Mortgage : Home Loans : Refinance : Home Equity Loans

By Benedict Rohan

If you’re Muslim and are concerned about financial products that comply
with Sharia Law, there are more and more options available to you
today. The first Islamic bank in the UK, the Islamic Bank of Britain,
opened its headquarters in Birmingham in 2004, offering a range of
products and services such as pensions, mortgages and loans.

The main requirement for financial products and services under Sharia
Law is that they neither charge interest nor pay it out, as making
money from money is considered usury, and that they do not invest in
companies that are deemed unethical, such as those connected with
alcohol, tobacco, pornography or gambling.

What often happens when providing loans is that the bank will purchase
an item for the customer at a set price and rent it or sell it to them,
with repayments made in instalments. The bank makes its money by
levying a charge on the customer’s payments.

With investments, Islamic finance works on the basis of sharing the
risk as well as the reward. Both the customer and the bank agree on
terms for sharing the risk of any investment and split any profits
equally between them.

The four main modes of Islamic banking are known as murabaha, where a
purchase is made by the bank and re-sold to the customer without any
interest payments; musharaka, a partnership in which the rewards and
risks – i.e. the profits and losses – are shared by both the bank and
the customer in an investment; mudaraba, where someone places their
investment in the hands of an expert who invests for them and shares
the profit but doesn’t bear the risk of any losses; and ijarah, a
rental agreement made in order for the customer to obtain goods, in
which rental payments are made over a specified period and the bank
reclaims the goods at the end of it.

Many of the high street banks offer Islamic products, and there are
some Middle Eastern banks with branches in the UK that provide
financial products and services suitable for muslims.

Trust funds

The government introduced child trust funds in 2005 to help new parents
to start saving for their child’s future. Upon the birth of a child,
they are given £250 in vouchers to invest on their behalf, and an
additional £250 on the child’s seventh birthday. Additional
contributions of up to £1,200 can be made annually, and the money
can be invested in savings accounts or in stocks and shares, or a
combination of both (a stakeholder account).

A Sharia-compliant child trust fund is also available for the children
of Muslim families, and is provided by the Children’s Mutual. It’s a

stakeholder account, which invests in the stock market until the child
turns 13 and then transfers the funds into a savings account or lower
risk investments such as government bonds. This aims to reduce the
impact of any stock market slumps in the run-up to their 18th birthday.
All investments are made in funds that don’t compromise Islamic
principles, and no interest is paid on the savings.

Mortgages

As mortgages are interest-charging loans, they are not considered
acceptable to the Islamic faith. However, as most people can’t afford
to pay cash to buy a property outright, there is a demand for Sharia-compliant mortgages
among the Muslim community. Many high street banks now offer such
products, as does the Islamic Bank of Britain. An Islamic mortgage
normally works by means of ijara, a leasing agreement in which the bank
purchases the property on behalf of the customer and charges rent to
them (including a handling fee) until the purchase price is repaid, at
which point the customer owns the property outright. As with other
mortgages, the bank retains the rights to the property until this point.

Bank accounts

To comply with the Islamic faith, bank accounts should neither charge
nor pay interest. This normally means that there will be no overdraft
or credit card facilities on current accounts, and that savings
accounts invest money to make a profit rather than receive interest on
it.

Pension schemes

A few financial organisations now offer Islamic pension schemes,
allowing Muslims to invest for their retirement without having to
compromise their beliefs. Such schemes invest only in funds considered
to be ethical under Sharia Law – i.e. no investment in companies
involved in alcohol, tobacco, betting or pornography, or any companies
such as banks that profit from charging interest. If any dividends
arise as a result of business involvement in any of these areas, the
money is ‘purified’ by giving it to charity rather than awarding it to
those investing in the scheme.

Biography:
Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages

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and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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By Dale Rogers

There is just too much at stake for the lender and the borrower. Being proactive is the rule of the day. In the area of Adjustable Rate Mortgages, lenders are pre-empting “payment shock” by calling months ahead to determine the budget status of families looking down the barrel of a huge increase. Some lenders who are able through this intervention to obtain the whole story that will allow for skipping a payment called a forbearance process where the arrears are made up in smaller parallel payments while continuing on with the regular payment. Lenders are hedging their bets by getting involved in the non-payment or late payment profile process early on to dampen losses resulting from foreclosure.

Three years ago Aaron and Gwendolyn moved from sharing an apartment to marriage to having a set of twins to buying their first home. Aaron four years out of college was employed at a local engineering firm specializing in water treatment and sewer/water construction work for several cities and counties in a 60-mile radius. Aaron started at an entry-level engineering position and was working his way up project by project. He was working to passing exams and satisfying requirements to become a Professional Engineer and thus command more money. The pay increases due to a slowing workload were lagging what was projected. Gwendolyn is a Registered Nurse worked a flexible schedule of three twelve-hour shifts per week and since she worked from six in the evening to six in the morning they were able to avoid any outside childcare. This gave her plenty of time with the twins who were experiencing the terrible twos period of pleasantry.

When Aaron and Gwendolyn bought their home due to cash flow considerations they chose an Adjustable Rate Mortgage with a start rate of 1.5%. With a purchase price of $325,000.00 the couple was able to negotiate an 80/15 piggyback combo with a combined loan to value of 95% CLTV. The first mortgage of $325,000 x 80% = $260,000.00. The second mortgage of 15% amounted to $325,000 x 15% = $48,750.00. The payment on the first was based on 1.5% so the payment for the first year was $897.31/month. The payment was scheduled to go up 7.5% per year for the first five years UNLESS the negative amortization exceeded 115% of the original balance, which would trigger amortizing the whole mortgage balance at the fully indexed rate. It is now winding up the end of the third year going into the fourth. The first year minimum payment was $897.31/month. The second year increased 7.5% to $946.61/month. The third year increased to $1,036.96/month. At the beginning of the month a noted rate increase was received. In reviewing, the prior month’s payment was $1,036.96/month. In the meantime, because the second mortgage was going behind a negative amortization first mortgage the best second mortgage available was one that is tied to the prime rate. Currently the prime is at 8.25%. Due to the risk level an additional 1.50% margin is added to the prime rate giving a current rate of 8.25% plus 1.50% = 9.75% rate on the second mortgage. The payment is now $415/month on the second mortgage but will float with prime. All during this period the taxes have risen to $3,900/year for a monthly escrow of $325/month. The hazard insurance has been holding with slight increases to $2,900/year = $241.66/month. The prior month’s payment was $1,036.96/month plus $415/month on the second mortgage plus $325/month in taxes and $241.66/month in hazard insurance for a total housing payment of $2,018.62/month. This was stretching the budget but Aaron and Gwendolyn were just making it together with all the expenses of the twins and settling in to !
a new ho
me.

Now with the most recent notice it brought home the downside of a negative adjustable rate mortgage showing its teeth from the ARM disclosure. There was a mountain of paperwork to sign at the closing outlining what was to transpire in the course of time with regard to this particular negotiated mortgage deal. The mortgage broker chose to present a 3.75% margin on top of the one-month LIBOR index, which is now at 5.32%. So the current fully indexed rate is at 5.32% plus 3.75% margin for a rate of 9.07%. With the broker structuring the deal at a 3.75% margin it gave a bigger Yield Spread Premium payment from the lender to the broker at closing. Margins could have been set closer to 2.00% or 2.25% to slow down the steep increases. If the lower margins had been selected, then the fully indexed rate would have been 2.0% + 5.32% = 7.32% or 7.57%. This is a big difference. The end result was to set the borrowers up to explode payment wise in three years in a rising market. With a 115% LTV loan to value limitation the mortgage could float up to approximately $260,000 x 115% = $299,000 before full amortization would take place by recasting the payment to pay out in the remainder term.

Note: ARM rider terms can very from case to case. Many differences are based on the index selected. Acronyms such as COSI, MOSI, MTA, 1-month LIBOR, 6-month LIBOR, 1-Year Treasury, 3-Year Treasury, 5-Year Treasury, etc. populate the market place. Some are more stable while others spike up and down over time. The consumer needs to carefully select something that will work for them. Look at the history of the index and understand it. If the ARM loan is not fully understood in detail, pass and get something else. The stakes are just too high.

This month’s notice put Aaron and Gwendolyn in shock. The mortgage amount on the first was now at $299,000 and the mortgage was being recast to fully amortize at the fully indexed rate of (5.32% index + 3.75% margin) 9.07% adjusting monthly per index movement. The new payment based on $299,000 principal and 9.07% rate with a remainder term of 323 payments leads to a payment of $2,477.59/month. This was a $2,477.59 - $1,036.96 = $1,440.63/month increase in payment. This was indeed a budget destroyer.

Normally, their mortgage payment was paid on the 1st of the month within a few days, but not this time. Aaron and Gwendolyn thought about selling or just walking away. With a new first mortgage payment of $2,477.59/month + $415/month on the second + $325/month in taxes + $241.66/month for hazard insurance for a new payment of $3,459.25/month. This was just an overwhelming number to them. It was great while it lasted paying the absolute minimum and staying in the $2,000/month range, but the chickens had come home to roost.

Gwendolyn called out to Aaron, “Honey! The bank is on the phone …since we were two days late on our payment…they want to make a deal.” Aaron thought it strange with just two days off from his normal payment date the bank would be calling and pounding on him for the money. The account executive flagged the file as one experiencing a major increase in the payment. She was proposing to role the first and the second mortgage into a new loan based on a fixed rate on a 40-year term with a rate of 6.25% fixed. The bank was willing to cut closing costs in half and add them to the mortgage and waive the six-month’s interest rate penalty on the first mortgage and roll the escrows over on the new loan. Looking at the numbers the first mortgage of $299,000 was added to the payoff on the second mortgage of some $47,772.88 for a total payoff of $346,772.88 plus accrued interest and closing costs of $4,000 for a new loan amount of $350,775.00. Fortunately for Aaron and Gwendolyn their property had appreciated from $325,000 to $375,000. Using an AVM (Automated Valuation Model) the bank was satisfied with the value found online and was waiving the appraisal. This was a 95% LTV loan and the bank was going to portfolio the loan and waived the PMI insurance by eating it. The new payment based on the $350,775.00 loan was $1,991.49/month for principal and interest. With taxes and insurance the fixed rate payment was now $1,991.49 + $325/month in taxes + $241.66/month in insurance for a new proposed housing expense of $2,558.15/month. This was ($3,459.25 -$2,558.15 =) a savings of $901.10/month with a fixed rate mortgage with only increases for taxes and insurance to deal with over time.

Aaron and Gwendolyn thought about the scenario for about five seconds and took the deal. It was either accepting this deal or move. Their credit would be destroyed in the process if they chose to do something else. If they tried to sell with selling costs there would be nothing left. This credit challenge would have been difficult to overcome. It was going to be rough for a few months but as soon as Aaron got his Professional Engineer (P.E.) designation he would be making a lot more money and his stature in the engineering community would skyrocket with his civil engineering background and other positive options would be available.

With what is happening in the market place, lenders are taking hits on short sales for as much as 10% to 20% of what is owed just to get it off the books. If the lender can work out a situation and the terms are made flexible and loans are rewritten all designed to keep the owner in the home and keep the property out of foreclosure. If a property goes into foreclosure there is a good chance a lender will take a major hit so all kinds of inducements and incentives are put into play to keep the loan in a performing status. Lenders are now doing “workouts” before the situation gets dire for the borrowers. A foreclosure on a borrower’s credit is a very adverse event to overcome. In some cases some lenders will not look at applications for a year or two after establishing a new housing history. There is a great benefit to borrowers to work it out.

In this case, Aaron and Gwendolyn were able to save their homestead and reduced their mortgage to a manageable level. They agreed among themselves, to make extra payments just as soon as Aaron got his P.E. ticket and put the amortization down in the twenty-year range just to justify the big run up in negative amortization. Many other couples are not being offered options as the loan has been sold into the secondary market and the service departments may not be able to offer generous options. In that case the homeowner needs to immediately seek help to change things up before it gets totally out of hand. It will end up in the tank with credit ripped to shreds if efforts are not made to engage the lender early in the cycle. Once “Notice Of Default” is filed it will be tough. The adverse credit event will likewise show up on the borrower’s credit and further complicate things by plummeting FICO scores.

To review: IF an ARM product is the answer, then the lowest possible margin needs to be negotiated coupled with a stable index. An option ARM has the power to allow a borrower to pay above the minimum payment and insure it does not go negative. Some lenders offer a bi-weekly plan, which accelerates the payments by making an extra payment per year and reducing the negative amortization. In any case, a consumer needs to shop and enter into an ARM mortgage with full knowledge of what the terms and conditions of the deal.

Otherwise, “Honey…The Bank Is On The Phone…Since We Were Two Days Late On Our Payment…They Want To Make A Deal…” OR “If we don’t have a payment by Friday, a Notice Of Default will be filed and Foreclosure proceedings will follow.” Homeowners need to be proactive if there is an impending problem with payments they may just get a sympathetic ear.

Dale Rogers
www.brokencredit.com
www.sellerhelpsbuyer.com
All rights reserved. Article may be reprinted as long as the content remains intact, unchanged, and all links remain active.

Dale Rogers is a forty-year mortgage veteran and from time to time contributes information articles to the Broken Credit Blog. The BCB is a free website created to assist the general public with information about credit repair and responsible mortgage lending. http://www.brokencredit.com

http://www.brokencredit.com

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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By Sharon White

Area of economical inconvenience for the borrower happens if the first payment is to be made to the previous servicer, and then the loan is transferred for new servicing to a different mortgage company.
The closing documents are required to outline the company in which the first payment is to be made to, however; customers in this instance are often treated by these companies as if they are mortgage professionals. Empathy should be displayed to borrowers in these situations and they should receive as much assistance and support from both parties as they need. In these cases, the previous servicer contacts the new servicer in request to a payment. The most common result of this issue is that the borrower was not aware that they needed to make a payment to the previous servicer since the loan was being transferred. Therefore they skip a payment and send the first payment due to new servicer. When this occurs, the new servicer is prohibited from reversing any monies for this payment if the borrower’s loan is not paid ahead. A current borrower will receive a delinquent notice if this process takes place and the new servicer prohibits from putting the borrower in this position. A letter is mailed out to the borrower by the new servicer indicating that their old servicer is requesting a payment. They are asked to provide evidence of the payment clearing their account if they feel the payment was already made. If the payment has not been made they are asked to make a new payment payable to the old servicer. This causes an economical set back as they will end up paying two mortgage payments for lack of education that the payment was due in the first place. If the payment is not made to the previous servicer, a collection process will be placed on the borrower’s account by that company. The new servicer continues to collect the regularly scheduled payments and “the contract” explains to the previous servicer that the current mortgage company will not be responsible for collecting payments due before the loan funds.
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For additional Mortgage Refinancing information
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By Anaya Erika

Have you ever thought why financial pundits quote buying a house or a piece of property wise investment? Getting the ownership of your own home is undoubtedly a “big deal”. The key to your home can literally unlock the doors of a cash trove known as a homeowner loan. Please note when I say a veritable cash fund, I mean ready financial help for future investments or in times of needs. A loan, no matter how attractive it may sound, should never be used to fund a lifestyle beyond your means. That’s financial suicide combined with bushels of stupidity that will make you easy prey for the loan sharks.

If you are a UK homeowner, you may opt for a homeowner loan to tide you over your hard times. A homeowner loan allows you to borrow money against the equity of your home. The equity in your home will depend upon the market value of your home. Any renovations or extensions done to your home will contribute to the value of your property. Generally, you can borrow up to 90 percent over the value of your home. Although, there are some lenders who may offer you a loan amount up to 125 percent over the equity of your property.

Your credit history goes a long way in determining the loan amount, as well as the interest rate. Higher your credit rating, the more you would be able to bargain for a lower interest rate. Beware- the lender has the right to take over your house in the event of failure to repay the loan. Work out your finances and decide on a manageable loan amount that you would be able to pay off comfortably. Plan out your monthly expenses accordingly and take care not to miss payments. Failure to pay your instalments will lead to bad credit rating.

Be aware of hidden costs. As a piece of real estate is involved, lenders will charge a fee for the evaluation of your property. Additionally, if you are applying for a loan through a mediator, then he might charge a commission against the loan deal. One of the best ways is to scour the internet for online lenders. Not only would they provide you affordable loan deals, they would also offer certain benefits which may not be feasible for high street lenders.

The author is a business writer specializing in finance and credit products and has written authoritative articles on the finance industry. She has done masters in Business Administration and is currently assisting Shakespeare finance as a finance specialist. For more information please visit at http://www.shakespearefinance.co.uk/

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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By Anaya Erika

Being a tenant for long is nothing but wastage of money. The money which goes out as rent can be used to pay off a loan. One of the most common and popular solution is to take a mortgage over the house that you intend to buy. In layman’s terms, your house will at as a guarantee against the payment of the loan amount.

If you have decided to take monetary help through a loan, the next step is to start looking for a good loan deal. Suppliers will offer you different home loans. The key to striking a good deal is to pay attention to details. Buying a house may be your biggest financial investment and you certainly don’t want to screw it. Go through the terms and conditions of the lenders carefully. Monthly rates that you will have to pay vary from lender to lender. Depending on your financial situation, you can pay off the loan earlier than the stipulated time. But be careful, some lenders charge a fee for early repayment of loans.

You can opt for fixed rate mortgage or variable rate mortgage. Lenders generally prefer to give fixed mortgage rates to borrowers for home loans stretching from ten to thirty years. A fixed rate mortgage means that the interest rate will remain the same. It will not be affected with the changing trends of the loan market. The borrower will be paying the same monthly instalments throughout the loan period. Incidentally, if you are paying fixed interest rate for the first five years, you may opt for a variable or adjustable mortgage loan for the remaining loan term. Of course, this change is subject to your lenders policies.

In a variable rate mortgage, the monthly interest rate will vary from time to time. Depending on the market index, the interest rate will fluctuate. This plan works if you take a short term home loan for a period of say, ten or twelve years.

For more information please visit at http://www.shakespearefinance.co.uk/

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
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