2nd Mortgage Resources

Owning vs. Renting The Big Debate

There comes a time in everyones life where they have to make the ultimate decision and decide whether to buy and own their own home or continue to rent. Its a huge decision as both have notable benefits and disadvantages and it is not one to be taken lightly. So lets have a look at these advantages and disadvantages to see which option is really the best option for you.

Owning your own home is the traditional dream that practically everyone has, especially when it comes to starting a family. It gives you a feeling that you have accomplished one of your goals and that you are both financially and emotionally secure as well as giving you a great sense of community. But is it the right decision for you? Lets have a quick look at the advantages and disadvantage of buying and owning your own home.

Advantages:
You set your own rules
You have a sense security
You have made a great investment
You have a sense of freedom
You get various sorts of tax rebates and deductions
Your repayment is usually the same or sometimes even lower than it would cost to rent
Your repayments arent wasted like rent they are going into owning your own home
You have the freedom to do what you like in terms of renovating and decorating your home and gardens
You build equity in your home over time
You have a better credit rating if you ever needed a loan again

Disadvantages:
You are liable for any accidents and injuries on your property
You are liable for any damage that is caused to you neighbors property if it stemmed from yours. For example if you have a tree that has a branch hanging over the neighbors yard and it breaks off, it can cause damage to their house which you are responsible for.
You are responsible for any maintenance in, on, or around your home
You havent the ease to just pack up and move when ever you want
You have a huge loan that needs paying off even if you are having financial hardships
You are responsible for all the insurance on your home and land
Varying equity rates
You will need to pay out a large down payment up front
You have property taxes to pay

Renting is something most of us start out doing and many people are comfortable doing it all their lives. There are many advantages to renting a home but there are also a few disadvantages. Lets have a look at them.

Advantages:
You can up and leave as soon as your lease is up
If you hit financial hardship you can again move
You have little or no responsibility for maintenance
Sometimes utilities are included in the rent
Sometimes you have free use of amenities such as laundry, pool and other sorts of actualities

Disadvantages:
You have little or no freedom in what you can do with the place
You may face increasing rent
You have limited space for your money
You are not eligible to get any tax deductions
You are at risk of being evicted
The house could be sold and you can be asked to leave
You could have restrictions on certain things like noise and pets
You could have a restriction on how many people can live with you
Your rent isnt going into a productive investment for you

As you can see clearly there are many advantages and disadvantages to owning your own home and renting. Some have advantages and disadvantages the other doesnt have, but both can be a comfortable way to live. When it really comes down to it you have to choose the one that suits youre financial, emotional and lifestyle needs at this time. You have to take your future into account as well, will you want to be tied down and take responsibility for a huge investment or will you prefer the freeness of being able to move whenever you please? It can be quite a hard decision to make and it is one that needs a lot of time and thought before you proceed to take any further steps.

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Dont take it personallyWhat to do when you are turned down for a loan

Often, when your lender scrutinizes your loan application for a new home or piece of property so finely that it is finally turned down, it can be very distressing. If this happens, you should be able to understand just why such a decision was taken and do what you can to remedy the situation. The cause for rejection given below will help you understand just why it happens to some people.

Causes for rejection:
The appraised value is far too low: Your lender perhaps found the ratio of the loan amount to the sale price or the appraised value of the property to be substantially lower than the purchase price or loan-to-value (LTV) ratio. Or perhaps the LTV is higher than your lender is allowed to approve. Then, perhaps you have applied for 90-95% of the purchase price as the loan amount. A low appraisal will then make your loan request far too large.

If the sellers price of the property far outstrips the prevailing rates in your locality, you would be best advised to renegotiate the price with him so that it conforms to the prices in the area. It should also be one which your lender would not refuse in order to pass your loan request. If this cant be done, it might be a better idea to accept a smaller loan amount, and pay the balance from your personal funds.

Insufficient funds: When your lender goes through your financial information and youre verification of deposit, he will find that you do not have enough funds to make the necessary down payment and cover closing costs. Even if these funds do not come from a loan, a gift could go a long way. Alternatively, you could ask the seller to take back a second mortgage on the property. This would help lower your down payment or get the seller to pay some of the closing costs, perhaps the origination fees. After all this, you could ameliorate the situation by just waiting in the wings, while you begin a savings scheme.

Do you have insufficient income? Lenders will refuse your loan application if they find that the mortgage payment on your property exceeds 28 percent of your monthly gross income. In addition, if your total debt including mortgage payments and other installments exceed 36 per cent, you stand to be refused. The figures are higher for FHA loans. But the situation can improve for you if your credit card record is good and you can prove that you already are carrying a huge household expense including rent or mortgage payments, perhaps your lender will swing his decision in your favor. This is just why you need to make a clean breast of your income and expenses while making an application.

Up to your eyes in debt: Often, lenders dont reject applications solely because of the amount of debt they carry on their heads. It is also the many credit cards they possess and revolving credit accounts with proof of rising account balances that come close to the limit prescribed. Such information is detrimental if you are out to prove your creditworthiness. To remedy the situation, you will need to pay off as many of your debts as possible and then reapply for a loan.

Poor credit history: What can be more devastating than to have your loan request turned down due to a history of poor debt repayment habits? If your lender sees that you have a history of making late charges often, owing amounts to the bank or insolvency, hes hardly likely to pass a loan application for purchase of property. Your lender is surely not going to be tolerant of a bad credit record. Even if you have had a low loan-to-value ratios and debt ratios, you cannot wipe out a history of poor credit.

Rejection is not the end of the world: Just because a lender rejects your loan application doesnt mean you can never own property in all your life. You can take corrective steps to improve your chances of acceptance. But if you work steadfastly at it, you can work a way round your problems. Find out why your loan application was rejected and work towards loan acceptance.

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The Lowdown on Loan Options

3 Mortgage Loan Options

When it comes to home loans there are plenty of options to choose from and it can be hard to determine which one can be right for you. Lets have a look at the three main types of mortgage loans there are available and what they have to offer to help find one that will suit your needs.

1. The first and most popular form of mortgage loan is the fixed mortgage loan:

30 year fixed rate: this loan is the most commonly used loan today as it offers the low monthly repayments and is the best option for home owners who want to stay in their house for a long time. Advantage you have more cash in your pocket each month. Disadvantage you pay more for the loan in the end compared to shorter loans.

15 year fixed rate: this loan allows you to pay your home off in 15 years, most likely before your children finish school or before your retirement. You save in the long run. Advantage you pay half the interest of a 30 year loan. Disadvantage you have to pay higher monthly repayments.

Biweekly loan: this loan is usually done on a 30 year fixed rate plan but by paying every fortnight you add in extra payments every year and usually have your loan paid off in about 23 years. This loan also builds your equity in your home a lot faster. Advantage you pay your home off faster and pay less interest. Disadvantage you have to pay every two weeks.

Adjustable rate mortgage or (ARM): this loan is great because it works on interest rates and they usually start off with a lower interest rate than a fixed rate home loan. This leaves you paying less each month but leaves you at risk of paying a higher interest if the rates go up.
Advantage when your interest drops so does your repayment. Disadvantage if your interest rate rises so does your repayment.

2. Next of the mortgage loan options is the convertible loans:

Hybrid and convertible ARM: there are two types of loans with this one. One is an ARM that you can convert to a fixed rate or a fixed rate home loan that you can covert to an ARM. These options give you the flexibility to change your mortgage loan after a few years. Advantage having the ability to change between ARM and fixed rate. Disadvantage if interest rates are high you might not wish to convert.

Interest Only Loan: this loan is good for people who work on commission or get big bonuses so they only pay the interest on their loan and when they get their bulk income they can put it towards paying off the actual loan. Advantages you are able to get a bigger loan amount. Disadvantage you have to pay in lump sums and when only paying interest you arent paying any thing off on your house.

Balloon loan: this loan is a fixed rate loan with small monthly repayments that usually last about 7 years, at the end of that time you must pay the loan in one big lump sum or have the option to refinance. Advantage great for people who will want to sell their house before balloon payment is due and low interest rates. Disadvantage you have to pay lump sum at end of the loan or refinance at usually a higher interest rate.

Reserve mortgage loan: this loan is designed for equity rich seniors. It requires no monthly repayments. Advantage more money in your pocket. Disadvantage loan needs to pay if you sell your house and reduces equity for inheritors.

Buy down mortgage loan: there is two types of this loan, a temporary and permanent. They both work on points and lower interest rates. Advantage lower repayments. Disadvantage need to pay higher down payment to lower interest rates.

3. The third option for loans is the special mortgage:

FHA mortgage: for first home buyers, people with little down payment and credit problems. Advantage low down payment and repayments. Disadvantage cap on loan and limited mortgage options.

Veteran Affairs Loan: only for people and widowers of the armed forces. Advantage no down payment necessary. Disadvantage not available for everyone and usually takes longer.

As you can see there are many loans you can get when you want to purchase a home. The best way to find out which one will work best for you is to talk to a financial professional and they will go through them with you.

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