Mortgage debt reduction needs to be a long term goal, but it doesn’t need to be difficult. In fact, there are several simple ways to reduce your mortgage quickly and cut down the loan term dramatically. You have the option of using one or a combination of any of the tips mentioned below as part of your mortgage debt reduction strategy.

Payment Frequency

When a bank calculates your mortgage repayments, they use a calculation known as ‘amortization’. This allows them to work out how much you need to pay each month so that a portion of your payment goes towards paying down your balance and the other portion of your payment is interest charged on your balance owing. They tell you how much you need to pay in monthly installments to pay off your loan over the exact loan term written on your mortgage contract.

However, if you’re paid bi-weekly or even weekly, you are able to adjust your repayments to the same frequency for which you get paid. This not only makes budgeting much easier to pay a smaller portion each pay period, but it can also cut years off your loan term and save you thousands in interest.

Call your lender and ask them if you can adjust your payment frequency to bi-weekly, but be absolutely certain you work out your own calculation amounts before you call.

Bi-Weekly Calculations

Find out exactly how much your minimum monthly payment will be and then divide it by two if you’re paid bi-weekly. If you’re paid weekly, then divide your monthly payment by four. Don’t use any fancy calculations or try to figure out how many weeks in a year and then divide by how many fortnights. This won’t work. Simply divide your minimum monthly repayment by two for bi-weekly or divide by four if you’re paid weekly. Write this figure down. It’s your new minimum repayment. You’ll pay this new amount every time you’re paid.

More than Minimum

Once you have your new bi-weekly minimum repayment worked out, round this figure up to the nearest $5. For example, if your payment comes to $423.24, then round this up to $425. This small amount won’t break your budget and you’ll find it easier to remember how much you need to pay.

Rounding up your repayments seems like such a small amount of money, yet it can save you tens of thousands of dollars in interest and reduce your loan term dramatically.

Lump Sum Reductions

Lenders calculate your interest repayments based on the balance you owe at the end of every day. Then they add up how much interest has accumulated and show you one simple figure at the end of the month. By making more regular payments, such as weekly or bi-weekly payments, and then rounding up those amounts, you’re reducing the amount you owe on a more regular basis. This reduces the amount of interest the bank can charge you.

If you receive a pay raise or a tax refund or a bonus or if you earn some extra cash from a yard sale, pay it as a lump sum payment off your mortgage. This reduces your outstanding balance and lowers the amount of interest you’ll be charged. Mortgage debt reduction really is as simple as finding a plan and sticking to it.

First you have to ask yourself if refinancing is right for you.  Using a home loan refinance online calculator, compare your existing loan, a new loan and your financial situation to determine if and how you may be better off refinancing. It might make sense to have a smaller or larger monthly payment — especially if your income has changed. A smaller monthly payment will increase your available funds, while a larger monthly payment will speed up your mortgage payoff. Either way, refinancing should help in meeting your financial goals.

Next you should look for a rate reduction.  The general rule of thumb is that if your closing expenses can be recovered in 30 months or if the interest rates are 1 percent lower than your current rate, home loan refinance – online or off – makes sense.

You should also look for ways to reduce the term of your loan.  If you are 5 years into a 30 year mortgage and you can get into a 15 year mortgage for about the same monthly payment, you shave 10 years off your loan and save tens of thousands of dollars in interest rates.

By doing a home loan refinance online calculation, you will also be able to determine whether you can switch from an adjustable rate to a fixed rate mortgage.  Another option is to change the terms of your adjustable rate mortgage to make it more attractive.

The final refinancing solution that you want to be looking at is whether you can get money out of your home.  Perhaps you want to send your kids to college, make repairs and upgrades to your home, or just take a dream vacation.  By doing a home loan refinance online calculation, you can see whether these options are viable for you.

It can make a lot of sense to refinance when the interest rates drop — if you are going to be staying in your home for long enough to recoup the closing costs.  Also, if you can increase or decrease the loan term to meet your current financial goals, refinancing can be a good idea.

You will need to provide many of the same documents you supplied for your first closing.  A new credit check, survey, title search and insurance, an appraisal and an inspection are usually required. You may want to check your files for the original documents and begin collecting updated information on these necessary items.  Depending on the mortgage loan you select, there may be charges for loan origination fees and points.

You can pay your closing costs in cash at the time of closing, roll the costs into your new loan amount, or add a premium to your interest rates.

Additionally, you should know that if you pay more points, you can sometimes lower the interest rates.

All of these factors can be calculated when you do a home loan refinance online.

REO stands for “real estate owned” and it means that it is a property that the bank has foreclosed on.  Generally, you will get a better deal on a REO property than you would if it were available from an initial homeowner.  This is because the lender is not in the business of owning or managing properties.  Therefore, they have an incentive to get the homes off of their books.  Expresspath financing was developed specifically to get homes off Fannie Mae’s books.

Express Path financing uses a low down payment fee (also known as LDPF), which means the mortgage insurance is not built into the rate. Buyers are able to compare rates from other lenders more easily with LDPF. There is a “MIsubstitute”, which is comparable to traditional mortgage insurance that a buyer would pay.

For owner occupied single family homes, 100 percent of the loan can be financed through expresspath.  However, the new homeowner is expected to make a token $500 down payment.  The $500 may be used for closing costs.

A property must be “owner occupied ready” to qualify for express path financing.  That means that no significant repairs must be made in order for the home to be habitable.  The NPDC makes the final determination on whether a home is owner occupied ready.  The NPDC is authorized to make repairs themselves to make a home owner occupied ready.

You will get a low down payment loan with an interest rate between 0 and 3 percent.  Additionally, you can get up to 5 percent back as a seller concession.  Express path financing is available in 15 and 30 year loan periods.

Investors who can put down 10 percent of the loan are eligible for all of the benefits of Express path financing.  Investors may receive appraisal waivers, reduced documentation, and all of the PHH Mortgage Guarantees

Additionally, manufactured homes are eligible for expresspath financing if they are coded correctly.  The maximum loan to value on a manufactured home is 95 percent.  Unlike traditional properties, manufactured homes must be owner occupied to qualify for express path financing.

One of the benefits of express path financing is that the appraisal is done before the home goes to market.  When the buyer goes for financing, approval can be quickly granted based on your own credit and income information and is not dependent on the home’s performance.

Express path financing is a quicker way to get into your new home and you can often get a better rate by using the system.  When you apply, you get a loan decision (not just pre-qualification) in 30 minutes or less.

If you are looking to buy a new home in today’s market, give express path financing a second look.

Second mortgages are secured loans that do not have first claim to the house.  If you go into foreclosure, the primary mortgage will be paid off from the proceeds of the sale before the second mortgage is.  That is why second mortgage interest rates are higher because there is more risk involved.

Because people with bad credit are at higher risk of defaulting on their home payments and going into foreclosure, bad credit second mortgage solutions are harder to find.  Here are some of the things banks look for.

First, is there any equity in the home?  A bad credit second mortgage ca often be secured when the homeowner owes 80 percent or less than the house is currently valued at.

Second, is there a low debt to income ratio?  The more debt you have, the less chance you have of securing a bad credit second mortgage.

Third, do you have a solid employment history?  If you do, you are more likely to secure a bad credit second mortgage.

Second mortgages can be used for a number of things.  If you do not have the traditional 20 percent down payment, the second can secure the difference.  Seconds are also used as home equity lines of credit to allow the homeowner to renovate the home or just spend the money.

It is also possible to secure a second mortgage above and beyond the value of the home.  Though this was more common when the credit markets were flush, sometimes you can get loans totaling 125 percent of the value of the property.  Lenders usually allow these loans when they perceive that the value of the property will rise in coming years.  This could be because the real estate market is on the upswing or it could be because the new owner is investing in improvements.

You should also know that it is possible to take out third and even fourth mortgages on your home, though these are rare.  The interest rate on each successive loan becomes steeper as the order of payment in case of a foreclosure is reversed.

Prior to its going belly up, Countrywide was the largest source of bad credit second mortgages.  Now that they are no longer in business, it is more difficult to find these loans.  If you need a bad credit second mortgage, you may want to simplify the search by turning to online providers.  In this way you can fill out one form and have several lenders make offers for your loan.  You can compare rates in one easy step.

Home ownership is part of the American dream.  But, the average cost of a home is six to ten times an average person’s salary depending on what part of the country you live in.  The only chance of owning a home for an ordinary person is to take out a mortgage.  If you have bad credit, it means going to bad credit mortgage lenders.

Many things can happen in people’s lives to put them in a situation where they have bad credit.  It may be the result of overextending yourself.  It may be that you are bad about paying bills.  You may have also had situations outside of your control like a major medical crisis or unexpected layoff.  In any case, bad credit mortgage lenders give you a chance to achieve the American dream of homeownership.

Unfortunately, it is not as simple to get yourself out of a bad credit situation as it was to get into it.  There are some things you can do immediately to improve your credit score, but other options take years of steady payments to improve the bottom line.

One thing you can do immediately is to obtain a free copy of your credit reports.  Then, go through and see if there are any errors.  If errors exist, report them immediately.  The credit bureau has 30 days to confirm the debt.  If they are unable to, then they must remove it from your records.  This can help your credit score tremendously.

When you are thinking about buying a home, make sure you make all your payments on all of your bills on time for at least a year.  This will improve your chances of getting a good rate on a loan.

But, when it comes to actually buying the home, you may find that you have no choice but to go to bad credit mortgage lenders.  This will mean that you have a higher than average rate on your loan and you may also be required to pay extra points.  The lender may also require that you take out insurance to secure the loan.

If you agree to these terms, you have a good chance of improving your credit over the next couple of years.  That is because when you make payments on a home, it improves your credit score.  After 24 months, consider refinancing the home because you should be able to get better rates after you have had the time to rebuild your credit.

Bad credit mortgage lenders offer subprime loans because the risk they take that you won’t pay them back is outweighed by the higher rates and fees you pay.  That’s how bad credit mortgage lenders make their money.

FHA and VA loans are loans that are backed by the Federal Housing Authority and the Veterans Administration, respectively. These two groups both have the goal of helping more Americans realize the dream of home ownership. They work in cooperation with certain lenders and provide those lenders with mortgage insurance in case you have to default on your loan.  Generally, these types of loans have a lower down payment, may have lower interest rates, and may be easier to qualify for. Also, with FHA and A mortgage loan types, the FHA and VA themselves set a lot of the parameters of the loan, such as how much of a down payment is needed, how much interest can be charged, inspections of the property in question, and so on. That is why not all lenders prefer to deal with FHA or VA mortgage loan types. The lenders have more control with conventional mortgage loan types.

Another major difference in types of mortgages is whether the loan is a fixed-rate or variable-rate loan. A fixed-rate loan has one interest rate that is set and remains unchanged throughout the life of the loan. Some people prefer to have a fixed-rate loan, especially during times of a “buyer’s market” such as we have now. Rates as well as housing prices tend to be lower right now, so it makes sense to get the lower rate and keep it forever, as interest rates are more likely to climb in the future, rather than decrease in the future. Also, knowing how much your payment is going to be helps you budget your finances more easily.

However, it can sometimes be more difficult to qualify for a fixed-rate loan, so some folks go with the adjustable mortgage loan type.  Adjustable mortgages begin with one interest rate, but it is not necessarily going to remain the same throughout the life of the loan. Periodically, the interest rate can be adjusted to suit market conditions. Depending on what is happening in the economy and on what the prime interest rate is, if you have an adjustable mortgage loan type, your interest rate (and payment) can go up or down.

There are also ways of financing that are known as unconventional mortgage loan types. There are a variety of such types of loans, and they are relative newcomers to the home lending industry. You can find interest-only mortgage loans, balloon mortgages, and even reverse mortgage loan types. When you are searching for financing to make your dream a reality, be sure to look into all mortgage loan types to see which is the best fit for you and your family’s circumstances.

Mortgage bridge loans are short-term loans that are designed to allow you to get into your new home before it is sold to someone else even if your current home has not sold yet. Bridge loans pay off the mortgage on your current home, and any “leftover” money can be used as a down payment on your new dream house. In this way, it is not necessary to wait for your house to sell in order to get into your new home.

Generally speaking, bridge loans do not require payments for about the first six months. After six months, if your old house is still on the market, you will have to begin making payments; sometimes those payments are interest only, as everyone knows you are not interested in building equity in that house. You are trying to sell it, not use it as a home or an investment!

When your house does sell, the bridge loan is paid off and you take out more traditional financing on the home of your dreams. Bridge loans can be especially useful for folks who really want or have to move even if they are unable to sell their old house. Examples of such times might be to be closer to an ailing relative who needs assistance or moving due to a job transfer. Of course, sometimes, you are just anxious to buy the house you want before someone else gets it first.

Although a bridge loan may be just right for you and your present circumstances, there are some definite disadvantages to mortgage bridge loans, as well. Because they are short-term and a little risky, they tend to come with higher interest rates and fees that are not associated with more traditional mortgage loans.  That means more money out of your pocket. Also, one common stipulation with most bridge loans is that you must use that same lending company to finance your new home, which might lock you into terms that are less favorable than they would be with a different lender.

As with any financial transaction, the actual closing costs, fees, interest rates, and terms for bridge loans can vary greatly from lender to lender; in fact, there are some lenders who do not offer bridge loans at all. If you do find yourself in need of a gap-closer loan so that you can move, it is very important that you fully understand everything before you sign on the bottom line.

Subprime loans are generally required by people who have missed more than two payments in the last 12 months; have a judgment, foreclosure, or eviction against them; declared bankruptcy in the last 5 years; or have a generally defined high risk of default.

Back in the 1930s, the 30 year fixed rate mortgage was introduced as a financial instrument.  Since then, the rate of home ownership has doubled and two-thirds of Americans own their own homes today.  To expand the reality of homeownership to as many people as possible, sub prime or bad credit mortgage loans came into being.

When you take out bad credit mortgage loans, be prepared to pay higher interest rates and fees.  You may also have to take out extra insurance to ensure that the bank gets paid back.  Be prepared for bad credit mortgage loans to be more difficult to get in 2009 than they were before the housing bubble burst.  This is because there is less liquidity in the markets and the capital will flow first to those with better credit.

But that does not mean that bad credit mortgage loans do not exist.  You just have to work a little bit harder to find them.

First off, you should clear up your own credit history to the extent possible.  Get a copy of your credit report and dispute any inaccuracies.  Pay off any bad debt and get the creditor to mark the bill satisfied in full on your credit report.

Then, start shopping for lenders.  You are looking for a bad credit mortgage loans lender who will give you the best loan at the best rate with the fewest fees.

Be prepared to get into a loan for the short term as your chances of refinancing after 24 months are good.  There are two reasons for this.  The first reason is that after 24 months of regular payments, your credit will improve making regular loans more accessible.

But, the other reason is that by 2012, the credit markets are bound to have improved.  You will have built equity in your home so the loan will be a secure investment for the bank.  At that point, you can refinance into a more manageable loan.

Bad credit mortgage loans exist to allow people like you the benefits and security of owning your own home.  These subprime loans are lifesavers for people who want to work their way back into normal credit.  Generally within 2 to 3 years, a responsible borrower will get into a regular loan rather than the bad credit mortgage loans they started with.

In order to understand the 40 year mortgage, we have to look at the history in which the concept came about.

The “standard” 30 year fixed rate mortgage was developed in the 1930s.  In 1935, the average home cost $3450 and the average salary was $1600.  That means, the average home cost just over two years’ salary.

Fast forward to today.  In 2005, the median home price in California was $524,000 while the average salary in that state was $43,000.  As you can see, homes now cost ten times annual salary.  This makes spreading the payments out over a 40 year mortgage quite attractive.

Another difference was that in the 1930s, people bought homes that they would live in until they died and then pass down to their children.  Today, people live in a purchased home for just 8 to 10 years on average.

All of this makes the lower payment 40 year mortgage an attractive option for people whose home purchase is a temporary investment.

A 40 year mortgage may offer you a lower monthly payment.  You may also be able to obtain a secure, fixed rate.  But these mortgages typically have a balloon payment at the end of thirty years.  AT that time, you have to refinance the loan or pay off the remaining balance.

A 40 year mortgage has lower payments than the 30 year fixed mortgage because it stretches out the amortization schedule over a longer period.  The loan is actually only for 30 years, but is amortized over 40 years, thus the balloon payment.

An alternative to the 40 year mortgage is the interest only loan as it offers a similar low payment schedule.  In some ways, the 40 year mortgage is more attractive though, because it allows you to build at least some equity in the home.

Both the 40 year loan and the interest only loan allow you to purchase a more expensive home than you can afford with the same amount of cash.  A $200,000 home would be $100 per month cheaper with a 40 year mortgage than it would be with a 30 year fixed rate mortgage.

The people who will benefit most from 40 year mortgage plans are those who don’t plan on moving from their home during the mortgage period.  If you do move, you risk leaving the home during a downturn in the market which puts your entire investment at risk.

It made a lot more sense to take out 40 year loans when it looked like the housing market would continue to rise from year to year.  In a depressed market, you need to be sure that you will be in the home for a long time before you take out a 40 year mortgage.

What does it mean to refinance your mortgage?

As the name implies, it means that you renegotiate your loan. Usually, refinance mortgage loans are taken out by people who wish to tap into the equity they have built up by paying down the principal on their mortgage. For this reason, refinance mortgage loans are also sometimes referred to as home equity loans.

What exactly does it mean to have equity in your home? That means that your home is worth more than you owe. If the market value of your house is, for example, one hundred thousand dollars, but you only owe eighty-five thousand, you have fifteen thousand dollars worth of equity in your home.

Many lenders are willing to offer a refinance mortgage loan if you have equity in your house, and you may choose to refinance to get cash for something you want or need such as a vacation, home improvements, or a college fund. You may also decide to refinance simply because it makes good financial sense. A lot of times, people have to take less-than-ideal mortgage terms when they are buying their house, either because they have bad credit or little credit when they first take out their home loan.

As time goes on, however, you may have a better credit history or the prime interest rate may be lower than it was when you first bought. If the prime rate is lower, you are likely to be able to refinance your mortgage loan at a lower interest rate and show a significant savings with reduced monthly payments or a lifetime interest savings of thousands of dollars.

Does it make good sense to refinance your mortgage loan? For some people it does; for others, there is no real advantage. If you are considering tapping into your home’s equity, be sure to discuss all your refinance options with a good financial planner and understand what exactly the pros and cons are for your particular situation.

Many people find a refinance a viable alternative to taking out other costly loans that may not have the same tax benefits as a home equity loan. Some refinance mortgage loans even have a lower interest rate than government-backed student loans, so it pays to take a look at all your options and make the best decision for you.