5 things you should do right now if you have a mortgage
TRANSCRIPT
5 THINGSYOU SHOULD DORIGHT NOW IFYOU HAVE AMORTGAGE
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With all of the subprime guidelinechanges and prime mortgage ratesat a low point, here are 5 Things You
Should do Right Now(TM) if youhave a mortgage:
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Do you have an adjustable rate mortgage (ARM), interest-only loan,pay-option (negative amortization) or second mortgage?
1. FIGURE OUT WHAT TYPE OF LOAN YOU HAVE:
If you have an ARM when does the rate adjust (most ARMs are either2,3,5 years after you got the loan) and what will it adjust to? You cantake a look at the index (it’s in the note and usually called the LIBOR orMTA) online from a variety of sources. This will give you an idea ofwhat your rate will jump to when it adjusts.
If you have one of these types of mortgages read the loan documents toget familiar with your obligations under the loan. It is tedious, but wellworth it to ensure your understanding. If it concerns you talk tosomeone to trust to explore your options.
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This will let you know how much longer you’ll be locked in toyour loan and will provide you a better picture of what optionsare available to you. There are very few circumstances wherepaying a pre-payment penalty makes sense (though I believe
that there are some), and this will let you know what timeframe you should be looking at for refinancing, especially if
your loan falls in to one of the categories in #1.
2. FIND OUT IF YOU HAVE A PRE-PAYMENT PENALTY ONYOUR LOAN.
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And don’t get it from one of those free, but not reallyfree sites. The credit bureaus – by law – have to giveyou a copy of your report once a year absolutely free. Cleaning up your credit and making sure the bureaushave accurate information is a whole series of articles
on its own, but as they say "knowing is half the battle". Once you know your credit score you’ll have a much
better grasp of what your options are if you choose torefinance.
3. Get a copy of your credit report for free.
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(1) Your mortgage payment(2) All of your bills including your mortgage payment.
For example if you make $5,000/month and your mortgagepayment is $1,000 and you have another $1,000 in bills your2nd ratio (2) is 40% ($2,000/$5,000). If number two (2) is morethan 50% you’re exposed to problems if your mortgagepayment adjusts to a higher rate. In fact, if it is near 50% you’regoing to feel significant pain if your mortgage readjusts.
4. Figure out how much of your monthly income isdedicated to:
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Using the mortgage calculator above figure out howmuch you may have to pay if you are unable to
refinance your mortgage and it adjusts to a higherrate. Once you are aware of what your new
payment will be, look at #4 again with the newnumbers. Add up all of your expenses with the newmortgage payment and see where you net out eachmonth. If that number scares you, talk to someoneyou trust about your options in keeping that from
happening.
5. Figure out the worst case scenario for your mortgagepayment.
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Even if your mortgage is fixed for more than a year ortwo, it still behooves you to plan and prepare
accordingly. If you have a sound plan regarding themanagement of your mortgage you’ll be much better
prepared to manage your debt better and won’t becaught off guard by any changes in your mortgage
payment. Everything works better with planning andyour mortgage is no different.
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T O L E A R N M O R EBLOWNMORTGAGE.COM
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C L I C K H E R E
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Justin McHood is Americas MortgageCommentator and has been providingMortgage commentary forover 10 years.
INFORMATION PROVIDED BY:Justin McHood
MORTGAGE COMMENTATOR
Information Originally Published:March 17, 2007BLOWNMORTGAGE.COM
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