July 22, 2005
Home Owner Loans Explained
How To Release Equity Locked Up In Your Home For Immediate Use.
Free up the monetary worth tied up in your property by asking your financial advisor for information on a secured home owner loan. These types of loans can be legally used for any purpose you see fit and are available to nearly all homeowners. Secured home loans can be very easy to apply for and can be used for any purpose such as, home renovations, a new auto, a luxury getaway, to pay off charge cards or credit cards and even debt consolidation.
You would be amazed at the variety of reasons people quote when applying for a home owner loan. They are many and varied. One of the most accepted types of home owner loan you'll see are debt consolidation loans where the intention is to dramatically reduce your monthly spend to a more sustainable level. This type of loan can really get you out of a nasty hole that many people find themselves in these days.
A further reason for applying for a home owner loan could be if you have a below par credit history. You will find many home owner loan outfits will accept an unfavorable credit card loan application.
It's a fact that the majority of lenders look more approvingly on those people who own their own home, since this is evidence that a commitment has already been made to repay a substantial amount of money over an extended period. Plus, the worst case scenario is that you face the very real prospect of losing your house should you fail to meet the repayments. If you are a home owner, the lender knows they will get their money back in most cases!
More comprehensive info....
A home owner loan has the benefit of providing you with a low cost, low rate alternative to a personal loan. Often, these types of loans have lower interest rates and smaller monthly repayments.
A home owner loan is an economical, low cost, lower rate loan secured on your property. It frees up the spare equity (the value of your house minus the existing borrowing) in your property and allows you to use it for whatever you like.
Most home owner loans will let you borrow from five to seventy five thousand.
A home owner loan is just the ticket if you want to raise a substantial amount, are having trouble getting accepted for an unsecured loan, or have a not so clean credit history. It's possible that you can get a home owner loan even if you've been refused an unsecured loan in the past.
Home owner loan rates are invariably tied to the base interest rate, often depending on your status.
The monthly repayments for a home owner loan will always depend on the amount borrowed and the term of your loan.
A home owner loan can assist you with things like property renovations such as a brand new kitchen or a deluxe bathroom. Why not take that once in a lifetime holiday, get your red sports car or speedboat? Or you may use the cash for more mundane things like repaying credit cards or other debts to cut your monthly spend to a more agreeable amount.
About The Author
Fabio Marcell is a seasoned contributor to many online and offline journals specialising in the financial sector. He has many years experience in the loans industry and is currently sponsoring the following website:
http://www.a1-low-interest-loans.info
What is a Reverse Mortgage?
Simply stated, a reverse mortgage is a loan that enables homeowners (age 62 and older) to convert part of the equity in their home into a tax-free income without having to sell the home, give up the title, or take on a new monthly mortgage payment. More and more homeowners are using this to supplement their retirement income, pay for health care, modify their home, or just get some cash for emergencies. Since this is a new product, some people have misconceptions of what a reverse mortgage is. The bank doesn’t give you money and take your house. Let’s look at some of the most common questions.
Are reverse mortgages for desperate people? No. It is an excellent financial planning tool used from people of all walks of life.
How do I qualify? You must be 62 or if both parties are on the mortgage, then you both must be at least 62. And, you must have equity in your home.
What if I still owe on my home? You may still qualify even if you have a balance on your first mortgage. The proceeds must be used to pay off the mortgage, first.
How much can I get? This depends on several factors such as, the age of your home, the value, your age at the time of closing, and interest rates.
Is it just monthly payments? No. You can get a lump sum, line of credit, monthly payments or a combination of monthly income and a line of credit.
But, won’t I have to pay taxes on these monthly payments to the government? No. The funds are tax-free. Its your money, not additional income.
Should I seek a lawyer or receive some counseling before I get a reverse mortgage. Yes. You must be counseled before receiving a reverse mortgage. You don’t have to talk to a lawyer or accountant, but it would be advised.
Who owns the title to my house? You still own the title.
What happens when I die? Once your home is passed on to your heirs, the mortgage becomes due. Your heirs may pay the mortgage and keep the home or sell the home and pay off the home. They may keep any excess sales proceeds.
What if I owe more than the house is worth? You can’t. Your repayment amount will never exceed the value of the home at the time the loan comes due. Also, there are no prepayment penalties.
What if I move? If you move, then the mortgage becomes due and must be repaid.
Where can I learn more? The National Reverse Mortgage Lenders Association at http://www.reversemortgage.org
About The Author
Stuart Simpson has a neat mortgage calculator FREE to use. Try it out at:
http://www.mortgage-refinance-review.com/calculator.php
Self Employed Mortgage Loans - A Survival Guide
When you're self employed you have numerous advantages. As you are a free agent, you will write off every deduction you can on your tax return. You acquire the potential to earn extra income much more so than someone who is employed by someone else. The best part is that you are the gaffer, the boss! On rare occasions, being freelance has some drawbacks. One is when you go to get finance for a property or a large purchase. However, here are some items to know that could help you prepare for the mortgage loan process. A self-employed mortgage loan survival guide, if you will.
While confirming your income - the average lender will need to be made aware of at least 2 years of self employment history, occasionally they will request 3 years. They will ask to see this history verified in tax returns, generally. Occasionally the lenders may figure your income as being the average income you claimed on your income taxes as profits, not your gross business income. Another time the lender may figure your income as the lowest of the two years and every now and again as the highest of the two years. Talk to your mortgage professional or lender and find out their verification criteria. For instance, some lenders may calculate a part of your write-offs or deductions and work it back into your income. There are ideas of additional ways that a lender may be able to verify your income and if you are a free agent it may help you to be able to show a supplementary of your income.
If you can, compile a profit & loss statement , accurately quoting your expenses & profits for the last couple of years. You may find this tedious, but it could be used as proof of income for a mortgage provider. If you can get it signed or verified by your accountant, more's the better.
If you can, it's always best to provide your bank statements to prove your income - search for a lender who might accept as little as 2 years of statements as sufficient proof. These days, you'll find that many lenders confirm your income in this fashion. This is normally a more favourable method of proving your income than lifting the figures from your tax returns. The reason being that you can, more often than not, show that you have a lot more additional cash flow than your tax returns might indicate. When completing your tax returns you generally subtract every single business expense prior to your claim of any profits. By employing bank statements, you are still proving income, this reduces the importance of your credit score or deposit during the application process - while a "self-cert" or "self-certification" mortgage will place more emphasis on your credit score.
If you cannot provide statements, apply for a "self cert", or "stated income" mortgage. This type of loan is very common these days. You actually need no proof of income, you simply state on the application form, the level of your income. It doesn't require verification on your part! This might help if you are freelance and need to specify your income as it currently stands. This method means that you don't have to worry about having the lender take your last two years worth of income and average them out. Whilst many people do abuse this feature, it's best to be accurate when self-certifying your income. Sometimes the lender will be able to obtain proof from your tax office to confirm your self-cert amount. Whenever you choose a self-cert loan, this will put more weight on the importance of your deposit and/or credit score. So, you might normally need one or both of these elements to be strong if you want to pursue this avenue. More often than not, when you do a self-cert, you could well be charged a marginally higher rate of interest because the lender will see this as more "high-risk".
Lenders make money by lending it to so they are always looking for ways to make it easier for you. There are several ways that lenders may work with you if you are freelance. The advice of a good, independent financial advisor is recommended and there are a proliferation of programs available to help you. If you can lay your hands on a deposit or you have good credit, you are halfway there! You're almost guaranteed to find a lender somewhere so don't despair!
About The Author
Fabio Marcell is a seasoned contributor to many online and offline journals specialising in the financial sector. He has many years experience in the loans industry and is currently sponsoring the following website:
http://www.a1-low-interest-loans.info
Home Equity Loan vs. 401(K) Loan -- Which Should You Choose?
You've finally decided to add that patio you've always wanted to your home. Now you can enjoy barbecue outdoors and get a little fresh air every now and again. But how are you going to pay for it? If you're like most people, you don't have cash for home repairs just lying around the house. You'll have to borrow. So where should you go to borrow? Mortgage rates are low these days, so a home equity loan would be pretty affordable, as would a home equity line of credit (HELOC) if you have a number of remodeling projects in mind.Then it occurs to you -- "What about my 401(K) money? I can get good terms on a 401(K) loan and borrow the money from myself!" That seems like a good idea. You can borrow the money from yourself and pay yourself back with interest! What could be better than that?.On the surface, borrowing from your retirement savings may seem like a better idea than taking out a home equity loan. The terms are good either way, and the interest rates are probably comparable. So, why not borrow from your 401(K) account?.There are several reasons why it may not be desirable to borrow from your retirement account:.
Most Americans fail to save enough for retirement, so borrowing from your retirement fund may leave you short later should you default. No one wants to be broke when they retire.
If you have a diversified 401(K) account, you will probably be earning interest on your retirement money. In fact, the interest rate you are earning on your retirement fund may exceed the interest rate you would pay for a home equity loan. In that case, you take out a home equity loan, leave the retirement money where it is, and you should earn a net gain between the two.
If your retirement fund is earning good interest, and in the late 1990's many were earning upwards of 20% per year, then borrowing on your principal could hurt you tremendously in the long run. Due to the nature of compounding, the amount you lose by borrowing from your retirement account could be far more than simply the sum of the loan amount plus interest.
The interest on a home equity loan is tax deductible, up to $100,000. The interest on a 401(K) loan is not.There are certainly some circumstances where you might benefit from borrowing from retirement funds instead of taking out a second mortgage, but those situations are fairly rare. A substantially higher interest rate on the home equity loan than the 401(K) loan would be one such example. If in doubt, you should consult with a financial planner.
Posted by Jason at 04:46 PM | PermalinkDo You Need a Home Equity Loan or Line of Credit?
A home equity line of credit is very closely related to a home equity loan but the subtle differences can mean a lot. Determining which option is the best for you relies upon you knowing your current situation and having a clear plan for what you wish to accomplish with the money.
A home equity loan is a lot like a mortgage. With a home equity loan you are able to borrow the amount of your homes value that you have already paid off. The benefits of this type of loan is that it is almost always guaranteed since it is based upon the amount of your home that you already own, the terms are almost identical to a mortgage and you receive the entire amount of the loan up front after closing.
While a home equity loan is also based upon the amount of your home that you currently own, the terms of the loan are very different. A home equity loan is basically a credit card where the limit is the amount of equity that you have in our home. Instead of receiving one large lump sum of cash, you will receive an overdraft type of service on your account that will allow you to withdraw as much or as little of the equity that you wish to use.
Which choice is better for you? The answer depends upon what you need the money for. With a home equity loan the monthly repayment schedule is known and the interest on your loan will be lower than most other types of loans. However, with a home equity line of credit, you have instant access to cash and the payments will vary depending but the interest will vary. With this in mind the question really becomes do you need access to a varying amount of money or one known lump sum of cash?
A lump sum of cash with a set repayment schedule is great for specific things such as debt consolidation or the funding of specific projects with a predetermined cost. If you are considering debt consolidation for credit cards or any other high interest loans a home equity loan is most likely a very good idea. You will be able to repay all of your debt and will only have to make one monthly payment at a lower rate of interest that you are currently paying on your cards and other unsecured loans.
Home equity loans also make perfect sense if you know the exact amount that you need to borrow. While it is always nice to have cash on hand it is often better to have more credit available to you. The more of your credit limit that you use up the higher the interest rates will be for you and the tougher it will be to borrow more money in the event of an emergency. It is definitely to your advantage to only be in debt for a specific amount to complete one project.
A line of credit option may be better depending upon what you wish to do with your money. While you will still use up a portion of your credit limit, the payments and impacts on your available credit may be lower. With a line of credit you always have the same amount of money available to you. As you pay off the amount of credit used, you can reuse that portion if needed without having to apply for another loan. Also your payments may be considerably lower since you are only paying on the amount of money that you have actually used, not the total amount borrowed.
As you can see there are some big differences between a home equity loan and line of credit. If you are looking at a single project, such as a new car or adding a pool to your home, a home equity loan is the better choice for you. However, if you are looking at starting up a new business, wish to travel or can not settle on predetermined amount money, then a line of credit is the better option for you. With a line of credit you can use as much of your credit as you wish whenever you wish and, much like a credit card, you can reuse the amount of the line of credit that you have repaid with out having to re-apply for a loan.
About The Author
Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.
What Does My Credit Score Mean?
Lenders are using credit scores more and more to make decisions about who they will lend to. The main developer of these scores is called Fair, Isaac Co (FICO), thus these scores are often called FICO scores. Scores range from 300-850 with a lower score indicating a higher chance of defaulting on a loan and a higher score representing a better chance that the lender will get paid back. The national average score is approximately 680.
Every lender sets up its own score cutoffs but generally speaking, you can expect to receive the following treatments based on your score:
300-549: Extremely difficult to find any lender that will offer you credit.
550-619: You may be able to find credit, but very high interest rates and fees will likely apply.
620-679: You should be able to obtain credit, but you will probably be offered a higher interest rate.
680-749: You should have no problem getting credit and you will receive good interest rates and repayment terms.
750-850: Lenders are happy to offer you credit and provide you with their best rates and terms.
These scores are becoming even more important to us as consumers over time. For example, most insurance companies also check your score when you apply for car or home insurance. If your score is too low they might not even offer you insurance or they may offer it to you with higher premiums.
Many companies will also check your credit when you apply for a job. They look at how well you handle your personal finances as an indicator of how well you will take care of your professional responsibilities.
With so much at stake with your credit score it makes sense to know what your score is. TrimYourDebt.com has negotiated with the credit bureaus to offer consumers a free look at their credit report and credit score. It is a 30-day free trial offer, so you get the information right up-front and you can cancel free of charge within 30-days. To check your credit score for free, visit http://www.TrimYourDebt.com/GetYourCreditScore.aspx?src=art to find out now.
About The Author
Don Blackhurst has been working in the banking and finance industries for over 15 years and has an MBA with an emphasis in Finance. He is the co-founder of TrimYourDebt.com ( http://www.TrimYourDebt.com ), which provides free budgeting tools, debt planning, and credit help.
July 09, 2005
PMI Tip
Keep track of your payments on the principal of the mortgage. When you reach the point where the loan-to-value ratio hits 80 percent, notify the lender that it is time to discontinue the PMI premiums. The Homeowners Protection Act of 1998, which took effect in 1999, requires lenders to tell the buyer at closing how many years and months it will take for them to reach that 80 percent level and cancel PMI. Lenders must automatically cancel PMI when the balance hits 78 percent.
Note: The law does allow lenders to continue requiring PMI all the way down to 50 percent equity for so-called high-risk borrowers. Traditionally, those loans that are considered riskier include reduced documentation loans, in which customers provide less proof of income and other information during the approval process. Loans for people with spotty credit histories and higher debt-to-income ratios also fall into this category. Additionally, some FHA loans require payment of PMI throughout the entire life of the loan.
**Information provided by bankrate
Posted by Jason at 06:49 PM | PermalinkHow to avoid paying PMI
• You can avoid paying PMI with a loan product known as an 80-15-5 or an 80-10-10. This means you take the first mortgage for 80 percent of the amount you're borrowing, pay five or 10 percent down and cover the other 10 or 15 percent in a second mortgage.
• You can also dump PMI by asking your lender. Many will agree to drop PMI when the value of your home increases or when you have paid enough on your loan and the amount of equity exceeds 20 percent.
• Getting rid of PMI can save you a lot of money, but don't get an appraisal unless you are confident you will be able to get rid of it.
Posted by Jason at 06:47 PM | PermalinkWhy a Change in PMI Requirements?
In the past, most lenders honored consumers' requests to drop PMI coverage if their loan balance was paid down to 80 percent of the property value and they had a good payment history. However, consumers were responsible for requesting cancellation and many consumers were not aware of this possibility. Consumers had to keep track of their loan balance to know if they had enough equity and they had to request that the lender discontinue requiring PMI coverage. In many cases, people failed to make this request even after they became eligible, and they paid unnecessary premiums ranging from $250 to $1,200 per year for several years. With the new law, both consumers and lenders share responsibility for how long PMI coverage is required.
Posted by Jason at 06:46 PM | PermalinkHow Do You Cancel or Terminate PMI?
Cancellation
Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.
Benefits of PMI
PMI plays an important role in the mortgage industry by protecting a lender against loss if a borrower defaults on a loan and by enabling borrowers with less cash to have greater access to homeownership. With this type of insurance, it is possible for you to buy a home with as little as a 3 percent to 5 percent down payment. This means that you can buy a home sooner without waiting years to accumulate a large down payment.
Posted by Jason at 06:44 PM | PermalinkWhat Is PMI?
PMI is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of their new home's value. In other words, buyers with less than a 20 percent down payment are normally required to pay PMI.
Posted by Jason at 06:43 PM | Permalink
