Real Estate Investing and “Subject To” Financing to Take Over Payments of an Existing Mortgage Loan

With record numbers of foreclosures, and many more homeowners getting into mortgage trouble every day, lenders are in deep trouble with foreclosed home inventories and non-performing loans. This is changing the risk-reward situation for “subject to” financing.

What does buying “subject to” a loan mean? It means that you, as the buyer, will take over the payments of an existing loan from the seller. However, you do not assume that loan nor the obligation to pay it.

Most modern home loans are not assumable. You can’t take over a loan and assume the liability, which releases the seller. That was the case many years ago. Now, if you take over the payments, the seller is still liable for the loan.

What about the “due on sale” clause? This is where there is probably more flexibility than in the past. Almost all of the loans of today have a clause that allows the lender to accelerate the loan and demand payment in full if the homeowner transfers their ownership. In the past, when real estate was selling more quickly, lenders were more likely to exercise the “due on sale” clause. However, with so many foreclosures already on their books in many areas today, it is probable that this isn’t something they want to do now. Mortgage lenders don’t want to hold physical real estate.

With the lender possibly being less likely to accelerate the loan (demand payment in full), what’s the benefit of a “subject to” sale for the seller and the buyer?

Buyer – You can negotiate a lower down payment if desired, as well as favorable loan terms. And you don’t have to apply for financing. If the interest rate is very low, you may be able to rent the property out for a nice, positive cash flow.

Seller – The seller is in trouble, and they’ve likely been unable to sell the home using traditional means. They are heading toward foreclosure or a short sale. In either of those situations, they will NOT receive any cash from the loss of their home.

You are offering them a way to sell the home, pass the notes to you, and take some cash away from the deal. They will have concerns about their liability for the loan, so you may have to set up a payment system that allows them to monitor your prompt payments. You can also assure them that your investment, the down payment, is something you don’t want to lose by going into default.

Mortgage Broker Bond – All About Mortgage Bonds and Rates

Mortgage bonds are among the largest types of bonds that are offered by financial institutions in the market today. Because of this, any changes in the economic market has a direct effect on the value of mortgage bonds which then influences the various mortgage rates that are applied on a mortgage taken out by a borrower. In fact, any activity that has a connection with bonds offered by various institutions would have an effect on the amount of interest rates that the US Government permits financial institutions to apply on mortgages or loans approved.

More for Less

Financial analysts have determined that the demand for mortgage bonds in the United States have had a converse effect on the amount of the interest rate charged by financial institutions and creditors to borrowers who are looking to take out a loan or a mortgage. By this, it only means that as the demand for mortgage bonds increases, the amount of interest rate charged by these institutions to those people who are taking out a mortgage or a loan. This is because a higher demand of bonds is able to provide these institutions the funds and capital it needs in order to compensate them in the event that the borrower defaults on the repayment schedule for one reason or another. As such, financial institutions are then more confident to lower the interest rates applied to their various loan and mortgage programs. In turn, more people who are seeking for financial assistance are able to avail of a mortgage program that would provide them the needed funds while being still viewing the repayment schedule to be within their budget.

On the other hand, when the demand of bonds diminishes, the reverse happens. Since there is a potential for the financial institution might incur losses in the event that a borrower would default in the repayment schedule, the interest rate imposed by these institutions increases.

The Role of the Investor

The ability of the mortgage bond to influence the amount of interest charged by a financial institution can be traced to the investor. Investors are constantly in the search of potential investments that promises low capitals with high returns at a short period of time. When the mortgage bonds offered by a particular financial institution is able to provide these needs, investors would be more than happy to put their money into the bonds offered by the financial institutions, causing an increase in the demand for bonds of that particular financial institution. On the other hand, if the mortgage bonds that is offered by a financial institution does not provide the high returns an investor is hoping to get, not only would this cause the investor to pull out the capital he or she initially invested in the mortgage bonds. This sudden pull out would cause more potential investors to become apprehensive in investing their money into these mortgage funds.

This being the case, financial institutions would, from time to time, modify the bonds it offers to potential investors to make them attractive enough to encourage investors to invest in these bonds instead of investing their money elsewhere. One way they do this is to increase the interest rates that would be applied on the capital placed in for the acquisition of the mortgage bonds in order to provide the investor a higher return rate.

The Role of Financial Institutions

Financial institutions also play a role in contributing to the manner on how mortgage bonds influence interest rates. This is because it is the decisions made by the financial institutions with regards to the mortgage bonds offered to potential investors that would, in turn, hold the key to whether or not the mortgage bonds would be attractive to potential investors or otherwise. Financial institutions would need to provide a sense of balance to the different needs of investors who are looking into taking out a mortgage bond, while ensuring that they do not incur any losses. This is determined through the interest rates that are imposed by these financial institutions on the mortgage bonds offered to investors.

What You Need to Look For Before Availing Your Car Loan

Going in for a car loan? Working out your financial options for your car? There are a few things you need to check out before “buying” your car. Here are a few pointers which will help you prepare for your “buy”:

Financing your new car

Unless you’re paying hard cash, you need to undertake a crash course on becoming a quasi “loans expert” if you’re planning to buy a car in the near future and don’t have an expert to handle your loan repayments. It makes no difference about the type of car you desire; the basic remains the same for all car types – cars, sedans, SUVs, pickups, mini vans, jeeps etc. You “borrow” once and “repay” on a monthly basis. Since you don’t have enough cash to fund your vehicle, or maybe you do have cash but still prefer to go in for a car loan (you pay a “down payment” – a fraction of the car’s cost), you are going to need financiers. Different financiers provide loans for different purposes. And the loan criteria also changes with the type of loan you need. So do your homework and research the financiers – “what person” or “company” is providing “what”, and what are the criteria for availing the credit. It’s important to avail loan options that offer affordable car loan rates.

Get pre-approved

It’s possible to buy your car if you end up getting the required credit. So the ownership of your car depends upon the availability of your car loan. Therefore it makes sense to “shop” for a “loan” first and once you get the approval, you “shop” for your car. The process of “approving” or “arranging” for your “loan” before actually deciding upon the vehicle is referred to as “pre-approval”. Getting your “pre-approval” is important since you are sure you have a source of finance for your car and your efforts put in while selecting or deciding your vehicle won’t go to waste.

Find the right financing company

All creditors are not alike. You can save a significant amount of money by selecting the right kind of finance providing car loan rates which suits your needs. Creditors follow a common pattern for charging the interest rates; however their monthly repayment schedule can vary. It’s the creditor’s discretion to decide how he or she wants the debt to be paid off. Finding the most cost effective loan will help you save a lot of money in the end – when you totally pay off your loan.

Borrowing money against some investments or savings

There’s another option available. If you’ve saved some money and invested the same in bonds or deposits in banks, chances are you might be eligible for “overdraft” facility against your investments. In such cases the car loan option works out to be very much in your favor as a lot of latitude is given in repaying the loan back. And you end up paying the difference of your savings rate minus the “borrow” or “interest” rate.

The quicker you payback, the more you save in the end

Creditors charge their interest on the duration of the “borrowings” i.e. for how long you need to avail the car loan facility. It means your net payable interest amount is in direct relation to the time you avail the credit facility. So if you make plans to pay off your debt within a short span to time, you end up paying lesser interest and end up saving money.