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Choosing the right mortgage broker is important, as you want to make sure you save as much money as possible on the mortgage loan that you take out. Being picky about your mortgage broker is more than just a matter of trying to save a few dollars, though – the right mortgage broker will also help ensure that you get the best loan terms available to you, and that you will have someone that you can work with should any changes need to be made to your mortgage loan’s terms. Comparing mortgage brokers is not difficult, but it does require that you have a basic knowledge of what to look for in the mortgage loans that the different brokerages offer to you.

It is important that you understand exactly what a mortgage broker is, of course; unlike a traditional bank or mortgage lender who will offer you a mortgage loan directly, a mortgage broker will pair you with a lender that meets your needs and will act as an intermediary between you and the lender. Because of this you can often get a better deal on a mortgage through a broker than you would be able to directly, since they can do the “shopping around” for you. Different mortgage brokers may offer different rates and terms on the loans that they find for you, however, so it is still important to shop around and compare brokerages before choosing the one that is best for you.

Before you start to compare mortgage brokers, take the time to research the basics of mortgage loans online. Not only will this give you some useful information that can be used as a basis for your comparisons, but you may also be able to learn about mortgage options that you did not know about previously. This does not mean that you have to learn everything that there is about mortgage loans, of course; simply try to cover the basics of loan options, opening and closing costs, and interest rate plans. You may also wish to take the time to find out what the average interest rates in your area are as well as nationwide so that you will have a better idea of how good of a deal the rates that you are being offered are.

Once you have a basic grasp of the mortgage lending process, start looking for mortgage brokers who operate in your area. You should be able to find several using your local telephone directory or internet listings. The more mortgage brokerages there are in your area then the greater your chances will be of finding a good deal on the mortgage loan that you take out, since you will have a number of different options to choose from. Begin contacting each of the brokers that you find and request average interest rate and loan term quotes from each.

When you have collected quotes from a number of different mortgage brokers it is time to begin your comparison. Sort the quotes by the interest rate that is being charged, but make sure that interest is not the only factor that you look at. In addition to the interest rate that you have to pay there may be a number of other costs which can affect how good of a deal a particular mortgage is, and the terms of one mortgage offer may not be as flexible as those of another. Sorting quotes based on interest will at least give you an idea of where the various offers stand based on one of the most obvious factors of the mortgage, however, and can also make it easy to eliminate the offerings of any broker whose rates are much higher than the others.

You may also list the points next to each loan’s interest rate. Points are a percentage of the loan you pay either at closing or rolled into the mortgage principal that acts as a “buy down” of the interest rate. For example, a rate that is 1% lower than a comparable loan may have 1 to 3 points attached to it whereas loan number two has zero points. Depending on the amount you are borrowing, one of these loans may be less expensive than the other. Your particular situation will determine which has the lower overall cost.

Begin comparing the quotes that you have received based on the estimated monthly payments you will have to make, opening and closing costs, and any specialized terms or conditions that certain mortgage quotes might have. Read through the quotes of the mortgage brokers several times to make sure that you have all of the information that you need for your comparison, and begin removing quotes from consideration when you find them to be more expensive or to have more strict terms than some of the other quotes. Continue reducing your potential mortgage loan quotes until only two or three remain so that you can compare them more closely before choosing a mortgage broker. Once you have finished the comparison you should have an idea of the broker who will find you the best deal on your mortgage so that you can then begin the process of getting the exact loan that is right for you.

By the word “mortgage” We used to have begun only recently: a relatively new concept for the Russian practice. If the mortgage housing is becoming more common, the commercial real estate mortgages – has only sporadic cases.

Mortgage commercial real estate or commercial mortgage (mortgage business), is widespread throughout the world. Western experience shows that with sound operation of commercial real estate – rental of premises for offices, shops, business services – its yield is comparable to any other area of small business and allows the use of mortgage loans.

The essence and conditions of commercial mortgages

Mortgage loan is granted for the purchase of non-residential premises: warehouse, office, etc. The meaning of the mortgage is to lend the purchase of commercial real estate under the same pledge. In contrast, housing loans, commercial mortgages are short term loan, but rather high interest rates.

Typically, the annual rates of commercial real estate mortgage loans range from 12 to 16%, mainly in the currency. The term of the mortgage real estate – a maximum of 10-12 years and the most common term – 5 years. Borrower must make an initial contribution of 25-40% of the value of real estate. In doing so, the client must be profitable and a minimum balance of the year on the market.

The legal nuances of commercial mortgage loan

The scheme of the commercial mortgage is similar to non-residential mortgage housing: there are the same procedures for assessing the borrower and the facility, the requirement of the initial deposit. But there is a fundamental difference – the law does not allow companies to draw up a mortgage on the property until the conclusion of the sale. The object must first acquire and then you can pledge to get the money.

An important legal aspect of commercial mortgages – the registration of ownership of non-residential premises, while mortgage encumbrance Federal law does not provide. The Treaty on mortgage commercial real estate is subject to general rules of the Civil Code of the Russian Federation on the conclusion of treaties, as well as the Federal Law “On Mortgage (mortgage). According to paragraph 1 of article 9 of the federal law in the contract of mortgage must be given to mortgage his assessment of substance, size and term of the obligation secured by a mortgage.

Who will benefit from the commercial mortgage?

Participants in the commercial mortgage market agree that the development of the mortgage business is constrained primarily loopholes in the law. However, it is not clear, and someone who will be the borrower, what is its quality. Reliable stable companies can take to acquire an ordinary commercial real estate loans on bail of any property, they do not particularly need a mortgage. And if the company has no collateral or banks do not consider it possible to give her credit based on the evaluation of such a company – why would need a mortgage borrower?

It is for this reason that Russia mortgage commercial real estate still is, essentially, for large companies. For small businesses do not have sufficient collateral. On the specific risks of small businesses overlap problem opaque commercial real estate market.

Commercial Mortgage Scheme

So, the existing legislation in respect of the mortgage business is not perfect. It defines and possible arrangements for the mortgage lending business. According to the law “On mortgage” for commercial real estate, as opposed to living quarters, is an entirely different mechanism of registration and registration of collateral. Therefore, the market has developed a number of ways to carry out this kind of transactions, enabling them under current legislation.

Scheme I

The conclusion of the sales contract. The seller receives a portion of their funds from the buyer, as well as the guarantee of a bank. Then the registration of ownership of the new buyer. Further, the registration of a collateral agreement, followed by the issuance of credit and final settlement. This scheme experts called the most complex and lengthy.

Scheme II

The buyer pays for pre-contract owner (the seller) of its own funds, and the seller receives from the Bank’s obligation to pay the missing funds in the event of registration of mortgage. Followed by registration of collateral on a bank and registration of all documents on the transfer of ownership of the new owner, that is, the buyer (the conclusion of a contract of sale), after which the seller receives the full amount, but registration is taking its course.

Scheme III

Realtors latest scheme called “Ransom entity.” A company, which is made out of real estate object (entity). Then the borrower to buy shares of the company by paying the loan. In doing so, the company arranged for the property.

Leasing – an alternative to commercial mortgages

According to experts, a good alternative business imperfect until the mortgage can become a commercial real estate leasing. In this case, the leasing organization – an analogue of a cooperative – gives credit for the purchase of the property and is the owner of the facility until the loan is not repaid. One of the advantages of leasing is that his arrangements clearly stated in the legislation. On the other hand, in case of bankruptcy leasing organization all of its property may depart for the debts of third parties, such as banks.

In any case, the risk is unavoidable. Banking experts advise entrepreneurs themselves to influence the terms of lending. According to most experts, the most urgent problem hindering the development of commercial mortgages, the low culture of the financing of small businesses. Mortgage becomes reality when the small business “Light”. The lower the tax culture of small business, the worse the conditions of mortgage lending for the same – the withdrawal of real market-mortgage business.

Subprime mortgages are loans made to people with less than pristine credit. It’s a code word for those of us who have some sort of credit issue in our past and don’t make the cut as a “prime” borrower. For several years now, subprime borrowers have been getting subprime loans, which mean loans with substantially higher interest rates than prime borrowers. In other words, the shakier your credit the more expensive your loan will be – and to some degree, the more difficult to make payments on every month. You can always trust our : mortgage and asset-backed bond funds . Two million Muslims in the UK face an ethical dilemma if they want a mortgage or a loan. Conventional mortgages and loans all require the payment of interest and “riba” as interest is called under Islamic law, is forbidden by the Koran or panel of lenders – mortgage choice .

Islamic finance is not widely available in the UK – so where can find it? Here are three suggestions:

Over the last few years Lloyds TSB has introduced Islamic products to 33 of its branches. Their spokesperson says, “It’s important for our customers to see that we are following the right procedures. We have a panel of four Islamic scholars who over-see the products. They offer guidance on Islamic law and audit the products”. Leading to mortgage and asset-backed bond funds . Another high street bank, HSBC, is developing a special range of Islamic products under the Amanah brand name. This range includes home finance plans, home insurance, commercial finance, and various current accounts and pensions. Hussam Sultan, the Amanah product manager says, “As a bank, we are not here to moralise or tell our customers that Amanah finance is the way to please Allah. We’re just here to provide them with a choice” on ca equity mortgages .

The Islamic Bank of Britain has three branches in London, two in Birmingham and one each in Leicester and Manchester. They’re the only British bank specifically providing for Muslim customers and claim to be halal throughout their operations. All their financial products are approved by their Sharia’a Supervisory Committee – all Muslim scholars who are experts in all aspects of Islamic finance. Which is backed up by : mortgage and asset-backed bond funds . British financial institutions are increasingly catering for Muslims’ specialist needs through a number of alternative arrangements that respects the teachings of the Koran. Here are just two of them:

Ijara with diminishing Musharaka – the mortgage alternative.

Ijara with diminishing Musharaka is an Islamic alternative to a conventional UK mortgage and has been adopted by several British banks and building societies.

Add to that the fact that lenders have been offering loans with ninety, ninety five and one hundred percent financing on loans. Mix that in with adjustable rates that cause steep hikes in monthly premiums after a few years, and you have millions of working Americans with substantial risk exposure on mortgages that they have taken out in the last few years. The reckless lending and starry-eyed borrowing is starting to generate some negative statistics at panel of lenders – mortgage choice .

According to UBS, the eighth-largest underwriter of mortgage-backed securities (a financial instrument backed by home loans) residential mortgage loans to subprime borrowers are “going bad” fifty percent faster this year than for the same period in 2005. What does “going bad” mean? In the UBS report, it means loans that are at least six months old and are delinquent more than sixty days.

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In the words of the UBS report, “Subprime performance continues to deteriorate for newer originations.” The change was from 1.6% of loans in 2005 to 2.4% of loans in 2006. That is a miniscule portion of all mortgages, but it is the degree of acceleration that concerns analysts.

The reason for this concern in the securities market is that subprime loans have been behind the fastest growing portion of the mortgage bond market. Subprime mortgage bonds, sold on Wall Street as “home-equity asset-backed securities,” have nearly doubled since 2002. Currently there are $565 billion of them in play. If you consider the fact that subprime mortgages are more common than prime mortgages and that over a third of all recent mortgages have been interest only or option mortgages, and you begin to understand the concern on Wall Street.

According to the report second-lien loans and mortgages with a high loan-to-value level created this year are also showing deteriorating lending standards. That means home refinance loans and loans of ninety to one hundred percent financing are in a shaky category of their own. The housing and loan frenzy produced an abundance of lenders which has, over the last year, become an overabundance of lenders. As the housing market has cooled mortgage originators have been under increasing pressure to produce, while their margins are being squeezed by the cost of funds. It all makes for an extremely nervous lending industry.

In essence, Musharaka means partnership. Under this Islamic financial concept, the bank buys the house and legally becomes its owner. Then throughout the pre-agreed period, say 25 years, a monthly payment is made. Each monthly payment includes a charge for rent and a charge that buys a small proportion of the house itself. It’s form of variable shared equity plan with the proportion of the house being owned by the purchaser, steadily increasing as payments are made. Once the final payment has been made, the house is owned outright. Ijara

Here you tell the bank or financial institution what you want, for example a car, and they buy it. In return for a monthly payment that covers the cost of the bank’s capital, the bank then allows you to use the asset for an agreed period. In reality, it’s a form of leasing.

For your interest we show below, definitions of some words used widely in connection with Islamic finance.

A Glossary of selected Islamic words used in finance.

Amanah : Means trustworthiness, with associated aspects of faithfulness and honesty. As a central supplementary meaning, amanah also describes a business deal where one party keeps another’s funds or property in trust. This actually the most widely used and understood application of the term, having a long history of use in Islamic commercial law. It can also be used to describe different financial activities such as deposit taking, custody or goods on consignment.

Arbun : Means a down payment. It’s a non-refundable deposit paid to the seller by the buyer upon agreeing a sale contract together with an undertaking that the sale contract will be completed during a prearranged period.

Gharar : This means uncertainty. It’s one of three essential prohibitions in Islamic finance (the others being riba and maysir). Gharar is a sophisticated concept that encompasses certain types of uncertainty or contingency in a contract. The prohibition on gharar is often used as the grounds for criticism of conventional financial practices such as speculation, derivatives and short selling contracts.

Islamic financial services / Islamic banking / Islamic finance : Means financial services that meet the specific requirements of Islamic law or Shariah. Whilst designed to meet specific Muslim religious requirements, Islamic banking is not restricted to Muslims. Both the customers and the service providers can be non-Muslim as well as Muslim on ca equity mortgages .

Ijara : Means an Islamic leasing agreement. Ijarah permits the financial institution to earn a profit by charging leasing rentals instead of lending money and earning interest. The ijarah concept is extended to hire and purchase agreements by Ijarah wa iqtinah.

Maysir : Means gambling. It’s another of three fundamental prohibitions in Islamic finance (the other two being riba and gharar). The prohibition of maysir is often used as the basis for criticism of standard financial practices such as conventional insurance, speculation and derivative contracts.

Mudarabah : A Mudarabah is a form of Investment partnership. Here, capital is provided by the investor (the Rab ul Mal) to another party (the Mudarib) in order to undertake a business or investment activity. Profits are then shared according to pre-arranged proportions but any loss on the investment is born exclusively by the investor and the mudarib then loses the expected income share at bad credit mortgages in ca .

Mudarib : The mudarib is the investment manager or entrepreneur in a mudarabah (see above). It is this managers responsibility to invest the investor’s money in a project or portfolio in exchange for a share of the profits. A mudarabah is essentially similar to a diversified pool of assets held in a conventional Discretionary Managed Investment Portfolio.

Murabaha : means purchase and resale. As opposed to lending money, the capital provider purchases the required asset or product (for which a loan would otherwise have been taken out) from a third party. The asset is then resold at a higher price to the capital user. By paying this higher price by instalments, the capital user effectively gets credit without paying interest. (Also see tawarruq the opposite of murabaha.)

Musharaka : This means profit and loss sharing. It’s a partnership where the profits are shared in pre-arranged proportions and any losses are shared in proportion to each partners’ capital or investment. In Musharakah, all the partners to the commercial undertaking contribute funds and have the right, but without the obligation, to exercise executive powers in that undertaking. It’s a similar concept to a conventional partnership and the holding of voting stock in a limited company. Musharakah is regarded as the purest form of Islamic financing.

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Riba : This means interest. The legal concept extends beyond interest, but in simple terms, riba covers any return of money on money. It does not matter whether the interest is floating or floating, simple or compounded, or what the rate is. Riba is strictly prohibited under Islamic law..

Shariah : This is the Islamic law as disclosed in the Quran and through the example of Prophet Muhammad (PBUH). A Shariah product must meet all the requirements of Islamic law. To facilitate this, a Shariah board is usually appointed. This board or committee is usually comprised of Islamic scholars available to the organisation for guidance and supervision for the development of Shariah compliant products.

Shariah adviser : Means an independent professional, usually a classically trained Islamic legal scholar, appointed to advise an Islamic financial organisation on the compliance of its products and services with Islamic law, the Shariah. While some organisations consult individual Shariah advisers, most establish a committee of Shariah advisers (often known as a Shariah committee or Shariah board).

Shariah compliant : Means the activity that ensures that the requirements of the Shariah, or Islamic law are observed. The term is often used in the Islamic banking industry as a synonym for “Islamic”- for example, Shariah compliant financing or Shariah compliant investment.

Sukuk : This has similar characteristics to a conventional bond. The difference is that that they are asset backed and a sukuk represents the proportionate beneficial ownership in the underlying asset. The asset is then leased to the client to yield the profit on the sukuk.

Takaful : This is Islamic insurance. Takaful plans are designed to avoid the characteristics of conventional insurance (i.e. interest and gambling) that are so problematical for Muslims. They structure the arrangement as a charitable collective pool of funds based on the comcept of mutual assistance and mortgage and asset-backed bond funds .

Tawarruq : When used in personal finance, a customer with a cash requirement buys something on credit on a deferred payment basis. That customer then immediately resells the item for cash to a third party. The customer thereby obtains cash without taking an interest-based loan. Tawarruq is the opposite to murabahah.

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Taking out a mortgage loan is a major responsibility, and it is not one that should be entered into lightly. It is important that you take the time before you take out a mortgage to educate yourself about both your specific mortgage and about mortgage loans in general; this will help to make sure that you get the best deal that you can on the loan that you take out and will also ensure that you are going to be able to make your mortgage payments without any problem. While educating yourself about mortgage loans is not as simple as simply looking at interest rates, learning more about your mortgage before you take it out does not have to be difficult or complicated.

The first thing that you should do in order to learn more about the mortgage process is to take the time to learn a few basic definitions. The most important of these are terms such as principal (the amount that you have actually borrowed), APR (annual percentage rate, or the amount of interest that is being charged on your principal), and PITI (the components that are combined to determine your monthly mortgage payment: Principal, Interest, Taxes, and Insurance.)

Other common terms that you may want to know include balloon and interest-only mortgages (two mortgage types where you make smaller payments for five years or less, then pay the outstanding balance due on your mortgage as a single payment) as well as some of the additional costs that may be associated with taking out a mortgage loan. Such fees include application costs, closing costs, and brokerage fees, and in most cases they have to be paid out-of-pocket instead of being included in your monthly mortgage payment. Not every bank or lender charges all of the same fees so be sure to do some comparison shopping.

Once you have a grasp of some of the more common mortgage terminology, you should take the time to read as much as you can about how the mortgage process works in general. There are a number of books and websites that you can use to educate yourself about the mortgage process, detailing how it works from preapproval to making your final mortgage payment. Consulting multiple sources will help to make sure that you do not miss any important details that may be overlooked by a single source, and will also help to eliminate any bias that may be held by one source.

In general, the mortgage process begins with preapproval so that you will know how much you can borrow (which in most cases will only be a portion of the total value of the property being purchased) and will continue through the loan origination, credit checks, closing, and purchase. The property that is purchased will be used as collateral to guarantee the mortgage loan and ensure that the lender gets all of their money, and the lender will have a legal claim to the property (known as a lien) until the mortgage has been repaid in full. Once you have paid all of the money that is owed to the lender, the lien will be released and you will own the purchased property outright.

After learning about mortgage loans in general, it is time to start shopping around for a lender so that you can find the mortgage that will best meet your specific needs. Talk to various banks, mortgage brokers, and other mortgage lenders in your area, discussing the advantages of the loans that each offers and requesting quotes for the interest rates that they will likely charge you. This will give you an idea of how much you are going to have to pay every month on the loan that you eventually take out, and will also help you to get a feel for the various lenders in your area so that you will know which ones will give you the best deal. It is important to educate yourself about the mortgage process in general before you start shopping around for quotes so that you can ask questions about any loan terms that do not seem right as well as explore options that you might not have known were available otherwise.

When you have narrowed down your options to one or two potential lenders take the time to discuss your loan with each in depth so that you can get an idea of exactly what your final mortgage loan will be like. There is a required form called the Good Faith Estimate that your lender is required to provide; this form discloses all the fees and helps to determine both the cash required for closing as well as your final monthly payment. This will let you learn more about the specifics of each lender’s loan products and will help you to choose the mortgage loan that is best for you and your property.

When comparing mortgages there are various factors to be taken into consideration. This article covers the following mortgage specific considerations, with more to follow in part two onwards.
- Total Cost Calculation
- Overall APR
- Arrangement fees
- Portability
- Early Repayment Charge
- Term of mortgage / Age of borrower
Total Cost Calculation
For many the major consideration when taking out a mortgage is how much the monthly payment will be. This is understandable as most people know what their level of income is and how much they can reasonable afford to pay in financing a mortgage. Unfortunately, it is this assumption that can cost you dearly. All too often those applying for a mortgage look only at the interest rate and the monthly payment, making the judgement that the lower the rate and monthly payment the better the mortgage.
In most cases the opposite is true because of total overall cost. Total cost refers to the overall cost of both the monthly payment plus any combined fees for the arrangement of the mortgage, such as a lenders arrangement fee or booking fee, a valuation fee, solicitors fee etc, and based on a specific period in years.
An example based on an interest only mortgage of £100,000
A £100,000 2 year fixed rate mortgage at a mortgage rate of 4.85% with a £499 lender arrangement fee and a £300 valuation fee has a total cost of £ 10,499 over 2 years
A £100,000 2 year fixed rate mortgage at a mortgage rate of 4.59% with a £1499 lender arrangement fee and a £300 valuation fee has a total cost of £ 10,979 over 2 years
In the example above, had the lower rate been taken, then the monthly payment would have been £21.66 per month less, but the net overall total cost would have been £480 more over a 2 year period, after the addition of the higher arrangement fee. This may not seem a huge difference over two years, but if the same decision were taken every two or three years over a typical 25 year mortgage term, the cost in additional interest would come to more than £10,000 pounds. In addition, as no capital is repaid with an interest only mortgage, the outstanding balance at the end of the term would also include the lenders arrangement fees that were added to the loan bringing the balance up to around £112,000.
Overall APR
Annual Percentage Rate (APR) is the total cost of borrowing which depends on the nominal rate of interest and on whether interest is charged annually, monthly, quarterly, daily or on some other basis. Comparison of the APRs of different providers is a facility for providing a direct and fair comparison of costs since the method of calculation is laid down in the Consumer Credit Act 1974. It is possible to compare the total amount payable by the end of the mortgage term. These are important comparisons if you are concerned about the total cost of the loan as well as the monthly outlay.
A word of caution however. The APR reflects the comparison of cost over the full mortgage term. If however the mortgage is changed after say a three year fixed rate period, the APR is not a good rate to use for comparison, and you would be better to look at the ‘Total Cost Calculation’ of the mortgage product as detailed in the section above.
Arrangement fees
An arrangement fee is generally payable to the lender to reserve the mortgage funds and is common amongst all lenders. The size of an arrangement fee can vary from a couple of hundred pounds up to one percent or more of the mortgage value, which can be a sizeable sum.
Many lenders now offer lower interest rates offset by a higher arrangement fee. Don’t be misled by the attractive rate as the overall cost often works out to be more than a slightly higher interest rate with a lower arrangement fee.
You should look very carefully at any conditions associated with the arrangement fee, as in some instances the arrangement fee will be payable on or before completion, although generally the option to add the arrangement fee to the loan is available.
Some lenders expect you to pay the arrangement fee when you submit your mortgage application (and may be reluctant to refund it if you decide not to proceed with their mortgage offer). For those lenders that allow the arrangement fee to be added to the loan, you will end up paying more interest over the term of the loan.
Portability
How often do you envisage moving house in the future? Having the facility to transfer the mortgage to a new property if regular moves are predicted, may be advantageous. For example, lets say you have taken a five year fixed rate mortgage which has an early repayment charge during the five year fixed rate period, but you then have to relocate due to work commitments. Being able to ‘Port’ (transfer) the mortgage to a new property means you can transfer the mortgage without incurring the lenders early repayment penalty charge.
Early Repayment Charge
When a loan is redeemed, there may be an early repayment charge levied by the lender depending on the type of mortgage you wish to take. Fixed, discounted and tracker mortgage rates usually charge a penalty of between 3% and 5% of the original loan amount if the loan is redeemed at any time during the fixed, discounted or tracker rate term.
Nowadays, it is common practice to waive any early repayment charge when an existing loan is transferred to the borrower’s new property, especially where a fixed rate mortgage is involved. This provides continuity to the borrower, and helps retain the business and existing client for the lender.
Term of mortgage / Age of borrower
Whichever method of repayment is selected for your mortgage, the shorter the term, the more expensive will be the monthly cost. If total peace of mind is required then a standard capital repayment mortgage should be selected. This is the only type of mortgage that guarantees that the mortgage will be paid in full if all mortgage payments are made.
When choosing either a Pension, ISA backed mortgage, contributions look more attractive over longer terms as the tax incentives have a compounding effect on the investment returns in the fund and will, therefore, generally become more competitive. There are no guarantees however, and fund values can go down as well as up. When considering a pension mortgages your age and the term of the mortgage are particularly important considerations as pensions are unable to provide any capital to repay the loan until at least age 50. For instance a first time buyer aged 22 would end up with a term of at least 28 years if the pension option was chosen.

I often get questions from potential investors about the basic functions of a mortgage fund (aka a mortgage pool). Therefore, I’ve decided to write about mortgage pools in general to clear up any misconceptions.

Mortgage pools are securities that are required by state and federal agencies to provide complete and full disclosure through an offering memorandum. A mortgage pool is a collection of capital contributions from many investors and is usually in the form of a limited liability company that sells shares. The investment pool of capital is then used to purchase a number of different loans, which are commonly called mortgages or trust deeds, and secured by real estate.

There are basically three ways to invest in mortgages, and regardless of a person’s real estate or investment acumen, there is a mortgage investment option available today that fits their investment portfolio. The three ways are: funding a mortgage directly, participating in a multi-lender or syndicated specific mortgage, or by investing in a mortgage pool.

The purpose of a mortgage pool is to create a long-term investment vehicle that provides for the fund’s management and a favorable rate of return to investors, while providing them with a diversification of risk and stability. Also, mortgage pools are redeemable on relatively short notice so they offer more liquidity than a direct mortgage or syndication.

For investors who don’t have the real estate expertise and don’t want to commit the time and energy to learn, the best route is to find a company that offers mortgage pools, like The Grace Fund LLC. These companies employ the services of a manager and administrator of the mortgage pool on the investor’s behalf who furnishes the investor with a monthly statement to keep them informed of their account balance, current yield and other details. The mortgage fund manager is paid a modest fee to research the proposal, make the lending decisions and handle all of the payments and administration. Fees earned by the manager are not paid by the investor, but rather a percentage of the income earned on the mortgages and servicing fees charged to the borrower.

These mortgage pools work through a four-step process: 1) investors purchase shares of a company; 2) the company purchases a number of qualified trust deed investments or mortgages; 3) the trust deeds and mortgages provide a return to the company and; 4) the company distributes a return to the investors from monthly cash flow, or growth through a Distribution Reinvestment Plan instead of taking a monthly payment.

Investing in the mortgage market can be a solid option for investors who want to benefit from the commercial real estate market without actually buying real property. In the past couple of years, returns of 10% to 12% or more in mortgage pools – compared to 3-4% for more mainstream investments – have been common. The pool is continuously managed with a primary objective of securing new mortgages to replace mortgages that mature, thus insuring investors a steady stream of passive income.

Monthly income from most mortgage pools usually varies as interest rates change or when mortgages are paid off. The returns to investors from the mortgage pool would follow market interest rate increases or decreases. The investor in a mortgage pool earns a blended rate of return on investment based on the interest earned from each respective mortgage. However, in the case of an investment in The Grace Fund, monthly distributions of 1.25% (15% annualized) are made to investors. To achieve the higher return, the Grace Fund mortgages are fixed at 15.5% annual interest to the borrower, an affiliate of Grace Realty Group. The higher rate reflects a premium to distinguish The Grace Fund from the many competitors vying for investor dollars in the marketplace.

I believe the most convenient, effortless and safest method for the average investor to invest in a debt instrument is through a mortgage pool. They pool their money by buying shares in the fund, and the interest earned from the mortgage payments received from the borrowers becomes income for the fund. All income earned is distributed to shareholders according to their proportional interest. Simple.

Similar to a mutual fund, a mortgage pool provides a vehicle to diversify a portfolio of investments – in this case, mortgages instead of stocks or bonds. Investing $50,000 in a mortgage pool consisting of 25 loans valued at $15 million provides better security through diversification than a $50,000 investment in a single loan secured by a single property.

Unlike a mutual fund, mortgage funds are secured by real estate and not subject to the same volatility as the stock market. Most mortgage pools are backed by well-underwritten and well-secured real estate loans. This is particularly true when the mortgages are secured by property that is financed at a very low loan-to-value ratio. To further mitigate risk, additional security is realized when the borrower purchases properties at a price far below their replacement cost with considerable value-added possibilities (buy low, fix up and sell strategy).

Another advantage to mortgage pools is that they are very suitable for most tax-deferred savings accounts including IRAs and 401ks, making them a good fit for future retirees or anybody else on a fixed income. An investment in a mortgage pool should be considered for inclusion in every serious investor’s portfolio.

1. Am I eligible for a Reverse Mortgage? • To qualify for a reverse mortgage, you must: • Be at least 62 years old. In the case of a couple or co-owners, both must be 62 if they want their names to be on title of the home. • Be a homeowner with enough equity in the home. • Seniors may qualify even if they have an outstanding balance on a mortgage. • Single-family homes and qualified condominiums, townhouses, manufactured homes, and 2 to 4-family owner occupied residences are eligible. • Reverse mortgages are available only for homes occupied by owners as a principal residence. • Can own up to 4 dwellings.

2. Are Reverse Mortgages legitimate? Yes. Reverse Mortgages are federally regulated and insured and are safer than most traditional mortgages.

3. If I get a Reverse Mortgage that means the government holds title to my home? False. Title does not get transferred into the governments name. Throughout the life of the loan, you own your home.

4. If I decide to sell my home, will the lender make me pay back the loan and will they collect a portion of the appreciation? False. The lender will only collect the amount that is due to them. If the loan balance is larger than the home value, the lender will only collect the proceeds from the sale. You can never owe more than what your home is worth.

5. What do I have to pay to get a Reverse Mortgage? In most cases there are no out of pocket costs to get a Reverse Mortgage. All costs deferred and only due when the homeowner moves out permanently, sells the home or passes away.

6. What are my payment options? You decide how to receive the money generated by a Reverse Mortgage. In general, your payment options are: • An upfront lump sum payment. • Line of credit. • Fixed monthly payments for as long as you remain in your home (or a predetermined, shorter period). • A combination of lump sum, monthly income and line of credit.

7. Are Reverse Mortgages only for desperate seniors, or for the “House Rich, Cash Poor?” False. The Reverse Mortgage is an excellent financial planning tool that has been used by homeowners from all walks of life to enhance their retirement years. While some have needed the cash from a reverse mortgage more than others, the growing popularity of this product is evidence of its benefit in a wide array of financial circumstances.

8. Am I required to pay anything during the course of the Reverse Mortgage loan? No. The flow of payments is reversed during the term of the Reverse Mortgage – the lending institution pays you. However, you are responsible for keeping up payments for your homeowner’s insurance and property taxes, and to maintain the condition of your home.

9. What happens when my house gets passed to my heirs? Once your home is passed to your heirs, the Reverse Mortgage comes due. Your heirs may either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage. If they sell the home, they get to keep any excess sale proceeds.

10. Can I do a Reverse Mortgage if there already is a conventional mortgage on the home? Yes. Existing mortgages must be paid off at closing. The proceeds from the Reverse Mortgage may be used for that purpose. This will eliminate any monthly mortgage payments.

11. Can a Reverse Mortgage be closed in a living trust? Yes. Generally this is acceptable. The complete trust documents will need to be copied and put in as part of the file.

12. Will a Reverse Mortgage affect my Social Security, Medicare or pension benefits? No. Proceeds from a Reverse Mortgage do not affect these benefits.

13. Can I get a Reverse Mortgage from anyone? No. Only federally approved lenders may offer HUD insured reverse mortgages. Rob Jones will close your Reverse Mortgages up to three times faster than the competition. Why not use a pioneer in the reverse mortgage profession, Sun American has over 20 years of Reverse Mortgage experience.

14. How do I get started? Call Rob Jones at Sun American Mortgage. He will need your birth date, approximate value of your home and the amount of money remaining on your mortgage, if any.

In most cases the senior is looking places to find money to off set the major loses they have felt from the banking and investment crisis. The one place that is still a safe haven in many areas is the home, even with declining values. The main reason is that most seniors purchased their homes when values were mush lower before the great appreciation era. If a seniors still has a mortgage on their home and many do have a current mortgage on their home and have to make payments every month. If a senior has a first mortgage lets say just for $100,000 at a 6% rate they are putting out over $600.00 per month or $7,200 per year. This amount if they did not have to make the payment would be added to their income that they would be able to use to live.

In many cases seniors over the years when the economy was booming many took at 30 year loans and or adjustable rate mortgage and are now faced with higher payments and they are trying to stay afloat.

If a senior is faced with this problem they should really consider a Reverse Mortgage for many reasons not to mention relief from payments. In many cases not only would they be free from mortgage payments, but they would receive additional funds to use as they see fit. Under the Reverse Mortgage program they senior controls how and what they spend the money on once they have closed.

Some things never change when doing a Reverse Mortgage and that is they still must pay the taxes and insurance on their home. If a senior is use to having an escrow of taxes and insurance they maybe able to set aside the monies with the company and have them pay it yearly for them.

One thing that all seniors should be looking at is the availability to access the money that they need from their home that they paid for over the course of their lives. In the years that you will need it the most and not have to worry about paying it back in their lifetime.

Many seniors are now thinking that if they take out a Reverse Mortgage and the bank or Mortgage Company goes out of business they will be out of luck. This is not true it is protected by the FHA mortgage insurance, that if they do go out of business then Federal Government takes over and pays them the money. The Reverse Mortgage is the safest mortgage in the entire mortgage industry. Unlike a typical mortgage where a lender has many options to force your paying of the loan, the Reverse Mortgage has the full protection of the US Government that guarantees that the senior will never have to leave their home for as long as they live. This of course is providing they pay their taxes and Insurance and continue to live in the home as their primary residence.

Now in 2009 a new program is emerging within the Reverse Mortgage and this a great option for many seniors who have one reason or another sold their home or have to move to a newer location. The Reverse Mortgage purchase program is now available to seniors over the age of 62. The program is design to allow seniors to purchase a home without any mortgage payments for life. Now just to make it very clear this does not mean that a senior can purchase with no money down. This is not the same mortgage that got this country in to the financial situation that we are in where people would by a home with zero down or less in some cases.

A senior who is looking to purchase a home will have to have money to purchase a home; it is all based on the age of the person and the appraised value of the home. Let’s say that a person age 62 wants to purchase a home that is appraised at $200,000, they would need approximately 40% down payment on the home. They would in most cases be able to finance all or part of the closing cost within the Reverse Mortgage. But let’s look at it in another way! Remember the older you are the less you will need down!

If that same person wanted to purchase a home using a conventional mortgage, they would need at least 20% down and would have to qualify with at least a 720 credit score and have the income to qualify for the mortgage payment.

So let’s look at the difference!

Conventional Reverse Mortgage

Now this is what it looks like on paper for a conventional mortgage verses the Reverse Mortgage the big difference is that a senior for a Reverse Mortgage purchase they will not have to qualify for the loan they already are if they are 62 or older. Also under the conventional mortgage if a senior fails to make a payment on their mortgage they will be foreclosed on just like anyone else.

For the senior who has a mortgage currently and is worried if they are going to be able to make payments on the mortgage Think Reverse Mortgage! No Income or Credit qualifying; if think this isn’t a big deal call your mortgage banker and see what it takes to get a mortgage today.

Also this is very important issue your conventional mortgage is not guaranteed that you will stay in your home for the rest of your life!

Here is what you have to do to get a Reverse Mortgage for your home!

So if you are thinking of how you are going to make it through these hard times, waiting to see if the market will ever turn around you are loosing money in your home.

Remember this as the stock market, and real estate even stay where it is now you may never see the return of that money.