Whether you are getting a first mortgage on your house, refinancing an old loan for better rates or terms, or taking out a home-equity line of credit, there are several traps that you can fall into if you aren’t careful.

Especially now that the economy has done so badly for the last few years because of this major recession we are in that has lasted from 2008 all the way up to 2010, banks have been less apt to loan money and when they do they may be more strict about how they do it.

This translates into several traps that you can fall into that may make your loan more expensive than it should be. But if you know about these things before hand then you can confront your bank about them and threatened to go to a different bank if they don’t remove them which is why I wanted to write this article for you today.

I’m pretty sure that everybody is aware of the variable interest rate trap where a bank tries to give you a variable rate that can go up or down every year depending on a set of criteria that the bank defines. In times of falling interest rates these are good for you because your interest rate can go down; but interest rates right now are at all-time historical lows, meaning they have nowhere to go but up so it’s a very bad idea to get a variable interest rate loan right now.

I’m also probably sure that everyone’s aware of the trick that banks use to try and get you to sign a 20 year loan instead of a 30 year loan. Yes by definition you’ll pay off a 20 year loan quicker, ten years quicker to be exact! And yes it’s true that you’ll pay less interest… but the fact remains the same that a 20 year loan will give you a much higher monthly payment than a 30 year loan will and especially for people who are refinancing in order to lower their payments this is an especially important fact to consider.

But in this article I wanted to discuss one of the less known traps that you can fall into. I’m talking about balloons. Many borrowers have never even heard of what a balloon is.  But they can be especially common in refinances and second mortgages. Basically a balloon is a balloon payment. It gives you a very low interest rate for a period of time, say five years. But then after that period of time the entire amount of the loan becomes due all at once.

In the old days this was attractive because you could take advantage of low interest and low payments for those first five years and then when it came time for the entire alone to be due on the fifth year you could simply go out and get a new loan and used the proceeds from it to pay off the old loan. The problem is, with the recession it’s harder to get new loans than it’s ever been so you may not be able to refinance in five years and then you’ll be stuck paying the entire amount of your loan all at once which can be devastating for most people.

So there you have three common and not so common traps to look out for when it comes to getting a mortgage. Hopefully now you have the information you need to get the best deal possible so that you pay the least amount of money for your loan.

Jason Markum has been an article writer online for well over 13 years.  When he’s not writing articles, he has a good time running a dinnerware web site where he also reviews corelle square dinnerware for your home use.
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Home mortgage modification deserves your serious attention.  There are already millions of homeowners who enjoyed its benefits.  You can also get the benefits of mortgage modification by knowing the right things to do.  

The Need for Mortgage Modification

There are several reasons why you need to modify your mortgage loan.  Your decision will primarily depend on your current financial situation.  For example, a job loss, increasing medical bills or a death in the family could have a significant effect on your capacity to pay your current mortagage and other debts.  The increasing disparity of income and cost of living is also a big reason why you may experience financial trouble.  

Unfortunately, most homeowners are afraid of calling their mortgage lenders thinking that they will get outright rejection if they apply for loan modification.  This is not true today because financing companies and banks are trying to reestablish trust in their customers.  Due to the bad economy, these companies are offering favorable arrangements so they can continue their business.

What to Do Before You Apply for Mortgage Modification

Before you attempt to contact your mortgage lender for a loan modification, there are several things that you need to prepare.  First, make sure that you have checked all your options.  There is a need for you to prepare a summary of your current financial position.  You may need to prepare duplicates of your documents in case you have a mortgage with two companies.  

Be thorough when you prepare your current financial standing.  You may need to include repetitive expenses like medications and recurring medical bills.  New expenses for required purchases can also be included.  By tracking your expenses, you will be able to establish an accurate picture of your cost of living.  It is generally suggested to go back at least three months in order to fully establish an accurate accounting of your cost of living finances.  

Who Can Help You When Applying For Loan Modification

You can seek the assistance of non-profit groups and organization that specialize in helping homeowners who want to apply for loan modification and refinancing.  These groups can help prepare your financial position in the proper format.  Most of these groups have already worked with different mortgage companies.  That is why you will be able to get good insights from them concerning the processes and procedures of home mortgage modification.  

Of course, your mortgage company can also offer valuable help for you.  Usually, these companies have special departments that deal exclusively with mortgage loan modification.  By speaking directly with the authorized service personnel of your mortgage company, you will know if your documentations are correct.  They will also give you the necessary forms to complete and other documents that you need to prepare.  Once you have prepared everything, you can now submit your paper works to formalize your application for a mortgage loan modification.  

Mortgage modification is a real life saver.  Modifying your mortgage could result to lower rates and low monthly payments.  So it is a good option that you really need to consider.

Rob K. Blake, mortgage expert and author, educates mortgage shoppers on finding local providers by state like Massachusetts Mortgage Brokers and Lenders and provides reviews of national companies like Aegis Mortgage.

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The Barcelona Real Estate market was out of control in 2007. Absolutely everything which was sold made a profit, and the average price per square metre was at 3800 Euros. Fast forward to December 2009, and you can quite easily slash 500 Euros from that price, which although might not seem like much, if you’re buying a one hundred square metre apartment in the city, you’ll already be saving 50,000 Euros. Taking into account the number of brand new properties which are lying unsold as well as those people looking to upgrade or simply those who haven’t been able to afford the constant rise of their mortgage repayments, and it really is a buyers market at the moment, and many people are getting some fantastic deals.

It’s important to note first of all that before you start looking to invest in Barcelona, like many areas in Spain and indeed Europe at the moment, then your financial situation should be absolutely water-tight. Many of the lenders and financial institutions in 2010 are offering a fraction of the services and completing a tiny amount of operations and loans in comparison to years gone by. While it’s true that banks are launching advertising campaigns to attract customers in with never-before seen offers and the lowest interest rates in the history of the Bank of Spain, the requirements to qualify for those rates are equally as un-reachable. Here are five things you need to know.

Firstly if you’re an investor, forget about it. The exceptional interest rates and terms only apply to the habitual living space – i.e. your own home, and banks and building societies are not interested in second homes, investment opportunities or summer chalets.

Another huge shift in the mix which may come to a surprise is the percentage that financial entities expect you to be able to cover in respect to the repayments that the new loan will offer. That sounds more complicated that it is. What it means if that a couple of years ago, lenders would see how much you and a partner earn (or you alone) and then only offer a mortgage if the month repayments did not exceed around 60-65% of that amount. So in plain English if you earn 1000 Euros a month, the mortgage repayments cannot be above 600-650 Euros. In 2010 this figure has dropped to a tiny 40%. Which means for the same property, with a repayment of 600 Euros, you need to be earning 50% more than a couple of years ago.

A third thing to be aware of is the risk seems to have increased. Thinking about it logically, if you’re going to a bank to re-arrange your mortgage it means you’re unhappy with the repayments and want to see if they can offer a better deal. This means that as long as you’re managing to keep up with the current re-payments, then the new deal on offer should be absolutely no problem.

Number four on your list of things to check is the type of interest you’ll be offered. Most financial entities opt for one of two indexes; Irph or Euribor. Without going into too much boring detail, the Euribor is the European interest rate and you will be charged a percentage on top which is the bank’s profit. The IRPH index is a combination of the previous few months Euribor to create an average, supposedly more stable, although this is not the case.

Finally, remember that there is no such thing as a tracker mortgage in Spain, so your rate will be fixed for one year, and each payment will be the same. In one way this is good, as you know the same amount you’ll need to raise at the end of each month for your home loan, but don’t expect the repayments to fall if there’s a drop in the indexes, similar to what happened over 2008 to 2009 in Spain and Europe as a whole.

David Brydon has been living in Barcelona, Spain for 10 years and writes for Barcelona Real Estate Agents Modus Vivendi. Their Barcelona Real Estate Guidelines are a must-read for anyone serious about investing in the property market.

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