Insurance Home Loan

Home loan: Checklist for borrowers

2010-05-21T02:35:00.001-07:00

A house is generally financed with a home loan, while a certain portion is financed out of one's own resources. It would be advisable for a borrower to consider some factors before taking a final decision on whom to borrow from and how much to borrow. As a preliminary step, you should prepare a checklist covering specific areas. While discussing with a prospective lender the checklist will come in handy to make a comparison and take a final decision .

Some points to be included in your checklist:

Purposes the loan amount is available for - purchase of plot, construction or for both How and when the disbursement will take place Documents required to sanction the loan Eligibility to be a co-applicant Time taken for sanction and disbursement of loan. Generally, a bank takes 7-10 working days Maximum loan the bank is ready to disburse When EMIs start Method of implementing interest rate change - reduction/increase in tenure or EMI Method of calculating interest rate Guarantor requirement Phases of the loan disbursement Legal and verification fees payable by the borrower Rate of interest and effective rate of interest.

The effective interest rate should be taken into account for comparison Commitment charges payable, if any Processing charges payable by the borrower Procedure for switching over from floating to fixed rate or vice versa. The conditions and corresponding charges payable In case of purchase of land and construction loan, will the bank sanction separate loans or a composite loan Monthly EMI amount Mode of payment of EMIs direct transfer from bank account, postdated cheques or debit from salary Offer of a free or concessional insurance policy for the loan, house or against personal accident Impact of part prepayment on EMI - reduction of EMI amount or reduced number of EMIs These factors constitute a preliminary checklist only and are by no means exhaustive. You may add any number of additional points. This will help in comparing and negotiating with banks for a good deal.
http://economictimes.indiatimes.com/features/financial-times/Home-loan-Checklist-for-borrowers/articleshow/5936076.cms

Select home loan provider with care

2010-03-03T03:08:00.000-08:00

Imagine a situation where you have identified a house you like to buy. You walk into a bank, provide some identification and the front-office executive offers you a special discounted rate based on your credit score thrown up by the bank’s computer. Not just that, the bank also feeds in details of the property that you wish to buy and tells you whether the seller has a loan outstanding against it or not.

A combination of events are taking place that will propel growth in retail loans to the level of developed markets by reducing bad loans and improved accuracy in pricing. At one end, a host of new credit information companies (CICs) are coming up to provide banks with a comprehensive database of borrowers’ track record.

At the other end, the government is promoting institutions like the Central Mortgage Registry, which will ensure that no two borrowers in the country will be able to raise institutional loans against the same asset. Helping link the borrowers to their credit histories will be the Unique Identification Authority of India (UIDAI) with its social security-like number, which has received a government support of Rs 1,900 crore in the recent Budget.
Last week, the Reserve Bank of India (RBI) gave operating licence to Experian Credit Information Company, which plans to roll out its products over the next few months. Experian is the first credit information company to receive operating licence after the Credit Information Companies (Regulation) Act was passed in May 2005.

Earlier in 2009 the central bank had given in-principle approvals to two companies — Equifax Credit Information Services and High Mark Credit Information Services. Both are expected to get full-fledged operational licences before the end of FY10.

The competition in this nascent sector is set to hot up as the new entrants enter the fray till now monopolised by Credit Information Bureau of India (Cibil), which came into existence bore the CIC Act was passed.

CICs maintain a centralised database on borrowers and rate their creditworthiness based on the information on their existing liabilities and past repayment record. The scoring is based on the analysis of the information provided by banks, which have already extended credit facilities to the borrowers. If a borrower goes to multiple lenders, then new lenders will benefit from these scores while making a lending decision and pricing the loan appropriately.

The success of the model is based on information sharing between members — NBFCs and banks. While Cibil enjoys a patronage of 200 credit grantors as members and has a database of about 1.5 million credit accounts, Experian has already obtained commitments from 39 lenders, even before starting full operations. Though the CIC Act has similar provisions for telecom and insurance companies, these are yet to take off commercially.

Each player has his own strategy to tackle competition. Cibil, which set shop in 2004, is aware of the challenges that it will face as more companies enter the market. “We welcome competition as it would eventually boost credit penetration in the country and bring financial discipline among individuals. We will continue to make investments in information technology infrastructure and offer innovative risk management products to the banking industry,” says Arun Thukral, managing director of Cibil.

"We have to differentiate our offering from that of Cibil. We understand the market and products better as we are twice the size of our nearest competitor globally,” says Phil Nolan, managing director of Experian Credit Information Company of India. Experian plans to outsource all its data processing work to its data centre in the UK, which it says is cost-effective. This UK-headquartered, $3.9-billion CIC has presence in 69 countries.

The US-headquartered Equifax, which too has a sizeable global presence, is expected to set up shop soon here. “Globally, Equifax has over 800 different products in its bouquet. Over the medium term, we plan to introduce some of the most relevant products in the Indian market,” says Equifax India head Samir Bhatia.

“Our foremost priority will be to offer our clients products such as credit information reports, scores and analytics services. We will also focus on identity and collection management areas. We are also investing to bring in high-end technology to enable our customers superior and easy access,” he adds.

The reason why none of the companies are particularly perturbed by competition is the size of the market. As of now, data is available only for 15 lakh borrowal accounts, that too mainly from large cities. But CICs are talking of covering Tier-I and Tier-II cities. Some, like Experian, are also in talks with micro-finance companies in order to enter the rural market.

As for banks, such reports will help them arrive at a more realistic lending decision which, in turn, will help them in reducing their non-performing assets (NPAs). However, this comfort comes with a cost. Every report obtained from a CIC attracts a fee. For lenders to refer to more than one credit information agency, it is incumbent upon the agencies to reduce their fees for such credit reports.

According to MD Mallya, chairman and managing director of Bank of Baroda, which holds stake in two credit information companies, “Competition will bring down the cost of accessing such reports. It will help us take quicker decisions based on qualitatively better data.”

Eventually, it will be the accuracy of the credit report, besides pricing, based on the information provided by banks that will hold the key. The competition may force CICs to ensure this. Cross-checking the customer’s data from two different bureaus may put more confidence in the minds of the appraising officials about the true state of affairs of the applicants’ current borrowing record.
http://economictimes.indiatimes.com/personal-finance/loan-centre/home-loans/analysis/Select-home-loan-provider-with-care/articleshow/5635276.cms

Demystifying insurance policies

2009-11-06T07:02:00.001-08:00

MUMBAI: Rajesh Sinha, a 30-year-old marketing professional had five insurance policies where he was paying a premium of Rs 50,000 against each of the policies. With such a huge premium outgo, he was under the impression that he was more than adequately insured.

But little did he realise that his actual insurance need was 10 times his annual salary which was over a crore of rupees. Against this each of his unit-linked policies (Ulip) schemes offered protection for only Rs 2.5 lakh i.e. a total cover of Rs 12.5 lakh.

The proliferation of Ulips has taken away the focus from insurance. Buying insurance needs a staggered approach and one has to review/expand the cover as s/he assumes more responsibilities such as marriage, having children or dependent parents.

HOW TO REVIEW YOUR COVER

Today single-income families are making way for more double-income families. But that doesn’t reduce the financial responsibility for either of the spouses.

“The need for insurance emanates from the various obligations that the breadwinner is expected to fulfil such as children’s education, retirement, health and savings. These change with the changing life stages and are driven by the individual’s specific needs. Thus, each individual should put a rupee value to each need and thereafter conduct a self-risk assessment,” Leena Dhankher Joshi, AV-P, life, accident & health profit centre, Tata AIG Life Insurance.

This may sound very complex, but is quite easy. Assume a complete discontinuation of your income and evaluate the implications of that on your family.

This self-assessment coupled with the current life stage and the responsibilities towards the family. For example, children’s education, marriage, retirement plans and various liabilities such as home loans will help you asses your insurance needs. A ball-park figure is 10-15 times your salary, which should be the size of your insurance cover.

INSURE YOUR HOME LOAN

If you have a large home loan, it’s a wise option to cover the liability. A borrower wouldn’t want to pass on the financial burden to his spouse or dependent parents in case of an unexpected demise or even a disability and hence a job loss. Life insurance companies have designed home loan insurance covers in alliance with banks to cover this risk. However, a simple term plan could be a better back up than these home loan insurance cover, financial advisors say.

“Let us assume a borrower has opted for a home loan of Rs 30 lakh. Now, in case of a term cover, an individual of 35 years can opt for a term cover of Rs 30 lakh and pay an annual premium of around Rs 8,000. If an individual would have opted for home loan insurance, he would have had to pay an upfront amount of Rs 1.52 lakh as an insurance cover on the Rs 30 lakh home loan.

Now, this could prove to be loss to a customer if he prepays the loan within 10 years. Secondly, the insurance amount is calculated on a reducing balance basis. So the value of the cover falls with every passing year,” Suresh Sadagopan a certified financial planner, Ladder 7 Financial Services.
http://economictimes.indiatimes.com/personal-finance/insurance/analysis/Demystifying-insurance-policies/articleshow/5197966.cms

Cut your home loan rate

2009-09-03T00:55:00.000-07:00

Stick with one institution for all financial services and you can vault your savings into the fast lane.

Home-loan packages that bundle together a mortgage, credit card and transaction account are a good deal, according to the banking industry researcher Canstar Cannex.

Financial institutions use measurements such as "cross-sell" (how many of the institution's products each customer uses) and "share of wallet" (how much of the customer's banking business goes to the institution) to determine the effectiveness of their retail banking operations.

Customers with lots of products generate more revenue for the bank and they are less likely to go through the bother of moving their banking business. Financial institutions are prepared to offer a discount on the standard home loan if the borrower will take the extra products with it.

Canstar Cannex says this is a good deal. The package discount on a variable home-loan rate is usually between 0.5 of a percentage point and 0.7 of a point (50 basis points to 70 basis points).

It is less common to find a discount on a fixed-rate loan and those that are available are smaller than discounts on variable-rate loans. Canstar found that of the 37 home-loan packages it reviewed, eight offered a fixed-rate discount and the range was between 10 basis points and 45 basis points.

The big trade-off is that package loans come with a large annual fee. The fee can be as much as $395 a year (charged by St George, National Australia Bank, Westpac and BankSA) and as little as $25 (charged by Suncorp on its My Home Package).

Taking the example of a $350,000 loan, a consumer with a typical variable-rate loan at 5.78 per cent (the average of the big four) would pay $20,230 of interest each year, a standard $100 mortgage servicing fee, a $50 credit card fee and $60 in transaction account fees. The total cost is $20,440.

A consumer who chooses the package at a discount rate of 5.08 per cent pays $17,780 of interest each year plus a $350 average package fee. The total cost is $18,130 and the saving over the stand-alone option is $2310.

Even borrowers who might be considering a cheaper basic home loan would save some money using a package, according to Canstar's calculations.

Other benefits cannot be measured in dollar savings, such as the convenience of managing your banking through one financial institution.

Canstar says there is quite a bit of competition in the package banking market. Some institutions waive the annual fee on credit card reward programs. Some discount premiums on home and contents and other general insurance products. Others discount financial-planning fees.

http://www.smh.com.au/news/business/money/property/cut-your-home-loan-rate/2009/09/02/1251570744215.html

Home Loan Rate - How Do Closing Costs Affect Home Mortgage Rates?

2009-07-31T08:55:00.000-07:00

First time home buyers or borrowers are often rather unpleasantly surprised at the time of closing or just prior when the good faith estimate of closing costs is received. These closing costs can sometime add a significant cost to the dollar amount that the borrower is expected to provide to clear the escrow account at the time of closing or shortly thereafter. The home loan rate is not directly tied to each of the closing costs, but indirectly, you will pay the closing costs. You should make sure you realize and understand each of these costs and how they impact your total cost of the loan.

Definitions

'Closing costs' is just one of the definitions that you should understand when considering obtaining a home loan. The 'home loan rate' is another. Closing costs are expenses related to the obtaining of the loan, such as document preparation, title search, appraisals, and various other expenses. These costs are typically listed as part of the closing process on the loan. The closing of the mortgage at the title company or with the loan officer will spell out each of these costs and who is responsible for payment of the cost at closing.

Title search

One of the responsibilities that must be met is a search by a title company of court records to insure that the ownership or title to the home in question is clear. They will be looking at sales and deed records to determine that the sellers actually have the legal authority to sell the property. There is a fee charged by the title company to conduct this search. The clear title means that the title company can guarantee the title is correct and that you will have a clear title to the property in question after closing. The title company actually provides a type of insurance, known as title insurance. The cost of the title insurance is one of the closing costs built into the home mortgage rates.

Origination fees

Another factor in the home loan rate is that of origination fees. These are costs associated with the work the lender or broker does in opening an application file and working to collect and pass on all the necessary documentation required to complete the loan according to the contract. These fees can be sizable or modest, depending upon the broker, but in most cases are negotiable also that fact is not commonly known.

Points

The borrower may be required to pay 'points' as part of the loan fees. There are two types of points that you may be asked to cover. Origination points are the fees you pay your broker or lender to secure the loan while discount points are essentially interest that you prepay in order to manage the best interest rates on your loan. Both types of points are usually paid at the home of closing. Payment of the discount points can significantly lower your home mortgage rates meaning thousands of dollars less in cost over the life of the loan.

http://ezinearticles.com/?Home-Loan-Rate---How-Do-Closing-Costs-Affect-Home-Mortgage-Rates?&id=1389414

Spring clean your finances and save £5,000 in a year

2009-06-07T00:13:00.000-07:00

Brits waste £243 billion by not changing to more competitive deals

With bank holidays around the corner, many people will be busily contemplating their next home improvements and how to fund them.

Calculations from moneysupermarket.com show a family with a typical basket of financial products1 could save £5,185.852 over a year if they took time out to review their finances and transfer their existing financial products onto more competitive deals, leaving them with more hard-earned cash to splash on themselves.

Stuart Glendinning, managing director at moneysupermarket.com, said: "A family with a typical financial portfolio could save a staggering £5,185.852 over a year by moving away from uncompetitive products.

Simply by reviewing their existing finances - mortgage, credit card, personal loan, savings, home insurance and motor insurance (amongst other things) and searching for better deals they can make considerable savings.

This would take only moments on moneysupermarket.com's website.

"Many people look to make home improvements over the bank holidays weekends and it can end up a costly exercise.

However, sorting out their finances first means they can make some significant savings which could really boost renovation plans." Examples of the savings that can be made: Mortgage With so many low fixed rate mortgages on the market homeowners can reduce their monthly payments considerably by remortgaging to a better deal, especially if they are languishing on the Standard Variable Rate (SVR).

For example, if they move from the Woolwich SVR rate at 7.39 per cent, paying £1,097.78 a month, to a more competitive lender, such as Yorkshire BS, offering 4.79 per cent on a two year fixed rate, they would only pay £869.36 a month.

A saving of £228.42 a month or £2,401.04 a year.

Personal loan Despite a few recent base rate rises, there are still some good deals to be had on personal loans.

There are still six personal loans on the market at less than 6.5 per cent APR.

Based on taking out £7,000 over five years a typical family could save ?168.60 in interest payments in just one year, if they change their personal loan with Lloyds TSB with a typical APR of 10.9 per cent to the Moneyback Bank loan at 6.4 per cent APR5.

Credit card There are still some very competitive 0 per cent deals on both balance transfers and purchases on the market.

Those who make the effort to choose the best deal to suit their needs will be rewarded.

If a £2,000 debt on a Natwest Classic Card at 16.9 per cent APR is switched to one of the 50 credit cards offering 0 per cent interest on balance transfers for the introductory period, such as the Virgin Credit Card (at 0 per cent until for 13 months and 1.2408 per cent per month thereafter), there would be no interest payments in the first year, making an annual saving of ?305.36 including the balance transfer fee.

Motor and home insurance There are some great savings to be made if people make sure their insurance is up to scratch.

By switching motor insurance provider on a Land Rover Freelander S 3Dr from Endsleigh, paying £31.36 a month, to Esure, paying £24.45 a month, they will save £105.95 a year6.

For a four bedroom detached house in St Albans over £135.32 can be saved a year by switching home and contents insurance from a provider such as Legal and General to Budget7.

Savings Savings that languish in poor paying accounts with the 'Big Five' banks could be a costly waste.

An individual with £10,000 in the Royal Bank of Scotland Instant Access Savings account paying 1.85 per cent AER would receive £185.04 in interest over a year.

However, if they swapped to the Alliance and Leicester Direct Saver account paying 5.8 per cent AER, they would earn £579.86 over the same period - an additional earning of £394.82 over the year.

Utilities Utilities have been the talk of the town of late, but customers should assess the deal they are on and not get scared into price protection deals.

For example, Powergen's price protection deal until 2010 would cost, on an average bill8, £1,029.21.

However by transferring onto British Gas Click Energy 2 deal, for the same energy consumption and you would see £265.24 shaved off the average householder's bill.

Other ways people can mop-up their finances is to review other areas such as their current accounts, overdrafts, travel insurance, store cards and new car finance.

Moving these products onto more competitive deals means someone could save a further £1,408.21.2 All these saving equate to a total saving of £5,185.852 in a year.

Stuart continued: "These savings can be made without changing your lifestyle or spending any less - all it costs is a little time to find the best deals for you and your family.

And if you kept these changes up for a year the savings are over £5,000 - enough to persuade the most reluctant saver to make the effort.".

http://www.insidemoneytalk.com/news/mon/mon131.html

5 costs of buying a home

2009-05-17T05:08:00.000-07:00

The conditions seem ripe to become a first-time homeowner.

Real estate prices are tumbling, mortgage rates are at record lows and there are big tax credits on the table. All that might have you scrambling to assess whether you can afford to make the leap into homeownership.

That was the situation for 28-year-old Holly Dewar and her boyfriend last winter.

“We really wanted to get the most for our money, and the market timing seemed right,” said Dewar, who works in public relations. Her boyfriend, 29-year-old Kurt Spring, works in real estate finance, which helped facilitate the purchase.

They closed on a three-bedroom, one-bathroom home just outside Boston for $340,000 in January. But that price didn’t include a host of other of costs, such as $4,000 in closing fees and $700 for a home inspection.

Before considering such details, find out whether the mortgage down payment is a deal breaker; lenders are requiring more money upfront as they tighten standards. For the less-than-ideal borrower, an array of new loan fees could be another hurdle.

So if you think it’s time to stop renting, here are some costs to consider.

Cost 1: Getting ready

Start the process by polishing your credit report. Banks are being more selective about making loans.

The Federal Reserve says a March survey found half of U.S. banks tightened lending standards on prime mortgages in the previous three months, up from 45 percent in February.

“We’re in very uncertain times, and you’re asking for a very big amount of money. The lender is going to be looking very closely at the credit report,” said Jed Smith, a spokesman for the National Association of Realtors in Washington, D.C.

A higher FICO score also gives you greater negotiating power over the terms of the mortgage and, ultimately, the total cost of the loan. A stellar score ranges from 760 to 850, while scores below 640 might mean you have to pay a significantly higher interest rate. You are entitled to a free annual credit report from each of the three major credit bureaus. Getting your FICO score costs $15.95 at www.myFICO.com.

Cost 2: Down payment

More lenders are demanding bigger down payments of 20 percent or more, Smith said.

The upside of making a bigger down payment, of course, is that you’ll owe less money and get better terms on your mortgage. If your down payment is less than 20 percent, however, you generally need to pay for mortgage insurance, which could cost $100 or more a month depending on your loan.

Cost 3: Adding up fees

New fees introduced by Fannie Mae and Freddie Mac in the past year will likely push the price of a mortgage higher for many people. The fees are based on credit profiles, the amount of the loan in relation to property value and the type of home.

As such, they’ll vary greatly depending on your personal situation, but could total as much as 3 percent of the mortgage.

In that case, you’d be paying another $3,000 for a $100,000 loan.

There are also standard closing costs to consider. These are service fees charged by the lender and could cover items such as credit reports, appraisals, documentation and administrative costs. According to Bankrate.com, the national average last year was $3,118 for a $200,000 mortgage.

Lenders are required to itemize all closing fees, so review them carefully. Some of the more standard fees might be negotiable.

Cost 4: Inspections

Your inspection costs will depend on the checks you want and whether your inspector offers comprehensive packages.

The seller might pay for inspections in some cases, but it’s more common for the buyer to foot the bill.

Other inspections might be for lead paint, pests or radon gas. Some of these checks might be required by the lender and included in the closing costs.

Cost 5: Maintenance

A common mistake for many new home buyers is focusing on the monthly mortgage alone. It’s easy to forget all the maintenance costs that come with owning a home.

To start, your utility costs will likely go up significantly. As a renter, you might not even pay for water, heat or electricity. But they could be a big drain if your home is large or you have a pool or other feature that drives up utility bills.

There are bigger maintenance matters to consider as well, such as repainting the house periodically. You’ll also be on the hook for any repairs for your home.

http://www.ajc.com/services/content/printedition/2009/05/17/pfhomebuying0517zh.html

Home Equity Loan Advice for People With Bad Credit

2009-04-18T00:12:00.000-07:00

Home equity loans are a type of loan that places a second lien on a property. Thus, these are commonly referred to as second mortgages. There are certain benefits and disadvantages to these loans. For example, it is easier to qualify for a home equity loan with bad credit, and the money can be used for expenses such as home improvement or debt consolidation. Some home buyers use a home equity loan to avoid private mortgage insurance or jumbo loans. The negative aspect is that a second mortgage uses your home as collateral. Non-payment on the loan may possibly initiate a foreclosure.

Here is some advice for people looking for a home equity loan.

1. Avoid Negative Amortization on the First Mortgage

To qualify for the first mortgage, a borrower with bad credit may have chosen a loan program that resulted in negative amortization. On these loans, the monthly interest payment is less than the interest due, and the mortgage balance rises over time.

When a borrower wants to keep their payments low in the beginning, a lender may recommend a negative amortization adjustable rate mortgage. Before a home equity loan is approved, the mortgage lender closely assesses the first mortgage. Many lenders instinctively reject a home equity loan if the first mortgage is a negative amortization.

2. Don't Count on Home Appreciation

Several home equity loans allow homeowners to borrow more than their home's equity. This is dangerous because borrowers place all their confidence in the likelihood of fast home appreciation. Regrettably, home market values can shift unpredictably, wherein some properties may experience a slight decrease in value. As a result, borrowers may owe more than their home's worth, and they are obligated to stay in the home. Selling a property under these circumstances means the homeowner will encounter a considerable loss, and end up owing the mortgage lender a ton of money.

http://ezinearticles.com/search/?q=Insurance+Home+Loan+

Grant drives home loans to record levels

2009-04-04T00:29:00.000-07:00

Renters have the best chance in a decade to upgrade to home ownership, as the cost of servicing a mortgage falls and first time buyers benefit from government grants, a leading mortgage insurer says.

QBE Lenders' Mortgage Insurance Ltd chief executive Ian Graham said the federal government's boost to the first home owners grant and 45 year low interest rates had made buying a home more attractive than renting.

"While there is significant uncertainty in relation to employment, an increasing number of first home buyers who are confident about the future have decided the time is right to take advantage of government incentives, low interest rates and attractive housing prices," Mr Graham said.

Conditions supporting a jump from renting to owning a home are the best since the late 1990s, according to QBE LMI April half year property research, conducted by residential property forecaster BIS Shrapnel.

The research shows that by June this year, the cost of renting in Sydney and Melbourne will be more than half way to the cost of paying off a median priced home.

Median weekly rents in Sydney and Melbourne relative to mortgage repayments will rise to 66 per cent, from around 40 per cent in 2008.

In Canberra, Brisbane and Perth, weekly rents will account for 80 per cent of a mortgage repayment and in Adelaide just over 75 per cent.

During the late 1990s, median rent were at or above 80 per cent of the weekly cost of buying a home in Brisbane, Adelaide, Canberra and Perth and above 60 per cent in Melbourne and Sydney.

In calendar 2008, rents rose 8.4 per cent - the fastest annual pace since 1989 - recent Australian Bureau of Statistics (ABS) data show.

But house prices fell by an average rate of 3.3 per cent across Australia in the year - the biggest annual fall in 23 years.

Mr Graham said first home owners had great incentives to buy property.

"The first home owner buyers grant scheme has helped first home buyers to get over the deposit hurdle and is driving new lending enquiry/home loan approvals to record numbers," he said.

Last October, the federal government doubled the first home owners grant to $14,000 for established dwellings and tripled it to $21,000 for newly built homes.

Between September and February, the Reserve Bank of Australia (RBA) cut the cash interest rate by four percentage points to 3.25 per cent, a 45-year low, while commercial banks lowered their standard variable mortgage rates by 3.75 percentage points.

Mr Graham said the market for investors was also improved.

"Conditions for investors are at their best since the late 1990s with a differential between yields and interest rates estimated at two per cent in the March quarter 2009," he said.

"Our report shows that through 2009 and into 2010, investor sentiment toward residential property is expected to increase significantly."

http://news.brisbanetimes.com.au/breaking-news-business/grant-drives-home-loans-to-record-levels-20090403-9m2r.html

Credit crunch: Insurers refuse coverage of some home loans, in areas

2009-03-25T09:15:00.000-07:00

Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow -- even for those with good credit.

Mortgage insurers, whose backing is required for borrowers who can't afford the traditional 20 percent down payment on a home, have already flagged nearly a quarter of the nation's ZIP codes where they refuse to insure some home loans.

That encompasses a wide variety of neighborhoods: McMansions in Scottsdale, Ariz.; luxury Miami condos; 1960 ranch houses in Flint, Mich.; and early 20th century kit homes in Metuchen, N.J. -- and houses in Utah's St. George.

The entire states of California, Florida, Arizona, Michigan, Ohio and Nevada -- which have seen the highest foreclosure rates and the worst price declines -- are blackballed on some mortgage insurers' lists. Twenty-two zip codes in the St. George area were included on lists this month from AIG United Guaranty and Radian Guaranty that flagged "declining markets."

Banks that have lost billions because of bad bets during the housing boom are now reverting to strict lending standards not seen in nearly 20 years, according to industry data and interviews with lenders.

For new homebuyers and those seeking to refinance, it can mean higher down payments and a higher bar for credit scores, among other requirements. The toughest restrictions are in markets where home prices are falling, though regions where property values are rising are not immune.

"We're in the midst of an epic, broad, sweeping change in the mortgage industry," said Chris Sipe, a loan officer with America East Mortgage in Frederick, Md.

The reluctance to extend credit comes despite a flurry of government initiatives, including steady interest rate cuts by the Federal Reserve, intended to make it easier for would-be borrowers and those facing interest-rate resets on their mortgages.

Lenders' growing leeriness threatens to dampen sellers' already soggy prospects for the spring homebuying season -- and that means more pain for the already battered housing sector and the broader economy.

In recent weeks, mortgage insurers have flagged more than 9,600 ZIP codes in at least 34 states where they won't insure certain types of home loans -- those for investment properties or second homes, those with riskier adjustable-rate or interest-only mortgages, or for buyers making down payments of less than 3 percent.

With banks and mortgage insurers pulling back, state and federal programs for first-time buyers and people with poor credit are attempting to fill the void.

Don Brekke, an equipment operator from Colorado Springs, Colo., tried to buy a bank-owned 1950s ranch home for $113,000. At first, he couldn't get a loan because the house was in a potentially declining market and lenders required a 10 percent down payment, more than he could afford.

Ultimately, he was able to qualify for a 100 percent loan from Colorado's state financing authority, and he plans to close in the coming days.

"It was a bunch of headaches -- going around and around to get this done," Brekke said.

The combination of sinking home prices and tighter lending standards has been a major aggravation for Ron Broussard, a 38-year- old sales representative for a home builder.

Broussard took advantage of soaring Southern California property prices three years ago to refinance a loan on a house he had owned since the late 1990s. Today he's still stuck with a $720,000 mortgage and has been renting it out since moving with his family to Texas a year ago. Once appraised for $1.1 million, Broussard's lender now says it's worth about $300,000 less.

He does not yet owe more than the property is worth, but Broussard worries that is a possibility.

"The way the market's going, you know, who knows?" he said.

Broussard has found little sympathy from his lender, Countrywide Financial Corp. While Broussard accepts responsibility for taking out a mortgage whose monthly payments are due to skyrocket once the unpaid principal exceeds the home's value by 15 percent, he feels betrayed by the lender's unwillingness to negotiate better terms.

The stinginess of banks is showing up in home loan statistics: The value of all new mortgages plummeted to $450 billion in the fourth quarter of 2007, down 38 percent from a year earlier, according to trade publication Inside Mortgage Finance.

Subprime loans, made to borrowers with poor credit, virtually disappeared from the market, plummeting 90 percent to $13.5 billion in the October-December quarter.

There is a silver lining: The Federal Reserve has repeatedly cut interest rates, helping borrowers whose mortgages were just about to reset to higher rates and people with student loans. Reflecting the Fed's efforts, rates on 30-year mortgages dropped below 6 percent this week for the first time in more than a month.

http://findarticles.com/p/articles/mi_qn4188/is_20080321/ai_n24957060?tag=content;col1

Cat Fund a threat to home insurance

2009-02-10T03:36:00.000-08:00

Months before hurricane season, Florida faces an unprecedented threat to its fragile home insurance market, again risking price spikes and policy shortages.

The threat comes from the state's primary tool to prevent such a mishap: the Florida Hurricane Catastrophe Fund.

In an effort to stop rate increases, Gov. Charlie Crist and lawmakers two years ago doubled the size of the fund to sell $29 billion in storm protection to Florida insurers, at prices far below the private market.

Insurers, in turn, were to pass the savings on to homeowners.

But since last fall, Cat Fund advisers have warned that Florida cannot borrow enough money to make good on its promise to pay hurricane claims.

The shortfall is an estimated $18 billion.

Now, two key financial rating agencies, A.M. Best and Demotech, say the state must shore up the fund or they will be forced to downgrade the financial ratings of dozens of insurance companies that rely on state coverage.

If that happens, millions of policies could immediately be deemed worthless, triggering banks to invalidate mortgages that require qualified insurance coverage.

Scott Jenkins, senior vice president for the Florida Bankers Association, calls the resulting scenario "a nightmare."

State leaders are scrambling to find a solution.

But in the current global recession, almost every path leads to further rate hikes in a state already swooning from record foreclosures and unemployment rates veering toward 10 percent.

"We've got to go where we can and find what we can, because we have a pretty serious problem," said Cat Fund Executive Director Jack Nicholson.

The gap in the Cat Fund appeared during hurricane season last year.

Lawmakers in 2007 sought to thwart post-Katrina insurance rate increases by doubling the fund to add $12 billion of hurricane risk.

Florida did not have the cash to pay such losses; lawmakers presumed the state could borrow the money if there was a hurricane.

That borrowing ability evaporated last year with the global credit crisis.

Fund underwriters estimate Florida could raise at most $10.6 billion — more than $18 billion short of the fund's full liability.

Next week, Cat Fund director Nicholson intends to recommend a combination of possible solutions, including seeking financial backing for the fund or reducing the amount of coverage Florida provides.

Nicholson proposes that the governor approve soliciting Wall Street investors to guarantee a loan that might never be needed, a promise that would cost hundreds of millions of dollars.

To straddle part of the gap last year, the Cat Fund paid billionaire Warren Buffet $224 million for the option to borrow $4 billion if needed.

This year, with financial conditions even worse, Buffett has said no.

Twice since December, Nicholson has approached Ajit Jain, reinsurance manager for Buffett's Berkshire Hathaway.

"Their capacity is hurt," Nicholson said. Even if Buffett would recommit, Nicholson said, the price would be higher and the terms "above our resources."

Cat Fund advisers warn that even if a similar guarantee is found elsewhere, it is bound to cost even more.

Hence, Nicholson also wants to ask the U.S. Treasury for a federal guarantee on Florida's hurricane debts or an outright promise to give the state a loan.

Fund advisers acknowledge the quest comes "at a time when many voices are competing for federal money."

Finally, the Cat Fund director believes Florida needs to consider selling less hurricane coverage.

That prospect would force Florida insurers to buy protection elsewhere at much higher rates or reduce their exposure by dropping policies.

The potential hit to consumers is large: insurers get their top layer of hurricane coverage from the Cat Fund at two cents per dollar of protection.

Private reinsurers charge an estimated 25 cents per dollar.

Reducing the Cat Fund by $5 billion would cost insurers — and therefore Florida homeowners — an estimated $1 billion more.

Scaling back the Cat Fund also carries political cost.

Approval would be required not only by the Florida Legislature, but also by Crist, who has made lowering home insurance rates a tenet of his administration.

State Farm's withdrawal from Florida complicates any effort to shrink the Cat Fund.

Hurricane coverage for its policies — one out of five homes insured by the private market — came through State Farm's parent corporation.

Companies picking up State Farm's jettisoned business would be buying reinsurance for those new policies at the same time they would be attempting to replace a portion of the Cat Fund.

The notoriously volatile reinsurance market likely would answer that increase in demand by raising prices.

There is also the risk that private reinsurers could not fill the demand for capital, pushing Florida insurers onto even thinner ice.

Nevertheless, a smaller Cat Fund has strong political supporters, among them Senate budget chief J.D. Alexander.

He plans to use his committee next week to vet the Cat Fund's shortfall.

"My problem is, if you can't write the check you shouldn't write the insurance," said Alexander, R-Winter Haven.

"It's legitimate for Florida to take on some of the insurance risk, but we have taken on so much it sinks the boat."

Rating agencies have made clear they will not wait for a hurricane to expose the Cat Fund's shortcomings.

A.M. Best gave credence to its threat last fall, when it put the ratings of seven major Florida insurers under review, including Allstate Floridian.

The watch was lifted only after hurricane season was over.

Demotech, which examines more than 60 Florida insurance companies that comprise the majority of the market, said it would withdraw its ratings entirely if the Cat Fund shortage is not addressed by May 15, the end of the legislative session and two weeks before the start of the 2009 hurricane season.

The mortgages on most homes require that property be insured by a rated insurer.

Loans backed by Fannie Mae and Freddie Mac must have an A.M. Best rating.

Without the ratings, most home mortgages would go into default, forcing a scramble for coverage in a pinched market.

"From first glance, this would be a concern for us," said Jenkins, the Florida Bankers Association senior vice president. "It could be a headache and a nightmare."

Demotech President Joseph Petrelli — engaged in his own flurry of meetings with Florida politicians, regulators and insurers — said he believes Florida officials will find a way to prevent dozens of insurance companies from losing their ratings.

"We know that May is around the corner in terms of hurricane season, but .?.?. I think the state of Florida is doing as much as it can," Petrelli said.

Meanwhile, he said, many private insurers are arranging a third layer of protection, backup plans to the backup fund.

These range from lines of credit at banks to bridge loans from other reinsurers.

All come with a cost, Petrelli said, and are accompanied by the question of whether there will be rate hikes to pass that cost to consumers.

http://www.ocala.com/article/20090209/ARTICLES/902090992/1402/NEWS?Title=Cat_Fund_a_threat_to_home_insurance

What are rich men's home loans good for?

2009-01-24T20:25:00.000-08:00

We are still waiting for the lending squeeze to relax its grip so that those of us with average salaries, average credit reports and average deposits can borrow money for property again. We could be waiting a long time, but in the meantime, lenders are coming up with ways to bargain with us over our financial needs.

The latest trend is the tie-in mortgage, where providers will consider you for a loan if you are an existing current- or savings-account customer or are willing to become one.

Last week, the Halifax joined the swelling ranks of those offering tie-ins with a fixed, two-year deal at 2.99 per cent interest, its lowest rate ever, available only to those who already hold a current account with the branch, or are prepared to switch to it. The move follows the launch of HSBC's two-year discounted mortgage for members of its Premier banking service, also at 2.99 per cent. And Royal Bank of Scotland will offer its packaged current account customers up to 30 per cent off mortgage fees on its new, fixed-rate range.

At first, it seems a good way to get round the credit crunch, but having so much of your day-to-day money held by just one organisation has a whole host of implications, while the conditions on the lending offers are limited to say the least. The Halifax rate is only available for those with a 40 per cent deposit or higher and the fee is a huge 2.5 per cent. Meanwhile, to be a Premier customer at HSBC, and so qualify for its special mortgage deal, you must have at least £50,000 in savings with the bank or a minimum salary of £75,000 and, curiously, a mortgage worth at least £250,000.

"This move towards tie-ins simply underlines the fact that lenders are looking for gold-plated customers," says Louise Cuming, the head of mortgages at price comparison site Money-supermarket.com. "If they can tie a mortgage to a current account, they can cherry-pick the customers they want. It also makes it difficult for a customer to compare the best rates and deals for their needs."

Even if you do fit the bill, these are not necessarily the cheapest deals out there. "They may have a market-leading mortgage rate but the catch is with the other products," notes Melanie Bien, a director of broker Savills Private Finance. "And it is hit and miss whether these will be as attractively priced. In most cases, you would have got a better deal if you had shopped around."

The Halifax current account pays only 0.1 per cent on credit balances, rising to 2.5 per cent for its high-interest account, which doesn't compare favourably with the market-leading 6.5 per cent offered by Alliance & Leicester's free-to- use Premier Direct current account. This means that if you consistently have £500 in your current account, you'd get £32.50 interest a year from A&L but as little as 50p from the Halifax.

Worse still, HSBC offers no interest at all on its current accounts, after recently removing the tiny 0.1 per cent it had been paying on the grounds this would make it easier for customers to calculate their tax return. (It also happens to save the bank an estimated £7m a year.)

A considerably cheaper mortgage rate would easily offset the effect of losing a high rate on the current account. But tie-ins are unlikely to offer you that either. The headline 2.99 per cent rate offered by the Halifax on its fixed, two-year deal is one of the best out there right now, but if you aren't prepared to pay that 2.5 per cent fee (equating to a staggering £3,750 on a £150,000 loan), the rate rises to 3.99 per cent for a £995 fee, or 4.19 per cent for a £495 fee. Alliance & Leicester is offering a two-year, fixed deal for 3.19 per cent at a 2 per cent fee (saving you £750 on the same loan) but is still at a better rate than the 3.99 per cent offer with the lower fee.

Likewise, HSBC's two-year mortgage, set at a discount to its standard variable rate, seems an unbeatable deal at 2.99 per cent for a £999 fee on a maximum loan-to-value of 60 per cent. But again, A&L can do a two-year tracker mortgage at 3.29 per cent with a 2 per cent fee, and you don't need a salary of £75,000 or £50,000 in the bank to do it.

Nor do these products compare well with offset mortgages, which won't demand a tie-in but will offer big discounts on your interest rate. "With offset you are not compelled to opt for other products linked to the mortgage, but it is in your interests to go for them to make the mortgage element cheaper," says Ms Bien. "This is a real benefit to the customer that is not there with tie-in accounts."

Also bear in mind that signing up for one of these deals will mean you have a current or savings account, as well as debts, with one financial company. The money you have in savings with a bank is protected up to £50,000 by the Financial Services Compensation Scheme if that institution goes bust. But if you also owe the same bank money, in this case your mortgage, those savings will be used to pay off your debt first. The chances are that if a bank holding both your mortgage and your savings goes under, you won't see any of your money again.

But if you do go for a tie-in mortgage, it's not just from low interest on savings and high interest on debts that banks will make money.

"As far as they are concerned, the driving force for tie-ins is usually to get hold of your current account because it gives them so much information about your money and spending habits," warns Ms Cuming. "If the bank knows when, how much and to whom you pay your home insurance, for example, they can easily try to sell you products and get more of your money. There is also the question of selling your information on to third parties."

Current accounts also have one of the highest rates of customer loyalty. Lenders are banking on the chances that once your account is with them, you won't leave.

"A year ago, tie-ins were looked on as the unacceptable face of mortgage lending," says Francis Ghiloni at mortgage comparison site mform.co.uk. "But nowadays, almost anything goes and borrowers have to jump through more and more hoops."

It isn't as if this type of mortgage will do anything to alleviate the wider lending crisis, either. "It adds to the development of two distinct groups of borrowers: the cream of the crop with perfect credit scores and plenty of savings, and the rest of us," adds Ms Cuming. "The Government wants to free up money for lending, but all the banks are doing is lending to the upper echelons of society. If we are to have any hope of getting the market moving, lenders must do business with first-time buyers who need to borrow 95 per cent of the value of a property."

http://www.independent.co.uk/money/mortgages/what-are-rich-mens-home-loans-good-for-1515006.html

Citi reaches deal with lawmakers on home loans

2009-01-12T00:00:00.000-08:00

WASHINGTON (AP) — Democratic lawmakers have reached a deal with Citigroup Inc. on a plan to let bankruptcy judges alter home loans in an effort to prevent foreclosures and urged other lenders to follow suit.

The lawmakers aim to attach the plan to President-elect Barack Obama's economic stimulus legislation, and said Thursday the change in bankruptcy law could ease the foreclosure crisis that has dragged the economy into the worst recession in decades.

The compromise between Citigroup and Sens. Richard Durbin of Illinois, Charles Schumer and Christopher Dodd of Connecticut, would be limited to loans made before the bill is signed. Obama has said he backs the concept.

Schumer said he received calls Thursday from several banks — which he did not name — indicating their potential interest in supporting the idea.

"This is a breakthrough day," the senior senator from New York said in a news conference on Capitol Hill. "We've been stymied because the banking industry opposed this simple provision, which is key to getting a floor to the housing market."

In a letter to lawmakers, New York-based Citigroup's chief executive, Vikram Pandit, said the change to bankruptcy law "will serve as an additional tool to the extensive home-retention programs already in place to help at-risk borrowers."

The so-called "cramdown" proposal has been backed by Democrats over the past year as a potential solution to the foreclosure crisis. Consumer advocates and Democrats say it would prod the lending industry to be more aggressive about modifying loans because of the looming threat of having a bankruptcy judge involved.

But the lending industry has battled fiercely against the idea, arguing it would force lenders to hike mortgage rates because they would have to charge more for loans that could be altered later by a judge.

"This would hurt the housing market at the exact time we're trying to stimulate it," said Scott Talbott, chief lobbyist at the Financial Services Roundtable, which represents large banks and insurance companies.

To qualify, borrowers would need to demonstrate that they have asked their lender for a loan modification before filing for bankruptcy.

Currently, a 1993 Supreme Court decision bars judges from altering first mortgages on primary homes, though such changes are allowed on loans for vacation homes, motorcycles, boats and other kinds of property.

Consumer advocates say that is unfair, while mortgage lenders contend it benefits the vast majority of borrowers who don't fall into bankruptcy because it keeps mortgage credit for primary residences cheap.

Other attempts by the government to deal with the surge in foreclosures over the past two years haven't made much of a dent in the problem.

A federal program, dubbed Hope for Homeowners, was intended to let 400,000 troubled homeowners swap risky loans for conventional 30-year fixed-rate loans with lower rates. But the early results have been disappointing, with fewer than 400 applications since the program's launch on Oct. 1.

In an interview earlier this week, a lobbyist for the mortgage industry vowed to keep the bankruptcy judge plan out of the economic recovery bill.

"We think that's an unwise move that could delay the stimulus package," said Francis Creighton, the Mortgage Bankers Association's chief lobbyist.

In a speech Thursday at George Mason University outside Washington, Obama asked Congress to work with him "day and night, on weekends if necessary" to pass an economic revival plan within the next few weeks so that it can be ready for his signature shortly after he takes office on Jan. 20

Obama promised to rewrite financial regulations and pledged to launch "a sweeping effort to address the foreclosure crisis so that we can keep responsible families in their homes."

http://www.google.com/hostednews/ap/article/ALeqM5jlW27DGaQ3AJv88EMr-WcK37-55AD95J9LE80

Senior Home Buyers Allowed To Use Reverse Mortgage

2008-12-21T02:04:00.000-08:00

Beginning Jan. 1, home buyers 62 and older will be able to buy a house using a reverse mortgage, as long as it's their primary residence.

Traditionally, people obtained reverse mortgages to take equity out of their existing homes to help them meet expenses, pay off the mortgage or pay the property taxes.

But staff members at the Federal Housing Administration noticed an increasing number of seniors selling their homes, buying new homes and then getting a reverse mortgage to pay off the new home, said Meg Burns, director, FHA office of single-family program development.

"They were going through two mortgage transactions and paying all those fees," she said. "Seniors need to keep their money in their pocket."
When the FHA staff members looked further, they found that the traditional reverse mortgage program designed to keep seniors in their home wasn't helping those who wanted to downsize, move to a house without stairs, move closer to their kids or move into active adult housing.

Burns said a program allowing a Home Equity Conversion Mortgage for purchase "came from us internally" as a way to accommodate that kind of consumer.

Fannie Mae launched a reverse mortgage program for purchase in 1997 called a Home Keeper for Home Purchase, but Burns said it was not used much because of borrowing limits.

With a reverse mortgage, the borrower takes the equity out of the home either as a lump sum, a line of credit, in a monthly payment or as a combination of these. The loan is repaid when the borrower sells the house or the last homeowner dies or moves out. The amount of the loan is based on the home's value and the youngest borrower's age.

A Cap On Fees
A new law that went into effect this fall imposed a $6,000 cap on origination fees, and that law applies to the HECM for purchase loan. Lenders can charge 2 percent of the first $200,000 of loan value plus 1 percent of any additional loan value. Consumers are still charged 2 percent for FHA insurance.

The FHA insurance protects both the borrower and the lender. If the bank should go under, consumers still will receive their reverse mortgage. And if the home's value drops below the original loan amount when the senior dies or moves out, the insurance protects the lender.

Consumers should expect to pay fees similar to a traditional reverse mortgage, with the additional fees relating to a purchase of a home such as recording fees and transfer taxes. Borrowers are still required to meet with a third-party, HUD-approved consumer counselor so they understand their options.

Those using a HECM loan for purchase must buy a one- to four-family house. The HECM for purchase may be used for new construction that has been completed and received a certificate of occupancy. Purchasers must move in within 60 days of closing.

"We talk to seniors. The folks we've talked to agree that it makes sense," Burns said. "I feel like this product is going to address a social issue for them."

Refinancing applications boost home-loan volume

2008-12-11T07:53:00.000-08:00

WASHINGTON – The number of home-loan applications filed nationwide rose last week compared with a year ago, according to a report today from the Mortgage Bankers Association.

In the week ended Dec. 5, the trade group’s seasonally adjusted Market Composite Index – a measure of overall mortgage loan application volume – was 796.8 points (March 16, 1990 = 100 points). That represented a decline of 7.1 percent from the 857.7 points of the week ended Nov. 28 (after adjustment for the Thanksgiving-shortened work week), but an increase of 99.90 percent from the eight-year low of the week ended Nov. 15 (READ MORE) and a year-over-year increase of 2.2 percent.

The MBA survey, conducted weekly since 1990, covers about half of all U.S. retail home mortgage applications.

Its seasonally adjusted Purchase Index fell 17.4 percent week-over-week to 298.1 points, after rising 38.0 percent the week ended Nov. 28 and 5.3 percent the week before that. Applications to purchase a home using Federal Housing Authority (FHA) and other government-backed loans fell 21.3 percent last week while applications for non-government backed loans fell 15.5 percent, the MBA said.

The Refinance Index dipped 0.9 percent last week to 3,767.3 points, after surging 203.3 percent Thanksgiving week and falling 2.1 percent the week ended Nov. 21. Refinancing was the goal of nearly three-quarters of loan applications last week – 73.7 percent – up from 69.1 percent in the week ended Nov. 28 and 49.3 percent in the week ended Nov. 21, the MBA said.

The share of mortgage applicants who were seeking adjustable-rate mortgages (ARMs) – rather than conventional fixed-rate loans – fell to 1.1 percent last week from 1.4 percent Thanksgiving week and 3.0 percent of applications filed in the week ended Nov. 21.

The average contract interest rate for a 30-year, fixed-rate mortgage dipped to 5.45 percent last week from the previous week’s from 5.47 percent, while the contract interest rate on a 15-year, fixed-rate loan declined to 5.09 percent from the previous 5.13 percent. But the average contract rate on a one-year ARM rose to 6.76 percent from the preceding week’s 6.61-percent average.

Still, by historical standards, “mortgage applications for purchases remain subdued,” Anna Piretti, a senior economist at BNP Paribas in New York, told Bloomberg News. And, she added, “tighter credit standards suggest actual lending remains constrained, weighing on sales.”

The Mortgage Bankers Association is a trade group representing the real estate finance industry. Its 3,000 member companies include mortgage firms, commercial banks, thrifts, life insurance companies and others. Additional information, including the MBA’s Weekly Application Survey, is available at www.MortgageBankers.org.

Home Insurance

2008-12-02T21:11:00.000-08:00

Insurance is a contract between the insured and an insurance company that protects against the risk of large and calamitous loss.

The importance of home insurance cannot be undermined. There are two primary reasons why home owners buy home insurance. Firstly, a home is the most important asset belonging to a home owner, and the need to protect it is imperative. Secondly, mortgage lenders require home owners to own insurance to protect the lender’s investment form damage or loss.

The major risks covered by home owner’s insurance are:

Damage or loss to the home and other structures included on the property

Damage or loss to personal property items in the home

Injury or harm to third parties who come to your home

The home insurance covers the person insured and the members of his home. Third parties who come to your home are also covered through the liability portion of the insurance policy for injuries. Additionally, you and your family members also have some liability protection to others even while you were away from your home.

There are two distinct types of insurance under home insurance - Title insurance and Homeowner's insurance. They protect against totally different types of risks.

Homeowner's insurance covers loss or damage to the home, structures on the property, personal contents of the home, as well as third-party liability.

Title insurance, on the other hand protects ownership interests in the real property. Title insurance is purchased to guarantee that the home owner has a good and marketable title to the property. When purchasing a home by means of a loan, lenders require you to obtain title insurance. That way they know that you have clear ownership of the real property and the home.

The title insurance company conducts a search to find out what liens, encumbrances and defects are present to the title as it stands in the hands of the seller before you can obtain the loan. Once the title insurance coverage is obtained, the Title Company guarantees that the buyer has marketable title to the property after the purchase. Any liens, encumbrances and other defects to the title that occur during your ownership of the property, however, are not covered by this insurance

William Brister - http://www.businessproguide.com - A guide to all your business needs. http://www.insuranceproguide.com - Everything you should know about insurance

Article Source: http://EzineArticles.com/?expert=William_Brister

Home Owners Insurance Covers More Than Just the Home

2008-11-12T04:15:00.000-08:00

Let us look at a scenario for a minute. It has been snowing for three days straight and you have not had the time to shovel the sidewalk free from snow. The mail person tries to deliver a package to your front door and slips and falls in an ice patch on your front porch. There is a broken leg and medical bills through the roof. Who is going to pay for the medical bills associated with that broken leg? The homeowner if they do not have homeowners insurance.

Homeowners insurance and renters insurance cover more than the physical home and the homes belongings. This insurance is there in case something happens to a person on your property. While you may not be directly at fault for the injury, legally if the injury occurred on your lands due to a "negligence", all medical bills can fall into your lap.

Depending on the location of the home, the insurance rates will vary widely. Some areas, such as central North Carolina, carry very low homeowners and renters insurance rates. Other parts of the United States, like Key West, Florida, will carry rates far higher due to the increased risk of hurricane and flood damage.

It is important to speak with your insurance representative about the homeowners insurance policy and the medical coverage in the policy. When the homeowner is renting out the home, it is important for the renter to carry insurance on the home as well. This will provide double coverage in the case that something goes wrong and the homeowner is facing a huge stack of medical bills through no fault of their own.

Julia Vakulenko is a licensed broker associate with Tampa4U.com Realty. She has one of the hardest working Tampa Real Estate team in Florida specializing in Tampa Condos and also in2Va Team for Northern Virginia Real Estate.

Article Source: http://EzineArticles.com/?expert=Julia_Vakulenko

Getting The Protection That You Need With Loan Insurance

2008-10-04T09:02:00.000-07:00

Loan insurance has always supposedly been designed to offer individual borrowers the peace of mind they need to feel safe n the knowledge that their debt is protected against ill health and unemployment. However, investigations into the payment protection insurance industry by the finance industry regulator Financial Services Authority have proved this not to be the case in the last year or so.

Instead of protecting the consumer, loan insurance was a cash cow for high street banks and lenders, providing them with a decent profit as a result of the strict terms and conditions that contain several exclusions. As a result of those very exclusions, many individuals were unable to claim on their loan insurance as and when they needed to. This may have resulted in their debts becoming even more severe and most certainly brought on financial difficulty through no fault of their own. As a result, in some cases, loan insurance represented very bad value indeed.

Some of the exclusions contained within the loan insurance small print should have been highlighted by sales representatives that sold the loan insurance to individuals in, but profits were apparently more important. This simply serves to highlight the fact that the general public needs to be more informed about loan insurance and what it can do for them.

It is most definitely up to the consumer to read the terms and conditions associated with the loan insurance that they are considering to make sure that they would qualify for a payout should they need to claim. This is absolutely necessary for peace of mind and also to escape the individuals that would dupe them for profits and results. Instead of being a statistic, consumers need to be pro active and help themselves because, as far as loan insurance is concerned, there are very organizations that will do it for them.

Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of loan insurance, mortgage payment protection insurance and income protection insurance.

Article Source: http://EzineArticles.com/?expert=Simon_Lance_Burgess

Insurance to cover your Home Loan Payments

2008-09-19T02:30:00.000-07:00

In this era of cut throat competition, where banks are introducing new schemes day after day, the insurance companies are not left behind. Private sector insurance companies have come up with innovative scheme where one can have a security of repayment of a loan if the borrower expires suddenly.

People do not prefer to take a home loan because of the risks associated with it. They are more worried about the uncertainties of life that holds them back from taking such a loan. Long loan tenure and repayment are among some of the top risks that come to the mind while opting for a housing loan.

As people are becoming more conscious about the uncertainties of life it make sense to pay a little extra and be secure of unexpected risks in the future. Introduction of schemes that protects a person against such risks is now becoming common.

Now-a-day the market is concentrated with several insurance products and innovation of home loan insurance schemes is the new attraction amongst the people. These schemes provide a wide range of choice for a person who wants to protect his home loan. Majority of these products currently available in the market are flexible enough and the premiums paid against them are eligible for tax exemption under the Income Tax Act.

Insurance schemes offered in the market have multiple options and a person can choose one that suits him the best. A variety of options can be combined together so that the policies can be modified to meet the specific requirement of a person. The premiums and returns differ according to the service provided under the policy

The insurance cover can be taken for entirely insurance purposes or for insurance and investment combined.

The policies that are based on entirely insurance purpose covers only the risk of non-payment due to a sudden demise of the borrower. Once the loan is repaid the insurance cover comes to an end and the borrower does not get anything. On the term's expiry, the borrower only gets the sum assured and the cover ceases without any maturity benefits. This is because term insurance plans are pure risk covers without any investment dimensions. Therefore, premiums under these plans are the lowest.
http://www.rupeetimes.com/news/home_loans/insurance_to_cover_your_home_loan_payments_1633.html

Credit crunch: Insurers refuse coverage of some home loans, in areas

2008-08-10T07:45:00.000-07:00

WASHINGTON -- Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow -- even for those with good credit.

Mortgage insurers, whose backing is required for borrowers who can't afford the traditional 20 percent down payment on a home, have already flagged nearly a quarter of the nation's ZIP codes where they refuse to insure some home loans.

That encompasses a wide variety of neighborhoods: McMansions in Scottsdale, Ariz.; luxury Miami condos; 1960 ranch houses in Flint, Mich.; and early 20th century kit homes in Metuchen, N.J. -- and houses in Utah's St. George.

The entire states of California, Florida, Arizona, Michigan, Ohio and Nevada -- which have seen the highest foreclosure rates and the worst price declines -- are blackballed on some mortgage insurers' lists. Twenty-two zip codes in the St. George area were included on lists this month from AIG United Guaranty and Radian Guaranty that flagged "declining markets."

Banks that have lost billions because of bad bets during the housing boom are now reverting to strict lending standards not seen in nearly 20 years, according to industry data and interviews with lenders.

For new homebuyers and those seeking to refinance, it can mean higher down payments and a higher bar for credit scores, among other requirements. The toughest restrictions are in markets where home prices are falling, though regions where property values are rising are not immune.

"We're in the midst of an epic, broad, sweeping change in the mortgage industry," said Chris Sipe, a loan officer with America East Mortgage in Frederick, Md.

The reluctance to extend credit comes despite a flurry of government initiatives, including steady interest rate cuts by the Federal Reserve, intended to make it easier for would-be borrowers and those facing interest-rate resets on their mortgages.

Lenders' growing leeriness threatens to dampen sellers' already soggy prospects for the spring homebuying season -- and that means more pain for the already battered housing sector and the broader economy.

In recent weeks, mortgage insurers have flagged more than 9,600 ZIP codes in at least 34 states where they won't insure certain types of home loans -- those for investment properties or second homes, those with riskier adjustable-rate or interest-only mortgages, or for buyers making down payments of less than 3 percent.

With banks and mortgage insurers pulling back, state and federal programs for first-time buyers and people with poor credit are attempting to fill the void.

Don Brekke, an equipment operator from Colorado Springs, Colo., tried to buy a bank-owned 1950s ranch home for $113,000. At first, he couldn't get a loan because the house was in a potentially declining market and lenders required a 10 percent down payment, more than he could afford.

Ultimately, he was able to qualify for a 100 percent loan from Colorado's state financing authority, and he plans to close in the coming days.

"It was a bunch of headaches -- going around and around to get this done," Brekke said.

The combination of sinking home prices and tighter lending standards has been a major aggravation for Ron Broussard, a 38-year- old sales representative for a home builder.

Broussard took advantage of soaring Southern California property prices three years ago to refinance a loan on a house he had owned since the late 1990s. Today he's still stuck with a $720,000 mortgage and has been renting it out since moving with his family to Texas a year ago. Once appraised for $1.1 million, Broussard's lender now says it's worth about $300,000 less.

He does not yet owe more than the property is worth, but Broussard worries that is a possibility.

"The way the market's going, you know, who knows?" he said.

Broussard has found little sympathy from his lender, Countrywide Financial Corp. While Broussard accepts responsibility for taking out a mortgage whose monthly payments are due to skyrocket once the unpaid principal exceeds the home's value by 15 percent, he feels betrayed by the lender's unwillingness to negotiate better terms.

The stinginess of banks is showing up in home loan statistics: The value of all new mortgages plummeted to $450 billion in the fourth quarter of 2007, down 38 percent from a year earlier, according to trade publication Inside Mortgage Finance.

Subprime loans, made to borrowers with poor credit, virtually disappeared from the market, plummeting 90 percent to $13.5 billion in the October-December quarter.

There is a silver lining: The Federal Reserve has repeatedly cut interest rates, helping borrowers whose mortgages were just about to reset to higher rates and people with student loans. Reflecting the Fed's efforts, rates on 30-year mortgages dropped below 6 percent this week for the first time in more than a month.

But the long-term impact of the Fed's move is far from certain, and the central bank's actions could end up feeding inflation and pushing up long-term rates.
http://findarticles.com

Tata Capital to enter home loans business

2008-08-01T20:14:00.000-07:00

K.R.Srivats

New Delhi, Aug 1 Tata Capital Limited, a wholly-owned subsidiary of Tata Sons Limited, plans to enter the booming home loan market by March 2009, its Managing Director and CEO, Mr Praveen P Kadle, has said.

“Although we will be a late entrant in this market, we see good business opportunities in offering home loans. We hope to start this by March next year”, Mr Kadle said here.

Tata Capital, a non-banking finance company, had commenced its operations in 2007. This had marked the entry of Tata Group into a host of new financial services. Currently, the company was capitalised at about Rs 2,000 crore and offered suite of products across multiple financial domains—personal loans, car loans, distribution and broking, wealth management, SME Finance, capital markets, private equity and infrastructure finance.

PE Fund

Mr Kadle also said that Tata Capital would by end-September launch its first private equity fund targeted at opportunities in mid-sized companies. While the size of the fund was yet to be finalised, indications are that the initial fund size may be around $ 250 million. Plans are afoot to also launch a venture capital fund focusing on the technology space (information technology/telecom).

Currently, the balance sheet size of Tata Capital is around Rs 4,000 crore. On whether the company would look at inorganic growth, Mr Kadle noted that most of the opportunities here were expensive. “Indian valuations are expensive. Inorganic growth may not be attractive, but that does not mean we will not look at inorganic growth”, he said.
Insurance broking

Meanwhile, Tata Capital would soon foray into insurance broking. “A subsidiary of Tata Motors has got licence for insurance broking from IRDA. This company would eventually come under Tata Capital. We will also get into commodities broking soon”, Mr Kadle said.
http://www.thehindubusinessline.com/2008/08/02/stories/2008080252280600.htm

Home Insurance Guide - Secure Your Home With Home Insurance

2008-07-27T09:37:00.000-07:00

Home insurance refers to an insurance policy that is a combination of personal insurance protections. Home insurance policy protect against certain accidents that can happen at the home. It is also known as homeowners insurance. Home is a largest investment for all thats why home insurance policy is essential to protect your home. Home insurance policies generally provide coverage against theft, fire, lightening, smoke, frozen pipes, ice and snow.

Cost of home insurance depends on the cost that is required to replace the house. It is a contract including all items that should be covered or not. Home insurance policy normally doesn’t include claims against earthquakes, floods, war or ‘Acts of God’. Sometimes homeowners can purchase special insurance that provide protection against flood and earthquake.

Home insurance policy is a contract that works for a limited period of time. Insured party has to pay an amount of premium to the insurer for each term. Sometimes insurer charges a lower premium. Another type of home insurance is perpetual insurance that is not fixed for a fixed term and can be acquired in some areas.

Buyers should read all contents of the policy at the time of purchase. They should maintain a list of personal property and review their insurance policy annually. They should read all terms & conditions before signing any type of contract.

About Author: The author owns a website on Home Insurance. Website provides information about home insurance, homeowners insurance, and some tips to buy home insurance policy at cheap rates. To get more information click: Homeowners Insurance

Article Source: http://EzineArticles.com/?expert=Gagandeep_Dhaliwal

Home Improvements Could Leave Prospective Sellers Under-Insured

2008-07-19T03:13:00.000-07:00

With a sluggish housing market, homeowners thinking of upgrading or extending their homes to increase saleability should be careful not to become under-insured, warns Confused.com.

Cardiff (PRWEB) July 19, 2008 -- Homeowners turning to DIY and home improvements in order to give their property a boost need to be aware that neglecting to inform their home insurance provider of any additions to the house's build/value will mean that these additions will not be covered by their policy.

For example, an extension adding £20,000 of value to a property will go uninsured unless buildings insurance is upgraded to specifically cover it. Failure to cover the extension means that the homeowner could be liable for any repair bill should something go wrong. Therefore, anyone making such improvements should be mindful of keeping their buildings insurance policy up to date, as the rebuild cost will rise accordingly.

Confused.com Product Director Simon Lamble said: "Additions to the home such as conservatories or extensions are costly, and while they tend to increase the value of the property, this is money thrown away if home insurers are not informed and the improvement is subsequently, say, damaged in a fire."

"Likewise, if homeowners realise that they are staying put, and decide to indulge in a little luxury - such as upgrading their old TV to an expensive plasma or LCD screen - it's also sensible to check that these will be covered under their existing contents insurance. If their price exceeds the valuable items limit, remember to declare them separately."

Note also that some home insurance providers request to be informed when building contractors are working on a property. To this end, homeowners are advised to check their policies.

About Confused.com:

Confused.com is one of the UK's biggest and most popular price comparison services. Launched in 2002, it dominates the car insurance aggregator market with a massive 70% market share and generates over one million quotes per month. It has expanded its range of comparison products over the last couple of years to include home insurance, travel insurance, pet insurance, van insurance, motorbike insurance, breakdown cover and energy, as well as financial services products including credit cards, loans, mortgages and life insurance.

Confused.com has 62 motor insurance partners, and customers can save up to on average £208. It also has a panel of 43 for home insurance, and customers who use Confused.com for home insurance can expect to save up to £193.

Confused.com is not a supplier, insurance company or broker. It provides a free, objective and unbiased comparison service. By using cutting-edge technology, it has developed a series of intelligent web-based solutions that evaluate a number of risk factors to help customers with their decision-making, subsequently finding them great deals on a wide-range of insurance products, financial services, utilities and more. Confused.com's service is based on the most up-to-date information provided by UK suppliers and industry regulators.

Confused.com is owned by the Admiral Group plc. Admiral listed on the London Stock Exchange in September 2004. Confused.com is regulated by the FSA.
http://www.prweb.com/releases/2008/7/prweb1121704.htm

From May to May, home loan approvals down 44 per cent

2008-07-13T05:47:00.000-07:00

The home loan market continues in its state of torpor, according to the latest survey from the Council of Mortgage Lenders (CML).

The CML has found that just 52,000 new home loans were approved in May. That represents a small rise of 4 per cent from the previous month, but it is still a whopping 44 per cent lower than the same month in 2007.

"Lending levels continue to be lower than last year and any recovery is still some way away," said the CML's director-general, Michael Coogan.

He added that the number of loans approved for house purchases could decline further over the coming months, with property prices falling in many parts of the country.

The number of people choosing to remortgage in May was down 14 per cent on the previous month and 22 per cent year on year – even though an estimated 116,000 homeowners a month are now coming off comparatively cheap fixed-rate deals and, in most cases, seeing their mortgage costs go up. Normally, this would provide a spur to remortgaging but, because of the credit crunch, large numbers of homeowners are finding it difficult to find a deal competitive enough to switch to. In other cases, they are simply being prevented from changing provider as a result of the tighter criteria now imposed by lenders.

http://www.independent.co.uk/money/mortgages/from-may-to-may-home-loan-approvals-down-44-per-cent-866269.html

Home Equity Loans Are Great Tools for 100% Home Financing

2008-06-29T06:41:00.000-07:00

Are you considering buying a new home, but do not have the funds for the required down payment? Or maybe you save the money for the down-payment, but are not sure if you want to use it for another type of purchase? If either situation fits you, then 100% home equity loans, also called a zero down home financing, might be the solution for you.

The first step to understanding 100% financing is to be aware of something called Private Mortgage Insurance (PMI). According to All-Options, “PMI insures the lender against loss if the borrower defaults on the mortgage loan. PMI is usually required when the borrower’s down payment or equity is less than 20% of the loan value.” Although not every mortgage lender insists on mortgage insurance, those who adhere to the Fannie Mae and Freddie Mac loan approval guidelines will require it.

PMI is added into the cost of your mortgage, so your monthly payments are higher than if you had put 20% down on the loan. Therefore, many people who are looking for a no money down home loan and want to avoid PMI, turn to something called an 80-20 loan. An 80-20 home loan takes the cost of the home and divides it into two mortgages. The first mortgage is for 80% of the home’s value. Depending on the specific needs and wants of the borrower, the first mortgage can be a fixed rate, adjustable rate, or interest only loan. The second mortgage is for 20% of the cost of the home. This second mortgage, also called a “piggyback loan,” is usually a fixed mortgage or a home equity line of credit. With the two mortgages, you are financing 100% of the cost of your home AND avoiding the additional monthly cost of PMI.

Zero down home loans can be a great option for those who don’t have the ability, or the desire, to put down a large down payment. With an 80-20 mortgage, you are able to avoid PMI and the required 5% down payment that many conventional mortgage products require. Before you begin shopping for an 80-20 loan, it is important to know and understand your credit score, as many lenders require a strong credit history for this particular mortgage option.

Jennifer is an author who has produced many helpful home loan related articles: 100% Home Equity Loan Financing & Bad Credit Home Equity Loans. If you need more information for 80-20 home loan rates, or HELOC Refinancing, check out Second Mortgage to 125%.

Private Mortgage Insurance (PMI)

2008-06-15T01:04:00.000-07:00

Homeowners' insurance: The mortgage connection

2008-05-31T00:31:00.000-07:00

A home owners’ insurance is the cover for the house against natural calamities as well as liability. This covers the house and its contents but also other personal possessions which the house secures. The natural calamities include fires and winds. It covers thefts and vandalism as well. It is also called hazard insurance (http://www.mortgagefit.com/hazard-insurance.html)

It is not mandatory, like in the case of automobile insurance to have a homeowners’ insurance. But when one mortgages, the deed of trust or mortgage requires the collateral to be insured. This is because in the event of a default, the lender must not suffer. If in the time span the house gets damaged due to a wind or accident, the value on sale will decrease and thus the lender will not be able to get back the debt balance.

Why does the lender insist on a homeowner’s insurance?

Firstly, the lenders’ name or the mortgage company appears on the certificate of the insurance policy. The lender is categorized as a ‘loss payee’ or a mortgagee. This ensures that the lender is entitled to the insurance amount if the borrower defaults.

Secondly, the insurance premiums are paid little by little along with the monthly obligations or it is deposited in with impound or escrow account. In both cases the lender can earn the interest which is earned out of this amount. Moreover an escrow requires an amount much more than a single premium to fund the account.

The manner of payment of the insurance premiums differs from lender to lender. Some require that the insurance premiums be paid off in the first year after closing; while others will spread the same throughout the loan term.

What you should keep in mind before taking a homeowners’ insurance?

You should shop for an insurance agent extensively .You must go in for an insurance company which will make an honest evaluation of your home value.

This insurance is not only for a liability security it is important to the borrower as well especially if you aim for a refinance or a remortgage. The collateral remains the same .Thus you can still avail of a loan amount equal to the earlier mortgage amount if not more (due to appreciation).

http://www.ezinearticles.com

Credit crunch: Insurers refuse coverage of some home loans, in areas

2008-05-10T06:40:00.000-07:00

WASHINGTON -- Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow -- even for those with good credit.

"We're in the midst of an epic, broad, sweeping change in the mortgage industry," said Chris Sipe, a loan officer with America East Mortgage in Frederick, Md.

With banks and mortgage insurers pulling back, state and federal programs for first-time buyers and people with poor credit are attempting to fill the void.

Ultimately, he was able to qualify for a 100 percent loan from Colorado's state financing authority, and he plans to close in the coming days.

"It was a bunch of headaches -- going around and around to get this done," Brekke said.

The combination of sinking home prices and tighter lending standards has been a major aggravation for Ron Broussard, a 38-year- old sales representative for a home builder.

He does not yet owe more than the property is worth, but Broussard worries that is a possibility.

"The way the market's going, you know, who knows?" he said.

Subprime loans, made to borrowers with poor credit, virtually disappeared from the market, plummeting 90 percent to $13.5 billion in the October-December quarter.

http://findarticles.com

Home Owner Insurance Is A Necessary Buy

2008-04-13T08:53:00.000-07:00

There's little doubt that home owner insurance can be pricey, but going without it can cost a home owner a lot more than a thousand or several thousand a year in premiums. It should be considered as vital a purchase for a home as electric, furniture and a new roof when it's needed.

Why is this? The reasons to make sure your house insurance is current and stays that way are, in fact, quite many. They include:

* Mortgage agreement: Most mortgage companies will not finance a home loan unless there is insurance on the property. Going without home insurance can result in a default of the loan terms. This means the home owner can find themselves without a home. The expense might be an "extra" you don't want to pay for, but avoiding it just should not be considered an option.

* Property protection: A good policy covers your home in the event of some major emergencies. Consider the recent hurricanes in the Gulf Coast area and the importance of insurance should be more than evident. Covering such things as fire, storms, earthquakes and more, a good home owner insurance policy simply protects your investment in your home. In essence, this means it protects your life, too. Remember, most policies don't cover floods though, so if you need this type of home owner insurance, you'll need to check into a separate policy.

* Personal liability protection: A home owners insurance policy can also protect you if someone becomes injured while visiting your property. A slip and fall, a trip, a dog bite, a falling roof shingle and so on can all result in litigation. When an insurance policy is present, these things are covered. This takes the headache and nightmare off of you while the insurance company handles the issue.

* A place to stay: Most include clauses that give you a place to stay if major damage is being repaired on your home. In the event of a fire, tornado or so on, you might have to move out while repairs are made. Rather than having to pay a mortgage and rent, too, a home owners insurance policy frees up your bank account to simply handle the mortgage.

* Replacement of personal items: When major emergencies happen, oftentimes a lot of personal items are lost. Most home owner policies will pay for such things as furniture, electronics, clothing and so on. The replacement costs can be outrageous, but a good home owner insurance policy will handle them for you.

Going without home owner insurance is like getting a glass of water without the glass. It doesn't make sense. Even though the expense can be high, especially in risky coastal areas, the price of the policy will be worth every penny if something bad does happen.

Whether you own your home outright or a bank is involved, making sure home owner insurance is current is a very smart thing to do. You never know when tragedy will strike and having coverage is like having money in the bank.

http://www.ezinearticles.com

Understanding Home Insurance

2008-04-02T23:26:00.000-07:00

In today's generation home insurance has created a mark among all other forms of insurance. Homeowner's insurance policy provides insurance to personal possessions including the house garage and other structures of property against certain risk factors like theft or fire.

Typical Homeowners insurance policy has two main sections.

Section 1 includes the property of the insured and Section 2 includes the personal liability coverage that needs to be insured.

At times, lender might require homeowner's insurance as part of requirement in obtaining a mortgage. While buying home insurance policy one has to keep certain important things in mind. One needs the best level of protection as well as the provisions for valuables like jewelry, computer equipment, kitchen appliances and other possessions. In order to have adequate home insurance coverage one must check with agent or home insurance company beforehand to be sure of the adequate coverage instead of relying on the coverage mandated by the bank or mortgage company. Those levels are for protecting the house only and eventually skip the protection of possessions.

While applying for home insurance the insurance company needs to know about your present occupation, employment history, marital status, date of birth and social security number. The insurer needs to check the credit criminal and insurance history. Insurance claims of past is also checked by the home insurance company. The decision to chose a specific type of homeowner's policy, deductible and how to pay for the coverage depends upon the homeowner.

There is exception to destructions like flood, earthquake and poor maintenance of house. Home insurance is needed and most lending institutions will require the homeowners to acquire a certain amount of coverage before issuing a loan to purchase property. The lender has a vested interest in property and wants to ensure financial compensation in the event of disaster. Homeowners may suffer a default of loan if they fail to carry the level of coverage needed by lender.

http://www.ezinearticles.com/

Understanding Loan Insurance Policies

2008-03-08T22:48:00.001-08:00

A loan insurance policy is also known as loan payment protection insurance or ASU insurance (which is accident sickness and unemployment insurance) and it can, providing your circumstances are right, provide you with a monthly tax free sum of money with which to continue meeting your loan or credit card repayments if you find yourself unable to work due to accident, long term sickness or unforeseen unemployment.

For a fixed monthly premium you can take out loan insurance policies to cover against the possibility that you might lose your income and be struggling to make your monthly loan or credit card repayments. A policy would begin to kick in and pay out once you had been out of work usually for 30 days or more and would continue to pay out for a period of up to 12 months - with some providers’ policies, up to 24 months.

This will give you adequate time to get back on your feet or find work.

The best way to purchase loan insurance is to buy it independently rather than alongside the loan when you take out the loan. While purchasing the cover alongside the loan is the easiest way to take the cover it is also the dearest, as high street banks and lenders charge notoriously high premiums for the cover in order to make big profits. However, there is another possibility when it comes to taking the cover and that is to go to a standalone provider. They will more often than not offer the cheapest premiums for loan insurance policies.

Loan cover can be taken out just to guard against accident and sickness only, unemployment only or to cover accident, sickness and unemployment. You have to make this clear at the outset when it comes to buying the loan insurance to ensure that you get the protection you need.

http://www.ezinearticles.com

Home Mortgage Insurance - Piggyback Loans Putting Mortgage Insurers in the Trough

2008-03-01T10:18:00.000-08:00

Because home prices have made twenty percent down payments impossible for legions of first time home buyers, a dual-loan concept has evolved for home financing that has made home mortgage insurance companies very unhappy. Also known as ‘private mortgage insurance (PMI), this policy is required of every home buyer who is taking out a mortgage of more than eighty percent of the home purchase price. The policy protects the lender against default, while the borrower pays the mortgage insurance premium. The policy is required until the mortgage is paid down to seventy eight percent of the home’s appraised value.

Home mortgage insurance can be expensive: as high as $1,500 per year on a $200,000 home. Divide that by twelve and you have the addition to your monthly mortgage insurance premium. In order to get around PMI, lenders have been offering dual loan packages with a mortgage of eighty percent of the purchase price and a second loan, called a piggyback loan that covers whatever portion of the 20% down payment that the borrower cannot meet. Thus an 80-15-5 loan package is an eighty percent mortgage, a fifteen percent piggyback loan and a five percent down payment.

While the additional loan will be at a higher rate than the mortgage, the interest on that loan is deductible whereas the premium on mortgage insurance is not. As a result, it is often cheaper to opt for the piggyback loan than mortgage insurance. According to one estimate, forty percent of all home purchases with down payments of less than twenty percent now opt to avoid home mortgage insurance.

Even though the borrower is paying closing costs on two loans, avoiding home mortgage insurance is still a better deal in the short run. Whether or not it’s a better deal in the long run depends on several variables. If the buyer is going to be in the home for a long period of time, he may be better off with the larger mortgage at a fixed rate and paying the mortgage insurance premium until he has sufficient equity. Eventually, the cost of the insurance premium will cancel out.

That process could take several years however, and if a buyer is not going to be in the house for an extended period the choice of dual loans and dual interest deductions may be a better bet – particularly if the principal mortgage is an ARM. Home mortgage insurance companies have responded by hurling insults at all things “piggyback” and by introducing products such as mortgage insurance premiums that are folded into the loan interest rate by raising it a quarter point or some similar amount.

With this design the lender pays the mortgage insurance premium. Because it’s folded into the mortgage premium, the policy premium may be deductible as interest. The policy can’t be cancelled in this model, however; in order to remove it from the mortgage you have to refinance. Home mortgage insurance companies have been lobbying Congress aggressively to provide deductible status for their product.

Home Equity Refinance

2008-02-08T19:42:00.000-08:00

Home equity refinance can come in handy when your main objective is to pay off your credit card debt or you want to remodel your home. The best part about home equity refinance is that you get the much-needed cash very quickly and that too without any problem. This is not the case with traditional refinance where you need to fill lots of application forms and go through various procedures.

No closing costs-

Another good thing about home equity refinance is that you don't need to pay any sort of closing costs for the loan. However, there are few financial institutions that will charge you few dollars for processing the loan but it is still quite low as compared to other loans.

Private mortgage insurance-

Don't opt for private mortgage insurance because not only it is useless but also quite costly in nature. You have to pay private mortgage insurance if you borrow against your home for more than 80 per cent of the value. You can avoid private mortgage insurance by going for a home equity loan, where you can borrow up to 100 per cent of the equity you possess.

Low interest rates-

Equity loan market is quite competitive in nature. Because of this, there is not much of a surprise that you can clinch the best equity loan deal with low interest rate by shopping around and comparing lenders. Local financial institutions are the brilliant source for these kinds of loans. In some cases, big national lending companies can also help you immensely.

Home Insurance

2008-01-19T02:17:00.000-08:00

Insurance is a contract between the insured and an insurance company that protects against the risk of large and calamitous loss.

The importance of home insurance cannot be undermined. There are two primary reasons why home owners buy home insurance. Firstly, a home is the most important asset belonging to a home owner, and the need to protect it is imperative. Secondly, mortgage lenders require home owners to own insurance to protect the lender’s investment form damage or loss.

The major risks covered by home owner’s insurance are:

Damage or loss to the home and other structures included on the property
Damage or loss to personal property items in the home
Injury or harm to third parties who come to your home
The home insurance covers the person insured and the members of his home. Third parties who come to your home are also covered through the liability portion of the insurance policy for injuries. Additionally, you and your family members also have some liability protection to others even while you were away from your home.

There are two distinct types of insurance under home insurance - Title insurance and Homeowner's insurance. They protect against totally different types of risks.

Homeowner's insurance covers loss or damage to the home, structures on the property, personal contents of the home, as well as third-party liability.

Title insurance, on the other hand protects ownership interests in the real property. Title insurance is purchased to guarantee that the home owner has a good and marketable title to the property. When purchasing a home by means of a loan, lenders require you to obtain title insurance. That way they know that you have clear ownership of the real property and the home.

FHA Home Mortgage Loans: Understanding The Benefits of FHA Mortgages for Purchase or Refinance

2008-01-16T22:00:00.000-08:00

We all try to find the best deal when shopping for a mortgage. And, you’ve probably hear of the FHA loan. FHA stand for Federal Housing Administration, and with built-in mortgage insurance, an FHA loan could help homeowners save hundreds of dollars a year.

The law requires any loan for more than 80% of a home’s fair market value or FMV to carry Private Mortgage Insurance. In fact, Private mortgage insurance costs homeowners insurance premiums ranging from $250 to $1200 per year. And, the insurance is not tax deductible.

FHA Today.com shows “The Federal Housing Administration (FHA), a wholly owned government corporation, was established under the National Housing Act of 1934 to improve housing standards and conditions. Its goal was to provide an adequate home financing system through insurance of mortgages, and to stabilize the mortgage market.”

The FHA program basically has three types of loans:

1. BASIC FHA requires 3% down payment and allows refinances up to 97% loan to value.

2. Disaster Victim Program requires no down-payment and allows 100% financing of the home.

3. Rehab-Loan Program allows borrowing above the purchase price to make home improvements.

Hopefully, you aren’t the victim of a disaster. “It is not a program reserved only for first time home buyers.” Shows FHAToday.Com. “You can buy your third or fourth home with an FHA loan. The only stipulation is that you may only have one FHA loan at a time.”

An FHA home loan is like having mortgage insurance for free. All of the interest is tax deductible according to the IRS.

For the homeowner looking to pull equity out of their home. The basic FHA program allows a home equity refinance of up to 97% of the home’s FMV. That means, homeowners are allowed to pull 17% more equity out of their home, without worrying about the extra costs of PMI. And, an FHA loan could prevent homeowners from having to carry two additional loans to pull more equity. Carrying fewer loans could mean lower interest rates and lower Combined Loan to Value Ratio. With fewer loans ands a lower CLTV, an FHA home loan could save homeowners the extra cash they need.

Homeowners Insurance - What Is Guaranteed Replacement Cost?

2007-12-23T06:21:00.000-08:00

Many times when you apply for a homeowners loan, the bank requires you to insure the home for the entire amount of the loan. The value of the land, which may be substantial, is included in the purchase price, and in the event of a catastrophe, the land generally is not going anywhere. To get around that, insurance companies came up with a guaranteed replacement cost policy. If you reasonably insured your house for $100,000, and after totally burning down it cost $150,000 to rebuild it, the insurance company would be on the hook for the entire $150,000. This relieved the homeowner of the responsibility of insuring his home for the entire amount of the loan if it exceeded the replacement cost of his home.

Due to several recent natural disasters, many insurance companies have discontinued their guaranteed replacement cost policies. Some will provide a percentage of the policy coverage amount at no extra cost, but many will only pay up to the policy limits to rebuild your home in the case of a loss. I strongly urge you to determine the replacement cost of your home, contact your insurance company to see if your current policy will cover that value and increase coverage if need be.

Understanding Gap Insurance

2007-12-16T02:05:00.000-08:00

The most significant aspect that differentiates a person who owns a car and a person who takes it on a loan is gap insurance. Gap insurance policy actually covers the gap between the lease amount and the amount provided by the insurance company at the times of vehicle theft or damage. This particular insurance coverage type has been designed so as to protect the investment.

There are several companies offering gap insurance. Many times, gap insurance is included in the lease agreement. Gap insurance is required when the buyer has taken the vehicle on lease without even making 20 percent down payment. Other situations where gap insurance is required include car finance that has been continuing for the last four years or when the existing car loan amount also includes the debt on the previous car.

According to the market, the value of a vehicle depreciates as soon as it is purchased from the dealer. This value is further lowered once the vehicle meets an accident. Depending on the damage and the cause of the accident, insurance companies determine the amount to be reimbursed towards insurance claim. After deducting this amount from the actual loan amount, the consumer is now left with the option of paying the remaining loan amount. This amount could be substantial on numerous occasions that could leave the customer in a financial crunch. Gap insurance protects customers from such situations.

However, gap insurance is not required for every individual who has purchased a vehicle on loan. Gap insurance is not required when the regular insurance policy has the option of paying off the entire finance amount in case of damage or theft.

Key to Choosing Life Insurance

2007-12-08T23:05:00.000-08:00

Term Life Insurance

There are various forms of term life insurance available. The main feature of term life insurance is that it offers death protection, protection for a stated time period, referred to as a term.

Term life insurance is the easiest to understand. It's very simple, and it was intended to provide temporary life insurance for people who have a limited budget available. Term life insurance can be purchased in relatively small amounts.

A good use of term life insurance is to buy a large amount that would cover a loan. For example a loan on the home, a mortgage as that is a temporary and defined time period. For paying off the mortgage, the loan is a short range loan to fulfill a short range goal. This is a good idea to use during the child rearing years.

A term life insurance policy can be renewed once the term is ending. To continue it will continue add higher premiums as the insured is older at the time of renewal. In most states the insurance can be renewed as late as age 85 or 95.

The Advantages of Term Life Insurance.

Term life insurance is affordable. The premiums can be adjustable, which means the company may raise or lower them at some point that's been specified in the policy based on changes in the policy owners life.

Even though term life insurance can be renewed, at the time of renewal the policy owners life is probably at a different age and his health may be different so the terms of payment may be higher.

While term life insurance does not have the greatest long lasting benefit it serves a valuable purpose in the short term. It's easy to understand and easier to afford than other life insurance products.

A term life insurance policy can be converted to a permanent life insurance policy within the same insurance company to age 75.

Mortgage Loan – Loan to Value Ratio Explained

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The loan to value ratio is an important aspect of your mortgage application. This ratio affects your approval status and the interest rate you qualify for. Here is what you need to know about loan to value ratios.

The loan to value ratio represents the part of home you are financing against the total value of the property. Mortgage lenders have specific guidelines for lending at a certain value of this ratio. If you are outside of the guidelines for a particular lender’s loan to value, your mortgage application will be denied.

Calculating Loan to Value is easy. Simply divide the total amount you wish to borrow by the value of your home. For example, if your home is valued at $180,000, and you are applying for a $120,000 mortgage loan you divide $120,000 / $180,000, and your loan to value ratio (LTV) is .66 or 66%.

The higher your loan to value ratio is, the less equity you own in your home. Mortgage lenders consider high loan to value ratios to be a greater risk. If your loan to value ratio is greater than 80% your mortgage lender may require you to purchase Private Mortgage Insurance as a condition for approving your loan. This insurance protects the lender from losses if you default on your mortgage.

If you are applying for a mortgage with a high loan to value ratio, expect the lender to charge you a higher interest rate for the loan. To avoid higher interest rates and private mortgage insurance you should save money for a larger down-payment. Use a mortgage calculator when shopping for your mortgage to help determine exactly how much mortgage you can afford. To learn more about finding the right mortgage for your situation, register for a free mortgage guidebook.

Life Insurance Settlement Loans

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A life insurance settlement refers to selling a life insurance policy to a third party buyer in exchange for a lump sum amount. After the settlement of the policy, the original owners are no longer responsible for paying the premiums. On maturity of the policy, they will not receive any amount as maturity benefit. However, if the policy owners need to raise money for any financial requirement, there is no need to sell the policy. Policy owners can obtain a life insurance settlement loan against the policy.

To apply for a life insurance settlement loan, the borrower needs to state the reason for the financial requirement in detail. This is where life insurance settlement loan differs from settlement, as there is no need to answer questions about the use of money. The life insurance settlement loan is required to be repaid over a certain period of time. The installments for repayment are monthly as in case of any other loan. The main advantage of such a loan is that, the policy owners get to keep the policy and also receive all the maturity benefits.

Policy owners need to approach the insurance company, which has written the policy for borrowing the loan. They need to fill an application form, mentioning all necessary personal details as well as details of the policy. It is up to the insurance company, to determine the amount of the loan sanctioned. This approved amount depends on the face value of the policy, and is usually calculated, based on the percentage of the policy value. The insurance company also determines, the period or term of the loan along with the installments. The insurance company applies a rate of interest on the loan during repayment. The policy papers are withheld with the insurance company till the loan is repaid. The policy is considered locked during this period. Policy owners are required to continue paying their premiums for the policy, in addition to the installment on the loan.