Owing a house is of great help in our lives as it is not only an addition to our asset book but also a superb option for financing our needs at odd hours. Many times in our lives we come across situations when we require funds but it is just not an easy task to arrange credit for these times. So, home equity loans are the best option under such situations. They are a flexible option to cater to all our financial needs.Home equity loan is a loan that is taken by the borrower by keeping the equity in his home as collateral. Equity is the difference between the price that your house is worth and the amount which you owe on it. By keeping the home as collateral, one can easily avail a home equity loan and even the lender does not hesitate in lending in type of loan as they are secured in nature. He just demands collateral for the loan and in case if the borrower fails to repay the loan amount, lender can sell the collateral at his possession to recover the loan.The borrower can only avail a loan that equals his equity. No lender extends credit more than the equity amount and this makes him quiet safe against default since the loan amount can be easily recovered.There are two types of home equity loans- the standard Home Equity Loans and the home equity line of credit.Standard home equity loans are extended at a fixed rate of interest and payments. Under this category, the loan amount is given in lump-sum and the interest rate is charged from the time, the loan is extended. On the other hand, there are home equity lines of credit whereby the borrower is extended credit in installments. The borrower is issued a cheque book or credit card in this case and he can borrow a certain amount whenever he wants rather taking a lump-sum amount. The interest rate is charged only when the borrower withdrew money. Also the borrower is charged a flexible home loan rates under this category.These home loans in India are offered at low interest rates as they are risk-free and the loan amount extended is eligible for certain tax deductions. This factor makes them very attractive as other kinds of loans do not offer this benefit. Even the bad credit borrowers are extended these loans because of their risk free nature.Today home equity loans are provided by almost all banks and financial institutions. A borrower can avail this loan for a variety of options ranging from reconstruction of home, pursuing of higher education, to clear medical bills and even consolidate debt. This is the best option to fund our urgent needs.
You can refinance your home equity loan for lower rates, just like with any other type of credit. Improving your credit and shopping for rates ensure that you will get the best financial deal. Researching lenders couldn’t be easier with rates and terms offered online for easy comparison.1. You Can Improve Your Credit ScoreCredit scores are fluid, changing every time you pay a bill or open an account. While huge credit score improvements take time, you can quickly polish your score with a few steps.First, check your free annual credit report for any errors. Also, spread out any credit card debt amongst your accounts so no card is maxed. Paying off debts and closing unused credit accounts are also good steps.Improving your credit will improve the rates you qualify for, along with other types of credit. However, even if you don’t dramatically perk up your credit score, you can still find great rates.2. Lenders Charge Different RatesLenders charge different rates than what are being quoted in the news. Financial companies determine their rates based on market demands and competition. You can find these below average rates by shopping around.Don’t just stick with the big named companies. Less known companies often offer better rates and terms in order to compete. Online access allows you to find these great deals. You may also find good rates through a broker site.While a difference of less than a percent may seem trivial, it can save you hundreds over the course of your loan. Taking some time to research lenders is really an investment that pays real dividends.3. You Can Request Free QuotesFinancing shopping couldn’t be easier or faster with the internet. Most lenders post their financing information online. You can also request a basic quote by providing some preliminary information.By requesting quotes first, you can compare lenders without filling out a ton of paperwork or authorizing a credit check, which temporarily hurts your credit score.While rates are easy numbers to look at, search for the APR, which includes both fees and rates. That way you can be sure you won’t get stung with large upfront costs.
Home equity loans are an attractive aspect of homeownership. Obtaining a loan from a financial institution is difficult. Applicants must have sufficient collateral or their loan request is denied. Individuals who take out a home equity loan can tap into their home’s equity to borrow money. The funds received can serve many purposes – home improvements, education, or paying off high interest credit cards.Why Choose a Home Equity Loan?When homeowners need quick cash, a home equity loan is the best option. Some choose to refinance their home and wrap the borrowed money into a new mortgage. This is a great option for individuals hoping to avoid making two monthly payments, and for homeowners who had high interest mortgage rates. On the flip side, refinancing a home is similar to applying for new mortgage. The process is lengthy and homeowners are required to pay fees such as closing costs, prepayment penalty fees, and title search fees.Home equity loans do not involve high fees and funds are received within five to seven days.How to Choose a Home Equity Loan Company?Second mortgages or home equity loans carry a higher interest rate than first mortgages. To obtain the best rate, homeowners should obtain quotes from several different loan companies. To begin, homeowners may contact their current mortgage company and determine whether they qualify for a second mortgage. Because a relationship and payment history is established, homeowners might be able to negotiate a low rate.Homeowners may also contact home equity loan companies located in their local area. These include banks, mortgage companies, and other financial institutions. Homeowners should request information on how to qualify for a loan. It is recommended that at least three financial institutions are contacted. Next, homeowners should obtain a quote or estimate from each lender. Compare rates and services, and choose the company with the best offer.Obtaining a home equity loans through a mortgage broker is another option. Brokers work directly with various lenders who specialize in home equity loans for all types of credits. Online brokers are very convenient. Homeowners submit a single application, and within 24 hours they will receive multiple offers from several lenders competing for their business.
Refinancing your home is becoming more popular nowadays, as people chase lower rates and better loan conditions. So why not think about refinancing your mobile home too? There are lots of good reasons to consider it.Firstly, what does refinancing your mobile home loan involve? Basically, you pay out your original mobile home loan with a new one. So effectively you replace one loan with another one that better suits your needs and circumstances. You will need to go through the same application process again, with all the same financials and credit history information required. But if you qualified once, chances are you’ll qualify again.Now, on to some of the benefits of refinancing your mobile home loan.Lower Interest RatesIf you’ve had your mobile home loan more than a couple of years, and you’re on a fixed rate loan, chances are you’re paying a much higher interest rate than you need to. A mobile home refinance loan could see you saving a substantial amount in interest over the course of your loan.Payment CertaintyMany mobile home loans are adjustable-rate mortgages, which means that as interest rates change, so does the mortgage rate. This is great when interest rates are declining, but with interest rate already very low, chances are the only direction likely is up. You don’t want to get caught with substantial rises in your monthly repayment, so refinance to a fixed rate mobile home loan, and you can be certain what your payments are going to be into the future.Better Customer ServiceLet’s face it, dealing with a lending company isn’t always a top-notch experience – customer service can be lacking in a big way. It could also be that your current lender refuses to make changes to your loan that would better suit you. So look around for another lender who might be more sympathetic to your requests, and who gives better customer service overall. With a mobile home refinance, for example, you may be able to increase the length of your current loan term, and so lower your repayments.Capped Interest RatesAgain, if you have a standard adjustable-rate mobile home loan, you’re at risk of rising interest rates making your payments unaffordable. By refinancing your mobile home loan, you can take out a new loan where the interest rates are capped at a certain level. That way, the interest rates may rise a little, but once they reach your capped level, your rate is then fixed. In some ways this gives you the best of both worlds – you can take advantage of adjustable rates when interest rates are low, but you have a fixed rate come into effect if interest rates start rising.Extra CashLike most homes, a mobile home will inevitably need some repairs or refurbishment. With a mobile home refinance, you can pull out any extra equity you’ve built up in your mobile home as cash, which you can then spend on doing the required work.Consolidate DebtIf you’ve had your mobile home loan for a while, chances are you now have considerable equity in your mobile home. If you’ve built up credit card or other high interest cost debt, it may be worth considering consolidating those debts into your mobile home loan. That way, you can pay off your outstanding debt at high interest rates and pay it all off in one easy to remember monthly payment at a much lower interest rate. Just don’t make the mistake of going out and spending up big on your credit cards again once you’ve paid them off – cut them up if you have to.
Many home owners have the need for extra cash to complete home improvement projects, pay for kids college or consolidate credit card debt. Many times these home owners wonder what option is better a traditional refinance vs home equity loan.Refinance vs Home Equity
Home equity loans offer a great way to tap the equity in your home and turn it into cash without having to do a full fledged refinance or pay the high closing costs that are associated with them.
Home equity loans are available as lines of credit and also normal loans. The home equity loan will function just like a standard mortgage. You close the loans, get your cash and make monthly payments to pay it off.
A HELOC or home equity line of credit functions like a credit card. You have a line of credit that you can use for what ever you chose and you spend it as yo need it. Many HELOC also allow you to pay on the interest only making your payments less expensive.
The only drawback to these types of loans is they do not offer the best refinance home mortgage loans rate when compared to a traditional mortgage.
Standard Mortgage Refinance
The standard mortgage refinance will also allow you to tap the equity in your home and turn it into cash. It will offer the best refinance home mortgage loans rate and also give you terms up to 30 years.
It does have much higher closing costs associated with it but often times they can be rolled right into the loan reducing out of pocket costs. These loans are typically used for large cash requirements
The amount of time you should wait to refinance your home depends on some key factors. Some deal with your type of mortgage and the lender you are currently with. Other factors depend on your financial situation and the market at the time you are considering to refinance your home. The type of mortgage you already have on your home determines refinancing timing more than anything else, so lets start there.Questions to Ask Regarding Your Current Mortgage
Does it have a seasoning period? A seasoning period is the time the mortgage company has written into the mortgage documents before which you cannot refinance your home. Some people buy foreclosure homes planning on refinancing once they get it re-appraised with enough value to eliminated the Private Mortgage Insurance. Many banks have time lines on mortgages that help them determine when they break even and will not allow the mortgage to be refinanced before then. If there is no seasoning period then any time is good.
Does your current mortgage have early payoff fees? Most mortgages now have eliminated these clauses because consumers caught on to them. However, if your home was mortgaged some time ago, it may have an early payoff penalty. This means if you pay off the mortgage early (even with a refinancing loan) you will pay a fee. If there is no payoff fee then you do not have to factor in those costs.
Is your current home loan fixed or variable? A fixed term mortgage gives you indefinite security with the current interest rate you have. You can wait out the market and your own personal financial situation to determine when the best time to mortgage will be. If you have a variable or adjustable rate mortgage (ARM) then when the fixed term portion of the mortgage (5 year ARM is 5 years fixed) is up, you may have a significant percentage increase if you do not refinance. If your ARM is getting ready to become variable it is a good time to refinance.
What is your current loan interest rate? Don’t look at the APR (annual percentage rate) since that counts in to your mortgage one time costs you have already paid and cannot recover (closing costs, points, etc). Look at the loan interest rate (the lower number you were likely quoted). Once you have figured out the above factors, and have the loan interest rate in hand you can move onto the next set of factors.Questions to Ask Regarding Your Financial Situation and the MarketThe mortgage market fluctuates interest rates for home loans daily. When that interacts with your personal financial situation and its fluctuations, a few months’ time can make thousands of dollars of difference. Here are some pieces of information you need to make an informed decision about when to refinance your home.
What is your FICO credit score? Do not pay or the vantage credit score, since it is not as well known and likely is not what banks will look at. Get your FICO credit score with a number. If your FICO score is above 700 then it may be a good time to refinance your home loan. If your FICO score is below 700, then you will likely want to repair your FICO score before refinancing since it could save you thousands of dollars to do so.
How much cash do you have on hand? To refinance a home loan you often need cash to cover closing costs (average cost is around $2500). You need to be sure you can cover the closing costs and still have a 3-6 months emergency fund in hand.
How long will you be in the home? If you plan on staying only a short time then the refinancing loan will have to pay for itself quickly. If you plan on being in the home for the foreseeable future then you can afford to take a few years for the refinance to pay for itself. Divide the total costs of refinancing by the savings per month over your old loan to determine how long it will take to pay or itself.
Is the APR for a new loan less than the loan rate for the current loan? You basically want to be sure that the costs of closing (assessment, points, origination fee and so on) when considered as part of the interest rate of the loan save you money over the loan interest rate you already have. Again, don’t look at the APR of your current home loan, that includes previous closing costs that you can’t change.
Why should you take out a second mortgage or a home equity line of credit instead of refinancing?Well…You Shouldn’t!Why Not?1. Second Mortgages usually have an interest rant that is twice or even three times as high as your first mortgage rate. You can refinance instead and keep a very low rate. In the long run a second mortgage will just cost you money in interest charges.2. Home equity lines of credit are designed for mortgage account executives (salespeople) to sell you on using it like a credit card attached to your home. They will try to convince you to use it over and over again.3. A refinance loan is better for the equity in your home. Very few companies will refinance your home at 100% of it’s value without forcing you to take out a second mortgage. You don’t want to use 100% of your equity because that means you no longer have that equity to fall back on in emergency situations.4. Second Mortgages and Home Equity lines of credit are designed to provide account executives (salespeople) with another tool to sway you into putting another commission in their pocket.5. Your equity is a precious thing and should not be used for unnecessary add ons or impulse buys. If you don’t need it and there is even a slight chance you can’t afford it, then don’t get a second mortgage to buy it.The only reason that I would ever recommend a second mortgage or a home equity line of credit is in an emergency situation. Only when there is no other option and you must take out a loan would I recommend either one of these options.
Gone are the days where home buyers stayed with their original lender for the duration of their home loan. Many now shop around for lower repayments, a lower interest rate, more loan options or better service.There can be many benefits to refinancing your home loan, but it’s important to look at your situation carefully and to clearly compare possible benefits and disadvantages.Typical reasons for refinancingYour home loan may no longer be the one that’s best for you, especially if your needs have changed since taking it out. Or you may want to consolidate other debts (like credit card balances, car finance or personal loans) by borrowing against the equity in your home. Secured property loans generally charge lower interest rates so you can reduce your total monthly repayments.If you previously paid a premium rate through not meeting normal lending criteria, your situation may now have improved and you could save interest by switching to a standard home loan.Alternatively, you may not be happy with the service or loan access options you are currently receiving. Rate competitiveness and fees are a major factor. You may be able to get a more competitive deal from another lender.What will refinancing cost?Check what your present lender will charge for breaking your agreed loan term and what discharge costs apply. What will your new lender charge to establish your home loan? Their costs will include a revaluation of your property as well as loan settlement costs.Mortgage stamp duty and registration fees don’t usually apply when refinancing your home loan, but be sure to check. And if you want to borrow more than 80% of your property’s value, you’ll need to pay Lender’s Mortgage Insurance. This could be considerable so again be sure to check.Who offers the best deal?If you’re happy with your present lender’s service, discuss your home loan needs with them first; they may be able to help and you may eliminate discharge and establishment fees.For information about other lenders, check out the Internet, home finance magazines, newspapers or phone and visit potential lenders direct.What about the paperwork?Refinancing your home loan does involve some time and effort to ensure you get the best new loan for your needs and minimise your costs.You’ll need to get your supporting documentation together, to confirm your income, your repayment history, property details and so on. An organised approach will make the whole process much easier with a lot less stress.
If you decide to sell your home, you most likely are going to want to buy another one. This process is known as stepping up in the market, but can lead to financing problems.Selling and buying homes can be a bit stressful to say the least. If you recall the process of buying your first home, you know this is more than true. Now that you are going to both sell your current home and buy another, you are going to have twice the stress. There is also another problem that may arise. It is known as the financing gap.When you sell a home, the transaction will close upon an agreed upon date. At the same time, you are going to be trying to buy a home that will close on or near the same date in question. At least, that is how you should try to line it up. The problem, of course, is coming up with money for the new purchase. You may have a lot of equity in your first home, but it is in a non-liquid form, to wit, you can’t spend it. When you need to put down an earnest money deposit or down payment on the new home, how do you come up with the money?The typical answer for filling this “financing gap” is to get a bridge loan. A bridge loan is a short term loan of two to three months that gives you the liquidity required to purchase the new home. Sound great, right? Well, short term loans are infamously expensive. Points and fees are, frankly, outrageous. So, is there another solution?One option is to try to use your home equity line of credit. A line of credit on your home is just what it sounds like. It allows you to tap your equity in the home, often through a checking account. If you actually sell the home at some point, the line becomes due immediately upon closing. That being said, you can still time out the sale and purchase real estate transactions to use it to provide financial assistance with your new purchase.Assume I list my home for sale on March 1st. I also go out and start house hunting and applying for pre-approval on a new loan. I reach an agreement to sell my home on April 1st and also reach an agreement to buy a home on April 3rd. The problem is I have nominal amounts of liquid money. I can access my line of credit to pay the deposit and down payment on my new home. When the sale of my previous home closes, the equity line is paid off when the buyer funds the transaction. By taking this step, I have effectively used the equity in my own home to buy the new one and avoided paying high fees and costs with a bridge loan.
Refinancing your home – everyone’s doing it! Everywhere you turn, there’s someone talking about refinancing; when they refinanced their home, how their parents refinanced their home, when are you going to refinance your home… and so on.If everyone’s doing it, it must be the right thing to do… right?Refinancing your home does have some benefits, there’s no doubt about that. After all, if it didn’t, it wouldn’t be such hot news.But does that mean that there’s nothing for you to think about or consider, that you should just run right out and sign up for the fastest and easiest refinancing deal you can get? Refinancing is like a windfall of cash from your home, right?Absolutely not. Refinancing your home is a legal contract and a debt that you’re entering into, and one that should be done only after you’ve given it some thought, time, and attention. There have been many homeowners who have made that mistake, of rushing out to sign the first refinancing deal they can, only to regret it later when they realized just what they had done.Why is that? What information did they miss or refuse to consider?If you don’t want to make the same mistake they did, if you want to be sure that refinancing really is the best deal for you and your family and your unique financial situation, here are seven critical factors about refinancing that you must consider first:1. What it means to refinance.Refinancing your home means setting aside your original mortgage in order to sign a new one; this new mortgage amount would include the balance on your current mortgage plus its own interest amount.When refinancing, you are basically asking the bank to set aside your current mortgage and then loan you the money you currently owe on your home all over again. So, if you originally borrowed $150,000 for your home purchase and since then have paid enough so that you currently only owe $100,000 on your mortgage, to refinance means to set aside that original loan and ask the bank to lend you that $100,000 as a fresh loan.This is important because many people think that refinancing is like a home equity windfall, where you adjust your current mortgage to get cash in your pocket from your home’s equity.This just isn’t correct. Refinancing is a completely new mortgage that replaces your old one.2. Not everyone is eligible to refinance.Your original mortgage that you currently have on your home is a legal contract that you’ve entered into, obligating you for the life of that loan. Not every bank or lending institution even allows for you to set that loan aside and find a new mortgage.Additionally, refinancing into a new mortgage also has qualifications that come with it, including credit history, the home’s value, and so on. Some people have found that their poor credit history has made them ineligible for refinancing, or for refinancing at a lower interest rate than what you have currently. As with other loans and even your original mortgage, the better your credit history, the lower the interest rate you are offered. If you still have poor credit, you might not be eligible for an interest rate that’s any better than what you currently have.To think that you’re automatically eligible for refinancing without first checking with your current mortgage holder to see if you can even set aside this original mortgage, or if your credit history is adequate, would be a mistake. It will save you a lot of time and effort if you first check with your current mortgage holder regarding their policy on refinancing, and do some checking on your own credit score as well.3. There is often a penalty involved.When you realize that refinancing means setting aside your original mortgage, you may naturally ask why your bank would allow you to do that. Won’t they lose money in the interest that you would continue to pay for the life of that mortgage?The answer is yes, they would lose money. Which is why most banks have a stiff penalty for anyone that wants to pay off their mortgage early or refinance with another lending institution.And sometimes this penalty can be steep. It’s usually figured as a percentage of your current mortgage, so if the principal amount that you still owe is quite high, this penalty will be rather high as well. If you’re not sure if your current lender includes a penalty for early payment, don’t hesitate to ask them directly.4. There are fees and closing costs that come with refinancing.Remember when you signed your original mortgage, and you had to pay a number of fees – credit check, appraisal fee, home inspector’s fee, processing fee, title search, title insurance, and so on?All of these fees and costs are also tacked on when you refinance. And as with the penalty for early payment, sometimes these fees can be very high as well, even into the thousands of dollars.5. It doesn’t always save money.Consider the information we’ve given you already, about penalties and fees associate with refinancing.Many people have found that when they add up all these costs, they really are not saving any money with refinancing, at least not right away.Most lending institutions refer to a “break-even point.” This means how many months it takes of paying a smaller mortgage payment before you’ve saved enough to cover, or break even, from these penalties and fees.To figure if you would really save money on a new mortgage, you would need to add up all the potential fees, penalties, and costs with refinancing. Then, you can take the amount of money you would save every month with your new mortgage, and divided those costs by this number, and that will tell you how many months it will take before you break even.Let’s give you a quick example. Suppose your penalties, closing costs, and other fees add up to $3,000.Suppose your current mortgage payment is $1,000. With refinancing, your new mortgage payment will be $850. This means you would be saving $150 per month.$3,000 divided by $150 is 20; it would take you 20 months (almost two years) to just break even from your penalties and fees.Obviously your own numbers would be different, but it does give you some information to think about. If your savings per month will be even less and your costs even more, and it takes you years to just break even, is it worth the time and hassle to go through refinancing in the first place?6. It can actually save you thousands of dollars in the long run.If we just said that the penalties and costs can make refinancing not worth the time and hassle, how can we say now that it might actually save you thousands of dollars?Simply put, many people signed up for an adjustable rate mortgage (ARM) years ago when interest rates were low. They did this because they were able to use a smaller down-payment and had lower mortgage payments at the time, so they were able to afford a home.However, interest rates have a tendency to do nothing but rise, and many people are finding that their mortgage payments are also creeping up. However, their higher payments are doing nothing to pay down the principal of their mortgage but are simply paying more and more toward the interest.If this is true in your case, you may want to consider refinancing in order to lock in a lower interest rate now, before rates get even higher. While an 8% interest rate may seem high if you signed your mortgage at 6%, it will seem very reasonable a few years from now if your ARM reaches 10% or even more.7. It can be wise if you’re using the home equity in other ways.Let’s suppose you are hesitant about refinancing because that 8% interest may seem high compared to the original interest rate you once had.However, there may be other things that you can do with the equity cash back you receive from refinancing, other than put it toward your mortgage payment. For example, are you swimming in credit card debt? What is the interest rate on your credit cards? If it’s higher than the rate on your mortgage (which it usually is), then it might be wise to use that money you get back or save from refinancing to pay down that debt.No, you don’t build equity by paying credit card debt the way you would by paying your mortgage, but many people simply don’t realize how much money they waste on credit card interest payments, especially when they’re paying only the minimum balance month after month, year after year. Assuming that you don’t even use the credit card to increase its balance, you can actually wind up paying half over again (or even more) in interest charges by the time you pay off your credit card.Additionally, you may be thinking of refinancing so that you can use some cash back to invest in your home for repairs or upgrades. These types of things can only increase the value of your home, making it a worthy investment.So depending on how it is that you expect to use the money you would save from refinancing, it might actually be a wise financial decision.These few tips that we’ve outlined here are in no way meant to be an exhaustive education on refinancing. And of course, as we’ve said, your exact numbers and financial situation will be different.However, the point is that for you to make the best decision for yourself and your family, you do need to do some homework. If you’re considering refinancing, set up an appointment with your lending institution or financial counselor. Don’t hesitate to ask questions and make sure you really understand every detail before you sign papers.And in the end, you’ll be able to make the best financial decision for yourself and your family.