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Be careful of Balloon Home Loans

John — Tue, 24 Apr 2012 07:06:05 +0000

A balloon type mortgage is a type of loan that is paid in regular amortizations, usually monthly and lump sum payments on intervals or at the end of the payment period. It is a type of loan that will not fully amortize or get paid with just the regular amortizations. This article will discuss the general concept of balloon payment loans and provide the reader with information regarding problem areas that need to be addressed in order to prevent incurring interest debt and/or penalties or worst, default.

Regular Amortizations vs. Balloon Payment

Mr. A and Mr. B have an agreement with Company CDE for the purchase of a principal residence in the amount of $120,000 to be paid in 120 regular monthly amortizations. Company CDE gives Mr. A, a regularly amortizing loan. The terms of the contract states that Mr. A will pay $1,000 per month plus 1% interest. Company CDE gives Mr. B a balloon payment loan, allowing Mr. B to pay $300 per month BUT at the end of the 120 months Mr. B has to pay the remainder of the balance in lump sum which is $84,000.

The Allure of a Balloon Type Mortgage

Why would consumer keep paying regular amortizations if they know they will default at the end of the contract because the lump sum payment is too much? What makes balloon type mortgages enticing is the fact that a consumer/mortgagor is given the ability to “purchase” a home for very low monthly amortizations, just a bit higher than rental rates. Enterprising bank/lender representatives marketed balloon payments as a type of rental property with a nest egg at the end of the amortization period.

For example, Bank XYZ will argue that a rental property, which has been used by several tenants, costs less than a hundred dollars than the more than the monthly amortization for a balloon type mortgage. Bank XYZ will then present the idea that at the end of the amortization schedule, instead of paying the lump sum balloon payment, a consumer can just sell the property back to them (Bank XYZ) for higher than the lump sum payment thereby creating a profit because, everyone knows that real estate appreciates in price, never depreciates. So in the final analysis you get to “rent” a better and brand new unit and at the end of the amortization period you have the option of buying the property thru a second loan or a refinance or selling the same to the bank at a higher price than the balloon payment, thereby earning you a profit.

What Actually Happened

The idea is actually very sound. The problem however occurs when thousands of homes are applied for a second mortgage, a refinance or resold to the bank. Naturally the supply of borrowers and sellers increase to such an extent that the price of real estate drops so sharply that the banks refuse to provide a second mortgage, refinance and the home is now worth less than half of the lump sum payment. Now you are left with a home that you cannot mortgage, refinance or resell to the bank because if you do so you still owe the bank a substantial deficiency. So what actually happened? Simple, the banks/lenders got paid “rent” for higher than the going rate and then get back the homes after the consumer is not able to pay the lump sum payment. Worst, consumer’s who tried to keep the property thru trial loan modification programs paid more “rent” but still got disapproved for a loan modification resulting in foreclosure. Talk about getting your cake and eating it!

The author is the content coordinator for a SA Home loans site. To read more visit gethomeloans.co.za

Preparations to Take for Letting a House

John — Mon, 16 Apr 2012 11:21:18 +0000

Are you planning to let your property? Well, this is a good way to earn a little extra. But letting a property is not an easy task. Finding a tenant is a tough job. But there are a lot of things associated with letting a property. You should plan things ahead, so that you can easily let your property at the right price.
Let’s have a look at the things you should do for letting your property.
• When you decide to let your property, you will have to check your property thoroughly for any defects. Remember, tenants are not going to rent a property. Moreover they will do negative word of mouth promotion. Just imagine, what will happen if your potential customers get negative feedback about your property. It will become impossible for you to let your property.
• You should hire a home inspector. He will check everything starting from floor to roof and give you a certificate that your house is not damaged. Make sure to get central heating and cooling system checked. You should also count on professionals for checking plumbing system, electrical system and so on.
• As soon as you get the certificate that your house is fine, it is time to advertise your property. You can place an ad in the local newspaper or TV channel. Make sure to include the name of the place your house is located at. For example if your house is located at Palm Beach, you can give a tag line like Palm Beach homes for rent.
• Instead of giving ads yourself, you can also hire a property renting agency that has a list of potential clients. A renting agency can help you to get a tenant easily.
• You can also hire a real estate broker. Brokers also have list of tenants. Moreover they have an idea about the rates. So they can help you to let your property for the right price.
Following these tips will help you to let your property successfully.

Tips to Start a Successful Property Management Business

John — Mon, 16 Apr 2012 07:07:31 +0000

If you have interest in the real estate business but don’t have enough money to invest in real estate, you can consider property management. This has become a promising business option these days. Most of the people these days don’t have much time to manage their own property. So they count on property managers. Whether they need to sell a property or buy a property, let a property or rent a property, people prefer to count on property managers. So you can consider starting your own property management business.
Follow the tips given below to start your own property management business.
• If you wish to start a property management business, it is better to obtain a bachelor’s degree in business management, finance or real estate.
• It is also a good idea to do a property management course if you have already obtained your bachelor’s degree in some other subject.
• If possible work as an intern in a property management firm. This will help you to gather some experience.
• Once you have gained some experience and ready to start your business, the next step that you need to take is to obtain license for your business. Talk to your nearest government agency to know which type of license will be ideal for you.
• After obtaining license you will have to choose a location for your property management office. Choose a location with low competition and easy accessibility.
• Do a thorough research about the local area and make a list of potential clients. Meet your potential clients personally and tell them what services you offer and how they can be benefitted by availing your service. Make your price competitive to get more clients.
Finally you will have to advertise your business through local newspapers, TV channels, banners and leaflets. You can also opt for online advertisements. Make sure to include the name of the place where your business is located. For example if you have started your business in Palm Beach Gardens, your advertisement should contain a catch line such as “property management Palm Beach Gardens”.

Real Estate- Why You Should Buy In Chicago Now

John — Tue, 21 Feb 2012 16:01:05 +0000

Washington DC area , is a hot area to buy in nowadays. There are a lot of great qualities about Washington DC , that make it a great place to move to and a great place to buy real estate. There is a lot to do for people of all ages, year around. There are museums, there are shops, there are movie theaters, theaters for plays, and more. In Washington DC the weather is great, there is winter weather but it’s not cold year-round, and even during the winter it’s nice to walk along the lakefront, it’s quite enjoyable.

There are a lot of opportunities in Washington DC , both educational and social. Washington DC is a major business center, allowing for many different chances for work, education, and networking. Washington DC is a place you can easily advance your career if you put some effort into it, and by doing so you will be successful in Washington DC area. Washington DC is a place where anyone can fit in , one place or another, and love it. Washington DC offers so much, it’s amazing. With so much to do year around, and with all the opportunities available, Washington DC is a great buy in real estate.

How to Rent a House Privately

John — Wed, 14 Dec 2011 13:23:09 +0000

If you have a transferable job there is no chance that you will settle in one place during your job life. You will rather have to live in different places for a certain period of time. Now it is obvious that you won’t buy a house to stay in every time you shift to some other places. Renting a house is a better option for people with transferable jobs. You can enjoy a rented house with no hassle at all. If the terrace leaks or the basement springs all you need to do is to call the owner of the house. Fixing the problems is not your responsibility.

The only problem with renting a house is that people often find it difficult to locate a good house. As a result they count on real estate agents who charge high for their service. But hiring a real estate is not the only way to find a house for rent. You can also rent a house privately without the help of an agent. Following the right procedure can help you in this matter.

Instructions to rent a house privately:

First decide which neighborhood you would like to stay in. Make sure your office, school, hospital, market etc are easily accessible from that neighborhood. Another important thing to consider is the crime rate of the neighborhood.
Once you determine the neighborhood, visit it yourself. You may find many houses with a sign board displaying “for rent”. Check whether these houses meet your requirements.
Home rental ads come in newspaper, local telephone books, cable TV, radio etc. Following these ads can help you to rent a good house.
Researching online is also a good way to find a house. Many home owners place their advertisements on sites that list rental properties. Checking these sites will help you.
If you already know someone who lives in that neighborhood you can ask that person for reference.

Exploring all or any of these ways can help you to find a good property for rent without seeking the help from a real estate agent.