Fortune Watch

The current mortgage rates are as good as they are going to be for a couple of years now. The current mortgage rate is 5 percent- a rate so good that it has forced people to rethink over paying off extra payments to pay off their debts well before their loan period is over. The Federal Reserve announced its decision not to buy mortgage-backed securities from now on last week. The rates are expected to go up once the Federal Reserve stops buying.

Your browser may not support display of this image. When rates used to be much higher at about 7 to 8 percent, it made sense to pay off extra payment to guarantee a return on your money. However, with the mortgage rate dipping low, it would be wise to invest your mortgage payments in someplace else where you can earn a greater return on your investment, especially when getting rid of your debt costs you much less.

Would you prefer to keep your money in a more liquid option than a mortgage? Having hit the lowest possible mortgage rates in years, would you be willing to invest your extra money in savings rather than clearing off your debt earlier than the mortgage requires.

The bottom line is this: Don’t make extra mortgage payments until you have cleared higher-interest debts. Speaking of higher-interest debt, credit card debt first comes to mind. Also, if you are not saving enough to get a full cover on your employer’s 401(K) or similar account, don’t rush to pay off the mortgage loans first. Increase your savings in that area first. Ensure that you have a decent emergency fund set aside before paying off the mortgage loans.

In reality, your interest rate is even lower than the 5 percent interest rate that you have. You get a part of your interest back each year in the form of a tax deduction. Picture this: Suppose your yearly income is $175,000. You pay 35 percent of it in taxes. If you pay $20,000 on mortgage interest each year on a 5 percent loan, that effectively brings down your yearly total taxable income to $155,000. That means that your total taxable income is lowered by a sum of $20,000. This in turn implies that you shall have to pay $7,000 (35 percent of $20,000) less in taxes per year.

This means that effectively, the after tax interest on your loan is brought down to 3.25 percent. So, any money that you have set aside for paying off the mortgage payments need to bring in a return of more than 3.25 percent. Seems quite feasible in current market situation, doesn’t it?

If you are worried that income taxes would cost you on the amount of money saved by not paying off the mortgage payments, all you have to do is to deposit the money into an account protected from taxes. A health savings account, a 529 college savings account, a Roth individual retirement account- all these would do the trick here. It is best advised to invest your money in some kind of tax-free investment. Otherwise, you may end up spending the money that you saved for paying off those mortgage loans.

The long-term rates for capital-gains taxes can well rise above the current rate of 15 percent. It is safe to have some of your savings in a taxable account though. In case you hit a long stretch of unemployment, banks won’t be willing to loan you money for a home equity loan without a steady income to repay it with. In case you need to sell your home and move quickly to a new town, why waste away extra amount of money on mortgage loan which you could have otherwise used as down payment for your new house.

Having said all this, one thing must be kept in mind. There is always a human factor involved when it comes to paying off the mortgage loan early. Many people want to ensure a good night’s sleep by repaying all their debts as soon as they can. This factor comes to play more strongly with people who are on the verge of retirement- many among them wish to retire without having a debt to their names. Many financial planners have taken this fact into consideration and helped their customers likewise. As one head of a major financial institution puts it- “The whole point of planning is to make life better,” he said. “It’s not to have more dollars at the end of the day.”

During the last few years of real estate boom the prices were rising like fanatical and mortgage finance was simple to come by. However, things are now started to cool off so most banks and financial institutions have stiffened their mortgage lending practices.

Most significant, interest rates are rising very slowly for a last few months. This might actually not look like a real deal if you are new in the practice of house buying industry. But on a big home finance even a tiny interest rate boost could create a very huge difference to the payment you make. In usual cases the interest rate could further make the disparity among being established or discarded for a home mortgage proposal. That is because with the intention of qualifying for a home mortgages your capability to pay for the payment is one of the most vital criterions for getting sanction. And any higher interest rate might simply put the imbursement impractical.

Here the best option is to get in touch with experienced and trained mortgage broker who has qualified Certificate in Mortgage Advice training. No matter what you do, don’t just begin making home mortgage choices until you link up with somebody who has a great experience in the field of mortgage. Find a mortgage advisor who has dear knowledge of present real estate and home mortgage states and further also has entrée to many required alternatives. This would more often than not be your welcoming area banker. Banks effort with their own services and are not paying attention in making you conscious of other available products, which might offer a superior deal to you.

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No question, foreclosures are at a record number right now. After a period of aggressive lending, more and more people are finding it impossible to meet their mortgage repayments. The banks and other lenders, in turn, are foreclosing on more and more properties.

I think the banks committed “foreclosure suicide” when they issued some of these adjustable loans and creative loan programs to people who really shouldn’t be getting those loans. They are now seeing the fruits of their labor. Given the crash in property prices across the nation… this means huge opportunities for the savvy real estate investor. So in this article I’ll outline the main ways you can make money from foreclosures.

Okay, so what is a foreclosure? Basically, a foreclosure arises where someone who has borrowed money from a bank or other lender to buy a property — and has given the lender the property as security for the loan — fails to meet their mortgage repayment obligations… and the lender decides to repossess and sell the property as a result.

There are three main foreclosure investment opportunities, depending on the status of the foreclosed home in the foreclosure process.

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Planning your financial future may not sound like the most glamorous of things, but it can make a huge difference. The key is to understanding the value of time.

They say death and taxes are the two things you can’t avoid. Well, they are wrong. There is a third thing – time. Time passes us by no matter how we try to fight it with exercise, diet and, in some cases, plastic surgery! From this description, it may sound as though time is a bad thing. It all depends on how you use it.

You can turn the passage of time to your financial benefit if you understand it. In truth, we live in a “now” world. Give me convenience or give me death! So many of us are used to getting things now, that the idea of doing something for a positive effect in ten or twenty years sounds ludicrous. Heck, most of us find it difficult to do such things even if we are talking about a benefit five years down the road. This is where you can make a major mistake in planning your financial future.

At its core, financial planning is really about time. The goal is to use dollars today in such a way as to maximize their future effect. Let’s look at a simple example.

The dream for many people is to own their own home. Millions of us clamor forth to find our first home and come up with the money for a down payment. We then apply for a loan, go through the application process and wait/pray for an answer. Most of us never even think about the term of the loan – the number of years it will be paid back over. We are just praying we get the financing and will worry about the detail later. This is a big mistake because it discounts time.

The traditional mortgage has a term of 30 years. This means you will be making that mortgage payment for 30 years or 360 months assuming you don’t sell it before then. Think about that for a minute. If you are 30 years old when you borrow the money, you will be making your final payment when you are 60! And they say people are unwilling to commit to things!

For a person that understands the importance of time in financial planning, a different approach is usually taken with a mortgage. Instead of a 30 year term, they go with a 15 year term. Since there is less time involved in the payback, each dollar of their monthly payment is converted into a greater percentage of principal, to wit, they pay much less interest over the length of the loan. Ah, but the monthly payment is more? Yes, but you can buy a lower price home, build up equity for five to seven years and then trade up for something nicer. You effectively have more money and a better home in five to seven years instead of the financial anchor of a 30 year mortgage. This is why understanding time is so important!

As hard as it may be, you should take into account time as a factor in your investing. If you can come to grips with the future benefits of action taken today, you will really be happy when those future benefits come around.

If you are thinking of buying your first home, your first big decision is..to buy, or not to buy. Sounds simple? It’s not. While the notion of owning a home may appeal to you, actually making that decision is tough. There’s the intellectual component, but also a very emotional one.

Buying a home is one of the greatest investments you will ever make. The best — and least stressful — way to purchase a home is to be well educated throughout the process.

Before you even start looking for a house to buy, you need to review your financial situation. This will let you know how much of a down payment you can afford and how large a monthly mortgage payment you can handle. Lenders will look at the ration of how much you make to how much you owe.

But you should look at what fits into your budget, not what the lender says you can afford. If you are currently making a rent payment of $1200 a month and barely getting by, how could you expect a mortgage of that size with the added insurance and maintenance costs of owning a home? You have to go with what works for your budget and finances. Remember, you can always work your way up to a larger home over time.

Once you have determined how much home you can afford, you need to check on your credit report and score. Lenders will rely heavily on your credit score when deciding whether or not to lend to you. It will also help decide how much interest you will pay. Your credit score is determined by the information in your credit file. If something is incorrect, your score will be affected.

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Investing in commercial property is well beyond the financial means of most people. Few can afford the large sums of money involved in buying commercial real estate. For most of us our investment in real estate is limited to where we live – our home.

But unfortunately our home doesn’t generate any income or cash flow. In fact it probably costs us money in maintenance, rates and upkeep.

Sure the financial incentive to invest in your own home is to offset the cost of renting or the capital gains you get when you sell your house if its value has gone up.

Most financial advisors will tell you the best investment strategy is to pay off your home mortgage as quickly as possible to reduce your debt.

But what about after that if you want to invest in property? You have a choice – invest in another residential property or a commercial property.

Residential properties can often provide a good cash flow from rent, but there are associated hassles with getting good tenants, poor tenants trashing your property and the ongoing cost of maintenance. If you like playing the role of the landlord and being involved in all those activities great! But what if you want a hassle free commercial property professionally managed.

An increasingly popular investment amongst smaller investors and retirees is through syndicated property trusts. This is known as direct property investment where smaller investors buy small parcels of a larger property through a prospectus. These projects are managed and marketed by licensed property dealers.

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Real Estate is one of the oldest forms of investing known to man.

Real Estate investing is easy and fortunes are made in a simple manner. For example, and investor decides that a desert area will eventually become an industrial development. He purchases a number of acres at a very low price. If his guess turns out to be correct, ten years later he sells the land hundred times more than what he paid for it. This can happen in any part of the country and is not an exceptional case.

As the population keeps growing, land prices continue to rise and it means that Real Estate will continue to offer one of the best investment opportunities. Compared to most forms of investment, Real Estate offers greater profit potential. Of course, not every piece of land will turn out to be a winner, and despite the great potential rewards in some cases risks are involved, so the necessity of careful study before invest.

One of the problems of Real Estate is lack of liquidity.

Liquid assists are those easily converted into cash like stocks or bonds. Most Real Estate investments take years before you can make some money, so it is not wise to tie up all your assets in this type of investment. Your financial situation will determine how much you can wisely invest in properties.

There is a difference between a land speculator and an investor.

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