Homequitybuilder

Your house is your home, but it is also an investment, and likely the largest investment you will have.  That being said, outright ownership of your house is usually a goal for most people, as well as building equity in their homes.

One of the best ways of building equity is to already have a lot of equity when you move in.  That’s not always feasible, but you’ll be much better off if you know there’s $50,000 or so of immediate equity in your new home- regardless of your down payment.

How do you know if you’re getting this kind of “great deal”?  There are many ways with today’s technologies and research data available.  There are also some real estate related companies that seek out these “good buyer deals”.  Two of them are-

www.truebargainhomes.com    and  www.hotpropertydeals.biz

If you’d like, please take a look at these sites.  Other than that, I’d recommend that you do your own research and due diligence on the market value of a home- and not just rely on a realtor’s opinion.  Every realtor wants to sell you a house- it’s their job.  Sometimes that could lead to you purchasing a house for a little more than you’d like.

Thanks, and Good Luck!

-KLME, LLC

As part of our ongoing marketing and informational efforts, KLME LLC has just completed and tallied a new consumer direct survey of existing homeowners in the New England area.  These findings and summary are a strong indicator of commercial viability of the AMF mortgage, and as such we continue our lender partnership efforts.

Overall, the results showed that approximately 19% of likely mortgage customers would elect for the AMF vs. the typical mortgage offerings now available to them.  This figure is actually higher than our previous, broad-scope, consumer survey done 18 months ago which showed a positive range of between 2% and 12% for the AMF.

Please check back to this Blog, or our sister website-  www.homequitybuilder.info  - for more information and for updates on the AMF availability.  Thank you.

Lately the “Money Merge Account” software program- or MMA- offered by United First Financial has been getting a fair amount of press and interest.  As the author of a Blog titled “Homequitybuilder”, I did want to relay a few of my thoughts on the matter.  But first, a few disclaimers-

1. I am biased.  As you can read elsewhere here on this Blog, and also on my related website-  www.homequitybuilder.info  - I am the proprietor of an equity-accelerating “competitor” of sorts, called the Alternative Mortgage Fund.  The AMF is not yet commercially available, as no working agreement has been reached with a lender.  But the AMF is a mortgage product in the works that I’ve developed.

2. I am not an expert in all things “MMA”, or “offset mortgages” or the like.  I also do not have an advanced degree in finance.  I am “just” a mortgage loan officer.

That all being said, the first thing I would say is that the MMA program is NOT a “scam”.  Some have called it such, for a variety of reasons.   UFF is selling the MMA program/software via a national and growing MLM (multiple level marketing) campaign, and there are some who associate any MLM offering with a scam.  MLM may not be my cup of tea really, but it certainly is not a scam in and of itself.  There are others who call it a scam because of the relatively hefty asking price for the MMA program (about $3500 retail), when if a borrower was financially astute enough they could go about all the noted equity appreciation without the help of the MMA product.  However, I don’t believe that renders it a scam either.  It is a product that could (and does) help a bunch of people pay off or down their mortgage faster, and I’m a big fan of that outcome.

The $3500 price tag I have to say is another matter though.  Already, if you do a Google search, you’ll find a handful of other equity-building HELOC (home equity line of credit) programs that are all very similar if not identical.  They are being offered by a few different companies.  I understand that one is called the “Equity Genie” and it sells for about HALF of the MMA price.  There is another, called MaxMyMortgage(?), that sells for just $99 total.  If there are CD-roms/programs that do the same for a $99 price tag, why would anyone pay $3,500 for it?  I don’t know, but I can tell you that the group at MMA/ UFF have a very good marketing/PR campaign that ties in with their MLM offering and fee/income structure.  A lot of loan officers (and others) are pitching the MMA and are earning a fair amount of money doing it.

For the numbers and who exactly can benefit from an MMA type program, this is what I’ve come up with thus far (feel free to verify/clarify this with those specific firms)-

1. Credit score of at least 680 (this eliminates about half of the borrowing public)

2. Equity in their home of atleast 25% (ex: house is woth $500K and there’s a mortgage on it for $400K.  $100K in equity); this eliminates about half of the remaining half of consumers

3. Positive monthly cash flow/ discretionary monthly income of at least $150/month.  Obviously the more the better.

If you fall in line with all 3 criteria, and are willing to abide by the program and the fiscal recommendations, then the MMA- or any of its like-competitors- can and will pay off your mortgage much faster than normal.  In the example I was handed by UFF, they show cutting 16 years off a 30 year mortgage.  I’d have to say that’s pretty darn good.

There are some “big picture” problems that I see with the expansion of the MMA-type products in the USA (the basis of these programs started in New Zealand, then the UK, and about 5 years ago it started in earnest in the USA).  In no particular order:

1. The vehicle for much of the program is obtaining a HELOC, and using the $$ in the HELOC to pay for your non-housing monthly (and periodic/sporadic) expenses.  Like car payments, utility bills, car insurance, whatever.  Of course none of these items is what a HELOC is truly to be used for.  Most HELOCs, if you read all that fine print, are to be used only for making improvements to your physical house/property.  If you’re not doing that at all, I’d say there could be a chance of some issues or liability (but I’d also admit I’m not an attorney).

2. The bigger issue is that of loan servicing and also of the mortgage-securities market on Wall Street.  I’m quite certain that the servicing (collecting and depositing payments, paperwork and accounting) of the MMA-based mortgage are going to be more timely and more expensive.  Who’s going to pay for those extra costs?  The bank or 3rd party servicer won’t be paying that.  Somehow it will be charged or billed back to borrower- in increased fees or something else.

More importantly, what investment group (Merrill Lynch, etc) that purchases thousands of mortgage notes is going to want to purchase many notes where the borrower is going to pay off the mortgage completely in half the time? Or maybe even 1/3 the time?  The individial investors that buy these mortgage-backed securities (stocks) are assuming a very small amount of people will prepay their mortgages.  When someone does prepay early, the overall value of that MBS/stock is actually less, because they are earning less interest/return on that mortgage.  If this is the case, that will mean that companies like Merrill Lynch will be less likely or will halt buying groups of mortgages that include hefty prepayment characteristics like the MMA provides.  If less firms will buy all these mortgages from the various wholesale and other lenders other there, then either the lenders will stop allowing people to use the MMA with their mortgages, or maybe the mortgage rate will be higher to accomodate for these potential issues.

A lot of this is merely speculation on my part, but be sure that the banks and those on Wall Street are (generally) pretty bright.  If they see some niche out there that is weakening their profits, they are likely going to do something to “fight back” and maintain their bottom line.

As for my bottom line on this subject, I have no real gripes against what the MMA does and what it can do for some borrowers.  I only advise that all interested do their own due diligence on the MMA and other programs.  It might be for you, and maybe you’ll be the one smiling in 10 or 12 years with no more mortgage payments….

Let me preface this article by saying that I’ve been in the real estate and mortgage field for a number of years.  That said, I do not have a crystal ball, and I’m sure there will be a few that disagree with my premise here.  Notwithstanding, if you’re thinking of selling or trying to sell your house-  get it done in the next 3-4 months, or else !

If you’re considering selling your home and you think that the market and seller’s market will be better 6 months from now, or 12 months from now- think again.   Take my advice that it will be even harder to sell 6 months from now for most of the country (note this posting is for the USA; as I do have some UK housing posts also in my Blog).

Overall, mortgage rates will be HIGHER 6 months from now.  With rates higher, buyers will be able to afford less house, and that always will bring house prices down.  Even compared to our current market.  Today’s average 30 year fixed mortgage rate is around 6.60%.  Over the past 10 years, the average is just north of 7%, and over the past 30 years it is around 8.5%.  Those are just general statistics, and have nothing to do with the current “subprime” credit crunch, general wholesale mortgage issues, as well as Freddie Mac just announcing a large quarterly loss.  Not to mention that many foreign countries and investors are cutting their US mortgage securities purchases because the US dollar has been falling in value.  All told, I wouldn’t be surprised if the average mortgage rate is around 7.75% in 12 months.  That is not a welcome sign for home sellers.

Foreclosures on the rise-  It’s been widely publicized that national foreclosure rates are their highest in at least 12-14 years.  Some stats show it the highest since records were kept on it.  2008 will likely be another record foreclosure year, due to resetting teaser ARM rates and mortgage payment shock for many homeowners.  The more foreclosed properties on the market will have a tendency to push general home prices down.

Also, there is the seasonal aspect of home sales.  Especially in this (bad) seller’s market, everyone and their mothers are waiting until the Spring of 2008 to put their house on the market.  I can guarantee that there will be a huge glut of new listings on the market come April and May.  I know December is tough, but I would put my house on the market tomorrow and hope for a February sale/closing if I had to.  Remember that almost half of the country really isn’t affected by the negatives of moving in the winter (like us here in the Northeast, and elsewhere).

OK- so how do I sell me house quickly?  It’s been on the market already for 100 days with no offers.  No easy answers here, but here are a few ideas-

1. Firesale-  Come up with a worst case scenario number, and reduce your asking price to that figure.  If you’re already at that point, you still might have to reduce to sell it in the next couple months.  If you’re stubborn and you wait 6-9 months, you’ll end up worse off.

2. Offer an extra bonus commission to a buyer’s RE agent to bring in a buyer under contract.  Typical co-broke for a buyer’s agent is between 2% and 2 1/2%.  Raise it 1% for a month or 2 and you’ll notice some more calls and foot traffic being brought in to your home.  The realtors are looking to make any extra money that they can.

3. With the tightness in today’s subprime type market, you may have to consider some alternates to bring in the largest buyer pools that you can.  One unique option is via a listing/advertising service called www.cheaphousepayments.com .  It’s another means of trying to sell the “value” of your home versus the rest on the market in your area.  Check out the website and you’ll see what it’s about.  There is a fee, but it may be worth it instead of lowering your list price- again.

4.  Other than, trust a good realtor and do the smart and basic things to make your home look as good as it can look, especially from the street curb.  That seems simple, but now its more important than ever.  Maybe involve a home stager, or hopefully your realtor can give you some good practical advice.

In conclusion, times are tough, but in my view they’ll just get tougher.  Unless you want wait 18 months or so, get brave and do what you have to do SOON to make the sale!  Good luck,

KLME, LLC

For those interested in seeing the benefits and features of the pending Alternative Mortgage Fund loan product, please go to the following link-

www.homequitybuilder.info     (Go to Calculators page)

You will see that our first heading is our exclusive and U.S. Copyright registered software program incorporating the AMF loan calculator.  By using this interactive calculator, a borrower can test different loan scenarios and see how much additional equity they may be earning by having an AMF mortgage.  (Please note that for both the USA and UK markets, the AMF is not yet available and is not yet registered with the federal regulatory agencies.  Contact KLME, LLC for more details.)

For potential UK customers, please check back in mid-November as we should have our custom AMF (UK-version) comparison calculator which will compare equity and payments to a 5-year fixed mortgage scheme.

Thank you for your interest, and we look forward to hearing from you.

As the Blog site is named “Homequitybuilder”, it’s clear that I value the equity (true ownership) that one has in their home.  As such, there is much info in other articles here about our pending mortgage product (the “AMF”) which is geared towards increasing your home equity via accelerated principal paydown.

The flip side of increasing your home equity is clearly tapping into your home equity via all of the home equity loans and lines of credit that are widely available and advertised.  (Yes, I also originate and broker equity loans and LOC’s- so I am not “above” any other loan officers out there).  I do believe that using your equity to fund certain items can be a good idea for some people at certain circumstances, but overall the OVERUSE and EASE of home equity loans have gotten many in this country in a lot of trouble.

Let’s face it- banks and lenders (and brokers) want to sell loans and services.  That’s how they make money, and that’s how their employees keep their jobs.  There is a lot of money in money.  Maybe not as much as a new purchase house mortgage, but home equity loan products can be an easy cash-cow for many neighborhood banks, and brokers as well.  But just because a product is offered doesn’t mean its a wise idea to apply for it.

There’s an interesting corollary between the rise of home equity loan products and the fall of the average American’s personal savings.  If you read the papers, you know that right now the average personal savings percentage is lower than any other time that this statistic has been measured.  You and your neighbor have much less in savings than you did 15-20 years ago.  This ties in with other economic factors, as well as the credit card craze of the last 10-15 years, but don’t forget about the other culprit.

Home equity loan products and credit lines essentially did not exist prior to the early 90’s.  It wasn’t until the mid 1990’s that they became commonplace, and every year during the real estate boom (that ended 2 years ago) they became more and more popular.  People were using their homes like an ATM machine.  With home values rising at an absurd level in many parts of the country, homeowners kept going to the well to “cash-out” via these bank products.

Two weeks in Barbados?  Home equity loan.  4 years of college tuition for their child?  Home equity loan.  New RV or SUV?  Home equity loan. 

The problem is- you DO have to pay it back.  Those that sold their home 2 years ago before the “bust” were lucky; they didn’t have to truly take $$ out of their pockets to pay off these loans.  Those of us who still are in our homes are still making these pretty hefty payments, and if we sold our homes today we would be bringing a sizeable check to the closing table just to pay off our home equity loans/ lines of credit.

Long story short-  home equity loans were created for the purposes of taking money out of your home TO IMPROVE YOUR HOME.  To increase the real value of your home.  If you read any of the fine print in these loans you are stating that you intend on using the funds for repairs or improvements to your property.  But we all know that many people use it as Monopoly money and do nothing to improve their home.  Better regulations and back-checking would help, but homeowners need to get smart the next time they consider a home equity loan.  As the old saying goes, “Nothing’s free”.

On a non-related note, please check out our new (and still in process) website titled-

www.homequitybuilder.info

We believe you’ll be pleased with the site and the offerings.  Thank you.

KLME just completed a consumer-direct survey to be a follow-up to another UK mortgage survey done 5-6 months ago.  The complete AMF comparison and questions are shown in the most recent Homequitybuilder blog.

The basic survey results are as follows.  Please note that the results are based solely on our survey example and questions, and are derived from surveying current UK homeowners:

• +/- 19% of UK mortgage-seekers would select and sign onto the AMF mortgage instead of the typical 5-year fixed mortgage option.
• Just over HALF of the 191 respondents noted that they were either Very Interested or Somewhat Interested in the AMF mortgage loan product.

Some quotes/ direct comments from UK borrowers:

“There will be a demand for the AMF”- from a current offset mortgage customer

“The AMF site/blog is offering a nice mortgage fund”

“Will be back to purchase/sign up”

“No hesitation in signing on with the AMF”

As noted earlier, KLME is furthering discussions via a variety of avenues in bringing the AMF to the UK mortgage market.  This includes the necessary FSA approvals and other logisitical responsibilities.  It is our plan to be offering the AMF to the UK homebuyer/ homeowner within the next 6-9 months.

For comments, questions, or for further information, please contact us at-

amfinfo@comcast.net

Regards,

KLME LLC

A few months ago, this Site (along with Htmail services) sponsored a consumer survey regarding our pending UK mortgage loan product, the Alternative Mortgage Fund (AMF).  The results of that survey are published in this Blog, but it is estimated that the AMF should attain approximately 5%-6% of the entire UK mortgage market.  As a follow-up, we are posting this new consumer survey- which will better allow us to more accurately determine the potential market share.  Please help us help the UK homebuyer/ homeowner with a BETTER mortgage alternative!

The benefits of the AMF are essentially a faster loan principal paydown than the conventional mortgages out there- all with normally no additional fees or costs.  Build your home’s equity faster!  The AMF is a combination between a fixed and a variable rate mortgage, and we would like your opinion on the following example and comparison:

L250,000 initial mortgage loan amount- 25 year term (current BOE rate- 5.75%)             

Values listed below are for the END of the initial 7-year period (most UK homeowners stay in their homes for between 7-10 years only).  “Rate” change below is the BOE base rate change from the loan’s origination point.

The AMF below is being compared to a currently offered 5-year fixed mortgage with a fixed rate of 6.70% (for Years 1-5) and a variable rate of 6.79% or BOE + 1.04 (for Years 6-25).  Under Zero net interest rate changes, the monthly and yearly payments of both conventional and the AMF loan are nearly equal.  The following chart shows the Net benefits for the consumer in using the AMF loan with differing interest rate changes:

Rate Change          Payments   PRINC. paid    NET +/- for Consumer

-3.00%          AMF  L145,355   L55,774         AMF ahead L7,823 overall

                     TYP  L136,162   L38,756      

-2.00%          AMF  L145,355   L52,657         AMF ahead L7,436 overall

                     TYP  L138,892   L38,756   

-1.00%          AMF  L145,355   L49,541         AMF ahead L7,190 overall

                     TYP   L141,760  L38,756    

0.00%           AMF  L145,355   L46,424         AMF ahead L7,079 overall

(no change)   TYP   L144,766   L38,756  

+ 1.00%       AMF   L145,355   L41,674        AMF ahead L5,467 overall

                    TYP   L147,904   L38,756    

+ 2.00%       AMF   L148,467   L40,635        AMF ahead L4,908 overall

                   TYP    L151,496   L38,756      

+ 3.00%       AMF   L153,217   L40,635        AMF ahead L3,202 overall

                   TYP    L154,540   L38,756     

Note the overall consumer benefit of the AMF vs a popular 5-year fixed mortgage scheme in ALL of the listed interest rate scenarios!  This is due to the inherent structure of the repayment of the AMF loan- it directs more of your monthly payments to paying down the loan’s principal amount.  Also note that the AMF is NOT the type of mortgage scheme which allows for the least amount of “out-of-pocket” initial monthly payments.  If that is your most important concern there are some better mortgage options, like the 2-year fixed mortgages with a very low initial (teaser) interest rate attached.

For some further information, please see some of the other postings on this Site.  Also note that the AMF is not currently available, but we are now seeking the necessary arrangements in order to bring our product to market via a partnership with an established UK bank/ lender.  The AMF is not currently listed or approved by the FSA; our application is pending.  Your input and comments will assist us in this goal by providing needed consumer-direct feedback.

Based on the previous example and the information provided, what is the likelihood that you would sign onto the AMF vs. a conventional 5-year fixed mortgage?

A) Over 50% likelihood would switch to the new AMF

B) Between 30%-49%

C) Between 20%- 29%

D) Between 10%- 19%

E) Between 1%- 9%

F) Zero %

Thank you for your time and participation.  For more information, please contact amfinfo@comcast.net. (temporary email address and product website only)

Thank you to all current homeowners who took part in our initial consumer survey on our fledgling new mortgage loan scheme, the Alternative Mortgage Fund.

Direct Quotes regarding the AMF from Current Homeowners:

“An excellent idea, will be very likely to swap (mortgages).”

“A requirement for many people.”

“Inventive and original.”

“Very appealing.”

Statistical results from the recent HTmail survey of 285 UK Homeowners-

13.2% of 5-year Fixed mortgage customers would switch/sign-up for the AMF mortgage if it was currently available.

Note that this percentage is with no consumer education and no marketing campaign to promote the advantages of the AMF mortgage.

For more information on the AMF and the proposed business plans of KLME LLC within the United Kingdom, please contact-

amfinfo@comcast.net           Thank you.

Worried about the payment shock from your 5-year fixed mortgage plan after the initial years are over?  Or are circumstances leading you to repay your balance during the initial period- costing you between 3,000- 7,000 pounds in charges?  Looking for a better, smarter mortgage alternative?

KL Mortgage Enterprises LLC (USA- based) and Alternative Mortgage Funding Company are excited to announce a brand new, revolutionary mortgage product called the Alternative Mortgage Fund (AMF).  The AMF will save your hard-earned money, and will also help shield you from the dreaded “payment shock” when either your mortgage scheme resets or the BOE raises its rates.  The AMF does this by applying more of your monthly payments to the loan’s principal paydown.  Just look at the following sample:

EXAMPLE: 250,000 loan amount/ 25 year term

Comparison of the AMF vs. a conventional 5/20 fixed mortgage (6.00% initial fixed/ BOE + 1.50% -currently 6.75%- after Year 5).  Both loans will accrue the same amount of interest payments over the full 25 year loan term, with no extra upfront costs or fees for the AMF.

*For simplicity, all numbers below are assuming no NET changes in the BOE base rates over the listed term.  The AMF is a combination of a fixed and variable mortgage.  As such, when the base rate rises, the borrower is affected less than the typical tracker or standard variable mortgage.  For further details, please contact the email addresses listed or feel free to post a comment.  Note that all values listed below are cumulative- from loan onset to Year noted.

Year Extra payments w/AMF  Extra PRIN pd w/AMF  AMF Net Benefit

  1           1102 pounds             1440 pounds         +342 pounds   

  3           3306 pounds             4122 pounds         +836 pounds

  5           5510 pounds             6485 pounds         +975 pounds

  7           4948 pounds             8493 pounds        +3545 pounds

  10         4105 pounds             10,730 pounds      +6625 pounds

Note the overall benefit of the AMF during the first 5 years of the mortgage, but also look at the incredible benefits should your mortgage last longer than the base 5 year period!  Many homebuyers choose a 3 or 5 year fixed mortgage scheme, and end up staying at their home much longer than this initial term.  If that’s you, it’s easy to see the advantage of the AMF if you think there’s a chance of staying in your home longer than 5 years.  In addition, the AMF has a very minimal early repayment charge (1% of repaid balance for the first 2 years of the loan only).  Compare that to most fixed rate schemes where an early payoff could cost you over 6,000 pounds!

As noted above, the AMF is not intended to be the mortgage scheme that allows for the least out-of-pocket payments from the borrower; it is a more conservative loan product which will benefit you from additional principal being paid down with each of your monthly repayments.  This additional principal gets deducted from your loan payoff amount when the time does come to move house or remortgage.

The AMF is currently not available, but we are now seeking the necessary arrangements in order to bring our product to market as soon as possible.  The AMF is not currently listed or approved by the FSA; our application is pending.  Your input and comments will assist us in this goal by providing needed consumer-direct feedback. 

Based on the previous example and the information provided, what is the likelihood that you would sign on to the AMF vs. a conventional 5 year fixed mortgage?

A) Over 50% likelihood would switch to the new AMF

B) Between 30%- 49%

C) Between 20%- 29%

D) Between 10%- 19%

E) Between 1%- 9%

F) Zero %

Thank you for your time and participation.  For more information, please contact:

amfinfo@blueyonder.co.uk   OR   amfinfo@comcast.net