What interest do you get to deduct on a Negative Amortization Loan? You get to deduct the interest when it is paid. When you make your minimum monthly payment, the whole payment is usually interest so for most people it is all deductible.
But the payment on a Negative Amortization loan does not cover all the interest. Some of the interest is added to principal.
What happens with that interest? When you pay off the loan- either selling or refinancing-, the interest that was "deferred" will be listed on the payoff statement. This interest is deductible for most people. A nice deduction, especially if the gain on the sale will be taxed.
MMM
Tuesday, July 31, 2007
Monday, July 30, 2007
Neg Am Loans 1
Negative Amortiztion. Words that scare many people. Reverse Mortgage. Words that bring great comfort to many. Ironic that a Reverse Mortgage creates the biggest Negative Amortization Mortgage!
As with all loans and mortgages, the right loan for you is one that meets your financial needs and goals and one you understand. Negative Amortization mortgages that help moderate monthly expenses while helping the borrower meet other financial goals are wonderful. Negative Amortiztion mortgages that put some one's home owership at risk are a traversity.
The number one question I would have is: What is your objective?
If you want to keep your payment low so you can invest the difference or make an income property give a positive cash flow a Negative Amortiztion loan is the way to go.
If you are trying to buy the home of your dreams that is out of reach any other way, you are looking for trouble.
More on Negative Amortization loans later.
MMM
As with all loans and mortgages, the right loan for you is one that meets your financial needs and goals and one you understand. Negative Amortization mortgages that help moderate monthly expenses while helping the borrower meet other financial goals are wonderful. Negative Amortiztion mortgages that put some one's home owership at risk are a traversity.
The number one question I would have is: What is your objective?
If you want to keep your payment low so you can invest the difference or make an income property give a positive cash flow a Negative Amortiztion loan is the way to go.
If you are trying to buy the home of your dreams that is out of reach any other way, you are looking for trouble.
More on Negative Amortization loans later.
MMM
Weekly Rate Outlook
Rates quit climbing as stocks went south last week. As the stock market went down, money flowed into mortgage backed securities bringing rates down a little. More importantly, the price of mortgage backed securities closed above the 25 and 40 day moving averages. These had been major ceilings of resistance.
This week there are major inflation and other economic reports. Bad economic news with low inflation news means lower rates will follow.
Link to my weekly Realtor news letter:
Paul's MMG Weekly
MMM
This week there are major inflation and other economic reports. Bad economic news with low inflation news means lower rates will follow.
Link to my weekly Realtor news letter:
Paul's MMG Weekly
MMM
Wednesday, July 25, 2007
NY Times: Mortgage Woes = Stock Sell Off
This mornings lead story in the New York Times reports on the comments made by Countrywide executives on company conference call. Read article
Although pessimistic in nature and Countrywide share price fell along with my company's and the whole market, if this drives us to the bottom of this housing resession, we can begin the recovery sooner.
The implecations for rates are good - bad economic news drives rates up - and bad - the news is about rates and the availability of funding for mortgages.
I think pressure will mount for rates to go down to stimulate the housing industry. Sooner the better.
MMM
Although pessimistic in nature and Countrywide share price fell along with my company's and the whole market, if this drives us to the bottom of this housing resession, we can begin the recovery sooner.
The implecations for rates are good - bad economic news drives rates up - and bad - the news is about rates and the availability of funding for mortgages.
I think pressure will mount for rates to go down to stimulate the housing industry. Sooner the better.
MMM
Sunday, July 22, 2007
Who should get a Reverse Mortgage?
The question comes up about once a week, "who should get a Reverse Mortgage?"
A Reverse Mortgage can give some one either a monthly income or money for major expenses or a combination of both. The two requirements are equity in your home and being over 65.
Since the no payment Reverse Mortgage needs to last a life time, the older the borrower, the greater proportion of equity that can be drawn from their home. The Reverse Mortgage calculates the portion of equity that can be drawn and how much equity needs to be reserved to pay the interest on the loan.
I would advise a borrower that the Reverse Mortgage be the last resource to tap so they will get the greatest benefit.
I am always an advocate of getting what you pay for. Reverse Mortgages are not free. They have upfront fees, while not out of pocket, are drawn from equity upon closing. Interest accumulates on all draws including these closing costs. Will the income provide enough benefit to justify the expense? That is the second question to answer before finalizing the Reverse Mortgage.
MMM
A Reverse Mortgage can give some one either a monthly income or money for major expenses or a combination of both. The two requirements are equity in your home and being over 65.
Since the no payment Reverse Mortgage needs to last a life time, the older the borrower, the greater proportion of equity that can be drawn from their home. The Reverse Mortgage calculates the portion of equity that can be drawn and how much equity needs to be reserved to pay the interest on the loan.
I would advise a borrower that the Reverse Mortgage be the last resource to tap so they will get the greatest benefit.
I am always an advocate of getting what you pay for. Reverse Mortgages are not free. They have upfront fees, while not out of pocket, are drawn from equity upon closing. Interest accumulates on all draws including these closing costs. Will the income provide enough benefit to justify the expense? That is the second question to answer before finalizing the Reverse Mortgage.
MMM
Weekly Rate Outlook
Sources I trust for stock investing suggest the market has room to move higher. Bad news for rates. Even though they took a rest from rising at the end of the week, look for them to move higher through the summer.
Link to my weekly Realtor news letter:
Paul's MMG Weekly
MMM
Link to my weekly Realtor news letter:
Paul's MMG Weekly
MMM
Thursday, July 19, 2007
Taking Rates in the News with a Grain of Salt
Today there is a news story about home mortgage rates staying the same. It quotes the FreddieMac rate survey rate.
People often ask why they cannot get the rate quoted in the newspaper. Here are some things to think about when talking about rates.
The FreddieMac rate survey is probably pretty accurate. They have been doing it along time and is a respectable organization. But they are surveying for rates not the price of a rate. The standard practice in some parts of the country is for the borrower to pay an origination fee for their loan. In other areas the standard practice is for the origination fee to be included in the rate. Net affect is rates are lower when an origination fee is paid by the borrower than when that fee is paid from the value of the loan. Rate difference is .25% to .375%
The source of the rate is also important. FNMA, the other large source of mortgage funds, has a wholesale rate that they publish and offer to news organizations. It is a "wholesale" rate meaning it does not include the cost of origination or servicing the loan.
Some other factors that affect rate are time, Loan to Value (LTV), and credit worthiness/risk profile.
The shorter the time to closing the loan, the lower the rate. Most surveys use a 30 day rate. 15 day rates are lower, 45, 60, 90, 120, 180, are each incrementally higher. The higher the ratio of loan amount to value of the home, the higher the rate. This is especially true for loans over 80%LTV. Credit Worthiness/ risk profile are also factors. The more risk a loan has the higher the rate.
Occationally a small bank or other institution will have an especially low rate. It is great if you can get it. Funds are usually limited and standards are very high. Most of the time when a low rate is quoted there is a catch. Get your quotes in writing from a reputable company.
People often ask why they cannot get the rate quoted in the newspaper. Here are some things to think about when talking about rates.
The FreddieMac rate survey is probably pretty accurate. They have been doing it along time and is a respectable organization. But they are surveying for rates not the price of a rate. The standard practice in some parts of the country is for the borrower to pay an origination fee for their loan. In other areas the standard practice is for the origination fee to be included in the rate. Net affect is rates are lower when an origination fee is paid by the borrower than when that fee is paid from the value of the loan. Rate difference is .25% to .375%
The source of the rate is also important. FNMA, the other large source of mortgage funds, has a wholesale rate that they publish and offer to news organizations. It is a "wholesale" rate meaning it does not include the cost of origination or servicing the loan.
Some other factors that affect rate are time, Loan to Value (LTV), and credit worthiness/risk profile.
The shorter the time to closing the loan, the lower the rate. Most surveys use a 30 day rate. 15 day rates are lower, 45, 60, 90, 120, 180, are each incrementally higher. The higher the ratio of loan amount to value of the home, the higher the rate. This is especially true for loans over 80%LTV. Credit Worthiness/ risk profile are also factors. The more risk a loan has the higher the rate.
Occationally a small bank or other institution will have an especially low rate. It is great if you can get it. Funds are usually limited and standards are very high. Most of the time when a low rate is quoted there is a catch. Get your quotes in writing from a reputable company.
Monday, July 16, 2007
Credit Loop Hole Closing
In the past I have recommended a loophole in the credit reporting system to quickly improve a credit score. By being added to an existing account with long history of on time payments, a borrower was able to have that history factored into their score. Today in the Mortgage Market Guide , my weekly Realor newsletter the closing of this loop hole was discussed. Fair Issac, the company that writes the software for credit scores, is looking out for "autorized users" and underweighting or not weighting that in the score.
Follow the following link to read the whole story.
Paul's MMG Weekly
Follow the following link to read the whole story.
Paul's MMG Weekly
Weekly Rate Outlook
Rates are currently resting after a crazy roller coaster up and down last week. Business news continues to talk about getting a higher rate of return in Australia, New Zeeland, and Western Europe. This is causing continued upward pressure on mortgage rates as we need investors to buy the bonds that fund your loans and their money goes to the highest return for the risk. The stock market has also been strong, pulling in more money. There are some indications that the stock market is "over sold" and ready for an adjustment. We shall see.
I am linking my weekly Realor newsletter from the Mortgage Market Guide if you would like more detailed information. I will link this every Monday.
Paul's MMG Weekly
I am linking my weekly Realor newsletter from the Mortgage Market Guide if you would like more detailed information. I will link this every Monday.
Paul's MMG Weekly
Thursday, July 12, 2007
Sub Prime Woes are NOT A Paper Woes
Even though Sub Prime Mortgage Bonds are getting a lot of press because of record foreclosures, Sub Prime Mortgages are still a small part of the market. "A" paper, mortgages underwritten to a higher standard, are the majority. Those loans continue to have very low foreclosure rates.
MMM
MMM
Tuesday, July 10, 2007
Freedom Day
Should you pay off your mortgage (s) or save and invest your money? Your Freedom Day is the day you havce enough savings and investments to pay off your mortgages if you choose to do so. Having your money seperated from your house not only allows you to earn income on the investments, but provides you more security along the way.
Your mortgage company has the right to foreclose if you fail to make payments whether you have no equity (100% financing) or 99% equity (1% financing). Every principal payment you make gives your lender more security and more of your equity is at risk.
Work toward your Freedom Day and give yourself more security along the way.
MMM
Your mortgage company has the right to foreclose if you fail to make payments whether you have no equity (100% financing) or 99% equity (1% financing). Every principal payment you make gives your lender more security and more of your equity is at risk.
Work toward your Freedom Day and give yourself more security along the way.
MMM
Monday, July 9, 2007
Weekly Rate Outlook
Rates continued their assent last week, pretty much following what I set out last week. This week is light on hard economic news. Since I am writing late in the day I can tell you rates took a rest on their way up. We need some major bad economic news to get rates to go lower.
Did you notice the Stock Market moved Higher Friday and again today. Money flowing away from mortgage backed securities and into the stock market continues.
Link to my weekly Realtor news letter:
Paul's MMG Weekly
MMM
Did you notice the Stock Market moved Higher Friday and again today. Money flowing away from mortgage backed securities and into the stock market continues.
Link to my weekly Realtor news letter:
Paul's MMG Weekly
MMM
Saturday, July 7, 2007
Why pay down your mortgage?
Who benefits when you pay down your mortgage? Your lender! The more equity you have in your home, the less risk the lender has. If the lender ever needs to forclose, the more equity the lender can control, the more likely they will be able to come out ahead on the loan.
If you put "extra" money in a savings account, and later needed the money to make your payment (and avoid forclosure), the money would be available.
Money in the bank earns interest too. When you prepay your mortgage, no income is produced from the "investment".
Put your money in the bank or other investment, not in your home.
MMM
If you put "extra" money in a savings account, and later needed the money to make your payment (and avoid forclosure), the money would be available.
Money in the bank earns interest too. When you prepay your mortgage, no income is produced from the "investment".
Put your money in the bank or other investment, not in your home.
MMM
Friday, July 6, 2007
Using Home Equity Wisely
How much is the return on your home equity? Answer 0%. It has no return. If you are over 62 you can arrange a reverse mortgage and take equity out of your home. (The Older you are the more you can take) Or you can take home equity and invest it.
Usually, invested equity will give you the ability to pay off a mortgage sooner than prepaying a mortgage. If future editions, we will look at some of the math that backs up that assumption.
A home is both shelter and a financial asset. I like to earn a return on my financial assets.
MMM
Usually, invested equity will give you the ability to pay off a mortgage sooner than prepaying a mortgage. If future editions, we will look at some of the math that backs up that assumption.
A home is both shelter and a financial asset. I like to earn a return on my financial assets.
MMM
Tuesday, July 3, 2007
Founding the Country On Faith in Money
Last night on Public Television the History Detectives found an authentic $6 bill from the Revolutionary War. Ben Franklin guided the use of money not only to pay the new country's bills but, through the printed images, illustrate how the colonists would overcome the most powerful country in the world.
Happy Fourth of July!!
MMM
Happy Fourth of July!!
MMM
Monday, July 2, 2007
Weekly Rate Outlook
Monday is interest rate recap day and last week was another volatile week.
As my Mortgage Market Guide Weekly newsletter states, rates improved some last week. I hope we are breaking this up trend on rates. Paul's MMG Weekly
Two things not mentioned in MMG Weekly are the stock market and foreign interest rates. On Bloomberg News this morning, the technical analysis suggests stocks are still headed up. England and the rest of the UK is expected to raise their Funds Rate this week to 5.75%.
I see the Worlds money supply as a vast ocean that flows to the perceived higher return and away from lower return. Money is flowing into the stock market and overseas and out of mortgage backed securities. Hopefully this week the outward flow will slow.
MMM
As my Mortgage Market Guide Weekly newsletter states, rates improved some last week. I hope we are breaking this up trend on rates. Paul's MMG Weekly
Two things not mentioned in MMG Weekly are the stock market and foreign interest rates. On Bloomberg News this morning, the technical analysis suggests stocks are still headed up. England and the rest of the UK is expected to raise their Funds Rate this week to 5.75%.
I see the Worlds money supply as a vast ocean that flows to the perceived higher return and away from lower return. Money is flowing into the stock market and overseas and out of mortgage backed securities. Hopefully this week the outward flow will slow.
MMM
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