There are many home equity loans out there, and they all come with different terms and different fees. Additionally, there are two basic types of home equity loan:
1. Regular home equity loan
2. Home equity line of credit.
It is important to know which home equity loan works best for you. Before you sign on the dotted line, make sure that all of the terms, as well as the type of home equity loan, is the best for your situation. This way you can save as much money as possible, and enjoy the best possible terms for your loan.
Home equity line of credit
For many people, the home equity line of credit is the best home equity loan. This is because a line of credit is a revolving credit account based on your homeÂ’s equity, rather than a lump sum payment that you have to pay back. One of the best things about the home equity line of credit is the fact that you can use as little or as much of the equity offered as you need. You do not have to worry about whether or not you have taken out enough. And you donÂ’t need to feel bad about paying back money if you took out too much. A home equity line of credit allows you to use money as you need it.
Getting a good interest rate
The very best home equity loan is the one with the best interest rate. If you want a good home equity loan, a good interest rate is a must. Shop around to see what you qualify for. If you have good credit, you should be able to get a relatively low interest rate. Even if your credit is less than perfect, however, you should still shop around. Interest rates vary by lender, and even though you will not get the same rate as someone with good credit has, you can still make sure that you get the best interest rate that you qualify for.
By carefully considering your options, as well as what you will use the home equity loan for, you can get the best home equity loan for your needs and your situation.
http://www.creditguy.net/article/mortgage_refinance/35
Saturday, August 18, 2007
Refinancing After Bankruptcy - Is Refinancing Your Home a Good Idea?
Refinancing your home after a bankruptcy is similar to purchasing a new home. A refinance creates a new mortgage to replace the existing mortgage. Thus, you are required to complete loan applications and pay closing costs and other fees. Some believe that obtaining credit following a bankruptcy is impossible. However, this is the best way to rebuild your credit. Some people choose to acquire new credit cards or lines of credit. On the other hand, if you are hoping to receive an interest rate reduction on your mortgage and receive cash-out at closing, refinancing after bankruptcy is a great idea.
Obtain a Lower or Fixed Rate
If you purchased your home before interest rates began to decline, you likely have a rate that is considerably higher than current trends. Various lenders are willing to lend money to people one day after a bankruptcy. However, if you wait two years after a discharge before refinancing your home, you may be able to obtain a reasonable, low rate. A lower rate will lower your monthly payments. Moreover, refinancing your home after bankruptcy is ideal for obtaining a fixed rate. Initially, some people accept an adjustable rate mortgage. These loans are risky because your mortgage rate will fluctuate according to current market trends. Thus, your mortgage may increase several times throughout the loan. With a fixed rate, your mortgage rate remains the same.
Improve Your Credit History
Refinancing your home after a bankruptcy is a perfect way to re-establish credit. Lenders review credit reports to determine our credit worthiness. A bankruptcy may disqualify you from receiving low interest rates on credit cards and other lines of credit. Once you have obtained three or four new lines of credit following a bankruptcy, and maintained a good payment history, other lenders will see you as a low risk and are willing to extend credit with reasonable rates. Moreover, mortgage companies are more ready to grant a loan because funds are secured by the property. If you choose to refinance and cash-out at closing, the funds received may go towards repaying chapter 13 debts, which will also improve credit.
http://www.creditguy.net/article/mortgage_refinance/1560
Obtain a Lower or Fixed Rate
If you purchased your home before interest rates began to decline, you likely have a rate that is considerably higher than current trends. Various lenders are willing to lend money to people one day after a bankruptcy. However, if you wait two years after a discharge before refinancing your home, you may be able to obtain a reasonable, low rate. A lower rate will lower your monthly payments. Moreover, refinancing your home after bankruptcy is ideal for obtaining a fixed rate. Initially, some people accept an adjustable rate mortgage. These loans are risky because your mortgage rate will fluctuate according to current market trends. Thus, your mortgage may increase several times throughout the loan. With a fixed rate, your mortgage rate remains the same.
Improve Your Credit History
Refinancing your home after a bankruptcy is a perfect way to re-establish credit. Lenders review credit reports to determine our credit worthiness. A bankruptcy may disqualify you from receiving low interest rates on credit cards and other lines of credit. Once you have obtained three or four new lines of credit following a bankruptcy, and maintained a good payment history, other lenders will see you as a low risk and are willing to extend credit with reasonable rates. Moreover, mortgage companies are more ready to grant a loan because funds are secured by the property. If you choose to refinance and cash-out at closing, the funds received may go towards repaying chapter 13 debts, which will also improve credit.
http://www.creditguy.net/article/mortgage_refinance/1560
How Soon Can I Refinance a Mortgage?
How soon can I refinance a mortgage is a question asked by many people looking for mortgage refinance options. However, before we take up your question, it is pertinent to understand what is refinance mortgage and how it is going to benefit you. You may be looking for opportunities to optimize your monthly payments by eyeing on the various refinancing mortgage options available for your mortgage plan.
You might be wishing to change over from the fixed rate home loan or vice versa. The change depends upon the interest rate. You may also be wishing to go in for cash out refinance mortgage options that allows the payment of all the old loans and allows for the new ones at the same time.
Before you are allowed to refinance a mortgage, lenders will give a careful look into your current balance, your monthly balance and the period left for the payments and then decide how best to help you. To get the best deal, advice of a mortgage consultant would be of a great help because they are the best person to offer you the right tips to refinance a mortgage.
Meaning of Refinance Mortgage
Refinance mortgage mean different things to different people. Mortgage refinancing could mean combining the first and second mortgages into a single mortgage. You may wish to increase the duration of repayment say from 15 to 30 years. You may be having extra cash at some point of time prompting you to shortening the loan duration. You may be wishing to change over from adjustable rate mortgage to a fixed rate mortgage with lower interest rate.
You may also be wishing to consolidate other debts and paying them off by refinancing a mortgage. All the options for their worth will have to analyzed to derive the maximum benefits from refinancing mortgage. You have to decide when to start the refinance. A word of caution, make sure you are not saddled with hidden costs while changing over. Advice of a mortgage consultant and adherence to the tips to refinance a mortgage should be of a great help to you for this critical decision.
Facts about Refinancing Mortgage
Before you go in for refinancing a mortgage it is always advisable to consult a mortgage consultant to learn about how much reduction will be there in the monthly payments on the reduced interest rate. The rate you are likely to get for mortgage refinance will depend upon the size of the loan, your credit score, type of lock in rate or you want it float, the closing time and the market conditions.
Beware of the best possible advertised mortgage rates because these are made only to the first few applicants. You are the best judge to know what is best mortgage refinance option for you in the long run.
http://www.creditguy.net/article/mortgage_refinance/1076
You might be wishing to change over from the fixed rate home loan or vice versa. The change depends upon the interest rate. You may also be wishing to go in for cash out refinance mortgage options that allows the payment of all the old loans and allows for the new ones at the same time.
Before you are allowed to refinance a mortgage, lenders will give a careful look into your current balance, your monthly balance and the period left for the payments and then decide how best to help you. To get the best deal, advice of a mortgage consultant would be of a great help because they are the best person to offer you the right tips to refinance a mortgage.
Meaning of Refinance Mortgage
Refinance mortgage mean different things to different people. Mortgage refinancing could mean combining the first and second mortgages into a single mortgage. You may wish to increase the duration of repayment say from 15 to 30 years. You may be having extra cash at some point of time prompting you to shortening the loan duration. You may be wishing to change over from adjustable rate mortgage to a fixed rate mortgage with lower interest rate.
You may also be wishing to consolidate other debts and paying them off by refinancing a mortgage. All the options for their worth will have to analyzed to derive the maximum benefits from refinancing mortgage. You have to decide when to start the refinance. A word of caution, make sure you are not saddled with hidden costs while changing over. Advice of a mortgage consultant and adherence to the tips to refinance a mortgage should be of a great help to you for this critical decision.
Facts about Refinancing Mortgage
Before you go in for refinancing a mortgage it is always advisable to consult a mortgage consultant to learn about how much reduction will be there in the monthly payments on the reduced interest rate. The rate you are likely to get for mortgage refinance will depend upon the size of the loan, your credit score, type of lock in rate or you want it float, the closing time and the market conditions.
Beware of the best possible advertised mortgage rates because these are made only to the first few applicants. You are the best judge to know what is best mortgage refinance option for you in the long run.
http://www.creditguy.net/article/mortgage_refinance/1076
An Infinity Mortgage?
Here in Spain the concept of a mortgage period of 20 or 25 years is something new. The general feeling by the banks is that want their money back more quickly than banks in countries in which they are accustomed to longer periods. The borrowers are also accustomed to the idea that the guiding principle is to pay off the mortgage as quickly as possible.
First Timers
The problem for all those people starting out on the property ladder is the amount of money that has to go out each month to put the roof over one’s head. At least this is true for the early years, but not necessarily as the4 years go by, since the advent of inflation. Cases that we studied showed e.g a couple, whose monthly income was £400, having to pay £150 per month in mortgage payment. Although the interest fluctuations since then have meant varying payments, as a percentage of their current monthly income of £2,000 per month, the mortgage does not now seem so horrendous.
Varying interest rates
The mistake made by many lenders in boom times is to conveniently forget the possible variation in interest rates during the early years. While a doubling of the payment in the case mentioned above would not be a disaster now, had it occurred during the early years it could have lead to foreclosure, and them losing their dream home. In our study we found various examples of interest rates going from 3% to 16% in very short periods of time. Maybe the lenders should have insisted on doing the relevant calculations, assuming a high rate, to check if the borrowers could afford the payment during the first few years in the event of this occurring. Asking the potential borrower would not necessarily have produced a sensible result, as many that we spoke to said, “It’s OK, we’ll manage somehow.” Unfortunately, for thousands of borrowers, this turned out not to be the case. One case showed an initial payment of £269 per month, on an income of £800 per month, which ballooned to £690 per month on an income of £900 per month, with devastating consequences.
How long a repayment period ?
Many years ago, a borrower, my father, tried to convince lenders of the idea of a much longer repayment period. In fact so long that he gave the idea the name, infinity mortgage. The idea was to pay the interest, at whatever the actual rate would be, but not to repay the capital. Naturally in the staid world of banking this fell on deaf ears, and several so called bankers laughed at the idea. Eventually he was able to persuade an institution to go ahead with his proposal, and he purchased a house. He is now nearing retirement and still has not paid off the mortgage, and continues to pay the interest. He is happy with the idea that, when we inherit the house, we will have to pay off the capital, and so are we.
The current position ?
The house is now valued at £280,000. My father’s income is £5,300 per month. And the mortgage payment ? The last time we spoke of the matter it was the mighty sum of £7.92 per month. The capital to be repaid ? The not insignificant amount of £1,900.
Whether your local currency is pounds sterling, euros or dollars, the principle is still the same. While the motivation at the time, as a penniless masters student, was to keep every payment down to a minimum, the capital repayment would not exactly have broken the bank once a few years had gone by. When he reached the point of what would have been the normal repayment period, and received advice from all and sundry that perhaps he might slip into the bank with a bit of loose change, and pay off the capital, he declined. He rather liked the idea of his infinity mortgage being just that, or at least being with him until his death. In that he will succeed, you know what some of these old folk are like.
http://www.creditguy.net/article/mortgage_refinance/2038
First Timers
The problem for all those people starting out on the property ladder is the amount of money that has to go out each month to put the roof over one’s head. At least this is true for the early years, but not necessarily as the4 years go by, since the advent of inflation. Cases that we studied showed e.g a couple, whose monthly income was £400, having to pay £150 per month in mortgage payment. Although the interest fluctuations since then have meant varying payments, as a percentage of their current monthly income of £2,000 per month, the mortgage does not now seem so horrendous.
Varying interest rates
The mistake made by many lenders in boom times is to conveniently forget the possible variation in interest rates during the early years. While a doubling of the payment in the case mentioned above would not be a disaster now, had it occurred during the early years it could have lead to foreclosure, and them losing their dream home. In our study we found various examples of interest rates going from 3% to 16% in very short periods of time. Maybe the lenders should have insisted on doing the relevant calculations, assuming a high rate, to check if the borrowers could afford the payment during the first few years in the event of this occurring. Asking the potential borrower would not necessarily have produced a sensible result, as many that we spoke to said, “It’s OK, we’ll manage somehow.” Unfortunately, for thousands of borrowers, this turned out not to be the case. One case showed an initial payment of £269 per month, on an income of £800 per month, which ballooned to £690 per month on an income of £900 per month, with devastating consequences.
How long a repayment period ?
Many years ago, a borrower, my father, tried to convince lenders of the idea of a much longer repayment period. In fact so long that he gave the idea the name, infinity mortgage. The idea was to pay the interest, at whatever the actual rate would be, but not to repay the capital. Naturally in the staid world of banking this fell on deaf ears, and several so called bankers laughed at the idea. Eventually he was able to persuade an institution to go ahead with his proposal, and he purchased a house. He is now nearing retirement and still has not paid off the mortgage, and continues to pay the interest. He is happy with the idea that, when we inherit the house, we will have to pay off the capital, and so are we.
The current position ?
The house is now valued at £280,000. My father’s income is £5,300 per month. And the mortgage payment ? The last time we spoke of the matter it was the mighty sum of £7.92 per month. The capital to be repaid ? The not insignificant amount of £1,900.
Whether your local currency is pounds sterling, euros or dollars, the principle is still the same. While the motivation at the time, as a penniless masters student, was to keep every payment down to a minimum, the capital repayment would not exactly have broken the bank once a few years had gone by. When he reached the point of what would have been the normal repayment period, and received advice from all and sundry that perhaps he might slip into the bank with a bit of loose change, and pay off the capital, he declined. He rather liked the idea of his infinity mortgage being just that, or at least being with him until his death. In that he will succeed, you know what some of these old folk are like.
http://www.creditguy.net/article/mortgage_refinance/2038
Mortgage Refinance Costs
When you refinance your mortgage, you usually pay off your original mortgage and sign a new loan. With a new loan, you again pay most of the same costs you paid to get your original mortgage. These can include settlement costs, discount points, and other fees. You also may be charged a penalty for paying off your original loan early, although some states prohibit this. The total expense for refinancing a mortgage depends on the interest rate, number of points, and other costs required to obtain a loan. To obtain the lowest rate offered, most mortgage companies will charge several points, and the total cost can run between three and six percent of the total amount you borrow. So, for example, on a $100,000 mortgage, the company might charge you between $3,000 and $6,000. However, some companies may offer zero points at a higher interest rate, which may significantly reduce your initial costs, although your payments may be somewhat higher.
http://rws.mortgage101.com/templateroot/articles/Refinance.asp?ArticleID=1039&pvlid=22684&
http://rws.mortgage101.com/templateroot/articles/Refinance.asp?ArticleID=1039&pvlid=22684&
Trade Your ARM for a Fixed Rate
By switching to a fixed rate loan, you will not only reduce your payment, you will also likely lock in an attractive rate for as long as you own your home.
In fact, while one year ARMs currently offer tempting introductory rates averaging 5.59%, most experts recommend avoiding them, because you could easily find yourself facing sharply higher payments in the near future, even if interest rates don't rise. Why? Well, after the introductory rate expires, ARMs are typically pegged to the one year Treasury rate (recently 5.25%) plus 2.75 percentage points, with increases of as much as two points a year. Assuming interest rates don't change, you would pay 7.59% in the second year (the full two point increase) and 8% in the third year.
There are certain cases, however, where an ARM makes sense. If you are fairly certain you'll be moving within five years, you can save some money -- and avoid rising payments -- with a five year ARM, recently averaging 6.62%. Such loans offer a fixed rate for five years and adjust annually thereafter.
http://rws.mortgage101.com/templateroot/articles/Refinance.asp?ArticleID=1117&pvlid=22684&
In fact, while one year ARMs currently offer tempting introductory rates averaging 5.59%, most experts recommend avoiding them, because you could easily find yourself facing sharply higher payments in the near future, even if interest rates don't rise. Why? Well, after the introductory rate expires, ARMs are typically pegged to the one year Treasury rate (recently 5.25%) plus 2.75 percentage points, with increases of as much as two points a year. Assuming interest rates don't change, you would pay 7.59% in the second year (the full two point increase) and 8% in the third year.
There are certain cases, however, where an ARM makes sense. If you are fairly certain you'll be moving within five years, you can save some money -- and avoid rising payments -- with a five year ARM, recently averaging 6.62%. Such loans offer a fixed rate for five years and adjust annually thereafter.
http://rws.mortgage101.com/templateroot/articles/Refinance.asp?ArticleID=1117&pvlid=22684&
Get Your Hands on Some Cash
Another way to make a refinance work for you is to refinance for more than the balance remaining on your old mortgage -- in effect, tapping your home equity, or "cashing out," in mortgage speak. Thanks to favorable rates, you may be able to do so without boosting your monthly outlay. For example, at 8.5%, the payment on a $200,000, 30-year fixed rate mortgage is $1,538. But at 7.5%, that same payment lets you borrow nearly $20,000 more.
The best use for the extra cash is to pay off any higher rate loans you may have. Let's say that you are carrying a $15,000 car loan at 10% and making minimum payments on a $10,000 credit card balance at 17%. Your monthly payments on those debts would total $680. Then assume you refinanced your mortgage, taking out an additional $25,000 to pay off your car and credit card loans. Result: At 7.5%, your additional monthly mortgage payment would total only $175, so you would come out $505 ahead ($680-$175=$505).
Of course, all the extra cash needn't go for paying off debts. When the Menards swapped their ARM for a fixed rate last December, they also increased their mortgage load by $34,000, from $106,000 to $140,000. They used $3,000 of the proceeds to pay their refinancing costs and another $17,000 to pay off a 10% home equity loan, which had been costing them $250 a month. Then they spent the remaining $14,000 to build a garage for Roger's antique car collection -- and they did all this for just another $19 a month.
http://rws.mortgage101.com/templateroot/articles/Refinance.asp?ArticleID=1118&pvlid=22684&
The best use for the extra cash is to pay off any higher rate loans you may have. Let's say that you are carrying a $15,000 car loan at 10% and making minimum payments on a $10,000 credit card balance at 17%. Your monthly payments on those debts would total $680. Then assume you refinanced your mortgage, taking out an additional $25,000 to pay off your car and credit card loans. Result: At 7.5%, your additional monthly mortgage payment would total only $175, so you would come out $505 ahead ($680-$175=$505).
Of course, all the extra cash needn't go for paying off debts. When the Menards swapped their ARM for a fixed rate last December, they also increased their mortgage load by $34,000, from $106,000 to $140,000. They used $3,000 of the proceeds to pay their refinancing costs and another $17,000 to pay off a 10% home equity loan, which had been costing them $250 a month. Then they spent the remaining $14,000 to build a garage for Roger's antique car collection -- and they did all this for just another $19 a month.
http://rws.mortgage101.com/templateroot/articles/Refinance.asp?ArticleID=1118&pvlid=22684&
Build Home Equity Faster
Many borrowers use a refinance to shorten the term of the mortgage. And brace yourself, even at low rates, a shorter term means a higher monthly payment. The benefit is that you'll build up equity faster and pay far less in total interest over the life of the loan.
Consider Jim Neill, 48, a real estate broker and his wife Merrilyn, 55, a psychotherapist. Recently, the couple took out a 15-year fixed rate loan at 6.75% to replace an 8.13% ARM with a 30-year term. Their monthly payment jumped by $200, but now they will own their own home outright by the time they retire. In addition, the total interest on the 15-year loan will come to $95,447, vs. $222,234 on the remaining life of the ARM -- and that assumes their adjustable rate would have held steady at its current 8.13%. "This is forced savings," says Jim. "When we retire, we can scale down and take equity out of the house."
If you can't afford the payments on a 15-year mortgage, your next best means of building equity is to refinance for less than 30 years. To do so, ask your mortgage company to customize your new loan's term to match the years that are left on your old loan -- if you are five years into a 30-year mortgage, for example, ask for a 25-year loan.
http://rws.mortgage101.com/templateroot/articles/Refinance.asp?ArticleID=1119&pvlid=22684&
Consider Jim Neill, 48, a real estate broker and his wife Merrilyn, 55, a psychotherapist. Recently, the couple took out a 15-year fixed rate loan at 6.75% to replace an 8.13% ARM with a 30-year term. Their monthly payment jumped by $200, but now they will own their own home outright by the time they retire. In addition, the total interest on the 15-year loan will come to $95,447, vs. $222,234 on the remaining life of the ARM -- and that assumes their adjustable rate would have held steady at its current 8.13%. "This is forced savings," says Jim. "When we retire, we can scale down and take equity out of the house."
If you can't afford the payments on a 15-year mortgage, your next best means of building equity is to refinance for less than 30 years. To do so, ask your mortgage company to customize your new loan's term to match the years that are left on your old loan -- if you are five years into a 30-year mortgage, for example, ask for a 25-year loan.
http://rws.mortgage101.com/templateroot/articles/Refinance.asp?ArticleID=1119&pvlid=22684&
Refinance Once Then Do It Again
Refinance Once Then Do It Again
When rates fall steadily, refinancing may make sense even if you have done so once already. Bob and Michelle Barbo of Kirkland, WA refinanced twice within three months in 1998. In October, they trimmed the rate on their 30-year fixed mortgage by a full point -- from 9.13% to 8.13% -- for a monthly savings of $63. Plus, because home prices in their area had boosted their home equity, they were able to stop paying private mortgage insurance that cost them $120 a month.
To exploit continued decline in rates, the Barbos refinanced again in December. Their new 30-year fixed mortgage is at 7.375%, lopping another $55 off their monthly bill. Since the couple had chosen a no cost refinancing each time, their total out of pocket expenses came to just $400 in appraisal fees. So by the time you read this, they will already have recouped their up front costs. "Now we can use the savings to build up a cash emergency fund," says Bob.
If you are considering a second refinancing, don't overlook this potential tax write off: When you pay points to refinance, you must deduct the amount over the life of the loan, usually 30 years. But when you refinance a second time, all of the points that have not yet been deducted from the first refinancing can be written off in a lump sum. Say you refinanced to a 30-year mortgage in 1993 and paid $3,000 in points. By now, you would have written off roughly $500. If you refinance again this year, you could deduct the remaining $2,500 on your 1998 tax return. For a homeowner in the 28% tax bracket, that works out to a savings of $700 -- enough to offset some or all of your costs this time around.
http://rws.mortgage101.com/templateroot/articles/Refinance.asp?ArticleID=1120&pvlid=22684&
When rates fall steadily, refinancing may make sense even if you have done so once already. Bob and Michelle Barbo of Kirkland, WA refinanced twice within three months in 1998. In October, they trimmed the rate on their 30-year fixed mortgage by a full point -- from 9.13% to 8.13% -- for a monthly savings of $63. Plus, because home prices in their area had boosted their home equity, they were able to stop paying private mortgage insurance that cost them $120 a month.
To exploit continued decline in rates, the Barbos refinanced again in December. Their new 30-year fixed mortgage is at 7.375%, lopping another $55 off their monthly bill. Since the couple had chosen a no cost refinancing each time, their total out of pocket expenses came to just $400 in appraisal fees. So by the time you read this, they will already have recouped their up front costs. "Now we can use the savings to build up a cash emergency fund," says Bob.
If you are considering a second refinancing, don't overlook this potential tax write off: When you pay points to refinance, you must deduct the amount over the life of the loan, usually 30 years. But when you refinance a second time, all of the points that have not yet been deducted from the first refinancing can be written off in a lump sum. Say you refinanced to a 30-year mortgage in 1993 and paid $3,000 in points. By now, you would have written off roughly $500. If you refinance again this year, you could deduct the remaining $2,500 on your 1998 tax return. For a homeowner in the 28% tax bracket, that works out to a savings of $700 -- enough to offset some or all of your costs this time around.
http://rws.mortgage101.com/templateroot/articles/Refinance.asp?ArticleID=1120&pvlid=22684&
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