The home equity line of credit is a device used by homeowners who want to borrow against the equity in their home. There are several different types of home equity lines of credit. These differences are frequently based on the interest rate charged the homeowner.
Sometimes a home equity line of credit will have variable interest rates. With variable interest rates, the homeowner cannot know for sure from month to month what the interest payment will be. The interest rate on the loan will vary to the same degree as the interest rate set by the Federal Reserve Board.
In some cases the home equity line of credit offers a low introductory interest rate. These rates sound attractive, but they hide the fact that the homeowner will later be asked to pay a considerably higher rate. The homeowner needs to read the loan materials carefully in order to learn exactly what the payments could be at a much later date.
Other differences in the home equity line of credit often concern the costs of the application process. Some offers of a home equity line of credit come with a large one-time fee. Other offers for a home equity line of credit might avoid mention of such a fee but then add continuing costs. It is also possible that a home equity line of credit could tack on a balloon payment. This is a sizable payment that is demanded from the homeowner once the period of the offer of credit has ended. Alternate offers for a home equity line of credit could avoid requesting a high balloon payment but instead request much higher monthly payments.
If the differences in the various types of home equity lines of credit confuse the homeowner, then it may be better to consider alternatives to the home equity line of credit. The homeowner who does not want to get a home equity line of credit can either takeout a second mortgage or borrow from credit lines that do not use the home as collateral.
In order to borrow from credit lines that do not use the home as collateral the homeowner needs to seek out those who value what he has to offer. Perhaps he owns land in a distant region where the land value is going up. This could possibly be used as collateral on a different type of line of credit. A small business owner who did not want to risk his home for a home equity line of credit might need to think about using the business as collateral.
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Monday, June 16, 2008
Sunday, June 15, 2008
Mortgage Refinancing
If you are one of those people who have difficulties paying your first mortgage and you are looking for options to help you with this, mortgage refinancing might just as well be the solution for you.
Mortgage Refinancing is what usually financial experts recommend leveraging mortgage rates. It is fundamentally paying off your first mortgage and getting a second mortgage. Most borrowers who for mortgage refinancing do so to have immediate equity on the mortgage and to change loan type. Other reasons include to take advantage of improved credit ratings. But, the most popular reasons for mortgage refinancing is to obtain lower interest in the mortgage to lower monthly payments.
Before you can get a mortgage refinancing, various information that were required in your first mortgage will again be asked from you such as your financial records and credit reports for you new loan report. The lender will require information about your debts and current assets, verification of your employment and your income, your financial accounts such as checking and savings and the title of your land. Lenders may also require you to submit an appraisal and the survey of the site where your home is constructed or will be constructed.
Information about your first mortgage such as your current monthly payments and outstanding mortgage balance will also be required by the lender before mortgage refinancing is approved. Aside from these, the status of insurance payments and property tax will also be considered. In cases where you are refinancing from another lender, original lender's contact information should also be submitted.
Of course, when you undergo mortgage refinancing, certain fees and costs are involved. Some fees that are originally paid during a mortgage closing out are paid during a refinance. Some of these are:
- Application fee- title search- title insurance fees- appraisal costs- prepayment penalties- loan origination fee- discount points- and if applicable, legal service fees.
Some financial institutions offer negotiations on these. And others allow borrowers not to pay these costs but are expected to have a higher interest rate in their mortgage refinancing.
It all sounds easy enough but just as you did on your first mortgage, there are some things you need to consider before going for mortgage refinancing. Fannie Mae, a well-known stockholder owned company that provides guidelines for conforming mortgage loans provides these considerations you need to assess in yourself before considering mortgage refinancing:- the length of time you think you'll stay in your house- the number of years left to pay for the existing mortgage - the ability to afford the costs involved and, - the ability to save money while paying the loan
To further see the impact of mortgage refinancing to your financial plans and objectives, many mortgage calculators are available online. There are usually different variants of these depending on the type of mortgage refinancing that you want and need. Some calculators compute whether mortgage refinancing will lessen costs, while others are used for refinancing 2 mortgages. Another calculator can be used to study if mortgage refinancing of one mortgage into two mortgages can lessen costs while a calculator for borrowers enrolled in Adjustable Rate Mortgage who want to refinance in Flexible Rate Mortgage is also available.
Aside from self-assessment and mortgage calculators, it is also recommendable for you to ask advice on mortgage refinancing from your financial adviser and on the lending company where you had your first mortgage.
Mortgage Refinancing is what usually financial experts recommend leveraging mortgage rates. It is fundamentally paying off your first mortgage and getting a second mortgage. Most borrowers who for mortgage refinancing do so to have immediate equity on the mortgage and to change loan type. Other reasons include to take advantage of improved credit ratings. But, the most popular reasons for mortgage refinancing is to obtain lower interest in the mortgage to lower monthly payments.
Before you can get a mortgage refinancing, various information that were required in your first mortgage will again be asked from you such as your financial records and credit reports for you new loan report. The lender will require information about your debts and current assets, verification of your employment and your income, your financial accounts such as checking and savings and the title of your land. Lenders may also require you to submit an appraisal and the survey of the site where your home is constructed or will be constructed.
Information about your first mortgage such as your current monthly payments and outstanding mortgage balance will also be required by the lender before mortgage refinancing is approved. Aside from these, the status of insurance payments and property tax will also be considered. In cases where you are refinancing from another lender, original lender's contact information should also be submitted.
Of course, when you undergo mortgage refinancing, certain fees and costs are involved. Some fees that are originally paid during a mortgage closing out are paid during a refinance. Some of these are:
- Application fee- title search- title insurance fees- appraisal costs- prepayment penalties- loan origination fee- discount points- and if applicable, legal service fees.
Some financial institutions offer negotiations on these. And others allow borrowers not to pay these costs but are expected to have a higher interest rate in their mortgage refinancing.
It all sounds easy enough but just as you did on your first mortgage, there are some things you need to consider before going for mortgage refinancing. Fannie Mae, a well-known stockholder owned company that provides guidelines for conforming mortgage loans provides these considerations you need to assess in yourself before considering mortgage refinancing:- the length of time you think you'll stay in your house- the number of years left to pay for the existing mortgage - the ability to afford the costs involved and, - the ability to save money while paying the loan
To further see the impact of mortgage refinancing to your financial plans and objectives, many mortgage calculators are available online. There are usually different variants of these depending on the type of mortgage refinancing that you want and need. Some calculators compute whether mortgage refinancing will lessen costs, while others are used for refinancing 2 mortgages. Another calculator can be used to study if mortgage refinancing of one mortgage into two mortgages can lessen costs while a calculator for borrowers enrolled in Adjustable Rate Mortgage who want to refinance in Flexible Rate Mortgage is also available.
Aside from self-assessment and mortgage calculators, it is also recommendable for you to ask advice on mortgage refinancing from your financial adviser and on the lending company where you had your first mortgage.
Thursday, June 12, 2008
Second Mortgage
Most average Americans are able to buy their own homes through a mortgage. And, while paying off the first mortgage, other needs for money arise for necessities such educational plans for the children, cash for improving the house, money for capitalizing on a small business or money to pay off personal debts. A second mortgage can even be used to pay off the first mortgage.
A second mortgage is usually based on the equity - your interest, as an owner, on your home based on the mortgage payments you have paid and the increased value of your home property.
Aside from it being a second to the first mortgage, a second mortgage is different from a first mortgage in terms of interest rates. A second mortgage usually has a higher interest and is usually paid in a shorter time. Aside from this, a single large payment called balloon payment is also made at the end of the paying period
Usually, refinancing is an alternative for second mortgage especially when interest rates are low because higher rates apply on second mortgages than on the first one. On the other hand, there are other features of a second mortgage which makes it more appealing than refinancing. This includes the looser contract guidelines which reduces the amount of time and effort to get that second mortgage. Apart from this, second mortgage may have lower transaction costs that can override the higher interest and which may also, in the long run, cost less than getting a refinancing.
Traditionally, a second mortgage has established repayment schedules and is offered as a fixed loan. But, at present, there are three options from which you can choose from. These are: the traditional second mortgage, a home equity loan and home equity line of credit. We will discuss the features of each briefly below
a. Second mortgage. This loan is ideal for situations where you need the money in lump form especially for home improvement. Second mortgage can be found as either fixed-rate or adjustable from 5 to 20 years but typically 15 years. Seventy five to eighty percent of the appraised value of the home is the loan limit for both merged loans.
In a second mortgage, interest rates are higher than that of the first mortgage especially if this is a fixed second mortgage. Adjustable second mortgage, on the other hand, have lower interests but have higher margins. Loans usually closed in two to three weeks and the amount to be paid during closing is usually two to three percent of the total loan amount. Requirements needed when applying for a second mortgage include home appraisal and credit check.
b. Home Equity Loan. A home equity loan is like the traditional second mortgage but is different in 2 ways. First, unlike second mortgage, this has lower interest rates and second, lenders can waive off closing costs. Most types of this loan being offered are adjustable in the market.
A home equity loan is typically used for home improvements and renovations just like a second mortgage and it can also be used to finance a business.
c. Home Equity Line of Credit. This type of loan is ideal for cases where there is a need for funds periodically such as for debt consolidation or for payments of college plans or tuition fees. Just like in a second mortgage, a credit check and a home appraisal is required before you can receive this type of loan.
The loan amount is usually seventy five to eighty percent of the home's appraised value and the interest is adjustable. Some lenders waive off closing costs but others could total up to $1,000 plus points.
A second mortgage is usually based on the equity - your interest, as an owner, on your home based on the mortgage payments you have paid and the increased value of your home property.
Aside from it being a second to the first mortgage, a second mortgage is different from a first mortgage in terms of interest rates. A second mortgage usually has a higher interest and is usually paid in a shorter time. Aside from this, a single large payment called balloon payment is also made at the end of the paying period
Usually, refinancing is an alternative for second mortgage especially when interest rates are low because higher rates apply on second mortgages than on the first one. On the other hand, there are other features of a second mortgage which makes it more appealing than refinancing. This includes the looser contract guidelines which reduces the amount of time and effort to get that second mortgage. Apart from this, second mortgage may have lower transaction costs that can override the higher interest and which may also, in the long run, cost less than getting a refinancing.
Traditionally, a second mortgage has established repayment schedules and is offered as a fixed loan. But, at present, there are three options from which you can choose from. These are: the traditional second mortgage, a home equity loan and home equity line of credit. We will discuss the features of each briefly below
a. Second mortgage. This loan is ideal for situations where you need the money in lump form especially for home improvement. Second mortgage can be found as either fixed-rate or adjustable from 5 to 20 years but typically 15 years. Seventy five to eighty percent of the appraised value of the home is the loan limit for both merged loans.
In a second mortgage, interest rates are higher than that of the first mortgage especially if this is a fixed second mortgage. Adjustable second mortgage, on the other hand, have lower interests but have higher margins. Loans usually closed in two to three weeks and the amount to be paid during closing is usually two to three percent of the total loan amount. Requirements needed when applying for a second mortgage include home appraisal and credit check.
b. Home Equity Loan. A home equity loan is like the traditional second mortgage but is different in 2 ways. First, unlike second mortgage, this has lower interest rates and second, lenders can waive off closing costs. Most types of this loan being offered are adjustable in the market.
A home equity loan is typically used for home improvements and renovations just like a second mortgage and it can also be used to finance a business.
c. Home Equity Line of Credit. This type of loan is ideal for cases where there is a need for funds periodically such as for debt consolidation or for payments of college plans or tuition fees. Just like in a second mortgage, a credit check and a home appraisal is required before you can receive this type of loan.
The loan amount is usually seventy five to eighty percent of the home's appraised value and the interest is adjustable. Some lenders waive off closing costs but others could total up to $1,000 plus points.
Getting A Home Mortgage
So, you're interested to get a mortgage for your dream house. In order to do this, there are some steps you need to get the right home mortgage for you.
The initial step is to order your credit report from the country's three major credit reporting agencies which are Equifax, TransUnion and Experian. Your credit report is very important in your home mortgage because this determines your ability to pay off the home mortgage you are applying for. Your credit report reflects how up to date you are on paying your credits, your outstanding balance and the amount of money you still owe. A good standing on your credit report assures the lenders that their risk in investing with you will assure them that they will get their money back and assures you that your home mortgage loan gets approval.
In relation to this, financial experts recommend that it is wise for you to check the credit reports once you have them for errors before submitting these to lenders. The reason for this is that, these errors can cost you thousands of dollars more in interest or it could deny you the home mortgage you are applying for.
The second step in taking a home mortgage is to know the current home mortgage rates. Mortgage rates fluctuate and looking at certain economic key indicators such as bonds and Treasury notes can help you decide if it feasible to go for a home mortgage now and can help you get interest savings.
The third step in taking a home mortgage is to decide which mortgage program is best for you. There are so many kinds of programs and loans that are available. These include government loans and non-governmental loans called conventional loans. It is best to be educated and knowledgeable about all these home mortgage options in order to get the best for your situation. Some things that you need to consider when you're in this stage are:- the amount of money you have for down payment for your home mortgage- the amount of monthly payment on your home mortgage you can afford without worry and with security- the number of years you plan to stay on the house or with the home mortgage- the importance of paying off the home mortgage early - the ability and an objective to give extra principal payments and,- your projection of your income's stability or its possibility to increase in order for you not to have difficulties in paying off your home mortgage in the future.These should all be considered because remember, a home mortgage is a long period investment and requires huge amounts of money.
The fourth step is to check and compare interest rates among the various lenders. This is the most difficult part but this is where you can usually save off in interests when you are already in the middle of a home mortgage program. Be wary also of terms that different lending companies use that may be pointing to the same thing. Other companies might waive off some fees and then add another one, which might cost you more. Take time to know all the figures behind the names they use for the fees that they give.
The fifth step is to look at the whole home mortgage package. Aside from interests, you need to consider other factors in the package such as the type of mortgage, the type of down payment, the presence of prepayment penalties, lock-in period, mortgage insurance, payment schedule, and other features.
And lastly, when you have decided on the lender for your home mortgage, determine the required documents for your loan. These typically include a completely filled up Uniform Residential Loan Application and your credit report fee. Fees are usually collected when submitting a home mortgage applications. Some of which are application fee and appraisal fee. Other requirements and fees needed to be paid for your home mortgage application may vary from one lending institution to another.
The initial step is to order your credit report from the country's three major credit reporting agencies which are Equifax, TransUnion and Experian. Your credit report is very important in your home mortgage because this determines your ability to pay off the home mortgage you are applying for. Your credit report reflects how up to date you are on paying your credits, your outstanding balance and the amount of money you still owe. A good standing on your credit report assures the lenders that their risk in investing with you will assure them that they will get their money back and assures you that your home mortgage loan gets approval.
In relation to this, financial experts recommend that it is wise for you to check the credit reports once you have them for errors before submitting these to lenders. The reason for this is that, these errors can cost you thousands of dollars more in interest or it could deny you the home mortgage you are applying for.
The second step in taking a home mortgage is to know the current home mortgage rates. Mortgage rates fluctuate and looking at certain economic key indicators such as bonds and Treasury notes can help you decide if it feasible to go for a home mortgage now and can help you get interest savings.
The third step in taking a home mortgage is to decide which mortgage program is best for you. There are so many kinds of programs and loans that are available. These include government loans and non-governmental loans called conventional loans. It is best to be educated and knowledgeable about all these home mortgage options in order to get the best for your situation. Some things that you need to consider when you're in this stage are:- the amount of money you have for down payment for your home mortgage- the amount of monthly payment on your home mortgage you can afford without worry and with security- the number of years you plan to stay on the house or with the home mortgage- the importance of paying off the home mortgage early - the ability and an objective to give extra principal payments and,- your projection of your income's stability or its possibility to increase in order for you not to have difficulties in paying off your home mortgage in the future.These should all be considered because remember, a home mortgage is a long period investment and requires huge amounts of money.
The fourth step is to check and compare interest rates among the various lenders. This is the most difficult part but this is where you can usually save off in interests when you are already in the middle of a home mortgage program. Be wary also of terms that different lending companies use that may be pointing to the same thing. Other companies might waive off some fees and then add another one, which might cost you more. Take time to know all the figures behind the names they use for the fees that they give.
The fifth step is to look at the whole home mortgage package. Aside from interests, you need to consider other factors in the package such as the type of mortgage, the type of down payment, the presence of prepayment penalties, lock-in period, mortgage insurance, payment schedule, and other features.
And lastly, when you have decided on the lender for your home mortgage, determine the required documents for your loan. These typically include a completely filled up Uniform Residential Loan Application and your credit report fee. Fees are usually collected when submitting a home mortgage applications. Some of which are application fee and appraisal fee. Other requirements and fees needed to be paid for your home mortgage application may vary from one lending institution to another.
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