Mortgage Rate News

Happy Thanksgiving from the Banks.com Mortgage Blog!

This is a good time of year to take stock of your financial situation, and look at your mortgage.

This year I was lucky enough to be able to buy a home, and here are some of the things I am thankful for from that process:

1. We got in before the subprime crash REALLY hit
2. A great traditional 30-year fixed mortgage
3. A good mortgage interest rate
4. A great loan officer that found us a good mortgage program
5. The change to meet an accountant who helped me set up my LLC

I have a lot to be thankful for, even in the economic times we live in.

But this is also a good time to think about others, and if you are grateful for what you have, it might be a good opportunity to help others who might not have as much. Giving generously to others is a great tradition, and it can help you in your personal financial life as well.

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If you are looking for investment real estate (or even to buy a home for personal use), you might consider looking for short sales. Short sales offer an interesting opportunity to buy property for a lower price. This can help you in terms of real estate investing, and it can help you save money in the case of buying a home for personal residential use.

What are short sales?

Simply put, short sales happen when a seller asks for less than is still owed to the bank. What you buy the house for will not be enough to pay of the home mortgage on the property.

If the mortgage is a traditional mortgage, short sales can offer amazing opportunities to get a home at below market value. Unfortunately, some second mortgages and negative amortization mortgages can mean that even with short sales you are still paying close to market value for the home. Make sure that you have the property appraised before you purchase it.

Real estate investing opportunity

If you can buy on short sales, you can increase your real estate investing opportunities. Your mortgage payments will be lower, making it easier for rental payments to you to cover (and exceed) the payments to the bank. Additionally, if you have managed to get the home for below market value, you will also be able to build equity in it faster. And, short sales increase the chance that you will be able to flip the home for an immediate profit (although this is very difficult in the current market).

Buying your own home

Even if you don’t plan to buy for investment purposes, short sales can be beneficial. They help you when buying your own home, allowing you a better price that can save you money. It can be very satisfying to save money on a home loan, and this is possible when you look for short sales.

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One of the growing trends in real estate is fractional ownership. Fractional ownership is when you actually own part of a property, along with other people. However, because a fractional ownership shares some similarities with a timeshare, it can be confusing to determine which is which.

What is a timeshare?

When you purchase a timeshare, you pay up front to purchase the opportunity to use a particular property a certain amount of time during the year. You often still have to pay for the nights in the hotel or resort, but the rate is usually discounted. You have only a limited time slot, but it is possible to swap your time slot, or even the property your visit, rather easily within the timeshare program.

Some of the downsides to timeshare include the difficulty in selling your timeshare, as well as the fact that few of them increase in value, and the fact that you don’t actually own the property means that you can’t build equity in it.

Fractional real estate

Fractional ownership is a concept growing in popularity because you actually own a piece of property that has the potential to grow in value. Fractional real estate is becoming popular in areas like Sedona, Arizona and Kapolei, Hawaii. It has been a regular fixture of the real estate landscape in places like Aspen, Colorado for years.

Even though there are fees with fractional ownership (timeshare has them too), the main benefit is that you own property, and that it can build equity. Financing for fractional ownership can be tricky, though, since a mortgage is necessary (when a timeshare is financed, it usually means an unsecured loan). However, it is possible.

Fractional ownership is a good option for someone who wants a better chance at a real estate investment return (although returns on fractional ownership have yet to be truly seen), and who can afford the high costs, since fractional real estate costs more than a timeshare.

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