How Credit Scores Affect Mortgage Applications
With a good credit score an applicant will receive prompt response from many lenders, all of them offering low interest rates and low down payment options. The loan amount offered also may be high. On the contrary a low credit score would result in a lot of rejection from various mortgage financers. Because creditors wouldn’t come forward easily to give credit to individuals that have a history of difficulty in repaying existing loans. Read more
Benefits of Secured Homeowner Loans
Filed under: Home Equity Loans, Home Loans, Home Mortgages, Secured Loans
All loans come under one of two umbrellas, and these umbrellas are secured or unsecured loans. A secured loan is secured against an asset, which is usually the home, and therefore is only available to homeowners. You will usually need to have some level of equity in your home to get a secured loan, although some lenders will offer finance to those with little or no equity. In order to calculate your equity levels you simply deduct the amount of any outstanding mortgage or other secured loans from the market value of your home, and the remaining balance is your equity. Read more
Pay Off Your Mortgage
Filed under: Home Equity Loans, Home Loans, Home Mortgages, Mortgage Refinance
There is an idea floating around out there in the ether. Some folks are actually talking about paying off their mortgages and getting out of debt for good. Poppycock! That’s madness. What is so great about financial freedom anyway?
Face it. Your mortgage, for which you probably broke traffic laws to get to the closing, has become a ball and chain. The dollar amount of your home loan may have actually increased over the years, while the appraisal value may have gone down. This begins to look rather hopeless after a while. Read more
Home Equity And Home Equity Loans
Home equity is the difference between the value of the home deducted by the remaining mortgage and other home costs. Home Equity accumulates over a period of time as the borrow pays down the mortgage and/or as the value of the home rises. Home equity loans are usually a line of credit granted to the borrower by a lender against the equity of the home.
These loans are usually very competitive and cheap. It usually takes two weeks to complete the loan process. Some lenders guarantee home equity loans within days, but tend to charge higher interest and/or fees. Because home equity loans are competitive it is smart to check with more than one lender when shopping for an equity loan.
There are a few reasons to consider taking on an equity loan. You can use the loan to pay off other higher interest loans, to consolidate debt, especially that of credit cards, to do major home repairs, maintenance, or improvements, or to finance education or major medical expenses. Read more
Basics of Home Equity Loans
A home equity loan is secured by the equity you have in your home. Equity is the difference between how much your home is worth and how much you own on the mortgage. Lenders may offer as much as 75% to 90% of equity as a loan amount. This kind of a loan is a sound choice for meeting some financial needs as it offers low interest rates of a secured loan and may also have tax deductible interest.
There are two types of home equity loans – lump sum home equity loans and home equity lines of credit, also known as HELOCs and work like credit cards. Both these are often referred to as second mortgages, because they are secured by your property.
Lump sum home equity loan – is a one-time, up-front loan where you receive the full amount of the loan when it is opened and pay it back in fixed monthly installments at a fixed rate of interest. Your payments can be fully amortized or may consist of only interest with a balloon payment of the balance money owed at the end of the term of the loan. Once you get the money, you cannot borrow further from the loan. This kind of loan is good for home improvements, debt consolidation, purchase of large expenditure items like a car and paying unexpected and large bills like medical expenses.
Home Equity Line of Credit – allows you to have a maximum loan amount available which you can draw on as and when you need, usually by writing a check. Its revolving balance makes it similar to a credit card. You monthly payment is generally a percentage of the total outstanding principle. HELOCs are thus more flexible then lump sum home equity loans and allow you to borrow and pay back only when required. A line of credit has a variable interest rate that changes over the life of the loan.
With either a home equity loan or a HELOC, you are required to pay off the balance when you sell the house.
Home equity loan rates differ from lender to lender so it would be worthwhile to shop around for the best and the lowest interest rate. Compare the Annual Percentage Rate (APR) which indicates the cost of credit on an annual basis. Also consider other charges such as points and closing costs which will add to the cost of your home equity loan. Additionally there are different types of home equity loan rates like fixed and variable. Most home equity credit lines have variable interest rates. These variable rates may initially offer lower monthly payments, but during the rest of the repayment period the payments may change and may be higher. Fixed interest rates, if available, may be slightly higher initially than variable rates, but fixed rates offer stable monthly payments over the life of the credit line.
Qualifying for a home loan:
Although there are no fixed rules, lenders look at two key factors while approving home buyers for the type and amount of mortgage they want – the borrower’s ability and willingness to repay the loan. Ability to repay is verified by your current status of employment and total income. Willingness to repay depends on the how the property will be used, for example will you be living there or just renting the property. It also depends on your fulfilment of previous financial commitments.
William Brister
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