Home loans are available from several types of lenders--thrift institutions, commercial banks, mortgage companies, and credit unions. Different lenders may quote you different prices, so you should contact several lenders to make sure you’re getting the best price. You can also get a home loan through a mortgage broker. Brokers arrange transactions rather than lending money directly; in other words, they find a lender for you. A broker’s access to several lenders can mean a wider selection of loan products and terms from which you can choose. Brokers will generally contact several lenders regarding your application, but they are not obligated to find the best deal for you unless they have contracted with you to act as your agent. Consequently, you should consider contacting more than one broker, just as you should with banks or thrift institutions.
Whether you are dealing with a lender or a broker may not always be clear. Some financial institutions operate as both lenders and brokers. And most brokers’ advertisements do not use the word "broker." Therefore, be sure to ask whether a broker is involved. This information is important because brokers are usually paid a fee for their services that may be separate from and in addition to the lender’s origination or other fees. A broker’s compensation may be in the form of "points" paid at closing or as an add-on to your interest rate, or both. You should ask each broker you work with how he or she will be compensated so that you can compare the different fees. Be prepared to negotiate with the brokers as well as the lenders.
Sunday, May 31, 2009
Saturday, May 30, 2009
Consumer Cautions
Discounted interest rates
Many lenders offer more than one type of ARM. Some lenders offer an ARM with an initial rate that is lower than their fully indexed ARM rate (that is, lower than the sum of the index plus the margin). Such rates—called discounted rates, start rates, or teaser rates-are often combined with large initial loan fees, sometimes called points, and with higher rates after the initial discounted rate expires.
Your lender or broker may offer you a choice of loans that may include "discount points" or a "discount fee." You may choose to pay these points or fees in return for a lower interest rate. But keep in mind that the lower interest rate may only last until the first adjustment.
If a lender offers you a loan with a discount rate, don't assume that means that the loan is a good one for you. You should carefully consider whether you will be able to afford higher payments in later years when the discount expires and the rate is adjusted.
Here is an example of how a discounted initial rate might work. Let's assume that the lender's fully indexed one-year ARM rate (index rate plus margin) is currently 6%; the monthly payment for the first year would be $1,199.10. But your lender is offering an ARM with a discounted initial rate of 4% for the first year. With the 4% rate, your first-year's monthly payment would be $954.83.
With a discounted ARM, your initial payment will probably remain at $954.83 for only a limited time—and any savings during the discount period may be offset by higher payments over the remaining life of the mortgage. If you are considering a discount ARM, be sure to compare future payments with those for a fully indexed ARM. In fact, if you buy a home or refinance using a deeply discounted initial rate, you run the risk of payment shock, negative amortization, or prepayment penalties or conversion fees.
Payment shock
Payment shock may occur if your mortgage payment rises sharply at a rate adjustment. Let’s see what would happen in the second year if the rate on your discounted 4% ARM were to rise to the 6% fully indexed rate.
As the example shows, even if the index rate were to stay the same, your monthly payment would go up from $954.83 to $1,192.63 in the second year.
Suppose that the index rate increases 1% in one year and the ARM rate rises to 7%. Your payment in the second year would be $1,320.59.
That's an increase of $365.76 in your monthly payment. You can see what might happen if you choose an ARM because of a low initial rate without considering whether you will be able to afford future payments.
If you have an interest-only ARM, payment shock can also occur when the interest-only period ends. Or, if you have a paymentoption ARM, payment shock can happen when the loan is recast.
The following example compares several different loans over the first 7 years of their terms; the payments shown are for years 1, 6, and 7 of the mortgage, assuming you make interest-only payments or minimum payments. The main point is that, depending on the terms and conditions of your mortgage and changes in interest rates, ARM payments can change quite a bit over the life of the loan—so while you could save money in the first few years of an ARM, you could also face much higher payments in the future.
Negative amortization-When you owe more money than you borrowed
Negative amortization means that the amount you owe increases even when you make all your required payments on time. It occurs whenever your monthly mortgage payments are not large enough to pay all of the interest due on your mortgage—the unpaid interest is added to the principal on your mortgage, and you will owe more than you originally borrowed. This can happen because you are making only minimum payments on a payment option mortgage or because your loan has a payment cap.
For example, suppose you have a $200,000, 30-year payment option ARM with a 2% rate for the first 3 months and a 6% rate for the remaining 9 months of the year. Your minimum payment for the year is $739.24, as shown in the previous graph. However, once the 6% rate is applied to your loan balance, you are no longer covering the interest costs. If you continue to make minimum payments on this loan, your loan balance at the end of the first year of your mortgage would be $201,118—or $1,118 more than you originally borrowed.
Because payment caps limit only the amount of payment increases, and not interest-rate increases, payments sometimes do not cover all the interest due on your loan. This means that the unpaid interest is automatically added to your debt, and interest may be charged on that amount. You might owe the lender more later in the loan term than you did at the beginning.
A payment cap limits the increase in your monthly payment by deferring some of the interest. Eventually, you would have to repay the higher remaining loan balance at the interest rate then in effect. When this happens, there may be a substantial increase in your monthly payment.
Some mortgages include a cap on negative amortization. The cap typically limits the total amount you can owe to 110% to 125% of the original loan amount. When you reach that point, the lender will set the monthly payment amounts to fully repay the loan over the remaining term. Your payment cap will not apply, and your payments could be substantially higher. You may limit negative amortization by voluntarily increasing your monthly payment.
Be sure you know whether the ARM you are considering can have negative amortization.
Prepayment penalties and conversion
If you get an ARM, you may decide later that you don't want to risk any increases in the interest rate and payment amount. When you are considering an ARM, ask for information about any extra fees you would have to pay if you pay off the loan early by refinancing or selling your home, and whether you would be able to convert your ARM to a fixed-rate mortgage.
Prepayment penalties
Some ARMs, including interest-only and payment-option ARMs, may require you to pay special fees or penalties if you refinance or pay off the ARM early (usually within the first 3 to 5 years of the loan). Some loans have hard prepayment penalties, meaning that you will pay an extra fee or penalty if you pay off the loan during the penalty period for any reason (because you refinance or sell your home, for example). Other loans have soft prepayment penalties, meaning that you will pay an extra fee or penalty only if you refinance the loan, but you will not pay a penalty if you sell your home. Also, some loans may have prepayment penalties even if you make only a partial prepayment.
Prepayment penalties can be several thousand dollars. For example, suppose you have a 3/1 ARM with an initial rate of 6%. At the end of year 2 you decide to refinance and pay off your original loan. At the time of refinancing, your balance is $194,936. If your loan has a prepayment penalty of 6 months' interest on the remaining balance, you would owe about $5,850.
Sometimes there is a trade-off between having a prepayment penalty and having lower origination fees or lower interest rates.
The lender may be willing to reduce or eliminate a prepayment penalty based on the amount you pay in loan fees or on the interest rate in the loan contract.
If you have a hybrid ARM—such as a 2/28 or 3/27 ARM—be sure to compare the prepayment penalty period with the ARM’s first adjustment period. For example, if you have a 2/28 ARM that has a rate and payment adjustment after the second year, but the prepayment penalty is in effect for the first 5 years of the loan, it may be costly to refinance when the first adjustment is made.
Most mortgages let you make additional principal payments with your monthly payment. In most cases, this is not considered prepayment, and there usually is no penalty for these extra amounts. Check with your lender to make sure there is no penalty if you think you might want to make this type of additional principal prepayment.
Conversion fees
Your agreement with the lender may include a clause that lets you convert the ARM to a fixed-rate mortgage at designated times. When you convert, the new rate is generally set using a formula given in your loan documents.
The interest rate or up-front fees may be somewhat higher for a convertible ARM. Also, a convertible ARM may require a fee at the time of conversion.
Graduated-payment or stepped-rate loans
Some fixed-rate loans start with one rate for one or two years and then change to another rate for the remaining term of the loan. While these are not ARMs, your payment will go up according to the terms of your contract. Talk with your lender or broker and read the information provided to you to make sure you understand when and by how much the payment will change.
Many lenders offer more than one type of ARM. Some lenders offer an ARM with an initial rate that is lower than their fully indexed ARM rate (that is, lower than the sum of the index plus the margin). Such rates—called discounted rates, start rates, or teaser rates-are often combined with large initial loan fees, sometimes called points, and with higher rates after the initial discounted rate expires.
Your lender or broker may offer you a choice of loans that may include "discount points" or a "discount fee." You may choose to pay these points or fees in return for a lower interest rate. But keep in mind that the lower interest rate may only last until the first adjustment.
If a lender offers you a loan with a discount rate, don't assume that means that the loan is a good one for you. You should carefully consider whether you will be able to afford higher payments in later years when the discount expires and the rate is adjusted.
Here is an example of how a discounted initial rate might work. Let's assume that the lender's fully indexed one-year ARM rate (index rate plus margin) is currently 6%; the monthly payment for the first year would be $1,199.10. But your lender is offering an ARM with a discounted initial rate of 4% for the first year. With the 4% rate, your first-year's monthly payment would be $954.83.
With a discounted ARM, your initial payment will probably remain at $954.83 for only a limited time—and any savings during the discount period may be offset by higher payments over the remaining life of the mortgage. If you are considering a discount ARM, be sure to compare future payments with those for a fully indexed ARM. In fact, if you buy a home or refinance using a deeply discounted initial rate, you run the risk of payment shock, negative amortization, or prepayment penalties or conversion fees.
Payment shock
Payment shock may occur if your mortgage payment rises sharply at a rate adjustment. Let’s see what would happen in the second year if the rate on your discounted 4% ARM were to rise to the 6% fully indexed rate.
As the example shows, even if the index rate were to stay the same, your monthly payment would go up from $954.83 to $1,192.63 in the second year.
Suppose that the index rate increases 1% in one year and the ARM rate rises to 7%. Your payment in the second year would be $1,320.59.
That's an increase of $365.76 in your monthly payment. You can see what might happen if you choose an ARM because of a low initial rate without considering whether you will be able to afford future payments.
If you have an interest-only ARM, payment shock can also occur when the interest-only period ends. Or, if you have a paymentoption ARM, payment shock can happen when the loan is recast.
The following example compares several different loans over the first 7 years of their terms; the payments shown are for years 1, 6, and 7 of the mortgage, assuming you make interest-only payments or minimum payments. The main point is that, depending on the terms and conditions of your mortgage and changes in interest rates, ARM payments can change quite a bit over the life of the loan—so while you could save money in the first few years of an ARM, you could also face much higher payments in the future.
Negative amortization-When you owe more money than you borrowed
Negative amortization means that the amount you owe increases even when you make all your required payments on time. It occurs whenever your monthly mortgage payments are not large enough to pay all of the interest due on your mortgage—the unpaid interest is added to the principal on your mortgage, and you will owe more than you originally borrowed. This can happen because you are making only minimum payments on a payment option mortgage or because your loan has a payment cap.
For example, suppose you have a $200,000, 30-year payment option ARM with a 2% rate for the first 3 months and a 6% rate for the remaining 9 months of the year. Your minimum payment for the year is $739.24, as shown in the previous graph. However, once the 6% rate is applied to your loan balance, you are no longer covering the interest costs. If you continue to make minimum payments on this loan, your loan balance at the end of the first year of your mortgage would be $201,118—or $1,118 more than you originally borrowed.
Because payment caps limit only the amount of payment increases, and not interest-rate increases, payments sometimes do not cover all the interest due on your loan. This means that the unpaid interest is automatically added to your debt, and interest may be charged on that amount. You might owe the lender more later in the loan term than you did at the beginning.
A payment cap limits the increase in your monthly payment by deferring some of the interest. Eventually, you would have to repay the higher remaining loan balance at the interest rate then in effect. When this happens, there may be a substantial increase in your monthly payment.
Some mortgages include a cap on negative amortization. The cap typically limits the total amount you can owe to 110% to 125% of the original loan amount. When you reach that point, the lender will set the monthly payment amounts to fully repay the loan over the remaining term. Your payment cap will not apply, and your payments could be substantially higher. You may limit negative amortization by voluntarily increasing your monthly payment.
Be sure you know whether the ARM you are considering can have negative amortization.
Prepayment penalties and conversion
If you get an ARM, you may decide later that you don't want to risk any increases in the interest rate and payment amount. When you are considering an ARM, ask for information about any extra fees you would have to pay if you pay off the loan early by refinancing or selling your home, and whether you would be able to convert your ARM to a fixed-rate mortgage.
Prepayment penalties
Some ARMs, including interest-only and payment-option ARMs, may require you to pay special fees or penalties if you refinance or pay off the ARM early (usually within the first 3 to 5 years of the loan). Some loans have hard prepayment penalties, meaning that you will pay an extra fee or penalty if you pay off the loan during the penalty period for any reason (because you refinance or sell your home, for example). Other loans have soft prepayment penalties, meaning that you will pay an extra fee or penalty only if you refinance the loan, but you will not pay a penalty if you sell your home. Also, some loans may have prepayment penalties even if you make only a partial prepayment.
Prepayment penalties can be several thousand dollars. For example, suppose you have a 3/1 ARM with an initial rate of 6%. At the end of year 2 you decide to refinance and pay off your original loan. At the time of refinancing, your balance is $194,936. If your loan has a prepayment penalty of 6 months' interest on the remaining balance, you would owe about $5,850.
Sometimes there is a trade-off between having a prepayment penalty and having lower origination fees or lower interest rates.
The lender may be willing to reduce or eliminate a prepayment penalty based on the amount you pay in loan fees or on the interest rate in the loan contract.
If you have a hybrid ARM—such as a 2/28 or 3/27 ARM—be sure to compare the prepayment penalty period with the ARM’s first adjustment period. For example, if you have a 2/28 ARM that has a rate and payment adjustment after the second year, but the prepayment penalty is in effect for the first 5 years of the loan, it may be costly to refinance when the first adjustment is made.
Most mortgages let you make additional principal payments with your monthly payment. In most cases, this is not considered prepayment, and there usually is no penalty for these extra amounts. Check with your lender to make sure there is no penalty if you think you might want to make this type of additional principal prepayment.
Conversion fees
Your agreement with the lender may include a clause that lets you convert the ARM to a fixed-rate mortgage at designated times. When you convert, the new rate is generally set using a formula given in your loan documents.
The interest rate or up-front fees may be somewhat higher for a convertible ARM. Also, a convertible ARM may require a fee at the time of conversion.
Graduated-payment or stepped-rate loans
Some fixed-rate loans start with one rate for one or two years and then change to another rate for the remaining term of the loan. While these are not ARMs, your payment will go up according to the terms of your contract. Talk with your lender or broker and read the information provided to you to make sure you understand when and by how much the payment will change.
Friday, May 29, 2009
Flood insurance
Flood insurance denotes the explicit insurance coverage against land loss from flooding. To establish risk factors for specific properties, insurers will often refer to topographical maps that denote lowlands and floodplains that are disposed to flooding.
Flooding is defined by the National Flood Insurance Program as a common and provisional condition of partial or entire inundation of two or more acres of normally dry land area or two or more properties (at least one of which is your property from: Overflow of inland waters, unusual and rapid accumulation or runoff of surface waters from ANY SOURCE, and mudflows.
A flood is an overflow or accumulation of an expanse of water that submerges land, a deluge. In the sense of "flowing water", the word may also be applied to the inflow of the tide. Flooding may result from the volume of water within a body of water, such as a river or lake, which overflows, with the result that some of the water escapes its normal boundaries. While the size of a lake or other body of water will vary with seasonal changes in precipitation and snow melt, it is not a significant flood unless such escapes of water endanger land areas used by man like a village, city or other inhabited area.
This can be brought on by landslides, a hurricane, earthquakes, or other natural disasters that influence flooding, but while a homeowner may, for example, have earthquake coverage, that coverage may not cover floods as a result of earthquakes.
Flooding is defined by the National Flood Insurance Program as a common and provisional condition of partial or entire inundation of two or more acres of normally dry land area or two or more properties (at least one of which is your property from: Overflow of inland waters, unusual and rapid accumulation or runoff of surface waters from ANY SOURCE, and mudflows.
A flood is an overflow or accumulation of an expanse of water that submerges land, a deluge. In the sense of "flowing water", the word may also be applied to the inflow of the tide. Flooding may result from the volume of water within a body of water, such as a river or lake, which overflows, with the result that some of the water escapes its normal boundaries. While the size of a lake or other body of water will vary with seasonal changes in precipitation and snow melt, it is not a significant flood unless such escapes of water endanger land areas used by man like a village, city or other inhabited area.
This can be brought on by landslides, a hurricane, earthquakes, or other natural disasters that influence flooding, but while a homeowner may, for example, have earthquake coverage, that coverage may not cover floods as a result of earthquakes.
Types of ARMs
Hybrid ARMs
Hybrid ARMs often are advertised as 3/1 or 5/1 ARMs—you might also see ads for 7/1 or 10/1 ARMs. These loans are a mix—or a hybrid—of a fixed-rate period and an adjustable-rate period. The interest rate is fixed for the first few years of these loans—for example, for 5 years in a 5/1 ARM. After that, the rate may adjust annually (the 1 in the 5/1 example), until the loan is paid off. In the case of 3/1 or 5/1 ARMs
Hybrid ARMs often are advertised as 3/1 or 5/1 ARMs—you might also see ads for 7/1 or 10/1 ARMs. These loans are a mix—or a hybrid—of a fixed-rate period and an adjustable-rate period. The interest rate is fixed for the first few years of these loans—for example, for 5 years in a 5/1 ARM. After that, the rate may adjust annually (the 1 in the 5/1 example), until the loan is paid off. In the case of 3/1 or 5/1 ARMs
- The first number tells you how long the fixed interest-rate period will be and
- The second number tells you how often the rate will adjust after the initial period.
You may also see ads for 2/28 or 3/27 ARMs—the first number tells you how long the fixed interest-rate period will be, and the second number tells you the number of years the rates on the loan will be adjustable. Some 2/28 and 3/27 mortgages adjust every 6 months, not annually.
Interest-only ARMs
An interest-only (I-O) ARM payment plan allows you to pay only the interest for a specified number of years, typically between 3 and 10 years. This allows you to have smaller monthly payments for a period of time. After that, your monthly payment will increase—even if interest rates stay the same—because you must start paying back the principal as well as the interest each month. For some I-O loans, the interest rate adjusts during the I-O period as well.
For example, if you take out a 30-year mortgage loan with a 5-year I-O payment period, you can pay only interest for 5 years and then you must pay both the principal and interest over the next 25 years. Because you begin to pay back the principal, your payments increase after year 5, even if the rate stays the same. Keep in mind that the longer the I-O period, the higher your monthly payments will be after the I-O period ends.
Payment-option ARMs
A payment-option ARM is an adjustable-rate mortgage that allows you to choose among several payment options each month. The options typically include the following:
Interest-only ARMs
An interest-only (I-O) ARM payment plan allows you to pay only the interest for a specified number of years, typically between 3 and 10 years. This allows you to have smaller monthly payments for a period of time. After that, your monthly payment will increase—even if interest rates stay the same—because you must start paying back the principal as well as the interest each month. For some I-O loans, the interest rate adjusts during the I-O period as well.
For example, if you take out a 30-year mortgage loan with a 5-year I-O payment period, you can pay only interest for 5 years and then you must pay both the principal and interest over the next 25 years. Because you begin to pay back the principal, your payments increase after year 5, even if the rate stays the same. Keep in mind that the longer the I-O period, the higher your monthly payments will be after the I-O period ends.
Payment-option ARMs
A payment-option ARM is an adjustable-rate mortgage that allows you to choose among several payment options each month. The options typically include the following:
- a traditional payment of principal and interest, which reduces the amount you owe on your mortgage. These payments are based on a set loan term, such as a 15-, 30-, or 40-year payment schedule.
- an interest-only payment, which pays the interest but does not reduce the amount you owe on your mortgage as you make your payments.
- a minimum (or limited) payment that may be less than the amount of interest due that month and may not reduce the amount you owe on your mortgage. If you choose this option, the amount of any interest you do not pay will be added to the principal of the loan, increasing the amount you owe and your future monthly payments, and increasing the amount of interest you will pay over the life of the loan. In addition, if you pay only the minimum payment in the last few years of the loan, you may owe a larger payment at the end of the loan term, called a balloon payment.
The interest rate on a payment-option ARM is typically very low for the first few months (for example, 2% for the first 1 to 3 months). After that, the interest rate usually rises to a rate closer to that of other mortgage loans. Your payments during the first year are based on the initial low rate, meaning that if you only make the minimum payment each month, it will not reduce the amount you owe and it may not cover the interest due. The unpaid interest is added to the amount you owe on the mortgage, and your loan balance increases. This is called negative amortization. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Also, as interest rates go up, your payments are likely to go up.
Payment-option ARMs have a built-in recalculation period, usually every 5 years. At this point, your payment will be recalculated (lenders use the term recast) based on the remaining term of the loan. If you have a 30-year loan and you are at the end of year 5, your payment will be recalculated for the remaining 25 years. If your loan balance has increased because you have made only minimum payments, or if interest rates have risen faster than your payments, your payments will increase each time your loan is recast. At each recast, your new minimum payment will be a fully amortizing payment and any payment cap will not apply. This means that your monthly payment can increase a lot at each recast.
Lenders may recalculate your loan payments before the recast period if the amount of principal you owe grows beyond a set limit, say 110% or 125% of your original mortgage amount. For example, suppose you made only minimum payments on your $200,000 mortgage and had any unpaid interest added to your balance. If the balance grew to $250,000 (125% of $200,000), your lender would recalculate your payments so that you would pay off the loan over the remaining term. It is likely that your payments would go up substantially.
Payment-option ARMs have a built-in recalculation period, usually every 5 years. At this point, your payment will be recalculated (lenders use the term recast) based on the remaining term of the loan. If you have a 30-year loan and you are at the end of year 5, your payment will be recalculated for the remaining 25 years. If your loan balance has increased because you have made only minimum payments, or if interest rates have risen faster than your payments, your payments will increase each time your loan is recast. At each recast, your new minimum payment will be a fully amortizing payment and any payment cap will not apply. This means that your monthly payment can increase a lot at each recast.
Lenders may recalculate your loan payments before the recast period if the amount of principal you owe grows beyond a set limit, say 110% or 125% of your original mortgage amount. For example, suppose you made only minimum payments on your $200,000 mortgage and had any unpaid interest added to your balance. If the balance grew to $250,000 (125% of $200,000), your lender would recalculate your payments so that you would pay off the loan over the remaining term. It is likely that your payments would go up substantially.
Thursday, May 28, 2009
Interest-rate caps
An interest-rate cap places a limit on the amount your interest rate can increase. Interest caps come in two versions:
- periodic adjustment caps, which limit the amount the interest rate can adjust up or down from one adjustment period to the next after the first adjustment, and
- lifetime caps, which limit the interest-rate increase over the life of the loan. By law, virtually all ARMs must have a lifetime cap.
Periodic adjustment caps
Let's suppose you have an ARM with a periodic adjustment interest- rate cap of 2%. However, at the first adjustment, the index rate has risen 3%. The following example shows what happens.
In this example, because of the cap on your loan, your monthly payment in year 2 is $138.70 per month lower than it would be without the cap, saving you $1,664.40 over the year.
Some ARMs allow a larger rate change at the first adjustment and then apply a periodic adjustment cap to all future adjustments.
A drop in interest rates does not always lead to a drop in your monthly payments. With some ARMs that have interest-rate caps, the cap may hold your rate and payment below what it would have been if the change in the index rate had been fully applied. The increase in the interest that was not imposed because of the rate cap might carry over to future rate adjustments. This is called carryover. So at the next adjustment date, your payment might increase even though the index rate has stayed the same or declined.
The following example shows how carryovers work. Suppose the index on your ARM increased 3% during the first year.
Because this ARM limits rate increases to 2% at any one time, the rate is adjusted by only 2%, to 8% for the second year. However, the remaining 1% increase in the index carries over to the next time the lender can adjust rates. So when the lender adjusts the interest rate for the third year, the rate increases by 1%, to 9%, even if there is no change in the index during the second year.
In general, the rate on your loan can go up at any scheduled adjustment date when the lender's standard ARM rate (the index plus the margin) is higher than the rate you are paying before that adjustment.
Lifetime caps
The next example shows how a lifetime rate cap would affect your loan. Let's say that your ARM starts out with a 6% rate and the loan has a 6% lifetime cap—that is, the rate can never exceed 12%. Suppose the index rate increases 1% in each of the next 9 years. With a 6% overall cap, your payment would never exceed $1,998.84-compared with the $2,409.11 that it would have reached in the tenth year without a cap.
Payment caps
In addition to interest-rate caps, many ARMs—including payment-option ARMs—limit, or cap, the amount your monthly payment may increase at the time of each adjustment. For example, if your loan has a payment cap of 7½%, your monthly payment won't increase more than 7½% over your previous payment, even if interest rates rise more. For example, if your monthly payment in year 1 of your mortgage was $1,000, it could only go up to $1,075 in year 2 (7½% of $1,000 is an additional $75). Any interest you don’t pay because of the payment cap will be added to the balance of your loan. A payment cap can limit the increase to your monthly payments but also can add to the amount you owe on the loan. (This is called negative amortization.)
Let's assume that your rate changes in the first year by 2 percentage points but your payments can increase no more than 7½% in any one year. The following graph shows what your monthly payments would look like.
While your monthly payment will be only $1,289.03 for the second year, the difference of $172.69 each month will be added to the balance of your loan and will lead to negative amortization.
Some ARMs with payment caps do not have periodic interestrate caps. In addition, as explained below, most payment-option ARMs have a built-in recalculation period, usually every 5 years. At that point, your payment will be recalculated (lenders use the term recast) based on the remaining term of the loan. If you have a 30-year loan and you are at the end of year 5, your payment will be recalculated for the remaining 25 years. The payment cap does not apply to this adjustment. If your loan balance has increased, or if interest rates have risen faster than your payments, your payments could go up a lot.
Let's suppose you have an ARM with a periodic adjustment interest- rate cap of 2%. However, at the first adjustment, the index rate has risen 3%. The following example shows what happens.
In this example, because of the cap on your loan, your monthly payment in year 2 is $138.70 per month lower than it would be without the cap, saving you $1,664.40 over the year.
Some ARMs allow a larger rate change at the first adjustment and then apply a periodic adjustment cap to all future adjustments.
A drop in interest rates does not always lead to a drop in your monthly payments. With some ARMs that have interest-rate caps, the cap may hold your rate and payment below what it would have been if the change in the index rate had been fully applied. The increase in the interest that was not imposed because of the rate cap might carry over to future rate adjustments. This is called carryover. So at the next adjustment date, your payment might increase even though the index rate has stayed the same or declined.
The following example shows how carryovers work. Suppose the index on your ARM increased 3% during the first year.
Because this ARM limits rate increases to 2% at any one time, the rate is adjusted by only 2%, to 8% for the second year. However, the remaining 1% increase in the index carries over to the next time the lender can adjust rates. So when the lender adjusts the interest rate for the third year, the rate increases by 1%, to 9%, even if there is no change in the index during the second year.
In general, the rate on your loan can go up at any scheduled adjustment date when the lender's standard ARM rate (the index plus the margin) is higher than the rate you are paying before that adjustment.
Lifetime caps
The next example shows how a lifetime rate cap would affect your loan. Let's say that your ARM starts out with a 6% rate and the loan has a 6% lifetime cap—that is, the rate can never exceed 12%. Suppose the index rate increases 1% in each of the next 9 years. With a 6% overall cap, your payment would never exceed $1,998.84-compared with the $2,409.11 that it would have reached in the tenth year without a cap.
Payment caps
In addition to interest-rate caps, many ARMs—including payment-option ARMs—limit, or cap, the amount your monthly payment may increase at the time of each adjustment. For example, if your loan has a payment cap of 7½%, your monthly payment won't increase more than 7½% over your previous payment, even if interest rates rise more. For example, if your monthly payment in year 1 of your mortgage was $1,000, it could only go up to $1,075 in year 2 (7½% of $1,000 is an additional $75). Any interest you don’t pay because of the payment cap will be added to the balance of your loan. A payment cap can limit the increase to your monthly payments but also can add to the amount you owe on the loan. (This is called negative amortization.)
Let's assume that your rate changes in the first year by 2 percentage points but your payments can increase no more than 7½% in any one year. The following graph shows what your monthly payments would look like.
While your monthly payment will be only $1,289.03 for the second year, the difference of $172.69 each month will be added to the balance of your loan and will lead to negative amortization.
Some ARMs with payment caps do not have periodic interestrate caps. In addition, as explained below, most payment-option ARMs have a built-in recalculation period, usually every 5 years. At that point, your payment will be recalculated (lenders use the term recast) based on the remaining term of the loan. If you have a 30-year loan and you are at the end of year 5, your payment will be recalculated for the remaining 25 years. The payment cap does not apply to this adjustment. If your loan balance has increased, or if interest rates have risen faster than your payments, your payments could go up a lot.
Wednesday, May 27, 2009
How ARMs Work: The Basic Features
Initial rate and payment
The initial rate and payment amount on an ARM will remain in effect for a limited period of time-ranging from just 1 month to 5 years or more. For some ARMs, the initial rate and payment can vary greatly from the rates and payments later in the loan term. Even if interest rates are stable, your rates and payments could change a lot. If lenders or brokers quote the initial rate and payment on a loan, ask them for the annual percentage rate (APR). If the APR is significantly higher than the initial rate, then it is likely that your rate and payments will be a lot higher when the loan adjusts, even if general interest rates remain the same.
The adjustment period
With most ARMs, the interest rate and monthly payment change every month, quarter, year, 3 years, or 5 years. The period between rate changes is called the adjustment period. For example, a loan with an adjustment period of 1 year is called a 1-year ARM, and the interest rate and payment can change once every year; a loan with a 3-year adjustment period is called a 3-year ARM.
The index
The interest rate on an ARM is made up of two parts: the index and the margin. The index is a measure of interest rates generally, and the margin is an extra amount that the lender adds. Your payments will be affected by any caps, or limits, on how high or low your rate can go. If the index rate moves up, so does your interest rate in most circumstances, and you will probably have to make higher monthly payments. On the other hand, if the index rate goes down, your monthly payment could go down. Not all ARMs adjust downward, however—be sure to read the information for the loan you are considering.
Lenders base ARM rates on a variety of indexes. Among the most common indexes are the rates on 1-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR). A few lenders use their own cost of funds as an index, rather than using other indexes. You should ask what index will be used, how it has fluctuated in the past, and where it is published—you can find a lot of this information in major newspapers and on the Internet.
To help you get an idea of how to compare different indexes, the following chart shows a few common indexes over an 11-year period (1996–2006). As you can see, some index rates tend to be higher than others, and some change more often. But if a lender bases interest-rate adjustments on the average value of an index over time, your interest rate would not change as dramatically.
The margin
To determine the interest rate on an ARM, lenders add a few percentage points to the index rate, called the margin. The amount of the margin may differ from one lender to another, but it is usually constant over the life of the loan. The fully indexed rate is equal to the margin plus the index. If the initial rate on the loan is less than the fully indexed rate, it is called a discounted index rate. For example, if the lender uses an index that currently is 4% and adds a 3% margin, the fully indexed rate would be
The initial rate and payment amount on an ARM will remain in effect for a limited period of time-ranging from just 1 month to 5 years or more. For some ARMs, the initial rate and payment can vary greatly from the rates and payments later in the loan term. Even if interest rates are stable, your rates and payments could change a lot. If lenders or brokers quote the initial rate and payment on a loan, ask them for the annual percentage rate (APR). If the APR is significantly higher than the initial rate, then it is likely that your rate and payments will be a lot higher when the loan adjusts, even if general interest rates remain the same.
The adjustment period
With most ARMs, the interest rate and monthly payment change every month, quarter, year, 3 years, or 5 years. The period between rate changes is called the adjustment period. For example, a loan with an adjustment period of 1 year is called a 1-year ARM, and the interest rate and payment can change once every year; a loan with a 3-year adjustment period is called a 3-year ARM.
The index
The interest rate on an ARM is made up of two parts: the index and the margin. The index is a measure of interest rates generally, and the margin is an extra amount that the lender adds. Your payments will be affected by any caps, or limits, on how high or low your rate can go. If the index rate moves up, so does your interest rate in most circumstances, and you will probably have to make higher monthly payments. On the other hand, if the index rate goes down, your monthly payment could go down. Not all ARMs adjust downward, however—be sure to read the information for the loan you are considering.
Lenders base ARM rates on a variety of indexes. Among the most common indexes are the rates on 1-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR). A few lenders use their own cost of funds as an index, rather than using other indexes. You should ask what index will be used, how it has fluctuated in the past, and where it is published—you can find a lot of this information in major newspapers and on the Internet.
To help you get an idea of how to compare different indexes, the following chart shows a few common indexes over an 11-year period (1996–2006). As you can see, some index rates tend to be higher than others, and some change more often. But if a lender bases interest-rate adjustments on the average value of an index over time, your interest rate would not change as dramatically.
The margin
To determine the interest rate on an ARM, lenders add a few percentage points to the index rate, called the margin. The amount of the margin may differ from one lender to another, but it is usually constant over the life of the loan. The fully indexed rate is equal to the margin plus the index. If the initial rate on the loan is less than the fully indexed rate, it is called a discounted index rate. For example, if the lender uses an index that currently is 4% and adds a 3% margin, the fully indexed rate would be
Index 4%
+ Margin 3%
Fully indexed rate 7%
+ Margin 3%
Fully indexed rate 7%
If the index on this loan rose to 5%, the fully indexed rate would be 8% (5% + 3%). If the index fell to 2%, the fully indexed rate would be 5% (2% + 3%).
Some lenders base the amount of the margin on your credit record - the better your credit, the lower the margin they add—and the lower the interest you will have to pay on your mortgage. In comparing ARMs, look at both the index and margin for each program.
Tuesday, May 26, 2009
What Is an ARM?
An adjustable-rate mortgage differs from a fixed-rate mortgage in many ways. With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an ARM, the interest rate changes periodically, usually in relation to an index, and payments may go up or down accordingly.
Shopping for a mortgage is not as simple as it used to be. To compare two ARMs with each other or to compare an ARM with a fixed-rate mortgage, you need to know about indexes, margins, discounts, caps on rates and payments, negative amortization, payment options, and recasting (recalculating) your loan. You need to consider the maximum amount your monthly payment could increase. Most important, you need to know what might happen to your monthly mortgage payment in relation to your future ability to afford higher payments.
Lenders generally charge lower initial interest rates for ARMs than for fixed-rate mortgages. At first, this makes the ARM easier on your pocketbook than a fixed-rate mortgage for the same loan amount. Moreover, your ARM could be less expensive over a long period than a fixed-rate mortgage—for example, if interest rates remain steady or move lower.
Against these advantages, you have to weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It’s a trade-off—you get a lower initial rate with an ARM in exchange for assuming more risk over the long run. Here are some questions you need to consider:
Shopping for a mortgage is not as simple as it used to be. To compare two ARMs with each other or to compare an ARM with a fixed-rate mortgage, you need to know about indexes, margins, discounts, caps on rates and payments, negative amortization, payment options, and recasting (recalculating) your loan. You need to consider the maximum amount your monthly payment could increase. Most important, you need to know what might happen to your monthly mortgage payment in relation to your future ability to afford higher payments.
Lenders generally charge lower initial interest rates for ARMs than for fixed-rate mortgages. At first, this makes the ARM easier on your pocketbook than a fixed-rate mortgage for the same loan amount. Moreover, your ARM could be less expensive over a long period than a fixed-rate mortgage—for example, if interest rates remain steady or move lower.
Against these advantages, you have to weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It’s a trade-off—you get a lower initial rate with an ARM in exchange for assuming more risk over the long run. Here are some questions you need to consider:
- Is my income enough—or likely to rise enough—to cover higher mortgage payments if interest rates go up?
- Will I be taking on other sizable debts, such as a loan for a car or school tuition, in the near future?
- How long do I plan to own this home? (If you plan to sell soon, rising interest rates may not pose the problem they do if you plan to own the house for a long time.)
- Do I plan to make any additional payments or pay the loan off early?
Monday, May 25, 2009
Common Questions Asked by Homeowners about Insurance
If a fire, flood, earthquake, or some other natural disaster were to destroy or damage your home, would you have the right insurance coverage to rebuild your house?
These questions questions are based upon consumers most frequently ask, explains what is covered in a standard homeowners policy and what is not. Where gaps in coverage exist, it tells you how to fill them.
To simplify explanations, we assume that you have a policy known as Homeowners-3 (HO-3), the most common homeowners policy in the United States. Find out what type of homeowners policy you have. If you have a different policy, you should review your options in question #17.
Question # 1: Am I covered for direct losses due to fire, lightning, tornadoes, wind storms, hail, explosions, smoke, vandalism and theft?
Yes. The HO-3 provides broad coverage for these and other disasters or “perils,” as they are called in the policy, including all those listed in the question. You should check the dollar limits of insurance in your policy and make sure you are comfortable with the amount of insurance you have for specific items. Also, if you live near the Atlantic or Gulf coasts there may be some restrictions on your coverage for wind damage. Ask your agent about windstorm/hurricane deductibles. In areas prone to hailstorms, you may have a specific hail damage deductible.
Question # 2: Are my jewelry and other valuables covered?
The standard policy provides only from $1,000 to $2,000 for theft of jewelry. If your jewelry is worth a lot more, you should purchase higher limits. You may wish to add a floater to your policy to cover specific pieces of jewelry and other expensive possessions such as paintings, electronic equipment, stamp collections or silverware, for example. The floater will provide both higher limits and protect you from additional risks, not covered in your normal policy.
Question # 3: If my house is totally destroyed in a fire and I have $150,000 worth of insurance to cover the structure, will this be enough to rebuild my home?
If the cost of rebuilding your home is equal to or less than $150,000 you would have enough coverage. The HO-3 policy pays for structural damage on a replacement cost basis. If the cost of replacing your home is, say, $120,000, then that is all the insurance you need. On the other hand if the cost of rebuilding your home is $180,000, then you will be short $30,000.
If you live in an area that is frequently hit by major storms, ask you insurance company about an extended or guaranteed replacement cost policy. This will provide a certain amount over the policy limit to rebuild your home so that if building costs go up unexpectedly, due to high demand for contractors and materials, you will have extra funds to cover the bill.
If you choose not to rebuild your home, you will receive the replacement cost of your home, less depreciation. This is called actual cash value. You should make sure that the amount of insurance you have will cover the cost of rebuilding your house. You can find out what this cost is by talking to your real estate agent or builders in your area.
Do not use the price of your house as the basis for the amount of insurance you purchase. The market price of your house includes the value of the land on which the house is situated. In almost all cases, the land will still be there after a disaster, so you do not need to insure it. You only need to insure the structure.
Question # 4: Am I covered for flood damage?
No. So, if you live in a flood-prone area it may be wise to purchase flood insurance. Flood insurance is provided by the federal government, under a program run by the Federal Insurance Administration. In some parts of the country, homes can be damaged or destroyed by mudslides. This risk is also covered under flood policies. Contact your agent or company representative to get this insurance or call the Federal Emergency Management Agency at 1-800-427-4661 or visit its Web site at www.fema.gov.
Question # 5: A pipe bursts and water flows all over my floors. Am I covered?
Yes. The HO-3 covers you for accidental discharge of water from a plumbing system. You should check your plumbing and heating systems once a year. While you are covered for damage, who needs the mess and hassle?
Question # 6: What if water seeps into my basement from the ground, am I covered?
No. Water seepage is excluded under the HO-3. And if the water seepage is not due to a flood you will not be covered under a flood policy. Seepage is viewed as a maintenance issue and is not covered by insurance. You should see a contractor about waterproofing your basement.
Question # 7: Am I covered for earthquake damage?
No. Earthquake coverage is sold as additional coverage to the homeowners policy. To find out whether you should buy this insurance, talk to your agent or company representative. The cost of this coverage can vary significantly from one area to another, depending on the likelihood of a major earthquake.
Question # 8: A neighbor slips on my sidewalk or falls down my porch steps and threatens to take me to court for damages. Does my policy protect me?
Yes. The policy will pay for damages, if a fall or other accident on your property is the result of your negligence. It will also pay for the legal costs of defending you against a claim. Also, the medical payments part of your homeowners policy will cover medical expenses, if a neighbor or guest is injured on your property. You should check to see how much liability protection you have. The standard amount is $100,000. If you feel you need more, consider purchasing higher limits.
Question # 9: A tree falls and damages my roof during a storm. Am I covered?
Yes. You are covered for the damage to your roof. You are also covered for the removal of the tree, generally up to a $500 limit. You should cut down dead or dying trees close to your house and prune branches that are near your house. It's true that your insurance covers damage, but falling trees and branches can also injure your family.
Question # 10: During a storm, a tree falls but does no damage to my property. Am I covered for the cost of removing the tree?
Your trees and shrubs are covered for losses due to risks like vandalism, theft and fire, but not wind damage. However, if a fallen tree blocks access to your home you may be covered for its removal. Decide if you need extra insurance for the trees, plants and shrubs on your property. You may be able to purchase extra insurance, which will not only cover the cost of removing fallen trees, but will also cover the cost of replacing trees, and other plants.
Question # 11: If a storm causes a power outage and all the food in my refrigerator or freezer is spoiled and must be thrown out, can I make a claim?
The general answer is no. However, there are a number of exceptions. In some states, food spoilage is covered under the homeowners policy. In addition, if the power loss is due to a break in a power line on or close to your property, you may be covered. You should check with your agent to find out whether you are covered for food spoilage in your state. If not, you can add food spoilage coverage to your policy for an additional premium.
Question # 12: I have children away at college. Are they covered by my homeowners insurance?
If they’re full-time college students and part of your household, your insurance generally provides some coverage in a dorm, typically 10 percent of the contents limit. If they live off campus, some companies may not provide this limited coverage if the apartment is rented in the student’s name.
Question # 13: My golf clubs are stolen from the trunk of my car. Does my homeowners policy cover the loss?
Yes. The HO-3 covers your personal property while it is anywhere in the world. However, if your golf clubs are old, you will only get their current value, which may not be enough to purchase a new set. Consider buying a replacement cost endorsement for your personal property. This way you will get what it costs to replace the golf clubs, less the applicable deductible.
Question # 14: I have a small power boat. If it is stolen, am I covered? What if there is a boating accident and I get sued? Am I covered for that?
Whether or not you are covered for either theft or liability depends on the size of the boat, the horsepower of the engine and your insurance company. Coverage for small boats under homeowners policies varies significantly. Ask your insurance representative whether you need a Boatowners policy.
Question # 15: My house is close to the ocean. I’ve heard that if it is destroyed by the wind, the town's new building code requires me to rebuild the house on stilts. This will add $30,000 to the cost of rebuilding my house. Am I covered for this extra cost?
No. The HO-3 excludes costs caused by ordinances or laws that regulate the construction of buildings. You can purchase an Ordinance or Law endorsement. This will cover the extra costs involved in meeting new building codes.
Question # 16: Am I covered for “Acts of God”?
Sometimes. The term “Acts of God” is not specifically mentioned in homeowners insurance policies. It usually refers to natural disasters like hurricanes and tornadoes, as opposed to man-made acts, like theft and auto accidents. Some natural disasters, such as damage from windstorms, hail, lightning and volcanic eruptions, are covered under homeowners insurance. Damage from floods and earthquakes is not.
Question # 17: What should I do if my policy provides less coverage than the HO-3?
Review your coverage with your agent. Some older policies provide less coverage than the HO-3. They may not provide coverage for water damage, theft, or liability. They may also provide coverage for the house on an actual cash value basis, rather than a replacement cost basis.
Actual Cash Value means replacement cost less depreciation. For example, if your roof is destroyed in a storm, the insurance will only pay for the cost of a new roof less the amount of depreciation of the old roof. If your roof was in great shape, this deduction will not be large. However, if the roof was old and worn out, the deduction for depreciation may be significant. You should try to get an HO-3.
These questions questions are based upon consumers most frequently ask, explains what is covered in a standard homeowners policy and what is not. Where gaps in coverage exist, it tells you how to fill them.
To simplify explanations, we assume that you have a policy known as Homeowners-3 (HO-3), the most common homeowners policy in the United States. Find out what type of homeowners policy you have. If you have a different policy, you should review your options in question #17.
Question # 1: Am I covered for direct losses due to fire, lightning, tornadoes, wind storms, hail, explosions, smoke, vandalism and theft?
Yes. The HO-3 provides broad coverage for these and other disasters or “perils,” as they are called in the policy, including all those listed in the question. You should check the dollar limits of insurance in your policy and make sure you are comfortable with the amount of insurance you have for specific items. Also, if you live near the Atlantic or Gulf coasts there may be some restrictions on your coverage for wind damage. Ask your agent about windstorm/hurricane deductibles. In areas prone to hailstorms, you may have a specific hail damage deductible.
Question # 2: Are my jewelry and other valuables covered?
The standard policy provides only from $1,000 to $2,000 for theft of jewelry. If your jewelry is worth a lot more, you should purchase higher limits. You may wish to add a floater to your policy to cover specific pieces of jewelry and other expensive possessions such as paintings, electronic equipment, stamp collections or silverware, for example. The floater will provide both higher limits and protect you from additional risks, not covered in your normal policy.
Question # 3: If my house is totally destroyed in a fire and I have $150,000 worth of insurance to cover the structure, will this be enough to rebuild my home?
If the cost of rebuilding your home is equal to or less than $150,000 you would have enough coverage. The HO-3 policy pays for structural damage on a replacement cost basis. If the cost of replacing your home is, say, $120,000, then that is all the insurance you need. On the other hand if the cost of rebuilding your home is $180,000, then you will be short $30,000.
If you live in an area that is frequently hit by major storms, ask you insurance company about an extended or guaranteed replacement cost policy. This will provide a certain amount over the policy limit to rebuild your home so that if building costs go up unexpectedly, due to high demand for contractors and materials, you will have extra funds to cover the bill.
If you choose not to rebuild your home, you will receive the replacement cost of your home, less depreciation. This is called actual cash value. You should make sure that the amount of insurance you have will cover the cost of rebuilding your house. You can find out what this cost is by talking to your real estate agent or builders in your area.
Do not use the price of your house as the basis for the amount of insurance you purchase. The market price of your house includes the value of the land on which the house is situated. In almost all cases, the land will still be there after a disaster, so you do not need to insure it. You only need to insure the structure.
Question # 4: Am I covered for flood damage?
No. So, if you live in a flood-prone area it may be wise to purchase flood insurance. Flood insurance is provided by the federal government, under a program run by the Federal Insurance Administration. In some parts of the country, homes can be damaged or destroyed by mudslides. This risk is also covered under flood policies. Contact your agent or company representative to get this insurance or call the Federal Emergency Management Agency at 1-800-427-4661 or visit its Web site at www.fema.gov.
Question # 5: A pipe bursts and water flows all over my floors. Am I covered?
Yes. The HO-3 covers you for accidental discharge of water from a plumbing system. You should check your plumbing and heating systems once a year. While you are covered for damage, who needs the mess and hassle?
Question # 6: What if water seeps into my basement from the ground, am I covered?
No. Water seepage is excluded under the HO-3. And if the water seepage is not due to a flood you will not be covered under a flood policy. Seepage is viewed as a maintenance issue and is not covered by insurance. You should see a contractor about waterproofing your basement.
Question # 7: Am I covered for earthquake damage?
No. Earthquake coverage is sold as additional coverage to the homeowners policy. To find out whether you should buy this insurance, talk to your agent or company representative. The cost of this coverage can vary significantly from one area to another, depending on the likelihood of a major earthquake.
Question # 8: A neighbor slips on my sidewalk or falls down my porch steps and threatens to take me to court for damages. Does my policy protect me?
Yes. The policy will pay for damages, if a fall or other accident on your property is the result of your negligence. It will also pay for the legal costs of defending you against a claim. Also, the medical payments part of your homeowners policy will cover medical expenses, if a neighbor or guest is injured on your property. You should check to see how much liability protection you have. The standard amount is $100,000. If you feel you need more, consider purchasing higher limits.
Question # 9: A tree falls and damages my roof during a storm. Am I covered?
Yes. You are covered for the damage to your roof. You are also covered for the removal of the tree, generally up to a $500 limit. You should cut down dead or dying trees close to your house and prune branches that are near your house. It's true that your insurance covers damage, but falling trees and branches can also injure your family.
Question # 10: During a storm, a tree falls but does no damage to my property. Am I covered for the cost of removing the tree?
Your trees and shrubs are covered for losses due to risks like vandalism, theft and fire, but not wind damage. However, if a fallen tree blocks access to your home you may be covered for its removal. Decide if you need extra insurance for the trees, plants and shrubs on your property. You may be able to purchase extra insurance, which will not only cover the cost of removing fallen trees, but will also cover the cost of replacing trees, and other plants.
Question # 11: If a storm causes a power outage and all the food in my refrigerator or freezer is spoiled and must be thrown out, can I make a claim?
The general answer is no. However, there are a number of exceptions. In some states, food spoilage is covered under the homeowners policy. In addition, if the power loss is due to a break in a power line on or close to your property, you may be covered. You should check with your agent to find out whether you are covered for food spoilage in your state. If not, you can add food spoilage coverage to your policy for an additional premium.
Question # 12: I have children away at college. Are they covered by my homeowners insurance?
If they’re full-time college students and part of your household, your insurance generally provides some coverage in a dorm, typically 10 percent of the contents limit. If they live off campus, some companies may not provide this limited coverage if the apartment is rented in the student’s name.
Question # 13: My golf clubs are stolen from the trunk of my car. Does my homeowners policy cover the loss?
Yes. The HO-3 covers your personal property while it is anywhere in the world. However, if your golf clubs are old, you will only get their current value, which may not be enough to purchase a new set. Consider buying a replacement cost endorsement for your personal property. This way you will get what it costs to replace the golf clubs, less the applicable deductible.
Question # 14: I have a small power boat. If it is stolen, am I covered? What if there is a boating accident and I get sued? Am I covered for that?
Whether or not you are covered for either theft or liability depends on the size of the boat, the horsepower of the engine and your insurance company. Coverage for small boats under homeowners policies varies significantly. Ask your insurance representative whether you need a Boatowners policy.
Question # 15: My house is close to the ocean. I’ve heard that if it is destroyed by the wind, the town's new building code requires me to rebuild the house on stilts. This will add $30,000 to the cost of rebuilding my house. Am I covered for this extra cost?
No. The HO-3 excludes costs caused by ordinances or laws that regulate the construction of buildings. You can purchase an Ordinance or Law endorsement. This will cover the extra costs involved in meeting new building codes.
Question # 16: Am I covered for “Acts of God”?
Sometimes. The term “Acts of God” is not specifically mentioned in homeowners insurance policies. It usually refers to natural disasters like hurricanes and tornadoes, as opposed to man-made acts, like theft and auto accidents. Some natural disasters, such as damage from windstorms, hail, lightning and volcanic eruptions, are covered under homeowners insurance. Damage from floods and earthquakes is not.
Question # 17: What should I do if my policy provides less coverage than the HO-3?
Review your coverage with your agent. Some older policies provide less coverage than the HO-3. They may not provide coverage for water damage, theft, or liability. They may also provide coverage for the house on an actual cash value basis, rather than a replacement cost basis.
Actual Cash Value means replacement cost less depreciation. For example, if your roof is destroyed in a storm, the insurance will only pay for the cost of a new roof less the amount of depreciation of the old roof. If your roof was in great shape, this deduction will not be large. However, if the roof was old and worn out, the deduction for depreciation may be significant. You should try to get an HO-3.
Sunday, May 24, 2009
Home Inspection
Conduct an organized inspection before you move in. Move from the exterior to the interior, carefully checking each room. Many manufacturers provide a checklist in the owner's manual. Fill it out, date it, include additional items that need servicing and promptly return it to the manufacturer. Keep copies for yourself. A delay could jeopardize your warranty.
Saturday, May 23, 2009
Additions and Alterations to Your Home
Once your home has left the factory, the HUD Code does not include provisions for additions and alterations. Such modifications may jeopardize your home warranty. They may also create malfunctions or an unsafe home. An approved addition should be a free-standing structure that meets local building codes; you may need a permit. Contact your manufacturer, the state agency that oversees manufactured housing in your state, the U.S. Department of Housing and Urban Development, or local building officials for more information.
Conduct an organized inspection before you move in. Move from the exterior to the interior, carefully checking each room. Many manufacturers provide a checklist in the owner's manual. Fill it out, date it, include additional items that need servicing and promptly return it to the manufacturer. Keep copies for yourself. A delay could jeopardize your warranty.
Conduct an organized inspection before you move in. Move from the exterior to the interior, carefully checking each room. Many manufacturers provide a checklist in the owner's manual. Fill it out, date it, include additional items that need servicing and promptly return it to the manufacturer. Keep copies for yourself. A delay could jeopardize your warranty.
Friday, May 22, 2009
Site Preparation - Installation
Manufacturers must provide instructions for proper home installation. Usually, the retailer will install your home or use a contractor. Typically, the price of your home includes installation. You should get a written explanation of the installation services from your retailer. Be sure to read your contract before you sign. If installation isn't included, you may have to hire a professional. Ask your retailer for recommendations.
Whether the retailer or a contractor installs your home, follow these guidelines listed below. They will help you understand what you're paying for and how to check that the work has been done properly. You'll also better understand your warranty protections.
1. Transporting Your Home
The manufacturer is usually responsible for transporting the home from the factory to the retailer. The retailer or its transporter is usually responsible for delivering the home to your site. However, if roads are inadequate or obstacles make delivery difficult, your retailer may not be able to accept responsibility for delivery. Have the transporter check out the route beforehand to avoid problems.
2. Building a Foundation
Your home must have a foundation. In addition to following the manufacturer's instructions and complying with local codes, ask the institution financing your home or your rental community if they have special requirements. The Federal Housing Administration (FHA), Veterans Administration (VA), and the Rural Housing Service (RHS) also have special foundation requirements for homes they finance. Remind your retailer of the kind of financing you're using so that all applicable requirements will be met. If you place your home on your own property, you can choose from a number of foundation types: concrete block, metal or treated wood piers; a concrete slab; or a full basement. A professional installer will know which local building codes apply. Ask the installer to obtain required building permits and inspections.
3. Leveling Your Home
It's critical that your home be leveled to meet the manufacturer's installation instructions. Otherwise, your home's weight will be unevenly distributed. This can cause floors and walls to buckle and prevent doors and windows from opening and closing smoothly. While the manufacturer's warranty won't cover repairs resulting from improper leveling, a written warranty from the installer may.
Insist on a walk-through before the installer leaves. Check for signs that your home may not be level.
Because some foundation supports may settle unevenly, it's important to periodically check that your home stays level. The first check should be done 60 to 90 days after installation, and then once every year.
4. Securing Your Home to the Foundation
To help minimize damage from high winds and earthquakes, your home should be anchored to the ground or concrete footers. Anchoring must comply with the manufacturer's instructions or as required by local codes. This is not a "do-it-yourself" project. Ask your retailer for more information.
5. Finishing Your Home
Your home may need finishing work, such as an enclosure around the crawl space. The enclosure must provide adequate ventilation openings at all four corners of the home. If you have a multisection home, finishing work may include molding and joining carpet on the interior, and siding and roofing work on the exterior.
6. Connecting Utilities
Installation should include connections to water, electricity, gas, and sewer. If connections aren't included in the installation price, you'll have to contract for them separately. Your retailer can help you with the arrangements, or you can contact local authorities for more information.
Whether the retailer or a contractor installs your home, follow these guidelines listed below. They will help you understand what you're paying for and how to check that the work has been done properly. You'll also better understand your warranty protections.
- Get written proof of the installer's qualifications. This may be required by state law.
- Ask if there is a written warranty for installation. If not, have the contractor put in writing any promises or claims regarding the installation.
- Ask the contractor to explain the installation process; have it written into the agreement.
1. Transporting Your Home
The manufacturer is usually responsible for transporting the home from the factory to the retailer. The retailer or its transporter is usually responsible for delivering the home to your site. However, if roads are inadequate or obstacles make delivery difficult, your retailer may not be able to accept responsibility for delivery. Have the transporter check out the route beforehand to avoid problems.
2. Building a Foundation
Your home must have a foundation. In addition to following the manufacturer's instructions and complying with local codes, ask the institution financing your home or your rental community if they have special requirements. The Federal Housing Administration (FHA), Veterans Administration (VA), and the Rural Housing Service (RHS) also have special foundation requirements for homes they finance. Remind your retailer of the kind of financing you're using so that all applicable requirements will be met. If you place your home on your own property, you can choose from a number of foundation types: concrete block, metal or treated wood piers; a concrete slab; or a full basement. A professional installer will know which local building codes apply. Ask the installer to obtain required building permits and inspections.
3. Leveling Your Home
It's critical that your home be leveled to meet the manufacturer's installation instructions. Otherwise, your home's weight will be unevenly distributed. This can cause floors and walls to buckle and prevent doors and windows from opening and closing smoothly. While the manufacturer's warranty won't cover repairs resulting from improper leveling, a written warranty from the installer may.
Insist on a walk-through before the installer leaves. Check for signs that your home may not be level.
Because some foundation supports may settle unevenly, it's important to periodically check that your home stays level. The first check should be done 60 to 90 days after installation, and then once every year.
4. Securing Your Home to the Foundation
To help minimize damage from high winds and earthquakes, your home should be anchored to the ground or concrete footers. Anchoring must comply with the manufacturer's instructions or as required by local codes. This is not a "do-it-yourself" project. Ask your retailer for more information.
5. Finishing Your Home
Your home may need finishing work, such as an enclosure around the crawl space. The enclosure must provide adequate ventilation openings at all four corners of the home. If you have a multisection home, finishing work may include molding and joining carpet on the interior, and siding and roofing work on the exterior.
6. Connecting Utilities
Installation should include connections to water, electricity, gas, and sewer. If connections aren't included in the installation price, you'll have to contract for them separately. Your retailer can help you with the arrangements, or you can contact local authorities for more information.
Thursday, May 21, 2009
Site Preparation - Delivery
In most instances, your home will be transported from the factory to the retail sales center. There, it will be inspected by your retailer. Any damage done to the home in transit will be repaired before it is delivered to your homesite.
If damage occurs on the way from the retailer to your site, the transporter is usually held responsible. Therefore, make sure you check for damage before the home leaves the sales center and again when your home arrives at the site. If you find any damage, report it to the transporter immediately.
Before you finalize arrangements to buy and transport a home, make sure you have a written warranty from the transporter. Otherwise, if damage occurs during delivery, you could have a difficult time getting no-cost repairs.
If damage occurs on the way from the retailer to your site, the transporter is usually held responsible. Therefore, make sure you check for damage before the home leaves the sales center and again when your home arrives at the site. If you find any damage, report it to the transporter immediately.
Before you finalize arrangements to buy and transport a home, make sure you have a written warranty from the transporter. Otherwise, if damage occurs during delivery, you could have a difficult time getting no-cost repairs.
Wednesday, May 20, 2009
Site Preparation
Before your home is installed, make sure the site has been properly prepared. Careful attention to the following details will help ensure satisfaction with your home for years to come. Your retailer can provide you with valuable guidance and assistance.
If you're having the home installed on your own land, you may be responsible for site preparation. But it's also a good idea to have your retailer or installer inspect the site. Here's a site preparation checklist:
If you're having the home installed on your own land, you may be responsible for site preparation. But it's also a good idea to have your retailer or installer inspect the site. Here's a site preparation checklist:
- The delivery truck must be able to reach the site.
- The site must be as level as possible.
- The area where the home will sit must be clear of trees, rocks, and other debris.
- The soil must be graded and sloped away from the home for water runoff.
- Fill soil must be compacted to prevent the foundation from sinking or shifting.
While you may be able to do some of the site preparation, most tasks, such as grading and compacting soil, require professional expertise. Otherwise, you could do damage to your home that's not covered by the warranty.
Tuesday, May 19, 2009
Rental Communities-Today's manufactured home
Perhaps a rental community specifically planned for manufactured housing appeals to you. Placing your home in such a community involves fewer practical concerns than siting the home on your own land since most services are included in your lease payments. If the idea of a rental community interests you, visit several. Today's manufactured home communities offer many of the same conveniences and services found in other planned residential developments. Retailers will have information about rental communities and, in some cases, operate such communities themselves. Compare services, amenities, and the costs of each, including the rent, installation fees, and other miscellaneous service charges. Ask the following questions before deciding on a community:
- Is a written lease required? If so, for what length of time?
- What are the charges for utility connections and other services?
- Can my home be installed by my retailer or other professional, or does the community require that it handle installation?
- What will I be charged for installation?
- Who is responsible for ground maintenance, snow removal, garbage collection, street maintenance, and mail delivery?
- What are the community's rules and regulations? Can I live with them? For example, are pets allowed?
- Are there any special requirements or restrictions if I sell my home?
- How are rent increases handled?
- Is there a homeowner's association?
- Are there restrictive covenants?
Monday, May 18, 2009
Personal Real Estate-manufactured homes
If you plan to buy land, there are several matters to consider. Your retailer can help you with the following concerns:
Zoning
In cities and suburban areas, and in some semi-rural areas, you may face zoning requirements or restrictions. Some areas may prohibit manufactured homes. Others may have requirements regarding their size and appearance. Contact your retailer and your planning and zoning office for more information.
Restrictive Covenants
These are limitations in property deeds that control how the land can be used. Covenants may mandate that homes be a certain size or that land be used for certain purposes. The title search, conducted when you buy the land, may outline these limitations. However, sometimes, the restrictions are described in ways that are difficult to understand. You may want to seek the advice of an experienced real estate attorney to avoid problems. Utilities. Although a manufactured home comes with plumbing, electrical, and heating systems, it must be connected to utilities. Contact your local public utility companies for connection and cost information.
Water
Not all areas have local water lines and you may have to drill a well. Check with a local well-drilling company about costs and whether success is guaranteed, as success rates are less than perfect. Also, check with local health officials about water quality.
Sewerage
Some areas rely on septic systems rather than city or county sanitary sewerage systems. If you can't connect your home to a municipal or county system, you must check with local authorities about installing a septic tank. While properly installed septic systems can work quite well, in some cases environmental conditions may prevent their use. For more information, contact your local health department or the office responsible for issuing building permits. Rental Communities
Zoning
In cities and suburban areas, and in some semi-rural areas, you may face zoning requirements or restrictions. Some areas may prohibit manufactured homes. Others may have requirements regarding their size and appearance. Contact your retailer and your planning and zoning office for more information.
Restrictive Covenants
These are limitations in property deeds that control how the land can be used. Covenants may mandate that homes be a certain size or that land be used for certain purposes. The title search, conducted when you buy the land, may outline these limitations. However, sometimes, the restrictions are described in ways that are difficult to understand. You may want to seek the advice of an experienced real estate attorney to avoid problems. Utilities. Although a manufactured home comes with plumbing, electrical, and heating systems, it must be connected to utilities. Contact your local public utility companies for connection and cost information.
Water
Not all areas have local water lines and you may have to drill a well. Check with a local well-drilling company about costs and whether success is guaranteed, as success rates are less than perfect. Also, check with local health officials about water quality.
Sewerage
Some areas rely on septic systems rather than city or county sanitary sewerage systems. If you can't connect your home to a municipal or county system, you must check with local authorities about installing a septic tank. While properly installed septic systems can work quite well, in some cases environmental conditions may prevent their use. For more information, contact your local health department or the office responsible for issuing building permits. Rental Communities
Sunday, May 17, 2009
How To Buy A Manufactured Home - Buying A Home - The Retailer's Warranty
A retailer may offer a warranty on a home. Ask to see the retailer's warranty in writing before buying a home. While retailer warranties vary, they typically include:
- The terms of the warranty;
- What you must do to keep the warranty in effect;
- What you can reasonably expect from the retailer; and
- That the home has been installed according to manufacturer installation instructions and local regulations.
- Owner negligence;
- Failure by the owner to provide notice for service; and
- Unauthorized repairs.
Saturday, May 16, 2009
How To Buy A Manufactured Home - Buying A Home - Implied Warranties
In addition to written warranties, you may be protected by certain "implied warranties." An implied warranty is an unspoken, unwritten promise that a product is fit to be sold and used for its intended purpose. For example, a manufactured home should be fit to be sold and lived in. Implied warranties protect you even if no written warranty is offered by the manufacturer or retailer. Most states allow sales that exclude implied warranties ("as is" sales). Howeaver, some states do not allow sellers to exclude or limit implied warranties. Check with your state or local consumer protection officials to learn more about implied warranty protections. If you're buying a previously-owned home, ask if it's being sold with a warranty or "as is" - with no written or implied warranty.
Friday, May 15, 2009
How To Buy A Manufactured Home - Buying A Home - The Manufacturer's Warranty
Warranty coverage varies among manufacturers. Retailers must make copies of warranties offered on the homes they sell available for you to review and read before you buy a home. Read them and compare coverage. The following questions may help you in doing this.
What coverage comes with the home? You may get warranties from the home manufacturer, the retailer, the transporter, the installer, and the appliance manufacturer.
What components and what types of problems does each warranty cover? What's not covered?
Does the manufacturer's written warranty cover transportation and installation? If not, are they covered by other written warranties?
How long do the warranties last?
How do I get warranty service? Who will provide it? Where will it be performed?
Are extended warranties available from the manufacturer? If so, what do they cover and cost? Manufacturer warranties generally cover substantial defects in the following areas:
What coverage comes with the home? You may get warranties from the home manufacturer, the retailer, the transporter, the installer, and the appliance manufacturer.
What components and what types of problems does each warranty cover? What's not covered?
Does the manufacturer's written warranty cover transportation and installation? If not, are they covered by other written warranties?
How long do the warranties last?
How do I get warranty service? Who will provide it? Where will it be performed?
Are extended warranties available from the manufacturer? If so, what do they cover and cost? Manufacturer warranties generally cover substantial defects in the following areas:
- Workmanship in the structure;
- Factory-installed plumbing, heating, and electrical systems; and
- Factory-installed appliances, which may also be covered by separate appliance manufacturer warranties. Manufacturer warranties do not cover:
- Improper installation and maintenance;
- Accidents;
- Owner negligence;
- Unauthorized repairs; or
- Normal wear and aging.
Make sure the person who performs the installation follows the manufacturer's installation instructions. Also ensure that the manufacturer's maintenance and repair instructions (contained in the consumer/homeowner's manual) are followed to keep your warranty in effect. While your retailer will perform most warranty service, the manufacturer is responsible for making sure repairs are done and completed in a timely manner.
Thursday, May 14, 2009
How To Buy A Manufactured Home - Buying A Home
Most manufactured homes are sold through retail sales centers, many of which are independently owned and operated. Others are owned and operated by a manufacturer. In some states, you may also buy from a manufactured home community owner, developer, or if you're purchasing a previously owned home, a real estate agent. Shop around. Retailers offer a variety of products and services.
Many will help you choose your home and its features and, if you want, place a custom order with the factory.Typically the retailer is also responsible for coordinating the delivery and installation of your home. Ask what warranty coverage the retailer provides on transportation and installation and get it in writing.
The retailer may arrange for financing and insurance. And, once you've moved in, the retailer is often the contact for warranty service.
A good way to find a retailer is to ask existing homeowners for recommendations. You can contact your state manufactured housing association for the names and addresses of manufacturers and retailers in your area. (Check the Yellow Page listings under manufactured or "mobile" homes.) As with any major purchase, check out a potential retailer or manufacturer with your local Better Business Bureau and state or local consumer protection agency. They'll tell you if they have any unresolved consumer complaints on file.
Many will help you choose your home and its features and, if you want, place a custom order with the factory.Typically the retailer is also responsible for coordinating the delivery and installation of your home. Ask what warranty coverage the retailer provides on transportation and installation and get it in writing.
The retailer may arrange for financing and insurance. And, once you've moved in, the retailer is often the contact for warranty service.
A good way to find a retailer is to ask existing homeowners for recommendations. You can contact your state manufactured housing association for the names and addresses of manufacturers and retailers in your area. (Check the Yellow Page listings under manufactured or "mobile" homes.) As with any major purchase, check out a potential retailer or manufacturer with your local Better Business Bureau and state or local consumer protection agency. They'll tell you if they have any unresolved consumer complaints on file.
Wednesday, May 13, 2009
How To Buy A Manufactured Home - Choosing A Home
If you have decided that a manufactured home is right for you, consider the following issues:
What size home and floor plan do I want?
Manufactured homes come in a variety of sizes and floor plans that include spacious living rooms, dining rooms, fully-equipped kitchens, bedrooms, family rooms, and utility areas. Depending on the size of your homesite, you can choose a single-section or larger multisection design. Homes range in size from 900 to 2,500 square feet and can be customized to meet your needs and preferences.
What features are available?
The interior design of your home can include custom cabinets; walk-in closets; bathrooms with recessed tubs and whirlpools; and wood-burning fireplaces. Because most manufacturers use computer-assisted design, you'll have flexibility in choosing variations to floor plans and decor. You can choose from a variety of exterior designs, depending on your taste and budget. Exterior siding comes in an array of colors and materials including metal, vinyl, wood and hardboard. Awnings, enclosures around the crawl space, patio covers, decks and steps also are available.
How much can I expect to pay for a home?
Depending on the size, floor plans and features, a new home can cost anywhere from $15,000 to more than $100,000. This doesn't include the land.
What financing options are available?
Your retailer usually can provide information about financing. You can also check with lenders in your area. Just as there are choices when you buy a site-built home, there are a variety of financing options when you buy a manufactured home. Downpayments and loan terms are similar - 5 to 10 percent of the manufactured home's sales price, and loan terms from 15 to 30 years. Most lenders offer fixed and variable rate loans and most have programs that allow you to "buy the rate down." If you own or plan to purchase the land where you will place your home, traditional mortgage financing can usually be arranged.
What other costs can I expect to pay?
While your mortgage payment may be your biggest expense, you'll have other regular and periodic payments. They may include utilities, property taxes, land rental fees, insurance, routine maintenance, and other service fees such as water and sewer. Today's manufactured homes are built to meet new national energy standards set by HUD. The energy conserving features found in manufactured homes help reduce your monthly energy costs.
How much maintenance will my home need?
Your homeowner's manual outlines maintenance requirements. It's important that they're followed. Failure to do so could void the warranty, as well as lessen the value and life of your home.
What warranty coverage is offered on the home, its transportation, and installation?
All manufacturers offer a written warranty that should cover:
* structural workmanship;
* factory-installed plumbing, heating and electrical systems; and
* factory-installed appliances, which also may be covered by separate
* appliance manufacturer warranties.
There are important differences among warranties. For example, manufacturer warranties usually do not cover installation (also called "set-up") and transportation of the home, but you may be able to get this coverage through the retailer or installation contractor. Although you may never need such warranty services, it's a good idea to check the coverage on any warranties offered before you buy.
Where can I locate my home?
Many homes are placed on privately owned property. If this option appeals to you, find out about zoning laws, restrictive covenants, and utility connections. Your retailer can give you more information. Another option is to place your home in a land-lease community specifically designed for manufactured homes. Here, you own the home but lease the land. Placing your home in a land-lease community involves fewer siting considerations such as utility connections. A third option is buying the home and land together in a planned subdivision where siting issues are handled by the developer.
May I move my home?
Yes, but it's not common to do so. The transportation of a home can place considerable stress on its structure and contents. Nevertheless, if you do plan to move your home at some future time, make sure you check with the appropriate state authorities about transportation and zoning regulations. States have restrictions on weight, size and width that may prevent you from moving your home. If you relocate, make sure you use a professional transporter; never try to move the home yourself. It's also important to check the data plate zone maps in your home. These maps tell you the wind, snow and thermal zones for which your home was constructed. Use them to determine if the new location is suitable for your home.
Cost is another consideration. Besides transport expenses, which include licensing fees to take your home through a state, you'll have to pay for a new foundation, installation, and utility hook-ups.
What size home and floor plan do I want?
Manufactured homes come in a variety of sizes and floor plans that include spacious living rooms, dining rooms, fully-equipped kitchens, bedrooms, family rooms, and utility areas. Depending on the size of your homesite, you can choose a single-section or larger multisection design. Homes range in size from 900 to 2,500 square feet and can be customized to meet your needs and preferences.
What features are available?
The interior design of your home can include custom cabinets; walk-in closets; bathrooms with recessed tubs and whirlpools; and wood-burning fireplaces. Because most manufacturers use computer-assisted design, you'll have flexibility in choosing variations to floor plans and decor. You can choose from a variety of exterior designs, depending on your taste and budget. Exterior siding comes in an array of colors and materials including metal, vinyl, wood and hardboard. Awnings, enclosures around the crawl space, patio covers, decks and steps also are available.
How much can I expect to pay for a home?
Depending on the size, floor plans and features, a new home can cost anywhere from $15,000 to more than $100,000. This doesn't include the land.
What financing options are available?
Your retailer usually can provide information about financing. You can also check with lenders in your area. Just as there are choices when you buy a site-built home, there are a variety of financing options when you buy a manufactured home. Downpayments and loan terms are similar - 5 to 10 percent of the manufactured home's sales price, and loan terms from 15 to 30 years. Most lenders offer fixed and variable rate loans and most have programs that allow you to "buy the rate down." If you own or plan to purchase the land where you will place your home, traditional mortgage financing can usually be arranged.
What other costs can I expect to pay?
While your mortgage payment may be your biggest expense, you'll have other regular and periodic payments. They may include utilities, property taxes, land rental fees, insurance, routine maintenance, and other service fees such as water and sewer. Today's manufactured homes are built to meet new national energy standards set by HUD. The energy conserving features found in manufactured homes help reduce your monthly energy costs.
How much maintenance will my home need?
Your homeowner's manual outlines maintenance requirements. It's important that they're followed. Failure to do so could void the warranty, as well as lessen the value and life of your home.
What warranty coverage is offered on the home, its transportation, and installation?
All manufacturers offer a written warranty that should cover:
* structural workmanship;
* factory-installed plumbing, heating and electrical systems; and
* factory-installed appliances, which also may be covered by separate
* appliance manufacturer warranties.
There are important differences among warranties. For example, manufacturer warranties usually do not cover installation (also called "set-up") and transportation of the home, but you may be able to get this coverage through the retailer or installation contractor. Although you may never need such warranty services, it's a good idea to check the coverage on any warranties offered before you buy.
Where can I locate my home?
Many homes are placed on privately owned property. If this option appeals to you, find out about zoning laws, restrictive covenants, and utility connections. Your retailer can give you more information. Another option is to place your home in a land-lease community specifically designed for manufactured homes. Here, you own the home but lease the land. Placing your home in a land-lease community involves fewer siting considerations such as utility connections. A third option is buying the home and land together in a planned subdivision where siting issues are handled by the developer.
May I move my home?
Yes, but it's not common to do so. The transportation of a home can place considerable stress on its structure and contents. Nevertheless, if you do plan to move your home at some future time, make sure you check with the appropriate state authorities about transportation and zoning regulations. States have restrictions on weight, size and width that may prevent you from moving your home. If you relocate, make sure you use a professional transporter; never try to move the home yourself. It's also important to check the data plate zone maps in your home. These maps tell you the wind, snow and thermal zones for which your home was constructed. Use them to determine if the new location is suitable for your home.
Cost is another consideration. Besides transport expenses, which include licensing fees to take your home through a state, you'll have to pay for a new foundation, installation, and utility hook-ups.
Tuesday, May 12, 2009
How To Buy A Manufactured Home - Introduction
Buying a home may be the most expensive purchase you will ever make. A manufactured home may be an appealing option for you. These homes come in a variety of styles, sizes, and floor plans, and range in price from about $15,000 to more than $100,000, without land. Manufactured homes can be installed on your own land, in a rental community, or in a planned subdivision.
Manufactured homes are factory-built to meet the federal Manufactured Home Construction and Safety Standards, also known as the HUD Code.
The Code, which is administered by the U.S. Department of Housing and Urban Development (HUD), regulates the home's design and construction, strength and durability, transportability, fire resistance, and energy efficiency.
It also sets performance standards for the heating, air conditioning, plumbing, thermal and electrical systems.
The Manufactured Housing Institute and the Federal Trade Commission have developed this guide to help you through the home-buying process. You'll learn about purchasing a home and its construction, transportation, installation, and important warranty protections. The retailer of your new home can provide additional information.
Manufactured homes are factory-built to meet the federal Manufactured Home Construction and Safety Standards, also known as the HUD Code.
The Code, which is administered by the U.S. Department of Housing and Urban Development (HUD), regulates the home's design and construction, strength and durability, transportability, fire resistance, and energy efficiency.
It also sets performance standards for the heating, air conditioning, plumbing, thermal and electrical systems.
The Manufactured Housing Institute and the Federal Trade Commission have developed this guide to help you through the home-buying process. You'll learn about purchasing a home and its construction, transportation, installation, and important warranty protections. The retailer of your new home can provide additional information.
Monday, May 11, 2009
Housing Counseling System (HCS)
Housing Counseling System (HCS) is a real-time automated data web system to manage HUD's housing counseling program by maintaining a current list of housing counseling agencies, collecting client data, and providing performance reports. HCS is used everyday throughout the year by both HUD personnel and the non-profit housing counseling agencies. Agencies are responsible for their data in HCS and are required to validate their information at least once every 90 days.
Agency information from HCS is used to produce the state-by-state lists of HUD-Approved housing counseling agencies on HUD's web site. and on the toll-free phone system. If the information on the web list or toll-free phone system is not correct, make corrections in HCS and the updated information will be posted the next day.HCS is currently under-going an enhancement to collect agency data automatically directly from the agencies without having the data manually inputted in HCS as they do now. Agencies will be required in FY08 to utilize a Client Management System (CMS) of their choice to automate their counseling services, store their client data, and interface correctly with CARS/HCS to automatically submit required information to HUD.
Sunday, May 10, 2009
Interview with Real Estate Brokers
So your sister just introduced you to her friend Irving, a real estate agent, and now you can't get rid of him, right? Wrong! Choosing the right person to sell your home is one of the most important steps of selling. Therefore, choose wisely.
At a minimum, speak with 2 or 3 brokers from different agencies. Ask prospective brokers the same list of questions, in order to compare their answers. Find out what they would do to sell your house.
Above all, choose a broker that you feel comfortable with and like. This person will help you make the biggest sale of your life, so find someone you think will do a good job!
The following is a list of questions that may be helpful to ask while speaking with prospective real estate brokers.
At a minimum, speak with 2 or 3 brokers from different agencies. Ask prospective brokers the same list of questions, in order to compare their answers. Find out what they would do to sell your house.
Above all, choose a broker that you feel comfortable with and like. This person will help you make the biggest sale of your life, so find someone you think will do a good job!
The following is a list of questions that may be helpful to ask while speaking with prospective real estate brokers.
- How many years have you been in business?
- For how long have you sold houses in this area?
- How many houses did you sell in the past year?
- What is your commission?
- If I were to work with you, how would you market my house?
- Will you organize meetings with potential buyers and will you coordinate them personally?
- Can you give me names and telephone numbers of other families that have used your services?
Thursday, May 7, 2009
Ten Important Questions to Ask Your Home Inspector
1. What does your inspection cover?
The inspector should ensure that their inspection and inspection report will meet all applicable requirements in your state if applicable and will comply with a well-recognized standard of practice and code of ethics. You should be able to request and see a copy of these items ahead of time and ask any questions you may have. If there are any areas you want to make sure are inspected, be sure to identify them upfront.
2. How long have you been practicing in the home inspection profession and how many inspections have you completed?
The inspector should be able to provide his or her history in the profession and perhaps even a few names as referrals. Newer inspectors can be very qualified, and many work with a partner or have access to more experienced inspectors to assist them in the inspection.
3. Are you specifically experienced in residential inspection?
Related experience in construction or engineering is helpful, but is no substitute for training and experience in the unique discipline of home inspection. If the inspection is for a commercial property, then this should be asked about as well.
4. Do you offer to do repairs or improvements based on the inspection?
Some inspector associations and state regulations allow the inspector to perform repair work on problems uncovered in the inspection. Other associations and regulations strictly forbid this as a conflict of interest.
5. How long will the inspection take?
The average on-site inspection time for a single inspector is two to three hours for a typical single-family house; anything significantly less may not be enough time to perform a thorough inspection. Additional inspectors may be brought in for very large properties and buildings.
6. How much will it cost?
Costs vary dramatically, depending on the region, size and age of the house, scope of services and other factors. A typical range might be $300-$500, but consider the value of the home inspection in terms of the investment being made. Cost does not necessarily reflect quality. HUD Does not regulate home inspection fees.
7. What type of inspection report do you provide and how long will it take to receive the report?
Ask to see samples and determine whether or not you can understand the inspector's reporting style and if the time parameters fulfill your needs. Most inspectors provide their full report within 24 hours of the inspection.
8. Will I be able to attend the inspection?
This is a valuable educational opportunity, and an inspector's refusal to allow this should raise a red flag. Never pass up this opportunity to see your prospective home through the eyes of an expert.
9. Do you maintain membership in a professional home inspector association?
There are many state and national associations for home inspectors. Request to see their membership ID, and perform whatever due diligence you deem appropriate.
10. Do you participate in continuing education programs to keep your expertise up to date?
One can never know it all, and the inspector's commitment to continuing education is a good measure of his or her professionalism and service to the consumer. This is especially important in cases where the home is much older or includes unique elements requiring additional or updated training.
2. How long have you been practicing in the home inspection profession and how many inspections have you completed?
The inspector should be able to provide his or her history in the profession and perhaps even a few names as referrals. Newer inspectors can be very qualified, and many work with a partner or have access to more experienced inspectors to assist them in the inspection.
Related experience in construction or engineering is helpful, but is no substitute for training and experience in the unique discipline of home inspection. If the inspection is for a commercial property, then this should be asked about as well.
4. Do you offer to do repairs or improvements based on the inspection?
Some inspector associations and state regulations allow the inspector to perform repair work on problems uncovered in the inspection. Other associations and regulations strictly forbid this as a conflict of interest.
5. How long will the inspection take?
The average on-site inspection time for a single inspector is two to three hours for a typical single-family house; anything significantly less may not be enough time to perform a thorough inspection. Additional inspectors may be brought in for very large properties and buildings.
6. How much will it cost?
Costs vary dramatically, depending on the region, size and age of the house, scope of services and other factors. A typical range might be $300-$500, but consider the value of the home inspection in terms of the investment being made. Cost does not necessarily reflect quality. HUD Does not regulate home inspection fees.
7. What type of inspection report do you provide and how long will it take to receive the report?
Ask to see samples and determine whether or not you can understand the inspector's reporting style and if the time parameters fulfill your needs. Most inspectors provide their full report within 24 hours of the inspection.
8. Will I be able to attend the inspection?
This is a valuable educational opportunity, and an inspector's refusal to allow this should raise a red flag. Never pass up this opportunity to see your prospective home through the eyes of an expert.
9. Do you maintain membership in a professional home inspector association?
There are many state and national associations for home inspectors. Request to see their membership ID, and perform whatever due diligence you deem appropriate.
10. Do you participate in continuing education programs to keep your expertise up to date?
One can never know it all, and the inspector's commitment to continuing education is a good measure of his or her professionalism and service to the consumer. This is especially important in cases where the home is much older or includes unique elements requiring additional or updated training.
Wednesday, May 6, 2009
Ways to Lower Your Homeowners Insurance Costs (Part 2)
7. Seek out other discounts
Companies offer several types of discounts, but they don't all offer the same discount or the same amount of discount in all states. For example, since retired people stay at home more than working people they are less likely to be burglarized and may spot fires sooner, too. Retired people also have more time for maintaining their homes. If you're at least 55 years old and retired, you may qualify for a discount of up to 10 percent at some companies. Some employers and professional associations administer group insurance programs that may offer a better deal than you can get elsewhere.
8. Maintain a good credit record
Establishing a solid credit history can cut your insurance costs. Insurers are increasingly using credit information to price homeowners insurance policies. In most states, your insurer must advise you of any adverse action, such as a higher rate, at which time you should verify the accuracy of the information on which the insurer relied. To protect your credit standing, pay your bills on time, don't obtain more credit than you need and keep your credit balances as low as possible. Check your credit record on a regular basis and have any errors corrected promptly so that your record remains accurate.
9. Stay with the same insurer
If you've kept your coverage with a company for several years, you may receive a special discount for being a long-term policyholder. Some insurers will reduce their premiums by 5 percent if you stay with them for three to five years and by 10 percent if you remain a policyholder for six years or more. But make certain to periodically compare this price with that of other policies.
10. Review the limits in your policy and the value of your possessions at least once a year
You want your policy to cover any major purchases or additions to your home. But you don't want to spend money for coverage you don't need. If your five-year-old fur coat is no longer worth the $5,000 you paid for it, you'll want to reduce or cancel your floater (extra insurance for items whose full value is not covered by standard homeowners policies such as expensive jewelry, high-end computers and valuable art work) and pocket the difference.
11. Look for private insurance if you are in a government plan
If you live in a high-risk area -- say, one that is especially vulnerable to coastal storms, fires, or crime -- and have been buying your homeowners insurance through a government plan, you should check with an insurance agent or company representative or contact your state department of insurance for the names of companies that might be interested in your business. You may find that there are steps you can take that would allow you to buy insurance at a lower price in the private market.
12. When you’re buying a home, consider the cost of homeowners insurance
You may pay less for insurance if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. It may also be cheaper if your home’s electrical, heating and plumbing systems are less than 10 years old. If you live in the East, consider a brick home because it's more wind resistant. If you live in an earthquake-prone area, look for a wooden frame house because it is more likely to withstand this type of disaster. Choosing wisely could cut your premiums by 5 to 15 percent.
Check the CLUE (Comprehensive Loss Underwriting Exchange) report of the home you are thinking of buying. These reports contain the insurance claim history of the property and can help you judge some of the problems the house may have.
Remember that flood insurance and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you'll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at FloodSmart.gov. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area. In California the California Earthquake Authority (www.earthquakeauthority.com) provides this coverage.
If you have questions about insurance for any of your possessions, be sure to ask your agent or company representative when you're shopping around for a policy. For example, if you run a business out of your home, be sure to discuss coverage for that business. Most homeowners policies cover business equipment in the home, but only up to $2,500 and they offer no business liability insurance. Although you want to lower your homeowners insurance cost, you also want to make certain you have all the coverage you need.
Companies offer several types of discounts, but they don't all offer the same discount or the same amount of discount in all states. For example, since retired people stay at home more than working people they are less likely to be burglarized and may spot fires sooner, too. Retired people also have more time for maintaining their homes. If you're at least 55 years old and retired, you may qualify for a discount of up to 10 percent at some companies. Some employers and professional associations administer group insurance programs that may offer a better deal than you can get elsewhere.
8. Maintain a good credit record
Establishing a solid credit history can cut your insurance costs. Insurers are increasingly using credit information to price homeowners insurance policies. In most states, your insurer must advise you of any adverse action, such as a higher rate, at which time you should verify the accuracy of the information on which the insurer relied. To protect your credit standing, pay your bills on time, don't obtain more credit than you need and keep your credit balances as low as possible. Check your credit record on a regular basis and have any errors corrected promptly so that your record remains accurate.
9. Stay with the same insurer
If you've kept your coverage with a company for several years, you may receive a special discount for being a long-term policyholder. Some insurers will reduce their premiums by 5 percent if you stay with them for three to five years and by 10 percent if you remain a policyholder for six years or more. But make certain to periodically compare this price with that of other policies.
10. Review the limits in your policy and the value of your possessions at least once a year
You want your policy to cover any major purchases or additions to your home. But you don't want to spend money for coverage you don't need. If your five-year-old fur coat is no longer worth the $5,000 you paid for it, you'll want to reduce or cancel your floater (extra insurance for items whose full value is not covered by standard homeowners policies such as expensive jewelry, high-end computers and valuable art work) and pocket the difference.
11. Look for private insurance if you are in a government plan
If you live in a high-risk area -- say, one that is especially vulnerable to coastal storms, fires, or crime -- and have been buying your homeowners insurance through a government plan, you should check with an insurance agent or company representative or contact your state department of insurance for the names of companies that might be interested in your business. You may find that there are steps you can take that would allow you to buy insurance at a lower price in the private market.
12. When you’re buying a home, consider the cost of homeowners insurance
You may pay less for insurance if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. It may also be cheaper if your home’s electrical, heating and plumbing systems are less than 10 years old. If you live in the East, consider a brick home because it's more wind resistant. If you live in an earthquake-prone area, look for a wooden frame house because it is more likely to withstand this type of disaster. Choosing wisely could cut your premiums by 5 to 15 percent.
Check the CLUE (Comprehensive Loss Underwriting Exchange) report of the home you are thinking of buying. These reports contain the insurance claim history of the property and can help you judge some of the problems the house may have.
Remember that flood insurance and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you'll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at FloodSmart.gov. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area. In California the California Earthquake Authority (www.earthquakeauthority.com) provides this coverage.
If you have questions about insurance for any of your possessions, be sure to ask your agent or company representative when you're shopping around for a policy. For example, if you run a business out of your home, be sure to discuss coverage for that business. Most homeowners policies cover business equipment in the home, but only up to $2,500 and they offer no business liability insurance. Although you want to lower your homeowners insurance cost, you also want to make certain you have all the coverage you need.
Tuesday, May 5, 2009
Ways to Lower Your Homeowners Insurance Costs
(Part 1)
The price you pay for your homeowners insurance can vary by hundreds of dollars, depending on the insurance company you buy your policy from. Here are some things to consider when buying homeowners insurance.
1. Shop Around
It'll take some time, but could save you a good sum of money. Ask your friends, check the Yellow Pages or contact your state insurance department. National Association of Insurance Commissioners has information to help you choose an insurer in your state, including complaints. States often make information available on typical rates charged by major insurers and many states provide the frequency of consumer complaints by company.
Also check consumer guides, insurance agents, companies and online insurance quote services. This will give you an idea of price ranges and tell you which companies have the lowest prices. But don't consider price alone. The insurer you select should offer a fair price and deliver the quality service you would expect if you needed assistance in filing a claim. So in assessing service quality, use the complaint information cited above and talk to a number of insurers to get a feeling for the type of service they give. Ask them what they would do to lower your costs.
2. Raise Your Deductible
Deductibles are the amount of money you have to pay toward a loss before your insurance company starts to pay a claim, according to the terms of your policy. The higher your deductible, the more money you can save on your premiums. Nowadays, most insurance companies recommend a deductible of at least $500. If you can afford to raise your deductible to $1,000, you may save as much as 25 percent. Remember, if you live in a disaster-prone area, your insurance policy may have a separate deductible for certain kinds of damage. If you live near the coast in the East, you may have a separate windstorm deductible; if you live in a state vulnerable to hail storms, you may have a separate deductible for hail; and if you live in an earthquake-prone area, your earthquake policy has a deductible.
3. Don't confuse what you paid for your house with rebuilding costs
The land under your house isn't at risk from theft, windstorm, fire and the other perils covered in your homeowners policy. So don't include its value in deciding how much homeowners insurance to buy. If you do, you will pay a higher premium than you should.
4. Buy your home and auto policies from the same insurer
Some companies that sell homeowners, auto and liability coverage will take 5 to 15 percent off your premium if you buy two or more policies from them. But make certain this combined price is lower than buying the different coverages from different companies.
5. Make your home more disaster resistant
Find out from your insurance agent or company representative what steps you can take to make your home more resistant to windstorms and other natural disasters. You may be able to save on your premiums by adding storm shutters, reinforcing your roof or buying stronger roofing materials. Older homes can be retrofitted to make them better able to withstand earthquakes. In addition, consider modernizing your heating, plumbing and electrical systems to reduce the risk of fire and water damage.
6. Improve your home security
You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm or dead-bolt locks. Some companies offer to cut your premium by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations. These systems aren't cheap and not every system qualifies for a discount. Before you buy such a system, find out what kind your insurer recommends, how much the device would cost and how much you'd save on premiums.
1. Shop Around
It'll take some time, but could save you a good sum of money. Ask your friends, check the Yellow Pages or contact your state insurance department. National Association of Insurance Commissioners has information to help you choose an insurer in your state, including complaints. States often make information available on typical rates charged by major insurers and many states provide the frequency of consumer complaints by company.
Also check consumer guides, insurance agents, companies and online insurance quote services. This will give you an idea of price ranges and tell you which companies have the lowest prices. But don't consider price alone. The insurer you select should offer a fair price and deliver the quality service you would expect if you needed assistance in filing a claim. So in assessing service quality, use the complaint information cited above and talk to a number of insurers to get a feeling for the type of service they give. Ask them what they would do to lower your costs.
2. Raise Your Deductible
Deductibles are the amount of money you have to pay toward a loss before your insurance company starts to pay a claim, according to the terms of your policy. The higher your deductible, the more money you can save on your premiums. Nowadays, most insurance companies recommend a deductible of at least $500. If you can afford to raise your deductible to $1,000, you may save as much as 25 percent. Remember, if you live in a disaster-prone area, your insurance policy may have a separate deductible for certain kinds of damage. If you live near the coast in the East, you may have a separate windstorm deductible; if you live in a state vulnerable to hail storms, you may have a separate deductible for hail; and if you live in an earthquake-prone area, your earthquake policy has a deductible.
3. Don't confuse what you paid for your house with rebuilding costs
The land under your house isn't at risk from theft, windstorm, fire and the other perils covered in your homeowners policy. So don't include its value in deciding how much homeowners insurance to buy. If you do, you will pay a higher premium than you should.
4. Buy your home and auto policies from the same insurer
Some companies that sell homeowners, auto and liability coverage will take 5 to 15 percent off your premium if you buy two or more policies from them. But make certain this combined price is lower than buying the different coverages from different companies.
5. Make your home more disaster resistant
Find out from your insurance agent or company representative what steps you can take to make your home more resistant to windstorms and other natural disasters. You may be able to save on your premiums by adding storm shutters, reinforcing your roof or buying stronger roofing materials. Older homes can be retrofitted to make them better able to withstand earthquakes. In addition, consider modernizing your heating, plumbing and electrical systems to reduce the risk of fire and water damage.
6. Improve your home security
You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm or dead-bolt locks. Some companies offer to cut your premium by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations. These systems aren't cheap and not every system qualifies for a discount. Before you buy such a system, find out what kind your insurer recommends, how much the device would cost and how much you'd save on premiums.
Sunday, May 3, 2009
Description of video
Video is the technology of electronically capturing, recording, processing, storing, transmitting, and reconstructing a sequence of still images representing scenes in motion.
Video technology was first developed for cathode ray tube television systems, but several new technologies for video display devices have since been invented. Standards for television sets and computer monitors have tended to evolve independently, but advances in computer performance and digital television broadcasting and recording are producing some convergence.
Computers can now display television and film-style video clips and streaming media, encouraged by increased processor speed, storage capacity, and broadband access to the Internet. General-purpose computing hardware can now be used to capture, store, edit, and transmit television and movie content, as opposed to older dedicated analog technologies.
Analog video standards worldwide NTSC PAL or switching to PAL SECAM No information
The term video (from Latin: "I see") commonly refers to several storage formats for moving eye pictures: digital video formats, including DVD, QuickTime, and MPEG-4; and analog videotapes, including VHS and Betamax. Video can be recorded and transmitted in various physical media: in magnetic tape when recorded as PAL or NTSC electric signals by video cameras, or in MPEG-4 or DV digital media when recorded by digital cameras.
Quality of video essentially depends on the capturing method and storage used. Digital television (DTV) is a relatively recent format with higher quality than earlier television formats and has become a standard for television video. (See List of digital television deployments by country.)
3D-video, digital video in three dimensions, premiered at the end of 20th century. Six or eight cameras with realtime depth measurement are typically used to capture 3D-video streams. The format of 3D-video is fixed in MPEG-4 Part 16 Animation Framework eXtension (AFX).
In the UK, Australia, The Netherlands, Finland, Hungary and New Zealand, the term video is often used informally to refer to both Videocassette recorders and video cassettes; the meaning is normally clear from the context.
Video technology was first developed for cathode ray tube television systems, but several new technologies for video display devices have since been invented. Standards for television sets and computer monitors have tended to evolve independently, but advances in computer performance and digital television broadcasting and recording are producing some convergence.
Computers can now display television and film-style video clips and streaming media, encouraged by increased processor speed, storage capacity, and broadband access to the Internet. General-purpose computing hardware can now be used to capture, store, edit, and transmit television and movie content, as opposed to older dedicated analog technologies.
Analog video standards worldwide NTSC PAL or switching to PAL SECAM No information
The term video (from Latin: "I see") commonly refers to several storage formats for moving eye pictures: digital video formats, including DVD, QuickTime, and MPEG-4; and analog videotapes, including VHS and Betamax. Video can be recorded and transmitted in various physical media: in magnetic tape when recorded as PAL or NTSC electric signals by video cameras, or in MPEG-4 or DV digital media when recorded by digital cameras.
Quality of video essentially depends on the capturing method and storage used. Digital television (DTV) is a relatively recent format with higher quality than earlier television formats and has become a standard for television video. (See List of digital television deployments by country.)
3D-video, digital video in three dimensions, premiered at the end of 20th century. Six or eight cameras with realtime depth measurement are typically used to capture 3D-video streams. The format of 3D-video is fixed in MPEG-4 Part 16 Animation Framework eXtension (AFX).
In the UK, Australia, The Netherlands, Finland, Hungary and New Zealand, the term video is often used informally to refer to both Videocassette recorders and video cassettes; the meaning is normally clear from the context.
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