Finance

Adjustable-Rate Mortgages: Benefits of Choosing 3/1 over 7/1 Loan

Finance

An adjustable-rate mortgage, or ARM, comes with a start rate period with stable interest lower than fixed-rate home loans. When the start rate expires, the interest could increase at least once a year or more—depending on the adjustment frequency stated in the contract.

Two of the most popular ARMs are 3/1 and 7/1 loans. The first digit refers to the number of years of the start rate period, while the second represents the adjustment frequency.

At first, it seems illogical to choose the 3/1 ARM over the 7/1 one, considering that the latter offers 48 more months of lower, fixed interest. Beyond this apparent disparity, though, any mortgage broker like Primary Residential Mortgage, Inc. in Portland, Houston, or Chicago would tell you that the two are more different from what you may think. In some cases, the 3/1 ARM is the sensible choice.

Here are the advantages of the 3/1 ARM over its 7/1 cousin:

Lower Interest

The fact that the 3/1 ARM only has three years of unchanging, below-average interest reduces its risk profile in the eyes of lenders. As a result, mortgages companies apply less interest on 3/1 ARMs than their 7/1 counterparts. The interest rate difference can go more than .30%. In turn, choosing a 3/1 ARM over other “hybrid” home loans with lengthier start rate periods provides you more interest savings.

Greater Loan Amount Maximum

Apart from the privilege to get an even more favorable interest rate, applying for a 3/1 ARM helps increase your purchase power. Compared to the 7/1 ARM, you can qualify for a larger loan amount with the 3/1 kind.

Wider Property Selection

The more money you can borrow, the more properties for sale you can choose from. The loan amount maximum difference between 3/1 and 7/1 ARMs can be over $20,000. If you pay a large down payment, say 20% of the property’s price, you can unlock even more property options—skip paying private mortgage insurance to keep your monthly payments low.

The edge of the 3/1 ARM over its hybrid mortgage relatives is undeniable. However, it might only make sense for your situation if you’d refinance your loan or sell your property before its start rate expires. Otherwise, your monthly housing payments could become too costly to manage for 12 months. Think with foresight and understand the cause-and-effect relationships of mortgage elements to choose the right financial product for you.

Lose Your Mortgage Before You Retire

Finance

You may look forward to your retirement, but most retirees face less than perfect lives what with their mortgages still hounding them. In 2016, 60-year-olds and older Americans borrowed as much as $2.84 trillion for their homes, and many of them continue to pay their loans well into retirement.

Some authorities may argue that housing debt in retirement can be a good thing, but it will remain as the single biggest expense you have. You can have a debt-free retirement, however, by following one of three ways.

Pay Down the Loan

Now, you probably already know one way how to retire without a mortgage: you simply have to pay off your loan before you retire.

No matter what age you are, no matter what mortgage rates you have in your Ogden mortgage, you can pay off your home loan quicker if you add in extra payments every month, semi-annually, or annually. Alternately, you can also pay any cash bonuses you receive towards your loan.

Downsize the House

The second way to retire without a mortgage involves downsizing. Downsizing can work perfectly for couples whose children are already grown-ups. You can sell your current home for a much smaller one you can happily live in, and the profits can go towards your home loan.

You can also downsize even if you still have children at home.

Refinance the Mortgage Terms

Thirdly and finally, you can refinance. Refinancing makes sense if your credit score went up or current interest rates became more favorable. When you refinance, however, choose a 15-year mortgage that you can pay off by the time you retire.

You also end up with more savings in the long run, and you can even combine this with the first suggested method: refinance then pay down the loan.

You can easily retire debt-free with any of the three methods above, and they will work best if you start on them early enough. Come retirement, you can relax and give no thought to your housing loan expense.

Are You Financially Prepared for a Divorce?

Finance

Would you save money to prepare for a divorce? A survey showed that two-thirds of Americans are unprepared financially in the event that their marriage reaches a dead end.

TD Ameritrade’s Financial Challenges of Divorce and Widowhood survey gathered information from 2,000 adults between 37 years old and above. The respondents also said that they have not prepared for the possibility of becoming a widow or widower.

The Truth Hurts

It might seem counterintuitive to tie the knot and then save for a potential divorce, but statistics indicate the ugly truth. An estimated 4 out of 10 married couples in the US decide to break up, while widowed Americans account for around 25% of people 65 years old and above.

If you live in New York, the first thing you should do when making financial plans includes looking for divorce lawyers in Long Island or New York City. The state may have the lowest divorce rate in 2016, but it does not imply that it may continue in the future.

Financial Plans

Census data revealed that only nearly 13 out of 1,000 New York married couples divorced in 2016. Experts believe that this may be due to alimony laws in the state. David Lynch, TD Ameritrade managing director and head of branches, said that having a financial plan is essential for when all else fails.

This will help you when the time comes that experiencing the burden of alimony laws might be a better option than remaining married to your spouse. Lynch described a financial plan for divorce similar to how we spend for other emergencies, such as possible disabilities or illnesses, in the future.

When you start saving for a potential divorce, it should not necessarily mean that you expect a failed marriage. You should consider it as a safety net since it is common knowledge that ending your marriage will require you to spend a lot of money.

A Key to Becoming a Debt-Free Home Owner Sooner

Finance

Man pulling out pocket as a sign of no moneytAs the U.S. inches its way farther from the disastrous effects of the Great Recession, mortgage rates have dropped considerably and reached historic lows over the past few years. However, the market remains completely unstable, resulting in its rates going up and down. These changes make it a bit worrisome for many mortgage borrowers, especially those with adjustable-rate loans.

Refinancing: An effective home loan cost-cutting technique

The good news is there are still several ways for you to cut back on your housing loan expenses. You’ll find reputable and reliable lenders offering great deals when it comes to their Salt Lake City refinance programs. With refinancing, American Loans explains that you can minimize the financial burden of your current mortgage, ultimately setting you free sooner from this massive debt you have.

Swapping from one type of mortgage to another (when it makes financial sense)

There are a number of reasons borrowers decide to switch their adjustable-rate mortgage to a fixed-rate one, or vice versa.

For instance, those who originally planned to stay short-term in the house they took out a loan for decided that they would rather spend their lifetime in the same place. Due to initial intentions, they opted for an ARM. In many cases, this type of mortgage doesn’t make the most financial sense, especially with the surprising increases in the interest rate.

If you combine that with the shorter term of the loan, it means greater monthly payments. In case your situation is similar, then refinancing your current loan for a fixed rate may be your best option.

Reduced risk of non-payment to prevent incurring more debts

Through ARM-to-FRM refinancing’s monthly payment reducing benefit, you can worry less about the possibility of missing your dues or resorting to paying insufficient amounts. As a result, you won’t incur penalties and other unnecessary expenses.

Over time, as you continue making good on your promise to pay, the amount of debt you’ll have will consistently shrink. You’ll be nearer to living a debt-free life as a homeowner sooner than you think.

Title Insurance: What No Home Buyer in NJ Can Afford to Ignore

Finance

Imagine having gone through the hassle of looking for your dream home, financing the buying process, and eventually moving in. Then when you have settled in and are going on with the exciting process of customizing your home, you get a note in the mail that crashes your world — the previous owner of your house had a lien and now your property has a new owner.

Nobody would wish for such a scenario, and you don’t have to learn this the hard way. This is where the need to appreciate the importance of title insurance policies comes in.

What is Title Insurance?

Title insurance refers to a policy that protects any house against problems with its legal ownership status. There are two categories of title insurance policies that can offer protection against any lien to your home:

• The lender’s policy, which protects the mortgage lender

• The owner’s policy, which protects your ownership of the property

The Process

During the mortgage approval process, your bank will conduct a title search to look into legal claims regarding your property. The bank also looks out for problems that the property could have and ways to prevent future problems.

No matter how thorough this title search may be, it doesn’t nullify the possibility of anyone showing up with papers claiming ownership of your property. Experts recommend finding the right title agency in NJ for you, so they can process your property’s title insurance quickly and give you peace of mind.

Even if you think the probability of someone claiming ownership of your property is zero, you cannot take chance on one of your life’s biggest investments. Before closing the deal, seek advice from professionals for the best advice. If you feel title insurance is an unnecessary expense, consider the financial strain you would go through once waking up to a title-related issue on your property, and how much you would have saved by taking title insurance.

*Always consult your attorney.