| Private Mortgage Investors (mortgage refinance)
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Private Mortgage Investors
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Use Your Mortgage To Create Wealth And Residual Income
Most people who buy homes get mortgages where they pay principal, interest, taxes, and insurance. They are taught that they must pay down the debt and have their equity--their investment--in the house.
Now, let's think about this for a moment. On a 30 yr mortgage with a fixed interest rate, most of your payment will go towards paying the interest with very little towards the principal. ... Read mortgage refinance article
Mortgage Refinance Information
Mortgage refinancing can be a nerve wracking situation for any homeowner. It doesn't matter how much equity you have in your home or what your credit is like, whether or not you overpay for the loan depends on how much time you can invest doing your homework and researching mortgage offers. Here are several tips to help you find the most competitive offer while avoiding common mistakes.
... Read mortgage refinance article
Private Mortgage Investors
To understand who private mortgage investors are, it is first necessary to understand what a private mortgage is. A private mortgage is a legal agreement, secured by real property, between a borrower and a private lender that obligates the borrower to pay money to the holder of the mortgage note. A private mortgage therefore produces a regular stream of income to the private mortgage investor with all the advantages and protections that a mortgage lien can provide.
Typically, private mortgage investors can charge more interest and points (fees) on a private mortgage than a bank could because the risk of lending to people who aren't eligible for normal mortgages is far greater. Quite often private mortgage investors lend to people with less than perfect credit, but they may also lend to real estate investors irrespective of credit.
Traditionally, private mortgage investors were individuals who had sold their property and agreed to take back a promissory note and a mortgage from the buyer. The advantages to the seller were threefold. Firstly, by offering such terms, the homeowner was more likely to sell their property in a slow market and obtain the full asking price. Secondly, the seller would be a guaranteed a regular fixed income at a better rate than could be obtained from investing in a CD. Thirdly, if the buyer defaulted, then the owner would be entitled to foreclose on the property, just as if he or she were a bank. The benefit to the buyer of private mortgage finance is that they don't have to worry about an extensive check on their credit or financial situation.
More recently, private mortgage investors have branched out into other areas of real estate financing. Some private mortgage investors specialize in lending money to professional real estate investors for the purchase and rehab of residential and commercial property. Others specialize in the making private mortgage loans to small real estate developers for the purchase of raw land and the initial construction finance. There are even some private mortgage investors who will lend to homeowners facing foreclosure or provide second mortgage financing, similar to a Home Equity Line of Credit.
Such has been the growth in private mortgage lending that there are now companies offering private mortgage investment services in the USA. Typically, these companies will either advertise individual mortgages for "purchase" by an investor, or syndicate a hard money loan amongst a group of private mortgage investors on their mailing list, or offer shares in a private mortgage investment fund.
Lastly, but by no means least, there are private mortgage investors who specialize in buying private mortgages at a discount, i.e. less than the principal amount outstanding. These investors provide an important role in creating liquidity in what would otherwise be an illiquid market. The main disadvantage of being a private mortgage holder is that you must wait for the loan to be repaid before you can access your capital. If an investor can't wait that long, then they will need to find a way of selling the mortgage to a third party and this is where this last type of private mortgage investor come into their own.
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Mortgage Refinancing - Avoid Bad Mortgage Advice
A well known author named Theodore Sturgeon once said "Ninety Percent of Everything is crap." This became known as Sturgeon's law and is even quoted in the Oxford dictionary. Sturgeon's law is alive and well when it comes to the Internet and the mortgage advice you find online is no exception. Here are several tips to help you separate the wheat from the chaff when it comes to online mortgage advice.
I recently read an article online offering suggestions on how one could save money when refinancing. The article suggested that you should concentrate your efforts on finding a mortgage broker that worked on a non-commission basis. The author stated that non-commission loan representatives are less likely to overcharge you and have your best interest at heart when refinancing. While this sounds like good advice, it's actually complete rubbish. If a mortgage company or broker tells you they work on a non-commission basis, you are guaranteed to pay too much refinancing with that company. Calling someone a "Non-commission loan representative" is just a slick marketing trick to gain your misplaced trust.
Here's what that author doesn't understand about the mortgage industry. Mortgage loans are simply retail products, just like televisions. Just as an electronic store marks up the price of your TV, the mortgage company or broker marks up your interest rate without telling you. This is in fact, how mortgage companies and brokers make the majority of their profits. It's not commission; they make money from retail markup. You're already paying origination points to this company for the new loan, so why should you pay double?
Here's a summary of how it works. You qualify for an interest rate based on your credit and the details of your application. That interest rate is not set by the mortgage company; it comes from the wholesale lender. The mortgage company receives a written guarantee of your rate from that wholesale lender. Your mortgage company turns around and provides you a separate written guarantee for a higher interest rate. This markup by the mortgage company is called Yield Spread Premium. Homeowners that learn to recognize Yield Spread Premium when refinancing their mortgage loans can avoid paying it.
Can you see how the advice this author gave in their article could result in overpaying for a new mortgage loan? To learn more about mortgage refinancing while avoiding bad advice, costly mistakes, and Sturgeon's law, register for a free mortgage guidebook.
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