Posts Tagged ‘investing’

Mortgage Refinancing Can Be Accomplished Despite Bad Credit

March 31st, 2012

There is no reason you should veer towards the pessimistic side when applying for home equity loans or similar forms of financial assistance despite bad credit. In fact, there are many options you may have available to you. Having a bad credit history is not a hindrance if you are really serious on getting a line of credit, home equity loan or trying to refinance your property. Due to the sea change that has just revamped the procedures and policies of the lending industry, it is now much easier for consumers to refinance their previous mortgage or qualify for a home equity loan. And that applies as well for individuals with bad credit – you too can find a loan option that would provide you with a very reasonable interest rate and terms.

It is not uncommon for individuals to choose refinancing as the way to go if they have several debts to pay off or if they need to make some improvements in or around their property. Many lenders will not hesitate to offer you 125% of your home’s actual value, even if you do not have a perfect credit history. Some of the most important factors that would be looked into when evaluating whether your loan would be approved or not include the value of your current mortgage package, your interest rate and the present terms, your intended duration of stay and the total amount of debt you presently owe. When you have equity in your home, it is more likely that you will get a lower rate of interest than if you have no equity or only a little.

A home equity line of credit is something that works like a revolving account and your home is used as security against the loan. When you get a home equity line of credit, you will be approved for a set amount of credit. The maximum amount that you can take out will be affected by your credit limit. In most cases, home equity lines of credit have a variable rate of credit, though in some instances there might be a fixed rate available to you. These lines of credit basically work like this – you, being the consumer, are provided with a set amount, which can be borrowed at any time, and the only time you would be eligible to borrow again would be upon repayment of the amount previously borrowed. There may be situations or packages where you would be only allowed to borrow the money accordant to a pre-specified schedule.

By receiving a home equity line of credit, you would be afforded the chance to do anything you may be setting out to do in the near or slightly distant future, such as sending your children to college, saving up for emergencies or remodeling your house. It allows you to have access to some extra cash, and you will have the peace of mind knowing that you are prepared for all kinds of contingencies.

Refinancing your existing mortgage, or obtaining a home equity loan has been a great help to American citizens looking to meet their financial plans. Being ineligible to apply for a loan just because of bad credit history is, to put it loosely, “old hat.”

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Remortgaging Is It Still Worthwhile?

March 28th, 2012

It is no surprise that a lot of mortgage lenders tend to denigrate the average consumer who would switch mortgage lenders the moment they find a better deal. They call these people “Rate Tarts” when in all actuality they are, in my humble opinion, “Shrewd Shoppers.” After all, who spends more for exactly the same product, in this case money, when you can get it cheaper elsewhere? After all a £ from one lender as effective as a £ from another!

The mortgage market is highly competitive and as long as lenders use price as the main weapon in their marketing platform, price competition will encourage re-mortgagers to follow cheaper deals. Call them Rate Tarts if you must, but they’ll be the richer for it!

With all the jumping from one mortgage lender to another so prevalent nowadays, lenders have come up with their own maneuvers to remain competitive – some raise their up-front fees, others work on their programs for customer retention. In such a competitive market, accolades will be awarded for the best customer retention programs but raising up front charges, will simply reduce the lenders market share, albeit on improved profit margins. It seems that lenders still have to learn that carrots are better than sticks!

Let us use a simple example – Mr Lender dangles a 3.89% two-year fixed deal in front of you. Naturally, you’re dead chuffed upon learning about what appears to be a bargain, till you read between the lines – you get to pay a stupendous £1,499 arrangement fee instead of the market standard of £500! If you write off the fee over two years at £749.50 per year, it’s equivalent to an additional three quarters percent interest on a $100,000 mortgage.

Now that you realize that Maths will play a major part here, consider these tips for remortgaging. You would first want to sum up every associated cost of switching to another lender. Remember to add in the valuation fee (typically $250 on a $100,000 mortgage), the arrangement fee (typically $500), maybe a booking fee ($50?), legal fees to switch the mortgage (usually around $350 on a $100,000 mortgage), plus the cost of any penalties you’ll be charged to exit your existing mortgage.

Now it’s time to phone your existing lender.

Inform them that you may be forced to switch to another lender who is offering a better arrangement. Unless you put pressure on them, lenders frequently work on the principle that provided they offer a fairly attractive deal, customer apathy will prevail. Usually they remain stolid amidst pressure from other competing lenders (a pressure they seldom know actually exists) because they realize most borrowers would “tough it out” rather than going through the troubles of changing lenders midway through the life of loan. So shake their tree and see if a better deals falls out. Now if they don’t, then that puts them on the defense with you bearing down on goal – and your goal should be to walk out on that onerous deal while you still can!

Just be sure to keep your options as open as possible, and compare between lenders as you see fit – you won’t regret your decision once you are able to qualify for a better deal than what you are presently under!

Simon Etheridge is a financial advisor from Surrey, England who primarily deals with life insurance quotes and remortgage inquiries, among other UK financial services.

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A Brief Primer On Low Down Payment Mortgages

March 27th, 2012

There has been a sea change in recent years with regards to mortgage applications. One of the biggest differences is low down payment mortgages that only require 3-5% down on your total mortgage. So why have mortgage down payments been threatening to hit rock bottom as of late? A substantial part of the reason why down payments are smaller is because of the sharing of risk amongst parties involved in your financial transactions. In short, mortgage lenders are objective financial institutions – their goal is to increase their own profit, and in previous years, the amount they used to require for a down payment before the risk could be spread to Fannie Mae was a healthy 20%. Now, with the commonplace ability to sell loans to Fannie Mae, they are willing to lower the down payment because their risk is lower.

If the low down payment is as low as the single digits, this would be a boon to you being the borrower in the early stages of the game; but throughout the course of the life of loan (LOL), lenders would leverage themselves so that they get a larger piece of the pie even if defaulting lowers their risk. One such tactic which lenders would use as a compensation for a low down payment loan (that is, less than twenty percent of the loan value) would be asking the borrower to pay PMI, or private mortgage insurance. While private mortgage insurance is not a huge expense it is still an expense, often being .5% of your total mortgage. Simple example – if your mortgage is worth $300,000 in total, then it would be safe to assume that you would be paying $1,500 worth of PMI every year. You would need to make these payments until you have paid off at least twenty percent of the loan. But there are some instances wherein the lender will still insist you pay PMI even if you are well past the twenty percent threshold.

Next thing to be discussed in brief would be the process of taking out two loans simultaneously, in order to obtain a loan without having to spend that much. The first loan would be your main loan, covering the main mortgage, while the second loan would work in reserve to cover the down payment. More and more people are utilizing this technique, which is informally, yet commonly known as piggy backing loans. In other words, you are taking out a second mortgage, which may be the most proper term for such a practice. You will essentially have two loans to pay each month, so your debt load is going to be higher. You have to think twice before considering such an option – it is a calculated risk, to be sure, but not exactly the type of risk you would want to take if you are strapped for cash to pay for your down payment, not to mention saddled by the burden of paying other expenses.

There are a few qualifications required for somebody to qualify for an FHA loan, which requires an especially low down payment of three percent. However, loan insurance is required with these mortgages to alleviate some risk, and the total loan amounts are relatively small. Typically these loans would not be available in areas where the cost of living is much higher than most. In addition, veterans administration loans are a good choice for military families seeking out mortgages with lower down payments.

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