Who is eligible for this program?

The provisions of the SSRA apply to active duty military personnel who had a mortgage obligation prior to enlistment or prior to being ordered to active duty (for Reservists). This includes members of the Army, Navy, Marine Corps, Air Force, Coast Guard, as well as commissioned officers belonging to the Public Health Service and those in the National Oceanic and Atmospheric Administration (NOAA) who are engaged in active service. Military reservists ordered to report for military service and those persons ordered to report for induction under the Military Selective Service Act as well as guardsmen called to active service for more than 30 consecutive days are also covered under the act.

In the area of home mortgage protections, the act limits the amount of mortgage interest that may be charged on home loans incurred by a service member (including debts incurred jointly with a spouse) before he or she entered into active military service.

Once requested by the home owner, mortgage lenders must reduce the interest rate to no more than six percent per year during the period of active military service. They must also recalculate future payments to reflect the lower rate. This provision applies to both conventional and government-insured mortgages.

It is important for those covered by the act to understand that this is not an automatic system. In order to request temporary interest rate reduction, you must send in a written request to the lender. This submission must include a copy of your military orders. The request may be submitted as soon as the orders are issued but must be provided to the lender no later than 180 days after discharge from active duty military service.

Some of those who are covered by the act may find that they cannot make the payments even at the lower rate. If this happens, the lender may let the member stop paying on the principal while the member is on active duty. They are not mandated to do this, but many of them will. The amount that is adjusted will still have to be paid but at a later time, once active duty service is completed or financial status of the member improves.

It is also important to know that many home mortgage lenders have other programs available to help those in need. If you or your spouse should fall into this category, contact your lender immediately and ask about loss mitigation options.

For those with FHA insured loans who are finding it difficult or impossible to make the required payments, FHA has special forbearance and other loss mitigation options that you may be eligible for.

Lastly, those covered under the act should know that mortgage lenders may not foreclose, or seize property for failure to pay, while a service member is on active duty. They may not do foreclose, as well, within 90 days after discharge without court approval. In order to get court approval, the lender would need to prove that the service member’s ability to repay the debt was not affected by his or her military service.

You can learn more the Soldiers and Sailors Relief Act online or at your military base.

Why are such penalties applied?

In order to attract borrowers, lenders are often forced to compete by offering mouth-wateringly cheap deals in the first two or three years, sometimes for longer periods.

The hope is that borrowers will then stick with them not just through the course of the deal itself but for several years afterwards.

Clearly, if borrowers were to jump from one mortgage to a cheaper one whenever they wanted to, lenders could lose a lot of money. So they protect themselves by applying charges on those who do.

Either way, lot of borrowers don’t become aware of these charges right up until when they wish to remortgage or pay off their mortgage early.

However, with most early redemption fees being in the thousands, it is vital you know beforehand if you will be liable to pay up and how much the cost might be.

Redemption fees can be calculated in the following ways:

• Percentage of the original mortgage loan value
• Percentage of the balance still owing on the mortgage
• Percentage of the amount repaid
• Number of months’ interest

For short-term fixed or discounted mortgages of, say, two years, the interest penalty will generally be a set amount of months’ interest.

In the case of longer-term mortgage deals, the fee may be set on a sliding rate. For example, say you have taken out a five-year fixed mortgage.

The redemption fee might be:

• Six months’ interest for the first year of the mortgage
• Five months’ interest for the second year
• Four months’ interest for the third year
• Three months’ interest for the fourth year
• Two months’ interest for the fifth year.

There are two main types of redemption fee. The most common is one that applies throughout the lifetime of the deal itself. So, a two-year fixed rate mortgage may have penalties that apply during the deal period, but not after it has ended and you are back on the lender’s variable rate.

The five year-deal, above, is one example of this.

In some cases, especially where a very cheap deal is on offer, the lender may apply an “overhang”, committing you to staying with the mortgage even after the deal is over. So, you might have to stay on that lender’s variable rate for several years after the deal ends.

In most cases, unless the deal on offer is exceptionally good, it makes sense NOT to opt for a home loan with a long overhang.

The simple way to avoid any such costs is to look for a mortgage that doesn’t impose early redemption fees.

But it may be hard to resist a good deal, especially when variable rates are high. In that case, it is better to opt for a shorter fixed rate deal.

Although you may pay a higher APR in the short term, it may be better to do as you then have the flexibility to shop around for a cheaper mortgage at a time of your choosing.

Refinancing your mortgage will save you money if you can get a lower interest rate than what you are currently having. In order to determine how much you can save on your mortgage you need to find out exactly how much you are paying out every month to your existing mortgage provider. To determine your savings simply divide the cost of refinancing your existing mortgage by the amount you will save on your mortgage payment each month. This will give you the saving that you can get by refinancing your mortgage now. Mortgage refinancing is a popular solution for homeowners wanting to lock in lower interest rates and save money over the life of their mortgage. If interest rates stay low, then an ARM (Adjustable Rate Mortgage) can offer you an attractive way to obtain a new mortgage and save you money.

Make a lump sum payment or a monthly overpayment to your mortgage if you had the money in savings a fast calculation of the interest saved on the mortgage versus the interest the bank is paying you to have money in your savings account will show you just how much of a saving is possible with this tactic. With a little research it’s amazing how much you can save on your mortgage. What you save on your mortgage interest could outweigh the interest you would otherwise have made on your savings. Make sure that your mortgage does not have a penalty for early pay off. The only way to really save money on a mortgage is by making extra repayments so that you are paying above the scheduled repayment timetable which means you are paying principal off not interest. If you currently have a $200,000 mortgage that you received a 6% interest rate over 30 years you will save yourself approximately $45,333.

You will be surprised how much faster your loans balance will drop and how much money you will save. Don’t Just Make The Minimum Repayment – If you want to save thousands of dollars in interest over the term of your mortgage work out the maximum monthly payment you can manage and pay that.

The truth is the bank is not going to tell you about how to save money on your mortgage as they want to make the interest on the money they have loan you. If they were to help you save money, they would lose money and their profits would stagnate.

With a little research it’s amazing how much you can save on your mortgage so go ahead a use the mortgage calculators out there and see how much you can save with as little as $50 extra payment per week and I think you are going to be amazed.