Mortgage Repossession Can Devastate A Homeowner Problem Remortgages Is Mortgage Financing Possible With Bad Credit How To Eliminate Capital Gains Tax
About the last thing an individual or a lender want to do is become embroiled in a mortgage repossession procedure as it can be devastating for a homeowner to lose their residence and it detracts from the daily business of the lender. However, in troubled economic times foreclosures may be on the rise as many people struggle to meet the obligations of home ownership.
There are many reasons for people to fall behind on mortgage payments such as illness, layoff, loss of employment, or even escalating interest rates.Despite a history of making payments on time, an event that challenges a persons ability to stay up to date on their payments, may prompt an action leading to mortgage repossession proceedings. Once the borrower becomes behind on even one payment, things usually spiral out of control, with the borrower being continually late time and time again.
In todays housing market, some lenders may have offered mortgages to people who were most likely not going to be able to make the payments, but low interest, variable rate mortgages gave them and the lender a false sense of security for the future. Buyers may have been counting on in increase in income to offset any potential increase in payments due to possibly rising interest costs and when the interest rose and the income did not come in as expected, found themselves unable to meet the obligation.
Had the interest rates remained as low as the level at which the initial purchase was made, the owner would most likely have been able to continue to make the payments, but when the rates began to skyrocket, the monthly payments went up with it and the amount may be completely out of reach. Additionally, other expenses continued to rise while income levels failed to keep the escalating pace, leaving the buyer little choice but to accept mortgage repossession.
If possible, one solution is to refinance the mortgage for a fixed rate mortgage and, if any equity has been established in the property, use that to pay off any past due payments while bringing the new payments to an amount the buyer can afford. Although if the buyer has arrears on the mortgage, lenders may be reluctant to advance additional loans, even though the payments would be lower and more attainable for the buyer.
Some predatory lenders have made loans knowing the person would end up defaulting as soon as high interest rates took effect, counting on the mortgage repossession to be able to sell the property to another buyer at a future date and recoup the money from the failed first buyer, parlaying the property into additional sales.
Fortunately, there are law to protect unsuspecting buyers of predatory lending practices, but people should be aware of the possibility of this happening. Especially if they have been repeatedly turned down for mortgage loans from traditional banks and someone suddenly offers to fulfil their dream of home ownership. Reading the purchase contract carefully can reveal any hidden charges that may point to future problems.
In life, due to certain urgent circumstances and emergencies, it does happen that, having taken a loan, you are unable to keep up with the repayments. The reasons vary from person to person-unforeseen medical expenses, high lifestyles and living beyond your means, purchasing exorbitantly expensive luxurious goods, a grand wedding and so on and so forth. You keep hoping you will make up and budget the following month, or the month after and before you know it – you are way behind in your repayment and you have a problem. Remortgage is the wisest solution to a mortgage with missed repayment problem. Remortgage gives you renewed hope to make your payments in time once again.
Problem remortgage must be attended to immediately because it is a crisis situation. In order to save your asset from foreclosure it is very important that you take immediate steps to rectify this setback. As soon as you sense that you cannot make the payments on your loan, have a meeting with your financial lender. Our lender can give you sound financial advice. Speak across the table openly and you will find that most lenders are usually open to solving the problem. Remortgage is availing of a second mortgage on the present mortgage loan. That is on the same asset as your existing loan.
When you are in a loan problem, remortgage can benefit you in several ways.
Primarily, it lowers your interest rate and thereby the repayment amount.
If you have multiple debts, credit card bills, other purchases’ out standings, etc. With problem remortgage you have the opportunity to merge all these debts into a single debt. Thus, you need make only one repayment towards clearing all your debts. Your problem remortgage lender simply consolidates all your out standings into a single loan repayment. So you have to pay less as well as have peace of mind. With a single repayment to make every month, you are less likely to miss it.
Apart from interest rates, repayments and loan tenure, on your problem remortgage you can also negotiate on processing fees, handling charges, evaluation charges, overdue charges, finance and legal charges. You can actually save a considerably amount of money with charges that are waived or reduced. Don’t feel embarrassed to bargain with your creditor for charges, fees and interest rates.
You could also be into problem remortgage due to poor credit score, inability to get your loan approved, defaulting loan repayments in the past, divorce, arrears, etc. No matter what the problem, remortgage helps you manage your finances in a better way. More and more as you become regular and disciplined with your repayments, you increase your chances of improving your credit ratings. Submitting your loan application online is no problem, remortgage package is designed for your individual needs by online financial advisors. Problem remortgage loans online give very prompt response and quick approvals, irrespective of your credit score.
Being able to buy that new home is still an option – even if you have bad credit. Lenders are definitely getting softer on their requirements for financing mortgages for those whose credit is not perfect. Here are some things that you need to know about getting your next home financed with bad credit.
The first thing that you should know is that getting the best deals in mortgage financing is only for those who do have good credit. Still, though, there are deals available that can put you into that house.
A zero down mortgage will allow you to possibly get financing and not even have to put anything down. In fact, it may be possible to get as much as 107% of what you need, and that could even include the closing costs. Depending on your actual credit score, this type of mortgage can be obtained with a credit score as low as 580, with documentation. The way it works is to give the borrower two mortgages, a first and a second. Typically offered in an 80/20 or 75/25 arrangement, this allows you to have greater savings since that process will not require private mortgage insurance.
Another way to reduce the payment is to be able to put something down – the larger the better. Although you may want to get a mortgage as cheaply as possible, you can reduce the mortgage payments, and possibly the interest, if you can put something down – even 3 to 5% will make a difference. This will show the lenders that you are making enough to save something, and that you have some control over your spending – which is always a good thing to them.
Other deals will simply include the more traditional type of mortgages. This type of financing for people with bad credit is available even for lower credit ratings than that. Some lenders will extend a mortgage for someone with a rating of 500, and some will probably even go lower than that.
Even though you can get a mortgage on your new home, it may be more important to wait and rebuild your credit first. Although it means holding on to those dreams a little while longer, by rebuilding your credit first, you can not only get a better interest rate, but you can also get a larger mortgage, and lower payments. If you take some steps quickly, rebuild your credit to closer to where it should be, then you can get those rates you want, a nice house, and payments that you enjoy even more. Besides, this could even allow you to have some extra money to do some of those other things you want, too.
Of course, you want to be very careful about the type of mortgage you get. This means that you take the time to learn about the different mortgage types, such as fixed rate and adjustable rate, and also know the terms. Unfortunately, some lenders are looking for people with bad credit, knowing that they may be a little more desperate to get a mortgage, and may do so hastily without carefully reading the agreement, or really understanding what they are signing. Only by being careful and understanding what is involved can you be sure to avoid trouble.
First off I will give a short summary of the Capital Gains Elimination Trust (CGET). Then, I will provide some details about how it works and conclude with a case study as an example of how someone might use this.
The Capital Gains Elimination Trust is better known as a Charitable Remainder Trust. How this works is one would deposit highly appreciated assets into the CGET. The trust sells the assets and pays no capital gains tax. You then get to withdraw an income each year from the trust. The withdrawal can be earnings and principal.
Donors can be the trustees of the trust and decide how to invest the trust’s assets. In addition, they get an income tax deduction for their contribution to the trust that is based on the term of the trust, the size of the contribution, the distribution rate, and the assumed earnings on the trust.
At this point, the assets are now removed from their estate, they have paid no tax on the capital gains, and they have a stream of income. The IRS requires at least 10% of the present value to be projected to go to a charity of your choice.
If someone wanted the money to be left to family, they could use part of the money they would have paid taxes on and buy a life insurance policy outside of their estate. Then, their children will still receive as much or more inheritance money, free of income and estate taxes.
A CGET can be used with real estate, stocks, or any other asset with capital gains, and must be unencumbered with debt.
CGETs are subject to a maze of law and regulation. The failure of a CGET to meet all requirements can result in a trust being disqualified as a Charitable Remainder Trust, with negative income, gift, and federal estate tax consequences. The loss of charitable status would also defeat a donor’s charitable intent.
Some of these requirements involve numerical tests, several of which have long been a part of the qualifying conditions for CRTs. The Taxpayer Relief Act of 1997 (TRA 97).
5% probability test (this applies only to charitable remainder annuity trusts)
5% minimum payment test
TRA act of 1997
50% payout limitation test
10% minimum charitable benefit
TRA 97 provided several relief provisions for trusts which would meet all CRT requirements, except the 10% minimum charitable benefit requirement. The law provides that a trust may be declared void ab initio (from the beginning). Under this option, no charitable tax deduction is permitted to the donor for the transfer and any income or capital gains created by property transferred to the CRT becomes income and capital gain to the donor.
The new law also allows a donor to reform a trust, by modifying either the annual payout or the term of a CRT (or both), to allow the trust to meet the 10% minimum charitable benefit. Strict time limits have been imposed for this reformation.
Seek Professional Guidance
The laws and regulations surrounding Charitable Remainder Trusts can be complex and confusing. Individuals facing decisions concerning the tax and estate planning implications of a CGET are strongly advised to consult with an attorney.
Beth and John own $1 million of stock that cost $100,000. They realize that their portfolio needs better diversification and would like more income, but they do not want to pay the capital gains tax. They could place the stock in a trust set up by their attorney. The trust would be a tax-free entity and could sell the stock without paying the tax.
Now there is $1 million cash that can be invested. This could go into a balanced portfolio, or an annuity. It doesn’t matter. And Beth and John can make a one-time decision on how much lifetime income they’ll receive from the trust.
The IRS will let Beth and John take an income tax deduction of $417,180 when they do this, as long as at least 10% of the money that originally goes into this trust is left to charity. And since they technically no longer own the $1 million, it is out of their estate, thereby saving their heirs $460,000.
Beth and John are thrilled. They’ll end up with more income, less market risk, and a nice tax deduction. But the kids aren’t so happy. They thought that they were going to get the $1 million. However, a wealth replacement trust would take care of that.
Beth and John take part of their new income and buy a $1 million, second-to-die life insurance policy on their lives. The policy is owned by an irrevocable life insurance trust so the proceeds are removed from their estate. When the survivor dies, the children will receive $1 million tax-free, and the charity will get whatever remains in the trust.
If you ever have questions about planning for your immediate or long-term retirement goals, please feel free to call or send in the enclosed coupon.
Mark K. Lund, CRFA
Stonecreek Wealth Advisors, Inc.
10421 So. Jordan Gateway, Suite 600
So. Jordan, UT 84095
Securities offered through Sammons Securities Company, LLC
Member NASD and SIPC.
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