Archive for April, 2011

What to Consider in Home Refinancing

Because of the current economic challenges, many families today are opting for home refinancing. Otherwise, they will be losing their homes. Home refinancing lowers your monthly mortgage payments and extends your payment terms.

But, it is charged a high interest rate. It also entails an application for a secured loan that uses you home as collateral. Thus, if you cannot pay your loan, the lending agency has the right to pull out your home. Despite the disadvantages of home refinancing, it is still the friendliest deal that people can get to save their homes.

One way to refinance is by converting an ARM to a fixed rate loan. This is used in investment properties especially homes that are taken from a portfolio lender or someone who does not sell the mortgage. Lenders allow ARMs to finance the entire amount of the property’s improved value. People who go for this type of refinancing usually get a 5 year ARM and convert it to a 30 year ARM before the five years expire.

Rate reduction in refinancing helps lower mortgage payments. The only doubt on refinancing is whether the cost is worth the reduced amounts of payment. A borrower must think about the time it will take for the mortgage to recover its costs. Different advice has been offered about the estimated recovery period.

However, this is a case to case basis. A homeowner should think about the length of time he or she plans to keep their house. Some borrowers want a longer recovery period if they do not plan to sell the house soon. A long term borrower who thinks that the low levels at the moment will not stay may consider refinancing at the soonest possible time even if this means that the savings are not as big as expected.

Benefits and Guidelines of a Home Refinancing Loan

The current economic situation resulted to a bad credit standing for most Americans. Despite the poor credit rating, there are many companies who specialize in providing bad creditors with the chance to refinance their mortgage through affordable home refinancing programs.

These programs lower the mortgage payments and extend the loan term of homeowners so that they can still afford to pay their mortgages. Aside from lower mortgage payments, the home refinancing program also helps individuals avoid bad credit score. Unpaid mortgage and high interest rates play a big role in bringing down an individual’s credit rating. Moreover, the home mortgage refinance program benefits many by giving borrowers a fixed interest rate. Before applying for a home refinance mortgage program, here are some refinancing guidelines to follow.

First, choose a lender who specializes in bad credit mortgage refinancing. These lenders are highly experienced in handling cases of bad credit. Hence, they can easily find the best deal for people with bad credit. If you have a bad credit, do not spend your time applying for a loan from traditional lenders.

Second, it is best to try applying to different lenders to get the best and most affordable home refinancing rates. Try researching online. This is easier and less time consuming. If you can apply online, do so. This is more convenient and the quotes are usually released a little less than one hour. Even if you have bad credit, remember that you can always negotiate to get the best loan terms.

The economic crisis of today has led to many people losing their jobs and consequently losing their homes. However, this can be prevented by applying for a home refinancing loan. Home refinancing loan lower interest rates, extend payment terms and make mortgage payments more affordable. In addition, it is made available to people even with bad credit.

Pounds VS. US Dollar in Interest Rates Expectations

The dollar exchange rate for pound is higher by 0.215% with 1 GBP being equivalent to 1.6288 USD. Similarly, the Australian dollar exchange rate for pound is higher by 0.368% with 1 GBP equal to 1.552 AUD. On the contrary, the euro exchange rate for pound is 0.216% lower with 1 GBP equals 1.6288 USD.

According to exchange rate analyst Adam Solomon at Tor FX, the British pound is rallying towards 1.63 versus the American Dollar despite the rumors that interest rates will increase quicker than FOMC.

Ahead of the minutes of the BoE that was recently released stated that the investors are predicting the MPC to increase the borrowing amount by 75 basis points in the next 12 months. Together with this, the Fed will continue to be unwilling to give extra-lenient policy measures.

Even though the inflation in UK has declined in the recently reported monthly figures, the prices of consumer products are still twice as much as the 2% target. Most of the attention will be focused on the GDP data of the first quarter. This data will be released in the coming weeks.

A positive comeback to the growth after the reduction in the fourth quarter will signal a returning speculation about rate increases in the month of May. When this increase happens, the Pound will be affected positively. As the pound increases, its impact to other currencies is not yet determined.

The currency in UK stays unchanged versus the Euro in the latest report. This occurred after reports came out that the manufacturing in Germany unexpectedly became better last month and resulted to more rate increases in the European Central Bank.

The single currency also showed gains against currencies that yield higher like Australian Dollar and New Zealand Dollar while Asian stocks declined and lowered the demand for assets that are riskier.

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HARP Extension to Assist Homeowners

The home refinance option of the Home Affordable Refinance Program (HARP) has been given an extension until June 30, 2012. The purpose of the program is to provide homeowners the refinancing assistance that they need because they cannot do it the traditional way. The reason for this is that the value of their homes depreciated because of the global economic crisis that led to the credit crunch. Homeowners are highly advised to seek the help of housing counselor experts to obtain more successful results.

The Home Affordable Refinance Program was created after the crash in the market in 2008. Its purpose was to help the home owners who were lucky to keep a good payment history and get more stable rates of mortgage even if the value of their primary residence decreased sharply.

The HARP loan does not require so much. This is open to homeowners who have an existing mortgage that is insured by Fannie Mae or Freddie Mac. Also, the borrower must have a good track record of paying his or her mortgage diligently and without default for more than 30 days. This good payment history must have been maintained for the last 12 months. In addition, the refinancing loan can still be obtained by the borrowers despite a lower value of their houses against their existing loan in the current market.

But, the limit of the mortgage value is set to stay below 125% of the current price in the market. In order to acquire the loan, the last condition is that the borrower must show proof of his or her capacity to afford the new payments. The loan must also demonstrate that it can give better stability to the mortgage borrower.

Interested homeowners are requested to consult a highly experienced mortgage lender to help them in the process. Research shows that a mortgage professional can greatly contribute to a better outcome that is in favor of the borrower because of its lower cost, lower terms and more savings.

Mortgage Assistance For Homeowners

The amount of money that was not spent from the $700 billion budget of the federal bank bailout two years ago will be used as mortgage assistance for homeowners in several states.

Kentucky, Indiana together with the District of Columbia and 16 other states who are having difficulties in paying their home mortgage will share $7.6 billion from President Obama’s program “Hardest Hit Funds.” This program aims to give assistance to states with high unemployment rates and declining housing market.

After paying for administrative expenses, $134 million will be used by Kentucky homeowners while $183 million is allocated for Hoosiers. Qualified citizens of Kentucky will get up to a maximum of $20,000 while Hoosiers up to $18,000. In the coming months, the assistance will be extended to the citizens of Indiana. About 6,250 to 13,000 families in Kentucky and 16,257 in Indiana will be given assistance.

According to Kentucky Housing Corp’s CEO Rick McQuady this program will assist Kentucky’s workers while they are waiting for a stable employment. The Indiana Housing & Community Development Authority and Kentucky Housing Corp. will pay for the mortgage of citizens who qualify in the program.

This program is aimed at helping people who cannot cope up with their monthly mortgage payments because of involuntary job loss or drop in income. Many of these individuals now have to deal with credit repair to improve thier scores. Borrowers who are seeking assistance are not allowed to save more than six months worth of house payments. Exemption for this condition is in the retirement accounts.

The provided assistance will be in the form of a loan that is not required to be paid for as long as the borrower stays in the same home for five years in Kentucky and for 10 years in Indiana. Different rules are given by each state depending on its officials.

Kentucky homeowners can claim up to $7,500 worth to pay for late mortgage and fees. Plus, the agencies of the state will pay their mortgage in full for one year or until the amount of $12,500 is spent. The total cost that the government will cover is $20,000. On the other hand, Indiana homeowners will receive a total of $18,000 worth of assistance for a maximum of 18 months. However, this is extended only to the “hardest hit” counties like Crawford, Orange and Scott.

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Refinancing Home Mortgage : Things To Consider

Refinancing a home mortgage is one option for home owners to pay their home mortgage that they cannot cope paying on time. Home mortgage refinancing loans can lower the refinance interest rate on the loan so that the monthly mortgage payments also decrease significantly.

However, despite the decrease in interest rates, the total amount to be paid for the entire duration of the loan may be higher compared to the amount due. It can reach the highest current value of the home. Home mortgage refinancing loan seem to be a big advantage, but most people really wonder if they can save money from making this option.

Mortgage cash out refinance is different from home equity loans. Refinancing replaces the first mortgage with low interest rate charges. The savings from this option comes from lower interest payment costs. But, also bear in mind that in mortgage refinancing, closing costs might need to be paid which can amount to several thousands of dollars.

The rate of interest is one thing that must be considered in opting for home refinancing. Some interest rates for home refinancing may be higher than the current mortgage rate. When this happens, there is no point in refinancing a mortgage. Usually, it is alright to refinance a home mortgage if the current rate of interest is up by about 2 points versus the current rate offered in the market. One thing that can be a problem is your credit score though. Those looking for bad credit loans may have issues.

One’s credit rating is another consideration in refinancing a home mortgage loan. Having a good credit standing can give the borrowers a lower refinancing mortgage rate which can lead to lower interest rates, lower monthly charges and a chance to build home equity by changing the loan period. On the other hand, refinancing with bad credit can mean paying for higher interest rates and higher mortgage payments. Hence, it is unwise to consider taking a refinancing home mortgage loan with bad credit since it can become even more expensive.

Mortgage refinance loan is an option that can be considered when having challenges with monthly mortgage payments. However, it is important to analyze the cost and benefits of taking that kind of loan. Interest rates and one’s credit rating are two of the important factors to be considered in making the decision to refinance a home mortgage.

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Bad Credit Affects Jobs Not Just Mortgages and Home Loan Refinance

25 states are proposing 49 debatable bills to give restrictions to employers who are using the job applicant’s credit histories in the hiring process.

According to the National Conference of State Legislature’s analyst Heather Morton, the bills passed concerning credit standing and employment are the response of legislators to the effect of recession on employment. The Privacy Rights Clearinghouse director Beth Givens further added that the legislature’s bills result from the growing concern on fairness. Givens says that the decision to hire based on an applicant’s credit report is a value judgment that is somehow sending the message that the applicant is an irresponsible and careless person because of a poor credit standing. This is an unfair basis for employment especially for people of color says privacy and civil rights advocates.

In the state of California, the combination of foreclosures and a 12.4% rate of unemployment have negatively impacted the credit scores of its residents. This is according to Tony Mendoza, the state’s assembly member responsible for California’s bill. A credit report is an unfair basis for job acceptance, added Mendoza. Despite this fact, 60% of employers in the U.S still perform credit checks on their job applicants says the Society for Human Resource Management.

The top bureaus namely Experian and Trans-Union oppose the bills. They say that it is an employer’s prerogative to know if their applicant had been prudent in their previous employments. Trans-Union spokeswoman Colleen Tunney-Ryan further adds that the credit report can be used as a tool to assess the employer’s job applicants. The chairman of Adam Levin says that job applicants must be prepared to answer any questions related to their credit when applying for a job.

Although the associate counsel for SHRM, Elizabeth Bille says that credit reports are mostly used in the latter part of the hiring process and for managerial positions, Nat Lippert, a research analyst of a labor union says otherwise. According to the analyst, more employers are using credit reports to hire people for low-paying jobs, the jobs that are sought for by workers of color. Credit report as a hiring tool should not be used because of its discriminatory impact added Lippert.

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What to do to Avoid Tax Charges on Forgiven Debt?

Being charged to pay taxes even after foreclosure is a clear manifestation of what is said to be adding insult to injury. Losing a home which most likely implies not having enough money would surely make anybody in this situation wonder why they still owe anything to the IRS. However, the simple answer to this is that the IRS considers canceled or forgiven debt as a taxable income

As an illustration, if a $400,000 home is foreclosed and the bank sells it for $300,000, the rest of the loan which amounts to $100,000 is the forgiven debt. However, the tax code says that the forgiven debt which is $100,000 in this case is considered a taxable income.

In 2007, a legislation enacted by the Congress exempts up to $2 million in canceled mortgage debt from being charged with taxes. This comes with the condition that the loan was utilized for purchase or improvement of the primary residence of the taxpayer. According to Thomson Reuters’ tax analyst Robin Christian, this means that individuals whose houses were foreclosed do not have to pay taxes for the forgiven debt.

This legislation however will expire by the end of 2012. The implication of this is that homeowners who are experiencing difficulties and are having payment delays in their mortgages may be surprised by the taxes that they have to pay in 2013. Moreover, people who have other types of cancelled debts may also be in trouble.

Financial institutions tasked to write off debts amounting to at least $600 must submit a Form 1099-C to both the IRS and the borrower. If a 1099-C is received for a forgiven debt after foreclosure, make sure to inform the IRS about its exclusion, says Christian. Do this by filling out Form 982 on Form 1040 and put a check mark on Part I of box 1E. Without this, IRS may consider the forgiven debt as taxable income. Other forgiven debt in the category includes credit card debt, student loans, mortgage debt from a second home, and home equity line of credit that was not utilized for home improvement.

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30 Year Fixed Rate Mortgage Still Under 5%

The rate for 30 year fixed mortgages remained unchanged for the latest week as the rate remained below the 5% mark.

Mortgage giant Freddie Mac announced on Thursday April 7th that the rate of this week remained unchanged however last week the rate rose from 4.86% to 4.87%. The rate hit a 4 decade low in November of last year when it fell to 4.17%.

Meanwhile the rate for the 15 year fixed mortgage rose this week by 0.01% to stand at 4.10%. The 15 year fixed mortgage had also hit a 2 decade low in the November of last year when it fell to 3.57%.

Mortgage rates closely flow the yield on ten year Treasury notes. Low mortgage rates have not helped the home sales market which is struggling to recover from the economic crisis. KB home is the latest homebuilder that has announced a decline in net orders for homes in the last quarter.

The company which is based in Los Angeles California and operates in 12 states across the country released statistics this week which showed a decrease by 28% in houses that were delivered in the last quarter and a decrease of 32% in new home orders.

Lennar Corp last week announced its statistics for the last quarter and they also posted a 12% decline in new orders and a 3% decline in homes delivered.

The sluggish new home sales in the United States are due to the fact that prospective home buyers are hesitant to buy new houses because of stringent credit requirements, fears of getting laid off and not being able to repay mortgages and an expectation that home prices will fall because of large amounts of foreclosures still available in the market.

Mortgage rates are extremely unstable and can vary on a daily basis. Hence to calculate the average rate for the week, rates are measured across United States every day from Monday to Wednesday every week by Freddie Mac.
On a 5 year adjustable rate mortgage the average rate rose from 3.7% to 3.72%. This rate hit its lowest mark since 2005 last month when it dropped to 3.25%.

Meanwhile the average rate for the 1 year adjustable rate mortgage dropped from 3.26% to 3.22%. This rate hit its lowest in almost 3 decades 3 weeks ago when it stood at 3.17%.

Home Mortgage Interest Rates On Rise Says FED

The economy of the United States is not ready for an increase in interest rates a Federal Reserve official has claimed. Dennis Lockhart, the president of the Federal Reserve of Atlanta termed the current economic situation in the country too delicate to withstand a rise in interest rates.

He further said that the Federal Reserve would remain on schedule to finish its bond buying program before July and there was no reason in his opinion to deviate from this plan.

When reporters asked Lockhart that leaked minutes of the Federal Reserve’s latest policy meeting showed that some of the members had started considering an increase in Interest rates, he replied that it would be pre mature at the moment. Lockhart said that actually he had not even given it a thought for now.

While talking to reporters he explained that there was still some fragility in the economy as it tried to recover from the economic crisis. He further said there was no need to take a U turn on the current course that they were following. He was attending an Atlanta Federal Reserve conference in Stone Mountain Georgia.

The economy of the United States of America has shown some signs of recovery recently. It expanded by a little over than 3% in the fourth. Unemployment figures have improved quickly in recent months and have come down to 8.9%.

Lockhart said that inflation was still not a big issue for them and actually the rise in prices was a desirable event for policymakers. Many of these policymakers had shown concerns last year of a deflationary spiral occurring in the United States.

He said that the recent rise in prices were due to the mechanics of supply and demand rather than the interest rate policy of the Federal Reserve. However Lockhart did say he expected prices of commodities to become stable eventually.

Lockhart did however admit that he had not yet decided on a preferred plan about how the United States would break off from its loose monetary policy. He did say that the Federal Reserve would most likely take a look at a very aggressive plan proposed by the Philadelphia Federal Reserve.

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