"I'm very unhappy with the lender servicing my mortgage. Would you spell out the procedures for changing lenders?"

Bad news, the only way to change the lender servicing your loan is by refinancing. Unless you have other reasons to refinance, that is a costly way to get a new lender, especially when you have no way of knowing that the new one will be better than the old one. There should be a better way, and I will suggest one below.  more...

Flexible-payment adjustable-rate mortgages (FPARMs) are for borrowers who need low payments in the early years. The minimum initial payment is calculated at the interest rate in month 1, which can be as low as 1.25 percent, and rises by 7.5 percent a year.

While the interest rate jumps in month 2, the initial payment holds for the year. In the four years that follow, each minimum is 7.5 percent higher than the minimum in the preceding year. The rate in month 1 thus determines the minimum payments for the first five years.  more...

"Can you explain flexible-payment ARMs, and their pros and cons?"

A flexible-payment ARM (FPARM) is an adjustable-rate mortgage that allows (but does not compel) borrowers to make very low initial mortgage payments that rise over time. The major drawback is that those who select the minimum payment option may suffer "payment shock" – a sudden and sharp increase in the payment for which they are not prepared.  more...

Adjustable-rate mortgages are complicated instruments. No one characteristic fully describes one. This is why, when readers ask me for the pros and cons of COFI ARMs, or Libor ARMs, or flexible payment ARMs, I get heartburn. You can't assess an ARM based on only one of its features.

But some features are more important than others. If any one feature deserves to be considered the "real price" of an ARM, it is the fully indexed rate, or FIR. Yet ironically, I have never had a reader ask me a question about the FIR.  more...

"What are the benefits/drawbacks of a simple interest loan versus a traditional mortgage? Which would you take if offered the choice?"

I would select a traditional mortgage. If two loans are exactly the same but one is simple interest, you will pay more interest on it unless you systematically make your monthly payment before the due date.

The major difference between a standard mortgage and a simple interest mortgage is that interest is calculated monthly on the first and daily on the second.

"What can a borrower do to prevent lock failure?"

A lock failure occurs when a lender refuses to honor a mortgage price that a borrower had believed was guaranteed. In two previous columns, I discussed some of the reasons why locks fail, and why there is seldom any recourse for the disappointed borrower. But lock failures can usually be prevented.  more...

Recent months have seen a flurry of lock failures – refusals by lenders to honor mortgage prices that borrowers had believed were guaranteed. Last week I discussed some reasons why this happens. That discussion assumed, however, that the borrower dealt directly with the lender. Usually, a mortgage broker is involved.

"Does working with a mortgage broker, as opposed to dealing directly with a lender, increase or decrease the probability of a lock failure?"

It can go either way.  more...

"Why have lock failures increased recently?

A lock failure occurs when a lender refuses to honor a mortgage price that a borrower had believed was guaranteed. Lock failures occur when interest rates are rising and honoring locks is costly to lenders. The bulge in lock failures in recent months reflects an increase in interest rate volatility, relative to prior years.  more...