Home Loan Refinance and Debt Consolidation

Refinancing your home loan and cashing out part of your equity can help you consolidate your debt with lower rates. By starting with a pay off plan, you can enjoy being debt free in a few years. As with any type of refinancing, check out loan terms before committing to a lender. Shopping lenders will save you money in fees and interest charges. But, don�t be afraid to lock in rates when you do find a great deal.

Create an Eliminate Debt Plan

Before you start shopping to refinance your home loan, create a pay off plan for your debts. Look at current statements on all the accounts you want to pay off. Total your balances to see your debt amount.

Next, check your home equity balance to see if it will cover your short-term debt balance. Don�t forget to include your home�s appreciation. In some housing markets, a home�s value can increase by double digits in a single year.

Check Out Home Loan Terms from Multiple Lenders

With a cash out equity loan, expect to pay slightly higher rates to refinance. You can still find low rates by checking out loan terms from a variety of lenders. Start with a mortgage broker site to get a general idea of rates. Then expand your search to include individual lender sites.

When requesting quotes, just give basic information about your credit. You don�t want a lot of inquiries into your credit report since that will lower your score. One option is to get a free copy of your credit report and submit that information to lenders for a more accurate financing offer.

Apply Online to Lock in a Low Interest Mortgage Rate

Jump on an offer that you think fits your financial situation. Rates change daily, so you don�t want to wait too long before locking in rates. This is also the time to let lenders look at your credit report for a specific mortgage offer.

By Carrie Reeder

Let a Home Equity Loan Ease Your Credit Card Debt

Credit card debt can be one of the worst types of debt because it has a high interest rate and no tax advantage. But a home equity loan can help ease the pain of credit card debt and provide a viable financial solution. In addition, a home equity loan can help you get back on track with other important goals, such as college funds, retirement plans, and investments.

Credit Card Loans vs. Home Equity Loans

Yes, it is true that a home equity loan involves mortgage payments, so it may seem like you're just replacing one loan with another. But, there are important factors to take into consideration. First of all, a home equity loan carries a much lower interest rate than typical credit card rates. Even more important, the interest on a home equity loan is usually tax deductible.

So while you'll still have to make monthly payments, you can secure a fixed-rate mortgage with a lower, constant fee. And this fixed payment can ease your mental and financial strains.

Extra Money, Extra Savings

The right home equity loan will allow you to reduce your monthly credit card debt, while contributing to a retirement account or other financial security. Along with a lower interest rate comes the perfect opportunity to invest in your future--no more wasted money on interest charges and transferred balances.

So if you're ready to make a serious dent in your credit card debt, consider a home equity loan. It can help you with cost-cutting payments and brighten your financial future.

By Debbie Wilson

Market Conditions Affect A Home Equity Loan Rate

Curious about how a home equity loan rate is set? If you're planning on pursuing a loan, it's to your benefit to understand the market dynamics. It can save you money in the long run.

Like other rates, a home equity loan rate is determined by where the government sets their benchmark rates. Many people think that if the government lowers interest rates, home equity loan rates naturally go lower as well. Not so fast.

Typically, home equity loan rates actually rise when the Federal Reserve lowers rates. Why? When rates are lowered, the "Federal Funds" rates are lower. It's the rate at which large banks lend funds to one another and is called a "short-term" rate. But mortgage rates are long-term - up to 30 years. And longer-term rates are sensitive to expectations about inflation. So when short-term rates fall - like the ones the Federal Reserve controls - borrowing and spending usually increase, which can actually cause inflation to rise. Longer-term rates, like mortgage rates, can rise when concerns about inflation increase.

Markets are often ahead of the Federal Reserve. Interest rates are determined every day in active public markets.

If those markets believe the economy is slowing

Interest rates may fall as markets anticipate that the Federal Reserve might lower short-term rates. This happened in the last half of 2000 when mortgage rates began steadily dropping, even though the Federal Reserve left their short-term rates unchanged.

The opposite can happen as well

Mortgage rates can rise well ahead of the Federal Reserve increasing short-term rates.


Always Compare Rates

You can save money on a home equity loan rate by shopping around and comparing quotes from all the different lenders that will compete for your business.

The more questions you ask, the more likely it is you will understand how to deal and negotiate with lenders. It�s that simple. Shopping for a home equity loan rate is like shopping for an auto loan. It takes time and negotiating skills, but in the end, you will reap the rewards. Remember lenders set rates according to what they think you will agree to, which means, the rates are negotiable.

Shopping Home Equity Loan Rates

If you have been in your home for a number of years and you have established some equity, you may be considering liquidating some of that equity. A great way to do this would be to go with a Home Equity Loan.

A home equity loan allows for you to borrow off of the equity you have established in your home through appreciation and monthly mortgage payments without having to touch your first mortgage.

This is why a home equity loan can also be known as a second mortgage. But before you go and start signing applications, shop around so you can find the best home equity loan rate out there.

There are two types of home equity loans on the market that you have to choose from. The first one is your standard home equity loan with a fixed rate, which of course, is based on prime. This loan you receive in a lump sum and begin to make monthly payments upon it immediately.

The second type of loan is the home equity credit line. This one, as its name implies comes in the form of a line of credit. The home equity line of credit has a rate that is variable, which means it will fluctuate with the prime rate. Many of them come with introductory rates for the first five or six months.

Once approved for a home equity line of credit, you will not receive it in the form of a lump sum. Instead you will receive it in the form of a check book giving you easy access to draw upon it in the amount you would like at your convenience. Once you do draw upon it, you will have to begin paying it back on a monthly basis. Normally in the form of interest only for the first ten years.

Suppose you were to receive a home equity line of credit in the amount of $25,000.00. If you only wanted to borrow $6000.00, than all you would have to do is write out one of the check�s the lender sent you and deposit it into your checking account. Your payment would than be based on the $6000.00 you borrowed from your line.

Keep in mind, home equity credit lines do come with a rate that is variable, and that rate is based on prime. So, if the prime rate goes up, the rate on your home equity credit line will go up as well.

On the other hand, if the prime rate goes down, than the rate on your home equity credit line will go down.

Mortgage companies are very competitive, so whichever home equity loan you decide to go with, it would be in your best interest to shop around so that you may compare rates.

After allowing for a few loan officers to assess your situation and offer you a rate and product, base your decision on the rate and product that best fits your needs and budget.

Home Equity Loan Rates - Pros And Cons

Have you owned your home for a least a couple of years? If so, you most likely have some home equity built up then. In today's real estate market, building up cash equity in your home happens rapidly.

A home equity loan allows you to borrow the equity you've built up in your home. Keep in mind that there are home equity loan rate pros and cons. This article will address some of the major ones.

Pros

A home equity can be a good deal if you're needing access to a large amount of money. You can borrow the money and repay it over a 5-10-15 year period at very favorable interest charges.

You can use the proceeds from a home equity loan for anything you want, from making home improvements to taking a vacation. It's your money to use as you wish.

A home equity loan can be a good way of paying for college education expenses.

A home equity loan is much easier to obtain than any other type of conventional loan.

Cons

A home equity loan is a loan, and you have to keep that in mind. You're paying interest on this money. There are some people who see it as a type of revolving credit, and get themselves in financial trouble later on when they have trouble making the loan payment.

Don't get a home equity loan and fail to make your payments. If you default on the loan it could cause you to lose your home entirely. Depending on the size of the home equity loan, you could have a cross-default clause which would cause your first mortgage to be in default also.

Be careful in taking out a home equity loan if you plan on moving in the near future. By stripping out your equity, you may leave yourself in a bad way when it comes time to find a new home.

These are just a few home equity loan pros and cons. Used wisely, they can be the solution to a financial burden you have, but used the wrong way they can be a financial disaster.

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By Terry Edwards

Buying a Home with Zero Down Payment in Irvine

Years ago, the only person that could buy a home in Irvine with zero down payment using a new purchase money loan were Veterans of War (called a VA loan). In the past several years, there has been an explosion of new loan programs designed to fit most any buyers circumstances. Today, most anyone can buy a home with zero down payment if they have sufficient income and decent credit.

There are three factors that determine if you have sufficient income to purchase a home with zero down payment, and they are: Purchase price of the home, Interest rates, and debt to income ratio that the mortgage program requires. These three factors are interrelated as described below.

The debt to income ratio is the monthly mortgage payment of the zero down loan, divided by your monthly gross income (not your net take home income). This ratio can vary from 35% to 50% dependent upon the loan program, and your credit score. The monthly mortgage payment is determined by the purchase price, current interest rates, and the type of mortgage program, such as 15 versus 30 years, fixed versus adjustable interest rate, etc. There is another ratio that mortgage lenders look at which is the total debt to income ratio which is too complicated to discuss here. This ratio also analysis other debts that you may have such as car payments, credit card payments, etc.

You�re your credit rating is reported by three different reporting agencies called Experian (formerly TRW), EquiFAx, and TransUnion. Your rating is boiled down to a single number, called your FICO score. An excellent FICO score would be about 800 and higher, and good score is about 700 to 800, an average rating is about 600 to 700, and a poor FICO score is below 600. Some mortgage lenders even have some zero down loan programs for borrowers with poor credit ratings at somewhat higher interest payments and lower debt to income ratios.

We are sometimes asked if you can buy a home with no money at all. The answer is no under most circumstances. Even thought the down payment is zero, there are sill some closing costs. Closing costs are typically comprised of loan origination fees, loan processing fees, possibly loan points, Appraisal fee, ALTA title policy, and escrow fee. But there are other options.

We can sometimes negotiate with the seller of the home to pay for a large part of your closing costs. Our best result to date, is we helped a buyer purchase a Condo in Irvine and their total out of pocket cash expense was $795! The buyer was a single woman, who was a first time buyer, using a zero down loan that we found for her, and her credit was average. We were able to convince the seller into paying for all of her closing costs except for $795. That home owner now has over $50,000 equity in her home which she can keep tax free if she were to sell that home today!

by Vincent Bindi

Planning Ahead for a Home Equity Loan

Home equity loan delinquencies are on the rise, as many consumers fall behind on their payments. But you can help to avoid those problems by planning ahead before you borrow, or by using a flexible home equity line of credit or HELOC.

The American Banker's Association now reports that delinquencies for home equity loans are trending steadily upward, pushed by the higher cost of adjustable interest rates. Interest on most mortgages and home equity loans is tied to the prime rate, and it rose dramatically within the past two to three years as the Federal Reserve hiked rates 17 times. During the same timeframe, many houses also lost market value because the real estate market slumped, making it harder to sell them to pay off mortgages. Homeowners who default soon lose their homes to foreclosure.

Look before you leap

To avoid becoming one of these unfortunate statistics, experts recommend that you carefully plan your financial future before applying for any kind of home equity loan. Because these loans are secured by your home, missed payments can result not just in penalties and fees, but also in the tragic loss of your house.

The easiest way to borrow against the value of your home is through a home equity loan or home equity line of credit (HELOC). Regardless of which method you choose, it's recommended that you don't borrow more than you absolutely need. Also, beware of offers to loan you more than 100 percent of the value of your home. Those loans could leave you "upside down" or owing more to the lender than your house is worth. While you struggle to make payments, your indebtedness will grow because of accrued interest, and the snowball effect can soon get out of control.

Boost your home's value

Some financial counselors advise that you use home equity loans only to make direct investments in your home, such as room additions or remodeling projects. That way, the loan helps boost your home's value. Using equity loans to pay for nights out on the town, a new wardrobe, or other temporary treats you otherwise couldn't afford can be a quick path to red ink. In the end, you might put your most important asset-your home-in jeopardy.

HELOC help

Those wishing to borrow money for special projects or expenses may prefer to use a HELOC instead of a home equity loan. The lender will determine your credit line based on the value of your property, your income, and your routine expenses. Then you'll be given special checks or a card similar to an ATM card. You can access your credit line with cash withdrawals until you reach your limit; at that point, you'll be denied access until you pay off some of the balance. This provides a built-in mechanism to protect you from overextending yourself. All of us can benefit from that kind of budgetary guidance or imposed discipline from time to time.

By Tom Kerr