Did You Know Your Mortgage is a Closed End Loan?

Originally posted 2008-11-30 07:59:21. Republished by Blog Post Promoter

  

Did you know that your mortgage is a closed end loan?  What is a closed end loan, you ask?  A closed end loan is a loan that has limitations because the money paid in cannot be withdrawn.  Meaning that once the money is received by the lender it is paid on the balance owed and equated into an equity position in your home.  Equity is the different between what you owe and how much the property is worth.  The lender will apply a full scheduled payment.  If you desire to pay toward your principal you must specify that the money needs to be applied to the principal.  Oh, by the way, you must be current on your mortgage to be able to pay on your principal balance.  Remember, the lender is in the business to make money so if you do not instruct the lender, where to apply the extra payment they will apply the additional money to, you guessed it, interest, because that is how lender makes money.  Interest, of course, is the rent that you are paying the lender to borrow their money to get your home.

The closed end loan is driven by an amortization schedule.  This amortization schedule does not move at the speed of light.  It moves the opposite slower than a snail.  Hence, taking 30 years to pay it down.  Before we go any further, I feel you need to understand what an amortization schedule is.  It is the blending of loan payments showing the principal and the amount of interest that you are paying each time you made your scheduled payment.  Why, you ask?  Let examine.  If your mortgage payment was $2,000.00 a month.  You will pay only $199.10 to principal and a whopping $1,800.90 to interest in your first month.  The second month, the amount to principal will increase by only one additional dollar, so for every month that follows there is only one more dollar applied to the previous months principal payment.  That’s right one dollar.  For instance, month two the principal payment is 200.10, month 3 $201.10, month 4 202.10, etc.

Another interesting thing about a closed end loan is the interest charges are from the principal balance at the end of the month.  In other words, the interest paid is for the next month not the month that the bill is due.  The interest is a pre-determine amount.  Meaning it is calculated daily but applied to the month end principal balance.  Now, this does not effect daily interest in the month the payment is receive, but effect the following month pre-determine amount.

It is should be easy to see that in order to reduce the choke hold that the lender has on us through our mortgage we must reduce our principal balance.

Benefits to Real Estate Investors Using 1031 Tax Deferred Exchanges

Originally posted 2008-12-01 08:11:17. Republished by Blog Post Promoter

According to Internal Revenue Code Section 1031, an investor can sell a property and reinvest the proceeds in a new property.  The usage of the Section 1031 allows the investor to defer capital gain taxes when selling any property ” held for investment purposes”.  There are many advantages to using the 1031 tax deferred exchanges.

One benefit to using the 1031 exchange is preservation of equity.  If the exchange is structured properly the investor can defer 100% of both Federal and State capital gain taxes.  This equality to an interest-free, no term loan on taxes.  It will, of course, be due when the property is sold for cash.  As an investor you could defer your capital gain taxes indefinitely if you continue to exchange from one property to the next.

Another benefit to using the 1031 exchange is leverage.  You could exchange from one property that is free and clear to one that is more valuable and creating a larger cash flow thereby providing greater depreciation benefits which in turn increase your return on your investment.

Still yet another benefit to using the 1031 exchange is diverisifcation.  An investor can diverify by changing geographic location of their investment property or type of investment property.

Another benefit to using the 1031 exchange is managment relief.  If you have several single family homes, you can exchange from those to an apartment complex with on site managment and maintenance. 

The last benefit to using the 1031 exhange is estate planning.  If you have inherited one large property from a family member and there are disagreement about what to do with the property.  By exchanging the property, the large property can be divided in to several different for each individual to list or sell.

Lake County to be Reassessed to 1.5 for homeowners by 2009

Originally posted 2008-12-01 08:13:48. Republished by Blog Post Promoter

Great news for the state, but more importantly for Lake County.  If you were not aware when the first information came out about changes or reassessment of taxes it was stated that all but two counties were going to benefit from the changes.  You guess Lake County was not going to benefit, but at least we were not alone.  St Joseph county was also negatively effected by the first tax alternative.  Well, the realtor association did not take this seating down we rallied to get a great deal for the citizens of Lake County. 

Originally, we asked for 1% of the assessed value to be paid by the homeowner, 2% for the investor, and 3% for the business property owners.  As a result of this reduce in revenue to the local cities and towns in Lake and St. Joseph counties, the officials of these counties rallied as well resulting in the taxes remaining the same.  Once again, the realtors rallied and stated that the counties and cities will have to cut the fat on surrender the consequences of have a mass exit of cities that are bleeding their citizens dry.  We stated that if a homeowner can get lower taxes in Porter County then that is what they will do.  We will be happy, however, to sell them that home, but we feel that it will be to everyone’s best interest to address the issues that are causing the towns and cities to need all this money.  As a result of this, there was a compromise of 1.5% of the assessed value for the homeowner, 2.5 for the investor, and 3.5 for the business property owner to be phased in 2009.  In 2010, the citizens of Indiana will be able to vote to have the caps incorporated into the state’s constitution.  If the citizens vote for the caps, it will not take effect until January 1, 2012.

 

Types of Ownership Deeds

Originally posted 2008-11-29 13:58:08. Republished by Blog Post Promoter

There are different types of ownership deeds you may receive as a real estate investor.  The types of ownership deeds are general warranty deed, sheriff’s deed, quit claim deed, special warranty deed, tax deed, trustee deed, and certificate of title.

It is important to understand that no matter which ownership deed you receive it is best to have title insurance on it.

Title insurance is a policy that guarantees that the title for the property is clear of liens and/or judgments.  It also guarantees that the owner of the property has the right to sell the property.

The title insurance protects the owner and the new owner from losses that may arise from unknown or undisclosed defects in the pas chain of title.  Unlike most insurance, title insurance is paid in an one time installment at the closing.  This one time fee protects your interest as the new owner and your heirs interest for as long as you own the property.

The title policy is insured by the title company.  The title company will provide legal defense against any and all challenges to the title and reimburse the owner against any losses as a result of hidden or unknown defects in the owner’s rights.

Now, that we understand what the title insurance is.  Let’s examine the different types of ownership deeds.

As an investor, you may come to own your property through a special warranty deed.

Let examine what happens to get you the special warranty deed.  First, there is a sheriff’s deed issued by a judge.  This is issued by a judge to satisfy a judgment or lien.  This takes place in a foreclosure.

Before we get to the sheriff’s deed or special warranty deed, the mortgage company receives a certificate of title after the foreclosure.    This is how the property is conveyed to the mortgage company.  Ater the mortgage company acquires the sherriff’s deed, they must convey a warranty of ownership to the new owner.  The mortgage company does this through a special warranty deed.  Be aware, that a special warranty deed only warrants back to the mortgage company’s ownership not any further.  Remember, until the last payment the mortgage company really owns the property.  You, as the owner, has insurable interest.  Insurable interest is your right or benefit that you have in the property.  Mening as long as the mortgage payment is current your interest is still there.  Once you are late or not able to pay your interest is superceded by the mortgage company.  However, you can still protect your interest in the property if your situation or ablility to pay has now changed for the better visit www.freedomforeclosure.com/taylorbrown to find out how.

Other forms of deeds include a tax deed.  A tax deed is given if the homeowner has not paid their property taxes and someone else pays those taxes for the homeowner. This person receives this document when paying taxes on the behalf of the homeowner at a tax sale.

Still yet, there is another type of deed.  It is a trustee deed.  A trustee deed is used to convey a property out of a trust.

The next type of deed is a quit claim deed.  A quit claim deed is used to release whatever interest the owner has in the proeprty to someone else.

The deed that offers the most protection is the general warranty deed or warranty deed.  This deed warrants against all defects in chain of ownership before or after ownership of the property.

Related Deed Articles

• TaxDeedLists.com Helps Investors Explore Emerging Careers in Property Investments (prweb.com)
• The Statutory Warranty Deed: What You Should Know as the Seller (raincityguide.com)
• Fannie Mae Announces Deed for Lease Program (raincityguide.com)

Discover the History of Lake County, Indiana

Originally posted 2009-06-05 15:01:36. Republished by Blog Post Promoter

The appearance of some of the towns in Lake County, IN are far from what the vision of those towns were when they were developed in the late 1800 and early 1900.

Lake County’s history span several decades.  Its history is surpassed only by Chicago who is fifty years older.

Lake County, though only 43 miles east of Chicago has its own unique history.

The county’s originial inhabitants were from the Indian tribes’ Potawatomi and Miami.  Hence, the name of some streets in Miller area of Gary.  In addition, Miller was a tow back then, but more on that later.

Consequently, all Native Americans were invited to resettle west of the MIssissippi in 1833 by President Andrew Jackson.  Evidentially, the invite became a “forced” resettlement.  That “forced” resettlement was completed in 1838.  Most of those Native Americans settled in Lake County, IN.

American settlers followed the Indians shortly thereafter settling in the northern half of the county. 

The county, however, wasnot formed or organized until 1837.

Many moved to Indiana and settled in different area outside of the Lake County settlement.  Areas included:

• St. Johns Township
• Hanover Township

There was so much settlement from so many different nationality that in 1925 English was a consider a second language in Lake County and all other surrounding settlements. 

During Lake County’s first forty years, agriculture was the only industry. 

With the first railroad reaching to Chicago in 1850, Lake County became prime real estate.  As a result fo the railroad and a vision,  George W Clarke started purchasing thousands of arces fo land .  At the time this land was considered swamp land. 

After the Civil War, Chicago’s population grew to 300,000, and Lake County’s new industry was manufacturing instead of farming due to the railroad.

The population of Lake County grew to 12,352 in 1870 due to the new manufacturing jobs. 

The communities that are still in existing today from back then are:

• Hobart
• Lake Station
• St. John
• Whiting
• Crown Point (the county seat)

There were still other towns that got absorbed into other neighborhoods like:

• Ainsworth
• Black Oak
• Cook
• Deep River
• Gibson
• Lottaville
• Liverpool
• Miller
• Robertsdale

That’s right everyone, Miller was a town at one time.  Some of those other towns are just neighborhoods as is Miller today.

There are other towns’ name that disappeared entirely:

• Cassello
• Cassville
• Centreville
• Farmsdale
• Fatout
• Hanover
• Hickory Point
• Pine Station
• Toleston
• West Creek

Due to jobs and other resources Lake County’s population grew to 37,892 by 1900.

Because of tits location between the iron ore mines and coal supplies, Lake County became the home of the largest steel mill in the world in 1906.  Not only did Judge Elbert Gary build the mill, but he built a town around it.    The town is called Gary, IN.  By 1920, the City of Gay has a population of 55,000 people.

Porter County benefited from its location as well and a steel mill was erected there, as well.  Following that Whiting was soon the home of an oil refinery.  To complete the needs of the steel mill, rail car manufacturing was added, as well.

Agriculture was still pervantent in the area so food processing was a manufacturere in the area, too.

Despite the count providing the “strong backbone” to the nation through two world wars, the industries of the county had to modernized to labor saving equipment thereby eliminating a lot of jobs.

The downsize forced several workers to leave the area in search of work.  Those jobs were evidentially replaced by  service jobs like”

• healthcare
• banking
• education

The county has great history, but so does each its twenty plus cities.  Visit Lake County and you will love its great history and diversity.  Live in Lake County and you will enjoy a historical abundance, many opportunities, and small town neighborly feeling.

Indiana Property Tax Appeal for LaPorte County

Originally posted 2011-08-22 07:20:56. Republished by Blog Post Promoter

LOOK This Home is Near Miller Beach, IN Has Been Reduced

Originally posted 2009-09-28 16:05:40. Republished by Blog Post Promoter

Get this 5 bedroom 2.5 bathroom home for $28,500 or best offer for a limited until September 30, 2009.

 

Contact Serena for more details at 219 803 4489 or 219 614 9390.

What Involved in Purchasing a Property as an Investor

Originally posted 2008-12-17 03:49:47. Republished by Blog Post Promoter

If an investor is interested in an investment property that is 60,000.  The investor acquires a loan for 90% of that amount. By the way, if the property is located in an area that is deemed declining then the mortgage company will require more down, so you may have to do 85% of the purchase price or pay 15% down to acquire the loan. For now, we will work with 90% of the purchase price.  The mortgage will be for the amount of $54,000; however, the interest rate will be higher because the mortgage company is taking on more risk because the investor does not live in the property.  The interest rate can be as high as 13%.  The higher interest rate though, is for mortgage that would include a rehab loan, but we will talk more about that scenario later.  In this example, the investor is just acquiring a mortgage to add the property to his or her portfolio.  The interest rate that the investor secured was 8% making his or her payment $396.23.  This payment is for principal and interest only.  The investor would also have pay property taxes, landlord insurance, and maintenance fee, and in some instances utilities.  In this scenario, the property taxes are $3000.00 annually.  Therefore, the monthly property tax is $250.00 a monthly.  The landlord insurance is 750.00 annually for 62.50 monthly.  There is also a monthly maintenance fee that the investor needs to account for which is 75.00 monthly.  The reason for the maintenance fee is that the investor is buying the property to make a profit. Therefore, the maintenance fee is to cover household repairs to the newly acquired property so the investor do not have use his or her on own money to make the repairs.     

 

 

Now, the investor must determine which property type he or she would like then move forward.  Always remember it is easier to rent three plus bedrooms than two or one. 

               

Up until now I have spoken only about the possibility of buy and hold.  What is buy and hold?  Well, buy and hold is when the investor buys the property and holds it to rent it for a pre-determine number of years.  It is important to note that in order for this to be successful the investor needs to know the area that is desirable to both renters and homeowners.  If the investor is not familiar with the area, he or she can determine if the area is desirable to both homeowners and renters is visit the area several different times of the day.  Another way to determine is to observe the upkeep of the exterior of the homes in the community.  Most homeowners keep the exterior appearance of their homes up to a good standard.  By doing this, it makes it easier to sell for a profit when you determine you want to sell. 

               

There is yet another way to be a real estate investor and it is called fix and flip.  Fix and flip is fixing up the property to flip or sell it to someone else.  Under the fix and flip, if your buyer is acquiring financing to purchase the property then you will have to have owned the property for at least six months to be able to sell.  Be aware that some lenders may require that you owned it longer.  You may be wondering how the financial institution of the buyer knows how long the seller has owned the property well the lender requires a clear chain of title.  The chain of title will show if there is any liens and/or judgment, but it also shows the chain of ownership.  The chain of title yet again let’s the lender know if the property is marketable and free to transfer ownership.  You may be wondering where the chain of title comes from?  The chain of title comes from an abstract of the title.  An abstract of the title is a condensed history of ownership of the property which is gathered by the abstracter through public record. 

 

 

Once the Title Company and lender determine that the property is free and clear to sell. The lender needs to know that the buyer is free and clear of liens and judgments as well.  The reason is that the liens and judgment that the buyer may have may attach to the property, so a search is done on the buyer by their name and social security number.  If the buyer has a common name then a name affidavit can clear up most information that may come up.  The name affidavit has the buyer’s name, social security number, marital status, last five years of addresses, etc.  This information is used to rule out judgment that may appear as the buyer’s judgment or not.

 

Further Reading

Common Myths about Foreclosure - This article is about myths about foreclosure.

Hammond Gets $31 M Grant for Green Project

Originally posted 2008-12-25 12:01:48. Republished by Blog Post Promoter

Merry Christmas

Hammond, Indiana get the go ahead for 31.4 Million improvement plan for Wolf Lake, Lake George, and Lake Michigan.  The Regional Development Authority approved a plan that would providea park and bike trails between Unilever and BP Refinery. 

Mayor Tom McDermott, Jr. describes the project as similar to green project that was completed at Portage Lakefront and it became the presence for Porter County.  He is hoping that will do the same for Lake County. 

The project will further improve Whiting trail systems, connect Hammond Lakes to Chicago, and provide an outdoor amphitheater for summer concerts at Wolf Lake.

The project is a welcome improvement to Hammond, but it will take four years to complete in three phase.  It still needs final approval from all the members of the Regional Development Authority, but even that looks promising with five of the seven members already giving there approval.

What is the difference between a Chapter 7 and Chapter 13 Bankruptcy

Originally posted 2008-12-15 04:18:31. Republished by Blog Post Promoter

Chapter 7 Bankruptcy

 

All assets are frozen when a Chapter 7 bankruptcy is filed.  The attorney creates an automatic stay. Under an automatic stay, the homeowners will not be able to buy anything, the homeowner will not be able  to sell anything, and the homeowner will not be able to give away anything.  All unsecured debt like credit cards, unsecured loans, etc. are eliminated or wiped out. However, the debtor or homeowner still may have to pay some of the debt.  The trustee or attorney who represents the court will evaluate all the assets (house, car, furniture, equipment) anything of value and decide what must be liquidated to pay some of the debt that was wiped out.

 

If the homeowner is in foreclosure, Chapter 7 stops the foreclosure proceedings.  Typically, the lender will ask the court to release the property from the automatic stay.  When this happens it may take an additional three to five weeks before the foreclosure process begins again.  

 

Chapter 13 Bankruptcy

 

A Chapter 13 is similar to debt consolidation.  The payments on the assets are discounted pennies on the dollar, and the homeowner pays an agreed upon amount to the Standing Chapter 13 Trustee every month for the next three to five years.  This bankruptcy option allows the homeowner to keep his or her home and other assets.  However, if the homeowner misses a payment the trustee can dismiss his or her bankruptcy and the foreclosure proceeding will begin again

There is another solution to foreclosure that is available it is called the Soldier Relief Act of 1940.  This program is for a person in the military that is behind on his or her mortgage payments.  This program may stop foreclosure based on certain criteria.  The criteria are:

 

 

 

• The serviceman has to be in active duty in order to qualify.
• The loan had to be established before the soldier was called out to active duty.

*****It is important to note that this act will stop the  foreclosure and  stop seizure of any personal property while the soldier is actively serving and several months thereafter.****

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