Stock Research – Wall Street Makes Fortune Sweeping Your Cash

Years ago, I was a limited partner at Bear Stearns and Company in New York City. Once a year, we would have a partner’s meeting, and I would attend as a matter of course. Now keep in mind that we were a trading firm, also a brokerage firm. Back then we didn’t do nearly the amount of investment banking that is done by some of the majors such as Goldman, Merrill, and Lehman Brothers at the time.

What was most interesting however is that we always referred to ourselves as “The Bank”. It’s a strange term when you consider that we were never licensed as a bank by the appropriate federal agencies. Nevertheless, on Wall Street when people were talking about their own specific firms, they always internally talked about “The Bank”.

The reason for this term is quite simple and appropriate. Years ago, if you wanted to know how much money a brokerage firm made all you had to do was calculate interest earned versus interest expense, and you basically had the bottom line, give or take a bit on a pretax basis. When I was s Senior Accountant with Arthur Andersen in the early 1970′s, this calculation was always appropriate, and we dominated banking and finance type companies at that time.

Recently after all these decades it looks like the same technique applies today that applied back then. Most individuals and institutions are still not making the interest they should be making, on the funds they have deposited with brokerage firms. They need to keep a better eye on their funds. The whole issue is the concept of IDLE CASH, and what is being done with it. Back in the late 70′s, Merrill Lynch led the industry with the development of what they called the CMA account which stood for Cash Management Account.

The objective was to go up against the banks both commercial, as well as savings and loan and fight for the cash. What the brokerage firms are doing now is sweeping your idle cash from your accounts on a daily basis and paying you interest on that dollar amount. What are the brokerage firms paying? The answer is probably as little as they possibly can. Recently I saw rates on the order of 1.5%.

What happens is that at the end of the day, the firm checks to see what idle cash is available in your account. It then sweeps the cash and pays you 1.5% on the balance or less. Meanwhile the firm acting like a bank will reinvest your cash over night in its own firm account at a much higher rate. Do these numbers amount to anything?

Would you believe that last year in 2006 Merrill Lynch must have made net, net $2 billion for its own account after paying out lesser amounts in interest to its customers on their idle cash balances? That’s right; they made $2 billion after expenses but before taxes. Is this any way to run a firm? You bet it is. The $2 billion was up from $1.3 billion two years before that. This mean’s the firm is getting better at sweeping the balances, and they are sweeping bigger balances.

Morgan Stanley started getting into the act last year, and Smith Barney which is owned by Citigroup got into the game late by starting up last September with the same technique. When Merrill was quizzed about the practice, they came back and said that the brokers at the firm are encouraged by the firm to discuss “higher-interest options” in order to “meet specific client demands”. Now I own a brokerage firm, and have been in the business for 30 plus years, my answer to that is “SURE”.

The master of this game is Charles Schwab, the discount brokerage house. They were using this technique years before anyone else. Merrill apparently took it from them. Today if you study Schwab’s financials closely, there is no question that they make more money from sweeping the idle cash from their client’s accounts, plus margin interest than they do from brokerage commissions.

Brokerage firms also pay different interest rates on these idle cash balances depending upon the actual balance. The small guy gets hurt, as he always does by having less money to deal with. Balances below a $100,000 usually get the lowest rate which is probably about 1.25% at the moment. The big boys who have over a $1,000,000 sitting in the account can easily negotiate a higher rate by simply picking up a telephone. What the brokerage firm counts on is not getting that phone call.

Since most people with brokerage accounts are always transacting business by buying and selling securities, they are not consciously aware of their idle cash balances all the time. They are thinking about gains and losses, not interest. This is a mistake, because if you are not watching your money, who’s watching it. The guy in charge of sweeping your account, is he watching it? You bet he is, but it’s not your interest he has at heart. His year end bonus is completely dependent upon how much he sweeps, and how little he has to pay you for your own money.

Forget about reading the small print in your agreements with the investment companies. They use language that requires a lawyer to interpret. That’s why the agreements are written by lawyers. The agreements will tell you that the accounts are “tiered”. This means the larger the balance, the more interest you will get. Now how are you supposed to know that?

Wachovia which owns the old Prudential broker network waits until the fourth paragraph of their customer agreement to tell you that Wachovia “may seek to pay as low a rate as possible.” This reminds me of the time that I was talking to a General Motors engineer about how much the jack cost in the trunk. His answer at the time was a”50 cents”. I said you got to be kidding, are you telling me that my life is dependent upon a 50 cent jack when I get a flat tire in the middle of a winter night. His answer was “Yes, 50 cents is what we pay.” As I walked away, he yelled, “Do you want to know why we only pay 50 cents for that jack.” I said sure, why? He said, “Because we can’t get one for a quarter.”

Be careful what you do with your cash, who’s calling the shots on it.

Goodbye and Good Luck

Richard Stoyeck
http://www.articlesbase.com/finance-articles/stock-research-wall-street-makes-fortune-sweeping-your-cash-100763.html

Issues regarding sell and rent back

You can stop home repossession by sell and rent back scheme. Sell and rent back means a property cash buyer may buy your house quickly and deposit cash in your bank account within a few days.  You may be worried after selling your house where will you stay. But your problem can be solved as you can stay in the same house as a tenant.  If you sell your house through a property cash buyer you may receive 75% of market value. It is very difficult to sell a house in the falling market. So majority of homeowners choose sell and rent back because they are desperate to move house or wish to stop repossession.

If you sell your house through a real estate agent it may take a few months or sometimes a few years also. But with the help of sell and rent back scheme you quickly sell your house. Sell and rent back normally covers legal fees and the availability of a property cash buyer means that there is no 1-2% estate agent fee.

If you sell your house through sell and rent back you can prevent home repossession, sell the house quickly, no estate agent and legal fees, affordable rent etc.  A sell and rent back means that seller has to pay low monthly rentals.

There are other reasons for people to sell their house. One of the main reasons is because of financial difficulties.  If you want immediate cash, then sell and rent back would be the best solution. If you sell your house through sell and rent back scheme, you can stay in the same house. Children need not change schools and you don’t have to look after another house. Other reason for a person wanting to sell his house is he might be in debt, he might have a lower income now or there might be a break up in relationship. His son or daughter might be going in for further studies for which money might be needed or he might have planned a dream holiday for which money in a lump sum may be needed. Whatever the reason, the whole process will be over quickly for both the seller and the buyer. The house that you rent back can be taken on lease for a minimum of ten years that can be renewed. This lease can be taken for a longer time, if necessary.

In great financial difficulties, when people are afraid of losing their homes, sell and rent back facility is definitely a great solution.

Andrew Wilson

Make Your Mobile a Cash Cow

Mobile advertising is a form of advertising via mobile (wireless) phones or other mobile devices. It is a subset of mobile marketing. Mobile advertising is closely related to online or Internet advertising, though its reach is far greater – currently, most mobile advertising is targeted at mobile phones estimated to reach 4 billion in 2008.It is probable that advertisers and media industry have started increasingly taking account of a bigger and fast-growing mobile market, though it remains at around 1% of global advertising spend. Mobile Advertising is less than 0.5% of the approximately 450 billion dollar global advertising industry. India Inc. has to joined the bandwagon to woo the advertisers and consumers in a big way. Why am I hankering about Mobile Advertising? It bears the honor of being a “CASH GENERATOR”. How? Read on to identify the stakeholders and what they have in store in the mad rush for mobile advertising. 1.Merchants (Products and Services): For Merchants and Business Houses looking for promoting their products and services ,Mobile Advertising is the sure shot way to reach the masses as is clear from the stats above.For a very competitive and flexible fee structure ,the advertising can be aimed at a very specific target audience egg. Based on location,age group etc.With Mobile Advertising mediators throbbing in the Internet space,it helps to tap the ever increasing user base of these websites without running around to create the user base for marketing.This helps in saving some useful money and effectively results in a higher Return On Investment. Spare me for the jargon:-) 2.Users or the Consumers(People like Me): How can it be fruitful to us where all the advertiser is doing is to fill his pocket with the advertising fees and luring us into advertisements. a) By bringing to us some very useful ads for our specific interests including various discounts on products and likes effective saving us some hard earned money by availing the discounts. b) “Get Paid to Receive Ads” bis the mantra that these Mob Ad websites are following to create that indispensable user base.

A step-by-step journey to Opulence – http://www.gettingmoneywise.blogspot.com

Mobile Advertising Moolah – http://www.cash-generators-online.blogspot.com

Ankit Agarwal

Wholesaling Bank Owned Foreclosures ‘ a Definitive Guide

Beginning investors who find themselves strapped for cash often start real estate investing by wholesaling properties to other investors.

With the market in its current condition more and more investors find that they are coming across hordes of motivated sellers. Unfortunately, all of these potential prospects tend to share one thing in common. They don’t have any equity! This little dilemma is causing many investors to turn their efforts toward bank-owed foreclosures.

The single biggest advantage associated with REOs is the fact that equity can be created instantly either by finding a hot deal or through shrewd negotiation. There’s nobody telling the bank that they owe too much on a property and can’t lower the price a bit. In theory…any house could be sold for as little as a dollar.

In fact, there is only one downside to wholesaling REO properties. Non-assignability. When an investor gets a bank owned property under contract it always comes with multi-page addendums that make the deal non-assignable.

A lot of new wholesalers will consider this one obstacle to be the end of the line where flipping bank owned homes is concerned, never knowing that there are four ways to maneuver around this bump in the road.

Method #1 – Add to Contract, Then Quit Claim

Most banks do not have an issue with adding an additional party to a contract, they just do not want the ORIGINAL parties removed from it at any time. So Ivan Investor can get an REO property under contract for $50,000. Ivan calls Louie Landlord and after talking about the deal Louie agrees to pay a total of $60,000 for the property.

Ivan calls the bank up and requests that an addendum be drawn up that adds Louie to the contract and title. The Bank agrees and everyone shows up on closing day.

Louie brings TWO certified checks. One for $50,000 for the purchase of the property, and one for $10,000 made out to Ivan. All parties then show up for closing and both Ivan and Louie then own the home. Louie hands Ivan the $10,000 check and Ivan signs a quit claim deed removing him from title on that property. Pretty simple, right?

Pros: The advantage to this method is that there is only one set of closing costs. It’s a rather simple and straight-forward method that works for most deals. It works around the 90-day deed restriction that comes packaged with many Fannie/Freddie properties.

Cons: Here are the negatives that come with this method. This does NOT work for HUD properties because HUD does not allow any changes to the parties that are on the original offer and the end buyer usually cannot be getting a mortgage because a mortgage company won’t allow you to be on title if they are lending someone else money against the home.

Method #2 – Simultaneous Double-Close

The simultaneous double-close (also known as a simul close or a “dry” close) is actually two transactions. An investor is buying from the bank and then instantly reselling to a third party in a separate transaction. It follows a typical A-to-B-to-C deal flow.

The “twist” that comes with this method is that the wholesale investor never actually brings any money into play. The end-buyer’s funds are used to fund BOTH transactions. This is possible because, as long as both closings take place on the same day, it doesn’t matter which one closes first for the title company’s accounting purposes. The second transaction (B-to-C) could take place a 9am with all the paperwork for that transaction taken care of at that time while the first transaction (A-to-B) doesn’t close until 2pm.

What really matters is that the deeds are RECORDED in the proper order when filed with the county. It’s important at that time to have the A-to-B deed filed first with the B-to-C deed following on record.

Pros: This works well for those who have zero cash as long as they have a good title company that will still do these types of transactions. It still works even with end buyers that are getting conventional financing if the end buyer is getting their financing through the right lender.

Cons: This method is NOT an option if the end buyer is getting FHA financing. This method also does NOT work for Fannie/Freddie foreclosures in most cases because these super-banks put a deed restriction in place that prevents you from reselling the property to ANYONE for a full 90 days.

Also, with all double-close deals there are two sets of transfer taxes, recording fees, and other closing costs that cut into your profit. Of course you can just build that into the deal by lowering your offer price in order to circumvent this small annoyance.

The biggest roadblock to getting these transactions closed is the fact that fewer and fewer title companies are comfortable with the “dry” simultaneous close where the wholesale investor brings in no cash to the deal. In fact, they are often refusing to close these deals at all!

Method #3 – True Double Close

The true double close (also known as a “wet” close) is the same as the simultaneous close in that the investor is buying the foreclosure property and instantly reselling it to the end buyer for a profit. However, the wholesale investor is actually bringing in his own cash to fund his end of the deal.

This little difference makes the title companies happy but it doesn’t work so well for beginning investors that don’t have piles of cash sitting around to make the deals work.

Then came Flash Funding. There are “transactional funding” lenders will lend you all the money you need to do these same-day double-close deals…for a price. Most will never run a credit check or request an appraisal on the property.

The pros and cons to this method are pretty much the same as the simul close, except that on the good side more title companies are willing to do business with you if you go this route and on the bad side you have additional costs in the form of Flash Funding fees chewing away at your profits.

Method #4 – Sell The LLC

This last method has been popularized by Steve Cook who’s said that he swiped it from commercial real estate investors who have been using it for years to avoid paying transfer taxes.

The idea is that an investor would submit an offer in the name of an LLC. If the investor was placing an offer on 1221 Sycamore, he may send it in with “Sycamore Group LLC”. If the offer is accepted, the investor immediately faxes in his LLC articles of organization and creates the company to match the Buyer on the purchase agreement.

From there the investor finds his end buyer and they agree that on closing day the end buyer will purchase the entire LLC from the original investor for the amount of the wholesale fee. From there, as the new owner of the LLC, the end buyer is empowered to close on the original transaction and purchase the property.

Pros: The upside to this method is that you workaround the extra costs in the form of transfer taxes and/or Flash Funding fees that come with the two Double-Close methods, and for those who are concerned about guarding their privacy, your name never goes on the deal.

Cons: The major obstacle to this one is that the end buyer has to pretty much be paying cash. Banks do not loan traditional mortgages (either to owner occupants or investors) in company names. You have to buy it in your own personal name to get a mortgage. Other concerns are that if you do this often enough you may attract the attention of state regulators who are confused as to why you start and sell 5-10 LLCs each month.

Armed with these four workarounds, investors nationwide are able to successfully wholesale flip REO foreclosures. None of these methods require the wholesaler to bring his or her own cash into play other than the initial earnest money deposit and none require a credit check. One of these methods will work for pretty much any situation you will come across when flipping bank owned homes.

Brian Kurtz
http://www.articlesbase.com/finance-articles/wholesaling-bank-owned-foreclosures-a-definitive-guide-736881.html

How to Purchase Your Home at a Cheaper Price

First-time home buyers facing financial constraints  sometimes abandon their plans to buy a home.  By identifying a foreclosed property, you can often buy a house at below market prices and with little initial cash down payment. Foreclosures homes are simply homes that have been repossessed by the bank or by a government agency due to default in mortgage payment by the original owner. Because the bank or agency is usually eager to unload the property, there’s a real opportunity to buy the home at a cheap price. But you have to do a lot of pre-study and some hard work to succeed in buying a home at foreclosure.

Where can you find foreclosures? The Internet has made things easy. Several web sites offer complete lists of properties at all stages of foreclosure. Properties offered by the Department of Housing and Urban Development are also available on-line. Many lender web sites now include lists of foreclosed properties.

How do you buy one? HUD homes (Housing and Urban Development) require a written bid, and except for those homes offered through exclusive listing contracts, HUD sells homes only through sealed offers. You can use any HUD approved real estate agent to help you submit one. For bank foreclosures, the procedures may vary. Auctions are usually advertised in the newspaper with specifics as to how much of a deposit will be required by bank check to secure the bid the day of the auction.

Please bear in mind that foreclosures homes are usually sold in “as is” condition. It is therefore critically important that you thoroughly inspect the home before deciding to buy. Do not fail to calculate what repairs on the foreclosure may cost by obtaining a bid from a contractor. Strangely, in quite a few cases, when you add the cost of the repairs to the purchase price, you may end up paying much more than you originally envisaged. 

Now let us examine buying pre-foreclosure homes which are lot cheaper then even foreclosure homes. The basic advantage in buying pre-foreclosure is buying the home at under market value price. If you are an investor in real estate, then buying pre-foreclosure is a windfall income. However, no matter investors or home buyers, you should first understand pre-foreclosure in order to avail the benefit.

Pre-foreclosure is the first stage of a home being foreclosed. This happens when the home owner has missed at least one payment and is now considered delinquent on the loan. The home owner receives a formal warning sent to the homeowner. The homeowner will be given a certain period to respond to the borrower. In this state, home owners are somewhat desperate and look for prospective home buyers to bail them out.

It should be understood that the home owner is passing through a bad patch in his life that has caused him to fall behind in his mortgage payments. Therefore, foreclosure home owners are very distressed when borrowers send in the warning of foreclosure. Remember, you as a home buyer can always help these foreclosure homeowners. If you are able to buy the foreclosure home with some amount above their mortgage balance, homeowners would settle part of their financial problem. Thus, buying pre-foreclosure is a win-win situation for both buyer and existing homeowner. You can get a under market value foreclosure home while homeowners could settle their unpaid home loan. However, the biggest challenge of buying pre-foreclosure is getting the attention of homeowner. Thus, acting fast and effectively will help you to reach pre-foreclosure homeowners.

Sarah Jose
http://www.articlesbase.com/investing-articles/how-to-purchase-your-home-at-a-cheaper-price-690903.html

Tips for Investing in Real Estate

Beginning a hobby or career in real estate investing doesn’t have to be so complicated or such hard work if you will only begin with what you have, right where you are at this moment.

Look for someone who really needs to sell their home and solve their problem. One of the fastest solutions if they are about to lose the house is to take over their payments on a subject-to contract. By giving them some walking money, they can afford to move and still have the cash to rent another home.

Then, clean up the property, lease it out to a future buyer on a rent-to-own basis which is called a Lease/Option. You get to collect an up-front, non-refundable deposit. Three to five percent of the future purchase price is a good figure to shoot for. You can actually do this every month and make some additional cash, or concentrate on this method as a full time lifestyle.

Have the renter/buyer sign a contract. You pocket the difference between what you’re paying the original owner and the amount you’re collecting from the new renter/buyer. The spread is higher on nice, expensive homes in great neighborhoods, so don’t be afraid to search in these areas.

This is a good method of collecting extra cash flow every month. There is no limit to the number of these deals you can do other than your time and effort.

Call on every “For Rent” ad in the local paper and just ask if they would be willing to sell the property in a couple of years if you sign a long-term lease. If you get a yes, negotiate a fair purchase price, sign a contract and find a renter/buyer. It really is that simple. Of course, you want to have a lawyer check out the contracts on the first deal to protect both parties.

Try to get at least $150 more per month than you are paying. Also get a minimum of $1000 above and beyond what you have paid out as the option deposit. You don’t want to be working for free, do you?

Let’s look at some figures from actual lease/options. A couple were behind on their notes because he lost his job, and she didn’t make enough to pay all the living expense. The stress was causing marital problems and they wanted to sell, but the house stayed on the market for six months with no takers.

They were getting desperate when a neighbor mentioned the situation to her church group. One of the group’s members had a son who was looking for a house that could be leased with an option to purchase in a few years. He and his wife didn’t have a lot of money for a down payment, but they knew that buying was better than renting.

After looking at the property, they decided it would be a perfect first home if they could manage the financing. The couple offered $1000 as a non-refundable option deposit, if the current owners would give them two years to qualify for a new mortgage. The timing was right and the current owners accepted the offer. The monthly payment they agreed on was $200 less than similar house rentals in the area.

Both couples were happy and they signed contracts for the deal the next day. The new couple didn’t even move in. They saw an opportunity to make some quick cash and a good monthly cash flow, so they lease/optioned the house to another couple for $5000 down with payments that were $300 above their obligation.

If this new couple closes on the deal in 1 year, they will have earned $5,000 up front and $3,600 over the course of the year in monthly cash flow. By the way, the sales price was $12,000 higher than what they had agreed to pay the original owners. Added up this equals $20,600 for just a few hours work.

These deals exist in every town in the world. You can do these until you build up your bankroll and monthly cash flow. There are no geographical limits. Travel the world doing deals, living where you please and life is no longer on a budget.

John Long
http://www.articlesbase.com/non-fiction-articles/tips-for-investing-in-real-estate-50755.html

Crucial Information About Cash Advance: Qualifying Requirements And Payment Terms.

There are very few requirements that have to be met by you in order to qualify for a cash advance.

You need is to be over 18 years of age and earn over $1,200 a month, plus you will also need to be able to produce a few recent pay checks that confirm that you are a regular earner who can make the repayment structure that the cash advance company will go over with you when you are accepted for the cash advance loan.

As long as you meet the requirements, then you will be more than able to be granted a cash advance loan even if you are applying for the first time. For a repeat customer, though, the process may become more difficult especially if they were unable to keep up with their repayments in the earlier loan.

If you were unable to keep up with your repayments in the first loan, then you are more than likely going to be rejected for a cash advance loan and cash advance companies like First Cash Advance will also suspend repeat customers who were unable to keep up with the repayments on previous loans. If you are willing to keep up with the repayments, then they are willing to help you.

Cash advance companies like First Cash Advance have to keep their business safe from customers who clearly can’t repay loans on time. They are letting those customers know that their budget does not support a cash advance, loan and that they need to review their budget before they can apply for a cash advance loan. It is something they have to do in order to run their business smoothly.

Let us now look at how the payment structure is in a cash advance loan.

The payment terms depend upon the amount of money you are borrowing from the cash advance company. If you are borrowing a very small amount of cash, you can probably pay it all off at once including the amount of interest. But if you are applying for a higher amount of cash, then you will probably need a more structured repayment plan that suits you as well as the cash advance company.

What you need to do is prepare a sensible budget monthly, so that you have enough money on hand to run your house even after paying off the monthly loan of cash advance.

The amount of the cash advance loan you request will decide the terms at which you must pay it back. If you can afford to make the monthly payments over a longer period of time, then you will be able to apply for the higher loan that you need; of course, if you only need a small amount of money to tide you over until payday, then you can borrow the amount and then pay it all off at once, or you can even spread out the payments, but you will be better off paying it all at once just to get it out of the way.

Your payment structure will be given to you with the amount that you have to pay them every month. The payment terms will mostly be requiring you to pay a certain amount to the company each month. Whatever your payment structure, it will always help to plan a budget and stick to it strictly, at least till you pay off your loan, to make sure you are not stuck with heavy interest rates due to missed payments.

Tanya Coles
http://www.articlesbase.com/finance-articles/crucial-information-about-cash-advance-qualifying-requirements-and-payment-terms-114542.html

Issues regarding sell and rent back

You can stop home repossession by sell and rent back scheme. Sell and rent back means a property cash buyer may buy your house quickly and deposit cash in your bank account within a few days.  You may be worried after selling your house where will you stay. But your problem can be solved as you can stay in the same house as a tenant.  If you sell your house through a property cash buyer you may receive 75% of market value. It is very difficult to sell a house in the falling market. So majority of homeowners choose sell and rent back because they are desperate to move house or wish to stop repossession.

If you sell your house through a real estate agent it may take a few months or sometimes a few years also. But with the help of sell and rent back scheme you quickly sell your house. Sell and rent back normally covers legal fees and the availability of a property cash buyer means that there is no 1-2% estate agent fee.

If you sell your house through sell and rent back you can prevent home repossession, sell the house quickly, no estate agent and legal fees, affordable rent etc.  A sell and rent back means that seller has to pay low monthly rentals.

There are other reasons for people to sell their house. One of the main reasons is because of financial difficulties.  If you want immediate cash, then sell and rent back would be the best solution. If you sell your house through sell and rent back scheme, you can stay in the same house. Children need not change schools and you don’t have to look after another house. Other reason for a person wanting to sell his house is he might be in debt, he might have a lower income now or there might be a break up in relationship. His son or daughter might be going in for further studies for which money might be needed or he might have planned a dream holiday for which money in a lump sum may be needed. Whatever the reason, the whole process will be over quickly for both the seller and the buyer. The house that you rent back can be taken on lease for a minimum of ten years that can be renewed. This lease can be taken for a longer time, if necessary.

In great financial difficulties, when people are afraid of losing their homes, sell and rent back facility is definitely a great solution.

Andrew Wilson

Cash May Be Available Through Refinance Loan

For homeowners who have been in their homes for a while, one of the easiest and possibly cheapest ways of getting money out of their house is to refinance their home loan. Depending on the interest rate being offered on home loans, they may also be able to save money on the cost of their loan as well as on the loan’s monthly payments.

Many homeowners bought their houses during the boom a few years back when interest rates were lower by agreeing to a fixed rate mortgage for a set number of years. With the loan converting to a variable rate hinging on the prime rate and in recent years when the prime rate went skyward they find themselves struggling to keep up with the payments. In many cases, they have not been able to make the payments and for different reasons have not been able to refinance the mortgage, ending up with the home loan being foreclosed.

Those who are able to refinance, have also been able to realize extra cash by taking the money earned as equity on their home as part of the loan process. Equity in a home is the difference in the appraised value of the property and balance due on the mortgage and in most cases, after about five years it will be a positive number. Those who are able to refinance their home loans are usually able to receive a loan of about 80 percent of the appraised value, using it to pay off the original loan and have cash left over for other uses. Stellar credit reports can sometimes realize a loan of 100 percent of the value.

Unfortunately, not all houses increase in value and houses that may have fallen into disrepair or been heavily damaged by disaster, may not be appraised at an amount equal to the loan balance. This is considered negative equity and obtaining a refinance loan is usually not possible. For a few, their only option is to either attempt to sell the house for less than they owe, or allow it to go into foreclosure and lose everything they have paid to date.

Home refinance plans are available to those with a clean credit history and in addition to the money available through the equity of the home; they can generally see additional savings through a lower interest rate. It is almost always better to obtain a new loan through the company holding the original mortgage as often the loan can go through quicker and the payment history has already been established. By lopping a percent or two off the interest rate, converting to a fixed rate mortgage, the loan payments will also drop saving money on a monthly basis. Be sure to fully understand the terms of your loan and payment information. If you feel you are not getting the best deal, be sure to shop around for better rates. You may find that you can get exactly what you want by comparison shopping.

James Copper

The Risks Of Rent To Own Real Estate Purchases

Copyright (c) 2009 Kentaro Konika

Rent to Own means the process that lets you pay for your house by paying rent. Owners who wish to sell their house can benefit from taking on a tenant who pays rent each month yet makes repairs and looks after the house as if it were their own. For the new buyer, this effectively means that each payment you make goes towards buying your house, which may sound like a fantastic deal. However, it is not a clear cut as it may seem and you should know the downsides of this option so that you don’t end up losing everything.

When you buy a house on the rent to own scheme you should know that not all of your monthly rent will in fact go towards you buying the house. For the new owners, you will in fact be paying off some interest each month to the previous owners, meaning that you will have paid a lot more by the time it comes to purchasing the house outright.

On top of this, any rent to own tenant should be aware of the fact that you will have to pay money up front. Whilst the schemes may be advertised as no money down, there are special payments that are usually required which can cost you up to 5% of the final sale price of the house. This is known as ‘options consideration’ and you must certainly take this into account when working out how much you want to spend on your house.

Scams do exist when it comes to money up front. Make sure that you do not have to pay a finder’s fee or money to fix your credit. It is much wiser to spend some extra cash and hire legal help who can save you money and hassle down the line.

Whilst you do pay money up front, this is no guarantee that you own any part of the property. Many people believe wrongly that this is a down payment, but it is in fact a payment that only goes towards the price of the house if you can pay all the payments and buy it outright. If you end up not buying the house, your original money is completely lost and you are not entitled to any percentage of the home.

These are just a few of the reasons for the sad fact that many people who rent will never end up owning their house. If you have bad credit ratings you may be attracted to such a scheme, but this is exactly the people the scheme is aimed at – people who will probably never be able to pay enough to own the home by the deadline.

It is important to take into consideration all of these factors before choosing a rent to own scheme. Whilst this is great for families or individuals who are working towards saving enough money for a property there are risks which you should always bear in mind.

Kentaro Konika
http://www.articlesbase.com/finance-articles/the-risks-of-rent-to-own-real-estate-purchases-817072.html

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