI Index

This index rise (and fall) more slowly than rates in general, which is good for you if rates are rising but not good for you if rates are falling.

• 1 Month COFI ARM Mortgage Rates
• 3 Month COFI ARM Mortgage Rates

LIBOR Index

LIBOR is an international index, which follows the world economic condition. It allows international investors to match their cost of lending to their cost of funds. The LIBOR compares most closely to the CMT index and is more open to quick and wide fluctuations than the COFI.

• 6 Month LIBOR ARM Mortgage Rates
• 12 Month LIBOR ARM Mortgage Rates

Pay Option ARM Loan

Pay Option ARM in a new loan program allowing customers to choose from up to 4 different payments. This loan program is part of an ARM, but with added flexibility of making one of the 4 payments.

Your initial start rate varies from 1.000% to anywhere around 4.000%. The initial start rate is held only for one month, after that interest rate changes monthly.

Four major options are:

1) Minimum payment: For the first 12 months interest rate is calculated using the start rate after that interest rate is calculated annually.

For example, if payment cap is 7.5%, the Option ARM’s 7.5% payment cap limits how much the payment can increase or decrease each year, except for every fifth year (beginning in the 10th year on certain programs), when the cap does not apply. In the event your balance exceeds your original loan amount by 125% (110% in N.Y.), the payment amount may change more frequently without regard to the payment cap.

Because you are paying “minimum payment” this option will defer a payment of an interest which will be added to your balance.

Minimum Payment Adjustment Period: The minimum payment is usually set to 12 months, unless negative amortization limit is reached.

Minimum Payment Cap: This is a limit on how much the minimum payment can change. Your payment cap will be 7.5% for the first five years. On your next payment due, your minimum payment cannot increase or decrease more than 7.5%. If it does than a loan is recast.

Recast (recasting) or re-calculating your loan is a way of limiting negative amortization (neg-am). Option ARM’s recast every 5 years. When the loan is recast, the payment required to fully amortize the loan over the remaining term becomes the new minimum payment

2) Interest Only Payment: With Interest Only you will avoid deferred interest, because you are paying principal and interest. If you pay only Interest or Principal your loan balance will increase because you are adding either principal payment or interest payment to your loan balance, thus leading towards Neg-Am Loan.

Your payment may change on monthly basis based on ARM index (LIBOR,COFI,MTA).

3) Fully Amortizing 30-Year Payment: It’s calculated each month based on the prior month’s interest rate, loan balance and remaining loan term. When you choose this option, you reduce your principal and pay off your loan on schedule.

4) Fully Amortizing 15-Year Payment: It is calculated from the first payment due date.

Negative Amortization Loan (Neg-Am Loan)

Negative amortization loans calculate two interest rates. The first is called the payment rate the second is the actual interest rate. The true interest rate is calculated as simply the index plus the margin without periodic caps. Borrowers are given a choice of which rate to pay. Thus advertisers of negative amortization loans often refer to these loans as “payment option” loans.

A loan that allows negative amortization means the borrower is allowed to make a monthly mortgage payment that is less than the interest actually owed during that month.

For example, let’s say we have a $300,000 loan with an adjustable rate that’s currently sitting at 5%. Simple interest on this loan is easy to calculate. Multiply the interest rate by the loan amount and you have the annual interest of $10,000. Divide $10,000 by 12 months and the monthly “interest only” payment is $1,250. The formula for your monthly payment for interest only loans: loan balance x interest rates / 12 = monthly payment.

Now, let’s say that there’s a provision in the loan documents that allow the borrower to make a minimum payment based on a “payment rate” of 4%. So your lowest payment would be $1,000 because the “payment rate” is based upon 4%, not the actual interest rate, which is 5%.

So if you make the lowest allowable payment you are actually losing $1,000 in equity. The balance of the loan increases to $301,000.

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The mortgage calculator will tell you how much you will pay monthly in your payments. It will also tell you how much you will pay in total cost. The principal behind a mortgage calculator is quite simple – input the amount of your loan and home value into  the calculator along with the interest rate applied to the loan, the amount of your down payment, mortgage term and other cost information, hit the ‘calculate’ button and ‘hey presto’ you have a schedule of monthly or yearly mortgage repayments, total monthly payment (principal, interest, tax, insurance and PMI) and other useful information for your home loan. So, for two or more mortgage offers you can enter the loan parameters into the calculator and get an idea of which mortgage offer will cost you more each month or in total over the lifetime of the loan.

Home Value: $ Loan amount: $ Interest rate: % Loan term: years Start date: Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Property tax: % PMI: % Output parameters » Draw charts Monthly vs bi-weekly payments Show annual amortization table Show monthly amortization table Free Mortgage Calculator

Take advantage of the above mortgage calculator. It is an easy way to get a good idea of what you can expect to pay for your new home or business property. Getting this information in advance might be one way to cut down on the stress of trying to figure out the best way to finance, and give you a little peace of mind knowing, in advance, what you can or cannot afford to pay. Compare several different home loan lenders to see what they can offer you and to see just what the difference in dollars and cents is. Taking just a few minutes to carefully consider these options and make a good decision, by using a mortgage calculator can help you to benefit many times over in your home loan.

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