The New York Times

A little-known strategy for cutting mortgage payments

Homeowners looking to lower their monthly mortgage payments and reduce their interest rate may be able to do so without refinancing.  A little-known strategy called recasting or re-amortization is available through some mortgage lenders and servicers, and eliminates the hefty fees and daunting credit requirements of refinancing.

  • Re-amortization requires borrowers pay off a lump sum of the principal amount on the mortgage and asking to have the monthly payments reset according to the original interest rate and loan terms.  The lump sum reduces the principal, so the new monthly payments decrease slightly and interest paid over the life of the loan is reduced.
  • Lenders typically charge an administrative fee of $150 or more to re-amortize a mortgage; however, borrowers are not required to pay closing costs or submit to another credit check.
  • Re-amortizing works well for homeowners unable to qualify for refinancing, especially those who are self employed or have low poor credit.
  • Homeowners consider re-amortizing their mortgage should be aware that some lenders require a minimum amount to be paid toward the principal in the lump sum.  JPMorgan Chase, for example, charges a $150 fee and requires a minimum $5,000 payment toward the principal.
  • Another challenge is finding a lender, or loan servicer, that offers re-amortizing.  JPMorgan Chase and Bank of America exclude loans backed by the Federal Housing Administration and Dept. of Veterans Affairs, and loans that were sold off and securitized may also need investor approval.

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The Wall Street Journal

The reverse mortgage gets a makeover

A reverse mortgage has long been considered a loan of last resort because of its high fees.  Now, a new type of reverse mortgage is attracting the attention of more-affluent borrowers eager to extract cash from their homes.  But older homeowners – and adult children who advise them – need to be aware of the new trade-offs.

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Yahoo! Finance

Resolutions for home sellers in 2011

If your New Year’s resolution involves selling a home in 2011, you’ve got some work to do: There’s lots of inventory out there and in a buyer’s market, getting an offer on a home can be challenging.

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How to make the shift from renter to homeowner

First-time buyers planning to make the shift from renter to homeowner this year should begin preparations as early as possible. Prior to starting the home-buying process, potential buyers should make sure they are ready to buy a home where they will live for three to five years or longer, since it can take that long to build equity in a home and recoup investment cost.

The first step a home buyer should take in the home-buying process is to check their credit score.  Lenders base mortgage qualification on a variety of factors, including income and assets, the borrower’s debt-to-income ratio, pattern of savings, and job stability.  However, the most important factor is the credit score.  Lenders tie the interest rate the borrower pays to the credit score, so borrowers with a credit score of 720 and sometimes 740 and above are the only ones who will pay the lowest mortgage rates.  Borrowers with a credit score below 620 may not qualify for a mortgage at all until they can improve their score.

A lender tells the borrower how much they can borrow, but each potential homeowner should create a simple budget for themselves with income and spending to determine how much they are willing to spend on housing payments.  Financial experts recommend that homeowners spend a maximum of about 30 percent of their gross monthly income on principal, interest, homeowners insurance, and taxes.  Included in the budget should be approximately 1 percent of the home price for condo or homeowner association fees and maintenance costs.

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