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Welcome to Integrity Mortgage and Investment Services Inc.,
a growing network of innovative financial services including many
of the more popular Florida Banks. Locally owned and family operated,
we customize solutions to meet your needs.
Choosing A Mortgage Program
There isn't a single or simple answer to this question. The right type of mortgage
for you depends on many different factors:
Your current financial picture.
How you expect your finances to change.
How long you intend to keep your house.
How comfortable you are with your mortgage payment changing.
For example, a 15-year fixed-rate mortgage can save you many thousands of dollars
in interest payments over the life of the loan, but your monthly payments will
be higher. An adjustable rate mortgage may get you started with a lower monthly
payment than a fixed-rate mortgage -- but your payments could get higher when
the interest rate changes.
The best way to find the "right" answer is to discuss your finances,
your plans and financial prospects, and your preferences frankly with a mortgage
professional. Loan Programs
Fixed Rate Mortgages
The most common type of mortgage program
where your monthly payments for interest and principal never change.
Property taxes and homeowners insurance may increase, but generally
your monthly payments will be very stable.
Fixed-rate mortgages are available for
30 years, 20 years, 15 years and even 10 years. There are also "bi-weekly" mortgages,
which shorten the loan by calling for half the monthly payment every
two weeks. (Since there are 52 weeks in a year, you make 26 payments,
or 13 "months" worth, every year.)
Fixed rate fully amortizing loans have
two distinct features. First, the interest rate remains fixed for
the life of the loan. Secondly, the payments remain level for the
life of the loan and are structured to repay the loan at the end
of the loan term. The most common fixed rate loans are 15 year and
30 year mortgages.
During the early amortization period,
a large percentage of the monthly payment is used for paying the
interest . As the loan is paid down, more of the monthly payment
is applied to principal . A typical 30 year fixed rate mortgage
takes 22.5 years of level payments to pay half of the original loan
amount.
Adjustable Rate Mortgages
These loans generally begin with an interest
rate that is 2-3 percent below a comparable
fixed rate mortgage, and could allow
you to buy a more expensive home.
However, the interest rate changes at
specified intervals (for example, every
year) depending on changing market conditions;
if interest rates go up, your monthly
mortgage payment will go up, too. However,
if rates go down, your mortgage payment
will drop also.
There are also mortgages that combine
aspects of fixed and adjustable rate
mortgages - starting at a low fixed-rate
for seven to ten years, for example,
then adjusting to market conditions.
Ask your mortgage professional about
these and other special kinds of mortgages
that fit your specific financial situation
Standard ARM Programs
A few options are available to fit your
individual needs and your risk tolerance with the various market
instruments.
ARMs with different indexes are available for both purchases and
refinances. Choosing an ARM with an index that reacts quickly lets
you take full advantage of falling interest rates. An index that
lags behind the market lets you take advantage of lower rates after
market rates have started to adjust upward.
The interest rate and monthly payment can change based on adjustments
to the index rate.
6-Month Certificate of Deposit (CD) ARM
Has a maximum interest rate adjustment
of 1% every six months. The 6-month Certificate of Deposit (CD)
index is generally considered to react quickly to changes in the
market.
1-Year Treasury Spot ARM
Has a maximum interest rate adjustment
of 2% every 12 months. The 1-Year Treasury Spot index generally
reacts more slowly than the CD index, but more quickly than the
Treasury Average index.
6-Month Treasury Average ARM
Has a maximum interest rate adjustment
of 1% every six months. The Treasury Average index generally reacts
more slowly in fluctuating markets so adjustments in the ARM interest
rate will lag behind some other market indicators.
12-Month Treasury Average ARM
Has a maximum interest rate adjustment
of 2% every 12 months. The treasury Average index generally reacts
more slowly in fluctuating markets so adjustments in the ARM interest
rate will lag behind some other market indicators.
Reverse Mortgage
A reverse mortgage is a special type
of loan made to older homeowners to enable them to convert the
equity in their home to cash to finance living expenses, home
improvements, in-home health care, or other needs.
With a reverse mortgage, the payment
stream is "reversed." That is, payments are made by the
lender to the borrower, rather than monthly repayments by the borrower
to the lender, as occurs with a regular home purchase mortgage.
A reverse mortgage is a sophisticated
financial planning tool that enables seniors to stay in their home
-- or "age in place" -- and maintain or improve their
standard of living without taking on a monthly mortgage payment.
The process of obtaining a reverse mortgage involves a number of
different steps.
The first, most widely available reverse
mortgage in the United States was the federally-insured Home Equity
Conversion Mortgage (HECM), which was authorized in 1987.
A reverse mortgage is different from
a home equity loan or line of credit, which many banks and thrifts
offer. With a home equity loan or line of credit, an applicant must
meet certain income and credit requirements, begin monthly repayments
immediately, and the home can have an existing first mortgage on
it. In addition, there is no restriction on the age of borrowers.
In general, reverse mortgages are limited
to borrowers 62 years or older who own their home free and clear
of debt or nearly so, and the home is free of tax liens.
Borrowers usually have a choice of receiving
the proceeds from a reverse mortgage in the form of a lump-sum payment,
fixed monthly payments for life, or line of credit. Some types of
reverse mortgages also allow fixed monthly payments for a finite
time period, or a combination of monthly payments and line of credit.
The interest rate charged on a reverse mortgage is usually an adjustable
rate that changes monthly or yearly. However, the size of monthly
payments received by the senior doesn't change.
Some reverse mortgage products also involve
the purchase of an annuity that can assure continued monthly income
to the senior homeowner even after they sell the home.
The size of reverse mortgage that a senior
homeowner can receive depends on the type of reverse mortgage, the
borrower's age and current interest rates, and the home's property
value. The older the applicant is, the larger the monthly payments
or line of credit. This is because of the use of projected life
expectancies in determining the size of reverse mortgages.
Seniors do not have to meet income or
credit requirements to qualify for a reverse mortgage.
Unlike a home purchase mortgage or home
equity loan, a reverse mortgage doesn't require monthly repayments
by the borrower to the lender. A reverse mortgage isn't repayable
until the borrower no longer occupies the home as his or her principal
residence.
This can occur if the sole remaining
borrower dies, the borrower sells the home, or the borrower moves
out of the home, say, to a nursing home.
The repayment obligation for a reverse
mortgage is equal to the principal balance of the loan, plus accrued
interest, plus any finance charges paid for through the mortgage.
This repayment obligation, however, can't exceed the value of the
home.
The loan may be repaid by the borrower
or by the borrower's family or estate, with or without a sale of
the home. If the home is sold and the sale proceeds exceed the repayment
obligation, the excess funds go to the borrower or borrower's estate.
If the sales proceeds are less than the amount owed, the shortfall
is usually covered by insurance or some other party and is not the
responsibility of the borrower or borrower's estate. In general,
the repayment obligation of the borrower or borrower's estate can't
exceed the value of the property.
In general, a borrower can't be forced
to sell their home to repay a reverse mortgage as long as they occupy
the home, even if the total of the monthly payments to the borrower
exceeds the value of the home.
LIBOR - London InterBank Offered Rate
LIBOR is the rate on dollar-denominated
deposits, also know as Eurodollars, traded between banks in London.
The index is quoted for one month, three months, six months as well
as one-year periods.
LIBOR is the base interest rate paid on deposits between banks
in the Eurodollar market. A Eurodollar is a dollar deposited in
a bank in a country where the currency is not the dollar. The Eurodollar
market has been around for over 40 years and is a major component
of the International financial market. London is the center of the
Euromarket in terms of volume.
The LIBOR rate quoted in the Wall Street Journal is an average
of rate quotes from five major banks. Bank of America, Barclays,
Bank of Tokyo, Deutsche Bank and Swiss Bank.
The most common quote for mortgages is the 6-month quote. LIBOR's
cost of money is a widely monitored international interest rate
indicator. LIBOR is currently being used by both Fannie Mae and
Freddie Mac as an index on the loans they purchase.
LIBOR is quoted daily in the Wall Street Journal's Money Rates
and compares most closely to the 1-Year Treasury Security index.
Balloon Mortgages
Balloon loans are short term mortgages
that have some features of a fixed rate mortgage. The loans provide
a level payment feature during the term of the loan, but as opposed
to the 30 year fixed rate mortgage, balloon loans do not fully
amortize over the original term. Balloon loans can have many types
of maturities, but most balloons that are first mortgages have
a term of 5 to 7 years.
At the end of the loan term there is still a remaining principal
loan balance and the mortgage company generally requires that the
loan be paid in full, which can be accomplished by refinancing.
Many companies have other options such as a conversion feature at
the end of the term. For example, the loan may convert to a 30 year
fixed loan at the thirty year market rate plus 3/8 of a percentage
point. Your conversion can be guaranteed based on certain criteria
such as having made your last 24 payments on time. The balloon mortgage
program with the conversion option is often called a 7/23 Convertible
or 5/25 Convertible.
Buydown Options
The most common buydown is the 2-1 buydown.
In the past, for a buyer to secure a 2-1 buydown they would pay
3 points above current market points in order to pay a below market
interest rate during the first two years of the loan. At the end
of the two years they would then pay the old market rate for the
remaining term.
As an example, if the current market rate for a conforming fixed
rate loan is 8.5% at a cost of 1.5 points, the buydown gives the
borrower a first year rate of 6.50%, a second year rate of 7.50%
and a third through 30th year rate of 8.50% and the cost would be
4.5 points. Buydown were usually paid for by a transferring company
because of the high points associated with them.
In today's market, mortgage companies have designed variations
of the old buydowns rather than charge higher points to the buyer
in the beginning they increase the note rate to cover their yields
in the later years.
As an example, if the current rate for a conforming fixed rate
loan is 8.50% at a cost of 1.5 points, the buydown would give the
buyer a first year rate of 7.25%, a second year rate of 8.25% and
a third through 30th year rate of 9.25% , or a three-quarter point
higher note rate than the current market and the cost would remain
at 1.5 points.
Another common buydown is the 3-2-1 buydown which works much in
the same ways as the 2-1 buydown, with the exception of the starting
interest rate being 3% below the note rate. Another variation is
the flex-fixed buydown programs that increase at six month interval
rather than annual intervals.
As an example, for a flex-fixed jumbo buydown at a cost of 1.5
points, the first six months rate would be 7.50%, the second six
months the rate would be 8.00%, the next six months rate would be
8.50%, the next six months rate would be 9.00%, the next six months
the rate would be 9.50% and at the 37th month the rate would reach
the note rate of 9.875% and would remain there for the remainder
of the term. A comparable jumbo 30 year fixed at 1.5 points would
be 8.875%.
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