Avoiding the Most Common Fixed Rate Mortgage Loan Traps

By Rob K. Blake
Basically, there are two types of mortgage loans available for prospective homeowners: fixed rate mortgages and adjustable rate mortgages or ARM. As the name implies, an ARM is a type of home loan which has a varying interest rate which usually depends on the current trends in the real estate market.
A fixed rate mortgage, on the other hand, is a type of home loan whose interest rate will remain the same all throughout the loan term. Let's say that you took on a 15-year mortgage at 7.5% interest rate. Unless you decide to refinance or switch mortgage providers, the interest rate will remain at 7.5% for the entire fifteen years that you are paying off the principal of your mortgage loan.
Steering Clear of Fixed Rate Home Loan Traps
Taking your pick between a fixed rate mortgage and an ARM is all a matter of weighing the pros and cons of each. Depending on your household budget and the mortgage amount of the property that you are eying, there are times when a fixed rate home loan will be a more cost-effective choice as compared to an ARM.
However, there are traps that you need to avoid when going for this type of a home loan. First, it is good to remember that applying for fixed rate home loan means that you are making that commitment with the lender or banking institution that you are keeping the loan for a particular length of time - be it 15, 20 or 30 years.
Now, if you decide to refinance your home loan before the loan term is finished, you would have to pay out the amount of the fixed rate home loan. There will also be applicable charges when you terminate a 15-year contract, for example, and decide to refinance your home after only seven years.
The rule of thumb to follow is that the lower your fixed rate is, the higher your payout amount will be. The current trends in the real estate market will also be considered if you decide to take the path of mortgage refinancing. So in order for you to steer clear of fixed rate home loan traps when you are considering applying for a mortgage refinance, remember that it pays to weigh the pros and cons first before deciding which course of action to take.
Possibilities when Dealing with a Fixed Rate Mortgage Loan
The good news is that there are several possibilities that you can consider when applying for a fixed rate mortgage loan if you don't want to fall under the traps that most borrowers run into.
There is absolutely no need for you to choose a fixed interest rate for the entire length of time that the loan is active. What you can do is choose to fix a portion of your loan for a particular period of time. Let's say that you have a 15-year mortgage loan which amounts to $300,000.
Your first option is to choose a fixed interest rate for the entire amount. Your second option is to fix half of the amount for three years, and leave the remaining years at a variable interest rate. Or, you can choose to only have the first couple of years stuck at a fixed interest rate - while leaving the rest of the period variable.
At the end of the day, weighing the pros and cons of applying for a fixed mortgage loan is a must. This way, you will be able to determine whether this is a better option for you as compared to a mortgage loan which has a variable interest rate.
Rob K. Blake, mortgage expert and author, educates mortgage shoppers on finding local providers by state like Washington Mortgage Brokers and Lenders and provides reviews of national companies like Ashwood Financial.
Article Source: http://EzineArticles.com/?expert=Rob_K._Blake

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Why Fixed Rate Mortgage?

By Sonia Smith
If you are buying your first home, moving into a new house or renewing a mortgage, regardless of your situation, selecting a fixed rate mortgage means that you will not have to worry about fluctuating interest rates for the term of your mortgage. A mortgage is categorized as fixed rate, if the interest rate is fixed for a certain period of time. The fact that the mortgage interest is fixed means that a borrower knows exactly how much the payments will be during the fixed rate period.
Advantages of a fixed rate mortgage
A fixed rate mortgage comes with a fixed interest rate for the entire, or a selected term of the mortgage. The biggest benefit of this type of mortgage is that you know exactly what to expect, since you know:
• the interest on your mortgage;
• the amount of your monthly mortgage payments;
• the distribution of payment between principal and interest;
• the amortization of your mortgage.
Enjoy a guaranteed rate
When you take out a new mortgage, your fixed interest can be guaranteed for a fixed period of time, usually around 90 days, before the date of completion of the purchase of your home. If the interest rates happen to rise during this period, you will still be entitled to the lowest rate that you agreed with the lender within the guarantee time period. Check with your lender, or your mortgage broker to see how long a lender will "hold" the interest for you at a fixed level.
Interest Rates
The interest rates normally associated with a fixed rate mortgage tend to be higher than that of a variable rate mortgage. The rate is usually roughly around 1% higher than a variable rate mortgage.
Good in rising rates
A fixed term loan can be an excellent way to protect yourself form potential interest rises. If you feel that there is a strong likelihood that future rates are likely to rise then a fixed interest rate loan is an obvious choice as it protects the borrower from the loan getting more expensive at times of higher interest rates. However, remember that the loan can become costly if the rates are reduced and you are left paying a loan at a higher rate then the current interest rate.
Choose what suits you best
Deciding between mortgage types is not easy, which is why you need to talk to a qualified mortgage broker to help you pick the best product for you. You need to assess whether you want the security of knowing exactly how much you will pay monthly or you can afford to take a chance on a variable rate loan to benefit from any potential interest declines
If you want to talk to a qualified broker for residential or commercial mortgage products then pay a visit to the buy to let mortgage website.
Article Source: http://EzineArticles.com/?expert=Sonia_Smith

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Why Fixed Rate Mortgage?

By Sonia Smith
If you are buying your first home, moving into a new house or renewing a mortgage, regardless of your situation, selecting a fixed rate mortgage means that you will not have to worry about fluctuating interest rates for the term of your mortgage. A mortgage is categorized as fixed rate, if the interest rate is fixed for a certain period of time. The fact that the mortgage interest is fixed means that a borrower knows exactly how much the payments will be during the fixed rate period.
Advantages of a fixed rate mortgage
A fixed rate mortgage comes with a fixed interest rate for the entire, or a selected term of the mortgage. The biggest benefit of this type of mortgage is that you know exactly what to expect, since you know:
• the interest on your mortgage;
• the amount of your monthly mortgage payments;
• the distribution of payment between principal and interest;
• the amortization of your mortgage.
Enjoy a guaranteed rate
When you take out a new mortgage, your fixed interest can be guaranteed for a fixed period of time, usually around 90 days, before the date of completion of the purchase of your home. If the interest rates happen to rise during this period, you will still be entitled to the lowest rate that you agreed with the lender within the guarantee time period. Check with your lender, or your mortgage broker to see how long a lender will "hold" the interest for you at a fixed level.
Interest Rates
The interest rates normally associated with a fixed rate mortgage tend to be higher than that of a variable rate mortgage. The rate is usually roughly around 1% higher than a variable rate mortgage.
Good in rising rates
A fixed term loan can be an excellent way to protect yourself form potential interest rises. If you feel that there is a strong likelihood that future rates are likely to rise then a fixed interest rate loan is an obvious choice as it protects the borrower from the loan getting more expensive at times of higher interest rates. However, remember that the loan can become costly if the rates are reduced and you are left paying a loan at a higher rate then the current interest rate.
Choose what suits you best
Deciding between mortgage types is not easy, which is why you need to talk to a qualified mortgage broker to help you pick the best product for you. You need to assess whether you want the security of knowing exactly how much you will pay monthly or you can afford to take a chance on a variable rate loan to benefit from any potential interest declines
If you want to talk to a qualified broker for residential or commercial mortgage products then pay a visit to the buy to let mortgage website.
Article Source: http://EzineArticles.com/?expert=Sonia_Smith

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FHA Loan Modification Help - The Best Program Guide on the Net

;

By: Justin Bartlett

Loan Modification information on FHA Making Home Affordable Loan Modification Program (HAMP) provided courtesy of ModificationZoom. Com. This is your resource for mortgage loan modification information.
Section of Housing and Urban Development Secretary Shaun Donovan proclaimed today the FHA has made changes to its mortgage loan modification plan so that it will more almost imitate President Obama’s Home Affordable Modification Program (HAMP) below Making Home Affordable. Section hoped that the new FHA mortgage loan modificationcourses of activity will be in perspective by August 15th.
How does this be of assistance to you? Well, whether or not you currently own a home mortgage held by the Federal Housing Administration (FHA), you better be capable to extensively ease your on a monthly basis home loan payments, interest rate, and possibly attain a partial crucial forbearance or remainder reduction (a decrease in the quantity you owe on your mortgage loan), provided you meet the new guidelines.
Householders that have successfully gotten a loan modifications through Obama’s Making Home Affordable Program have had marvelous results, some Householders cuting down their mortgage interest rates to as low as 2% on 30 and 40 year permanent loans, saving big amounts of moneyeach month on their mortgage.
The Recession is a truly stirring era for homeowners in FHA loans, as they now in addition can attain similar results. Qualifying for the FHA -HAMP may be a small problematic, and there is some junk out there on in which way to successfully adjust your mortgage. We’re going to put to rest the buzz, and help you knowhow to get qualified, ModificationZoom style.
First of all we must cross the “eligibility” bridge – Your mortgage holder needs to be FHA-Approved to adjust below FHA-HAMP. The nearly all of lien holders that offer FHA mortgage loan programs are qualified. The biggest way to answer whether or not your bank may adjust your loan below FHA-HAMP is to call and ask whether or not they take part in the initiative! First of all your “mortgagee” (lender) is eligible, your next step is to make sure that you are eligible!
Your present mortgage ought to be an existent FHA-backed single family home loan, and the current home mortgage ought to be delinquent, meaning that you are 1 payment past due more than 30 days, but less than 12 full mortgage loan payments behind.
Your home ought to be a FHA insured single family home (1-4 units), home loans previously amended below HAMP don’t qualify, you ought to have had the loan for 12 months, and here is a nifty piece of information: There is no net present value (NPV) test for eligibility!
(The NPV investigation is exerciesed to resolve whether it’s amenable for your lien holder to adjust your home mortgage. Beneath this process, it does not matter whether or not it’s financially optimal for your servicer to adjust your mortgage loan or not! Beneath you qualify, your mortgage holder ought to adjust your loan, in spite of the quantity of equity you have in the house! )
There’s no upper limit on home loan amount for loans eligible for loans modifications, and it’s not crucial what your credit score is! There’s no valuation necessitated, and your FHA – HAMP updated mortgage is anticipated to be at a decreased interest rate and payment than what you already have!
For supporting documentation, you will need to present the next:
1) Hardship Letter
2) Income Documentation – Paystubs & W-2s, or Profit & Loss Statements & Full Tax Returns whether or not you are Self-Employed.
3) 3 Months Bank Statements
4) Financial Worksheet of Income & Expenses
5) Hardship Affidavit
So what is going to happen when you get a loans modifications through FHA – HAMP? Firstborn, you will be placed in a temporary loan modifications payment plan, and after you make the Firstborn 3 payments below your new plan, FHA-HAMP may be fixed for the life of the loan.
Your loan will be changed to a 30 year fixed rate to a (proposed) front end DTI of 31%. You ought to verify that your back end (proposed) DTI is below 55%.
What exactly does this denote? Your “front end” DTI may be computed by dividing your mortgage loan payment by your gross income. Your “back end” DTI may be calculated by adding all of the on a monthly basis payments that show up on your credit report by your gross income – e. G. – credit cards, car loans, and further and added loan payments.
Equally, to work out what your new payment will be, plainly multiply your gross income by 31 percent!
Alright, I may be grateful for that was some facts, so we’re going to review with a “To-Do List”:
1) Make certain that you possess an FHA loan, and that your Mortgagee (mortgage lender) is FHA – Approved.
2) Your mortgage loan ought to be leastwise 1 payment late, but not more than 12 payments late.
3) Make certain your home is 1-4 units, that it’s your Essential and only residence, that you’ve had the loan for 1 year, and you haven’t previously updated below HAMP.
4) Write out the hardship affidavit, write a hardship letter, document your income, finished a financial worksheet, include bank statements and submit the package to your mortgage servicer!
5) Get your loan updated!
The remainder of the information out there on FHA – HAMP is germane, but not inevitably stuff that has to be understood to get a loan modifications through the government program. For example; your mortgage holder will mold in which way to get to the goal 31% payment by giving you a 30 yr or 40 yr fixed term and the calculated fixed rate, and may have to lower your crucial to help you qualify for the payment you must be financially stable.
ModificationZoom is not a Government Agency, but we do realize the ins and outs and loopholes of FHA – HAMP, and may help you.
Alright, now you are ready to rock and roll with the FHA Home Affordable Modification Program (HAMP).
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Mortgages Unravelled

By: Emma Pilcher

Terms such as ‘balloon mortgage’, ‘foreclosure’, ‘negative equity’ and ‘100% mortgage’ are used all of the time in the property industry and many of us have to put sole trust into a solicitor/mortgage advisor rather than attempting to comprehend the meaning of such jargon.
Mortgages are technically just a loan with the difference being that it is secured on property, instead of a signed piece of paper. When searching for a property, estate agencies are usually the first port of call either on the phone, over the internet or by fax. Many of these firms provide their own mortgage advisors or financial consultants in order to be able to offer their customers with educated advice about the most suitable mortgage based on individual circumstance. Popular Types of Mortgage
There are many different types of mortgages available with something to suit almost all financial situations. Prospective customers looking into buying a property will usually benefit from having a large deposit as this will potentially bring mortgage repayments down as well as offering a better credit rating to the loan companies. Those who have very little in the way of a deposit will likely be referred to a high interest mortgage covering the loan firm if the new owner defaulted at an early stage.Fixed rate mortgages are aptly named as the interest rate for these is fixed over the term of the loan so the debtor (the person who takes out the mortgage) knows exactly what will have to be paid off. Variable rate mortgage costs change every year and can go up or down in price; largely depending on the way the London Interbank Offered Rate moves.Another popular loan type in the UK is an endowment mortgage in which the loan for the property is given but the repayments are done on an interest only basis. A set fee is paid into an endowment policy with the plan that when it matures, it will be able to pay the loan off on the property in full with the possibility that there will be some left over for the debtors to enjoy.

Other Types of Mortgages
Flexible mortgages are ideal for those who are buying a property but who do not want to stick to static payments each month for their agreed term. It offers the facility to take payment holidays for anything up to 12 months or do the complete opposite and pay more than what the monthly sum has been set up for.
Another way of getting money back on a property without selling it through an estate agent is to release some of the equity in a property. An equity loan is similar to a second mortgage where once the property is worth more than what is owed on it; a loan can be taken out on that part of the house. This is often the case when the debtor wants to add an extension, refurbish a room or needs to free up some cash for personal reasons.
There are many types of mortgages available and the majority offers something suitable for most individual circumstances. It takes time to search for the best loan to suit tailored needs and expert advice is usually the best way forward. It is vital to get the most suitable deal as mortgages on average run for a period of 25 years plus and such an important financial burden must be the best one for you.

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Lethbridge Mortgage Rates-00-3900

Lethbridge Mortgage Rates-00-3900
By: robert may

Canadian mortgage interest rates have recently risen from historic lows. There is continued pressure on the Bank of Canada to increase lending rates as the Canadian Bond market continues to rise. The price of these bonds directly influences the interest rate that the lenders charge for money they lend to consumers, more specifically mortgage money.In Lethbridge, our real estate market is strongly influenced by interest rates. When rates go down, people buy Lethbridge real estate to take advantage of it. When rates go up, people who have active preapproved mortgages in place or people who have variable rate mortgages on their Lethbridge real estate investments, all convert them into fixed term mortgage products.
The reality is, that it makes no difference which direction real estate mortgage interest rates are moving, but just that they are moving. This will keep the mortgage market moving in Lethbridge too.

Of course, for the sake of consumers, a lower interest rate allows them to purchase nicer homes for the same payment, or to have lower overall payments on their Lethbridge real estate. This is a nice benefit and something which truly benefits the consumer and the economy as the whole, as the consumer then has more money to spend on other commodities.
Do some research on the city of Lethbridge, search out my Lethbridge real estate blog, find me on the internet. I post several videos and photos on Lethbridge and area on youtube and would love to discuss buying, selling, or investing in Lethbridge with you. My name is Robert May and I am a real estate broker as well as being a mortgage broker. I am an avid internet marketer and operate my business almost entirely online. Find me, lets chat.
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Fixed rate mortgage

A fixed rate mortgage (FRM) is a mortgage loan first developed by the Federal Housing Administration (FHA)[1] where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float." Other forms of mortgage loan include interest only mortgage, graduated payment mortgage, variable rate (including adjustable rate mortgages and tracker mortgages) , negative amortization mortgage, and balloon payment mortgage. Please note that each of the loan types above except for a straight adjustable rate mortgage can have a period of the loan for which a fixed rate may apply. A Balloon Payment mortgage, for example, can have a fixed rate for the term of the loan followed by the ending balloon payment. Terminology may differ from country to country: loans for which the rate is fixed for less than the life of the loan may be called hybrid adjustable rate mortgages (in the United States).
This payment amount is independent of the additional costs on a home sometimes handled in escrow, such as property taxes and property insurance. Consequently, payments made by the borrower may change over time with the changing escrow amount, but the payments handling the principal and interest on the loan will remain the same.
Fixed rate mortgages are characterized by their interest rate (including compounding frequency, amount of loan, and term of the mortgage). With these three values, the calculation of the monthly payment can then be done.
Monthly payment formula
• Note: Fixed rate mortgage interest may be compounded differently in other countries, such as in Canada, where it is compounded every 6 months.
The fixed monthly payment for a fixed rate mortgage is the amount paid by the borrower every month that ensures that the loan is paid off in full with interest at the end of its term. This monthly payment c depends upon the monthly interest rate r (expressed as a fraction, not a percentage, i.e., divide the quoted yearly nominal percentage rate by 100 and by 12 to obtain the monthly interest rate), the number of monthly payments N called the loan's term, and the amount borrowed P0 known as the loan's principal; rearranging the formula for the present value of an ordinary annuity we get the formula for c:
c = (r / (1 − (1 + r) − N))P0
For example, for a home loan for $200,000 with a fixed yearly nominal interest rate of 6.5% for 30 years, the principal is P0 = 200000, the monthly interest rate is r = 6.5 / 100 / 12, the number of monthly payments is N = 30 * 12 = 360, the fixed monthly payment c = $1264.14. This formula is provided using the financial function PMT in a spreadsheet such as Excel. In the example, the monthly payment is obtained by entering either of the these formulas:
=PMT(6.5/100/12,30*12,200000)
=((6.5/100/12)/(1-(1+6.5/100/12)^(-30*12)))*200000
= 1264.14
This monthly payment formula is easy to derive, and the derivation illustrates how fixed-rate mortgage loans work. The amount owed on the loan at the end of every month equals the amount owed from the previous month, plus the interest on this amount, minus the fixed amount paid every month.
Amount owed at month 0:
P0
Amount owed at month 1:
P1 = P0 + P0 * r − c ( principal + interest - payment)
P1 = P0(1 + r) − c (equation 1)
Amount owed at month 2:
P2 = P1(1 + r) − c
Using equation 1 for P1
P2 = (P0(1 + r) − c)(1 + r) − c
P2 = P0(1 + r)2 − c(1 + r) − c (equation 2)
Amount owed at month 3:
P3 = P2(1 + r) − c
Using equation 2 for P2
P3 = (P0(1 + r)2 − c(1 + r) − c)(1 + r) − c
P3 = P0(1 + r)3 − c(1 + r)2 − c(1 + r) − c
Amount owed at month N:
PN = PN − 1(1 + r) − c
PN = P0(1 + r)N − c(1 + r)N − 1 − c(1 + r)N − 2.... − c
PN = P0(1 + r)N − c((1 + r)N − 1 + (1 + r)N − 2.... + 1)
PN = P0(1 + r)N − c(S) (equation 3)
Where S = (1 + r)N − 1 + (1 + r)N − 2.... + 1 (equation 4)
S(1 + r) = (1 + r)N + (1 + r)N − 1.... + (1 + r) (equation 5)
With the exception of two terms the S and S(1 + r) series are the same so when you subtract all but two terms cancel:
Using equation 4 and 5
S(1 + r) − S = (1 + r)N − 1
S((1 + r) − 1) = (1 + r)N − 1
S(r) = (1 + r)N − 1
S = ((1 + r)N − 1) / r (equation 6)
Putting equation 6 back into 3:
PN = P0(1 + r)N − c(((1 + r)N − 1) / r)
PN will be zero because we have paid the loan off.
0 = P0(1 + r)N − c(((1 + r)N − 1) / r)
We want to know c
c = (r(1 + r)N / ((1 + r)N − 1))P0
Divide top and bottom with (1 + r)N
c = (r / (1 − (1 + r) − N))P0
This derivation illustrates three key components of fixed-rate loans: (1) the fixed monthly payment depends upon the amount borrowed, the interest rate, and the length of time over which the loan is repaid; (2) the amount owed every month equals the amount owed from the previous month plus interest on that amount, minus the fixed monthly payment; (3) the fixed monthly payment is chosen so that the loan is paid off in full with interest at the end of its term and no more money is owed.
Characteristics
Unlike adjustable rate mortgages, fixed rate mortgages are not tied to an index. Instead, the interest rate is set (or "fixed") in advance to an advertised rate, usually in increments of 1/4 or 1/8 percent.
Terminology
• Fully Indexed Rate—The price of the FRM as calculated by adding Index + Margin = Fully Indexed Rate. This is the interest rate for the life of the loan.
• Term—The length of time of the loan. The number of payments is independent of this term, so a 30-year term would have 30 payments for a yearly payment plan, but 360 payments for a common monthly plan.
Popularity
Fixed rate mortgages are the most classic form of loan for home and product purchasing in the United States. The most common terms are 15-year and 30-year mortgages, but shorter terms are available, and 40-year and 50-year mortgages are now available (common in areas with high priced housing, where even a 30-year term leaves the mortgage amount out of reach of the average family).
Outside the United States, fixed-rate mortgages are less popular, and in some countries, true fixed-rate mortgages are not available except for shorter-term loans. For example, in Canada the longest term for which a mortgage rate can be fixed is typically no more than ten years, while mortgage maturities are commonly 25 years.
Pricing
Fixed rate mortgages are usually more expensive than adjustable rate mortgages. Due to the inherent interest rate risk, long-term fixed rate loans will tend to be at a higher interest rate than short-term loans. The difference in interest rates between short and long-term loans is known as the yield curve, which generally slopes upward (longer terms are more expensive). The opposite circumstance is known as an inverted yield curve and is relatively infrequent.
The fact that a fixed rate mortgage has a higher starting interest rate does not indicate that this is a worse form of borrowing compared to the adjustable rate mortgages. If interest rates rise, the ARM cost will be higher while the FRM will remain the same. In effect, the lender has agreed to take the interest rate risk on a fixed rate loan. Some studies [2] have shown that the majority of borrowers with adjustable rate mortgages save money in the long term, but that some borrowers pay more. The price of potentially saving money, in other words, is balanced by the risk of potentially higher costs. In each case, a choice would need to be made based upon the loan term, the current interest rate, and the likelihood that the rate will increase or decrease during the life of the loan.
Prepayment
In the United States, fixed rate mortgages, like other types of mortgage, may offer the ability to prepay principal (or capital) early without penalty. Early payments of part of the principal will reduce the total cost of the loan (total interest paid), and will shorten the amount of time needed to pay off the loan. Early payoff of the entire loan amount through refinancing is sometimes done when interest rates drop significantly.
Some mortgages may offer a lower interest rate in exchange for the borrower accepting a prepayment penalty.
source : http://wikipedia.org

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Fixed rate mortgage

A fixed rate mortgage (FRM) is a mortgage loan first developed by the Federal Housing Administration (FHA)[1] where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float." Other forms of mortgage loan include interest only mortgage, graduated payment mortgage, variable rate (including adjustable rate mortgages and tracker mortgages) , negative amortization mortgage, and balloon payment mortgage. Please note that each of the loan types above except for a straight adjustable rate mortgage can have a period of the loan for which a fixed rate may apply. A Balloon Payment mortgage, for example, can have a fixed rate for the term of the loan followed by the ending balloon payment. Terminology may differ from country to country: loans for which the rate is fixed for less than the life of the loan may be called hybrid adjustable rate mortgages (in the United States).
This payment amount is independent of the additional costs on a home sometimes handled in escrow, such as property taxes and property insurance. Consequently, payments made by the borrower may change over time with the changing escrow amount, but the payments handling the principal and interest on the loan will remain the same.
Fixed rate mortgages are characterized by their interest rate (including compounding frequency, amount of loan, and term of the mortgage). With these three values, the calculation of the monthly payment can then be done.
Monthly payment formula
• Note: Fixed rate mortgage interest may be compounded differently in other countries, such as in Canada, where it is compounded every 6 months.
The fixed monthly payment for a fixed rate mortgage is the amount paid by the borrower every month that ensures that the loan is paid off in full with interest at the end of its term. This monthly payment c depends upon the monthly interest rate r (expressed as a fraction, not a percentage, i.e., divide the quoted yearly nominal percentage rate by 100 and by 12 to obtain the monthly interest rate), the number of monthly payments N called the loan's term, and the amount borrowed P0 known as the loan's principal; rearranging the formula for the present value of an ordinary annuity we get the formula for c:
c = (r / (1 − (1 + r) − N))P0
For example, for a home loan for $200,000 with a fixed yearly nominal interest rate of 6.5% for 30 years, the principal is P0 = 200000, the monthly interest rate is r = 6.5 / 100 / 12, the number of monthly payments is N = 30 * 12 = 360, the fixed monthly payment c = $1264.14. This formula is provided using the financial function PMT in a spreadsheet such as Excel. In the example, the monthly payment is obtained by entering either of the these formulas:
=PMT(6.5/100/12,30*12,200000)
=((6.5/100/12)/(1-(1+6.5/100/12)^(-30*12)))*200000
= 1264.14
This monthly payment formula is easy to derive, and the derivation illustrates how fixed-rate mortgage loans work. The amount owed on the loan at the end of every month equals the amount owed from the previous month, plus the interest on this amount, minus the fixed amount paid every month.
Amount owed at month 0:
P0
Amount owed at month 1:
P1 = P0 + P0 * r − c ( principal + interest - payment)
P1 = P0(1 + r) − c (equation 1)
Amount owed at month 2:
P2 = P1(1 + r) − c
Using equation 1 for P1
P2 = (P0(1 + r) − c)(1 + r) − c
P2 = P0(1 + r)2 − c(1 + r) − c (equation 2)
Amount owed at month 3:
P3 = P2(1 + r) − c
Using equation 2 for P2
P3 = (P0(1 + r)2 − c(1 + r) − c)(1 + r) − c
P3 = P0(1 + r)3 − c(1 + r)2 − c(1 + r) − c
Amount owed at month N:
PN = PN − 1(1 + r) − c
PN = P0(1 + r)N − c(1 + r)N − 1 − c(1 + r)N − 2.... − c
PN = P0(1 + r)N − c((1 + r)N − 1 + (1 + r)N − 2.... + 1)
PN = P0(1 + r)N − c(S) (equation 3)
Where S = (1 + r)N − 1 + (1 + r)N − 2.... + 1 (equation 4)
S(1 + r) = (1 + r)N + (1 + r)N − 1.... + (1 + r) (equation 5)
With the exception of two terms the S and S(1 + r) series are the same so when you subtract all but two terms cancel:
Using equation 4 and 5
S(1 + r) − S = (1 + r)N − 1
S((1 + r) − 1) = (1 + r)N − 1
S(r) = (1 + r)N − 1
S = ((1 + r)N − 1) / r (equation 6)
Putting equation 6 back into 3:
PN = P0(1 + r)N − c(((1 + r)N − 1) / r)
PN will be zero because we have paid the loan off.
0 = P0(1 + r)N − c(((1 + r)N − 1) / r)
We want to know c
c = (r(1 + r)N / ((1 + r)N − 1))P0
Divide top and bottom with (1 + r)N
c = (r / (1 − (1 + r) − N))P0
This derivation illustrates three key components of fixed-rate loans: (1) the fixed monthly payment depends upon the amount borrowed, the interest rate, and the length of time over which the loan is repaid; (2) the amount owed every month equals the amount owed from the previous month plus interest on that amount, minus the fixed monthly payment; (3) the fixed monthly payment is chosen so that the loan is paid off in full with interest at the end of its term and no more money is owed.
Characteristics
Unlike adjustable rate mortgages, fixed rate mortgages are not tied to an index. Instead, the interest rate is set (or "fixed") in advance to an advertised rate, usually in increments of 1/4 or 1/8 percent.
Terminology
• Fully Indexed Rate—The price of the FRM as calculated by adding Index + Margin = Fully Indexed Rate. This is the interest rate for the life of the loan.
• Term—The length of time of the loan. The number of payments is independent of this term, so a 30-year term would have 30 payments for a yearly payment plan, but 360 payments for a common monthly plan.
Popularity
Fixed rate mortgages are the most classic form of loan for home and product purchasing in the United States. The most common terms are 15-year and 30-year mortgages, but shorter terms are available, and 40-year and 50-year mortgages are now available (common in areas with high priced housing, where even a 30-year term leaves the mortgage amount out of reach of the average family).
Outside the United States, fixed-rate mortgages are less popular, and in some countries, true fixed-rate mortgages are not available except for shorter-term loans. For example, in Canada the longest term for which a mortgage rate can be fixed is typically no more than ten years, while mortgage maturities are commonly 25 years.
Pricing
Fixed rate mortgages are usually more expensive than adjustable rate mortgages. Due to the inherent interest rate risk, long-term fixed rate loans will tend to be at a higher interest rate than short-term loans. The difference in interest rates between short and long-term loans is known as the yield curve, which generally slopes upward (longer terms are more expensive). The opposite circumstance is known as an inverted yield curve and is relatively infrequent.
The fact that a fixed rate mortgage has a higher starting interest rate does not indicate that this is a worse form of borrowing compared to the adjustable rate mortgages. If interest rates rise, the ARM cost will be higher while the FRM will remain the same. In effect, the lender has agreed to take the interest rate risk on a fixed rate loan. Some studies [2] have shown that the majority of borrowers with adjustable rate mortgages save money in the long term, but that some borrowers pay more. The price of potentially saving money, in other words, is balanced by the risk of potentially higher costs. In each case, a choice would need to be made based upon the loan term, the current interest rate, and the likelihood that the rate will increase or decrease during the life of the loan.
Prepayment
In the United States, fixed rate mortgages, like other types of mortgage, may offer the ability to prepay principal (or capital) early without penalty. Early payments of part of the principal will reduce the total cost of the loan (total interest paid), and will shorten the amount of time needed to pay off the loan. Early payoff of the entire loan amount through refinancing is sometimes done when interest rates drop significantly.
Some mortgages may offer a lower interest rate in exchange for the borrower accepting a prepayment penalty.
source : http://wikipedia.org

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Fixed rate mortgage

A fixed rate mortgage (FRM) is a mortgage loan first developed by the Federal Housing Administration (FHA)[1] where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float." Other forms of mortgage loan include interest only mortgage, graduated payment mortgage, variable rate (including adjustable rate mortgages and tracker mortgages) , negative amortization mortgage, and balloon payment mortgage. Please note that each of the loan types above except for a straight adjustable rate mortgage can have a period of the loan for which a fixed rate may apply. A Balloon Payment mortgage, for example, can have a fixed rate for the term of the loan followed by the ending balloon payment. Terminology may differ from country to country: loans for which the rate is fixed for less than the life of the loan may be called hybrid adjustable rate mortgages (in the United States).
This payment amount is independent of the additional costs on a home sometimes handled in escrow, such as property taxes and property insurance. Consequently, payments made by the borrower may change over time with the changing escrow amount, but the payments handling the principal and interest on the loan will remain the same.
Fixed rate mortgages are characterized by their interest rate (including compounding frequency, amount of loan, and term of the mortgage). With these three values, the calculation of the monthly payment can then be done.
Monthly payment formula
• Note: Fixed rate mortgage interest may be compounded differently in other countries, such as in Canada, where it is compounded every 6 months.
The fixed monthly payment for a fixed rate mortgage is the amount paid by the borrower every month that ensures that the loan is paid off in full with interest at the end of its term. This monthly payment c depends upon the monthly interest rate r (expressed as a fraction, not a percentage, i.e., divide the quoted yearly nominal percentage rate by 100 and by 12 to obtain the monthly interest rate), the number of monthly payments N called the loan's term, and the amount borrowed P0 known as the loan's principal; rearranging the formula for the present value of an ordinary annuity we get the formula for c:
c = (r / (1 − (1 + r) − N))P0
For example, for a home loan for $200,000 with a fixed yearly nominal interest rate of 6.5% for 30 years, the principal is P0 = 200000, the monthly interest rate is r = 6.5 / 100 / 12, the number of monthly payments is N = 30 * 12 = 360, the fixed monthly payment c = $1264.14. This formula is provided using the financial function PMT in a spreadsheet such as Excel. In the example, the monthly payment is obtained by entering either of the these formulas:
=PMT(6.5/100/12,30*12,200000)
=((6.5/100/12)/(1-(1+6.5/100/12)^(-30*12)))*200000
= 1264.14
This monthly payment formula is easy to derive, and the derivation illustrates how fixed-rate mortgage loans work. The amount owed on the loan at the end of every month equals the amount owed from the previous month, plus the interest on this amount, minus the fixed amount paid every month.
Amount owed at month 0:
P0
Amount owed at month 1:
P1 = P0 + P0 * r − c ( principal + interest - payment)
P1 = P0(1 + r) − c (equation 1)
Amount owed at month 2:
P2 = P1(1 + r) − c
Using equation 1 for P1
P2 = (P0(1 + r) − c)(1 + r) − c
P2 = P0(1 + r)2 − c(1 + r) − c (equation 2)
Amount owed at month 3:
P3 = P2(1 + r) − c
Using equation 2 for P2
P3 = (P0(1 + r)2 − c(1 + r) − c)(1 + r) − c
P3 = P0(1 + r)3 − c(1 + r)2 − c(1 + r) − c
Amount owed at month N:
PN = PN − 1(1 + r) − c
PN = P0(1 + r)N − c(1 + r)N − 1 − c(1 + r)N − 2.... − c
PN = P0(1 + r)N − c((1 + r)N − 1 + (1 + r)N − 2.... + 1)
PN = P0(1 + r)N − c(S) (equation 3)
Where S = (1 + r)N − 1 + (1 + r)N − 2.... + 1 (equation 4)
S(1 + r) = (1 + r)N + (1 + r)N − 1.... + (1 + r) (equation 5)
With the exception of two terms the S and S(1 + r) series are the same so when you subtract all but two terms cancel:
Using equation 4 and 5
S(1 + r) − S = (1 + r)N − 1
S((1 + r) − 1) = (1 + r)N − 1
S(r) = (1 + r)N − 1
S = ((1 + r)N − 1) / r (equation 6)
Putting equation 6 back into 3:
PN = P0(1 + r)N − c(((1 + r)N − 1) / r)
PN will be zero because we have paid the loan off.
0 = P0(1 + r)N − c(((1 + r)N − 1) / r)
We want to know c
c = (r(1 + r)N / ((1 + r)N − 1))P0
Divide top and bottom with (1 + r)N
c = (r / (1 − (1 + r) − N))P0
This derivation illustrates three key components of fixed-rate loans: (1) the fixed monthly payment depends upon the amount borrowed, the interest rate, and the length of time over which the loan is repaid; (2) the amount owed every month equals the amount owed from the previous month plus interest on that amount, minus the fixed monthly payment; (3) the fixed monthly payment is chosen so that the loan is paid off in full with interest at the end of its term and no more money is owed.
Characteristics
Unlike adjustable rate mortgages, fixed rate mortgages are not tied to an index. Instead, the interest rate is set (or "fixed") in advance to an advertised rate, usually in increments of 1/4 or 1/8 percent.
Terminology
• Fully Indexed Rate—The price of the FRM as calculated by adding Index + Margin = Fully Indexed Rate. This is the interest rate for the life of the loan.
• Term—The length of time of the loan. The number of payments is independent of this term, so a 30-year term would have 30 payments for a yearly payment plan, but 360 payments for a common monthly plan.
Popularity
Fixed rate mortgages are the most classic form of loan for home and product purchasing in the United States. The most common terms are 15-year and 30-year mortgages, but shorter terms are available, and 40-year and 50-year mortgages are now available (common in areas with high priced housing, where even a 30-year term leaves the mortgage amount out of reach of the average family).
Outside the United States, fixed-rate mortgages are less popular, and in some countries, true fixed-rate mortgages are not available except for shorter-term loans. For example, in Canada the longest term for which a mortgage rate can be fixed is typically no more than ten years, while mortgage maturities are commonly 25 years.
Pricing
Fixed rate mortgages are usually more expensive than adjustable rate mortgages. Due to the inherent interest rate risk, long-term fixed rate loans will tend to be at a higher interest rate than short-term loans. The difference in interest rates between short and long-term loans is known as the yield curve, which generally slopes upward (longer terms are more expensive). The opposite circumstance is known as an inverted yield curve and is relatively infrequent.
The fact that a fixed rate mortgage has a higher starting interest rate does not indicate that this is a worse form of borrowing compared to the adjustable rate mortgages. If interest rates rise, the ARM cost will be higher while the FRM will remain the same. In effect, the lender has agreed to take the interest rate risk on a fixed rate loan. Some studies [2] have shown that the majority of borrowers with adjustable rate mortgages save money in the long term, but that some borrowers pay more. The price of potentially saving money, in other words, is balanced by the risk of potentially higher costs. In each case, a choice would need to be made based upon the loan term, the current interest rate, and the likelihood that the rate will increase or decrease during the life of the loan.
Prepayment
In the United States, fixed rate mortgages, like other types of mortgage, may offer the ability to prepay principal (or capital) early without penalty. Early payments of part of the principal will reduce the total cost of the loan (total interest paid), and will shorten the amount of time needed to pay off the loan. Early payoff of the entire loan amount through refinancing is sometimes done when interest rates drop significantly.
Some mortgages may offer a lower interest rate in exchange for the borrower accepting a prepayment penalty.
source : http://wikipedia.org

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BP to drill controversial Rockies site

As oil continues to gush from a BP wellhead in the Gulf of Mexico, critics say the company has quietly broken ground on a controversial project in B.C.'s Rocky Mountains.
Opponents of the Mist Mountain project say they were surprised to find that BP Canada, an arm of the BP group of companies, began construction earlier this month on an exploratory well for its coalbed methane project near Fernie, B.C.
The company was granted permission to conduct experimental drilling in the pristine area in southeast B.C. just a few days after the Deepwater Horizon explosion and oil spill.
The disaster that has unfolded in the gulf since then has renewed concerns about the BP subsidiary's plans in the Rockies.
"This is just a reaffirmation of what we've always known and what everyone has known about BP is that they've had the worst environmental record of all oil companies in the world, even before the gulf disaster," said Ryland Nelson, of the group Wildsight, which opposes the project.
Drilling this summer
But Hejdi Feick, the director of communications for BP Canada, said British Columbians can be reassured that the company is a good corporate citizen.
"We are absolutely committed to doing this right," she said Tuesday. "We have been very open and accessible over the last three years."
That is little comfort for Nelson, who said BP had promised to consult with the public every step of the way yet he only learned construction was underway when he went to the site Monday.
Nelson said the contractor on site told him they hope to bring in drilling equipment by the end of the month and start drilling this summer.
"Here they are, they've been working for nearly two weeks and nobody knew anything about it," he said.
The provincial government awarded tenure to BP Canada for the Mist Mountain project last December, over the objections of conservationists and First Nations on both sides of the border, as well as the Fernie town council.
Those critics say there is not enough environmental oversight for the project, which they believe will impact water and wildlife in the Rocky Mountain ecosystem.
Polluted water injected
The coalbed methane extraction includes reinjecting polluted water back into the ground, a process conservationists worry will contaminate ground water.
Feick said the company has been forthcoming with all information, including that it planned to start test drilling this summer.
"This is certainly not news to the folks there," she said.
"We've already gone as far as inviting some of the key groups to come and tour the site when we are drilling so they can have a sense of what that entails and what it means, what it looks like, that sort of thing."
Critics including Nelson say because BP's application was for a single well, the company avoided a thorough B.C. Environmental Assessment review, but Feick said the company has done three years of environmental studies and all the reports are available on the its website.
Graham Currie, a spokesman for the B.C. Oil and Gas Commission, said the commission did an extensive review of the project and concluded that direct impacts to wildlife habitat, environment and the forest land base would be minimal.
Project reviewed
Currie said the review is a rigorous environmental assessment, but he couldn't say how it compared to the B.C. Environmental Review process.
He said there was no thought of reviewing BP's application, given the actions of its parent company surrounding the Gulf of Mexico disaster.
"No. We have made an extensive review here, we have granted a well authorization," he said. "We are satisfied with our process."
Nelson said the project threatens one of the most important wildlife corridors in North America. The well will be drilled in the area between Banff National Park and Waterton-Glacier International Peace Park, which stretches between Alberta and Montana, a corridor for grizzlies, wolverines and other mountain-dwelling wildlife.
"This special place needs special consideration when considering major developments like this," he said.

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Pre-game: South Africa vs. Uruguay

What's at stake
South Africa and Mexico played to a 1-1 draw in their opening game, while Uruguay and France battled to a goal-less stalemate. As a result, all four teams are tied for first place in Group A with one point apiece, so the race for the top two spots (and the berths in the next round that go with them) are up for grabs.
Conventional wisdom suggests that a team needs five points to clinch a second-round spot. If that's true, this is a make-or-break game that neither South Africa nor Uruguay can afford to lose.
A victory would propel one nation into first place in Group A with one game to go and put them on course to the round of 16. The loser would still be alive mathematically, but realistically their World Cup dreams would be over, needing a win in their final match and some help in order to advance.
A tie would be disastrous for South Africa, as it would need a victory in its final match of the first round is against France, considered the Group A favourite, to move on.
Suspension watch
Kagisho Dikgacoi and Tsepo Masilela earned yellow cards in South Africa's previous match. If either one of them receive a yellow card against Uruguay, they will be suspended for South Africa's final game of the group stage.
Diego Lugano and Mauricio Victorino are in a similar predicament for Uruguay. Also, Nicolas Lodeiro is suspended for Uruguay against South Africa.
Player to watch for South Africa
Siphiwe Tshabalala — The Bafana Bafana midfielder won the hearts of his nation when he scored the opening goal of the tournament, beating Mexican goalkeeper Oscar Perez with a sublime finish from inside the penalty area. With his confidence at an all-time high, it will be interesting to see what he can do for an encore.
Player to watch for Uruguay
Diego Forlan — The Uruguayan forward was kept off the score sheet against France, but not due to a lack of effort. He had several scoring chances but couldn't put any of them away. That's unlike the usually clinical Forlan, who will be looking to make amends against the host nation.
Key match-up
Aaron Mokoena vs. Diego Forlan — This should be an intriguing one-on-one battle pitting the 23-year-old defender, considered the brightest prospect in South African soccer, versus the veteran striker, rated one of the most dangerous goal-scorers in the game today.
The South Africa perspective
"A win against Uruguay will virtually seal our passage into the second round and make the nation even prouder. Uruguay will be in trouble if we carry on where we left off against the Mexicans." — midfielder Siphiwe Tshabalala
The Uruguayan perspective
"We did come to win against France. We got a point, which isn't the end of the world because everyone now has one point after one game. We still have the chance to go forward and progress. … We defended well but the attacking was less effective. We'll have to attack more in the next game." — forward Diego Forlan
World Cup head-to-head
South Africa and Uruguay have never met in the World Cup.
All time head-to-head
Games played: 2.
Uruguay: 1 win, 0 losses, 1 draw.
South Africa: 0 wins, 1 loss, 1 draw.
Goals: Uruguay 4, South Africa 3.
Last match: South Africa hosted Uruguay in Johannesburg in 2007 and played to a 0-0 draw.

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Jessica Simpson Slams Plastic Surgery Report

Jessica Simpson has dismissed speculation she's preparing to undergo cosmetic surgery. The singer was spotted leaving a Los Angeles medical centre on Monday, June 14 and insiders claimed she had been consulting a surgeon about beauty procedures.
But Simpson has laughed off the rumours, insisting she was merely undergoing a medical check-up. In a post on her Twitter.com page, she writes, "True - went to the doctor yesterday. False - plastic surgery."
Simpson has been the subject of beauty criticism ever since splitting from husband Nick Lachey. "When it comes to media criticism, that's just something I have had to train myself - literally train myself - to ignore," she said in an interview. Simpson is now hosting a reality show called "The Price of Beauty" where she searches different meaning of beauty around the world.

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Kelly Clarkson Thrills Fans With Impromptu Karaoke Concert

thrilled fans in Nashville, Tennessee on Monday night, June 14 by staging an impromptu show at a karaoke bar. The "Since U Been Gone" hitmaker took to the microphone at Larry's Lounge, and she extended an invite to all her online followers to join her.

In a post on her Twitter page, she wrote, "Okay, everyone that sees this in Nashville, meet us at Larry's Lounge asap!! Karaoke and fun times for everyone 21 and above!! Bring it!!"

Clarkson sang a number of songs during the night, including tracks by Carrie Underwood and Ke$ha, and she later gave a shout-out to her loyal followers who made it the venue, tweeting "And the trophy for most awesome fan at Karaoke tonight goes to DANIELLE!!!!! You're awesome and sang the heck out of 'Proud Mary' girl!!"

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Microsoft Office 2010 Now Available Worldwide

Mircrosoft’s much hyped new version of its productivity suite, Microsoft Office 2010, is debuting to the public today and will now be available for purchase at 35,000 retail stores and a number of online retailers including Best Buy and Amazon.com.

Of course, many will find the new version pre-installed in their PCs upon purchase. In a release, Microsoft says that in the next year, more than 100 million PCs will ship with Office 2010 preloaded, which users can then purchase.

The suite, which was announced last year (see our coverage here), had 9 million downloads in its beta program. One of the more notable features in the suite is the interconnectivity between the web and the desktop.

Office 2010 Home and Student is priced at $149, and Office 2010 Home and Business runs at $249. However, you can already find discounted versions of the suites on Amazon.com

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Obama: We're Going to Make Sure 'BP Pays For The Damage It Has Done'

As a congressional committee chided the heads of the nation's five largest oil companies in Washington, President Obama assured the people of the Gulf coast again that the administration would make BP pay for the largest environmental disaster in U.S. history.
"Yes, this is an unprecedented environmental disaster," the president said today at the Naval Air Technical Training Center in Pensacola, Florida. "But we're going to continue to meet it with an unprecedented federal response. ... This is an assault on our shores and we're going to fight back with everything we've got."
"I am with you, my administration is with you for the long haul to make sure BP pays for the damage it has done," Obama said to loud applause.
Obama, on his fourth trip to the region, visited Pensacola, Florida, today where he surveyed oil containment and cleanup efforts with Coast Guard Adm. Thad Allen. He traveled through Louisiana , Mississippi and Alabama on Monday.
The president dispelled the idea that the Gulf coast waters were unsafe and expressed optimism that the economy would pick up again.
"This city and this region will recover and it will thrive again," said Obama.
The president will address the nation tonight on the BP oil spill -- the first nationally televised address of his presidency to be delivered from the Oval Office -- to try to convince the American people that the administration is on top of the growing economic and environmental crisis in the Gulf of Mexico, 57 days after millions of gallons of oil first began spilling from a damaged BP well.
Obama will discuss plans to contain the environmental damage, how it will pressure BP, long-term recovery plans for the Gulf coast, the importance of a "clean energy" future, and the reorganization of the Minerals Management Service (MMS).
Meanwhile, in Washington, lawmakers grilled oil industry executives for what they describe as inadequate plans to ensure the safety of oil drilling operations in the Gulf of Mexico and respond to a catastrophic spill.
source http://abcnews.go.com

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