Calculating Your Home Equity

Calculator for crunching numbers. Examining home equity.Knowing the amount of equity you have in your home can be beneficial, especially if you’re thinking of applying for a mortgage refinance.

Calculating your home equity is fairly easy to do. You simply take the current market value of your home and subtract what you owe. For instance, if you have a home that is currently valued at $200,000 and you owe $80,000 in principal on your home loan, then your equity would total $120,000.

Keep in mind that your equity will not stay constant. As the market shifts, so will your home’s value. Additionally, any improvements you make or damages that occur can consequently add to or deduct from your home’s value.

The simplest way to increase your equity is to pay down your mortgage. It should be noted, however, that paying off your principal balance is what really improves your equity – not paying off the interest. Because most of your beginning payments will go toward paying off interest, your equity will build slowly at first.

There is a way to build equity faster, and that is by shortening the term of your mortgage. Switching from a 30 year home loan to a 15 year fixed rate loan will increase your monthly payment, but a larger amount will also be put toward the principal each month. This is becoming a popular option for people who want to own their homes outright and be mortgage free sooner. [Read more…]

Could Buying a Home with a Stigma Be a Great Deal?

Home in old neighborhood.

Looking for a great deal on your next home? How about buying some old creepy place!

There is a hush-hush phenomenon in real estate that prospective house hunters should be aware of. Although they may not be present in every neighborhood, there are homes to be had for much less than they are worth because they were the scenes of unsavory incidents. In this author’s own neck of the woods, there is a valuable piece of property that has been on the market since 1999. A brutal murder took place there and in spite of the home being demolished and several price reductions, it remains unsold. Given the opportunity, could you take advantage of a set of unfortunate circumstances in order to secure your dream home? Those house hunters willing to let the past die are finding some deals out there.

From homes that once belonged to serial killer Jeffrey Dahmer, O.J. Simpson, or child-killer, Andrea Yates, those buyers willing to forgive and forget are laughing all the way to the bank. Just ask Peter Muller, who purchased the Yates home on Beachcomber Lane in Houston. In 2004, he bought the charming Spanish-style home now thought to be worth $125,000.00 for a mere $87,000.00. “It’s in a good location,” Muller said. “Plus, it’s got a great layout. There’s a living area and combined dining area.” He went on to explain to an AOL Real Estate representative that the home’s history does not bother him, because he does not think about it.

Of course living in a home that is a former CSI site is not for everyone; a few studies show that they can be outstanding bargains. The real estate consultant firm, Bell Anderson and Saunders, specializes in disaster and crime scene properties, such as the Jon-Benet Ramsey home in Colorado. They suggest that a buyer can save as much as 25 percent on a home that carries a stigma. [Read more…]

What’s the Difference Between a Short Sale and a Foreclosure?

House with sold sign in the front yard.

Foreclosure, REO or short sale … What’s the difference?

As a potential home buyer, you’ve probably already come across the terms “short sale,” “foreclosure,” and “REO property.” Although it can be confusing, it’s important to understand the details and differences in these types of properties, especially if you are considering purchasing one. What is a Short Sale?

A short sale is when the lender is willing to take less than the full loan payoff amount for an owner’s property. Generally, short sales are done to avoid foreclosure. Neither the owner nor the lender wants foreclosure, as it can be a very costly and unpleasant process. A home owner who has not been able to make their mortgage payments can apply for a short sale, but lenders are not obligated to accept it. Lenders take each short sale application on a case-by-case basis. Sometimes the loss a bank would take on a short sale is less than the loss they would take if the property went into foreclosure. In a short sale situation, the home owner’s name is still on the title and they are still considered the seller. The bank is simply entering into an agreement to accept less than what is owed on the property.

The term “short sale” can be misleading. The word “short” refers to the amount of money received by the lender, not the amount of time to complete the transaction. It can be a long process with many individuals and departments within the financial institution involved. If you put in an offer to buy a short sale property, it can take months to hear whether or not your offer is accepted. Also, because the lender is already taking a loss, negotiating on things like price, appliances or repairs is generally not an option.

What is Foreclosure?

Foreclosure is when a bank takes full possession of a property and the owner is no longer a party in the sale of the home. Foreclosed properties can be put up for auction at a trustee sale at a county court house. It’s recommended that only seasoned investors should participate in this highly risky purchasing process. When buying a foreclosed home from a trustee sale, you risk encountering serious problems that are ordinarily handled by a real estate agent or other professional. These problems can include title issues, IRS liens, or the property still being occupied. [Read more…]

Ways To Save Money On Your Mortgage

Pile of coins

See if you can save some coin on your next home loan!

For many home owners, mortgage payments are their largest monthly expense. Fortunately, there are ways to decrease your monthly payment and pay off your loan faster. Keep in mind, these are merely suggestions and may not work for every homeowner. Talk to your mortgage consultant or financial adviser before committing to any of these practices.

For illustrative purposes, let’s use this imaginary 30 year fixed rate mortgage as an example:

Mortgage amount: $200,000
Term: 30 years
Rate: Fixed, 5%
Estimated monthly P & I payment: $1,073.64

Make one extra payment a year

If you are able, make one additional, full mortgage payment a year. Be sure this extra payment is going toward your principal¬† balance, not your interest. Depending on your loan terms, you may need to request that the money be put toward principal. [Read more…]

PITI: The 4 Components of a Mortgage Payment

North Carolina Beach Houses

Learn about what your mortgage professional is talking about when he or she mentions PITI

As you may know, when you make a mortgage payment, you aren’t just paying one big chunk toward one balance. In a typical mortgage arrangement, your payment will be divided into four parts that will go toward four different debts. Principal, Interest, Taxes and Insurance are the four main components of a mortgage payment. Whenever you make a monthly payment, your money is divided among these four balances.

Here’s a simple look at how your monthly payment is divided among the four components.

  • Principal: The original amount of the loan. If you buy a house for $150,000 and you put $15,000 down, then the principal of your loan would be $135,000. Very little of your early payments will go toward paying off the principal.
  • Interest: The total amount of interest that will be applied to the principal. Using the same example above, say you take out a loan for $135,000 at a 4 percent interest rate. Four percent of $135,000 comes to $54,00, which will be added to your overall mortgage balance. Most of your early payments will go toward interest.
  • Taxes: Your obligatory payments for city, county or property taxes. Many homeowners pay their property tax obligations as part of their monthly mortgage payments and their mortgage servicer puts the amounts into an escrow account until the bills are due. This is simpler for home owners who pay the same amount each month rather than having to come up with enough money to cover a large tax bill once a year. Mortgage lenders also prefer it because they can be certain the money is there to pay the taxes due. If the homeowner failed to pay his or her taxes a lien could be put on the home jeopardizing the mortgage lender’s interest.
  • Insurance: Payment for homeowner’s insurance to cover damage to your home or property. Most insurance policies are not all-inclusive, so be sure you understand exactly what is covered in your policy. Homeowners insurance (and any other applicable policies such as flood insurance) is often paid for as part of the payment and put into an escrow account just like the property tax payment. If you purchased a home with less than 20% down, you may be required to pay private mortgage insurance (PMI). This protects the lender if you should default on your loan.

What are the Fastest Growing Cities?

Thinking of making a move? Check out these fast growing communities.

Thinking of making a move? Check out these fast growing communities.

Not looking forward to another winter in Buffalo or a summer in Phoenix? Stuck in rut at your job and considering a change of scenery? Maybe a fresh start is in order. CNNMoney.com put together a nice slideshow of the fastest growing cities in the United States and we did a little bit of legwork to help provide you with some resources on these booming metropolitan areas.

City: Greeley, Colorado

  • Population has grown from 180,826 people in 2000 to 252,825 in 2010.
  • CNNMoney.com’s notes – Says that there is a lot of jobs for unskilled laborers in meat-packing plants….hmm…on second thought.
  • Greeley’s City Site
City: Austin, Texas
City: Bend, Oregon
  • Population has grown from 115,367 people in 2000 to 157,733 in 2010.
  • CNNMoney.com’s notes – “Bend is blessed with lovely climate, with little rain…” Who knew? Jobs available in health care and technical services.
  • VisitBend.com
City: Myrtle Beach
  • Population has grown from 196,629 people in 2000 to 269,291 in 2010. [Read more…]
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