Many people are thinking about refinancing their mortgage because they know that they may get low interest rates. However, refinancing a mortgage is not always the best decision to take. The following are conditions in which mortgage refinancing may not be a good idea:
1. Long Break-even Period
Before people decide to refinance their mortgage, they have to calculate the break even period. To calculate the break even period, people need to know how much money they will have to spend on the new loan‘s closing costs. People can ask their lender to get the estimation, and use the number to do the break even period calculation. There is no standard of acceptable break even period. Everything depends on how long people plan to stay in the house, and how sure they are with their prediction.
2. Expensive Long-term Costs
Refinancing a mortgage can be a great way to lower the monthly payment. However, it may actually be more expensive in the long run. People who have been in a 30-year mortgage for a few years have paid a considerable amount of money for the interest, but they have not paid much of the principal. If they refinance with another 30-year mortgage, they can get lower interest, but they have to be paying it for another 30 years. In this case, the amount of money that people save from refinancing is actually insignificant compared to the amount of money that they will spend in the long run.
3. Having to Change to an ARM to Get Lower Rate
People who already have a low interest rate on their mortgage will need to refinance with an adjustable-rate mortgage if they want to benefit from substantial savings. The interest rates of adjustable-rate mortgages are the lowest in the industry. Because the interest rates are so low, many people decided to take an adjustable-rate mortgage to refinance their previous mortgage without even thinking. The problem with adjustable-rate mortgages is that the interest rates are currently low, but they may not be as low in the future. People who take an adjustable-rate mortgage may face higher monthly payments when the mortgage resets.
4. Expensive Closing Costs
When people refinance their mortgage, they have to pay some costs. The problem is that mortgage closing costs are not cheap. Usually, people have to pay thousands of dollars on closing costs. Some lenders provide the option to roll the closing costs into the loan, but of course, people will need to pay interest on it.
Most people find it difficult to decide whether to refinance their mortgage or not. Rather than doing something that they may regret for many years, people should get a professional opinion from a financial advisor, not from people who want to sell a mortgage to them.
Tuesday, August 23, 2011
The Best Solutions for “Underwater” Homeowners
Many homeowners are trapped in a difficult position. Their mortgage balance is more than the actual value of their home. This kind of problem may be the result of some events that people cannot control, such as a deteriorating neighborhood, falling real estate prices, etc. However, “underwater” homeowners may also be in their current condition because of their own fault, such as taking an adjustable rate mortgage, or borrowing more than what they can afford by taking an excessive equity loan. Being “underwater,” or also referred to being “upside down,” is not a comfortable position. But the problem is that it is not easy to escape it. The ideal way to solve this problem is to continue paying the mortgage. But people who want to start over need to take a drastic step. In many cases, “underwater” homeowners need to sell their home cheaply. The following are some options that might be the right solutions for homeowners who are “underwater.”
1. Short Selling the Home
If the difference between the amount of mortgage and the sale price of the home is small, short selling can be a good option. In short selling, the homeowner can use check to pay off the mortgage balance. However, if the homeowner must sell the property but cannot afford to pay off the mortgage balance, the holder of the mortgage must be contacted to arrange everything. Arranging a short sale with a lender is not an easy task. Homeowners who want to short sale their home often need to wait a long time and deal with lots of paperwork. After the lender agrees to do the short sale, the homeowner must find a real estate agent to handle the sale. However, after the short sale, there is a chance that the homeowner might end up owing money to the bank.
2. Foreclosure
When homeowners realize that the difference between the home’s sale price and the amount that the bank is willing to accept is too much, foreclose may be a better option. However, foreclosure is only to be taken when there are no other solutions available. Doing a short sale hurts people’s credit score, but a foreclosure is worse. People must remember that a bad credit score will affect many things in their life.
To avoid getting trapped in “underwater” position, people should choose to get a mortgage to buy a home that they can actually afford. People should also try to pay off their mortgage as quickly as they can. According to an expert, it is always a good idea to make a substantial amount of down payment when taking a mortgage, because by doing so, people can have enough home equity that keep them safe in case home values decline
1. Short Selling the Home
If the difference between the amount of mortgage and the sale price of the home is small, short selling can be a good option. In short selling, the homeowner can use check to pay off the mortgage balance. However, if the homeowner must sell the property but cannot afford to pay off the mortgage balance, the holder of the mortgage must be contacted to arrange everything. Arranging a short sale with a lender is not an easy task. Homeowners who want to short sale their home often need to wait a long time and deal with lots of paperwork. After the lender agrees to do the short sale, the homeowner must find a real estate agent to handle the sale. However, after the short sale, there is a chance that the homeowner might end up owing money to the bank.
2. Foreclosure
When homeowners realize that the difference between the home’s sale price and the amount that the bank is willing to accept is too much, foreclose may be a better option. However, foreclosure is only to be taken when there are no other solutions available. Doing a short sale hurts people’s credit score, but a foreclosure is worse. People must remember that a bad credit score will affect many things in their life.
To avoid getting trapped in “underwater” position, people should choose to get a mortgage to buy a home that they can actually afford. People should also try to pay off their mortgage as quickly as they can. According to an expert, it is always a good idea to make a substantial amount of down payment when taking a mortgage, because by doing so, people can have enough home equity that keep them safe in case home values decline
Improvement Loan Options
However, the first thing that you need to know about home improvement loans is that there is no such thing. This overused term actually describes any number of loans that can be put toward general home improvements. Here are a few of the most popular examples:
1) Home Equity Loan
A home equity loan is a loan where the borrower uses the equity in their home as collateral. The equity in your home is essentially the amount of your loan that you have paid off and therefore “own” in your home. These types of loans are also commonly referred to as “second mortgages” because they are taken out in addition to the first mortgage. Also, these types of loans are usually for a shorter duration of time than the primary mortgage. The loan comes in a lump payment to the borrower and is paid off in regular intervals at a fixed rate.
2) Home Equity Line of Credit
A home equity line of credit is similar to a home equity loan in that you borrow on the equity of your home. However, instead of getting the money as a lump sum, you get it in a revolving fashion much like a credit card. You qualify for a specific amount based on the equity you have in your home. You can take out amounts up to your limit, and as you pay the principle of the loan back, you can use it again—just like a credit card.
One advantage of this type of loan to the regular home equity loan is that you only end up borrowing exactly what you need. The negative side of both of these loans is that you are using your home as your collateral. If you default on the loan, you will likely lose your home. While many people use these loans for home improvements, they can also be used for college or other expenses.
3) Energy Efficient Mortgage
Sometimes, renovations aren’t just about fixing the aesthetics of a dated bathroom or kitchen. Sometimes, they are essential to the upkeep of the house and to lowering bills. Replace an aging, inefficient HVAC system and ductwork and you’ll save money on bills and have a more temperature-controlled home. An EEM is like a second mortgage that is ultimately rolled into your primary mortgage. For a new house, you can get it when you first get your mortgage. You can utilize this type of loan for an existing home by having it added on during a refinance. Any funds received are earmarked for specific renovations.
4) Cash-out Refinance.
A cash-out or cash-back mortgage refinance is when you refinance your home for more than the outstanding balance on your existing loan. This is usually a strategy used when a property has increased in value. For example, say you bought your house for $200,000 ten years ago and have paid off $90,000 of the loan and still owe $110,000. The house has doubled in value since you purchased it, so it’s now worth $400,000. You could do a cash-out refinance where you refinance for $250,000. You use the money to pay off the outstanding $110,000 loan and take the remaining $140,000 in cash for renovations.
If you are looking to make changes to your home but didn’t think you could afford it, look into a home improvement loan. I’ve tried to give you an overview of the most popular types of loans, but dig deeper and you likely find something that is even more closely tailored to your needs.
1) Home Equity Loan
A home equity loan is a loan where the borrower uses the equity in their home as collateral. The equity in your home is essentially the amount of your loan that you have paid off and therefore “own” in your home. These types of loans are also commonly referred to as “second mortgages” because they are taken out in addition to the first mortgage. Also, these types of loans are usually for a shorter duration of time than the primary mortgage. The loan comes in a lump payment to the borrower and is paid off in regular intervals at a fixed rate.
2) Home Equity Line of Credit
A home equity line of credit is similar to a home equity loan in that you borrow on the equity of your home. However, instead of getting the money as a lump sum, you get it in a revolving fashion much like a credit card. You qualify for a specific amount based on the equity you have in your home. You can take out amounts up to your limit, and as you pay the principle of the loan back, you can use it again—just like a credit card.
One advantage of this type of loan to the regular home equity loan is that you only end up borrowing exactly what you need. The negative side of both of these loans is that you are using your home as your collateral. If you default on the loan, you will likely lose your home. While many people use these loans for home improvements, they can also be used for college or other expenses.
3) Energy Efficient Mortgage
Sometimes, renovations aren’t just about fixing the aesthetics of a dated bathroom or kitchen. Sometimes, they are essential to the upkeep of the house and to lowering bills. Replace an aging, inefficient HVAC system and ductwork and you’ll save money on bills and have a more temperature-controlled home. An EEM is like a second mortgage that is ultimately rolled into your primary mortgage. For a new house, you can get it when you first get your mortgage. You can utilize this type of loan for an existing home by having it added on during a refinance. Any funds received are earmarked for specific renovations.
4) Cash-out Refinance.
A cash-out or cash-back mortgage refinance is when you refinance your home for more than the outstanding balance on your existing loan. This is usually a strategy used when a property has increased in value. For example, say you bought your house for $200,000 ten years ago and have paid off $90,000 of the loan and still owe $110,000. The house has doubled in value since you purchased it, so it’s now worth $400,000. You could do a cash-out refinance where you refinance for $250,000. You use the money to pay off the outstanding $110,000 loan and take the remaining $140,000 in cash for renovations.
If you are looking to make changes to your home but didn’t think you could afford it, look into a home improvement loan. I’ve tried to give you an overview of the most popular types of loans, but dig deeper and you likely find something that is even more closely tailored to your needs.
Home equity loans guide for dummies
Home equity loans – Popular and high demand is a good way to describe this loan type. You might have heard all about this loan before and you seem interested in getting a home equity loan, yet you dont really know much about it. Did you know you can get a bad credit debt consolidation home equity loan? that you can use your home equity loan to consolidate all your outstanding debt and at the same time better your credit score?
Yes, this is true, even if you have bad credit, you are still eligible to apply and be approved for a home equity loan. One great advantage is that you can now apply for home equity loans online without having to que up at the bank and face endless paperwork procedure. How convenient is that ?
Due to the high demand in home equity loans, thousands of home equity loan lenders have taken their service to a new dimension by now offering home equity loans online. These lenders also offers a large variety of different home equity loan options and packages.
Before you apply for a home equity loan, please make sure you know all about his loan to prevent yourself from unwanted surpsrises in the future. So what is there to know about these loans?
Before filling out a online application for home equity loans, make sure you read about the following:
- home equity loan rates – bad credit debt consolidation home equity loans – benefits of a home equity loan – home equity loan pros and cons – how and where to get these home equity loans – and much more
Would you like to read more? Maybe apply for a home equity loan? Compare rates? Use a calculator? Find local hme equity loan lenders?
THEN GO HERE !
With us you can find the best deals and lowest rate home equity loans online. Compare your given rates and decide which home equity loan lender offers you a great deal.
Also find free online home equity loan calculators to help you determine your home equity loan costs.
Yes, this is true, even if you have bad credit, you are still eligible to apply and be approved for a home equity loan. One great advantage is that you can now apply for home equity loans online without having to que up at the bank and face endless paperwork procedure. How convenient is that ?
Due to the high demand in home equity loans, thousands of home equity loan lenders have taken their service to a new dimension by now offering home equity loans online. These lenders also offers a large variety of different home equity loan options and packages.
Before you apply for a home equity loan, please make sure you know all about his loan to prevent yourself from unwanted surpsrises in the future. So what is there to know about these loans?
Before filling out a online application for home equity loans, make sure you read about the following:
- home equity loan rates – bad credit debt consolidation home equity loans – benefits of a home equity loan – home equity loan pros and cons – how and where to get these home equity loans – and much more
Would you like to read more? Maybe apply for a home equity loan? Compare rates? Use a calculator? Find local hme equity loan lenders?
THEN GO HERE !
With us you can find the best deals and lowest rate home equity loans online. Compare your given rates and decide which home equity loan lender offers you a great deal.
Also find free online home equity loan calculators to help you determine your home equity loan costs.
Best Home Equity Loans
It is first important to understand what the best home equity loans are. As the name suggests you will be putting your home up as collateral in exchange for the loan. This may sound a like a mortgage and in fact, the equity loan is a type of second mortgage but there are some key differences. A second mortgage is used to either alter the conditions of the original mortgage or to refinance it. The second mortgage is on a set schedule with a set amount that must be paid back. An equity loan on the other hand is based largely on your credit score which determines the amount of the loan you receive. Mortgages are based on the value of the home.
Instead an equity loan is based on your credit score. Like a mortgage you will be putting your house up as collateral which means that failure to repay the loan means the loss of your home. Another loan similar to a home equity loan is the Home equity line of credit or HELOC. The difference here is that the best home equity loans are available only once or twice while the HELOC is a revolving line of credit.
You must be very careful when deciding if you should take out such a loan. Small purchases or ones deemed unnecessary such as a plasma television or a vacation are not ideal reasons to take out the best home equity loans using your house as collateral. Instead, save this loan for something a bit more important like emergency surgery and college tuition.
Once you determine that the loan is justified given the need you must now find the loan. You will need to get a hold of an advisor which will help determine the amount you can borrow, remember it is based on your credit score. The advisor will also be able to help you establish a budget to see if you will be able to pay the loan back in the alloted amount of time. Once that it determined it is time to shop around and compare prices.
Loans can be very helpful in times of need. Never forget that a loan is something must be paid back often times with interest. Loans that use your property as collateral are very dangerous especially if you are not 100% sure that you can pay it back by the time agreed upon. This is especially true with home equity loans but it is possible to find a good loan suitable for your needs. While finding the best home equity loans might take some time to find it will be time worth spent.
Instead an equity loan is based on your credit score. Like a mortgage you will be putting your house up as collateral which means that failure to repay the loan means the loss of your home. Another loan similar to a home equity loan is the Home equity line of credit or HELOC. The difference here is that the best home equity loans are available only once or twice while the HELOC is a revolving line of credit.
You must be very careful when deciding if you should take out such a loan. Small purchases or ones deemed unnecessary such as a plasma television or a vacation are not ideal reasons to take out the best home equity loans using your house as collateral. Instead, save this loan for something a bit more important like emergency surgery and college tuition.
Once you determine that the loan is justified given the need you must now find the loan. You will need to get a hold of an advisor which will help determine the amount you can borrow, remember it is based on your credit score. The advisor will also be able to help you establish a budget to see if you will be able to pay the loan back in the alloted amount of time. Once that it determined it is time to shop around and compare prices.
Loans can be very helpful in times of need. Never forget that a loan is something must be paid back often times with interest. Loans that use your property as collateral are very dangerous especially if you are not 100% sure that you can pay it back by the time agreed upon. This is especially true with home equity loans but it is possible to find a good loan suitable for your needs. While finding the best home equity loans might take some time to find it will be time worth spent.
Improving the Chance of Getting Approved for a Mortgage
When you visit the websites of mortgage lending companies, you can see images of beautiful homes and smiling families. However, those are just images because getting approved for a mortgage is not something that every family can achieve. This is perfectly understandable because mortgage lending is a risky business and lenders will not give mortgages easily. They need to make sure that they are giving away mortgages to people who are able to make the payments without problems. If you want your mortgage application to be approved, you need to pass the lenders’ requirements for qualified borrowers. Each lender may have different requirements, but the following are a few things that you can do to improve your chance of getting approved for a mortgage:
1. Getting a Cosigner
You need to be realistic. If you don’t have enough income to qualify for a mortgage, you should find a cosigner who has enough disposable income to be considered toward the amount of your loan. If your credit score is not good, sometimes getting a cosigner can also compensate it. Getting a cosigner with enough disposable income will increase your chance of getting approved for a mortgage because the lender will have less risk.
When you get someone to be your cosigner you need to make sure that you both understand the legal and financial obligations of the deal. Your cosigner must understand that if somehow you default on your mortgage, he or she will have to take care of the debt. In such case, the cosigner will also have his or her credit score reduced. To avoid problems, before getting a cosigner you need to be sure that you will be able to pay your mortgage payments on time, and you have a well-secured source of income.
2. Waiting for the Perfect Time
Things are always changing. Sometimes the economic conditions make lenders stricter and getting a mortgage becomes harder. When you think that you are in that kind of climate, you should wait and apply for a mortgage when conditions have improved. However, that does not mean that you don’t have to do anything. While waiting for conditions to improve, you should try to improve your credit score by increasing your savings and reducing your debt.
3. Finding Cheaper Options
When you find that the amount of mortgage that you want is too hard to reach, you should consider looking for cheaper homes. You can search for alternatives in less attractive neighborhoods, or simply search for smaller homes. You don’t have to worry because in the future when your financial situation has improved, you can always trade up your old home and get your dream home in the neighborhood that you really want to live in.
1. Getting a Cosigner
You need to be realistic. If you don’t have enough income to qualify for a mortgage, you should find a cosigner who has enough disposable income to be considered toward the amount of your loan. If your credit score is not good, sometimes getting a cosigner can also compensate it. Getting a cosigner with enough disposable income will increase your chance of getting approved for a mortgage because the lender will have less risk.
When you get someone to be your cosigner you need to make sure that you both understand the legal and financial obligations of the deal. Your cosigner must understand that if somehow you default on your mortgage, he or she will have to take care of the debt. In such case, the cosigner will also have his or her credit score reduced. To avoid problems, before getting a cosigner you need to be sure that you will be able to pay your mortgage payments on time, and you have a well-secured source of income.
2. Waiting for the Perfect Time
Things are always changing. Sometimes the economic conditions make lenders stricter and getting a mortgage becomes harder. When you think that you are in that kind of climate, you should wait and apply for a mortgage when conditions have improved. However, that does not mean that you don’t have to do anything. While waiting for conditions to improve, you should try to improve your credit score by increasing your savings and reducing your debt.
3. Finding Cheaper Options
When you find that the amount of mortgage that you want is too hard to reach, you should consider looking for cheaper homes. You can search for alternatives in less attractive neighborhoods, or simply search for smaller homes. You don’t have to worry because in the future when your financial situation has improved, you can always trade up your old home and get your dream home in the neighborhood that you really want to live in.
Dealing with Mortgage Rejection
If you’re currently looking for a mortgage loan to buy your dream home, you must have already known that you need good strategies. Most mortgage-related websites suggest things like getting a cosigner, waiting for the perfect time to apply, and finding less expensive options. However, there are many other things that you can do to have your mortgage approved. So if you have tried all of the things mentioned earlier but you still unable to get a mortgage, you can try to do the following steps:
1. Asking for an Exception from the Lender
It may sound odd, but you can actually try to ask for an exception from the lender. When your mortgage loan application is rejected, you can ask the lender to reconsider it. You can ask to talk to someone else in the company to get a second opinion. However, you need a very good reason to ask for an exception. You also need a good credit history to be able to get an exception. You should write your reason in a carefully worded letter that focus only on the facts. Remember that you should avoid writing sob stories and excuses because those will not do any good. In most cases, asking for an exception works for people who are unable to get a mortgage because they had gone through terrible one-time events such as natural disaster, unexpected medical expense, or divorce.
2. Trying another Lender
When a lender turned your mortgage loan application down, you can always try another lender. Being rejected by one lender does not mean that any other lenders will also reject you. However, when you have tried to approach several lenders and all of them rejected your mortgage loan application for the same reason, you definitely need to do something about your current financial situation.
Even if none of the lenders that you approached approve your mortgage, you must avoid dealing with loan sharks. Mortgage loans are reasonable loans, but loans from loan sharks are not. Rather than getting a loan from loan shark, it is better for you to wait until your financial situation gets better.
3. Teaming Up with a Family Member or a Friend
If your income does not qualify for a mortgage loan, you can team up with a family member or a close friend. Teaming up to get a mortgage loan is similar, but different from getting a cosigner. When you team up with someone else to get a mortgage loan, both of you have the same responsibility towards it. Make sure that the person that you are going to team up with has more or at least the same amount of income so that you can have a better chance of getting approved.
1. Asking for an Exception from the Lender
It may sound odd, but you can actually try to ask for an exception from the lender. When your mortgage loan application is rejected, you can ask the lender to reconsider it. You can ask to talk to someone else in the company to get a second opinion. However, you need a very good reason to ask for an exception. You also need a good credit history to be able to get an exception. You should write your reason in a carefully worded letter that focus only on the facts. Remember that you should avoid writing sob stories and excuses because those will not do any good. In most cases, asking for an exception works for people who are unable to get a mortgage because they had gone through terrible one-time events such as natural disaster, unexpected medical expense, or divorce.
2. Trying another Lender
When a lender turned your mortgage loan application down, you can always try another lender. Being rejected by one lender does not mean that any other lenders will also reject you. However, when you have tried to approach several lenders and all of them rejected your mortgage loan application for the same reason, you definitely need to do something about your current financial situation.
Even if none of the lenders that you approached approve your mortgage, you must avoid dealing with loan sharks. Mortgage loans are reasonable loans, but loans from loan sharks are not. Rather than getting a loan from loan shark, it is better for you to wait until your financial situation gets better.
3. Teaming Up with a Family Member or a Friend
If your income does not qualify for a mortgage loan, you can team up with a family member or a close friend. Teaming up to get a mortgage loan is similar, but different from getting a cosigner. When you team up with someone else to get a mortgage loan, both of you have the same responsibility towards it. Make sure that the person that you are going to team up with has more or at least the same amount of income so that you can have a better chance of getting approved.
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