InvestorBlogger

Needing a little help calculating your mortgage payments? Try this calculator. It may not be 100% accurate because of all the possible variations, charges, etc.., but with declining mortgage rates over the past few months, it will help you to do back-of-the-napkin type calculations to check your mortgage isn’t being grossly overcharged.

I noticed in my own bank statements how quickly the local bank was to raise rates in the past two years, but I am still waiting for a commensurate fall in the rates. I could very well be using this when I go to the bank to update the passbook.

Calculator is provided by Mortgage Calculator.

This article is guest written by Adam Hefner, and examines the different kinds of mortgage rates you may end up paying. I hope you find this useful.

How to calculate a mortgage payment is one of your most important decisions when purchasing a home. Rather than be a mathematician, you will just need to learn a little bit about the process and what it is all about. You will have many choices when it comes to figuring out what your payment will be. Key to the process is what your credit is and what you will want to borrow.

What kind of mortgage do you want? Whether you choose an adjusted rate mortgage (ARM), a fixed, or a balloon type payment will depend mainly on how much money you make and what your credit score is. These variations will cost you dearly if you are not well informed about their differences!

If you get a balloon mortgage you will have to pay it off or refinance it every 5 or 7 years generally. Interest rates can change daily and so will your ARM. Your rates could start as low as 5% and go up passed 8% in a short period. The rates don’t stop there either; they could go very high, with no cap. Don’t make the mistake of comparing a low ARM rate to a higher fixed rate, the fixed rate won’t change but the ARM will. With a fixed rate of 7% what you start with is what you will end your mortgage rate with.

Do you have a large or small income? When a loan agent reviews your loan they will look at you using between one fourth and less than one half of what you make monthly or yearly. The best bet is not to spend more than a third of the money you make each month on your house payment. Basically you can look at it like this, if you are bringing home $1200.00, you will want your house payment around $400.

Are you aware of your credit score? The four basic categories for credit scoring are poor, fair, good and excellent. If you have good or excellent credit, the interest rate that you are offered is usually going to be lower. If your credit is in the low ranges, you can expect to see higher interest rates. Most mortgage loans are based on simple interest.

One type of simple interest loan, the amount of interest is added each day. If your payment on the first day is $360, the next day would be $370 and so on. Each day your interest is added until you pay for that month. When you have made your payment, your principle will go down (the base loan amount), and interest will be added to that smaller amount. So you will be saving money each time you do this by paying less interest.

Mainstream mortgages are usually calculated as monthly simple interest. Regardless of what day you pay your mortgage it will not change what you owe because the interest is charged monthly, as long as you pay on time. When using a mortgage calculator it is important to know which type of interest you are going to go with, daily or monthly.

When you decide on how to calculate a mortgage payment, make sure you are familiar with all of the terms associated with your loan. You will have a choice of simple or advanced models. You will get a bigger financial picture when you use the more advanced mortgage calculators.

Save time and learn the best way to calculate a mortgage payment from your own home. For more, visit http://www.MortgageLoans-101.com where you’ll find this and plenty more on your mortgage loan needs.

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

In this regular feature, InvestorBlogger will publish stories and experiences that we all face everyday. This story is especially useful for those considering first time mortgages, especially those with extra frills (like credit cards, extra loans, 100%+ financing…),

When I bought my house, my mortgage company offered me a credit card that seemed like a very good deal. They would apply 1% of my purchases to my mortgage principal when that one percent reached $25. I accepted the card and I paid off the entire balance every month but found myself getting into a bit of trouble after about four months.

I paid off the balance each month and incurred no interest, but I was beginning to spend more. That end table was great and less than fifty dollars. A garden hose for next summer was on sale. I could replace my cheap microwave at 60% off and help pay down my mortgage.

One month the bill came in and I was glad I was sitting down. I’d gone from buying essentials to just buying and believe me, that was a very tough month to live through! Now I subtract charges from my checking balance, writing the amount in red. No more surprises when I treat the card as a debit card. I keep a better eye on expenses and don’t overspend. I’m still paying down my mortgage from my everyday purchases—just a little more sensibly.

Thanks

Shopper

InvestorBlogger writes:

However you pay when you out shopping, it’s always good advice to keep a track of the expenses that you incur. A little note in your notebook, an SMS, or a message on your answer machine/in your email-box… all of these are good reminders in case you threw away the credit card receipt. Of course, you shouldn’t throw them away, either. But this way you can double check your purchasing, and keep tabs on whether you are exceeding your budget or not.

More importantly, though, tying other financial products to your mortgage may not always be a good idea. Additional lines of credit, such as personal loans, 2nd home loans, credit cards, etc., may increase the loading of loans on you, increase the rates that you may for such loans, and may (as the writer found out) make repayments even more difficult on the primary mortgage, as well as other outstandings.

 

Judging by the number of posts that I have done on issues like secured loans, secondary mortgages, refinanced house loans, homeowner loans, etc.., you could be forgiven for mistaking that I wholeheartedly support them. But I do not. It really depends on who is borrowing, how much they are borrowing, what they are paying, why they need the money, …

Politics, Parents and Principal

For today’s post, though, I’d like to share an all too common problem in Taiwan that affects local homeowners, and this is a story that is true. One of my friends went back to visit her mother just last weekend because she had to vote in the Legislative Elections held in Taiwan nearly two weeks ago. On Sunday, I just happened to call her to talk about the rout that one of the political parties had experienced… Instead, I heard this rather disturbing story. (All numbers in NT$ – US$1:NT$32.5 est.).

The Principle Character and Her Principal

The mother (who is single, and has no independent income) was borrowing money as part of a secured loan on the family home. The house had been bought in the late 70′s in Taipei County, and had appreciated considerably over that time (by the order of 10x or more, I reckon).

But the mother had regularly dipped into the equity of the house for various reasons, including paying education fees, investing on the stock market, etc., so despite the value of the house increasing so much, and the initial mortgage being so little, the actual outstanding principal on the current loan agreements amounted to over $1,500,000 (I estimated it to be more than three times the original purchase price of the house).

Borrow and Spend Today: The End Is Nigh

Worse, just the day before the mother had tried to persuade her daughter and son to pay the installments on an additional $500,000 to fund living expenses for the mother (and unknown other expenses). This would have meant that the total amount of the expenses exceeded $2,000,000 and monthly payments would increase to approximately $20,000 per month.

Again, I don’t have access to the actual totals, the interest rates paid, or the terms of the loan(s), so I have no way to know if the amounts are correct or not. But typical mortgages in Taiwan are 20 years in length, and the APR is variable depending on the Central Bank of China’s lending rate. Obviously, secondary mortgages and ‘riskier’ mortgages may attract higher marginal rates than the standard rates (about 4% currently). Simple calculations using common numbers in Taiwan showed that they would need to pay an additional $3000 on the current installments – this is a conservative estimate. Given that they are already paying more than my own mortgage for their outstanding loan (and ours is $16,500 per month), it seems that they’d really be pushing the $20,000 mark.

Your House Is Not YOUR ATM Machine

There are a wealth of companies that in the late 1990′s and early 2000′s made a ton of money encouraging home owners to extract equity from their houses at variously reasonable to expensive rates to cover all manner of expenses:

• refurbishing
• new cars
• foreign holidays
• consumer items
• investment
• paying off credit card loans
• and any number of other probable reasons

Of course, when house prices were rising by 10% or more annually, this was an easy way to get ‘free’ money. And with interest rates at historical lows, who cared? You simply borrowed the money, waited a few months or years, and sold. Then the additional loans were paid off.

To buy a new house, you could always borrow 100% loans anyway (or more), and with rising house prices, that 100% mortgage would soon be a large fraction of the total value of your house. In fact, you could add all sorts of costs, fees, decoration, equipment, etc. to the value of the house loan in the expectation that next year, your house price would have simply increased enough not to worry about it.

An example: 2001 with a 100% loan on a $200K house becomes in 2002 an estimated 89% loan as you pay off the principal and the house price rises; and so on. The maths works nicely.

The Math Doesn’t Work (Anymore)

The math for most consumers no longer works (if it ever did) when house prices stagnate, inflation jumps, oil prices increase, the economy slows, and jobs start folding. In fact, for many families, these pressures didn’t just come one at a time, but they came altogether. Then interest rates started jumping, too. Even in Taiwan, interest rates have already risen by 25% or more from historical lows. In America and the UK, interest rates are already over 5% on many mortgages. And that’s for standard mortgages.

(all rates courtesy of BankRate.com)

Helocs are being quoted at over 6.5% in the US with some rates nearing 8% on a secured home.

Given that most pundits are expecting interest rates in Asia to return to more historical norms (ie. 5% and above which, in Taiwan, was around 8-9 years ago), interest payments on that extra could add another 10% to the total if the rates continue to rise. Of course, property prices are rather buoyant right now anyway, and when the next batch of presidential elections are held in March 2008, things could move up even more.

While Taiwan is experiencing an upswing again in property, employment, exports, stock markets, currency rates, etc.. the same cannot be said to be true of the US markets. The pendulum starts swinging the opposite way. And all those house loans (that seemed a ‘sure thing’, just a few short years ago) are now turning sour.

For individuals and families, it is going to mean a period of difficulty: less spending power, job insecurity, house prices dropping, perhaps even a recession.

Are you ready for a bumpy ride?

If you’re not, you should start to make preparations: shore up your emergency funds, cut your spending for the short term, pay off the high interest debt as fast as possible, and budget more carefully in the longer term. Trust me on that one: my wife and I had to do this last year when our business went into something of a crunch. It wasn’t easy. But we survived. Things are better now. And they can be for you, too. But it’s a time for action.

And my friend, so far she refused to support her mother by taking on more debt for general life expenses; she has sought advice and suggestions on how to solve the problem permanently, though she faces some difficult decisions and discussions. But this is the kind of stuff that helps to determine what we’re made of.

What would you do if you were the mother? The daughter? Have you had experience of loan problems? Do share… You can always use a ‘nom de plume’, if you wish or email me privately.

The world of online lending gets more and more crowded every day as new entrants to the market increasingly raise the bar of what is expected from an online lending site. The latest review from InvestorBlogger is for a company called NetLoans whose tag line is “Homeowner loans lowest ever rates on our any purpose secured loans!” NetLoans provides access to a variety of secured loans for home purchases, debt consolidation loans, bridging finance, and so on.

First Impressions: Polished, Bold and Web 2.0!

So, despite the slightly garbled tag line, the first impressions of the site are very pleasing indeed. The design of the website is clearly laid out: tabs along the top; interactive loan calculator right on the page, right hand sidebar, latest news headlines, and easy to find contact information.

It’s obvious from the first few clicks that a lot of thought has gone into the design and usability of the site from the users’ point of view so that users can find usable information from the moment they log on to the site. Unlike many similar sites, this quality would tend to make the site much ‘stickier’ than other sites in the same category.

The bold graphics, interactive forms, and fresh news feeds help to create the feel that this is a website designed for Web 2.0 though there are some obvious limitations in how far the model has been pushed. I did find it possible to get quite informative responses to some standard questions that I had.

The plus points on the site design are so many it’s difficult to know where to start: but I’ll highlight five that stand out to me as an outsider.

Loan Calculators: Interactive and Practical

It’s difficult to imagine why many loan websites do NOT include these calculators at least some where on the website. What is more surprising is the bold decision to put the loan calculator right on the front page. As if that weren’t bold enough, there are two tweaks that make it even better: there are three grades –good, fair, and poor– of credit scores that (while not particularly precise) can help potential customers evaluate the kinds of payments they might be making.

Surprisingly, instead of just being requested to fill in details about your loan request, you can actually get some rule of thumb ideas about costs, options, and loan profiles BEFORE you commit to applying. In addition, you can (usually) get a choice of lenders as well by choosing different variables, credit rating, amount of loan, and loan period. The results automatically appear listed below. In fact, there are additional calculators in one of the other pages that can be used to calculate a debt consolidation loan. This interactive calculator is perhaps that appeals to me the most, because it can really help shape my thinking about the kind of loan that I would need, how much I can afford to borrow, and what terms are available. This alone is perhaps the best feature of the site.

Meeting Prospective Customers’ Leads: FAQs, Contacts, News, and an Affiliate Program.

Many such websites provide the barest minimum of help hoping that visitors to the website will simply pick up the phone and call the 0800 number or hit ‘apply’ or ‘email me’, not realizing that many visitors are simply browsing for information at first to find out what loans and options there are, how much they cost, and which companies are better at serving their customers. NetLoans aims to reach such customers by providing regularly updated news feeds, helpful FAQs, useful calculators, recent news and a glossary of terms .

(This image of a sample feed shows some of the stories that have been recently published on the feed.)

Additionally, customer contact details are available all over the place, including contact phone numbers, email, a physical address with a map, about the only thing that is missing is a “Live Contact” box that allows potential customers to contact you from the website page (I’ve used it several times, and it’s very effective on some sites!).

Last, but not least for Webmasters, there is an affiliate program that is available. I’ve signed up for the program, and may end up using it on my own website here. The promised pay out is GBP250 per applicant (which is a lot of money with the current USD in the toilet situation!). This could be an attractive way for Financial Bloggers to adapt and extend the features of the website within their own e-finance website.

And the catch…

So, what is the catch? Well, and this is a highly personal opinion, that such very web 2.0 sites miss out on one very important aspect of the web in 2008 – that of creating community and interaction between real people.

While it is apparent that the website is intended to be a e-commerce website, the lack of a personal element – a voice, as it were – doesn’t help to brand the site as customer-friendly. It would be great if there could be a personal voice that highlighted how the loans REALLY benefit customers, especially if that were written in direct and honest manner. While the word ‘testimonials’ comes to mind, I’m thinking much more of examples and entries of how the loan officers made a difference in customers’ lives. This would be best served in a real blog style format where communication and community could be brought together. That combined with photographs, videos, and other tools of the modern ‘blog’ could really draw additional traffic to the website and generate the feel of a real blog.

Other Suggestions

I think it would be a good idea to include a TOS (Terms of Service) and a Spam Policy, both of which would help to increase customer confidence and assurance that the company is serious about its business. Also, it would be great if there was a functional search box, accessible from every page, so users could enter key words and find the information they are looking for, not just what the webmasters want them to know. These are minor suggestions, but would help cement what is otherwise an excellent website.

Disclaimer: While this review has been paid for by NetLoans, the viewpoints expressed here are entirely my own. If you would like a review of a website, please contact me for more information.