There is a little known strategy homeowners don’t really know about that can lower their monthly mortgage payments and as well as save on interest and all the hassle and off-putting credit requirements of refinancing.
Some mortgage lenders and servicers lets you avail of this smart tactic called “Recasting” or “re-amortization”. It requires shelling out a lump sum of the principal amount and requesting to have the monthly costs rearranged to the original loan terms and interest rate. The lump sum cuts the principal, and your new monthly payments are slightly reduced – thus, saving you the interest paid over the life of the loan.
An administrative fee of $150 [or more] is the amount usually charged by the lenders for this service. But because they are not asking for a new loan, borrowers are not obliged to pay closing costs or present to another credit check.
The strategy works well for those who are not eligible for refinancing in the course of the constricted credit guidelines.
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The term “recasting” in the mortgage industry usually means rearrangement of adjustable-rate mortgages, but here the loan term and interest rate do not change.
Only few if any lenders suggest recasting because they are trying to become more customer service- oriented, and will do it on a case by case basis. Homeowners are suggested to get in touch with their lender’s customer service department.
Lenders would most likely rather gross significant amount of money in closing fees from refinancing your loan and they are not required to recast mortgages. And particular types of mortgages, let’s say interest only and adjustable-rate loans, usually don’t qualify. The borrower has to have been up-to-date with every mortgage payment to be eligible.
Recasting can be rather useful to recent buyers, for whom it makes slight financial sense to refinance but who anticipate getting a tax refund or other considerable amount of money after closing their property, like profits from a family member’s sale of property, stocks, etc.
It may not be sensible to avail of the service if your interest rate is 5 percent or lower, because the spare cash could be put into an investment with a higher return. But at the end of the day, it is your choice – do whatever puts your mind at ease.
“Give me more money!” – Mortgage giant Fannie Mae greets home buyers and refinancers new year by asking them to pay more – If you want a loan this year, that’s exactly what FM wants you to do – thousands of dollars more in some cases – It doesn’t matter how high your credit scores are or how hefty your down payments are. You are no exception for higher “risk-based” fees. If your credit scores have been hitting the ground with the economy, brace yourself for the worst –because things could get much worse.
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In a December 23 memo to lenders in its network, Fannie Mae declared that it would enforce a new schedule of higher add-on fees, akin to what Freddie Mac – the other infamous mortgage investor- revealed just before Thanksgiving.
Both Fannie Mae and Freddie Mac have mandated substantial federal financial infusions – amounting close to $150 billion – since the real estate market started getting frail, and they now function under a federal conservatorship arrangement. The current administration plans to give proposals to Congress this January on what to do with the two corporations – terminate them, reform them, privatize either or both, or other ways out.
For the moment Fannie and Freddie proceed to guarantee increase of two-thirds of new mortgage originations. Their market dominance makes them play principal roles in establishing whether – and how fast – the real estate market can get back on its feet.
The enforcement of higher add on fees will be felt beginning of spring. On the other hand, they don’t seem to make financing any easier. These fees are just the beginning of the multilayered, cumulative risk-based pricing system that both corporations impose. Every apparent risk factor in a loan transaction gets its own separate add-on fee, and get all summed up for your final loan charges.
Fannie and Freddie called the add-ons vital to protect the companies from “the costs and risks” intrinsic in mortgages they guarantee. Both corporations “ under-priced” mortgage credit risk in the boom years of the real estate market.
What does this mean for borrowers in 2011? It’s payback time. You’re gonna do exactly that – regardless if the hefty add-ons slow down the market’s upturn or not.
Buying a foreclosed home is becoming a trend in the market. Along with its rise are worries about the risk that comes with the purchasing process. Last month’s survey said that 49 percent of Americans were somewhat likely to think through purchasing a foreclosure, up 4 percent from 45 percent in May 2010. However, the number of US adults who thought there are downsides to purchasing foreclosures had also risen, from 78 percent to 81 percent over the same period. They had a lot of fears about buying a foreclosure, but the biggest concerns were:
- Purchasing foreclosures comes with hidden costs.
- The purchasing process itself is precarious.
- Foreclosed homes might continue to lose value, after escrow closes.
Although risks are inevitable when buying a foreclosed home, the most perilous way to do it is also the most unusual method: at the foreclosure auction itself. Auction buyers, more often than not, do not have the chance to fully assess the foreclosure to ensure that they are getting clear right and/or to make sure they’re not getting something worthless. That being said, most foreclosures are not being resold at the auction, but as a Real Estate Owned [by the bank], listed by a broker on Multiple Listing Services.
When you purchase an REO in this manner, chances are, you have lots of opportunities to pull off some tricks of the trade, to fend off some of the traps you may fear. Here are some ploys and traps for foreclosure buyers:
1. There is there, that is that. [Usually,] banks are not known to spark interest in executing fixes on your home. Most of these homes are handled by an asset management company in a different state, and may not even have a local person aside from the broker who can take care of major repairs. Simply put, bank owned homes are sold on a very constricted “as-is, where-is” manner, which simply means that you must anticipate to take hold of it, if you purchase it, in exactly the position and location it is, no matter how impaired. You cannot view a less-than-adequate foreclosed property, and make an offer for its flaws, assuming you’ll be able to get the bank to “fix” it later. If the bank intends to do any fixes to a foreclosed home, they do so when the listing agent says so, before the home is listed.
If the foreclosure you are considering has apparent major damage, have your contractors stop by with you or collect whatever data you need to get as complacent as you can with your offer price, assuming that the bank will not help with anything regarding repairs, before you make the offer.
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2. The bank does not rat out their evil. Fact is, when it comes to real estate disclosures, the bank tends to shy away. Many states grant banks and other types of corporate homeowners immunity from making essential disclosures regarding the condition of the property. Even when not legally exempted, most banks will just write across the required disclosures something that translates as “the bank has no knowledge of the home’s condition.” (You may think it’s unfair, but before you object, remember that the bank never resided in the property, so most often truly does not have idea of any significant details about its state or location, the data an average seller would be asked to disclose.)
Even in a regular transaction, it requires a buyer to be painstakingly careful in having the home inspected and keen about reviewing the turned out inspection reports. But purchasing foreclosure ups even that ante, as you have no seller disclosure to play up specific problems you should have checked out, and none of the common legal refuge you would have if a regular seller made incomplete disclosures. Get a thorough property inspection. Have it inspected for pests, have the roof inspected, have the sewer line inspected, and have the pool inspected (if you have a pool and is concerned about its condition).
All these reassessments require you to shell out significant amount of money, but the hassle each of them can keep you away from is worth it. Do not forget to go over your state’s buyer inspection advisory, so just to make sure you are in the know of all the reassessments that are available to you and collaborate with your broker to decide which ones are sensible, and which are not.
Some insider tips:
- Utilities of untaken foreclosures are often turned off. Collaborate with your agent to make sure the utilities get turned on – even for a day – so that your property inspector can run the water taps, check the stove and dishwasher, check if the water heater and electrical outlets are work properly, and so on.
- If appliances are there, the bank will most likely leave them there, albeit technically, they may not have “legal” ownership of them, so they may not be included in the contract, unlike in a regular home sale.
- However, the bank “will not” guarantee you any kind of warranty on appliances, so try to get any warranty coverage you need somewhere else – from a home warranty company or, if possible, the original manufacturer.
3. The contract terms are subject to change without prior notice. Local market standard practices are one thing entirely in the area of expertise of real estate pros. From bargaining practices to which party pays which closing costs, each market is distinct, and been around local brokers are very capable on this information. If you’re purchasing a foreclosure, though, the bank will often ask you to utilize its own purchase contract, instead of the more traditionally used state forms. A lot of times, this is done to make known to buyers of the bank’s unwillingness to make essential disclosures and to change some of the regular practices for your locale to the bank’s standard practices.
Case in point, if you are purchasing a home in a contingency state, where you would usually have to sign a document eagerly releasing contingencies, the bank’s contract will most likely change that, so that your transaction functions on an objection period. In “objection” based transactions, you have a definite time period in which you shall either raise your issues with the property and/or cancel the deal, or you will automatically be considered to be going forward with the undertaking and your deposit money will be void should you change your mind after the given period.
If you’ve bought homes before and you think you know the ropes, it doesn’t hurt to think otherwise and read verbatim the contract you sign when you buy an REO, and ask your agent, broker or attorney to explain anything that doesn’t fit.
4. Brace yourself for the bad, the worse and the worst. When you purchase a foreclosure, you might turn out working with the bank’s escrow company, as opposed to the company you or your agent chooses. And the bank’s escrow provider might be tedious and unsystematic. The bank might hurry you for your deposit money, but take their time and keep you waiting for the necessary signatures on their part to settle the deal. That is normal [but not necessarily acceptable]. You might anticipate that the bank would be on their knees for buyers, and instead realize that there are numerous offers for the same REO. Or, you might be the only offer and still get your bizarrely low offer cast aside, only to have the bank cut the list cost of the property to the same cost of your offer.
The purchasing process is full of glitches. Expect your timetable to be wrecked, expect the bank to be stiff and absurd. Asking your broker or agent to give you a brief on the usual dilemma they see in REO transactions is not overkill. If anything, the briefer will help you have realistic expectations and prevent you from losing it.
The government-run bodies Fannie Mae and Freddie Mac were once government sponsored bodies until the year 2008 soon after the housing crisis almost banish them. These two companies assured about half of all loans in the country at the time the housing bubble burst, and as of the first quarter of last year, Fannie Mae and Freddie Mac (with the Federal Housing Administration and the Department of Veteran Affairs) have assured almost 90 percent of the country’s new loans.
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Though evidently a significant part of keeping the lending lines open now, tax payers have had to pay everything for the two companies’ bailout, amounting to about $134 billion to date, and there is a rumor about at least another $20 billion FM and FM are getting to keep things moving. By contrast, as Alan Zibel’s Wall Street Journal write-up said, the estimated total cost of freeing the rest of the financial industry is a mere $25 billion.
Supporters of on-going federal support for Freddie and Fannie say that the real estate market is going down without them at this point. To take away that support right now would be catastrophic.
Democrats in the main have supported an enlarged role for Fannie Mae and Freddie Mac to guarantee that people from lower classes have right to homeownership.
A number of Republicans think that relying heavily upon the two mortgage giants to rebuild the real estate market, is keeping private lenders from coming back in to the view, and demanding tax payers to pay the price. Many Republicans were eager to relieve the federal government of the two “money-sucking” giants, but since their turn for power, they have cooled down a little.
Seems like Fannie and Freddie will still be the scene stealers of the country’s housing market.
The U.S real estate market has a good supply of conventionally beautiful McMansions, cozy Pebble Beach homes, and some unremarkable Colonials up for grabs. If you are out to find the quirky, odd, strange… if you want to set your eyes on homes that can be described with the former adjectives, be more vigilant and you might not just set sight on them – you might find yourself living in them.
One of the weirdest is the dwelling retrofitted from the Cold War ruins of an Atlas Missile site. It is situated in the forested mountains of Adirondack State Park in New York.
The storage-tower abode fetches for $2.3 million. On the façade it may seem like an undistinguished 2,000 square-foot mountain habitat – besides for the hidden airplane runway. Down the kitchen’s spiral staircase, however, and you’ll see two levels of nuclear mayhem- resistant living area packed within three –foot, chunky concrete ramparts armored with steel mesh.
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For a different kind of offbeat, you may want to spend on the Montezuma Canyon’s Cave Palace Ranch that sneaks out of the base of a grand Utah mountain. The mountain’s natural red rock cave was turned into a three-bedroom property that will keep you warm in the cold months and keep you from hyperventilating in the hot months. It runs on solar power and propane.
Ultra-luxury estates come in forms not generally anticipated. Setting your eyes on the meticulously manicured lawn of a Holmby Hills property that fetches for $28.5 million, you wouldn’t suppose a nightclub below the landscaping. The extensive concrete-enforced nightspot features the latest sound and illuminating systems, a stage, and a hidden entry disconnected from the mansion’s.
If you are eager to consider purchasing an odd home, you must know that they can be hard to sell (people who have quirky taste and are willing to spend on it are harder to find). Most of the properties on the “odd” list have been sitting on the market for years, and they often catch buyers after the sellers (having no choice) insistently cut their original asking prices.
Getting one of these homes sold relies on two significant factors: price point and whether what makes it “extreme” induces a strong positive or negative response from the average person who is looking to purchase a home in that price range.