Timing is Everything

Interestingly, the available fixed rate home loans from Newcastle Permanent are lower than most major banks. Its 4- and 5-year fixed rate is at 4.39%, while the other terms with a shorter number of years have a 3.99% p.a. interest rate. What does this mean? If you did opt for a fixed home loan from the start, and let’s say the rate was at 6.5% at the time you purchased the loan, then you must be regretting on the fact you are unable to enjoy this decrease right now.

However, this is not always the case. Who knows if five years later, the rate would go up again? You will probably be thankful for having a fixed rate home loan. Point being, the changes in the interest rate have always been unpredictable, especially today when lenders are gaining independence from central banks, and thus, these banks are losing control over regulating the interest rates on all house mortgages as to whether to keep them down or up.

With a fixed rate home loan, you will be able to remove this uncertainty for a certain period of time. You do not have to worry about the abrupt changes in your country’s interest rate and the need to check if you will be able to keep up with higher interest rates. Unlike its counterpart, the variable rate home loan, this type of mortgage may apply the ongoing interest rate without prior notice. In home loans, timing is everything.

Part Variable, Part Fixed Rate Home Loan

Some debtors do not like the idea of paying for a break cost once they decide to terminate the fixed rate contract. Although the break costs have considerably decreased in the last couple of years, the inability in making flexible payments (lump sum, extra repayments, etc.) does make fixed rate loan quite snobbish to debtors who are used to variable rate home loans.

For those who really want to enjoy the best of both worlds, they opt for a split type of mortgage, which uses a separate offset account which can be connected to your home loan. Split loan is a great way to balance out your outstanding credit and loan, as payment is timely released to pay for your loan via an offset account. You have to be a good money saver though, if you want to make the most of the rate discounts you get.

Minimize the Risks by Evaluating Your Financial Objectives

When you review your financial goals, you should do it every four months. You should be able to realize if the current loan structure is really helping you with your cause. There are risks, as there are impacts. So when you make a decision on whether to fix your loan or not, you should evaluate all situations that point to finding out if your loan structure is still working for you. A good home loan product should help you stay on the right track of your financial goals, and towards improving them in the long run.

Are you looking into fixing your home loan?

When is the Best Time to Fix Your Home Loan? is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

And, to complicate matters, there are many mortgage life insurance products available that confuse matters even further.

It’s important to buy some form of life insurance to cover your mortgage because if you don’t, your surviving family members may not be able to pay for the mortgage and the lender could foreclose on the home.

Most lenders generally want the mortgage amount paid off in full when the principal signatory passes away. The lender may allow the survivor to reapply for a new mortgage afterwards, but each lender has their own policies which vary.

Let’s clear up the confusion so you understand your choices.

What is Mortgage Protection Insurance (MPI)?

Mortgage Protection Insurance, also known as Mortgage Protection Life Insurance, is a product offered through lenders indirectly through a life insurance company, or is sold directly by a life insurance company.

There are variations of these products available. Some products are similar to a decreasing term life insurance policy, while others are a level term type of policy.

Some of the policies available will pay the death benefits as a lump sum while others will pay out death benefits as an annuity to cover the mortgage payments over time. Policies which pay out death benefits as a lump are more expensive than those which pay out as an annuity.

There are also variations of these products which contain attached riders which will also provide coverage for accident and sickness such as if you can no longer work, or to cover the life insurance premiums so coverage will continue. Needless to say, this additional coverage is convenient but is also more expensive.

Also, some policies will make the lender the beneficiary while others will allow you, as the policy holder, to name your own beneficiary. The advantage in the latter is that it allows your beneficiary to use the funds in any manner they choose.

What Type of Mortgage Life Insurance to Buy?

It depends on your situation. If you are young and healthy, you might be better off either buying a level term policy on its own by using an independent life insurance agent because they can find you the best rates. Your beneficiaries can use the payout to either pay the mortgage off and/or use the outstanding balance anyway they need.

You could also opt for a decreasing term policy where the amount of death benefits diminishes over set time increments.

Or, you could opt for a more specific MPI product which offers additional protection for accident and sickness or cover your premiums if you can’t work.  Keep in mind that these types of policies that offer this more comprehensive form of coverage are provided by life insurance riders and that this additional coverage will cost more.

If you are elderly and/or have health issues, you might be better off applying for a life insurance product which does not require a medical exam through either the lender or a private life insurer. The cost of life insurance is more but at least you can feel confident that the mortgage will be covered. Otherwise, if you try to buy a policy on your own you could end up being declined.

We recommend that before you decide, consider speaking to an independent life insurance agent. They can discuss your particular situation and needs. The agent can explain what choices you have and then they can perform the comparison shopping for you to find you the best deal.

Otherwise you will be stuck with what a private lender or a private insurer will charge. You can likely find a much better rate by using an independent agent.

Also remember that you can stagger or layer several life insurance policies together so you have several policies to cover different needs. If you have a policy strictly for you mortgage, you can cancel it when the mortgage is paid off and still have the other policies in force.

And finally, you need to keep in mind what you want for your family and what they will need.

Need Help with Mortgage Life Insurance?

Mortgage life insurance can be a complicated issue especially with so many products available. And, everyone has there own particular needs when it comes not only to life insurance but also for life insurance to coverage a mortgage.

To help you decide, we suggest that you contact the independent brokers at JRC Insurance group today because we can provide you with the advice you need to help you make that crucial decision. 

This post is written by Chris Huntley, a licensed life insurance agent in 48 states. He is director of marketing at JRC Insurance Groups and blogs about life insurance at InsuranceBlogByChris.com.

Life Insurance to Cover a Mortgage is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

I have always had a hate-hate relationship with renting. In my perspective, there is nothing at all good about it. Not even the whole “you don’t have to pay for repairs” thing, because landlords then have the opportunity to make you wait for the repair (example – when we waited for three weeks without a washing machine) because they are not affected by the situation.

So, no, I will never even consider being a lifelong renter.

With our neighbours being such assholes all the time, it feels like even more incentive to work hard and build up our funding to purchase a home.

Now that I have a REAL job, home ownership can become a reality for us.

Being the most impatient person in the world, I have a hard time waiting, and have had a lot of fun looking at the MLS listings as of late. But, I know I need to wait in order to make the right move at the right time.

So, based on careful calculations, analysis, and reading a LOT of articles, we’ve decided to start looking in:

January/February

This is based on a number of factors, that I would love to get down on paper (or, virtual paper, as you may have it):

The Prices

Some people seem to think that the housing prices in the areas surrounding Vancouver are good, it’s just Vancouver city that has soaring home prices.

This is not the case. The prices in the surrounding cities are, admittedly, much lower than those of Vancouver, but still higher than almost everywhere else in the province.

The Vancouver housing market greatly affects what goes on in the surrounding cities, so when economists forecast a 10% decrease in prices in Vancouver and Toronto, I fully expect that decrease to trickle out to the ‘burbs (where we want to buy).

That forecast was said to happen over the course of a year since May, and by January or February, we are sure that the 10% decrease will be well on it’s way.

The Market

The Canadian housing market has finally turned into a buyers market, and it will likely remain that way for the next few months. With prices slipping, and new mortgage rules (the maximum is 25 years), this is turning into good news for the likes of J and I.

The mortgage rules will discourage a lot of buyers from purchasing, because this makes it a little less affordable. We couldn’t imagine being locked into a mortgage for 30 years anyway, so we had planned to pay it off in 15-20 years. That 25 year rule is great, because there will be fewer buyers, thus giving us more power, AND we will have to pay a lot less interest than if we mortgaged for 30 years.

Bonus!

Time of the Year

Everyone knows that June, July and August are the busiest home buying months. BC is no exception to that rule, and of course that is when the prices are the highest.

Winter is slow for home buying, causing prices to decrease. Sellers are proven to take lower offers in the winter months instead of the summer months, which is great news for us.

Also, houses never have as high of a curb appeal in the winter, which will work in our favour.

Down Payment

With my new job, I will be making substantially more (30%) each month and year. We already have a pretty good chunk of change saved up for a down payment, but we would like to have 10-20% of our purchase price.

We are pretty close, but that extra few months will help a lot in being able to save some for emergencies, as well.

Rental Income

We plan to buy a house that either has a roughed-in basement suite, or that we can convert to have a basement suite.

My brother lives on his own in an apartment that he doesn’t love right now, and he has expressed his interest in renting our future-suite from us. He really likes the suburb that we are looking to buy in, and January/February would be the perfect time for him because he is out of town working right now.

I don’t want to rent out to people we don’t know and trust, and of course we would be able to give my brother rent discounts when he is out of town on work (which he is about half of the year). He keeps his apartment while he is out of town because he gets a living out allowance and needs a place to come home to, so this would work out well.

Debt

A big reason why we are not rushing to buy now is that I still have my car loan. It’s not much, but I would love to have it almost paid off by the time we purchase a home. I would have an extra $220 in my pocket each month, for maintenance and for property taxes.

I likely won’t have it completely gone in January (unless some old, rich uncle that I have never met dies and leaves me with money. OR! Maybe I should respond to that Nigerian prince who is always offering me cash), but it will be reduced significantly.

What do you think – does this sound like a good plan? Any arguments against buying a house at this time?

Planning For Homebuying is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Fannie Mae is the name commonly associated with the Federal National Mortgage Association. It is a publicly traded company that is sponsored by the government with the purpose of expanding the secondary mortgage market by allowing lenders to reinvest their assets. Fannie Mae may have properties for sale because a homeowner was unable to avoid foreclosure on the home in which Fannie Mae was the investor

HomePath and Fannie Mae

HomePath.com by Fannie Mae provides a home buyer with the tools to search for a home that fits with his or her price, location, size and style preferences, as well as offering financing with a low down payment and flexible mortgage terms.

Related Article: How To Buy A Foreclosure

HomePath has one distinguishing feature when it comes to their home search, and that is that they only offer listings for foreclosed properties owned by Fannie Mae. The selection of properties includes single family homes, townhouses and condos. While sales prices vary, most are newer homes that require repair. HomePath financing is only available for properties owned by Fannie Mae by result of a default mortgage, and they claim to have special offers and incentives but also mention home buyers have their choice of lender.

Foreclosures and the Housing Market

While HomePath provides housing options on the real estate market, they are ruining the housing market by only providing financing for foreclosed homes owned by Fannie Mae. Foreclosed homes are homes that the previous owner could not pay the mortgage on, and therefore, they were turned over to its lender (the “bank”). Foreclosed homes are bad for the housing market because they typically sell for lower prices, and, as a result, they lowering the value on neighboring homes for sale.

Related Article: Why Harp 2.0 Will Not Work and How Banks Really Think

HomePath.com is doing potential home buyers an injustice by only offering listings on foreclosed properties and not allowing them to search for other homes that fit their price, location and size requirements.

Why purchasing a foreclosed home from Fannie Mae is bad for the housing market…

• The economy receives zero stimulation for the purchase of a foreclosed home because all of the funds go back to the lender to make up for the mortgage that was defaulted on by the previous owners. Whereas a person selling his or her home generally makes a profit and usually has money to spend, and/or the realtor makes a commission and also has money to spend.

With HomePath financing, Fannie Mae is the only company to see any of that money.

• The lower price of a foreclosed home reflects poorly on the value of neighboring homes and can result in a much lower selling price for the other houses on the street.

• Foreclosed properties are flooding the housing market, and other home sellers are having a hard time competing Fannie Mae, which is promoting this by only offering financing for foreclosed properties.

• A foreclosed home is sold “as-is” and many times, it is not properly inspected, which can lead to problems for the new owners. They might have a false sense of security when they acquire the home at a low price, but in reality, it is in need of costly repair.

Because HomePath by Fannie Mae only offers financing on foreclosed homes and foreclosed homes are bad for the housing market and economy, Fannie Mae is helping to bring down the real estate market.

While buying a foreclosed home is not necessarily a bad thing, you should make sure to do your research. You do not want to be tempted by the low price tags and end up buying something that is not worth the money.

Have you ever bought a foreclosed home? Did you flip it? Keep it? Have you used HomePath? Tell us your story!

How Fannie Mae HomePath Financing is Ruining the Housing Market! is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.