All about: Secure banks, Crisis, Mortgage, Loans, Credits and Refinancing

Ten of the nation's largest banks were given the green light Tuesday to repay $68 billion in government bailout money, freeing them from restrictions on executive compensation that they say are making it hard to keep their top-performing executives.

The Treasury Department said the banks had been approved to repay the money they received from the Troubled Asset Relief Program created by Congress in October at the height of the financial crisis.

Experts say allowing 10 banks to return $68 billion in bailout money shows some stability has returned to the system but caution that the crisis isn't over. And some fear the repayments could widen the gap between healthy and weak banks.

All eight banks that took TARP money and last month passed government "stress tests" confirmed they received permission to repay the bailout funds. They are: JPMorgan Chase & Co., American Express Co., Goldman Sachs Group Inc., U.S. Bancorp, Capital One Financial Corp., Bank of New York Mellon Corp., State Street Corp. and BB&T Corp.

Morgan Stanley did not pass the government test, but on Tuesday said it had raised enough capital quickly and was approved to repay its TARP money.

Northern Trust Corp. was not among the 19 banks subjected to stress tests, but the company said it also had received permission to repay the bailout funds.

Speaking at the White House, President Barack Obama welcomed the news but said "this is not a sign that our troubles are over — far from it."

Stocks zigzagged after the Treasury's widely expected announcement. In afternoon trading, the Dow Jones gained about 20 points. Broader stock averages also edged up.

Some analysts questioned whether the repayment of TARP money obscures dangers in the broader banking industry. Smaller banks are still saddled with billions of dollars in risky commercial real estate loans. And large banks continue to hold the toxic mortgage-backed assets at the heart of the financial crisis.

More than 600 banks have received nearly $200 billion in TARP money, and 22 smaller banks already have repaid their funds.

The 10 banks are set to return money from a $200 billion program the government created as part of the $700 billion financial rescue package. The money initially was used to buy preferred shares in the banks — which are investments that pay regular dividends.

Officials insisted the money was an investment in the companies. The government would receive dividends and warrants, which allow it to buy shares of the banks at a set price over the next 10 years.

Critics have fretted that taxpayers may never see much of the money. But Tuesday's news makes clear that at least for this program, repayments could yield some profits for taxpayers.

Obama said he's happy that people are beginning to see "an initial return on a few of these investments."

Money from the $700 billion fund used for other programs will be harder to recover. And some of it, such as the $70 billion used to wind down failed insurance giant American International Group Inc., ended up in the pockets of relatively healthy banks including Goldman Sachs. That means taxpayers are unlikely to recoup the entire $700 billion, even with profits from the banks.

Bank analyst Bert Ely called the repayments a positive sign for the banking sector but not a reason to celebrate. He noted that three of the nation's biggest banks — Citigroup Inc., Wells Fargo & Co. and Bank of America Corp. — are still tied to the bailout.

Even the banks permitted to repay the bailout funds are still dependent on government support, including debt guarantees from the Federal Deposit Insurance Corp. and credit lines from the Federal Reserve.

American Express and U.S. Bancorp said the repayments would reduce earnings for the quarter.

Other observers worried the repayments are a better deal for the banks than they are for the taxpayer.

"We all know why the senior executives want to repay this money: It's a burden to manage the TARP politics," said Mark Williams, a finance professor at Boston University and former Fed examiner.

Williams argued that it would be best for the banks to keep as much capital as possible until the economy turns around. Unemployment continues to rise, he said, and that could mean more losses on loans and new bank failures.

"We're not at the bottom of the banking crisis, so why is it, then, that the regulators are letting these banks reduce their capital cushion?" Williams said. "Should they stumble again, taxpayers will have to come to rescue."

Banks have been chafing under limits on executive compensation and say key employees have been leaving for small private firms and foreign banks. JPMorgan Chief Executive Jamie Dimon has railed against government restrictions on hiring foreign employees.

The administration is expected to roll out new executive compensation rules Wednesday that would apply to banks that still have TARP funds.

When Treasury first doled out the money, it received warrants from the banks allowing it to buy stock at a fixed price at some future date. The stock prices are expected to rise as the economy recovers. As a result, the warrants could provide substantial profits for taxpayers.

The firms now have the right to purchase the warrants Treasury holds in their firm "at fair market value," Treasury said Tuesday.

Testifying before a Senate panel, Geithner said the value of the warrants for banks permitted to repay TARP funds are in the "several billion dollar range."

Besides Treasury's potential income from the sale of the warrants, the 10 banks already have paid dividends on the preferred stock totaling about $1.8 billion over the last seven months.

Dividend payments received for all TARP participants are about $4.5 billion to date, according to Treasury.

The amounts the banks could repay are:

• JPMorgan: $25 billion

• Morgan Stanley: $10 billion

• Goldman Sachs: $10 billion

• U.S. Bancorp: $6.6 billion

• Capital One: $3.6 billion

• American Express: $3.4 billion

• BB&T: $3.1 billion

• Bank of New York Mellon: $3 billion

• Northern Trust: $1.6 billion

• State Street: $2 billion

The push to repay the funds comes a month after "stress tests" of the nation's 19 largest financial firms found that 10 needed to raise $75 billion more to protect against future losses. All of those banks, including Citigroup, Wells Fargo and Bank of America, had submitted plans by late Monday to bolster their capital cushions that were enough to help them survive a deeper recession, the Fed said.

The other nine institutions had to prove they could raise enough private capital without federal guarantees before they could return the money.

So far, 16 of the 19 banks have raised $75.2 billion, mostly by selling common stock.

Geithner cautioned senators Tuesday that Treasury still needs flexibility to inject money into the financial sector and did not guarantee that the paybacks would be used to reduce government debt.

Lawmakers, particularly Republicans, have been insisting that any repaid bailout money be used to reduce the deficit.

But Geithner did say that the repayments made it less likely that the administration would need to seek additional money from Congress. The administration had included up to $750 billion in additional bailout funds in its budget proposal.

____

Associated Press writer Jim Kuhnhenn and AP Economics Writer Martin Crutsinger in Washington, and AP Business Writers Madlen Read, Stevenson Jacobs and Sara Lepro in New York contributed to this report.

Here's a sample of what you'll learn when you register for my Underground Mortgage Videos. This module is called "Your Mortgage Lender Has a Dirty Little Secret..."

Summary: When you build a home you may take out a construction loan. You may later decide to convert that construction loan to a permanent loan. Does changing your home financing affect your credit score or credit history? Will your credit score or credit history be negatively affected if you refinance a home loan? Learn to distinguish between home loan financing and what affects your credit score.

Q: We have a construction loan with a credit union. The current market value of the house is twice what we owe. The credit union doesn’t require a current appraisal and wants to convert the construction loan to a permanent loan at 6.25 percent.

Can we renegotiate the amount of our permanent loan to an amount that is greater than what we owe on the loan and a lower interest rate? We have a current appraisal that shows our home is worth twice as much as what we owe. 

How will this affect our credit since the credit union reported our construction loan to all three credit bureaus? Can we tell them that if they don’t give us a new loan for a higher amount than what they previously reported to the credit bureaus that we will walk away from their deal?

A: You shouldn’t mix the issue of obtaining financing and the issue of your credit history and credit score.

If your current lender is willing to convert the construction loan into a permanent loan, that’s great. But that doesn’t mean that you shouldn’t shop around. You should compare the interest rate and costs to convert the current loan to a new loan obtained with a different lender.

Are you still under construction? If your home is still under construction and your lender is willing to convert your loan to permanent financing without pulling another appraisal, that may be a good offer. A conventional lender might be hesitant to offer permanent financing on a house that’s under construction.

If you have completed construction, you can refinance with the current lender or use a different lender. 

While the interest rate you are being offered by your current lender may be higher than other lenders, your upfront costs may be lower. You will need to balance the upfront costs with the interest rate to determine the deal that will be best for you.

Turning to your credit history, your current lender has reported your loan payments to the major credit reporting bureaus, and your new lender will probably do the same. If you’ve paid your construction loan payments on time, your credit shouldn’t suffer as a result of the construction loan. There are many factors that go into determining your credit score: the length of time you have had your loans, your ability to pay all of your bills on time, the amount of credit you have, the amount of credit you have taken out when compared to the total amount of credit available to you.

While you probably have not had the construction loan for a long time, if you’ve made your payments for this loan, and all of your other bills, on time, your credit score should be pretty high.

You can get a copy of your credit report for free from AnnualCreditReport.com, and you can purchase a copy of your credit score there as well for about $8. You may want to review one of your credit reports and a credit score to see where you stand. 

If your credit is excellent, you may wish to explore taking out a new loan for a greater amount of money. Your credit score may adjust somewhat with a new, larger loan, but if you can afford it and get an interest rate that is closer to the market rate, it might be a good deal because it will give you the extra cash you’re looking for.

May 28, 2009

I am witnessing an alarming trend.

More and more loan officers are relying on email as their primary and sometimes their only way to communicate with their prospects.

Don’t get me wrong. Email is great. I love email. It’s free, fast, and you don’t have to play phone tag. With a client whose loan is already being processed, email and a few phone calls is enough.

But email is not enough when working with prospects. To me, a prospect is someone you know is interested in a mortgage but has not committed to working with you.

I was going over the follow up plans of one of my coaching clients this morning when I noticed that even though he had 6 steps in his follow up plan with hot prospects, 5 of the 6 were by email.

As loan officers, we use email and the Internet all day, every day. But not all of our prospects do. If you are only following up with clients via email, you are missing the boat. But at least you are following the trend. As more and more loan officers follow up only through email and phone, this gives the smart ones a great opportunity to stand out from the crowd.

If you want to stack the odds in your favor, I suggest you find ways to WOW your prospects. WOW them to a point that you are their only choice for a loan. Is it hard to do? No. But it takes creativity and a little work.

Email is the lazy loan officer way to follow up. The lazy loan officer thinks, “Hey, I’ll just write the emails once, load them onto an autoresponder, and whenever I get a lead, I’ll add them to the list. The autoresponder will send out the emails for me and I can sit back and relax.”

That would be true is email alone was enough. But it is not.

Put yourself in your prospect’s shoes. Say you are looking for a financial planner. You can find ads for investment advice and planning everywhere you turn. They offer free seminars and free consultations. They will advise you for free on how to structure your portfolio to see if you are diversified enough. They will send you free information until you beg them to stop. Sounds just like the mortgage biz doesn’t it?

So let’s say you visit a planner and like what he has to say but can’t decide to pull the trigger. After all, you don’t want to choose the wrong planner. You might get ripped off for several thousand dollars. So you tell him you will think it over.

As soon as you leave the planner adds your email address to his email list and you start getting emails once every 4-5 days. You read the first couple. They are well written and make good sense but without a compelling reason to hire him right now, you act like most normal people act and you put off making a decision.

The next weekend, your brother-in-law hears you are looking for a planner and says you’ve got to talk to his guy. “My guy’s a financial wizard!” he tells you. And your brother-in-law even goes as far as to give your phone number to his guy, who calls you on Monday. You arrange to meet with him and he says pretty much the same thing the first planner told you. So you decide to go ahead with him. This guy comes recommended, he is about the same as the first guy, and how many more planners are you going to interview anyway?

When you get home you have another email in your inbox from the first planner. You skim it and hit delete. You hope the first planner never calls you because you will feel guilty telling him you went with someone else. And lucky for you, the first guy never calls. All you get are his emails, which after three weeks, don’t even get opened anymore.

This same scenario plays out in the mortgage business everyday. Two or more loan officers fighting for the same loan and neither one stands out. Neither one offers a compelling reason to choose one over the other.

If you want to win more battles, if you want to stand out, don’t settle for the lazy way. Incorporate other forms of follow up besides email. Here are some examples:

postcards

thank you notes

a singing telegram

a letter

a bobble head of yourself

a huge box delivered by UPS with nothing it but a fake check

a bouquet of flowers or balloons

the list is only limited by your imagination

The more unusual, the more you will be remembered and the more applications you will be processing.

Let’s go back to our fantasy scenario. Rewind back to when you leave the office of the first planner. In addition to putting you on his email autoresponder, the planner takes five minutes to write you a thank you note and mails it so you get it the day after meeting with him.

Two days later you get a large envelope from him in the mail with a cd in it. As you drive to work the next day you listen to the cd which is of the planner interviewing several of his clients who are raving about how great he is and how wonderful it is to work with him.

Seven days after meeting with him, you get a FedEx envelope from the planner. You open it to find a letter with a $100 bill stapled to the top. The letter says that it has been a week since you met and that by not using him, you have cost yourself several hundred dollars. But being the nice guy that he is, and knowing how busy you are, he is offering you $100 as payment for another meeting. He then calls you later that night to schedule the meeting.

A couple days later your brother in law tells you about his guy and you go to meet with his guy on Monday. But you can’t sign up because you like the first guy and you already accepted $100 to meet with him on Tuesday.

You do meet with him on Tuesday and he convinces you to work with him.

By taking extra steps and being proactive in his follow up, the first planner converted you from prospect into client. It cost him a little: $1 for the thank you note, $2 for the CD, and about $110 for the FedEx Letter, but when the commission is several hundred or thousands of dollars, isn’t it worth it?



By: Ameen Kamadia

Mortgage Rate Watch 2009

Mortgage rates aren’t easy to pin down. Different market forces affect them, and change them daily, and not all consumers are eligible for all rate programs. Homeowners looking to refinance and potential home buyers need to monitor interest rates to obtain the most advantageous program and payment schedule. But watching the financial markets and understanding changes in interest rates can be particularly daunting in 2009, as the recession and housing bubble collapse are affecting communities nation-wide.

What to look for in 2009

As you prepare to get or refinance a mortgage in 2009, here are the events and factors you should watch for. Be sure to consult a reliable mortgage professional before taking out any loan.
Rates could be good for several months: The average rate for 30-year fixed mortgages – the industry standard – in the nation was just 5.57% in December 2008. Most experts expect rates to hover in this neighborhood – 5.5% to 6% — for much of this year. On a $200,000 30-year loan, that’s a payment of $1,136 per month on a 5.5% loan, or $1,199 on a 6% loan.
The recession could help your rate: In one of the few positives of the recession, mortgage rates will likely hold steady or slightly drop as the nation works to move out of a recession. This is because the negative growth of our economy is eliminating any chance of inflation. Monitor rates to see if they gradually move down. If they start going up over a period of days or weeks, it might be time to lock your rate and obtain a loan.
The government could be getting involved: The new administration and Congress are creating proposals that could refinance millions of mortgages at extremely low rates. Troubles with Fannie Mae and Freddie Mac, combined with the looming troubles from “sub prime” mortgages that caused the housing collapse, have created a climate where the government needs to act to stave off any more economic troubles. Stay abreast of proposals and programs as they could affect you and your new loan.
The market hasn’t settled yet: While the “bubble” has burst, it’s not quite over. Housing market analysts are not in agreement as to whether the collapse is complete. The market could get worse before it gets better, which means banks might remain hesitant to lend money. Stay in contact with your lender to achieve the best possible program.
You’ll need more upfront: While there is good news about mortgage rates – likely staying low, no inflationary pressures – there is a downside: You’ll need more money when you apply for a mortgage. Borrowers with poor credit will need larger down payments, and cannot count on zero-down payment loans anymore.
It’s all about timing: Anyone thinking about refinancing should wait until their available refinance rate is at least 1 percentage point lower than their existing rate. For example, someone with a 6.25% loan can feel good about refinancing for 5.25% or less.
Know your score: Your FICO score, the number issued by credit-reporting companies that impacts the rate you receive from lenders, should be at least 740. Borrowers with FICO scores lower than that are considered high risk and might not receive a loan, or will receive one at a higher rate with added fees.
Do your homework: Not all lenders are the same, and each offers different programs. Consumers have to shop around and do research to ensure they are receiving the best loan at the best price.
Patience pays off: While it can be difficult, lenders are issuing new mortgages every day. Borrowers should work to improve their credit scores, monitor rates and determine the most advantageous programs and lenders. The bubble may have burst, but real estate remains one of the best investments available.

Bad credit mortgage refinancing provides a way for those with poor financial history to convert to a fixed rate mortgage, remodel, pay off high interest debts, and save on the monthly payment amount. Families who find themselves in a position where they cannot refinance may want to check out bad credit home mortgage refinancing with lenders online. Some homeowners may even find themselves in a position where they face foreclosure because their monthly payment amount is just too difficult to make. 



Homeowners may also be suffering with low credit scores because trying to make a large mortgage payment has caused them to get behind on the rest of their bills. Late payments and maxing out charge cards can do a great deal of damage to one’s financial history. The best way to go about finding a lender who offers refinance mortgage rate is to do a search online and compare options between financial institutions.

One of the types of loans available for homeowners with questionable financial history is through Federal Housing Administration (FHA). Bad credit mortgage refinancing through FHA can help a person to avoid foreclosure. An FHA option means that 97% of the mortgage is covered so the remaining 3% is for the down payment. Congress has raised the limits on FHA options for several months and concessions can be made for the down payment which will mean down payment assistance for those who need it. A fixed rate or an adjustable rate can be chosen. One option allows the homeowner to have a reduction in interest for the first year of the mortgage but this is usually done with an adjustable rate mortgage.

Lenders online advertise that borrower’s with past financial problems can qualify for second mortgage with bad credit.. Bankruptcy, being late on credit card payments and even late payments on a mortgage will not disqualify a potential borrower from being approved. A person can do credit repair before applying for a loan to help raise scores. This can be easily done by disputing any derogatory or incorrect information on financial history kept by the three major credit bureaus. Disputes must be answered within 30 days or the item in question must be removed from the report. When a negative item is removed or corrected then this helps to raise scores.

Homeowner’s with bad financial history can qualify for home mortgage refinance loan because some lenders do not evaluate a person based solely on past financial history. Mortgage refinancing companies that offer no closing cost refinance takes the borrower’s ability to repay into consideration by looking at income and other factors. The borrower must be able to prove income by supplying paycheck stubs or profit and loss statements. A lender will want to figure debt to income ratios when the borrower has a great deal of debt. A borrower’s past payment history on an existing mortgage may be taken into consideration. If the borrower has made several years of payments on time a lender will be more likely to give an approval even if their current situation has put him or her behind.

Equity Acceleration Programs - Are they better for the borrower or the bank?

You know what equity acceleration programs are? Well, this is an option that might come into play in your life so you need to learn about it as quickly as possible. You never want to be taken advantage of and that is especially true if you are dealing with things are like equity. One question that we are going to explore is whether equity acceleration programs are better for the bank or if they are better for the borrower. This is very important, because you, the borrower, needs to be making sure that everything is going according to your plan. Your plan should be to get the best deal possible with equity acceleration.

The Bank

This whole process works well for the bank if you rush into it. They are helping you gain an adjustable line of credit that you can have. This sounds very nice because it will allow you to cash in on equity sooner. The problem is that you might run the risk of having high interest rates that continue to rise. This is how the bank can make some quick money off of you while giving you what appears to be the best deal on equity. Remember, every time you get a good offer you can guarantee that someone is going to be making a profit off of it. This will end up being just another mortgage in your life and someone will be making money off of you. This is why you need to make sure that you are always paying attention.
The Borrower

If you take your time then you might be able to find an equity acceleration program that will do what it is suppose to. It is suppose to help you cut some years off of your mortgage, while savings you some money in the process. This is not something that you need to rush into though. You also should not get greedy. Take what you can get, but do not try to get in over your head. You have a small window for this to work for you; you just need to make sure that you pay attention. The bank will look to gain money off of your mortgage troubles; just do not be fooled by this equity acceleration. There are other ways you can go about it as well.

Other Ways

Instead of an equity acceleration program some people are opting for a different approach. They are choosing to open up savings accounts instead. This will gain you interest money and you do not have to worry about some mortgage bank trying to take your money away. You are making money off of your own money and there is no one to stop you. This might be a better way to gain some extra money to help with the mortgage troubles.

Bad credit is a typical problem of today’s world and this comes mainly as a result of debt kind of actions of the people. If you take numbers of debt and don’t have the capacity to repay them timely, you can’t help but having bad credit rating. However, as there are problems, there are ways too. There are bad credit debt consolidation loans to let you peel the bad credit off your skin.

Bad credit debt consolidation loans are the loans particularly made for the bad credit holders. This is actually a stint we get whenever we fail to repay the debt on time or make a late repayment. So, bad credit is somehow related to the inability to repay the debt. Well, here come the bad credit debt consolidation loans which act as the reformer and fixer of this bad credit stint.

Since most of our debt burden is the result of having multiple debts, bad credit debt consolidation loans give a viable way out to fix this multiple-debt problem. Multiple debts mean that there will be a number of interest rates too. So, that makes the problem and bad credit debt consolidation loans here come to save you through offers of single loans. Bad credit debt consolidation loans offer you to combine and pay off all the existing debts through single loans to be paid again, with single interest rates. Single interest rate is always than paying a number of rates for different loans. So, debt consolidation loan works and with them, you can surely fight back the bad credit rating.

However, bad credit debt consolidation loans are the loans for everyone and these are available both in the formats of secured as well as unsecured. You can pledge your collateral in the secured bad credit debt consolidation loans to yield cheap loans or if you have any problem in the collateral attachment, you can take unsecured bad credit debt consolidation loans.

These loans are available again, online, where anything is bound to be fast as well as cheap enough because, borrowers have more and easier choices there.

Buying a home brings with it many confusing terms and processes, like mortgages, interest rates, ARMs and equity. Understanding a home’s equity is one of the most important things a homeowner can accomplish. By knowing your home’s value – and in the process, your home’s equity – you’ll be able to plan ahead for refinancing, fluctuations in the marketplace and, eventually, selling your property.

Equity is the amount of money you have invested in your home in relation to its value. For example, if you owe $100,000 on a home that is worth $150,000, you have $50,000 equity. Lenders pay careful attention to equity: many lenders charge extra fees to borrowers who have less than 20 percent equity in a home. Buyers who have more equity in their homes generally receive preferable interest rates as well because they are considered less of a risk to lenders. Homeowners who pay their mortgages on time gradually increase the equity in their home. If you took out a 30-year mortgage and made every payment for 30 years, you’d end up with 100 percent equity.
Can my home’s equity change?

Yes! In theory, your home’s equity can change daily and without any consequence of your actions. Your equity is based on both your mortgage balance – what you owe on the property – and the market value of the home – what it’s worth if you sold it today.

For example: Your home cost $150,000 when you purchased it, and you now owe just $100,000. But your neighborhood’s real estate market has gone up, and a home next-door which is just like yours sold for $175,000. So, without spending a dime, you gained $25,000 in equity when your neighbor’s home sold.

Of course, equity also works in the reverse. If your local real estate market falls, your equity will fall as well. This is one of the reasons it’s extremely important for homeowners to invest as much in their home’s down payment as possible: You don’t want to owe more than your home is worth.
My home just went up in value. Is that money mine?

Not exactly. The changes in home value – which can be caused by recent sales, the number of properties available and even the latest mortgage rates – affect your equity, but not your checkbook balance. Homeowners can take out a home equity line of credit (or HELOC) or a home equity loan, which are financial tools that lend against the equity you’ve built up.

Different banks and lenders set limits on how much equity you can borrow from your home. Generally, owners use equity loans for home repairs and other large expenses. One of the benefits of equity loans is that the borrowed money is tax-deductible, just like your mortgage.

But remember: Your home is not a piggy bank. Many homeowners borrow too much money out of their equity, and end up with little to no money when they sell their homes. Equity lines are effective financial tools for responsible homeowners. Be sure to seek the counsel of a professional before considering taking out an equity loan.

There’s a simple rule when it comes to debts. Unless the debt is interest free, continuing to borrow the money is costing you money. If you can earn interest on savings or get a return on other investments, it usually benefits you to pay off the debts and invest your money. Except, if you are overpaying to reduce your debts this can leave you short if there should be an emergency and some lenders dislike people repaying more quickly than they should and charge fees and impose penalties for early repayment. So, applying the general rule, you should always pay off the most expensive loans first. That means those store cards, credit cards and high interest loans you are carrying. Under normal circumstances, mortgage interest tends to be less than commercial loans.

So, for these purposes, let’s assume you have few credit card debts and some savings. What are your options? One is to use the savings to reduce your mortgage debt. This immediately reduces the interest you pay and it will help if you are thinking about refinancing. Property values have been falling fast. In fact, at the time of writing in May 2009, the market has probably not yet bottomed out. That means your loan to value ratio has been falling. Even though you might have had a mortgage for years, you may now find the current balance of the loan is worth more than 90% of the resale value of the property. This will make finding new finance difficult. Even when the ratio is between 80 and 90%, the interest rate is likely to be quite high to reflect the risk of further falls in property values. If you have a capital sum that will lower the amount borrowed, this will make the chances of refinancing at a cheaper rate possible. However, before you pay, make sure you know when the mortgage interest is calculated. You need to ensure you make the capital repayment at a time when you will get the maximum reduction in interest. Also check to see whether there are penalties if you make an early repayment of part of the principal.

The other factor is practicality. Once you pay a lump sum into the mortgage, that money is locked up. If there’s an emergency of some sort, that forces you to borrow all money needed at higher rates of interest. With the current recession in full flow, unemployment is rising fast. It can be worth having some capital set aside to live on should you lose your job or fall ill. In particular, you should have enough to cover your mortgage repayments for six months should your income dry up. So you can save on your mortgage by overpaying installments or paying a lump sum, but it’s not for everyone. Sit down and do the math to see whether it’s really for you. But, if you are looking at mortgage refinancing, having a lump sum to hand makes a very good bargaining chip in both getting a new deal and getting that deal at a low interest rate.

There’s a simple rule when it comes to debts. Unless the debt is interest free, continuing to borrow the money is costing you money. If you can earn interest on savings or get a return on other investments, it usually benefits you to pay off the debts and invest your money. Except, if you are overpaying to reduce your debts this can leave you short if there should be an emergency and some lenders dislike people repaying more quickly than they should and charge fees and impose penalties for early repayment. So, applying the general rule, you should always pay off the most expensive loans first. That means those store cards, credit cards and high interest loans you are carrying. Under normal circumstances, mortgage interest tends to be less than commercial loans.

So, for these purposes, let’s assume you have few credit card debts and some savings. What are your options? One is to use the savings to reduce your mortgage debt. This immediately reduces the interest you pay and it will help if you are thinking about refinancing. Property values have been falling fast. In fact, at the time of writing in May 2009, the market has probably not yet bottomed out. That means your loan to value ratio has been falling. Even though you might have had a mortgage for years, you may now find the current balance of the loan is worth more than 90% of the resale value of the property. This will make finding new finance difficult. Even when the ratio is between 80 and 90%, the interest rate is likely to be quite high to reflect the risk of further falls in property values. If you have a capital sum that will lower the amount borrowed, this will make the chances of refinancing at a cheaper rate possible. However, before you pay, make sure you know when the mortgage interest is calculated. You need to ensure you make the capital repayment at a time when you will get the maximum reduction in interest. Also check to see whether there are penalties if you make an early repayment of part of the principal.

The other factor is practicality. Once you pay a lump sum into the mortgage, that money is locked up. If there’s an emergency of some sort, that forces you to borrow all money needed at higher rates of interest. With the current recession in full flow, unemployment is rising fast. It can be worth having some capital set aside to live on should you lose your job or fall ill. In particular, you should have enough to cover your mortgage repayments for six months should your income dry up. So you can save on your mortgage by overpaying installments or paying a lump sum, but it’s not for everyone. Sit down and do the math to see whether it’s really for you. But, if you are looking at mortgage refinancing, having a lump sum to hand makes a very good bargaining chip in both getting a new deal and getting that deal at a low interest rate.

A proper use of credit cards is a good help to manage personal finances. Some of the Credit card benefits you can get are:
Reduce the risk of load with cash.
If the total liquid timely your debts, you can receive a low-cost financing.
You can have economic solvency in emergencies such as hospitalization, travel unexpected, or urgent car repair.
You become a creditor of many services such as hotel reservations, rental car or go to entertainment centers.
You can have the cash 24 hours a day, all year, at an ATM.
Check out services such as telephone, cable or wireless.
You can take advantage of special offers and prices of products or services.

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No matter how careful people are, debts can get on top of them. For almost every family, the monthly mortgage installment will be their biggest payment. If there’s an emergency of some kind and more money has to be borrowed on a loan or credit cards, this can disturb the delicate balance between paycheck and monthly payments. What was affordable suddenly becomes unaffordable. How should families react when disaster strikes? The first rule is always to communicate with your lenders. If you have a problem, they should be the first to know. The second rule is to keep paying as much as you can on all your liabilities. The moment you stop, this sacrifices every creditor’s sympathy for your problems. You are now a delinquent, and penalties and service charges will drive up the amount owing. Can this all be avoided? Well, with some care, you can talk some lenders into modifying the loan or refinancing the debt.

The modification you want from your mortgage provider is some reduction in the monthly installment. This may come from extending the term of the loan or from reducing the interest rate applied. Why should a lender modify the loan? The problem for lenders is that foreclosure is a sledgehammer remedy to crack a nut. If the lender does foreclose, there is a small mountain of fees to be paid to end up with ownership of a property it cannot sell in a depressed market. Indeed, lenders are now looking at increased costs to maintain and repair properties to prevent further losses in value. None of these costs will ever be recovered from the borrowers, particularly if they are forced into bankruptcy. It is more cost-effective to take less from a borrower and leave the house occupied. This preserves the asset value and keeps some money coming in from the borrower. Most lenders now have a dedicated department to deal with modification applications. Applying for relief is more likely to receive a constructive response today.

President Obama has pushed through a package called “Making Home Affordable”. It covers both mortgage refinancing and modification. If you qualify, lenders must reduce your monthly repayments so that they are less than 31% of your income. To qualify, you must be current on your loan with no payment more than 30 days overdue. You must be able to show the resale value of your home has dropped by more than 15% and that your personal circumstances justify federal assistance. For these purposes, anyone with a mortgage from Fannie Mae or Freddie Mac qualifies automatically. This can entitle you to interest as low as 2% with all the lender’s losses covered by the government and represents an excellent deal if you can bring yourself within the terms of the scheme. If you do not qualify, it will come down to you or a professional advisor acting on your behalf to talk the mortgage lender into agreeing a refinancing package on favorable terms. It’s in everyone’s interests that you save on mortgage installments and keep making some repayments to the lender. This way leads to peace of mind, knowing that the ownership of your home is secure.

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