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Being mortgage free is the paradise that all mortgage holders are looking for, and thousands of people every year decide to over pay on their mortgage to help them achieve this goal. Whether this overpayment is a lump sum, or one or two extra payments over the course of a year, reducing your mortgage will help you to save later on in life.

However, does the notion of paying off your mortgage early distract you from putting money away in a savings account? At the end of the day, what is a better position to be in – mortgage free with no savings, or savings and a hefty mortgage? Let’s take a look at the pros and cons of paying or your mortgage, or saving the money instead.

Savings

Before you make a decision about whether or not to save or spend, first consider whether you have enough of a savings fund to build on. In order to cover any emergencies, it’s always recommended that you have at least four to six months’ worth of savings in the bank. Even if you do have a decent amount of money to fall back on, that still doesn’t mean that you should spend it on paying off your mortgage, or clearing a decent chunk of it at least.

Before using this money to pay off your mortgage, consider paying off any other debts you have, like credit cards or other financing debts. These expenditures will typically have higher rates of interest, meaning you’ll be saving yourself money in the long run if you pay these amounts off. Only then should you consider paying off your mortgage with your savings. There could be early-repayment penalties if you decide to clear some of your mortgage, so always seek the advice of your m

Making Sense Of It All

In order to choose saving your money over paying off your mortgage, your savings account would have to offer better interest rates compared to the money you would save reducing your mortgage debt in the long run. If we take a look at the best mortgage deals verses the current interest rates across the typical high street savings accounts, saving your money wouldn’t be advisable.

As interest rates are very low at the moment, you’ll certainly be paying more interest on your mortgage repayments compared to the money you would save with your savings account. Getting an ISA savings account is key if you want to avoid income tax on savings interest, but again, what you are able to save in a savings account must also be compared to what you would knock off your mortgage in the long run.

If you are able to make monthly overpayments on your mortgage, then you could find that you’re making quite a saving on your debt. Over a typical 25 year mortgage, a homeowner could save over £8,000 just by making an extra £50 payment every month, based on a £150,000 mortgage. Furthermore, the more you can pay off on top of your monthly repayments, the more you’ll save!

For some reason, most of the marketing behind home ownership leads you to believe that you should be paying off your home for the next 20-30 years. People even have ‘mortgage-burning parties’, where they (symbolically or actually) burn their mortgage documents at the same time that they retire.

If it sounds crazy to take over 20 years to pay for something, don’t worry, it’s absolutely possible to pay off your home faster.

Interest Rates Are Important

A lot of people assume if you’ve been dealing with a bank for most of your life that they will be the best option for getting your mortgage. This is not always the case and it’s imperative that you shop around. Even a 0.05% difference on the interest rate will mean thousands of dollars over the life of your mortgage.

Websites like http://mortgagerates.ca are fantastic for comparing lenders (even those you’ve never heard of) and making sure you’re getting the best rate. Don’t be afraid to negotiate with your bank. If you prefer to keep your accounts in the same place, at least explain to your rep at the bank that you have better options and ask if they can match them.

Your Mortgage – Pre-payment Options

Interest rates aren’t the only consideration for your mortgage. If you want to pay this off aggressively you’re going to need some pre-payment options. There are typically two ways you can pay down your home faster.

• Monthly payment options – most mortgage lenders allow you to modify the amount you’re paying every month. This is usually listed as a percentage of your payment. For example, if a lender allows you to bump up your payment by 25% and your current payment is $1,000 a month, you’ll be allowed to increase that to $1,250. You can get mortgages that allow up to a full 100% increase.

• Lump-sum payments – You should also have the option to contribute lump-sum payments whenever you want. These are great for things like tax refunds, bonus cheques, and other found money. These are typically offered again as a percentage, this time of your total mortgage amount, and range from 10% to 25%. So if you owe $300,000 on your mortgage, you’d be able to contribute up to $75,000 a year (at 25%) on top of your regular payments.

Finding The Money

You might be laughing at the idea of having an EXTRA $75,000 a year kicking around, and yes, it’s probably not going to be that much. What it does is give you options.

If you really decide to get serious about paying off your home, it’s time to prioritize. Remember that every dollar you put towards it now will save you all of that compounding interest in the future, so the time to make the most sacrifices is right now.

Make cuts wherever you can. Use an online mortgage payment calculator to calculate how much every extra payment will save you in the long run – this will keep you motivated.

There is help for our veterans who are looking to refinance their mortgage loans. With the help of a VA home loan when using a VA Streamline loan the refinancing process should be very easy.

What Is The VA Streamline Loan

The VA Streamline loan was created in 1944. The purpose of this loan was to give aid to the former military personnel when purchasing their homes and helping maintain their homes. This is a loan that was guaranteed by the Veteran’s Administration. With this type of a loan the veterans would receive an interest rate that was considerably lower than that of a typical financial lender.

Even as a veteran there are those that are being denied for the VA Streamline Loan. They are being denied due to a not so good credit history or because the home that they own has lost it’s original value. Believe it or not even though the banks are denying you there is still help and options available to you.

Guidelines To A VA Streamline Loan

Even though the lenders claim that they know all of the mortgage rules and policies for every type of a loan out there the personal loans for bad credit lenders who are unfortunately denying the VA Streamline loans are doing so because they do not know the policies of the lending for the Veteran’s Administration. They will deny the loan due to them not wanting to take the risk. This is not correct. It is important that as a veteran you know the guidelines and rules as well as the lender.

Guidelines

The first and major thing to remember when applying for one of these loans is that there is no credit score required. Many lenders will demand that they run your credit score. If you are a person with a not so good credit history it might be a great idea to walk away from that lender and find one who will follow the correct policies of the Veteran’s Administration.

Another guideline that should be followed is that there is no appraisal required. This is a very important guideline to remember because in today’s housing market there are many people who have upside down mortgages. This is because the values of their homes have crashed and the amount of their mortgage is more than what their house is worth. As a Veteran you have the option of refinancing your home under the VA Streamline loan without having to worry about how much is owed on your current mortgage loans with no credit check.

The last guideline is that manufactured homes are eligible. If you are a veteran with a current VA mortgage loan you will be eligible for this loan whether you have a manufactured home or a home that the frame has been built.

Conclusion

As a Veteran you have many advantages when it comes to certain things. A home loan and a refinance of your home loan is one of these advantages. You should take advantage of all of the benefits that you receive. After all you have served the country and you deserve what it gives back to you.

Mortgage lenders are definitely making it harder for you to obtain a mortgage.
Especially when compared to the boom years when criteria was probably too
relaxed. It is a hard market to research at the moment because lenders are
constantly moving their goal posts as to what is required to obtain a mortgage.

One of the big changes in the market is that lenders are requiring large deposits
to allow you to go onto an interest only mortgage. Historically interest only
mortgages were available to everyone disregarding deposit levels however over the years this has changed. Over the last couple of years it has been pretty
standard for a 25% deposit to be required to go onto interest only however
these levels have increased by some lenders to 50%.

A repayment mortgage will guarantee that the mortgage is paid off by the end
of the term however an interest only mortgage is only paying the interest so at
the end of the term the mortgage amount owed will still be the same. This is a
big concern for mortgage lenders as at the end of the loan they will want the
mortgage to be repaid and is one of the reasons why there has been a reduction
in interest only mortgages.

To take out an interest only mortgage you have to prove that you have a
method to repay the mortgage through an alternative investment vehicle
such as an ISA. These checks are also becoming stricter to ensure that your
investment vehicle is realistically going to be able to pay off the mortgage.

This is just one way in which finding the right mortgage has become more
complicated due to the changes in criteria. There are also many other factors
such as employment status, proof of income, affordability and credit status.

It is wise to get advise if you have any doubt about whether or not you are
applying for the right mortgage because a mortgage broker can ensure that you
are not wasting your time and credit checks applying for a mortgage that you
may not be able to obtain. They can also ensure that you are getting the best
deal on the mortgage market.

In 2012, the HARP refinance program for underwater homeowners was revamped.  New guidelines have been set forth by the government and they are soon expected to be adopted by lenders.  But, will the HARP program 2.0, as it has been nicknamed, live up to the expectations?

First, let’s take a look at what this program was designed to do.  HARP was designed as a way for underwater homeowners to refinance their mortgages to current interest rates.  This is assuming that their current interest rate on their mortgage is higher than todays rates, which is usually the case.

Homeowners who are current on their mortgage payments and have a loan that is backed by Freddie and Fannie will be able to refinance the loans.  Homeowners who have late payments will not qualify and must look to other options such as loan modification or a short sale to avoid foreclosure.

The original HARP program placed a cap on your loan to value ratio, which eliminated many homeowners as participants in the program.  Too many people had homes that were worth far less than they owed.  With the new program, this cap has been lifted so that anyone who is upside down on their mortgage and meets the other requirements should be able to qualify and refinance.  Exciting, right?

Sure, if you believe everything that you read.

Here is the main problem I see with the HARP underwater refinance program:  The government does not control what lenders do.  They only set the “guidelines” for the program and expect lenders to adopt them.   The lenders have to agree to these guidelines and use them.

Why they won’t agree to these guidelines

Loans are backed by investors.  For lenders to agree to these guidelines, investors must agree to these guidelines as well.  Wall Street must agree to these guidelines!  Do you think an investor will let someone who owes $300,000 on their home that is worth $125,000 refinance to a lower rate? I for one, do not.

What I think will happen with HARP

When the guidelines are officially adopted by lenders there will definitely be a “feeling out” period.  Sure, HARP refinances will happen, but the majority of those refinances are going to be loans with an LTV (loan-to-value) of 125% or less.  This is what investors are looking for.  I think some lenders may be able to push up the cap to 135% or maybe even 145%, but I just don’t see it getting any higher than that.

HARP can say that they have new guidelines and no LTV cap for underwater homeowners looking to refinance, but it doesn’t mean it’s going to happen.

I imagine we will see similar problems with HARP that we saw with the HAMP loan modification program.  Sounds great, but not many homeowners will qualify and get the help that they need.

About the author:  Jeff G. is a prolific financial writer who has composed numerous articles relating to loan modification and the HARP refinance program.