mortgages

Short Sale vs ForeclosureThere are several differences between a short sale and a foreclosure. Homeowners who find they are having difficulty meeting their monthly mortgage payments should be careful to understand these differences before taking action. Discussing the options with their mortgage company, scheduling a meeting with a real estate consultant, and learning what potential taxable and credit report consequences may be, are all important facets to understand before making a decision. Let’s first look at the definition of these terms:

Short Sale – when a lender agrees to accept less than what a homeowner owes on a mortgage. In a short sale the home is listed by the owner and sold.

Foreclosure – when the homeowner stops making monthly mortgage payments and the bank takes legal action against the homeowner and the deed of the home returns to the lender. In a foreclosure, the deed is transferred to the bank in a legal action.

Now that we know the difference, let’s take a look at the specifics of the short sale and a foreclosure:

A short sale provides the home owner the opportunity to put the home on the market at or near market value even if more than the market value is owed on the property. When the home is offered for sale, it must be advertised and marketed with verbiage such as “short sale” and “all contracts must be approved by bank.” This informs potential buyers that the seller cannot accept any offer without approval from the mortgage holder. In some cases, the bank will wait until several offers have been received before making a decision as to which one, if any, to accept. The reason for this is so the bank can be sure to accept the highest offer, thereby receiving the most money back on their initial investment.

The reason a bank will even consider a short sale is because often times they will retain more of the money owed them as opposed to going through a costly foreclosure. The foreclosure procedure is expensive for banks as they include attorney fees, court fees, realtor fees, and tax expenses. Often it is simply more cost effective for them to accept the short sale.

Homeowners who are considering either of these options should also consult a real estate professional, a tax specialist, and perhaps a tax attorney. There are real estate professionals who specialize in short sales. They can provide additional information, such as the current market value of the home, the potential for it to sell at a specific price, and how long it will take to receive an offer. They will also be able to manage the short sale transaction, assisting the homeowner with forms, communication and anything else required of the bank. In addition, a tax specialist or tax attorney will be able to provide advice on any potential taxable consequences the homeowner may be responsible for in either a short sale or a foreclosure.

When determining what is best for a particular situation, short sale vs foreclosure, consult the professionals, discuss options with the mortgage holder, and understand what it will take to be successful in either case.

Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

The idea of being upside down on a vehicle is not that new. This commonly occurs when a consumer makes the decision to purchase a new vehicle before they have paid off their existing one. As a result, the balance of the loan on the existing vehicle is added to the note for the new vehicle. The result is that the consumer owes more on the new vehicle than it is actually worth.

Today, many consumers are finding they are now upside down on their mortgages. Unfortunately, this did not occur because they bought a new house and added in the cost of their old home to the new mortgage. This situation occurred in many cases because of the rapid rise of home values in many areas followed by the real estate market crash that sent home values subsequently spiraling downward.

In many markets, the majority of homeowners are now actually upside down on their mortgage, and that number is increasing rapidly. A large number of these homeowners are consumers who purchased their homes at the peak of the boom. During that time home values doubled and even tripled within a short period of time in many areas. This situation leaves many homeowners wondering what they should do. Options are often based on whether the homeowner is able to continue making their monthly mortgage payments. While some are able to pay their monthly mortgages, especially if they have a fixed rate mortgage, that is not the case with others who took out adjustable rate mortgages.

Homeowners who can still afford their monthly mortgage payments and who are not feeling the pressure to sell due to employment reasons may find they are better off by riding out the market decline. There is wide belief that once the market bottoms out and begins to rebound, these homeowners could still be poised to make a profit on their home.

Other homeowners are not so fortunate; however. In some cases, homeowners simply have no choice but to move now rather than wait as a result of relocation or job loss. Homeowners who have adjustable mortgages may also find they are simply no longer able to afford their mortgage payments as they continue to rise. These homeowners are now facing the bitter reality of foreclosure when they are not able to pay off their debts or refinance their home loans because of tightening loan restrictions.

Homeowners are also facing the reality that their options are reduced because they have little or no equity in their homes. The amount of equity a homeowner has in their home is often determined by the amount of their down payment. During the housing boom it was quite common for many buyers to purchase homes with very little, if any, down payment. At the time it seemed like a good deal; however, today it is causing significant problems as housing values continue to decline.

This situation is causing further problems for homeowners who would like to take out home equity loans either to make necessary home improvements or to consolidate higher interest debts. Even if they are among the few homeowners who do have equity in their home, they are finding that lenders are increasingly wary of making home equity loans. Just as the default rate on mortgage loans have increased, so has the default rate on home equity loans. Quite simply, lenders are no longer willing to take on risk when they are already holding a number of defaulted loans.

The ability to refinance has also dwindled in many locations. Not only are loan guidelines becoming stricter but most homeowners who are upside down are frequently finding the lower value of their home makes it nearly impossible to qualify for a new loan. In essence these homeowners now have negative equity and lenders are simply not willing to take on that risk.

Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Types of Home MortgagesMany of the novelty type home mortgages — such as the “payment-option” loan — have disappeared in the wake of the housing bust. But homebuyers and homeowners who want to refinance still have several types of loans from which to choose.

The most basic choices include: fixed-rate mortgages, adjustable- or variable-rate mortgages and hybrid mortgages (which combine features of both the fixed- and adjustable-rate options).

Fixed-Rate Home Mortgages
The fixed-rate mortgage is probably the most popular choice for homebuyers and homeowners because it offers peace of mind that the interest rate and monthly payment will remain unchanged for the entire term of the loan, typically 15 or 30 years. A fixed-rate loan with a 30-year term will have a slightly higher interest rate, but a significantly lower payment than a fixed-rate loan with a 15-year term.

Adjustable-Rate Home Mortgages
The adjustable-rate mortgage, or ARM, gives the borrower a lower initial interest rate and a payment that may be more affordable than the rate and payment on a fixed-rate home mortgage. However, the borrower should be prepared for the possibility that the low initial interest rate and payment on an ARM may not last. That’s because the rate and payment on an ARM typically adjusts — either higher or lower — according to a well-established interest-rate index, such as Libor. Rate adjustments often are subject to certain caps which limit the amount of the increase.

Hybrid Home Mortgages
Hybrid home loans come in two configurations. One format starts out with a low initial adjustable interest rate that makes the payment more affordable, and then converts to a fixed market rate — which may result in a higher payment — after a set number of years. The other format starts out with a fixed rate and payment for a set number of years, and then converts to an ARM, on which the payment may be either higher or lower, depending on market interest rates.

These loans are popular among homebuyers who intend to sell the home or refinance the mortgage, if possible, before the adjustment occurs.
One other type of home mortgage is an interest-only loan, on which the borrower makes a lower payment, but none of amount is applied to the principal balance.

Not sure which type of mortgage is right for you? Talk with a mortgage specialist. They are trained to advise you which way to go, based on your current circumstances, and what your future plans are. One size does not fit all when it comes to a mortgage on your home.

Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Great Benefits, Serious Risks – A loan secured by a homeowner’s “equity” can be an economical way of borrowing money because the interest rate is typically low and, for many people, the interest paid will be tax deductible. However, there’s a big risk…

Have questions about home equity loans not answered here? Use our comment link below to ask. We’ll get back to you with answers.

Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

More homeowners prefer to pay off their mortgages sooner as interest rates have stayed near rock-bottom and weak labor conditions have caused them to reduce their debt loads.

According to a recent survey, the current trend in refinancing into shorter-loan terms is a stark contrast to the one during the height of the housing boom, when families were taking out bigger mortgages against the rising values of their homes.

Of those homeowners who refinanced a 30-year fixed-rate mortgage during the second quarter, 37 percent moved into a 15-year or 20-year fixed-rate loan. This is the highest since the third quarter of 2003.

In the second quarter, interest on the 30-year mortgage averaged 4.65 percent, compared with a 3.84 percent average on 15-year mortgages.

Refinancing has comprised the bulk of U.S. mortgage activity since the housing bust that led to the 2007-2009 global financial crisis.

During the second quarter, the refinance share of mortgage applications, versus the share of applications for loans to buy a home, averaged 70 percent, according to Freddie Mac.

Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.