What To Do If You Have A New Lender
If your loan is sold to a new lender:
- Expect to receive a separate notice from the new lender. This is due to you within 30 days of them taking ownership of the loan.
- Review the notice carefully. Baker says this notice must include:
- The name, address and telephone number of the loans new owner
- The date the new owner takes possession of the loan
- The person who receives legal notices and can resolve issues about loan payments
- Where the transfer of ownership is recorded.
Your new lender should file paperwork with your county real estate records. This will reflect the sale of the loan, Whitman notes.
What To Do If Interest Rates Fall After Your Rate Lock
If you locked in your rate early but interest rates are dropping, you might consider withdrawing the current mortgage application and starting a new one. There are some risks to this approach, however. You could:
- Lose money youve already paid on an appraisal and other costs, such as a credit check youll end up paying for them again with a new loan application
- Pay more for processing the new application if the lender or mortgage broker has higher fees
- Wait longer to close on a home, which could complicate your planned purchase of a home if the seller needs the transaction to close on an exact date. This is not as much of a concern when refinancing.
However, if there is a big difference between your possible new rate and the current locked-in rate, it might be worth dropping the loan application and spending a few hundred dollars to obtain a rate that saves you thousands over the life of the loan.
What Browsers Does Freedom Mortgage Support
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What To Consider Before Prepaying Your Mortgage
Prepaying your mortgage is a great goal to work toward, but before you do, make sure youve met these financial milestones first:
- Get the match. If youre not getting the full company match from a workplace retirement plan, youre passing up an instant return. The typical company match equals 50 percent to 100 percent of your contribution, up to a limit . Thats where extra money should go first until youre on track for retirement. Retirement plan contributions get a tax break and the more time your money has to grow, the better.
- Pay off your higher-rate debt. It doesnt make sense to pay off a 4 percent mortgage if you have credit cards accruing at 16 percent or more.
- Plan for emergencies. A savings account with at least three to six months worth of expenses can help you weather most setbacks.
- Protect yourself. You should be adequately insured, which for most people means having property, health and disability policies. If you have financial dependents, youll probably want life insurance, as well.
Once those bases are covered, prepaying a mortgage comes down to discipline and comfort level. Do you want to be completely debt-free, or would you prefer your money working harder for you in other ways? Ideally, you want to pay off your mortgage before retirement so you dont have those monthly payments to worry about if your income becomes more limited.
How Can You Combat This
At Mortgages Online our team of experts have all the tools to help you combat any sudden mortgage interest rate increases. What we can do is compare a variety of rates and different types of mortgages from loads of different lenders to find the right deal for you. What we also do is answer any questions you might have about all things mortgage related. So, once youve got to the end of this article and want to go over a couple of things with us, dont hesitate! Drop us an email or give us a call.
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Homeowners Insurance Your Mortgage And Escrow
Now that weve explained the difference between PMI and homeowners insurance, lets get back to the question of the latter being included in your mortgage. If you pay for your homeowners insurance as part of your mortgage, you have an escrow.
An escrow is a separate account where your lender will take your payments for homeowners insurance , which is built into your mortgage, and makes the payments for you. This is advantageous for both you and your lender you dont have to worry about keeping track of one or two more bills, and theyre assured that youre staying current on those financial obligations.
Some borrowers will be required to escrow their insurance and property taxes into their mortgage payments, and some wont. Like your PMI, if you havent paid a 20 percent or more down payment on the home, chances are that your lender will require it.
If youve made a down payment of 20 percent or more, you can usually choose whether or not you want to pay your insurance with your mortgage. Those who decline to pay via escrow generally prefer to pay their insurance in one lump sum or have more control over when payments are made.
Buying A House After Bankruptcy
Can I buy a house after bankruptcy? It is a common question trustees are asked. Most people are not able to afford to purchase a home outright and need to know how to get a mortgage after bankruptcy. The key is to ensure that you receive a discharge from the bankruptcy and that you are working on re-establishing your credit. Canada Mortgage and Housing Corp. will review your application as early as 18 months 2 years after discharge if you have re-established your credit. Therefore, it is possible to get a mortgage post-bankruptcy.
You can also talk to a Licensed Trustee to get your questions answered. We have trustees everywhere from Ottawa to Edmonton and more. Talk to one today.
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Mortgage Payments Increase When The Interest
- Your payment can also surge higher if you have an interest-only loan
- At that time it becomes fully-amortizing, meaning both principal and interest payments must be made
- Its doubly expensive because youve been deferring interest for years prior to that
- This explains why these loans are a lot less popular today and considered non-QM loans
Another common reason for mortgage payments increasing is when the interest-only period ends, an issue that was common prior to the last housing crisis.
Typically, an interest-only home loan becomes fully amortized after 10 years.
In other words, after a decade you wont be able to make just the interest-only payment.
You will have to make principal and interest payments to ensure the loan balance is actually paid down.
And guess what the fully amortized payment will be significantly higher than the interest-only payment, especially if you deferred principal payments for a full 10 years.
Simply put, youll be paying the entire beginning loan balance in 20 years instead of 30, assuming the loan term was for 30 years, because interest-only payments mean the original loan amount remains untouched.
This can result in a big monthly payment increase, forcing many borrowers to refinance their mortgages.
Just hope interest rates are favorable when this time comes or you could be in for a rude awakening.
The Short Answer: It Depends
Every time you make a bi-weekly or monthly mortgage payment, a portion of the money goes towards paying down the principal and a portion is taken off as interest. At the beginning of your mortgage amortization period, the majority of the payment goes towards interest. As you pay off the principal owed over time, the ratio skews to less interest and a higher percentage towards principal, as shown using a mortgage calculator.
With a closed variable rate mortgage, your regular payment remains the same regardless of whether or not interest rates change. If interest rates go up, the portion of your payment that goes towards interest, however, will increase, meaning it will take longer to pay down the principal. On the other hand, if rates go down, youll be paying more principal and less interest with every payment.
The one exception is in the case that interest rates rise to the point that your payment doesnt cover the interest portion of the payment . In this situation, your lender will either increase your payment amount or require you to make supplementary payments to cover the difference.
With an open variable rate mortgage, your mortgage payment will increase or decrease as rates change so that the interestprinciple ratio remains the same. The downside here is that if interest rates climb sharply, homeowners may have difficulty covering higher mortgage payments.
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Is Homeowners Insurance Included In Your Mortgage
Some homeowners may think their home insurance is included in their mortgage because they make a single monthly payment that covers both their homeowners insurance premium and their monthly mortgage payment. However, homeowners insurance is not included in your mortgage. It is an insurance policy separate from your mortgage loan agreement. Even when your loan and insurance costs are bundled into a single monthly payment, your homeowners insurance premium goes to your homeowners insurance company and your mortgage lender receives your mortgage payment.
Your mortgage lender may set up an escrow account3 from which to pay your homeowners insurance and property taxes. This helps to ensure that you have enough money to pay both important expenses on time. Typically, the bank collects that money as part of your monthly mortgage payment, places the funds in escrow and then makes a payment to your homeowners insurance company on your behalf every six months or every year.
Mortgage Payments Can Increase With Interest Rate Adjustments
- If you have an ARM your monthly payment can go up or down
- This is possible each time it adjusts, whether every six months or annually
- To avoid this payment surprise, simply choose a fixed-rate mortgage instead
- FRMs are actually pricing very close to ARMs anyway so it could be in your best interest just to stick with a 15- or 30-year fixed
Heres the easy one. If you happen to have an adjustable-rate mortgage, your mortgage rate has the ability to adjust both up or down, as determined by the interest rate caps.
It can move up or down once it initially becomes adjustable , periodically and throughout the life of the loan .
For example, if you take out a 5/1 ARM, its first adjustment will take place after 60 months.
At this time, it could rise fairly significantly depending on the caps in place, which might be 1-2% higher than the start rate.
So if your ARM started at 3%, it might jump to 5% at its first adjustment.
On a $300,000 loan amount, were talking about a monthly payment increase of nearly $350. Ouch!
Simply put, when the interest rate on your mortgage goes up, your monthly mortgage payments increase. Pretty standard stuff here.
To avoid this potential pitfall, simply go with a fixed-rate mortgage instead of an ARM and you wont ever have to worry about it.
Or you can refinance your home loan before your first interest rate adjustment to another ARM. Or go with a fixed-rate mortgage instead.
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When A Mortgage Company Sells Your Loan
Lenders and investors buy and sell mortgages all the time, usually without any problems. So how do you prevent mishaps if this occurs?
If you get a notice from a new servicer without notification from your current servicer, dont send any money. Contact your current servicer. Thats how you avoid fraud.
What Is Mortgage Life Insurance
Mortgage life insurance is coverage that you can purchase as a mortgage borrower. Its designed to pay off or pay down the mortgage if you die. The insurance money payable under the coverage is always applied to the mortgage balance. This can help your family stay in their home, even if the primary income used to make the mortgage payments is no longer there.
Mortgage life insurance can be convenient to get at the bank when youre arranging your mortgage. It may be easier to qualify for coverage than with personal life insurance. Mortgage life insurance also features an easy application process. Since mortgage life insurance is group insurance, this can result in lower premiums because the risk is spread out over a large group of people.
A benefit of having mortgage life insurance as part of your overall financial plan is that it can free up money you may get from other insurance policies. For example, the money you get through insurance from employer benefits or a personal life insurance policy could go towards expenses other than the mortgage, such as utility bills or university tuition for children.
Mortgage life insurance usually carries a 30-day free look period when all premiums paid can be refunded if you cancel your coverage. This lets you buy coverage right away and have time to review the insurance certificate. It also allows you to talk with an advisor to determine what type of insurance may be best suited for your own financial situation.
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What Is An Escrow Shortage
If the funds in your escrow account are projected to fall below the required minimum balance at any point in the 12-month period, you have a shortage. This happens when taxes or insurance premiums for the previous 12 months are more than expected, or the projections for the next 12 months are higher than the previous year. Your escrow analysis statement provides detailed information on any projected shortage.
Escrow shortages are made up over 12 months. We will automatically adjust your monthly payment to include the shortage amount.
Because the shortage was caused by an increase in one or more of the escrowed items, even though you’ve made up the shortage, your monthly escrow payment will not return to the previous escrow amount because we must now collect for the higher amount.
Get Started On The Right Foot
It can be hard to wait when youre ready to buy a home. If youre just beginning the process and looking for ways to keep your mortgage payment low, having the 20% down payment is a great first step. Setting a larger amount of money aside also gives you options when it comes time to decide how much you want to pay for your mortgage each month.
Even if youve been approved and can afford a specific mortgage payment, a larger down payment lowers the amount of principal you owe and removes PMI costs that can add a large amount to your overall payment.
No matter what stage of the home buying process youre in now, it helps to have a trusted advisor to answer your questions and create a plan thats best for you and your financial situation. At FirstBank Mortgage, our goal is to help our customers get to a better place whether thats in new home or a new financial position. For more information, questions or concerns, please email and well connect you with a loan officer in your area.
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Preparing For Changes To Your Monthly Mortgage Payment
Unfortunately, circumstances change and unexpected costs can pop up. This is why its important to be prepared and seriously think about how major financial decisions might affect your wallet in the long run.
Making sure you arent buying more home than what you can comfortably afford, saving money for unforeseen expenses and keeping track of your finances can help ensure that when things change, they dont put your financial health in jeopardy.
Can I Get Cash From Va Refinancing
If you already have a VA mortgage and need cash to consolidate high-interest debt, make home improvements or further your education, our cash-out refinance option may be right for you. It can also be used to refinance a non-VA loan into a VA loan. The VA will guarantee loans up to 100% of the appraised value of your home.
Contact Freedom Mortgage and let our loan specialists help you determine if you qualify for VA Cash Out Refinancing and how you can consolidate your debt to save money.
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When Will My Account Be Analyzed
Freedom Mortgage utilizes a state schedule to perform the annual escrow analysis. While we make every effort to adhere to this schedule, there may be times when the timing of the analysis will differ. Please also see the “What is an escrow analysis” FAQ for more helpful information about your escrow account.
