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Click on Detroit - Your Mortgage Matters

Channel 4 - Click on Detroit - You Mortgage Matters. Q & A with Dan Milstein, Rick Richter and Mike Hyman.

Mortgage Matters: Understanding prepaid interest with your mortgage loan (column)

When closing on the financing of either a refinance or a purchase transaction, interest on the loan will be collected from the borrower and prepaid to the lender upon funding of the loan. Easy enough, right?

Think of prepaid interest as the mortgage payment to the bank or the lender for the month in which you close. Prepaying interest at consummation of the transaction avoids having to make a mortgage payment to the bank or lender a few days or weeks after you close. As easy as this sounds, there are a few variables to keep in mind with prepaid interest.

Starting with a specific illustration, let's assume you are going to close and fund on the purchase of a new home on Nov. 15 with a loan amount of $350,000 at an interest rate of 4 percent. Rounded slightly, the per-diem interest on the loan is $40. At closing, you will prepay the lender interest from Nov. 15 to Dec. 1, or 16 days. Sixteen days of interest at $40 (plus or minus) per day is roughly $640 you will pay the lender at closing.

Mortgage risks fading thanks to higher rates, tougher rules: Bank of Canada

OTTAWA — The Bank of Canada provided a closer look Wednesday at just how much stricter mortgage rules and higher interest rates have helped slow the entry of new households into the category of "deeply indebted borrowers."

The lofty levels of household debt has been a key concern for the Bank of Canada as it gradually raises its trend-setting interest rate, which it has already hiked five times since the summer of 2017.

To determine the pace of future hikes, the central bank has closely watched how well households are adapting to higher borrowing costs, particularly when it comes to those that are significantly overstretched.

So far, the bank has said Canadians have been making spending adjustments in response to rate hikes and the arrival of stricter mortgage policies. At the same time, the bank has reported that credit growth has continued to moderate and household vulnerabilities, while still elevated, have edged down as a result.

What does it mean to be "Upside down" , pertaining to financial

It means you owe more than the item is worth. Example you owe $80,000 on your house and it is only worth $50,000. Visa Versa would be "right side up" or owing $50,000 on the house and it is worth $80,000.