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.
When undergoing a mortgage refinance, one step in the process is acquiring an appraisal of your home. An appraisal is a written estimate of the market value of your property. Mortgage lenders will use an appraisal to determine the amount one qualifies for the mortgage. The appraisal will also establish how much equity there is in a home. It gives an estimate of the price that can be obtained by selling the property. An appraisal is a necessary step when refinancing existing mortgage because it assures the lender or bank that the property will sell for at least the amount which they will be providing as a home loan. This protects them in the event of a mortgage default by ensuring they will get their money back if they have to repossess the house and sell it.The mortgage lender will normally arrange for the appraisal. It often depends on the mortgage company’s policy for obtaining appraisals. A home appraisal is different from a home inspection. Appraisers look for value in a home. Lenders need to know the home is worth what you want to borrow. The appraiser is a licensed professional that will do a market analysis of the sale price of a home. The appraisal will require a thorough inspection of your home inside and out. The appraiser will look for problems in the property.Appraisals generally include: evaluating the condition of your home, details of the property, a comparison of the property with other properties in the area, an evaluation of the real estate market in the area, the type of area where the property is located, and an estimate of how long it will take to sell. Although it may vary among appraisers, generally speaking, they take home sales within about a 1/4 mile within the last 4 – 6 months and average them per square foot. They then multiply that number by the square footage of the home being appraised.The appraiser will assess the actual home. He or she will measure the outside of your home, look at the inside, take pictures of both the outside and inside and determine a market price for your home based on the most current previous sales of nearby homes. Such aspects that affect a home value include: kitchen, number of bedrooms, size of rooms, finished basement, new roof, number of bathrooms, new windows, and a solid foundation. They will also measure the property line to get the amount of square feet on the outside. They will then notify the lender or person who requested the appraisal. The lender uses all of the information to determine the amount of the refinance loan.The appraiser’s assessment of a home is an extremely important part of refinancing a mortgage. It is important to inform the appraiser of any new additions such as a garage or patio deck. Before an appraiser arrives, make sure that you have all repairs completed that can affect the value of your home. Factors that can affect the value can include poor upkeep of the property and any damage to the home. Because of the low interest rates being offered by banks and other lenders, this is a great time to refinance. Knowing what appraisers look at when assessing a home and neighborhood will increase the likelihood that you will get a great refinance loan.
If you are looking for an equity line of credit it can be easy to find once you talk to your bank. Many people have lost a lot of equity in their house since prices have recently fallen. If you’re one of the lucky ones and you still have an equity it is not hard to get approved for an equity loan or line of credit. Their many advantages when getting this type of loan and one of the best is that you can always get the lowest rate of interest. If you’re wanting to do some improvements on your house this is probably the best way to do them.It is important that when looking for an equity line of credit you shop around and find the lowest interest rate you can. First you want to check with your current bank and see what race they can offer you. Search online and compare your banks rates with other rates you can find online. you should also consider getting an inequity loan if you’re trying to pay off some old debt because in most cases you can get a lower rate of interest then you can by obtaining a debt consolidation loan. Once you find the rate you are comfortable with it is easy to fill out the application in most cases you can and be approved the same day.Remember that it can be easy to find a home equity loan or line of credit. It is important that you shop around and compare interest rates so that you can find the lowest available one. You should always start with your bank and see if they will match any lower rates that you possibly find online. If you’re trying to reduce your debt or maybe improve your home this is one of the best ways you can get a loan to accomplish either thing.
Getting a Home Equity Loan or Line of Credit can be easy if your house has gone up in recent years. Basically if you take the amount you owe on your home and then take the current value then that amount is what you can get a loan for or line of credit. Getting a Equity Loan can be a great benefit to you if you are making home improvements or if you are in need of money. The benefits of a home equity loan over a traditional loan is that you are guaranteed that you will get approved and this is the best way to get the lowest interest rate possible.When getting this type of loan it is important to understand that you will be given long terms like you did with your original mortgage usually 15 or 30 years. It is important that with this type of loan that you budget in some extra payments that you can make so that you pay off the loan early because paying a loan over this amount of time can really cost you a lot of money in interest even if the rate is low.The first thing that you want to do is to talk with your financial institution and discuss what are your best options to get a Home Equity Loan. They can give you all the current rates and explain how the loan is to be paid back and how long the term will be for.Remember that getting a Home Equity Loan can be a great thing for you if you are in need of money to make improvements. It is important that you get informed so that you understand the terms of the loan and how thew payback works.
In this article, we’ll cover the benefits and disadvantages of home equity loans, home equity lines of credit (HELOCs) and personal loans. Whether you’re looking for funds to finance a major expense or simply pay down consumer debt, this article can help you decide what type of financing is best for you.Home Equity Loan* Best for: Major, unexpected expenses or large investments.* Not for: Ongoing or smaller expenses.How it works: A home equity loan is like a mortgage – the borrower is given a lump sum of money up front and begins paying interest and principal payments right away. The amount of the loan is based on how much equity you’ve acquired in your home after appreciation and mortgage payments.* Pro: Home equity loans typically offer a lower, fixed interest rate than HELOCs and personal loans.* Con: Borrowers have to pay interest on the full balance right away.Home Equity Line of Credit (HELOC)* Best for: Ongoing expenses like major renovations, college tuition or having a baby.* Not for: single, major expenses.How it works: A home equity line of credit is secured by the equity in your home, and you can draw on it like a credit card or savings account. Typically, the rate is adjustable and you’ll make interest payments on what you borrow until the term of the line of credit is over.* Pro: You only pay for what you borrow and they’re often easier to qualify for and faster to get than home equity loans.* Con: The interest rate is adjustable and often higher than a home equity loan. When shopping for a home equity line of credit, look for a low permanent rate.Personal Loan* Best for: Small single expenses like a new car or small business investment.* Not for: Ongoing living costs, major projects like home renovations.How it works: A personal loan is a loan given to you by the bank and often secured by the piece of equipment (e.g. a car) or property (e.g. business) that you’re using the loan to purchase. Typically, personal loans are smaller and can often be obtained in the form of a line of credit.* Pro: Simple application process without sacrificing home equity.* Con: Without the security of home equity, the interest rates on a personal loan are often higher.In short, whether you get a home equity loan, a HELOC or a personal loan will depend on why you need to borrow the funds, the kind of interest rates you can afford and your own current financial situation. Remember, always shop around for the lowest interest rate! Doing so can save you hundreds – if not thousands – of dollars over the life of the loan.
Can Your Line of Credit Disappear?In Australia, lines of credit have been a flexible way of people gaining access to funds secured by their own homes. But what happens when a lender cancels your line of credit, and what you may do to avoid this from happening.What is a Line of Credit? A line of credit may allow you to access the equity within you home to borrow for other reasons at home loan rates. The equity that you have is simply the difference between what what your home is worth and what you owe on it.Hopefully, the value of your home will increase over the years, so that even if you have not paid off significant amount of the loan your equity and real worth of the home has increased.While lines of credit may be an effective way of consolidating your debts at low interest rates, they may also lead you into paying little off the principal of the loan or even going backwards.Remember, every time you access your line of credit for a new car, holiday etc, you are wearing down the equity in your own home.Some Reasons why a Line of Credit May Be Revoked1. You Weren’t Truthful in Your ApplicationIf you didn’t fully disclose all relevant financial details to the lender that would affect their decision to lend you the money, they can certainly take away the facility.Often people inflate the value of the property or their ability to repay the loan via personal financial circumstances. If these misrepresentations are revealed, the line of credit may be revoked immediately.2. You Exceeded Your Credit LimitIt seems the temptation of having easy access to loads of cash is too much for many borrowers. Some people simply can’t control their spending and will need to have their repayments altered so that they are easy to meet, or in some unfortunate situations, the line of credit may be withdrawn altogether.3. Your Circumstances Dramatically ChangeNearly all loan documents insist that you inform the lender when your financial situation affect your ability to repay the loan. In extreme cases, this may relate to bankruptcy, imprisonment or death of the main provider. If you don’t inform them promptly of these circumstances, they (the lender) can commence cancellation of your loan.Common Terms & ConditionsA common clause in many loan documents reads something like:”We may refuse to provide further credit at any time without prior notice to you. We may also reduce or cancel the credit limit at any time without notice to you. If we cancel the credit limit we may ask you to pay the money owing in full immediately.”What to do if Your Line of Credit is Cancelled In the unlikely event that a lender revokes a line of credit, there are 3 options depending on why the loan was revoked.1. Convert the line of credit to a standard into a standard loan. This is the best option if you can meet the loan criteria, especially if you can get the lender to waive establishment fees and termination costs.2. Refinance with another Lender.This option may be difficult if not impossible dependent again on your situation. On the other hand, the financial market is constantly changing and new products may arise that suit your needs3. Dispose of the asset used as the security – your homeThis is clearly the worst option and the scenario is usually when mortgage refinancing isn’t possible because the value of your home dropped significantly and you have used up all the equity available through your line of credit before the facility was withdrawn. You then would have to look for a lender that will lend you more than your home is worth.As this is extremely unlikely, you would have to have a fire sale of your property to clear most of the debt.In brief Knowing the terms and conditions of lines of credit is vitally important, especially when the stakes involve the roof over your head. Knowing where you stand before entering such an agreement is a must, and any uncertainties must be discussed in full before proceeding. Lines of credit may be a powerful tool in your financial health, but like any loan, restraint and discipline should never be abandoned in pursuit of temptation.Debt relief contactsFinancial Ombudsman Service, 1300 780 808Credit Ombudsman Service, 1800 138 422Credit & Debt Hotline, 1800 808 488Financial CounsellorsFinancial counsellors offer a free and independent service to help you assess your options if you’re having trouble managing debt. Google “Financial Counsellors” or “Free Financial Counselling” including your locality or capital city to find a Financial Counsellor in your area.Useful websitesFinancial Counsellors Association of NSWWesley MissionCentrelinkConsumer Credit Legal CentreInsolvency and Trustee Service Australia
Ok, tired of those ridiculous credit card statements? Time to refinance! If you own a home chances are your bank will help you out with your bills…and at rates that at a fraction of what your existing credit card rate.If you are paying the minimum payment on your card, and in most cases, on your CARDS, then depending on your outstanding balance, it would take you decades to pay off the cards. During that time you could have paid out in interest more than what you owe on the cards!This is where refinancing comes in. You can secure a line of credit and pay off the credit cards with your line of credit. This way you are making one payment, instead of multiple payments to different cards. Once have you credit line established, cut up most of your cards, but keep one with the lowest interest rate. You should never be without a credit card for emergencies.With your interest rate low, add up the amount per month you were paying on your cards and slap that towards your line of credit monthly. You’ll pay down the line of credit quickly and at the same time, keep yourself some extra “resources” to tap into at a low interest rate.All of this may sound like a daunting task, but in the long run you will be using your money and credit more effectively and this can in turn help you with any future borrowing of money when needed.
You can borrow against the equity in your property by taking a home equity loan or line of credit. It’s important, however, to make sure you weigh the pros and cons to make sure this strategy is right for you. Otherwise you may end up with more debt than you started and with additional risks that you could have avoided.A Lower Rate One of the biggest advantages of a home equity loan is that the interest rate will likely be lower than the rate you pay on credit cards. Plus, home equity financing is tax deductible. For many people, these two factors create significant savings. It has been proven that by exchanging credit card debt with home equity debt you can save thousands of dollars on interests over the whole life of the loan.For some people, however, home equity interest rates may be higher than those for student loans or promotional vehicle loan rates. If you choose to go with a home equity line of credit rather than a loan, you may have an adjustable rate that could increase according to market conditions. Nevertheless the interest rate will always be lower than that of credit cards.Lack of Discipline If you have trouble keeping those credit cards in your wallet, you’ll most likely have the same problem with a home equity loan, especially if you choose a line of credit. You could be paying for impulse purchases years later. Most home equity loans have to be repaid in 15 years, and since most have very low minimum payments that are just interest plus a tiny amount of principal, you may come up short when the loan has to be paid off. Risk of Repossession Don’t forget that your home equity loan or line of credit is secured with your home. So, unlike with consumer debt, if you can’t make the payment and default on your loan, the lender can take legal action of repossession against your property. These loans come with so advantageous terms because the lender knows that he will recover his money one way or another.Summing Up Only if you know that you will change your credit behavior using the equity on your home to pay off your credit card debt makes sense. Otherwise, once your credit card balances are cleared, you’ll start building up more debt and you’ll end up with the same problem that you had, aggravated by the fact that you may loose your property due to your lack of discipline. If you don’t trust yourself and still want to use this method, then just destroy the credit cards and close the accounts so you can be sure you won’t make the same mistakes again
If you have credit problems in your past and a low credit score, if you decide you want to refinance or get a home equity loan, you will probably need to work with a subprime mortgage lender. In order to do that, you will need to be careful of a few things. Subprime mortgage lenders sometimes take advantage of borrowers with poor credit and charge excessive fees or offer terms that are not reasonable.Be careful of these things when applying for a new refinance or home equity loan:1. Watch Out For The Pre-Payment Penalty – Most sub-prime mortgage loans have a pre-payment penalty attached. That means that if you decide to either sell your home or refinance your home anytime within the designated period of time, you will have to pay a penalty which is usually equal to about 6 months of interest or mortgage payments. If you are ok with a pre-payment penalty, make sure you know exactly how long that allotted amount of time is and exactly how much the penalty is. A penalty is usually for anywhere from 6 months to 2 years. But, a penalty that is two years or longer, in some cases, might be considered excessive.2. Watch Out For Junk Fees – Many times in sub prime mortgage loans, a broker will tack on excessive fees that are not completely necessary. Have your mortgage broker go through all of the fees one by one and make sure you understand where all the fees are going. Here is a list of junk fees that sometimes get added to mortgage loans.
Homeowners have several options for acquiring extra cash. If your home has a substantial amount of equity, you may refinance for a lower interest rate and obtain a lump sum of money. In addition, getting a home equity loan or line of credit puts extra cash in your pocket. Home equity lines of credit are very popular. With these lines of credit, you may withdraw money from an open account whenever you need emergency cash.How Do Home Equity Line of Credits Work?Home equity lines of credit are similar to credit card cash advances. If you open a line of credit, using your home’s equity as collateral, you are provided a debit or ATM card. In most cases, the lender will also provide you with a checkbook. If you need money for home improvement, car repairs, or vacation, you may withdraw money from your line of credit.The money you withdraw has to be repaid. Each month the lender will send you a statement with your minimum payment due. Because the amount you withdraw from your home equity line of credit will fluctuate, so do your minimum payments. While home equity lines are similar to credit cards, the interest rate is much lower. Thus, your payments are smaller and you are able to payoff the balance quicker.Home Equity Line of Credit RatesIf you get a home equity line of credit, the lender will either give you a fixed or variable rate. There are advantages to both types of rates. Variable rates are great for individuals who want a low introductory rate. If you do not plan on using a large portion of your line of credit, a variable rate is a good option. However, be aware that your rate may increase, or decrease throughout the years. Interest rate increases result in higher monthly payments.If you plan on using your home equity line of credit to payoff debts or other huge expenses, a variable rate is not in your best interest. It will likely take years before the line of credit is paid back to the lender. During this time, an interest rate increase may drastically increase your monthly payments. If you are unable to maintain payments, the lender may foreclose on your home. Thus, a fixed rate interest rate is a better option. This way, your monthly payments are predictable.