Home Equity Loans

How to Avoid Trouble with Mortgage Payments

2007-09-30T10:41:00.000-07:00

Introduction

If you’re having trouble meeting your mortgage payments you’re not alone. When buyers take advantage of low adjustable interest loans to buy their homes, there’s sure to be a high rate of mortgage delinquency when repayment schedules change and the housing market tanks. But don’t despair of losing your home – just make sure you take action quickly.

Instructions

Step One

Don’t stick your head in the ground if you’re having trouble with your finances. Be sure you know when your bills are due so you can pay them on time.

Step Two

Focus on your budget. To keep your mortgage commitment under control, you need to keep a close eye on your monthly expenses. Examine where you can cut back if you look like you’re going to have trouble paying the really important bills, like the one that guarantees you a roof over your head. Some of the luxuries you’ve enjoyed, even some things you may have thought of as necessary, may have to be put aside for a time so you have money for what really matters.

Step Three

Familiarize yourself with the terms of your mortgage and see if you can find one that may lessen your repayment burden. If you have an adjustable rate mortgage (ARM) find out when the rate will adjust and how high it will go so you can be prepared for any increases in your mortgage payment. Check out the benefits and availability of a fixed-rate mortgage, which would offer more predictability when it comes to handling your finances.

Step Four

If you’re late with a mortgage payment, pay it as soon as you can. It’s better to make your mortgage payment late rather than not make it at all. Whatever you do, don’t wait until you're 30, 60, or 90 days late before you take action.

Step Five

If after you’re pared back your outgoings, and still think you’ll have problems with your mortgage, talk to your lender immediately. It’s less expensive for them to help you sort your problem out than it is for them to foreclose your home.

Step Six

If you’re late with payments, and it’s likely to be a temporary situation, find out from your lender if you can get forbearance, or a request to suspend or temporarily reduce your payment. If you've lost a job or had some other short-term setback, your lender may allow you to skip several payments and give you time to get back on your feet. You'll need to be able to produce some evidence -- pay stubs, bank statements -- that you are doing your best to pay your bills.

Step Seven

See if uncle Sam can help. Ask your lender about helping you get a one-time payment from the government’s FHA-Insurance Fund to bring your mortgage current. You may qualify if your loan is at least 4 months delinquent, but no more than 12, and you are able to begin making full mortgage payments. Keep the number of a Dept. of Housing and Urban Development (HUD) approved counseling agency handy since they offer many free services that could help you. Call (800) 569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you.

Step Eight

If your financial problems are likely to be long term, ask your lender about restructuring your loan to make it easier for you to keep on top of payments.

Step Nine

If you’ve exhausted all your options and you’re facing foreclosure, get your lender’s advice on your options. There are alternatives to foreclosure and your lender will help you find the best option for you. For instance it may be better for you to sell your home at a loss rather than damage your credit score with a foreclosure.

Tips & Warnings

If you are in serious financial difficulty, you should seek professional assistance and/or legal counsel to protect your home and get you back on track with your bills.
Don't wait until you're actually in trouble to do something about it. If you’re going to have trouble meeting your mortgage payment, call your mortgage lender immediately. Swift action may prevent the loss of your home.
Bankruptcy is a last resort when dealing with your financial problems because it will damage your credit record for at least seven years.

MD

New York Home Equity Loans : New York Home Equity

2007-09-30T10:35:00.000-07:00

Using a home equity loan to gain financial flexibility is one of the most common financial strategies for New York Home owners.

New York Home Equity Loans

Many of us do have most of our net worth tied up in our homes. Although nobody wants to use up their equity, sometimes there are valid reasons for pulling out the equity rather than letting it just sit in the house. Do need to make improvements to your home?

Do you need to consolidate higher interest debts, such as credit cards?

Do you need to finance a one time large expense such as a child's tuition, a new car, or an unexpected medical bill?

Have you found yourself temporarily out of work?
All of these are valid reasons for using the equity stored in your home via a home equity. When taking out an equity loan it is not necessary to use all the equity. Rather, many people take out a Home equity line of Credit or (HELOC) and draw upon this line of credit only at the time the funds are needed.

Securing Your Business Loan With Your Business Income

2007-09-25T02:29:00.000-07:00

lengthways a concern is not an gentle extend and the poverty of finance is a must. However, a performing soul wants a affordable inspiration of finance and not rates that worry up every revenue. insecure lines of attainment are either likewise pricey or not procurable for moderate businesses. Thus, if the acting doesn’t know spare assets the mortal haw soul to utilization his possess private assets.

Fortunately there is added solvent to fortify a give for your business: the apply of the business’ income.

Your performing hawthorn exhibit money but it belike does not do so at the rank you essential and with the accurate timing you need. That is reason every businesses penury many form of business inspiration and secured ones ply a twopenny seed of funds.

There are loans and lines of credit provided both by business institutions and botanist that preserve be secured with the company’s income in antithetic structure and that keep cater every the finance your line needs.

Bank Or business Institution product Of accomplishment

Your afoot camber or whatsoever business infirmary container ply you with a line of attribute or a give supported on your business’ profits. Of class the word or line of entry preserve be either secured or unsafe but secured lines of approval stool give punter terms. Therefore, it is a reputable idea to plow with your declare trainer the unsurpassed options gettable to you as a commerce soul to obtain finance finished secured loans or lines of credit.

Your cant or business establishment preserve expect assets to ensure a word or line of credit. honorable equivalent with interior loans or home justness loans, if the companionship or acting owns an immobile property, it terminate be old to strengthen a loan. However, if your business’ accounts are managed by the incline or business organization and payments are finished by them too, you tin obtain finance securing it with that income.

Credit salutation Purchases As confirming

Some business institutions that hold ascribe bill payments present give to give you with financing securing the word or line of payment with the revenues generated by your sales.

The most frequent scenario is a bloodline of accomplishment related with the statement where the money from the income prefabricated with assets game is deposited. Thus, you can recede money flat when there is not sufficiency interchange on your invoice and when the income prefab with assets record are vulcanised the become owing is deducted from the income as a percent that has to be united beforehand.

This group provides you with every the financing that you require spell at the indistinguishable instance it provides warrantee to the lenders who experience that as shortly as you obtain money from your sales, they testament be the position ones to accumulate yet before the money is actually deposited into your account. specified bass danger implies that the investor buoy wage rattling profitable position on your piping of assets and it is an superior way to obtain affordable finance for your business.

The Home loans of the equity - they are right for you?

2007-08-16T23:48:00.000-07:00

piece base equity loans hump been favorite in past geezerhood the challenge is, are they sect for you and your situation? The respond truly depends on how you design on using the money.

A abode justice give is a identify of word in which the borrower uses the justness in their internal as collateral. It is an superior thing of finances as it dismiss unloosen up the justness you\'ve collective up in your home, and you potty prehend the currency to utilize for some decide you desire.

A base justness product of accomplishment or a interior justness word is a position mortgage that some fill have welfare of to settle soured debts, or do that expectant national transformation projection they\'ve been wanting to do. But, it is also a intellectual transaction, and you should see that you gift be swing up your abode as confirmatory to safe the loan. If you choice in making payments the pledgee has the knowledge to occupy over the give and you tin retrogress your home.

Another aid of a support mortgage or location justice give is that you buoy recoup the portion disbursal on your taxes. It is much amend than having a assets salutation because it has a decrease percentage measure and it is levy deductible. That\'s an chief characteristic to reserve in mind.

Applying for a mortgage location justness word online is fast and easy, and really accessible since you tin do it manus from housing whatsoever example period or night. If you\'re not careful how overmuch you currently owe on your mortgage, conversation with your pledgee and they\'ll be fit to support you out.

It is also important, as in whatever attribute transaction, to alikeness the summate costs of the give to opposite types of accomplishment useable to the consumer. When you comparability domestic justness word offers liken every fees for the loans you consider, not rightful the curiosity charge or reference proportion rate.

Poor title or close credit, a debt compounding secondment mortgage or plate justness word is easily obtainable in nearly some situation. Lenders are solon choice to word you the money level with impecunious attribute because your housing is victimized for collateral. If you resolve that this is for you, store around for the advisable part order and worst motility costs. utilized properly, a interior justice give keep ply you acquire your home assets in improve shape.

Should I Take Out A Home Equity Loan To Consolidate Credit Cards?

2007-08-16T23:45:00.000-07:00

If you’re same most Americans, you mortal both form of accomplishment greeting debt. If you’re paid upwardly of 10% and flat 20% on those approval cards, then chances are you aren’t making overmuch progression when it comes to salaried them off.

Turn on some TV or knock up whatsoever paper and you’ll chance the housing equity word or HELOC (home justness product of credit) industry is straight targeting consumers strapped with high-interest ascribe lineup debt.

The upside? Most housing justice loans or HELOC’s course between 7% and 9%, a often outstrip rank than the 18% to 21% of fund title cards. This incomparable could reserve a consumer hundreds to thousands of dollars over the sprightliness of a balance. Up to $100,000 of domestic justness word portion payments are tax-deductible. peak payments are unremarkably lower, and dealer is paying plumage often faster.

The downside? Your debt is today fastened to your home. If you failure on the national justice word or HELOC, you could recede your house. For anyone with level a lean way towards unpunished consume of assets cards, combining through domestic justice hawthorn be disastrous. There are ordinarily motility costs related with these types of indorse mortgages, so don’t lose to cypher those amounts from whatsoever part saved.

Before you play a exam decision, ponder the pursuing factors.

How some present you actually forbear on interest? There are a assemblage of business calculators on the Net to ameliorate you check what you present settle in relate over the period of a assets book balance. consider this to what you gift clear with a HELOC or habitation justness loan. Don’t lose to constant in coming costs specified as give exertion fees, valuator fees, mortgage filing taxes, etc.

How such do you owe? The pervading conception is to consolidate at $10,000 or more, but just shift to cards with decrease steady rates if your equilibrium is less. If you change logical credit, you potty commonly maturate payment game with change immobile rates and move your balances. flatbottom if you mortal to re-apply for new game every ennead months to a year, it leave be couturier the effort.

What caused your assets salutation debt to commence with? If it was a one-time cost much as college tuition, scrutiny emergency, duty departure or wedding—and you’re mostly good about experience within your means—then debt compounding is belike an fantabulous option.

If your impute lineup debt stems from trips to the mall, a big-screen TV, a voyage and lots of opposite lug you don’t plane remember, then chances are combining is NOT a cracking choice for you. irrespective of your balance, you’ll be amend served transferring balances to lower-rate cards.

Regardless of what you decide, make certain to register the penalty publish on every location equity or assets roll offers. examine for fees and last costs, and cypher them into your decision. desist the advise to “medicate” your debt symptom by making precipitant decisions. get a fewer life to island over offers you’re considering.

Either choice faculty prevent you money and signal you mastered the moving to debt freedom, so see your options, micturate your decision, and incur started!

Your Home As An Earning Member Of Your Family

2007-08-16T23:44:00.000-07:00

If you are a householder and are in poverty of spacious become of money then examine no more and avail a domicile justness loan. To avail national justice word you present have to area your lodging as confirming with the lender.

With domicile justness word you container helpfulness an total ranging from £5, 000 to £ 75,000. Loan total also depends upon the view of confirmatory and the assets story of the borrower. The quittance length ranges from 10 – 25 years. location justice give can be practical for via Net also. You pot helpfulness this give to fit personal needs suchlike purchase a car, deed for a vacation, stipendiary preceding debts etc. As abode justice loans are secured in nature they sway scummy pertain range and bendable payment options. They sack also be availed by grouping having nonfunctional assign story repayable to reasons same arrears, defaults, CCJ’s etc. In framing of national justice give lenders, they disregard the big entry number of borrower because they jazz the security in the make of the borrower’s home.

With secured national justness loan, homeowners keep help wide become of money really easily and in dumpy time. Also the occupy range of is rattling gear compared to else loans. You remove take a pliable payment duration depending upon your needs. If you poorness to earnings small monthly installments, determine a yearner stop for repayment. But have in intelligence that mortal payment length agency you’ll have to cogitate the powerfulness place for individual time and thus you change remunerated many money. Borrowers excruciation from intense approval record due to arrears, defaults, CCJ, IVA, tardily payments etc remove growth their commendation incision by paid the word installments regularly and on collect time.

While applying for some word you should e_er care for a pledgee that offers give at minify pursuit rate. intelligent the Net tin be really stabilizing in this regard. With some clicks you pot aim quotes from different business institutions, phytologist and disposal firms for free. You buoy then consider between the quotes and pertain for loan that is existence offered at sound recreation order and defrayment options. Applying online also helps you to refrain your treasured time. With lodging justice word homeowners dismiss easily helpfulness whacking become of money at rattling alto portion rate.

Home Equity Loan: Your Home As An Earning Member Of Your Family

2007-08-09T04:01:00.000-07:00

If you are a Eigenheimbesitzer and large quantity money needs then, not continues to look and is useful main cheapness to a loan. Around main cheapness loan to be useful you must set your house as collateral security with the credit-giving place.

With main cheapness loan you can be useful to a quantity, which hands 000 too £ 75,000 from £5. Loan quantity depends also after the value of the collateral security and the credit note history of the borrower. The repayment duration is enough from 10 - 25 years. Main cheapness loan can be also requested over Internet. You can be useful to this loan to fulfill around personal necessities like the purchase of a car and go to holidays and preceding debts etc. paying. While main cheapness loans in nature become secured, they carry lowinterest-bearing to estimate and flexible repayment elections. They can be also used by the people, which place bad credit note history because of the reasons such as arrears, resetting, etc. CCJS in case of the main cheapness loan-credit-giving to have, them ignore the bad credit note notch of the borrower, because they have security in the form of the house of the borrower.

With secured Eigenheimbesitzer of large quantity money can be useful to main cheapness loan and in brief very easily. Also the interest rate of is very low compared to other loans. You can select a flexible repayment duration, depending after your necessities. If you liked to pay smaller monthly instalment payments, a longer period for repayment to select. But in the understanding it holds that longer repayment continuous means you must pay the interest rate for longer duration and therefore you paid more moneys. The borrowers, those under bad credit note history because of the arrears, the resetting, CCJ, IVA, which late payments etc. suffer, can increase their credit note notch, by paying regularly the loan payments by instalments and on suitable time.

When requesting each possible loan you should always look for a credit-giving place, the loans with lower interest rate offer. The Internets to search can be very useful in this regard. With wenigem clicking you know stating lines of the different banks, from which banks and from borrowing enterprises for free receive. You can compare between the stating lines then and request loans, which is offered at the appropriate interest rate and repayment elections. Assistance on-line also use you, in order to store your precious time. With main cheapness loans can use Eigenheimbesitzer of large quantity money with very lowinterest-bearing rate easily.

Selecting the Right Mortgage

2007-07-31T20:14:00.000-07:00

By : Rosy

The right mortgage to select is crucial somewhat much, because with so vielem housing loan and mortgage elections in the market of real estates open, you requires the confirmation of the right mortgage is usable for your requirements.

For the fact that you go away fulfilled with your mortgage you confirm must per finds a research to do and must catch up as much information as possible. The points, which are further down mentioned, can support you, if they select the right mortgage: First when selecting the mortgage, your present financial condition examine and the condition of your future financial status also estimate.

Number of days calculate, which you plan to remain and examine out in the house whether you do not feel uncomfortable with mortgage payments, for which holds, to change according to the market. Determine after this, how much you from the credit-giving place expect can, by associating mortgage with a computer.

Since, mortgage computer you short idea over function financial organization give, is it very much important that you in living expenditure, insurance regard, because mortgage computer a general outline give of, how much a financial organization lends to you, is it vital that you can to have to return also factor in living expenses, in the insurance, in supporting and in all possible other debts you, in order a more conventional approximate value from, which you can obtain afford, in order on a mortgage each month without any difficulty to spend.

This supported guarantee the right mortgage choice. Confirm over the quantity of the deposit in advance, which you will form to avoid the later controversies. Normally by laying down large quantity on the purchase of the house you lower the mortgage expenses and the interest percentage, which you will pay during the long period. If you must less as if disburse, 20% of the expenses of your house, which pays then for mortgage insurance, to be considered. It is always suggested, in order to do little research, before one terminates your decision. By Internet or by other information desks find out, which different taxpayer for different kinds of Hypotheken are. Different institutes offer varied rate and drafts, are good it to buy around in order to look, who provides the best rate with the finest and simple repayment conditions. A house to buy can be exciting and irresistible.

By preselecting the right mortgage, you can hold away you from pressure caused because of the very large financial decision, which you can make in your life at all.

Adjustable Rate Mortgages - the Sad Truth

2007-07-31T20:09:00.000-07:00

By : Jeremy R

The mortgage of recordable rate is equally the new phenomenon for the mediators of mortgage and the companies of mortgage. They know that a your rate is going to go in on and that you will have to refinance your domestic loan before too much along, therefore they come to swoop within and they are the hero here.

I bet that those 90% of the mortgage mediators who call them were those that put their customers in these types of mortgages, therefore in the reason for they that call them and of the customers they have not worked with in the past. Unfortunately the schools in America do not have a code category standard of finance in order to instruct our citizens approximately the domestic property, the credit cards and other obligation that financial we take over while we develop ourselves.

That not only holds account affinchè we is profited for but moreover that it allows that the so-called the professionals are profit you for from the companies work As an example in order to, some years ago the means and other advanced civil employees of place in the mortgage industry were saying to everyone that to take a mortgage of recordable rate, but because? If you behind asked it they then to bet that they would say because the rates are low.

The truth is, mortgages of generally fixed rate has a higher interest rate confronted to the ARM, usually half of the point to a point on your interest rate. On a mortgage $200,000, 6.75% a recordable damped mortgage and rate of fixed rate to 7.75% in 30 years have one difference of payment of $136 a month. My conjecture is, if your debit to the yield relationship is to the high on the mortgage of fixed rate but characterized to you for the mortgage that of recordable rate been watching a center that is over your estimate.

Hour that found attacked in this dilemma, to find an escape is not impossible as thoughts. You must begin to try the sense of options before that your rate is going to record. The problem that more common I see today must be taken care more of editions than accreditation rather than of the fairness lack. A true professional of mortgage is not going to only discard it because that not characterized to you today for a loan, he or is going to work with you in order to resolve in advance payment your problem 3 months, 6 months or 9 months in order to even prepare them for a new loan before that your rate mortgage you record.

If begun to try one new mortgage enough soon you will be able to really determine which mediating of mortgage he preoccupies for you and which mediating of mortgage he only preoccupies himself for if same. To make a favor and to begin to deepen into that possibilities are on hand today you therefore when the time come affinchè your mortgage of recordable rate them registries are prepared.

The Science of House Buying

2007-07-29T23:50:00.000-07:00

By ; Ajeet Khuran

Buying a house is quite a demanding task. There are many things which can be bought in a few minutes. Batteries, pens, pencils, and even books and gadgets can be picked up off the shelf within a matter of minutes. However, when it comes to buying houses, you cannot avoid doing some research on your own. After all, there is nothing remotely "use and throw" about an investment of this kind. This is a place that you will be living in for a long while now. So you should make it a point to become aware of all the necessary concepts when you are going about buying a house.

Now, the first thing to do is to make up your mind with regards to the location. Would you like to live in amidst the noise and bustle of a city? Or would you prefer to put up in some relatively quiet suburban area? What are the things that you would have to have close to your home? Are you a shopping and movies buff who needs a mall and a theatre? Are you looking for a school for your child? Would you like a library close by? List out the things that are must-haves when it comes to finding a house. Then you think about things like whether you want an airy apartment or a big bungalow or just a one bedroom flat.

You really should try to take advice from a house broker or a real estate agent to help you narrow down your search. A broker will have several great bargains that you might not have found on your own. So it would be a good idea to consult someone who has adequate knowledge of house-buying if you are not well-acquainted with the required procedures. Once you have found some properties that you will manage to pay for as well as your other needs, you will have to go about finding suitable mortgage plans.

If you would just on the Internet you would find a whole lot of websites that have mortgage calculators. These mortgage calculators take into account questions like your current income, the loan amount you are seeking, and your current debts to decide what kind of a mortgage loan amount should be given to you. Try out a few mortgage calculators from a few different websites and you should be well aware of what to expect when you actually decide to go and apply for a loan. Never go to a loan provider without first trying to learn about the loans that are available. This will allow your loan provider to facilitate your finding quickly the best possible loan.

Why Real Estate is Still the Best Investment You Can Make

2007-07-29T23:47:00.000-07:00

By ; Grant Eckert

Though there's no such thing as a "sure thing," real estate is still considered the best investment you can make for your financial future - and with good reason. With the favorable housing market for buyers and for sellers, real estate is an almost guaranteed way to increase your income as well as your net worth. Here are the top four reasons why you might want to make real estate your business too.

The first reason for investing in real estate is common sense - everyone needs a place to live or work. When you need to have a space for a certain function, you turn to the real estate market, whether you're renting or buying. Because this demand is never going to go away, investing in real estate is a move that is certain to pay off in the future. Even as housing prices rise and buyers are more hesitant, there is still a market for renting. And when the housing prices go down, the buyers will be ready to buy again. No matter what the market is doing, real estate still sells.

The next reason for making real estate your main investment is that it can continue to increase in value over the years. By adding additions to a property or installing new features, you can continue to make the piece of property valuable. The initial price that you paid for the property can be recouped as well as turn a profit if you've made substantial improvements. If you're looking to make a profit from the selling of properties, you will want to continue to make improvements and repairs on the home so that it's in good repair for future sales. In addition, if you are constantly making improvements to a rental property, you can increase the rental rates to compensate for these features.

You will also find that real estate is a great investment because it is so simple to get into. In many cases with option ARM mortgages, you won't have to pay a lot of money to buy a property and then can turn around to sell to someone else. Known as flipping houses, this has become common practice with many real estate investors. While you will need to make the initial investment and then wait for someone to buy your home, you will be able to make a large amount of money in exchange. Buy properties in popular areas and you will be able to make even larger amounts of money.

Finally, real estate is a worthwhile investment when you're in an area of development. Cities and suburbs outside of bigger metropolitan areas are often much more likely to have a favorable housing market because most people don't want to live inside the city, but do want to live near the city as that's where they work. But as a result, these houses are less expensive to buy in the outer regions of the busier areas, making it simple for you to invest when the housing market is new.

The flexibility of real estate is also something that makes it a great investment. While it used to be difficult for the buyer to buy a home, it's easier than ever with a wide range of mortgages, making it easier for the seller to sell. If you are a homeowner that's not looking to sell, but owns your own home, you can use the equity in your home to add value to your home as well as to your life. The investment you've made will continue to pay off for years to come.

Get Deals on a Home Equity Line of Credit , Home Equity Loans and More

2007-07-28T07:50:00.000-07:00

By: Doug Bane

The massive growth of the internet has meant a win-win situation for both loan companies and the public. Financial companies get access to a huge nationwide market of millions and millions of potential customers; while consumers have a ton more choices. Those choices also mean a lot more competition among the online home and other loans companies, which means the average person may well be able to get a home equity loan or home equity line of credit at lower interest rates then if they just had local options.

This proliferation of home equity loan companies also means that people with less than stellar credit ratings (or even bad credit ratings) have a much greater chance of getting a loan. In fact since many loans for people with perfect credit are handled by their local banks, the internet has attracted many firms who specialize in offering home loans to those with less than perfect credit.

There are two main types of home equity loans:

Fixed Rate

These loans are a single, lump-sum payment to the borrower, which is repaid over a set period of time at an agreed-upon interest rate.

Home Equity Lines of Credit (HELOC)

This is a variable-rate home loan that works much like a credit card and occasionally comes with one. Borrowers are pre-approved for a certain spending limit and can withdraw money when they need it via a credit card or special checks. Monthly payments vary based on the amount of money borrowed and the current rate of interest.

Both types are available with terms that generally range from between five and 15 years, and both must be repaid in full if the home on which they are borrowed is sold.

Many other types of loans are available online:

Debt consolidation loans - they will pay off your existing loan or credit card debts and then you pay them back - but at a lower interest rate than your old debt. It's especially beneficial for people with credit card debt, since those interest rates are typically extremely high.

Payday Loan Companies are also common on the internet. It's good news if you need one, since there's so much competition among the companies competing for your business. Just remember to always pay back a payday loan in full when you get your paycheck; since payday loan fees start to get steep if you renew the loans.

Whatever type of loan you're looking for, the best bet is to visit many financial companies web sites and request rates for the loan you want. Then simply do a comparison and pick one with a competitive interest rate; preferably a company you have heard of. Otherwise you can just google the company name and learn more about each company.

If you take advantage of the huge marketplace provided by the internet, and compare interest rates carefully, you can get great deals with online loans.

Home Equity Loans - How to Squeeze Money From your Home

2007-07-25T09:49:00.000-07:00

By Jim Wilson

Equity loans were designed to assist homeowners to raise the equity on their home in order to make profit, or else set up a new loan on the house. Home prices escalate as time goes by, making the house worth more each day that it is around. A House's equity then is the complete value of the property, minus the amount the homeowner is paying on the home.

If you take out an equity loan, you must keep in mind that the loan is configured to pay out your first mortgage and then commence regular payments on the pending loan. Lenders need borrowers to pay five to ten percent upfront deposits, as a guarantee. The greater amount of deposit will decrease your interest rates and mortgage payments in most situations.

Equity loans then are borrowed money and the homeowner puts up collateral, which usually is the home. There are advantages of signing up for equity loans, particularly if the borrower is in debt and needs cash to pay off his home. The collateral,however, is the garnishing product if the borrower cannot repay his mortgage. Said another way, if the borrower fails to make repayment on the equity loan, then the bank may possibly take back the house.

Consequently, the tactic for homeowners is to borrow cash by establishing an equity loan to reduce the monthly mortgages. Some homeowners may possibly pay $500-$600 per month on their mortgage; and if they uncover the perfect lender, they will create an equity loan to repay $180 per month. The reduction is big, but what the homeowner is doing is choosing a 30-year term loan, paying under $200; thus the homeowner is really paying twice for the same home.

Mortgages come in various types; as a result if you are contemplating refinancing your home, it pays to shop around for rock bottom rates and greatest deals. If you are choosing an equity loan, you may want to query about overpay and underpay loans, where you may possibly get huge sums of cash back on your mortgage. As well, you will most likely want to print out contracts and compare them beside each other to find out what benefits you will derive by choosing one legal contract over the other.

Secure Home Loans Help Procuring Amount

2007-07-25T09:47:00.000-07:00

By Andrew Baker |

Home is place where one lives in with dignity and pride. But when one comes across with some unexpected financial emergency, the home always stands by in good stead. This is the equity of the house that provides the required sum at the need of time. For the purpose, the finance-needed individuals can take stoke of the market situation. The market is nowadays full secured home loans.

The Secure Home Loans are collateral based. So for that, the individuals have to place house as collateral for their guarantee. On the market value of the house i.e., home equity, the amount is sanctioned. Equity is current market value of a home minus the outstanding mortgage balance amount on money. For instance, the market value of one’s house is £ 200, 000 and owes £ 70, 000 on one’s mortgage. Now, the individual will easily have £ 130, 000 equity available on own home.

With the help of the equity, individuals can easily apply for a good amount of loans. However the amount offered by the lending authority and corporate are up to £ 100, 000, it can be upgrade further for the convenience of the borrowers. This amount will be availed by the borrowers for a period ranging between 5 to 25 years.

Thing that always keep in mind is of the equity. That is as the equity increases due to market force, likewise the sanctioned amount increases proportionately. The advisable part of the secure home loans is that the borrowers may remain always watchful to the ups and downs of the finance market.

Secured home loans qualify all the requirements of the borrowers. The offered sum can be utilise for any kind of purposes whether it be a matter of home improvement that ultimately upgrades the market value of the equity or children’s education or wedding purpose. Moreover, these loans help in consolidation of many loans and provide opportunity to improve credit scores too.

Importantly, it good to visit the lenders in person, but if the individual is not smart enough to understand the hidden terms and conditions then it can be detrimental for the borrowers. Online accessing, for this kind situation, is deemed fit. The internet helps study comparative analysis of the market on the one hand and provides different loan quotes on the other.

Paying off credit cards with home equity loans has pluses, minuses

2007-07-23T05:02:00.000-07:00

When facing mounting credit card balances, taking out a home equity line of credit can sometimes allow borrowers to get back on solid financial ground while paying lower interest on their debt.

However, financial experts warn it is not the best option for everyone.

Transferring debt to a home equity loan, which typically has much lower interest rates than credit cards, can help consumers pay off their credit cards more easily, according to Bill Hardekopf, CEO of LowCards.com, a Web site that ranks credit cards and lets consumers compare various cards based on interest rates, annual fees and other criteria.

Depending on their credit status, the loans could let consumers borrow 75 to 85 percent of the appraised value of their homes, he said.

"In the right situation, a home equity line of credit can be a good option for reducing credit card debt," he said, but the loan comes with its own risks and may not be the best fit for everyone.

"The first thing you should do is review your past experiences with debt," he said. "If you chronically have problems paying down your credit card balance, going over the limit, managing your debt, or continuing to add to your balance, then a (home equity loan) may be much more harmful than good for you."

According to Hardekopf, the advantages of a home equity line of credit are:

It converts debt from a high-interest credit card to a loan with a lower interest rate.

Consolidating credit cards into a single home equity loan shows fewer outstanding loans on consumers' credit reports.

Depending on the circumstances, borrowers may be able to deduct the interest for taxes because the debt is secured by their home.

But the loans also pose risks, putting borrowers' homes on the line, said Diane Mull, education specialist at Consumer Credit Counseling Service of Southern New England in Milford.

"Certainly, it's not the ideal way to handle debt," she said. Transferring debt from credit cards to home equity may tempt borrowers to begin using those paid-off credit cards again. "It opens the door to increasing all of those balances on the cards again."

Defaulting on a home equity line of credit could have a catastrophic effect on homeowners, Mull said. "It could put your home in jeopardy because your line of credit is secured by your home."

Hardekopf agrees that home equity lines of credit can be detrimental to some borrowers. Among their risks, he said:

Home equity credit is still a debt that must be paid off, and should be viewed as a one-time fix. Consumers who don't have the discipline to stop using their credit cards should not take out home equity loans because if they get into deeper financial trouble, they are putting their homes at risk.

The loan is based on a home's value, which is variable. Borrowers should not assume that the value of their home will never drop. If the value of a home drops, so does the equity.

As with a mortgage, there are fees and paperwork for a home equity loan. They include property appraisal, application fees and closing costs, including attorney fees, title searches and mortgage preparation.

The loan should not be used to live beyond one's means, or to purchase travel or leisure products. Use it only for expenses with long-lasting benefits, such as education, home improvements or debt reduction.

In most cases, there are penalties to paying off the loan early, so those who plan to move from their house in less than five years should seek another option.

Shifting debt from one source to another does not alleviate the central financial problem, Mull said. A better strategy is for consumers to determine how much debt they really have and then devise a plan to address it, she said, and a key component to that often is setting and living within a budget.

"They have to have their spending under control," she said.

By ; Cara Baruzzi, Register Staff

Via : www.nhregister.com

Use A California Second Mortgage Home Loan To Your Benefit

2007-07-21T10:34:00.000-07:00

A California second mortgage home loan can provide financing for home improvements, credit card debt or other needs.

Taking out a California second mortgage home loan used to carry some stigma with it - a sign that you were in financial trouble. But today, the ability to borrow money against your California real estate is considered one of the biggest advantages of owning a home.

A California second mortgage home loan is essentially secured by your home or

another piece of property with a first mortgage. The California second mortgage allows the homeowner to tap the home equity to pay for college tuition, essential home improvements, pay off credit card balances or other pressing financial needs.

Because there is more risk involved with a California second mortgage, the lender's conditions are usually more stringent, the term is shorter and the interest rate is higher than for the first mortgage. In the event of default, the holder of the second mortgage is subordinate to the first.

To qualify for a California second mortgage, your credit must be in good standing and you must be able to document your income. An appraisal will be required on your home to determine the home's market value.

By definition, a California second mortgage is any loan that involves a second lien on the property, but you generally have two options: a home equity loan or a home equity line of credit.

Both options combine your first and second loan, so your loan will be limited to 75 to 80 percent of your home's appraised value. With a California home equity loan, you borrow a lump sum of money to be paid back monthly over a set time frame, much like your first mortgage. However, the closing costs (often 2-3 percent of loan amount) are often higher than your first mortgage and the rate - usually fixed - is also higher.

A California home equity line of credit (HELOC) is an open line of credit tied to an equity-based maximum loan amount. You may use the account for a set period of time (5, 10 or even 20 years) as long as there are funds. Once your predetermined time period is up, you will be required to pay off the loan, making monthly payments on the principal and interest. The interest rate can fluctuate month to month on a home equity line of credit, which makes this option appealing when interest rates are low, but risky when interest rates increase.

When deciding what type of loan is best for you, it is important to consider how you will use the money and how you intend to pay it off. Do you need money in one lump sum or intermittent over several months or years? Do you want a fixed interest rate so you can repay your loan in precise monthly installments or would you rather have the flexibility to make any size payment above the interest-only minimum? In today's competitive market, there are many options available. I will help you find the right mortgage product for your lifestyle and financial needs.

For more information about a California second mortgage home loan please call 866 398 4664 or go to www.GoldMedalMortgage.com

Home Loans: Building Dreams Houses for You

2007-07-20T07:51:00.000-07:00

By Renita Vaughan

Home is the basic requirement and also everyone longs for a home of their own. Like others, you also desire to have your own home but the main hindrance is the lack of sufficient finance. If this is so, then home loans are always there to aid you with the amount that you required. The home loans are structured in a manner which aid monetarily persons from every financial category to build the home they dream to live in.

The finance of home loans can be obtained in two forms secured and unsecured. If you decide to opt for the secured one, then pledging of collateral becomes mandatory and in turn facilitates borrowers to borrow large amount of loan. The unsecured form is the alternate option of secured form, and can be opted when an individual does not has property or reluctant to place it against the loan. The secured and unsecured forms are the two sides of the same coin whose objectives are to provide finance for building homes.

Home loans can be borrowed for multiple purposes as it is designed so. To build a home is the primary objective, and along with it individuals can borrow to renovate or repair the house and even borrow it to make extensions of rooms. Home loan is easily available in the market and lenders also do not hesitate to approve the loans if proper documents are furnished. By producing the data in a precise manner, bad creditors can also approve the loans and borrow the finance despite their poor credit or adverse credit. Home loans come at marginal rate of interest and also one can borrow it according to their repayment ability. To make the repayment burden more rational the repayment tenure are stretched to long durations which graces from 5-25 years.

The sophisticated technology has made it possible to approve home loans by sitting at home. The process is in complex and reliable which saves time and effort despite providing instant results. The online device reduces the period gap between the person and his dreams of having a home of their own.

Dina Wilson is an expert loan adviser at online home improvement loan. She has done MSc Management and Finance from University of Whales.To find Home loan, home loans, home equity loan, approve home loans, home equity loan UK visit http://www.online-home-improvement-loan.co.uk

JPMorgan Takes Home-Equity Hit

2007-07-18T07:34:00.000-07:00

JPMorgan Chase (JPM - Cramer's Take - Stockpickr) stumbled in early trading Wednesday after the banking giant posted better-than-expected second-quarter earnings but said profits were hit by troubles with home-equity loans.

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In the quarter, JPMorgan Chase made $4.2 billion, or $1.20 a share, up from $3.5 billion, or 99 cents share, in the year-earlier period. Revenue rose 25% to $18.9 billion.

Analysts were expecting the New York bank to earn $1.08 a share on $17.6 billion in revenue.

Revenue from JPMorgan Chase's investment bank rose 34% in the quarter to $5.8 billion. The jump reflected solid investment advisory fees, strong debt underwriting and "record" equity underwriting fees, the company said.

But JPMorgan Chase's retail financial-services business was another story.

While revenue from the unit rose 15% to $4.4 billion, its profit slid 10% to $785 million as the company sharply increased its provision for credit losses.

The provision for credit losses in the businesses jumped to $587 million from $292 in the first quarter and $100 million a year earlier.

The provision includes a $392 million increase in the allowance for loan losses related to home-equity loans. Home-equity net charge-offs more than tripled to $98 million in the quarter from $30 million a year earlier.

"The increase in provision reflects weak housing prices in select geographic areas and the resulting increase in estimated losses for high loan-to-value home equity loans, especially those originated through the wholesale channel," the company said. "Home equity underwriting standards were further tightened during the quarter, and pricing actions were implemented to reflect elevated risks in this segment."

The stock was down 70 cents, or 1.4%, to $49.22 in early trading.

"Our strong earnings benefited from solid performance in the investment bank, record results in asset management and treasury and securities services, and very strong results in private equity," said Jamie Dimon, its chairman and CEO. "In addition, during the quarter we strengthened our reserve for the home equity lending portfolio. Although we remain at a relatively benign point of the credit cycle, we continue to focus on being prepared for a less favorable environment. Given the diversity of our business mix, improving operating margins across our businesses and the strength of our balance sheet, the firm is well-positioned for the future."

By ; Laurie Kulikowski

Via : www.thestreet.com

HDFC enters home equity business

2007-07-18T05:09:00.000-07:00

MUMBAI: HDFC, the country’s largest housing finance company, has made a big move in the home equity business by offering loans against property at 13.25%. This could turn out to be big business opportunity for the lender since most of its borrowers pre-pay home loans.

The finance through the home equity route makes available finance at a cheaper rate than, say, auto finance or personal loans with easier repayment schedules. HDFC expects a big demand for this product from borrowers who have cleared their mortgage dues. This loan would also be available to existing borrowers, if the market value of the property is much higher than the outstanding home loan. The advantage of this loan over the existing top-up loans is that there is no Rs 5-lakh ceiling, which is applicable on top-up loans.

Renu Sud Karnad, executive director, HDFC Ltd, said, “Asset Plus is not a new product from HDFC in the true sense. However, it is now structured differently, and is aimed at assisting customers to meet their immediate financial requirements while they continue to occupy their homes. Also, if compared to a personal loan, the interest rate on Asset Plus is lower and loan term is much longer. This gives a borrower the option to spread the loan repayment over a longer period of time, in effect reducing the immediate financial burden.”

Interest rate for Asset Plus loans will be charged from 13.25% onwards on floating rate loans and the loan term against residential premises is 15 years while the term for non-residential property is 10 years, subject to the age of customers. The product entitles customers to loan sizes beginning from 50% of the market value of the property. Subject to the market value of the property and loan eligibility criteria, HDFC’s customers can have a total exposure of up to 70% of the market value of the property and at the same time get an interest rate, which would be lower than non-HDFC home loan customers.

The eligibility criterion for Asset Plus is that the property needs to be freehold, self-owned and fully-constructed, with a clear and marketable title. One can also mortgage a joint property by having all owners as co-applicants for the loan. Although a small business in India, loans against home equity are big business in developed market like the US. However, since this involved increased leveraging, the loan product increases the market sensitivity to interest rates and real estate risks.

Via : economictimes.indiatimes.com
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Credit-card delinquencies decline in first quarter

2007-07-16T21:57:00.000-07:00

Credit card loan delinquencies declined in the first quarter of 2007, according to the latest American Bankers Association Consumer Credit Delinquency Bulletin, released July 3. Late payments on credit cards were 4.41 percent of all accounts in the first quarter, compared to 4.56 percent in the fourth quarter of 2006 (seasonally adjusted).

“The good news is that credit card delinquencies fell during the first quarter of 2007,” said ABA Chief Economist James Chessen in a news release. “The improvement in credit card late payments is somewhat remarkable, given that the economy was not operating on all cylinders.”

Chessen noted, however, that consumers’ overall financial positions were worsened by slow job growth, falling home prices and weak economic growth.

“There are still signs of consumer financial distress, which will continue throughout most of this year as the worst of the housing problem works its way through the economy,” Chessen said, referring to the sharp increase in the composite ratio, particularly for items directly related to housing.

The number of delinquent accounts in the composite ratio, which tracks eight closed-end installment loan categories, increased to 2.42 percent from 2.23 percent. This ratio moved upward for the past year, reaching levels not seen since 2001.

“The increase in the first quarter of 2007 was driven in part by double-digit increases in home-equity loan delinquencies,” Chessen said.

By ; SBJ Staff
Via : www.sbj.net

Credit-scoring system is about to undergo change

2007-07-16T01:38:00.000-07:00

In September, the FICO credit-scoring system is set to undergo a major overhaul. Fair Isaac Corp., the Minneapolis company that creates the formula used to calculate the score, is downplaying the change, saying that it won't have much of an effect.

But 40 of the top 50 financial institutions in the country rely on FICO scores to determine whether to approve a loan and what rate to charge. Retailers, landlords, insurance companies, employers and utilities also use it to decide how to do business with you -- or whether they should.

So any change in the way that scores are decided affects millions.

Because Fair Isaac doesn't want rivals to copy its formula, it isn't giving out too many details about the changes, but spokesman Chris Watts did say this: Fair Isaac divides the population into 10 segments based on credit history and applies a different formula to each. Eight segments include people with good credit, and two are for people with serious problems. Under the new system, the population will be divided into 12 segments: eight for people with good credit and four for people with bad credit. That could result in a slight change -- up or down -- in many scores.

"This new system will give lenders more dependable scores for those higher-risk consumers and those who have little history," Watts said.

Now, that's not really a bad thing if your credit is pretty good, but if you're on the margin or trying to establish your credit, it could mean trouble.

Because businesses interpret scores differently, a slight change could be the deciding factor in whether a landlord decides to rent to you or whether your bank decides to increase the interest rate on your mortgage or home-equity loan.

For example, according to Fair Isaac's Web site ( www.myfico.com), the difference between a score of 620 to 659 and one in the range of 660 to 699 can result in a $163 difference in the monthly payment on a 30-year mortgage.

Watts concedes that certain groups will feel the effect far more than others.

People with thin credit history or poor credit will likely see their score either jump or drop significantly, he said.

As it goes with most change, some people are going to be hurt through no fault of their own.

One adjustment to the current credit scoring system will be to stop giving credit points to those who are authorized users on someone else's credit card.

This change will affect about 30 percent of people with credit reports, or about 60 million consumers, said John Ulzheimer, president of educational services for Credit.com and a former manager with Equifax and Fair Isaac.

"When they close this loophole, it will eliminate millions of authorized users and their scores will go down," Ulzheimer said. "This is a very, very big deal."

This change is going to affect young adults trying to establish credit by attaching themselves to their parents' credit cards, spouses -- mostly women -- who are authorized users on the family credit card, and people who are trying to re-establish credit by coat-tailing a family member's good credit history.

Fair Isaac has closed this loophole because the lending industry has complained about abuses and said it was distorting borrowers' true credit risk.

So what can consumers do?

First, those who became authorized users to help build up credit should consider switching to a joint account. That will allow the joint member to continue to reap the benefits of the primary cardholders' strong credit history.

But this option poses more risks to the primary holder of the credit card.

For example, if an authorized user abuses the card, the primary cardholder simply has to make a phone call to revoke the user's card.

It's not as easy to remove a joint user. The primary cardholder would have to close the account and open a new one to remove the user from the account.

Most of these rules apply in determining ways to improve or maintain your credit score, Watts said.

BY ; VICKI LEE PARKER

VIa : www.star-telegram.com

How to Break Into the Housing Market, Even Now

2007-07-15T17:48:00.000-07:00

It was about as far as you could get from Jeff Langholz's and Karen Lowell's idea of a dream house and still have four walls and a roof: a ramshackle double-wide on a weed-infested lot in rural Monterey County. A trailer for $169,000. Was this a joke? Had real estate grown so cartoonish that two Ph.D.-packing graduates of Cornell were scrambling to move into a green-shag-carpeted mobile home in a community nicknamed "Prunetucky"?

Well, yes, it had. It was 1999, the beginning of the real estate boom, and with just $7,000 from Karen's parents for a down payment and prices on the coast edging toward $500,000, the couple realized the Prunedale property was their only way in. So they bought. Three years later, with two kids in tow, they traded up to an 1,100-square foot house on 2 acres on a sunny hillside a mile away.

It was a critical step up. With a white-hot market on their side, they were well on their way to realizing the kind of wealth that real estate brings to those lucky enough to get a piece of it.

That might have been the end of their concern with the brutality of the California housing market. But at the Monterey Institute of International Studies, where Langholz teaches environmental policy, he was hearing housing horror stories from far beyond the West Coast. Newly minted graduates who'd landed highly prized jobs in New York, Washington and Geneva were facing even more hostile conditions than he and Karen had.

"They're destined to be renters for life," Langholz says. "And it's just not right. If you're a hard-working, educated person with decent credit, you should be able to buy a house."

What was missing, he reasoned, was the leg up to the bull's back -- the down payment. In most Bay Area markets that had become a formidable barrier to entry. To get an 80 percent loan on a $500,000 condo meant pulling together $100,000 -- which was flat-out impossible for most first-time buyers. Langholz knew real estate has always been viewed by investors as an attractive bet, although one that generally requires more time and effort than other types of investments, not to mention tenant-induced headaches. Couldn't something be worked out between the people with no cash for a down payment and those looking to invest a little money in a relatively hassle-free way?

The concept already existed in a little-used financing tool called equity sharing. The problem was nobody knew about it. Langholz arrived at a seemingly obvious solution: the Internet. What if a priced-out buyer in Oakland could log onto a site and find an investor from Palo Alto -- or Miami, for that matter -- who could supply the down payment in exchange for a piece of the equity down the road?

Thus was born the idea for www.homequityshare.com, what Langholz calls "a housing affordability program for the middle class." It started in March with a matchmaking database for buyers and investors.

"All of life's big transitions usually come in stages," he says. "Before you get married you get engaged; before you get your driver's license you get your learner's permit. Well, with real estate there's no stepping stone between 0 percent ownership and 100 percent ownership. We're creating that intermediate stage."

Ordinarily, people get the down payment for a first house in various ways: They inherit it, they cash in stock options or they scrimp and save for years. Equity sharing is a way around the waiting, the penny-pinching and the role of luck.

"It's people helping people," says Frank Ricci, who started putting together equity-sharing deals in the Sacramento area in the early '90s before moving to Oregon to continue the process. He says it pays intangible dividends for investors tired of the adversarial landlord-tenant dynamic. "You talk about humanitarian feelings. It just goes on and on."

When Sharon Lunn stepped into the three-bedroom condominium in Martinez overlooking the pool and tennis courts, she knew immediately it was the place for her.

"The color of the tile they'd put in blends in with the colors in my dining set," she says. "All my furniture is oak; the cabinets were oak, the door was oak, the railings are oak. It was as if my furniture belonged in here."

A former homeowner, Lunn had the money for a down payment on the $500,000 condominium. But having recently divorced, she was reluctant to spend it all and leave herself without a financial cushion.

One day over lunch her friend Denise Holley suggested she call Ken Beasley, a partner with the Danville-based Home Equity Group. In short order, Lunn had entered an equity sharing arrangement with an investor who put in 10 percent down to match her own 10 percent contribution. They agreed to revisit the deal after three years.

"If the market is good at that time, then I'll refinance," she says. "If it's not so good, then we'll extend the agreement so it benefits both myself and the investor."

Denise Holley had firsthand experience with equity sharing. She and her husband Mike had bought a house in San Ramon with Beasley's help 15 years earlier. Back then, as newlyweds with a blended family, they were eager to leave behind their old towns -- Antioch in her case, Hayward in his -- for what they were convinced was a better community.

"Basically, it allowed us to live where we wanted to live and have a home we would not have been able to afford otherwise," Mike Holley says.

As he watched the value of his house skyrocket during the late '90s and early 2000s, Holley became so enamored of the equity sharing concept that he became an investor himself. He's chipped in on eight properties in the last five years, he says.

"I was able to buy my wife a new Lexus, right? I paid for the car with cash. I bought myself a new Harley-Davidson. And I got no complaints."

In another typical arrangement, Dottie and William Mattos contributed a 20 percent down payment of $35,000 on a new house in Portland for Michael and Tina Ferguson. Listed as co-owners with the Mattoses, the Fergusons lived in the house and paid the mortgage. Per the terms of the contract, after three years they reassessed: Refinance and buy out the Mattoses, or sell the house and split the profit? In either case, the Mattoses stood to triple their money and the Fergusons stood to gain full ownership of the house they were in or about $40,000 cash for a new down payment. Like most people who have bought through equity-sharing agreements, they've decided to try to refinance.

Equity sharing works best, of course, when the market is strong and both parties can realize a considerable return on their investment. But because lending practices have been so loose, equity sharing hasn't been that popular in the most recent boom cycle.

San Francisco real estate attorney Andy Sirkin says home equity sharing becomes more attractive when the buying gets tougher, like it is now with the zero-down hangover.

"When down payments are higher and underwriting guidelines are stricter, then buyers who are financially weak need more assistance," he says. "In those periods we see higher volume with equity sharing."

Trouble comes when the market is too hot or too cool. When prices are climbing too rapidly, homebuyers can't afford to buy out investors and are forced to sell instead -- in which case they almost certainly cannot afford to buy in the same neighborhood. That can be disruptive, especially with kids in the picture.

On the other hand, if homes are appreciating too slowly, a homebuyer will find insufficient equity in the house to buy out the investor, while selling yields too small a return to be of much use.

In the absolute worst-case scenario, housing prices fall, leaving homebuyer and investor yoked together in misery.

Langholz acknowledges that buying a house with a stranger and hoping to ride the market to riches in tandem is hardly a risk-free venture. But in almost all cases it beats the alternative.

"Even if they equity share for five years and the market stays flat and they get zero price appreciation, they're breaking even," he says. "That would still be better than if they were losing it on rent."

The newly divorced, the self-employed, buyers with shaky credit, renters who want to buy the house they're in and homeowners who face default are prime candidates for home equity sharing. What they all have in common is that their limited incomes or credit histories make banks nervous.

Those things make individual investors nervous, too. So a watertight agreement that protects both parties is key.

Marilyn Sullivan, a Pismo Beach (San Luis Obispo County) attorney and partner in Langholz's venture, has done 5,500 successful equity-sharing agreements since stumbling onto the concept in 1981 as she was trying to buy her own first home. A loan calculator she created, plus a model contract, are available at homeequityshare.com.

Sullivan has long been a big believer in home equity sharing, but she feared it wasn't getting the attention it deserved. When Langholz called her last November with his idea for the Web site, she was ecstatic.

"I said, 'Oh, my God, this is exactly what I needed to do,' " she recalls. "I felt I had taken this to a certain place, but people were missing out on the whole marketplace of being able to hook up with each other."

Langholz compares his Web site to Prosper, the person-to-person lending Web site that started in February 2006. It allows people, regardless of credit rating, to post the amount they'd like to borrow so lenders can bid on it, eBay-style. Prosper has facilitated more than 11,000 loans totaling $61 million.

Prosper co-founder and Chief Technical Officer John Witchel says these community-based models of doing business have important implications for the economy.

"The thing we talk about internally, it's kind of schlocky, but we talk about that great scene in "It's a Wonderful Life" where Jimmy Stewart is at the teller window and there's a run on the bank, and he's saying, 'The money's not in a safe or in a vault or in the basement, it's in your neighbor's house, it's in the farm down the road, and we all have to work together to make it work. And if not, Mr. Potter's coming to town.'

"We'd like to see a return to a way of life where people are standing up for each other," Witchel says, "and they're not naïve about it and they're not idealistic about it. We believe people are good."

Truthfully, it doesn't take a heart of gold to lend a stranger a hand when it's going to double or triple your money. One of the more slippery aspects of equity sharing is its contribution to the rich-get-richer cycle; it works disproportionately in favor of investors simply because it takes money to make money, and they have it. They can compound their advantage by playing hardball in negotiations with desperate first-time buyers; for example, by demanding a 60 percent share of the house and equity. Indeed, 50 percent is quite common.

So it comes back to the agreement, hammering one out that rewards the investor for taking a risk and rewards the homebuyer for taking on the burden of fixing toilets and maintaining a lawn.

Langholz warns that even under the best agreement, homebuyers might wince when it comes time to split the equity on a house where they've been living, decorating and gardening. But as a first step it's worth it, he says: Statistically, people who buy real estate are worth seven times as much money at the end of their lives as those who don't.

It's his way of trying to bridge the widening gap between the classes.

"We want to democratize real estate wealth," he says, "because we're becoming a country of haves and have nots."

Traci Hukill is the managing editor of Metro Santa Cruz. She lives in a rented house in Monterey with her boyfriend and their cat.

BY:Traci Hukill

VIA:www.sfgate.com

After paying off house, seniors increasingly let it pay them

2007-07-15T17:45:00.000-07:00

WASHINGTON — With an estimated 77 million baby boomers about to hit their golden years, the move toward reverse mortgages has begun.

Though less than 2% of seniors have decided to turn the equity in their homes into cash by taking out a mortgage that pays them instead of the other way around, half of those reverse loans were written in the last two years. Plus the lending community has embraced the loan product — big time.

Reverse mortgages, also known as home-equity conversion loans, enable homeowners age 62 or older to convert their equity into tax-free proceeds. The amount you can receive is based on the age of the youngest owner, the value and location of your home and current interest rates. Generally, the older you are, the more you can get.

The house (mobile homes and cooperatives are not eligible) must be your primary residence. If there is any outstanding debt, it must be paid off with proceeds from the loan.

Reverse-mortgage borrowers can take their money in a lump sum, as monthly payments, as a line of credit that can be tapped as needed or in any combination of the three choices. Interest accrues on the borrowed amount, but no payments are necessary until the home is no longer owned. Consequently, the loan does not have to be repaid until you sell, move out or die.

In the last few months, Bank of America and Countrywide Financial have entered the home-equity conversion market. Wells Fargo already lays claim to being the nation's No. 1 retail reverse-mortgage lender. A number of smaller companies also are joining the hunt with new reverse-mortgage products.

Although all this activity holds the promise of lowering costs and increasing consumer choices, it also raises the question of rip-offs. Fortunately, reverse mortgages are loaded with consumer protections. One of the most important protections is a requirement that all borrowers must agree to attend an independent counseling session with a government-approved agency to make sure the product is the right financial tool for their situation. If anyone suggests you don't need to seek outside advice, run — don't walk — to the nearest exit.

Two key loan features also serve as consumer protections:

• Reverse mortgages are nonrecourse loans, meaning you'll never owe more than the value of the house. You'll owe the sum of what you borrowed plus the accrued interest. If the house is worth more than you owe when you leave it, you or your heirs will receive the difference. But if it is worth less than what you owe, the difference is not your problem or that of your estate.

• Mortgage insurance guarantees you will continue to receive your money if the lender goes out of business or otherwise defaults on the loan. There are other safeguards built into the product as well, according to Cheryl Chapin MacNally, who runs the senior products group at Wells Fargo in Bourne, Mass. Interest rates on adjustable loans are capped, meaning they can never rise above a certain level. There is no prepayment penalty, and borrowers can change their minds up to 72 hours after signing the papers.

Despite these protections, reverse mortgages have been a tough sell.

"It's a 20-year-old business that's still in its infancy," says Barton Johnson, president of Irvine-based Financial Freedom Senior Funding Corp., a dominant player in the field. Wells Fargo's MacNally agrees: "We haven't even scratched the surface yet. It is still a very underserved market."

But Johnson and others believe that's about to change. "The boomers are coming!" says MacNally, noting that cash-strapped senior homeowners can use reverse mortgages as financial planning tools to supplement their retirement incomes, maintain their houses, pay their property taxes, cover healthcare expenses or take care of their children and grandchildren.

Peter Bell, president of the National Reverse Mortgage Lenders Assn. in Washington, D.C., predicts that within the next few years, as many as a million reverse mortgages a year will be written.

"It's going to be a real monster product," agrees Financial Freedom's Johnson.

By ; Lew Sichelman, United Feature Syndicate

Via:www.latimes.com

How to get best student loan deal

2007-07-15T02:44:00.000-07:00

Wading through the hype makes it tricky to choose a lender

Where do you find generous deals on federally sponsored loans? Schools that participate in the Federal Direct Loan Program give you direct access to Uncle Sam's largesse; the government funds the loans, and the school administers them.
The majority of schools, however, leave it to you to choose a lender, and that's where the process gets tricky. Commercial lenders vie for your business by offering to waive processing fees, pare the fixed rate and bestow rebates on borrowers who pay electronically or on time for, say, 24 or 36 consecutive months. Comparing those sweeteners can drive you crazy, says Thom Hunzicker, a college financial planner in San Dimas, Calif. "There should be a way to quantify the moving parts."
Financial-aid offices try to do just that by vetting deals and sending families a list of preferred lenders. "In most cases, the price the student gets through the preferred-lender list is better than what the student would get directly from the lender," says Keith Landis of Collegiate Advisors, which provides technical backup to college financial planners.
Cover your bases by checking a few other programs (you can find a list of lenders and their discounts at www.finaid.org). Investigate nonprofit lending agencies in both your state and the state where your child will attend school. Such agencies use low-cost loans to encourage students to study — and stay — within state borders.
Wherever you shop, look for up-front benefits, such as an interest-rate reduction at the start of repayment, rather than future perks — say, for making 36 on-time payments. "That's like saying, if I make the 260th through the 290th payments on my mortgage on time, I'll get a discount," says Landis. "No one does that." Plus, many students consolidate their loans early in repayment, rendering future discounts meaningless.
If you're a homeowner, you've probably already considered using home equity to cover some of the college bills. Borrowing against home equity makes sense if you earn too much to qualify for the student-loan interest deduction. You can deduct interest on up to $100,000 of home-equity loans.
Some college financial planners recommend going with a home-equity line of credit, which lets you borrow money as you need it, rather than taking a second mortgage and paying interest on the whole amount. But the line of credit's variable rate, currently at almost 9 percent, puts you at risk, says Hunzicker. He prefers second mortgages with fixed rates, lately about 8.2 percent.
One more consideration: A home-equity line of credit can enhance your chances for financial aid, whereas a second mortgage can hurt them, depending on whether the school counts home equity as an asset.

By ; Jane Bennett Clark

Via : deseretnews.com

TAPPING HOME EQUITY

2007-07-15T02:29:00.000-07:00

Like millions of Americans, Bill and Helen Bluett's greatest financial asset is their home, a Spanish-style dwelling just a quarter of a mile from the ocean in San Clemente, Calif.

Selling the place and buying a cheaper one elsewhere could have brought the couple hundreds of thousands of dollars in extra money for their retirement years. But there was one problem with that idea.

"We love our home," said Bill Bluett, 67, a retired mechanical engineer. "We love our neighborhood. As long as we're physically able, we want to stay right where we are."

So this year, the Bluetts signed up for a reverse mortgage, a type of loan that allows older borrowers to tap their home equity without making payments as long as they live in the house.

With the money, the Bluetts are more than able to take on projects such as remodeling the kitchen and bathrooms.

More important, Bill Bluett said, the reverse mortgage makes them financially prepared for "any emergency, whether it's medical or whatever, that might come up" in the years ahead.

"My wife and I decided it would give us a lot of peace of mind," he explained.

Reverse mortgages have been criticized for high upfront costs. Lenders may charge 2 percent of the loan amount in origination fees, and most borrowers also pay 2 percent for mortgage insurance, along with other fees that can far exceed those in conventional home loans.

Loan amounts often are subject to strict limits, which vary based on location, and many financial planners still are not familiar enough with reverse mortgages to guide their clients.

But in an era when legions of older homeowners are sitting on vast amounts of untapped equity, reverse mortgages seem to be catching on.

Competition has started to push down costs, and lenders are beginning to offer loans on unlimited amounts, a noteworthy shift in an industry that has mostly relied on federally insured mortgages with strict caps.

In recent months, Countrywide Financial Corp., Bank of America Corp. and BNY Mortgage Co. have scaled up their efforts in the growing field.

After years on the sidelines, Wall Street has entered the game, with investment banks for the first time purchasing such loans in a secondary market, which may further stir innovation and encourage more lenders to offer reverse mortgages.

At the current rate, lenders could sell more than 100,000 reverse mortgages this year, more than double the number from 2005.

"The significant thing in the last several months is that the big boys are coming in," said Bart Johnson, president of Irvine, Calif.-based Financial Freedom Senior Funding Corp., a leading provider of reverse mortgages. "The last six months to a year have been incredible."

Housing and Urban Development Secretary Alphonso Jackson recently described reverse mortgages as "the bright spot in today's housing market," adding that "their significance will only increase as more baby boomers reach retirement."

In a conventional mortgage, the lender lends you money to buy a house, and you gradually pay down the debt and build up equity as you make monthly payments.

In a reverse mortgage, the lender gives you the money - as a lump sum, in monthly installments or as a line of credit - and takes your home equity as payment.

Typically, reverse mortgages don't have to be paid back until you sell your home, move or die. People must be at least 62 to qualify for a reverse mortgage.

As with all loans, reverse mortgages have fees and charge interest. For example, a 78-year-old borrower whose home is worth $200,000 might end up with a reverse mortgage of $123,000, based on his age, interest rate levels and other factors.

In this case, the borrower might pay about $13,000 in upfront fees, including a $4,000 loan origination fee, $4,000 in mortgage insurance and a $4,000 "set-aside" to cover servicing costs for the life of the loan, according to Fannie Mae, the federally chartered lender.

Based on recent interest rates, such a loan might come with an adjustable interest rate of about 6 percent, with interest charges compounding during the life of the mortgage.

Given that, homeowners should carefully weigh their options, experts say.

Home-equity loans can be a cheaper way to come up with cash for people willing and able to make payments in retirement.

Selling the house and downsizing to a cheaper dwelling is another alternative, depending on the borrower's priorities.

If the goal is simply home repair, seniors should explore whether their communities have low-cost loans available for that purpose, said John Rother, director of policy and strategy for AARP.

"It's good to have the option," Rother said of reverse mortgages. "But it's not an option appropriate for everyone."

But for people who are long on home equity and short on cash, the reverse mortgage offers a key advantage: Borrowers don't have to pay back the loan as long as they stay in the house.

Indeed, a reverse mortgage may be the only way that some people can afford to stay in their own home.

"People who are using them, by and large, have a huge degree of satisfaction," said Peter Bell, president of the National Reverse Mortgage Lenders Association, whose membership has more than doubled during the past few years, to 540 firms.

"For a senior with a fixed income, taking on a loan with monthly payments doesn't make a lot of sense."

Most reverse mortgages are insured by the Federal Housing Administration, but loans insured by the agency are capped at $362,790 in higher-cost regions, such as southern California. In lower-cost areas, the cap is as low as $200,160.

In some cases, older borrowers seek reverse mortgages to gird for future medical bills.

Malcolm Greenhill, a financial planner in San Francisco, recalled a 72-year-old client with emphysema who feared that his health would decline further, but lacked the income to pay for in-home care. The man's home was worth $1.2 million.

"I put his mind at rest and said there's a way here that you can tap into your equity," Greenhill said. "A reverse mortgage would be a good option for somebody like that."

Increasingly, big lenders are stepping up efforts to market the loans and starting to offer some breaks in their cost.

They are motivated, in part, by the high level of home ownership among older people.

And they are aware that aging baby boomers will be making big-ticket retirement decisions in the coming years.

As some see it, reverse mortgages are destined to become increasingly popular as the more than 75 million baby boomers head into old age.

Boomers may prove much more comfortable with accepting debt in old age than today's seniors.

Beyond that, many could face financial hardship because of a squeeze on pension benefits and increases in health care costs.

"In the future we'll see new vehicles, new pricing, new ways of pulling out just the amount of money that you need," said Michael Boone, a financial planner in Bellevue, Wash.

"I fully expect a reverse mortgage to be as normal as a 30-year fixed."

By ; JONATHAN PETERSON

Via : www.courant.com

Reverse mortgage taps home equity

2007-07-15T02:25:00.000-07:00

The loan doesn't have to be repaid until retiree sells the house, moves or dies.

Like millions of Americans, Bill and Helen Bluett's greatest financial asset is their home, a Spanish-style dwelling just a quarter of a mile from the ocean in San Clemente, Calif.

Selling the place and buying a cheaper one elsewhere could have brought the couple hundreds of thousands of dollars in extra money for their retirement years. But there was one problem with that idea.

''We love our home,'' said Bill Bluett, 67, a retired mechanical engineer. ''We love our neighborhood. As long as we're physically able, we want to stay right where we are.''

So this year, the Bluetts signed up for a reverse mortgage, a type of loan that allows older borrowers to tap their home equity without making payments as long as they live in the house.

With the money, the Bluetts are more than able to take on projects like remodeling the kitchen and bathrooms. More important, Bill Bluett said, the reverse mortgage makes them financially prepared for ''any emergency, whether it's medical or whatever, that might come up'' in the years ahead.

''My wife and I decided it would give us a lot of peace of mind,'' he explained.

Reverse mortgages have been criticized for high upfront costs. Lenders may charge 2 percent of the loan amount in origination fees, and most borrowers also pay 2 percent for mortgage insurance, along with other fees that can far exceed those in conventional home loans.

Loan amounts often are subject to strict limits, which vary based on location, and many financial planners still are not familiar enough with reverse mortgages to guide their clients.

But in an era when legions of older homeowners are sitting on vast amounts of untapped equity, reverse mortgages seem to be catching on. Competition has started to push down costs, and lenders are beginning to offer loans on unlimited amounts, a noteworthy shift in an industry that has mostly relied on federally insured mortgages with strict caps.

In recent months, Countrywide Financial Corp., Bank of America Corp. and BNY Mortgage Co. have scaled up their efforts in the growing field.

After years on the sidelines, Wall Street has entered the game, with investment banks for the first time purchasing such loans in a secondary market, which may further stir innovation and encourage more lenders to offer reverse mortgages. At the current rate, lenders could sell more than 100,000 reverse mortgages this year, more than double the number from 2005.

''The significant thing in the last several months is that the big boys are coming in,'' said Bart Johnson, president of Irvine, Calif.-based Financial Freedom Senior Funding Corp., a leading provider of reverse mortgages. ''The last six months to a year have been incredible.''

Housing and Urban Development Secretary Alphonso Jackson recently described reverse mortgages as ''the bright spot in today's housing market,'' adding that ''their significance will only increase as more baby boomers reach retirement.''

In a conventional mortgage, the lender lends you money to buy a house, and you gradually pay down the debt and build up equity as you make monthly payments.

In a reverse mortgage, the lender gives you the money -- as a lump sum, in monthly installments or as a line of credit -- and takes your home equity as payment.

Typically, reverse mortgages don't have to be paid back until you sell your home, move or die. People must be at least 62 to qualify for a reverse mortgage.

As with all loans, reverse mortgages have fees and charge interest. For example, a 78-year-old borrower whose home is worth $200,000 might end up with a reverse mortgage of $123,000, based on his age, interest rate levels and other factors. In this case, the borrower might pay about $13,000 in upfront fees, including a $4,000 loan origination fee, $4,000 in mortgage insurance and a $4,000 ''set-aside'' to cover servicing costs for the life of the loan, according to Fannie Mae, the federally chartered lender.

Based on recent interest rates, such a loan might come with an adjustable interest rate of about 6 percent, with interest charges compounding during the life of the mortgage.

Given that, homeowners should carefully weigh their options, experts say.

Home-equity loans can be a cheaper way to come up with cash for people willing and able to make payments in retirement.

Selling the house and downsizing to a cheaper dwelling is another alternative, depending on the borrower's priorities.

If the goal is simply home repair, seniors should explore whether their communities have low-cost loans available for that purpose, said John Rother, director of policy and strategy for AARP.

''It's good to have the option,'' Rother said of reverse mortgages. ''But it's not an option appropriate for everyone.''

But for people who are long on home equity and short on cash, the reverse mortgage offers a key advantage: Borrowers don't have to pay back the loan as long as they stay in the house. Indeed, a reverse mortgage might be the only way that some people can afford to stay in their own home.

''People who are using them, by and large, have a huge degree of satisfaction,'' said Peter Bell, president of the National Reverse Mortgage Lenders Association, whose membership has more than doubled over the last few years, to 540 firms. ''For a senior with a fixed income, taking on a loan with monthly payments doesn't make a lot of sense.''

Most reverse mortgages are insured by the Federal Housing Administration, but loans insured by the agency are capped at $362,790 in higher-cost regions. For the Allentown-Bethlehem-Easton metropolitan area, including Carbon County, the limit is $305,666. For Bucks and Montgomery counties, which are included in the Philadelphia region, the limit is lower: $292,685.

In some cases, older borrowers seek reverse mortgages to gird for future medical bills. Malcolm Greenhill, a financial planner in San Francisco, recalled a 72-year-old client with emphysema who feared his health would decline further but lacked the income to pay for in-home care. The man's home was worth $1.2 million.

''I put his mind at rest and said there's a way here that you can tap into your equity,'' Greenhill said. ''A reverse mortgage would be a good option for somebody like that.''

Increasingly, big lenders are stepping up efforts to market the loans and starting to offer some breaks in their cost. They are motivated, in part, by the high level of homeownership among older people. And they are aware that aging baby boomers will be making big-ticket retirement decisions in the coming years.

As some see it, reverse mortgages are destined to become increasingly popular as the more than 75 million baby boomers head into old age. Boomers may prove much more comfortable with accepting debt in old age than today's seniors. Beyond that, many could face financial hardship because of a squeeze on pension benefits and increases in health-care costs.

''In the future we'll see new vehicles, new pricing, new ways of pulling out just the amount of money that you need,'' said Michael Boone, a financial planner in Bellevue, Wash. ''I fully expect a reverse mortgage to be as normal as a 30-year fixed.''

Jonathan Peterson is a staff reporter for the Los Angeles Times, a Tribune Publishing newspaper.

By ; Jonathan Peterson

Via : www.mcall.com

Where to invest if your home equity evaporates

2007-07-15T02:22:00.000-07:00

If you can't depend on your home equity increasing during a U.S. housing downturn, where do you turn for growth?

U.S. bonds offer cold comfort. With ultra-safe six-month Treasury Bills yielding as much as 5 percent, your real return is paltry after inflation and taxes.

What about U.S. stocks? The specter of a housing recession, consumer slowdown and more ugly surprises in the subprime mortgage market weighs heavily on Wall Street now. That leaves a compelling investment typically neglected by most investors: non-U.S. stocks with high dividends.

Since the U.S. home market may get blistered further by a general economic decline, more houses coming on the market or bond yields surging, you will need to find growth elsewhere. If you haven't considered how the global economy is propelling emerging markets, it's time to take a hard look.

China and India, of course, grab the headlines with gross domestic product growing at 11 percent and 9 percent, respectively.

Then there's Argentina, at 8 percent and Taiwan at 4 percent. Even at 4.3 percent, Brazil's economy is accelerating twice as fast as the U.S. with a healthy 2.25 percent budget surplus to boot.

Before the case is made for cash-rich companies overseas, there needs to be an honest accounting of the state of the U.S. residential real-estate market.

Unsustainable debt

Massive equity deflation may be taking place. Fueled by cheap mortgage money, low lending standards and the willingness of Americans to plunge ever deeper into unsustainable debt, the housing market was due to hit the brakes.

Banks and brokers lent with abandon, including to millions who were one interest-rate increase away from foreclosure in subprime mortgages.

As Peter Schiff, an investment adviser and president of Euro Pacific Capital Inc., in Darien, Conn., says: "Wall Street may be able to buy some time by bailing out troubled hedge funds to keep their worthless subprime mortgage investments off the market, but no such safety nets exist for strapped consumers looking down the barrel of resetting adjustable rate mortgages."

"Inventories will continue to balloon," adds Schiff, "until reluctant homeowners come to their senses and slash prices."

When supplies exceed demand in a time of rising rates, it could be years before the housing market grows again.

State of housing

Home prices in 20 metropolitan areas fell 2.1 percent in the year ended in April, the largest year-over-year decline since record-keeping began in 2001, according to S&P/Case- Shiller. New-home sales dropped 1.6 percent in May and were down 16 percent from the same time last year. The supply of unsold homes reached a record 7.1 months of inventory.

While home financing is still relatively cheap by historical standards, it has climbed over the past year. The average 30-year loan rate was 6.6 percent through July 5, according to Freddie Mac, the quasi-public mortgage company.

If you were fortunate to lock in a mortgage in June 2003, you could have received a 5.2 percent, 30-year fixed-rate loan, the lowest rate in a generation. As recently as June 2005, a five-year adjustable mortgage averaged about 5 percent.

In addition to the higher rates, Americans took cash out of their house from sales, home-equity loans or refinancing. From 1991 to 2005, property owners extracted about $530 billion annually, spending about $66 billion a year on personal expenditures, according to a Federal Reserve study. Millions who were banking on endless appreciation are now finding they are deeper in debt, with little equity.

Looking abroad

What if your home equity doesn't grow through market appreciation? Wouldn't that damage nest eggs for those whose largest source of wealth is the value of their house?

Diversifying away from the U.S. home, stock and bond markets is a reasonable alternative to build wealth.

With non-U.S. stocks, you can also profit from the falling value of the dollar relative to other currencies.

Companies that pay consistent dividends in growing economies are worth considering. Dividends are earnings that are paid back to shareholders and are bonuses only from the healthiest, established corporations.

The Alpine Global Dynamic Dividend Fund invests 80 percent of its assets in companies that pay dividends. This year, the new closed-end fund has beaten the Standard & Poor's 500 Index by about 11 percentage points through July 5, with a 12 percent return.

No guarantees

A more established choice is the Fidelity International Discovery Fund, which focuses on non-U.S. stocks that pay dividends and show potential for capital appreciation. The fund, which is part of my 401(k), was up 14 percent through July 5.

None of these returns is guaranteed and you need to understand they carry additional currency and market risk. They should be long-term holdings.

Who would have thought that building home equity in the U.S. was risky?

Yet millions believed that their domicile's nest egg was assured and provided a firm foundation for retirement. It's still likely that in many markets, you won't lose much, if any, home equity, provided the current downturn isn't prolonged or severe.

The best strategy is to ensure you are getting growth from somewhere. For that, you may have to look far from home.

By ; Asbury Park

Via : www.app.com

Reverse mortgage is not for everyone

2007-07-14T23:55:00.000-07:00

Brenda and Bob: We are seeing a lot of advertisements for reverse mortgages. We own our house outright and are in our late 70s. What is your opinion of these products?

Elaine: Let's talk about these products and who qualifies for them, then discuss the benefits and things to consider when deciding on them.

A reverse mortgage is a home loan for senior homeowners who have substantial equity in their homes. (The minimum amount varies among lenders, but many will not consider loans of less than $60,000). The lender loans you money based on the value of your home, the amount of equity you have in your home and your age at the time of the application. The lender pays you in one of three ways: a lump sum, in monthly installment payments or as a line of credit. This loan differs from a home equity loan or second mortgage because you do not repay the loan unless you sell your home, move out permanently or die.

Most seniors take these loans with the intention of being paid until their deaths. This may be what you are thinking about. But if your circumstances change and for some reason you sell your home, you will need to repay the loan. The amount will be more than you borrowed because you did not make any payments.

You seem to meet the required criteria for a reverse mortgage. The borrowers must be over 62, which you are. And your mortgage must be completely or nearly paid off, which you stated yours is. Because there is no income criterion, this is not something we need to address.

Here are the questions you should ask before you apply for a reverse mortgage.

How much will the fees be for the reverse mortgage, and what part of these will I need to pay in cash? Be sure you know the complete amount in fees you will be charged for the loan. Ask for all of this in writing. You can get "good faith estimates" from several lenders. You are not obligated to use any of them, if you change your mind.

How much money will I receive monthly or in a lump sum from the loan? Again, get this in writing from several lenders. Just like anything else, do some comparison shopping. This is a big decision, so take your time making it.

There are a few things to remember when considering a reverse mortgage. You will retain the title to your home. This means you are still responsible for the property taxes, insurance and general upkeep of the property. These expenses will not go away and mostly probably will increase annually with inflation. If the expense of maintaining a home has been difficult in the past, the funds generated by a reverse mortgage may not solve this problem. You may need to consider other options.

A reverse mortgage may affect your continued eligibility in need-based government programs such as Supplemental Social Security (SSI) and Medicaid, especially if you take the payout as a lump sum. Make sure you understand the implications these funds could have on your eligibility to these programs before you agree to take this type of loan. If you take the payout in monthly amounts, you may have to spend the funds within the month you receive them so they are not considered "income," which also may negatively impact your eligibility.

As with any important document, do not sign anything you do not understand. And never sign a loan application with blank spaces.

With a federally insured "Home Equity Conversion Mortgage" (HECM) you will probably receive the most funds. Let's assume you have $200,000 in equity in your home. As a lump sum you will receive about $110,831. Or you may receive a credit line of $110,831 that may grow by 7.17 percent each year (worth about $221,409 in 10 years if untouched). Or you can take monthly payments of $774 for as long as you live in your home. Or you take a combination of all three of these.

Check with your accountant and your family members to see if a reverse mortgage is the best option for you.

Have a question for Elaine? Write her at Elainezimm@aol.com

By ; Elaine Zimmermann

Via : www.commercialappeal.com

Lenders eye baby boomers in reverse

2007-07-14T23:52:00.000-07:00

Baby boomers in their 50s and 60s who took out low-rate mortgages during the 2002-05 refinancing boom now hold home loans that many won’t pay off for another quarter-century.

Tens of thousands of these people will still be paying monthly mortgage bills in their 70s or 80s - unless they take advantage of new loan products now entering the marketplace.

Bank of America and other lenders will soon offer souped-up “reverse” mortgages to help people pay off existing loans, pull out equity, establish credit lines or even buy second homes.

Reverse mortgages are special home loans in which the bank generally sends you a check each

month instead of the other way around (hence the name “reverse.”)

Offered to those age 62 or older, reverse mortgages give you either a monthly payout or a one-time lump sum of cash.

You (or your heirs) don’t have to pay this money back until you either move or die and the house is sold. At that point, the lender gets the loan’s principal back - plus fees and deferred interest - out of the sale’s proceeds.

The most popular reverse mortgage around is the “Home Equity Conversion Mortgage,” which is insured by the Federal Housing Administration.

Last year, banks wrote some 72,000 such loans - a 49 percent increase from 2005.

But HECMs have one drawback: Loans by law can’t exceed $363,000.

That’s too low to cover even median-priced homes in high-cost housing markets like the Northeast or West Coast.

Congress is currently weighing a proposal to raise the FHA’s loan limits.

But in the meantime, banks are filling the void by rolling out new “jumbo” and “super-jumbo” reverse mortgages.

Recently, Countrywide unveiled its “Simple Equity” program in 46 states, offering reverse mortgages with no set limit on how much money you can borrow.

BofA plans to soon roll out a similar product: the “Senior Equity Maximizer” jumbo reverse mortgage.

Under this program, BofA will write reverse mortgages for as much as $10 million, depending on factors like your age and how much equity you have in your home. Borrowers can get either lump-sum payouts, monthly checks or lines of credit to draw on as needed.

However, these programs have significant costs to consumers.

For openers, reverse mortgages charge higher interest rates than traditional home loans do.

Reverse mortgages also usually include substantial origination and insurance fees - typically 4 percent on HECM loans. (Countrywide and BofA say they plan to charge much less.)

Reverse loans are also inherently complicated for estate planning.

As such, I suggest pre-application counseling for any homeowner interested in these programs.

Harney is a nationally syndicated real estate columnist.

By ; Kenneth R. Harney/ The Nation’s Housing

Via : business.bostonherald.com

S&P Warns on Subprime-Backed Issues

2007-07-13T07:53:00.000-07:00

On July 10, Standard & Poor's Ratings Services placed its credit ratings on 612 classes of residential mortgage-backed securities [RMBS] backed by U.S. subprime collateral on CreditWatch with negative implications. The affected classes total approximately $12.078 billion in rated securities, which represents 2.13% of the $565.3 billion in U.S. RMBS rated by Standard & Poor's between the fourth quarter of 2005 and the fourth quarter of 2006. A list of the issuers of the RMBS securities in question appears at the end of this article.

Beginning in the next few days, we expect that the majority of the ratings on the classes that have been placed on CreditWatch negative will be downgraded. We will lower our rating:

-- To CCC on any class that does not pass our stress test scenario [a class is expected to experience a principal write-down or, with respect to the senior classes, a principal shortfall] within 12 months, regardless of its current rating;

-- To B on any class that does not pass our stress test scenario within 13 to 24 months;

-- To BB on any class that does not pass our stress test scenario within 25 to 30 months; and

-- To BBB on any class that does not pass our stress test scenario within 31 to 36 months.

The CreditWatch actions are being taken at this time because of poor collateral performance, our expectation of increasing losses on the underlying collateral pools, the consequent reduction of credit support, and changes that will be implemented with respect to the methodology for rating new transactions. Many of the classes issued in late 2005 and much of 2006 now have sufficient seasoning to evidence delinquency, default, and loss trend lines that are indicative of weak, future credit performance. The levels of loss continue to exceed historical precedents and our initial expectations.

No Signs of Abating We are also conducting a review of collateralized-debt obligations [CDO] ratings where the underlying portfolio contains any of the affected securities subject to these rating actions.

We have been watching these transactions on a regular basis and have been monitoring market trends. At this time, we do not foresee the poor performance abating. Loss rates, which are being fueled by shifting patterns in loss behavior and further evidence of lower underwriting standards and misrepresentations in the mortgage market, remain in excess of historical precedents and our initial assumptions.

New data reveal that delinquencies and foreclosures continue to accumulate at an increasing rate for the 2006 vintage. We see poor performance of loans, early payment defaults, and increasing levels of delinquencies and losses.

Total aggregate losses on all subprime transactions issued since the fourth quarter of 2005 is 29 basis points, compared to seven basis points for similar transactions issued in 2000. Transactions from the 2000 vintage are used as a comparison because they were, until now, the worst performing vintage of this decade. When recent transactions with the same seasoning are compared on a quarterly basis with similar transactions issued in 2000, we find that both mean losses and standard deviations are running in excess of the 2000 book for the fourth quarter of 2005 through the fourth quarter of 2006.

Weakness in Property Market Seriously delinquent loans [90 days-plus, foreclosure, and real estate-owned] on average also exceed the 2000 book of business for each quarterly comparison except for the fourth quarter of 2005.

On a macroeconomic level, we expect that the U.S. housing market, especially the subprime sector, will continue to decline before it improves, and home prices will continue to come under stress. Weakness in the property markets continues to exacerbate losses, with little prospect for improvement in the near term. Furthermore, we expect losses will continue to increase, as borrowers experience rising loan payments due to the resetting terms of their adjustable-rate loans and principal amortization that occurs after the interest-only period ends for both adjustable-rate and fixed-rate loans.

Although property values have decreased slightly, additional declines are expected. David Wyss, Standard & Poor's chief economist, projects that property values will decline 8% on average between 2006 and 2008, and will bottom out in the first quarter of 2008.

Fewer Refinance Options While our LEVELS model assumes property value declines of 22% for the 'BBB' and lower rating-category stress environments [with higher property value declines for higher rating-category stress environments], the continued decline in prices will apply additional stress to these transactions by increasing losses on the sale of foreclosed properties, as well as removing or reducing the borrowers' ability to refinance or sell their homes to meet debt obligations.

As lenders have tightened underwriting guidelines, fewer refinance options may be available to these borrowers, especially if their loan-to-value [LTV] and combined LTV [CLTV] ratios have risen in the wake of declining home prices.

The Mortgage Asset Research Institute [MARI] reports that alleged misrepresentations on credit reports were up significantly as a percentage of total submissions received in 2006. MARI, which was recently commissioned by the Mortgage Bankers Assn. [MBA] to conduct a mortgage fraud study, reported that the current findings of fraud were in excess of previous industry highs. Data quality concerning some of the borrower and loan characteristics provided during the rating process has also come under question. Therefore, key risk variables that have historically influenced default patterns, such as the borrowers credit score under the widely used FICO scoring system, LTV, and ownership status, are proving less predictive.

Quality of Data in Question It is expected that the ongoing weakness in both national and regional property markets will exacerbate losses with little prospect for improvement in the near term. Also many of these transactions will likely encounter additional credit stress from upcoming interest rate and payment resets.

Data quality is fundamental to our rating analysis. The loan performance associated with the data to date has been anomalous in a way that calls into question the accuracy of some of the initial data provided to us regarding the loan and borrower characteristics. Reports of alleged underwriting fraud tend to grow over time, as suspected fraud incidents are detected upon investigation following a loan default.

In addition, we have modified our approach to reviewing the ratings on senior classes in a transaction in which subordinate classes have been downgraded. Historically, our practice has been to maintain a rating on any class that has passed our stress assumptions and has had at least the same level of outstanding credit enhancement as it had at issuance. In the future there will be a higher degree of correlation between the rating actions on classes located sequentially in the capital structure. A class will have to demonstrate a higher level of relative protection to maintain its rating when the class immediately subordinate to it is being downgraded.

Increasing Review For transactions that close on or after July 10, 2007, we will incorporate several changes to our ratings methodology that will result in greater levels of credit protection for rated transactions. Our cash flow methodology assumptions will include a simultaneous combination of faster voluntary and involuntary [default] prepayments.

Given the level of loosened underwriting at the time of loan origination, misrepresentation, and speculative borrower behavior reported for the 2006 vintage, we will be increasing our review of the capabilities of lenders to minimize the potential and incidence of misrepresentation in their loan production. A lender's fraud-detection capabilities will be a key area of focus for us.

Issuers of the RMBS in question include:

Aames Mortgage Investment TrustABFC TrustACE Securities Corp. Home Equity Loan TrustAegis Asset Backed Securities TrustArgent Securities TrustAsset Backed Securities Corporation Home Equity Loan TrustBear Sterns Asset Backed Securities I TrustBravo Mortgage Asset TrustCarrington Mortgage Loan TrustCitigroup Mortgage Loan TrustCWABS Asset-Backed Certificates TrustEncore Credit Receivables TrustFBR Securitization TrustFieldstone Mortgage Investment TrustFirst Franklin Mortgage Loan TrustFremont Home Loan TrustGE-WMC Mortgage Securities TrustGSAA Home Equity TrustGSAMP TrustHome Equity Asset TrustHome Equity Mortgage Loan Asset-Backed TrustHSI Asset Securitization Corp. TrustIndyMac INDB Mortgage Loan TrustIXIS Real Estate Capital TrustJ.P. Morgan Mortgage Acquisition TrustLehman XS TrustLong Beach Mortgage Loan TrustLuminent Mortgage TrustMASTR Asset Backed Securities TrustMerrill Lynch Mortgage Investors TrustMorgan Stanley Capital I Inc. TrustMorgan Stanley ABS Capital I Inc. TrustMorgan Stanley Home Equity Loan TrustMorgan Stanley IXIS Real Estate Capital TrustNew Century Home Equity Loan TrustNomura Home Equity Loan Inc.NovaStar Mortgage Funding TrustOption One Mortgage Loan TrustOwnit Mortgage Loan TrustPopular ABS Mortgage Pass-Through TrustRAMP TrustRASC TrustSecuritized Asset Backed Receivables LLC TrustSG Mortgage Securities TrustSoundview Home Equity Loan TrustSoundview Home Loan TrustSpecialty Underwriting and Residential Finance TrustStructured Asset Investment Loan TrustStructured Asset Securities Corporation Mortgage Loan TrustStructured Asset Securities Corporation TrustTerwin Mortgage Trust

Source: Business Week

Via : www.builderonline.com

Opposition: Extend home loan scheme

2007-07-13T07:49:00.000-07:00

The Opposition wants the State Government to extend its First Start home loan scheme for low income earners.

The scheme announced in February offered a shared equity home loan to 3,000 West Australian families over three years to help them build their own home.

The Opposition's Treasury spokesman, Troy Buswell, says in the three months to May 3,865 people had applied for the loan.

He says the figures show the scheme is popular and the government must extend it.

"It's a serious issue for the government. How are they going to determine who gets access to the grants and who doesn't and are they going to extend the scheme or bring forward monies into this year that may have been spent in other budgets?," he said.

"I mean the housing affordability crisis is one of the single most important factors facing the long term future of this state."

"It would appear from the massive early response that if they don't do that they're going to be turning away first homebuyers. How do you say to a young West Australian look put your aspirations on hold for a year, come back next year and you may be lucky enough to win the lottery and win a handout from the government? That approach is not fair."

Via : abc.net.au

Financing options for aging baby boomers

2007-07-13T07:45:00.000-07:00

WASHINGTON - How are baby boomers who are still carrying hefty first and second mortgages going to pay them off?

Millions of homeowners refinanced during the "refi boom" years of 2003-04 and took out new loans with 15-year or 30-year terms. Some boomers now in their late 50s and early 60s have big mortgages with terms running for another quarter-century.

When monthly payments on those mortgages begin to weigh heavily, will boomers need to sell their houses to relieve the debt pressure? The largest banks and mortgage companies in the country are readying creative new financial products designed to make the answer to that question a resounding no!

Tops on the list: Proprietary reverse mortgages that allow owners to pay off their existing home loans, pull out additional equity dollars for other expenses, establish credit lines or even buy second homes - all without producing monthly payment obligations.

In a pilot program in Arizona on its "Senior Equity Maximizer" jumbo reverse mortgage, Bank of America found that "the No. 1 usage" of funds was to retire existing first mortgages, according to Colin McCormick, the bank's reverse-mortgage product executive.

The "maximizer" allows reverse mortgages to go as high as $10 million, depending on available equity in the home, the borrowers' ages, and current interest rates. McCormick says the program is scheduled for a phased nationwide rollout later this year, probably beginning

in California and Florida.

Like other reverse mortgages, Bank of America's program is available solely for homeowners 62 or older, and permits them to receive lump-sum cash payments, monthly checks and credit-line drawdowns. No monthly payments to the bank are necessary during the lifetimes of the borrowers, as long as they remain in their houses. At their death or sale of the property, the accumulated balances paid out over time, plus interest and fees, become due and payable to the lender.

By far the most popular reverse loan product is the "Home Equity Conversion Mortgage" insured by the Federal Housing Administration. FHA's program is booming - total loans closed in the last year alone jumped by 49 percent to just under 72,000.

However, the FHA program has a major drawback for seniors who live in high-cost markets: FHA's congressionally mandated loan limits, which top out just under $363,000, are too low to handle even median-priced homes. That problem would be remedied in part by pending legislation increasing FHA's limits, but it would still not reach equity-rich homeowners in dozens of areas.

All of which leaves the door wide open to financial giants such as Bank of America and Countrywide Financial to offer new breeds of jumbo and super-jumbo reverse mortgages. Countrywide's proprietary "Simple Equity" program, launched earlier this year, is available to borrowers in 46 states, according to Steve Boland, the firm's managing director of reverse mortgages.

The program has no set dollar limit, and offers multiple options to tap home equity. Say you want to pay off your first mortgage but also take out some extra cash for travel or investment. On top of that, you'd like some monthly cash to supplement your retirement income.

Here's an example prepared by Countrywide for the owners of a home in Ventura, worth $1.5 million that has a $220,000 first mortgage. The borrowers could pay off the $220,000 balance immediately - ending their monthly principal and interest payment burdens - then take out another $100,000 in cash, create a 10-year monthly income supplement of $4,057, and still have hundreds of thousands of dollars in equity to use later if they choose - all without selling the house.

Bank of America's McCormick says that one intriguing option for seniors is to pay off their existing mortgage debt by converting it to a reverse mortgage, then pull out additional money to acquire a second or seasonal home for cash. To illustrate, say the owners of a $1 million house in the Northeast have a $250,000 first mortgage. They could pay it off with the first draw on a jumbo reverse mortgage, then take another $250,000 to make a 50 percent down payment on a house in Florida. They could then do a Bank of America reverse mortgage on the Florida home, transferring all debt obligations to some time in the future.

There are costs to all this - they're just not collected upfront or monthly. Interest rates on reverse mortgages are higher than on traditional "forward" mortgages. Lender origination and mortgage insurance fees can be substantial - 4 percent typically on FHA loans - but both Countrywide and Bank of America say their fees are much lower in relative terms.

Reverse mortgages are also inherently complicated for estate planning. That's why pre-application counseling is a must for most homeowners interested in participating.

Kenneth R. Harney is a nationally syndicated real estate columnist based in Washington, D.C. You can e-mail him at kenharney@earthlink.net.

BY ; Kenneth Harney

Via : www.mercurynews.com

New cash idea for homeowners

2007-07-11T22:05:00.000-07:00

They can tap into home equity but avoid loans in a new plan from REX & Co.

San Francisco - Despite the counsel to "diversify, diversify, diversify," many Americans have most of their financial eggs in one basket: their homes. Juggling eggs just got easier for some of them, thanks to the San Francisco-based company REX & Co.

REX allows homeowners to convert home equity to cash, much like a home-equity loan. But this is no loan; REX charges no monthly payment, nor any interest. Instead, when the home is sold, REX takes a portion of the home's appreciation.

For a house valued at $500,000, REX might offer a lump sum of $70,000 in exchange for half the home's change in value. If the house eventually sells for $600,000, REX gets $120,000, the original 70K plus half the price gain. If the home sells for only $400,000, REX shares in the loss, getting just $20,000 back.

Real estate analysts say the idea shows promise as a way for homeowners to hedge against real estate volatility. But they also warn that it's a potentially more difficult financial tool for consumers to gauge, especially given its newness on the market.

"This is not a bad idea. This is a kind of instrument that helps complete the market," says Susan Wachter, a professor at the University of Pennsylvania's Wharton School. A large problem in the housing market, she says, is that many homeowners have most of their money tied up in that one investment. Rex and Co.'s agreement allows them to take some of that money and invest it elsewhere.

REX agreements aren't available to everyone. The company operates in only nine states (see rexandco.com). Homes in the top or bottom tenths of their local market won't be considered. Homeowners need credit scores of 680 or higher, and cannot have more than 75 percent of their home mortgaged.

To decide between a REX or a home-equity line of credit, homeowners might want to call on some expert help unless they are prepared to dig out some No. 2 pencils, fire up their Casios, and do some research on historic housing price trends at ofheo.gov.

It would be reasonable for a homeowner to pay slightly more for a REX agreement than a home-equity loan because REX offers some protection against a dip in prices, says Thomas Davidoff, professor at the Haas School of Business at the University of California, Berkeley.

But caveat emptor, warned several analysts, when it comes to the "neutrality" of third-party appraisers as well as fees charged by REX if the homeowner sells in less than five years.

Since beginning to offer these agreements several months ago, REX says it has received about 1,000 requests for proposals from interested homeowners.

"Eighty percent of boomers' net worth is tied up in their house," says Thomas Sponholtz, CEO of REX. "If you believe it's a declining market, it may make sense to take some of the chips off the table."

REX gives them a new way to do that without having to take on monthly payments into the retirement years. And for many baby boomers, selling is even less appealing. "Now they can stay in their home and still finance their life," says Mr. Sponholtz. How customers use the lump sum is their business, whether it's to switch money over to retirement annuities, give an "early inheritance" by paying for a child's college, or buy a yacht.

Agreement is an alternative to loans

"You have earned the equity in your home," says Sponholtz. "Why pay a lender to borrow your own money?"

Of course, given Americans' poor record on saving, REX could become one more tool for ill-advised borrowing from the future to spend now.

But as Dr. Davidoff points out, it's already easy to tap into home equity. "I think they have home-equity line machines in casinos almost, at this point," he jokes.

And at least with REX, the profligate wouldn't face the same risk of defaulting on monthly loan payments, says Mark Levine, a real estate professor at the University of Denver.

At the moment, REX isn't offering deals to home buyers, a move that down the line could put some inflationary pressure on home prices, say analysts. Sponholtz says his firm might do so in 12 to 18 months, but emphasizes that it would not be in the subprime market.

REX is a private company; its investors include the insurer AIG and the Bank of Scotland. Investors could expect significant tax savings if the IRS considers the agreements capital gains not loans, says Dr. Levine. The concept is not entirely novel. Something similar – shared appreciation mortgages – were once fairly common.

"What's attractive about this particular form of a shared-appreciation mortgage is that there is an up-front transfer of cash, so that the burden of it all working out is more on the company than on the homeowner. Often that is reversed," says Dr. Wachter.

REX touts itself as the first company to bring its equity sharing model to scale. Wachter thinks it won't be alone: "In more volatile housing markets, these kinds of vehicles are in various stage of development."

As with new high-tech gadgets, consumers would be wise to let others test REX's model, argues Errold Moody Jr., a financial planner based in San Leandro, Calif. When reverse mortgages were first introduced, he says, it took several years to work out the kinks.

"With risks, you always let the other guy go first, find out if he can swim from Alcatraz and make it," says Dr. Moody.
By ; Ben Arnoldy

Via : www.csmonitor.com

Those who don't ask don't get

2007-07-11T11:50:00.000-07:00

Poor knowledge of loan products means borrowers could be missing out on a significant discount.

A survey conducted by Wizard Home Loans shows that one in three prospective borrowers is unaware of widespread home loan discounting.

This result has surprised people in the consumer finance industry. Harry Senlitonga, a researcher at the research group Cannex, says his figures indicate that half the new home loans sold are in packages that include discounts.

The Reserve Bank of Australia (RBA) has commented recently that the majority of borrowers are getting a discount to the standard variable rate when they buy a home loan. The average discount, according to the RBA, is 0.6 per cent.

Some of the more aggressive lenders, such as Westpac, are offering discounts of 0.7 per cent and there are reports that lenders have given their top brokers authority to discount as much as 0.9 per cent for the right business.

As the accompanying charts show, you can save $68,469 on a $350,000 home loan if you cut the rate from 8.07 per cent to 7.07 per cent. On a $500,000 loan the saving is almost $100,000.

None of this negates Wizard's finding that a significant number of borrowers may miss out. "Seventy-eight per cent of respondents to our survey said that a lender should tell them if they are eligible for an interest rate discount. They felt that they should not have to ask for it," says Mark Bouris, chairman of Wizard.

Wizard's survey suggests that Australians are not as savvy about the home loan market as they like to think.

This is also the finding of Genworth Financial's Mortgage Trends Report, published in June.

Genworth, a lenders' mortgage insurer, found that through a combination of ignorance and conservatism borrowers were reluctant to take advantage of innovations such as shared equity, capped rate loans and long-term loans.

Alan Shields, an executive with Retail Finance Intelligence, which prepared the report, says the big driver of change in the mortgage market over the past 20 year has been home affordability: "In the mid 1980s, 41 per cent of first-home buyers were able to put down a deposit of 20 per cent or more.

Only 2 per cent of first-home buyers had no deposit when they bought their home back then. In the 20 years since, homes have become less affordable.

"In our latest survey, 27 per cent said they were able to put down a deposit of 20 per cent or more on their first home, while 12 per cent said they had no deposit when they bought their first home."

Peter Hall of Genworth says a lot of product innovation is aimed at meeting the needs of first-home buyers who can no longer save a substantial deposit.

The problem is that borrowers are unaware of or unwilling to use the new products. According to the survey, 64 per cent would not consider taking out a mortgage with a 100 per cent loan-to-valuation ratio.

"One-third said such a loan would be too expensive. Another third said it was too risky and a third said they would prefer to wait and save the deposit," Hall says.

Fifty-seven per cent of respondents said they would not consider a shared equity loan, saying they did not want to share their capital gain with their lender.

To date the only shared equity loan on the market is offered by Adelaide Bank in partnership with Rismark International.

Borrowers can use the equity loan, which is sold by Adelaide Bank in conjunction with a standard home loan, to borrow up to 20 per cent of the value of the home for a term of 25 years.

No repayments are made on the equity loan portion during the term. When the loan matures or is paid out, the borrower must repay the principal plus 40 per cent of any capital gain on the property. If the value of the property falls, Rismark reduces the amount of principal owing by 20 per cent.

Hall says borrowers are reluctant to get into very long-term loans and only slightly less reluctant to use capped repayment loans where the term rather than the repayment changes when interest rates move.

Meanwhile, Wizard has launched a product called VIP Advantage with discounts which are tiered according to the size of the loan and range from 0.3 to 0.45 per cent.

By ; John Kavanagh

Via : www.smh.com.au

Home equity loan avoids fees of refinancing mortgage

2007-07-11T11:45:00.000-07:00

Q. I would like to refinance my adjustable-rate mortgage to lock in one of today's low rates. But I don't want to pay a lot of fees for a new mortgage that would actually make my monthly payments bigger over the next year. Refinancing would cost thousands, which seems like an awful lot for a loan of only about $80,000. What should I do?

A. You might consider a home equity loan instead of an ordinary mortgage. Many home equity loans are unusually attractive now.

Yours is a dilemma that confronts many homeowners with adjustable mortgages, or ARMs: They may be happy with the low interest rates they're paying today - in many cases only 4 percent or so - but they worry their rates will rise in the future.

It would be nice to lock into a low fixed rate, but refinancing fees can total thousands. That's hard to swallow, especially as the refinancing might make monthly payments bigger, at least for now.

How could that happen?

Because ARM payments are recalculated every year, based on the remaining debt and the number of years left on the loan. Typically, the interest rate is set by adding 2.75 percentage points to the current yield of one-year Treasury bills.

That yield is now about 1.3 percent. So ARMs adjusting now will charge just over 4 percent until they are recalculated a year from now.

While 4 percent is terrific, suppose the ARM goes to 8 percent or 10 percent sometime in the future, leaving the homeowner with much higher payments?

Many ARM holders would prefer to avoid that prospect by refinancing to a fixed-rate mortgage that will carry the same rate permanently. For many, that predictability is valuable even if for the next year, the fixed rate is 5 percent or 6 percent compared to the ARM's 4 percent.

Unfortunately, a traditional refinancing can involve thousands of dollars in fees. There's a title search, application and appraisal fees and, if you're to get the lowest rate possible, upfront interest charges called points. Each point is 1 percent of the loan amount, and these days the average mortgage charges 1.5 points.

This is why a home equity loan can work well in some cases.

Like a traditional mortgage, a home equity loan uses the home as collateral. To get one, you must have equity in the home - that is, the home must be worth more than the remaining debt on it.

Interest rates on home equity loans are typically a percentage point or two higher than rates on ordinary fixed-term mortgages.

But right now there are some unusually good deals. E-Trade, the online bank and brokerage at http://www.etrade.com, is charging only 6 percent for fixed-rate home equity loans with terms as long as 20 years, for example.

Most important: There are no fees. No title insurance. No appraisal. Nothing other than a $300 charge if you pay off the loan within the first two years. And interest payments on home equity loans of up to $100,000 are deductible on your federal tax return.

So, if you have enough equity in your home, you could take out a 6 percent home equity loan and use the money to pay off all or part of the old mortgage.

Granted, you could get a lower rate - about 5 percent - with a fixed, 15-year mortgage. That could make more sense if you expect to have the loan long enough for the slightly lower payment to offset the refinancing costs. Still, a 6 percent rate on a no-fee home equity loan is worth a look.

By the way, you may see home equity rates in the 4 percent and 5 percent range. These generally are for lines of credit that work like credit cards. You borrow only when you want. The interest rates are adjusted every month and could go much higher in the future.

That's the hazard you're trying to escape by getting rid of your ARM. So be sure to get a home equity installment loan with a permanent rate.

To shop for loans, try the Web site of Bankrate.com, the lending information company, at http://www.bankrate.com.

By ; Jeff Brown

Via : www.wfrv.com

Harbor Mortgage Hosts Telephone Seminar for Seniors July 26 - Reverse Mortgages Made Understandable

2007-07-10T05:17:00.000-07:00

Braintree, MA (OPENPRESS) July 10, 2007 -- Senior homeowners and their families are invited to stay at home, pick up the phone, and dial in to hear a free Educational Telephone Seminar on Reverse Mortgages and Retirement Planning on Thursday July 26 from 11 AM to 12 Noon.

Moderated by George Downey, a former Chairman of the Massachusetts Mortgage Association, this telephone seminar will provide objective information about the unique government backed programs that allow seniors (age 62+) to access the equity in their homes. Now seniors and their families can learn about an important financial option without leaving their home, just by listening.

Listen and Learn
Businesses have used telephone seminars for years. Participants don’t need to say a word; they just dial in to a specially designated 800 number from the comfort and privacy of their home or office on July 26 at 11 AM and hear:

• How to access the equity in their home.
• Implications for retirement planning.
• Answers to THEIR questions (submit with RSVP).

Seminar speakers will include: Elder Law Attorney Ronald Kearns, R.N. Esq., Case Manager, Senior Resource Center, Quincy, MA; and Chris Downey, President of Harbor Mortgage Solutions, Braintree, MA.

Advance reservations are required. Call 1-800-503-6187 to RSVP and find out how to dial into this informative seminar on July 26th.

Those who dial in to the Reverse Mortgage seminar will learn how a reverse mortgage can help homeowners over the age of 62 cash in on the investment they made in their home without having to sell, move, or take out a home equity loan. Reverse mortgages can help provide a steady source of tax-free income enabling seniors to have the extra cash needed to pay off their bills and stay in their own home.

A recent study conducted by the National Council on Aging found that impaired, older Americans are struggling to live at home at a time when they own more than $2 trillion in untapped housing wealth. Senior homeowners throughout Massachusetts are struggling to make ends meet, yet most are unsure of how to proceed to unlock the equity in their homes.

A reverse mortgage, essentially the opposite of a traditional or “forward” mortgage, can enable seniors to tap into accumulated equity without having to face ongoing payments. Unlike traditional mortgages where borrowers make monthly payments, in a reverse mortgage the cash flow is reversed, and the lender makes payments to the borrower, enabling borrowers to use the tax free cash they receive in any way that they wish.

There are no minimum income, asset, or credit qualifications to meet and no effect on Social Security or Medicare benefits. The property must be the primary residence of the borrower and properly insured and maintained, with real estate taxes kept current. As long as the borrower continues to live in the property the loan can never be called.

Unlike a traditional mortgage where the balance starts high and the borrower’s monthly payments systematically reduce the loan balance, the balance of a reverse mortgage loan starts low and continues to increase as more cash is drawn and the deferred interest charges are added to the balance. Repayment is required if the home is sold, or when the last borrower permanently leaves the property, or passes away. At that time, the heirs can sell, or refinance, the property to pay off the loan.

Once the province of a few small banks and private lenders, the great majority of reverse mortgages today are provided through government-sponsored programs, namely the HUD/FHA Home Equity Conversion Mortgage (HECM) and the Fannie Mae Home Keeper (HK) programs.

Telephone Seminar Sponsor - Harbor Mortgage Solutions
The Senior Homeowner Division of Harbor Mortgage Solutions is dedicated to providing customized service, obtaining the best possible solution for each individual client every time. Harbor Mortgage Solutions, Inc. is located at 100 Grandview Road, Suite 105 in Braintree, MA 02184.

An equal opportunity lender licensed in Massachusetts (license #MC0041) and Rhode Island (license #20041821LB), Harbor Mortgage Solutions is a member of the Massachusetts Mortgage Association, the National Association of Mortgage Brokers, and the National Reverse Mortgage Lenders Association, strictly subscribing to their rigid code of ethics. Harbor Mortgage Solutions is also an Educational Subscriber of the Massachusetts Chapter of the National Academy of Elder Law Attorneys.

BY ; SDubin

Via : www.theopenpress.com

The sky-high cost of 'cheap' home loans.

2007-07-09T09:55:00.000-07:00

The black clouds that swirled over the Bank of England last Thursday were eerily appropriate.

There has been a growing sense that Britons' huge appetite for debt would end in tears. That mood darkened considerably in the aftermath of the Bank's decision to raise rates for the fifth time in less than a year.

You get the distinct feeling that households will now really start to feel the pinch and that the horrors of a housing collapse, repossessions and negative equity - dismissed as impossible for so long by so many -could yet become a reality.

People who pushed themselves to the limit, borrowing as much as they could afford when they were able to pick up a fixed-rate mortgage at around the 4 per cent mark, will be sleeping a little uneasily at the moment. They will have their work cut out to find a remortgage deal under 6 per cent - and even these loans don't come cheap. Not only will higher rates hit homeowners' pockets, so too will the exorbitant fees that come with the current crop of deals.

Go back to the last time the base rate stood at 5.75 per cent, in February 2001. The cheapest two-year deal was 4.99 per cent and the fee was just £295. Indeed, most fees on fixed-rate deals hovered around the £290 mark back then; and they averaged around £300 until 2005, when they began to nudge up to about £400.

But over the past two years these fees have doubled - and in some cases trebled. The cheapest two-year deal today charges 5.49 per cent with a fee of £899, and for other competitive fixed rates you have to pay through the nose, with many fees topping £1,500 and some hitting £2,500.

Lenders are canny beggars and they have also introduced fees based on a percentage of the loan in the past couple of years - a particularly good wheeze at a time of rising house prices.

The lenders argue that the deals are actually more competitive today and the high fees are down to "swap" rates - the price at which lenders borrow money to fund fixed-rate deals.

They protest that swaps are more expensive today because the money markets are factoring in more rate rises. This means that fixed-rate mortgage deals that are priced below swap rates will be lossmaking - and the fee goes some way towards plugging the gap.

In February 2001, by contrast, the markets were expecting base rates to fall and so swap rates were priced accordingly: they were far lower. This enabled lenders to offer competitive deals without having to recoup money via sky-high fees.

They have a point, but the figures still don't add up. There is little doubt that some lenders are taking advantage of borrowers - some charge fees of £1,000 or more even on deals with the highest interest rates.

The bean counters at Moneyfacts, the financial analyst, compared the best two-year fixed-rate deals in 2007 with those in May 2001 (on a £100,000 capital repayment mortgage over 25 years). They say the true cost over the two-year deal period is more than £800 higher now; the best discount deal is also more than £500 more expensive over the two-year term than in 2001.

It gets worse. Not only have the deals become more expensive but the rate borrowers revert to once the fixed-rate deal has ended has also risen. The average standard variable rate before the latest increase was 7.32 per cent, which is 0.36 of a percentage point higher than in March 2001 and 0.13 of a point higher than when base rate was 5.75 per cent in May 2001.

Banks always sigh when you bring up the fee debate. They talk about "misnomers" and say borrowers have more choice than ever. They offer products that charge a fee and offer a lower rate and vice versa. It is up to customers to examine the overall package and decide what is best for them. That is as maybe but you can't help feeling the lenders are piling on the misery for homeowners at the very time they need some respite.

Bargain pensions a step nearer

On a brighter note, a vote in the House of Lords on "lost pensions" last week could boost the pensions of thousands of women and carers.

Some 12m people, the majority of them women, are on course to retire without a full basic state pension because they have fragmented work records. As it stands, people can buy back incomplete "contribution years" only within six years; otherwise they lose the opportunity altogether. The problem is that most people don't realise until the end of their working lives that their record is incomplete, which means it is too late for them to do anything about it - and it can cost them a bundle.

Buying back missed years of basic state pension entitlement is terrific value, provided that you do not expect to be relying on benefits for the majority of your retirement income. For around £7.50 a week anyone who does not pay National Insurance contributions can buy a pension worth more than £125,000.

An amendment to the Pensions Bill tabled by Baroness Hollis in the House of Lords last week received overwhelming backing: 179 members (including a number of Labour peers) voted in favour while 86 opposed.

The amendment could soon allow people to buy back up to nine years of "lost" NI contributions at any point in their working lives. It is now down to MPs to approve the rule change. Let us hope that common sense prevails.

By ; Paul Farrow

VIa : www.telegraph.co.uk

Fewer homeowners tapping home equity well

2007-07-09T09:52:00.000-07:00

After years of piling debt on their homes, Americans are becoming more cautious about using them as a piggy bank.

A cooling housing market and higher interest rates have made homeowners more reluctant to tap the equity they may have built up in their residences. The amount borrowers owe on their home-equity lines of credit has slipped in the past six months, to $561 billion at the end of March, the first such decline since 1999, according to new data from Equifax Inc. and Moody's Economy.com Inc. Although that decline was partly offset by a pickup in fixed-rate home-equity loans, total home-equity borrowing rose just 9 percent in the 12 months through March, well below the 21 percent average annual growth rate of the past five years.

"People are feeling uncertain about the value of their home and are feeling tapped out," says Doreen Woo Ho, president of Wells Fargo & Co.'s consumer-credit group.

Some homeowners have decided to "wait and see what happens to real estate," says David Rupp, Bank of America Corp.'s home-equity executive, "or they may view themselves as not needing to borrow."

During the housing boom, demand for home-equity lines of credit climbed sharply as property values rose, interest rates fell and lenders made it easy for borrowers to tap their equity for everything from home improvements to vacations. Borrowing against home equity freed up roughly $187 billion in cash per year between 2001 and 2005 that was used to pay off other debts and for new spending, according to a recent paper by former Federal Reserve Chairman Alan Greenspan and Fed economist James Kennedy.

Now, the slowdown in home-equity borrowing is leading to weaker sales in some markets for autos, building materials and electronics, says Mark Zandi, chief economist of Economy.com. The slowdown has been particularly notable in parts of the country that are suffering most from housing and mortgage corrections, including Boston, Minneapolis, Miami, Las Vegas and Washington.

Rising short-term interest rates have driven rates on home-equity lines of credit to an average of 8.7 percent, up from as little as 4.64 percent in April 2004, according to HSH Associates. Home-equity lines carry a variable rate, usually tied to the prime-lending rate, and give homeowners the right to borrow up to a certain amount, either all at once or over time.

Meanwhile, rates on home-equity loans, which provide borrowers with a fixed-rate and a lump sum, have also increased, but not as much as lines of credit. Home-equity loans average 8.1 percent, up from 6.75 percent since April 2004, HSH says.

As a result, more borrowers have opted for the stability of a fixed-rate home-equity loan over the flexibility offered by a line of credit. Balances on fixed-rate home loans climbed 24 percent to $290 billion in the 12 months ended in March, according to Equifax and Economy.com.

Also, some borrowers who already have lines of credit are refinancing into a new fixed-rate mortgage or fixing the rate on some or all of their credit line, an increasingly common option, says Mitch Ohlbaum, a mortgage broker in Los Angeles. Rates on 30-year fixed-rate mortgages currently average 6.37 percent, HSH says.

Felice Soule, a medical-device saleswoman in Los Angeles, cut the balance on her home-equity line of credit to $58,000 from about $168,000 when she refinanced her $1 million mortgage. The rate on the home-equity line had jumped by more than two percentage points to 9.25 percent since she took out the credit line two years ago. "By refinancing and rolling (most of the home-equity line) into the first mortgage, it's saving me around $800 a month," she says.

But Keith Gumbinger, an HSH mortgage analyst, says this strategy doesn't make sense for every borrower. By doing a cash-out refinance, you're also extending the length of your mortgage, which means your "total interest charges over time are likely to be higher" than they would be with a home-equity line or loan, he says. And in some cases borrowers may face a prepayment penalty, which can range from a few hundred dollars to 2 percent of the loan amount, if they close down their home-equity line or loan in the first few years.

Even at today's higher rates, a home-equity line or loan can be an attractive option. Rates are generally lower than for most other sources of financing, and interest payments are typically tax deductible. Most borrowers who have owned their homes for several years still have plenty of equity they can tap.

"If you need the money to clear up some credit-card debt, it's certainly worth the trade-off," says David Lesnick, a financial planner in Goodyear, Ariz. But Lesnick is also advising clients to proceed with caution. "If it's something that could wait, let it wait," he says.

Lenders are responding to slowing demand for home-equity borrowing by boosting their marketing, unveiling special offers and focusing on traditional uses of home equity, such as home improvement and debt consolidation. Wells Fargo rolled out a "Home Improvement Program" that gives home-equity customers discounts at retailers such as Best Buy, Brookstone and LampsPlus.com and access to a network of third-party local contractors.

J.P. Morgan Chase & Co. is running its first cable-television advertising campaign for home-equity borrowing, focusing on the product's flexibility. It's also rolling out a training program designed to help bankers in Chase branches do a better job of selling home-equity products. Bank of America, has launched a "green" home-equity card program, in which the bank will make a $100 donation to environmental group Conservation International on behalf of new home-equity customers who use their equity-line Visa card for purchases of $2,500 or more.

Delinquencies on home-equity lines of credit also have climbed, to 1.29 percent in the first quarter, according to a separate study by Equifax and Economy.com. That's up from 0.8 percent a year earlier and the highest level since early 2002.

Partly as a result, lenders are tightening their standards. That, in turn, is making it tougher for some borrowers to get so-called piggyback mortgages, which combine a mortgage with a home-equity loan or line of credit and allow borrowers to finance more than 80 percent of a home's value without paying mortgage insurance.

National City Corp. says that in the past 60 days it has tightened its standards for home-equity loans made to borrowers providing little, if any, documentation of their income or assets. E. Kennedy Carter Jr., a National City executive vice president, says the bank saw applications for these loans jump as other lenders withdrew from the market when institutions who invest in mortgage-backed securities lost their appetite for riskier loans. Citigroup Inc.'s Citibank also tightened its eligibility standards for home-equity loans.

Gibran Nicholas, a mortgage broker in Ann Arbor, Mich., says one of his clients was hoping to tap the equity on his $1 million home in an effort to make up for a sharp drop in his income, but couldn't because he had been late on some payments. "Lenders are not looking to do 100 percent financing for people with less than stellar credit," Nicholas says.
By ; RUTH SIMON

Via : homes.dailyherald.com

Compare loan vs. home equity

2007-07-08T01:10:00.000-07:00

With interest rates on the rise, consumers looking to tap into their home equity want to make sure they are getting the best possible deal for their money.
With home-equity rates looking attractive, consumers should consider whether they are better off tapping into a loan rather than refinancing the mortgage to get their cash out.
You can do the comparison by setting your Web browser to www.lendingtree.com/smartborrower/Calculators.aspx

Via : www.azstarnet.com

Home loan crisis infects 'burbs

The bulk of foreclosed properties on the market are in the cities — but suburbia may be catching up.

Take East Bridgewater, a middle-class town where the median house price is $335,000.

This suburb of Brockton had the biggest increase of foreclosure filings — a whopping 233 percent hike — between May 2006 and May of this year among communities in Massachusetts that had 50 or more filings in that period.

The numbers are tracked by Framingham-based ForeclosuresMass.com.

Walpole, a suburban town with some upscale neighborhoods, saw its foreclosure filings rise by 152 percent during the same period.

Some say foreclosure numbers can be misleading as homeowners may address their financial situation before the house is actually foreclosed upon.

But filing numbers can be an indicator of foreclosure trends, in this case that the crisis is reaching into suburban areas.

“With the price of gas, the cost of living being up, we are seeing people who have larger mortgages,” said Sherry Palmer of Four Points Realty in West Bridgewater. And, once they get behind in payments, the foreclosure process kicks in.

Suburbs in other parts of the country also are joining the foreclosure ranks.

In Montgomery County, Va., for example, the foreclosure rate has tripled in a year. In nearby Fairfax County, it has quadrupled, according to The Washington Post.

Maryland has seen a similar trend. Foreclosures rates there have been rising sharply, especially in the suburbs, as many buyers who had stretched to purchase homes have found themselves unable to keep up with payments, the Baltimore Sun reported.

In another non-urban indicator in Massachusetts, Foreclosures.com also found that Barnstable County, which includes 15 coastal communities on Cape Cod, saw a 79 percent increase in foreclosure filings.

Locally, there have been 18 actual foreclosures in East Bridgewater in the past 18 months, East Bridgewater Assessor Cheryl Pooler said. Eleven of those foreclosures were recorded in 2006, seven in the first six months of 2007.

The latest statewide figures show 1,589 notices of foreclosure auctions in May, a 143 percent increase from a year ago.

“Foreclosures are more and more prevalent in the area,” Palmer said.

The surge in foreclosures has been traced to “sub-prime” mortgage loans made to people who stretched their finances too far to purchase homes in an inflated real estate market.

Sometimes unscrupulous lenders loosened credit rules for home buyers with bad credit, who made no down payment or who didn't earn enough money to qualify for traditional loans. The lenders then charged them higher interest rates, which made the loans more expensive and the payments harder to make as other living rose, such as food and fuel.

May statistics indicate that foreclosure activity will continue to rise in Massachusetts, according to Timothy Warren Jr., CEO of the Boston-based Warren Group.

“There are fewer options available to people,” Warren said. “In the past, maybe they had enough equity in their house to refinance.”

Pooler, the East Bridgewater assessor, said she is not surprised that many homeowners find themselves facing foreclosure, though they can recover before losing their homes.

Many find ways to reverse the process, while others who may have been marginal buyers to begin with, cannot.

“There's more bank-owned property for sale,” said Palmer, the West Bridgewater Realtor. “The percentage is becoming greater and greater.”

By ; Elaine Allegrini, ENTERPRISE STAFF WRITER

Via : www.enterprisenews.com

ICICI snips home loan rates 0.5%

2007-07-07T05:14:00.000-07:00

MUMBAI: ICICI Bank recently reduced interest rates on home loans by 50 basis points. The institution has seen a dip in its home loan disbursements following its decision to raise interest rates above what was being offered in the market.

A spokesperson for the bank said the bank had decided to reduce rates following a decision by the central bank to grant priority sector status to home loans up to Rs 20 lakh. Most of ICICI Bank’s home loans are below Rs 20 lakh and a growth in home loans would allow the bank meet its priority sector obligations.

He added the bank was passing on the benefits of the regulatory relaxation to borrwers. Officials said the reductions applied to all loans below Rs 20 lakh. ICICI Bank’s lendable resources have gone up sharply with the bank raising close to Rs 17,500 crore through an equity issue. Besides providing it with lendable resources, the equity issue also increases the lending headroom for the bank by raising its net worth.

Prior to the reduction, the bank offered floating rate loans at 12% and fixed rate loans at 14%. Now, loans will be available to floating rate customers at 11.5%. Despite the reduction, ICICI Bank’s home loans continue to be more expensive than those offered by HDFC. The country’s largest housing financce company is offering floating rate loans at 11% as part of a monsoon scheme.

A customer applying for a home loan up to Rs 50 lakh between June 18 and July 15 will be offered a variable interest rate of 11% per annum instead of 11.25%. In addition, the reduced applicable fees during the promotion will be 0.25% instead of 0.50% of the loan applied for, subject to a maximum of Rs 5,000. However, the customer has to avail of disbursement before July 31.

Last week, HDFC chairman said he expected interest rates to be steady in the coming months as he believes interest rates have peaked. HDFC chairman also pointed out that real estate prices were coming down in places with excessive construction activity.

Via : economictimes.indiatimes.com

All you need to know about reverse mortgage

2007-07-07T05:11:00.000-07:00

Reverse mortgage is a financial option that senior citizen homeowners aged 60 and above can explore. Once all mortgages on their property have been paid off, they may borrow against the equity (or appreciation in value) of their home.

By availing of it, he would receive payment without getting displaced from his current residence. The option of selling his existing flat and moving to a different place is quite traumatic for most people – and especially for older people.

Unlike ordinary home loans (mortgages), a reverse mortgage does not require repayment as long as the borrower lives in the home. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors.

Payments may be received in a lump sum, on a monthly basis (for a fixed term or for as long as they live in the home), or on an occasional basis as a line of credit. Currently at least, this is a product that is ideal for a consumer who is asset-rich but liquidity-poor. In fact, there is no competing product in the market.

The reverse mortgage can be used by senior homeowners (say age 65) and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home.

* Tenure: Equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.

* Term: EMIs for a fixed period of months selected.

* Line of Credit: Unscheduled payments or instalments at times, and in amount of borrower's choosing until the line of credit is exhausted.

* Modified Tenure: Combination of line of credit with monthly payments for as long as the borrower remains in the home.

* Modified Term: Combination of line of credit with monthly payments for a fixed period of months selected by the borrower.

Situation in India

We still haven’t seen many options launched here in India yet. In fact, only Punjab National Bank and Dewan Housing have launched the product and executed deals. Others like Corporation Bank and ICICI Bank are all still in the drawing board stage. SBI has postponed the launch in view of the lukewarm response so far from the end user.

DHFL was the first to launch the Saksham scheme on reverse mortgage in September 2006.

The scheme is currently targeted towards urban customers. All bankers (including a couple of foreign banks) agree that it is a very difficult product to take to the Indian market. The main worry is the social stigma attached to borrowing – an especially big issue in case of individuals aged 60 years and above. Also, a chat with a senior citizen reveals that he would use the monies from reverse mortgage for a medical emergency, but would not be comfortable using it for say a luxury like a holiday.

By ; PV Subramanyam

Via : moneycontrol.com

A new way to tap equity without going into debt Homeowners can sell a share of future appreciation

2007-07-06T06:03:00.000-07:00

Bill and Elaine Nolan paid top dollar when they bought their Tiburon house a few years ago at the height of real estate frenzy. Now, of course, the market is cooling rapidly.

So Bill Nolan, who deals with money all day long as a partner in an investment management firm, wanted to diversify. He turned to a startup based on a new concept: Let homeowners tap their equity without taking on debt.

Nolan contracted with Rex & Co. to receive $100,000 cash in exchange for a 10 percent stake of the home's future appreciation. When the Nolans sell their home, they'll pay Rex the $100,000 plus 10 percent of their home's appreciation above its current value of $2 million. For example, if the home sells for $2.5 million, the Nolans would pay Rex $150,000 -- the original $100,000, plus 10 percent of the $500,000 gain in value, or $50,000. If the home were to depreciate, Rex would share in that loss as well.

(The Nolan house is atypical because of its high value; more typically, a $100,000 Rex payment would be in exchange for a larger share of a house's appreciation.)

"It was an interesting opportunity to take some cash out of the house and hedge against any decline in home value," said Bill Nolan, who plans to invest the money in his business. "It was a way to hedge against the (real estate) market being flat or not performing as well as the equity market; to pull money and put it into something else I felt had a reasonable chance of outperforming the real estate market."

San Francisco's Rex & Co. (www.rexandco.com) -- the name stands for Real Estate Equity Exchange -- bills itself as the first company offering a way to make home equity liquid without incurring debt. It essentially buys a share of a home's future appreciation. Rex gives homeowners a large up-front cash payment -- up to 15 percent of a home's value, topping out at $300,000 -- in exchange for a share of the home's future change in value -- up to 50 percent of its appreciation or depreciation.

No payments, no interest

When the home is sold, the homeowner returns the original investment to Rex plus the agreed-upon share of appreciation. The homeowner does not pay interest and does not make any payments until the sale.

"People, especially Baby Boomers, are sitting on a tremendous amount of equity," said Rex chief executive Thomas Sponholtz, a former Barclay's executive who co-founded the company with Ian Charles, formerly an investment banker at S.G. Cowen. "If you take on debt to unlock that value, you're paying to borrow your own money."

Sponholtz said many potential customers will want cash to meet specific needs, such as college tuition or retirement income.

He is quick to correct any reference to the Rex payment as a loan. The company prefers the terms equity co-share or equity co-investment.

Another way homeowners can take money out of their house without making monthly payments is through reverse mortgages, which are only available to people over age 62. Reverse mortgages, unlike the Rex system, are a form of debt. They provide either a lump-sum payment or regular monthly payments, and do not have to be repaid until the homeowner dies, sells or moves out for longer than a year. The loans accrue interest and come with hefty up-front fees.

Rex does not charge up-front fees, but the homeowner pays for standard real estate services. In originating a Rex deal, the homeowner would pay for an appraisal, an escrow fee to a title company and title insurance. The latter two are because the home's title would be amended to show Rex as having a lien against it. Rex offers some rebates on those fees.

Homeowners referred to Rex through financial advisers or mortgage brokers might be charged fees by those individuals, the company said. To discourage flipping, Rex charges an early exit fee for properties that are sold within five years. The exit fee is 25 percent of the cash advance in the first year and declines by five percentage points a year over the next five years. Homeowners can end their Rex arrangement at any time by paying the company the original investment plus Rex's agreed-upon share of the home's appreciation at that point (plus the early exit fee, if appropriate). The appreciation would be determined by an independent appraiser.

Rules to qualify

Nolan said he might consider ending his Rex deal if Tiburon houses go down in value, so that Rex would share in the loss on his home. "The beauty of it is that no one else can 'call' me on the option; I own the trigger point," he said. "No one else decides, 'This is an opportune time, home prices have risen, we'll call Mr. Nolan on our option to give us our 10 percent.' "

Only certain properties qualify for a Rex deal: They must be owner-occupied, detached, single-family homes. Condos, vacation homes and rental properties do not qualify. Owners must have at least 25 percent of the home's equity and must have good credit.

"We're looking to invest in the typical house in the neighborhood -- not castles," Sponholtz said. Rex will not buy shares in homes in the bottom 10 percent or top 10 percent by value in any given neighborhood.

Sponholtz said the company will do business in all metropolitan areas where it can get comparative price data and will not exclude areas where the housing market is struggling. But it will pay different prices for a share of future appreciation depending on its assessment of individual markets and homes, he said. That means if you have a well-maintained home in a desirable area, you're likely to land a better deal with Rex.

Rex's investors include AIG Financial Products Corp., part of insurance giant American International Group; San Francisco investment firm Hellman & Friedman; and Royal Bank of Scotland/Greenwich Capital.

Of the $21 trillion worth of residential real estate in the United States, $12 trillion is owned outright by homeowners; the rest is debt owned by lenders. For most people, their home is both their biggest asset and their biggest vehicle for saving. Many financial experts warn consumers that they should diversify -- taking money out of their house and putting it in a financial product that will generate income, for example.

"Most people are over-invested in their home," said Christopher Thornberg, principal at Beacon Economics in Los Angeles. Selling "an equity stake in your home makes sense to me. Taking money out of your house and putting it in some other type of investment like stocks or bonds basically reduces the overall risk of your portfolio."

Thornberg said he wondered why Rex is starting now "considering that equity will go nowhere but down." Many experts think the real estate market might not bottom out for another year or two; Rex said that since it's aiming for a five-year-plus horizon, the immediate market is not a concern.

'A certain pizzazz'

Rex operates in nine states: California, New Jersey, Virginia, Florida, Illinois, Washington, Colorado, New York and North Carolina. It hopes to go nationwide within a couple of years. It considers California its biggest market.

Tim Chrisman, who runs Los Angeles executive-search and planning firm Chrisman & Co., did some work for Rex and said he was impressed by the concept. He ended up investing in the company.

"It has a certain pizzazz about it," said Chrisman, who is also chairman of the San Francisco Home Loan Bank Board, one of 12 such federally sponsored banks. "What is so novel about Rex, as the homeowner you can pull real dollars out of your home and you don't incur debt; that's the significant factor. When you get a home equity loan or pull out through (refinancing or reverse mortgages), you get the equity but you also incur more debt."

Chrisman said he could picture a scenario where Rex would turn its equity-sharing agreements into securities and sell them to other investors, just as mortgages are now routinely packaged and sold to Wall Street.

Meanwhile, obviously, Rex will not be generating cash flow for some time, because its contracts encourage home buyers to stay put for at least five years.

Rex spokesman Wade Randlett said that is not an issue for the company. Rex's investors are seeking long-term returns and agree with the company's philosophy that the returns will ultimately be significant, he said.

While Randlett declined to say how much financing Rex has, he said: "We have sufficient credit to originate thousands of these (deals) across the United States. If we got to the point that the current credit facility was maximized, I am 100 percent confident we'd be able to increase that credit facility."

By ; Carolyn Said, Chronicle Staff Writer

Via : www.sfgate.com

Secured loan or mortgage equity release?

Despite all forecasts house prices are on the increase again. There was a lull in May, but indications for June are that house prices were on the march again.

Against the tide of rising house prices that has continued almost unchecked for the last ten years, Britain’s home owners has borrowed a staggering £264bn against the rising value of their homes. Is this a wise step to take?

Such borrowing, when you already own your home via a mortgage loan, but take out a further mortgage to raise some cash, is known as mortgage equity release or withdrawal.

One argument suggests that mortgage equity release is a good thing…

UK house prices continue to rise against expectations, and in June they rose again, by around 1.1%, taking the annual house price increase to an average of 11.1%. This helps us understand why mortgage equity release has become so popular.

With the average UK home currently worth around £200,000, for every 1% rise, and extra £2,000 is theoretically available in the value of your house. This ten-year rise in house prices has given homeowners the confidence to save less and spend more, as you are sitting on an asset which continues to go up in value. The situation is similar to that of the 1980s property boom.

In 2006, £50bn was withdrawn through mortgage equity release, and that represents about 6% of take-home pay. So, for every £100 of earnings, an extra home loan can put another £6 in your pocket.

Be in no doubt, though: release equity will increase your mortgage repayments, simply because you are borrowing more, never mind any increases in interest rates. But a mortgage is still the cheapest way to borrow money. The loan is automatically secured against the house, so borrowers can borrow against the value of the property to pay off other unsecured debts such as outstanding credit card bills or overdrafts.

Consolidation of loans may sound like a good idea, but doesn’t work for everyone. It actually works out to a great total repayment as the loan is over a longer period, and the apparent freeing up money enables people to spend again – which is just what they do, to give themselves even great problems.

Similarly, people considering remortgaging to release equity should be wary of the negative equity trap. House prices can go down – and they did in the early 1990s leaving many people owning more on their homes than it was worth. So, the key is to not borrow more than you can afford to – don’t borrow up to the value of the house, leave lots of leeway.

As with all borrowing, do not be tempted to overspend.

Another argument suggests that a secured loan is a better bet…

Let’s face it, we all carry some debt at some time in our lives, even if it is “only” a mortgage. Maintaining a certain level of credit is a fact of life for most people.

Recent research has shown that, despite several warnings about the subject, most of the UK population is comfortable with their borrowing levels, although many of them are concerned that they are not getting the best deal that they might get on, for example, interest rates. Given that, debt consolidation through a secured loan might be a good choice for people who to arrange their borrowing sensibly. As there are so many options for credit cards and loans in the marketplace, it is essential that people read and understand the terms and conditions of any loan agreement they have.

There is an argument against securing a loan against your home, especially if you have had trouble paying off your debts in the past. Nevertheless secured loans can offer lower interest rates than they’re already paying and help people to reduce their monthly repayments. Also, the management of money being owed back to various different suppliers can be a headache for some people, and one source of a loan would suit them much better. With the lower interest rates available, money can be freed up, although total payment over the whole period may work out more.

Secure loan consolidation of other debts can be a good alternative to those people who are unable to remortgage for whatever reason. Some may already be on a favourable mortgage rate that they would have to sacrifice if they remortgaged. Some may have to pay early redemption penalties. Some may simply not have the required level of equity in their home

A secured loan is not the best option for everyone, and a responsible lender will screen potential customers thoroughly, especially with credit scoring to make sure that they only lend to people who can comfortably afford the repayments. Choices are made every day by consumers, and taking time and effort to make the best loan choice should be no different.

Via : www.thriftyscot.co.uk

Paying the piper: Home equity loan delinquencies rise

2007-07-04T22:05:00.000-07:00

It was fun while it lasted. All that extra money from your home equity that helped you finance your new car or the his and her flat-screen TVs.

The party may be over. The American Bankers Association yesterday released its quarterly survey of consumer loans, and noted that late payments on home equity loans rose to 2.15% in the first quarter. That's up quite a tick from 1.92% in the final quarter of last year.

Payments are considered delinquent if they are 30 or more days past late.

"There are still signs of consumer financial distress, which will continue throughout most of this year as the worst of the housing problem works its way through the economy," said James Chessen, the association's chief economist, in a press release. Still?

The ABA's survey is based on information supplied by more than 300 banks nationwide. Delinquencies on a bevy of other consumer loans are also growing, including those for auto, boats and home improvement, according to the survey. These loans increased 2.42% in the first quarter. That's up from the fourth quarter's 2.23% delinquency rate, and the highest since the second quarter of 2001, when, if you remember, we were in a recession.

Strangely, this same survey suggests that credit-card payment delinquencies are down. I don't know what to make of that one. But it's definitely just one more cloud on the horizon.

By ; Julie Tilsner

Via : www.bloggingstocks.com

More Americans fall behind on debts

2007-07-04T11:01:00.000-07:00

Slow job growth and declining home prices are causing financial problems for more Americans, who are falling behind on consumer debt, including home equity loans, at the highest rate since 2001, the American Bankers Assn. said Tuesday.

Credit counselors said consumers were paying the price for reckless attitudes about debt fostered by years of easy credit, particularly in the mortgage market.

"It's a monster we all created," said Todd Emerson, president of Springboard, a nonprofit consumer credit management organization in Riverside.

During the housing boom, home equity loans gave many consumers a ready source of cash as the value of their property shot up.

But with prices declining — quite sharply in San Diego and some other California regions — borrowers have less equity available to cash out by selling their houses or refinancing their home equity loans. As a result, late payments on such loans rose to 2.15% in the first quarter, up from 1.94% a year earlier and the highest in nearly two years. On home equity lines of credit, the delinquency rate was 0.6%, the highest since mid-2003.

Those jumps helped push the delinquency rate on all consumer loans to 2.42% from 1.94% in the first quarter of last year. The latest rate was the highest since 2001, when the technology bust and the 9/11 attacks led the economy into recession.

"There are still signs of consumer financial distress, which will continue throughout most of this year as the worst of the housing problem works its way through the economy," said James Chessen, the banking group's chief economist, who also cited slow growth in jobs as a contributing factor.

The study, based on data from more than 300 banks nationwide, showed a bright spot that Chessen called "somewhat remarkable": Delinquencies on credit card bills declined slightly from the fourth quarter.

Loan payments are considered delinquent if they are 30 or more days past due.

Economists linked the trouble in home equity loans in part to the meltdown of the sub-prime mortgage industry.

As housing prices began to stagnate in mid-2005, lenders loosened their standards for loans to risky borrowers. But with housing prices falling, late payments on sub-prime home loans nationwide rose in the first quarter to the highest level since 2002, the Mortgage Bankers Assn. reported recently.

As a result, lenders have tightened standards and regulators have cracked down on risky practices such as qualifying borrowers for loans based on initial "teaser rates."

The tighter underwriting also made it harder to refinance home equity loans.

"So folks who were habitual refinancers — and I knew some of them, taking out loan after loan — suddenly weren't able to do that again because prices stopped rising," said Wachovia Corp. senior economist Mark Vitner. But he added that such consumers probably were "more the exception than the rule."

He noted that the bankers' report showed fewer delinquencies on auto loans to borrowers with solid credit as well as on credit card debt. Household finances "are still in reasonably good shape," he said, adding that unemployment remained extremely low at about 4.5% nationally.

But anecdotal evidence reflects more people under financial stress, said David Jones, president of the Assn. of Independent Consumer Credit Counseling Agencies. He said his members were reporting more debt-ridden consumers unable to make monthly payments, often on mortgages with adjustable rates that now are ratcheting higher after initial teaser rates ran out.

Some consumers, Jones said, can be helped by programs set up to help avoid foreclosure or by debt repayment plans, but many others are "hanging on by their fingernails."

"Some people cannot be helped," he said. "They don't have enough income to afford the debts they have, and those people are going on to bankruptcy."

Emerson said the bankers' report reflected a scary trend: Ten or 15 years ago, consumers made regular mortgage payments at all costs so as not to lose their homes.

"People today, in order to keep themselves alive, they're paying off their credit cards first rather than paying off their mortgages first in order to keep an open line of credit," he said.

Many of those homeowners bought expensive properties with a "figure it out when they get there" mentality, Emerson said.

"Trouble is," he said, "they never figure it out."

By ; E. Scott Reckard and Andrea Chang, Times Staff Writers

Via : www.latimes.com

Discrimination in home loans

2007-07-03T09:45:00.000-07:00

As we approach, what is now the inevitable, Jamaica's General Election 2007, I would like to use this opportunity to bring a very important issue to the table for debate. It's the mortgage business.

One of the things we notice when Jamaicans migrate to the United States is the speed with which many acquire homes. The reason for this is the very liberal mortgage lending policy in the United States. There are also very strict laws protecting home-loan borrowers against discrimination because of race, sex, age and place of origin.

However, a very important factor in the mortgage equation is the length of time one is given to pay back a home loan. In the United States, the minimum years most people are given to pay back a home loan is 30 years. There are even some lending institutions which are now offering 50 year mortgages.

Paying back your mortgage

The problem with home ownership in Jamaica is that you can only get a 30-year mortgage if you are 20 years old. If you are 50 years and older you are given only five to 10 years to pay back your home loan. This is where we have serious problems with home ownership in Jamaica. Because the monthly payment becomes prohibitive for those over 50 wishing to purchase a decent sized home, they are forcing people to live in match-box homes.

The truth is, if there were 30-year mortgages for everyone, regardless of age or sex, people would be able to afford much better homes than they are now forced to buy. Using a formula of 70 cents to the 100,000 which is the base used to calculate home loans in the U.S., a $2 million mortgage would give you an approximately $14,000 monthly payment, while a $10 million mortgage would give you a monthly payment of about J$70,000.

These are obviously two extremes, but the point is people at both ends of the spectrum would be better able to afford a mortgage. And, of course, if the age discrimination is removed, almost everyone would be able to better participate in this very important milestone.

There is an even more important factor in this mortgage equation. With the age limit removed, a whole new industry would be born creating literally thousands of jobs and billions of new money flowing into the financial sector. Along with the birth of a vibrant buying and selling of mortgages between financial institutions, there would also be the emergence of the Mortgage Backed Security (MBS) industry.

Us multi-trillion dollar business

In the U.S., the MBS industry is a multitrillion-dollar business. The way it works is financial institutions which offer mortgages, pool these mortgages and sell them in lots. The holders of these mortgages lend and borrow these pools of mortgages on which they charge a fee. At the end of the day, they make huge profits on these transactions resulting in this multitrillion-dollar industry.

There would be a much bigger explosion in the construction industry since home owners would be able to refinance their homes at more favourable rates and equity could be taken out to finance the creation and ownership of businesses and even larger homes which we all love. This would not be restricted to just afew people but many.

I would dare to say that there are many people in Jamaica who know this MBS industry well and who can testify that what I mention so far is real. I happen to work in this industry so I know enough to write with authority. I think this would be a very good topic to bring to the table should there be any debate between the aspirants for the next prime minister of Jamaica.

By ;Stafford Perkins

Via : www.jamaica-gleaner.com

There's help to buy a first home

2007-07-02T11:03:00.000-07:00

With the housing market sluggish, now is a good time to buy. But even if a price looks right, putting together a down payment can be tough for first-time buyers. Then come closing costs that can add hundreds — even thousands — to the upfront cost of a mortgage.

The Federal Home Loan Bank of Boston has a program that can help buyers in that predicament. It's called the Equity Builder Program, and it's available through FHLB's partner banks. The FHLB is a wholesale bank and does not make loans directly to individuals.

FHLB spokesman Mark S. Zelermyer told me the Equity Builder Program is funded each year out of 10 percent of profits the bank sets aside annually for affordable housing initiatives. This year's allocation, $3.2 million, is available until it's used up, he said.

That means there's no calendar deadline in 2007, but the earlier you apply the better.

The money is available to income-eligible families who plan to buy a first home within the next three to six months. It can mean up to $15,000 toward the down payment and closing costs.

Eligible ownership units include single-family, one- to four-family homes, townhouses, duplexes, condominiums,

cooperatives, and modular homes that will be used as the buyer's primary residence.

If you keep the house (and mortgage) for at least five years, you don't have to pay the Equity Builder money back. If you sell or refinance, you are liable for some portion of it.

Income-eligible families are those earning no more than 80 percent of the median income for the area in which they are buying. In the Berkshires, that is roughly $40,000 for a single person and up to $57,000 for a family of four.

Candidates are required to also complete a home-buyer-counseling program. Other requirements may apply.

More information is available on the Federal Home Loan Bank's Web site, www.fhlbboston. com/communitydevelopment/fundingprograms/ebp.

Applications are through FHLB's partner banks in the Berkshires.

Those listed on the Web site are Greylock Federal Credit Union, Legacy Bank and the Williamstown Savings Bank.

By ; Charles Bonenti

Via : www.berkshireeagle.com

Bill Consolidation Loans - Quick Debt Elimination

2007-07-01T09:11:00.000-07:00

Although there is no way to eliminate debts overnight, you can manage debt in a way that offers quicker repayment. There are many programs and loans available to help consumers become debt free. Because each person has a different situation, they much choose a debt reduction strategy that is most fitting for their circumstances. Here are a few tips on ways to quickly reduce debts using a bill consolidation loan.

Debt Reduction Options Available to Homeowners

Fortunately, owning a home makes it possible to quickly reduce credit card debts and other loans. Over time, homeowners will build equity in their homes. To gain access to the equity, homeowners must choose to sell their homes or take advantage of mortgage loans that allow them to tap into the equity.

These options consist of a mortgage refinancing or a home equity loan. There are advantages and disadvantages to both options. Nonetheless, if you are hoping to eliminate debts and consolidate bills, either option is effective. Before choosing a method of bill consolidation, closely examine your situation. A mortgage expert may be useful in helping you decide the most effective approach.

Take Advantage of Good Credit Rating

If you do not own a home, or do not want to use a home equity option, it may be possible to get a personal debt consolidation loan. Getting approved for these types of loans are difficult. On the other hand, if you have good credit and gross a sizeable income, some banks or credit unions may be willing to grant a bill consolidation loan. Unsecured loans have higher interest rates. To get approved for a lower rate, think about using some sort of collateral, perhaps a vehicle title.

Debt Consolidation Service

Non-homeowners with bad credit also have options for consolidating their debts. Although banks are less likely to offer bill consolidation loans, there are several debt management services that offer consolidations. These consolidations involve no credit checks or collateral.

Debt management services simply consolidate all debts into one payment. Furthermore, agencies will negotiate lower rates with current creditors. Thus, monthly payments may be reduced up to 60%. Working with a debt consolidation service is a great way to become debt free in five to ten years.

By: Carrie Reeder

Visit www.abcloanguide.com/debtconsolidation.shtml for a list of bill consolidation companies. View our recommended online companies to help you eliminate debt.

Secrets of the Unmortgage

2007-06-29T07:39:00.000-07:00

If you're approaching retirement age, own a home, and are considering how best to make ends meet after you leave work, the idea of a reverse mortgage has probably crossed your mind. For those who haven't yet heard about it, a reverse mortgage is pretty much what it sounds like -- a way for seniors to convert home equity into a monthly income, a lump-sum payment, or a line of credit. Reverse mortgages are offered by Fannie Mae (NYSE: FNM), as well as by specialist lenders and traditional banks such as IndyMac Bancorp (NYSE: IMB) and Bank of America (NYSE: BAC).

Unlike regular home-equity loans, reverse mortgages are available only to seniors, and there's usually no requirement to make any payments until you die or permanently move out of your home. If you're not sure your nest egg will be enough, or if you own a home and want to raise your standard of living during retirement, a reverse mortgage should be on your list of options.

The basics
To be eligible, you and all co-borrowers (typically, this includes everyone named on the deed to your home) need to be at least 62 years old. You need to own your home outright, and you must be living in it. (If you still have a small balance on your mortgage, you can usually pay it off as part of the reverse mortgage process. The lender will require that the reverse mortgage be the primary loan on your home.) The amount you can borrow is determined by a formula that takes into account the age of the borrowers, the appraised value of your home, and Federal Housing Administration guidelines for your region. (You can estimate how much you'd qualify for with the calculator at this site.)

The FHA regulates reverse mortgages, and its rules provide that as long as you abide by the loan agreement, you can't be forced to give up your home -- even if property values fall and you end up owing more than your home is worth. (The FHA insures lenders against loss.) When you die, the loan comes due, at which point your heirs can either sell the home or refinance the loan, meaning they'd get a regular mortgage to pay off the reverse mortgage.

Key considerations
For some seniors, a reverse mortgage makes a lot of sense. But before you run to the bank, here are some considerations:
Can you delay getting the reverse mortgage? The longer you wait, the more home equity you're likely to have. Also, given that reverse mortgages have an actuarial component -- the terms take into account how long you're expected to live -- waiting several years will usually increase the amount you'll be able to borrow.
Consider the fees. Fees for a reverse mortgage are typically higher than those on a regular mortgage -- as much as 12% of the amount borrowed, though competition is expected to drive fees down over time. These fees cover the additional risks assumed by the lender (like if you live longer than expected or your house declines in value). You can usually finance them as part of the loan, but that will reduce the amount you end up borrowing.
Consider your estate plan. If it is important to you to leave your house to heirs, weighing whether they'll be able to repay the reverse mortgage may be a consideration. While as a general rule, I recommend that you consider your needs first and the needs of heirs later, for some people it's very important to know that their family property will stay in the family.

If you're considering the reverse-mortgage option, check out the Fool's Home Center for more details. In addition, you can find a great article in last December's issue of our Rule Your Retirement newsletter with much more on how to look at reverse mortgages. You can read it free with a 30-day trial. But the most important thing to remember is this: If you can wait longer before taking a reverse mortgage, it's usually best to do so.

To read more about reverse mortgages and get much more expert advice to help you retire well, try the Fool's Rule Your Retirement newsletter service free for 30 days. Your trial includes access to all back issues -- look for Doug Short's reverse mortgage articles in the March 2006 and January 2007 editions -- as well as all current content, planning tools and calculators, and a special members-only message board. Sign up for a free trial and see for yourself -- there's absolutely no obligation.

Fool contributor John Rosevear has many years of payments left on his regular mortgage, and hopes not to need a reverse mortgage for a long time. He does not own any of the stocks mentioned in this article. Bank of America is an Income Investor selection. Fannie Mae is an Inside Value recommendation. The Motley Fool has a disclosure policy.

By : John Rosevear

Via : www.fool.com

Home Improvement, Home Equity in disguise

2007-06-28T07:17:00.000-07:00

When you want to improve your home, the cost of materials and various expenses begin to add up to enormous sums. You want to get it done all in one go, instead of spending six months or more with sand, sawdust and a stink of paint all over the house. Solution, a home improvement loan.

It’s A Long Deserved Prize

You and your family deserve this treat, after waiting for a number of years. The kids have grown up, but their marks on the walls, doors and ceiling are still there. So, you begin to make plans.

The first question you ask yourself is where to get the money from. It is good advice to avoid grabbing a loan, first off.

However, it certainly will make you feel that you can get by without asking for anyone’s help. So, what type of loan? One that is ideal in this case, is a home improvement loan. It works in a similar way to the home equity loan, but since the purpose is fixed and a very special one, it will also be a special loan.

Home Equity In Disguise

The security for this type of loan is the equity on your home. So, considering that not only is it a low risk loan for the lender, but in addition, the property itself will acquire more value before the payback period is over, the conditions are even better than for a home equity loan. As a consequence, the equity will be higher before the payment term is over.

The General Considerations

Always give yourself a couple of days to inquire about the conditions that a serious, reliable lender will be willing to give you, for your case in particular. So give detail of your financial situation and credit report when you ask for a quote.

Preparing Your “Pitch”

Prepare well-laid-out plans of all the changes or additions you want to make. This will give your lender the idea that you are organized and don’t do things in a hurry. Accompany a budget of the whole operation. Materials, plans, supervision and any special permit that your local City Hall might require.

A Good Image

All this contributes to a better image and therefore a better negotiation capacity. Prepare your meeting in advance. Not necessarily word by word, but all the points you want to ask for and everything the lender might oppose to them. Special length, no fee, fee spread out throughout the term, APR and all you can think of.

Skip Payment

In some cases, say, for a long payback term, the lender might allow you to skip a payment, considering annual vacation and/or Christmas. The only thing this does is that it lets you skip a payment, that’s all. The term is lengthened in one month, accumulating one month more of interest.

Plenty To Chose From

You’ll find Internet full of loan advertising and there will always be one just right for you. If you have any doubt or want to test yourself, first ask a lender you will NOT take a loan from. Once they give you an answer, go to the lender and ask the same question, with a negotiating edge… your creativity goes on from there.

by Kate Ross

Via : www.americanchronicle.com

Should a home-equity loan be used to pay off credit-card debt or loans?

2007-06-26T23:21:00.000-07:00

Walter L. Koon Jr.
Koon Financial Planning & Consulting
In some cases a home-equity loan, also known as a second mortgage, offers a way to lower your interest cost and to spread out your payments.
Interest rates for a home-equity loan may be less than half of the rates charged by credit-card companies. Lowering the interest cost on your debt can be a factor in paying the loan off sooner.
To qualify for a home-equity loan, you must own or be buying your home, have a satisfactory credit record and have sufficient income to make the payments.
Borrowing money against your biggest asset to "pay" credit cards really isn't paying off anything, just exchanging debt for debt. If you are not willing to quit adding to your debt burden by giving up your credit cards, you may find yourself with big credit-card bills and no equity in your home.
Here are some things to keep in mind:
• Know if the rate will be fixed or variable.
• Credit insurance, if required, may increase the loan's total cost.
• A line of credit offers flexibility to pay more or less, but also can lure you into borrowing even more.
• Watch for additional fees and charges.
• Establish a maximum amount that preserves some equity in your home.

Ed Snyder
Oaktree Financial Advisors
Definitely maybe.
Conventional wisdom would tell us yes because the interest is deductible from your taxes. But interest rates on home-equity loans have risen in the last couple years and competition in the credit-card business has heated up, so it's not difficult to find credit-card offers on balance transfers with low interest rates for the life of the balance.
So if you run the numbers with a lower credit-card interest rate, you may save more money even without the tax benefit of the home-equity loan.
You need to do your homework and make sure the interest rate is locked in for the life of the balance. Beware the zero percent interest introductory offers. They're often only good for 12 months and then jump to 18 percent or more.
Also, don't forget to factor in the balance transfer fee. A lot of cards will cap it at $75, but make sure first. And if you do transfer balances to a lower-interest credit card, cut up the new card and don't put any new purchases on it.
No matter what you do, it doesn't correct the behavior that got you into this situation.
If you move the debt to a home-equity loan or transfer it to a new card, it leaves your original credit-card balance(s) at zero, meaning you can go charge them up again. If you do that, you'll be facing a bigger problem down the road.

Kevin Clasen
West Point Private Client Group
It is common for Americans to turn to their home equity to relieve the stress of debt. Many times this strategy merely puts a Band-Aid on the problem.
The real root of the problem many times is overspending. No amount of juggling of the structure of debt can eliminate the requirement to pay off the debt.
If you do find yourself in a situation where you need to do something, using home equity can be a good option. Most people use their home equity as it has become easier to tap into and it may be tax-deductible.
This can be the Band-Aid you are looking for. But if your spending habits don't change, you most likely will find yourself back at the same place soon.
There are many sources of learning about how to use money -- from self-help materials, financial advisers, and even churches.
The resources are endless. However, you just need to make the decision to ask for help.

• Walter L. Koon Jr. is a certified financial planner in Greenwood and Bloomington.
• Kevin Clasen is a certified financial planner.
Via http://www.indystar.com

Home Equity Loan Lines of Credit vs. Credit Cards - Which is Better? The Mortgage Store Online Report

2007-06-19T21:19:00.000-07:00

The Mortgage Store Online has released an exclusive report on the rate and payment benefits of home equity loan lines of credit, compared to the use of credit cards. This report is directed at North American (U.S. and Canadian) homeowners and potential borrowers, who are looking for low interest credit options.

Toronto, Ontario (PRWEB) June 12, 2006 -- The Mortgage Store Online today released an exclusive report on the rate and payment benefits of home equity loan lines of credit, showing them to be the much better option for U.S. and Canadian potential borrowers looking for low interest credit options, compared to the use of credit cards.

Currently, the interest rate for home equity lines of credit is vastly lower than the interest rates that leading credit card companies in North America offer. According to BankRate.com, lowest US rates for home equity loan lines of credit presently average out at 6.31% and the Canadian rates come as low as 6%.

These home equity rates sit much lower than credit card rates from the most popular credit card companies - MasterCard, and American Express.

* Home equity loan line of credit rates are 11.98% and 13.49% LOWER than a MasterCard credit card for U.S. and Canada, respectively. (The current interest rate for MasterCard is 18.29% for U.S. and 19.49% for Canada.)

* Home equity loan line of credit rates are 11.93% and 12.99% LOWER than an American Express credit card for U.S. and Canada, respectively. (The current rate for an American Express card is 18.24% for U.S. and 18.99% for Canada.)

Although the results of this report may surprise first time borrowers, Joe Janovich, President of The Mortgage Store Online says that this is not a new trend. "Home equity loan line of credit rates are almost always significantly lower than those of the credit card. It has been this way for many years. The real surprise that comes with this report is the number of people who aren't taking advantage of this line of credit."

Saving Tens of Thousands of Dollars

US borrowers who choose a home equity loan line of credit over a MasterCard can expect to save $26,316 for every $10,000 increment, over 25 years using the current rate of 6.31%, and Canadian borrowers can expect to save $28,116 on the same amount with Canada's rate of 6%. "Although it may seem strange to borrowers that they could save around 'twenty' thousand dollars on a mere 'ten' thousand dollar loan, the effects of interest compounding over 25 years creates a debt that greatly exceeds the original borrowed amount, especially with credit card rates that are as high as 18%," states Janovich.

The Monthly Savings

With a home equity line of credit, US borrowers would pay $66.34 a month, and Canadians $63.98 a month, on each $10,000 amount they use from the credit line. However, with most credit cards, the minimum payment alone would be $300/month on the same borrowed amount, as most credit card companies require card users to make minimum monthly payments that equal 3% of their current card debt.

Overcoming Misconceptions About Home Equity Lines of Credit

Janovich also understands that both Americans and Canadians have many misconceptions about home equity lines of credit, that lead them to choose the credit card instead. "These misconceptions make people lose out on tremendous savings. It's important that brokers and banks debunk the myths that place credit cards on a pedestal. By properly understanding and utilizing home equity lines of credit, North Americans can save money and keep their debt to a minimum."

In order to clarify and discredit the rumors about home equity loan lines of credit, The Mortgage Store Online has provided the following articles to educate both US and Canadian borrowers:

* Monthly payments on home equity loan lines of credit are lower than credit card minimum payments

* Larger borrowed amounts come from home equity lines of credit

-- Proof of income not necessary for home equity loan lines of credit

-- Broker fees do not make home equity loan lines of credit more expensive than credit cards

-- Home equity line of credit, defined

About the Mortgage Store

The Mortgage Store Online provides home and commercial mortgage loans in most Canadian provinces (excluding Quebec and the Territories), along with mortgage news and advice for all of North America. Founded by veteran mortgage broker Joe Janovich, The Mortgage Store Online couples 'real world' experience, industry relationships, customer service and secure technology with the convenience of the Web. Learn more about The Mortgage Store Online's home equity loan services and mortgage line of credit options by calling (866) 880-2577 or visiting www.themortgagestoreonline.com

The Mortgage Store Online
Sarah Janovich
866-880-2577
E-mail Information
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Which Home Equity Loan is Best for You?

2007-05-11T23:48:00.000-07:00

Deciding which home equity loan is best for you depends on two things:

Do you want to receive your money in one lump sum?

What do you need to use the money for?

There are three ways to turn your home equity into usable cash:

1. Cash-Out Refinance

When you take a cash-out refinance, it means you're refinancing your existing loan to a larger amount than what you owe and taking the difference in cash. You receive your money in a lump sum and you might use the cash for home improvements or debt consolidation. If the mortgage interest rate on your existing home loan is higher than current rates, it may make sense to refinance this way.

2. Home Equity Loan

If you have a great mortgage interest rate and don't want to refinance your existing mortgage, a home equity loan might be the way to go. A home equity loan is a second loan that you take out in addition to your first mortgage . It allows you to get cash from your home equity.

A home equity loan takes less time than refinancing your first mortgage and is a good choice if you'd like your cash in a lump sum. Again, you might use this for home improvements or paying off high-interest credit card debt. You might also use it to pay medical bills or finance a second home.

3. Home Equity Line of Credit

A home equity line of credit (HELOC) is different from the first two options. It works similar to a checking account or credit card except that it uses the equity in your home as the revolving line of credit. You pay only if and when you use the money. But, unlike credit cards, the interest is usually tax-deductible.*

With a home equity line of credit, you have the choice of getting a lump sum at closing or only part of your money and drawing on the rest when you need it. Unlike a home equity loan or a refinance, you can get a home equity line of credit in as little as ten days.

A home equity line of credit can be a good choice if you need to access your money more than once, like when you're renovating your house and need to pay different contractors at separate times.

If you'd like to know more about choosing the right home equity loan, call us at 800-251-9080 to talk to a Quicken Loans Home Loan Expert.

* Please consult your tax advisor.

Via quickenloans.com

Nine Reasons Why Property Taxes Increase

2007-05-11T09:00:00.001-07:00

By Greg Mischio

Ask any homeowner, and he'll tell you that property tax bills always seem to rise. Yet, when you consider the sheer number of factors that can spark a change, you should probably be thankful that there aren't even more property tax hikes.

As a physicist, Sir Isaac Newton was right when he said, "What goes up, must come down." But if he had been an economist, he would've been making a grave mistake, because property taxes defy the laws of gravity. Taxes paid on privately owned property at different time periods during the year, are based on a combination of local tax rates and assessed property value. However, as you'll see from the list below, there are a number of other factors that can cause an increase.

1. Valuable property. Most municipalities tend to reassess a home's property value over a period of time, generally five to 10 years. An assessor could visit you even sooner if you've made sizable home improvements to your property, especially if you've added square footage.

2. Keeping up with the Joneses. The overall value of property in your district may increase, causing everyone's tax to increase. This can be caused by new local construction, such as the addition of new homes.

3. Government interference. Your state legislature may decide to increase overall property taxes.

4. The levy isn't dry. The city, township, or county's budget levy may change. Each of these government entities can review the "discretionary spending" in their budgets and decide that they need more funding.

5. Blame the kids. If your state funds its schools through property taxes, your school may request more money to keep itself operational. Taxes on homes can account for a significant portion of a school's budget.

6. Who's special? Special districts, including hospitals, drainage, and watershed, are unique entities that can draw on property taxes if they need to increase their budgets.

7. Neighborhood upgrades. Improvements made by your municipality, such as new sidewalks or curbs, may warrant additional funds, triggering a special assessment for the tax rolls.

8. Give us the money. On occasion, local government projects are required to be funded through a special referendum, such as the building of a new library, school improvements, etc. These may require significant operating costs.

9. Blame it on the Fed. It's not uncommon for federal legislators to pass an unfunded mandate that local governments are required to implement. Federal and state authorities may also revise their aid formulas for local governments.

Property tax increases often require a great deal of political will to enact. But as any property owner will tell you, where there's a will, there is a way. For that reason alone, it appears that property taxes will forever frustrate the likes of Newton and continue their gravity-defying act.

VIA : www.mortgageloan.com

Are Certificates of Deposit Good Investments?

2007-05-11T09:00:00.000-07:00

By Nicki Howell

Nobody wants to work forever. But the only way people can stop working is to either win the lottery-an unlikely prospect-or have enough money saved for retirement. Unfortunately, saving isn't enough. The money that you accumulate must be invested wisely in order for it to grow into a comfortable nest egg.

There's no doubt that stocks have been the best performing investment over the long term. However, there's a high degree of risk involved with putting your money in equities. If you don't balance the risk with a safer vehicle, you could see your nest egg cracking during periods of down markets.

In order to protect your money, you need to balance your portfolio with an investment that guarantees that you'll make money. For that portion of your portfolio, certificates of deposit (CDs) are a great tool. They offer competitive rates of return, and are federally insured up to $100,000.

Tips for purchasing CDs
Here's a guide for adding CDs to your portfolio:

1. Identify your investment goals. First, decide how soon you'll need your investments for living expenses. Evaluate both current and future needs. If you have many working years before retirement, you can safely choose a longer term CD. On the other hand, if retirement is around the corner, consider the shorter-term instrument.

2. Avoid early withdrawal penalties. Review CD terms before purchasing. If funds are withdrawn before maturity, you'll generally pay a penalty. Think twice before opting for early access to your money.

3. Be aware of automatic rollovers. Some CDs have an automatic rollover policy. This means that, if you don't request action, your CD will automatically rollover into a new one, and you'll be locked into an interest rate that you may not want. If you keep track of maturity dates, you can make sure that you get the best CD rates available when you purchase anew.

4. Choose the longest term you can afford. As a general rule, longer terms pay higher CD rates. Choosing the longest term you can afford will help you earn more.

5. Let your interest compound. As the saying goes, time is money. This is particularly true with regard to the length of time that you keep your assets invested. If you don't need the interest income now, continue to reinvest. This will ensure the growth of your savings.

6. Keep your short-term needs in a liquid CD. A traditional savings account won't pay as much as a CD. If you're close to retirement and need easy access to your money, consider liquid CDs. Rates are competitive and access to your money is easy. Invest the rest of your funds in regular CDs to maximize your earnings.

Use safe investment vehicles, such as CDs, to protect yourself from market risk. While they don't offer double-digit returns, they do offer consistent gains and, most importantly, no losses. That's why they're a great investment, and should be considered as a part of any well-diversified portfolio.

VIA : www.mortgageloan.com

Home Equity Line of Credit: The Facts

2007-02-21T10:45:00.001-08:00

A home equity line of credit can be a great way to use your home equity to finance big ticket items such as home improvements, paying off high-interest debt, or buying a second home.

What Is a Home Equity Line of Credit?
A home equity line of credit (HELOC) is a type of second mortgage . The way a HELOC works is very similar to the way a credit card works. Your home equity is used as the collateral for the loan and you receive a line of credit from which you can draw money.

Benefits of a Home Equity Line of Credit
Using your home equity line of credit for home improvements, consolidating your high-interest debts, or keeping a "rainy day" fund, is a better financial alternative than using your credit cards. Here are the top 4 home equity line of credit benefits:

You get a lower interest rate than you would with your credit cards. That means you pay less interest over the life of the loan.
You get tax advantages that are not available with credit cards. With a home equity line of credit, the interest is usually tax-deductible.* Interest on credit cards is not tax-deductible.
You get flexibility in your payment options. Lenders like Quicken Loans offer interest-only options to help make your payments more flexible. With an interest-only home equity line of credit, you have the option to pay only the interest for a pre-determined amount of time or pay interest plus as much or as little principal as you want.
You get much larger credit limits. Quicken Loans offers home equity lines of credit up to $500,000. This is a great option to have when making a large purchase, such as remodeling your kitchen or adding an addition to your home.
How Does a Home Equity Line of Credit Work?
A home equity line of credit has several unique characteristics. Here is a quick overview:

During the initial years of the loan, you are usually only required to make interest-only payments and you only make payments if and when you draw money from your account.
After the initial years of the loan, the full balance is amortized and paid off over remaining years. An initial minimum draw (taking the money in cash) is sometimes required at closing. However, Quicken Loans does not require an initial minimum draw on HELOCs.
Like any standard loan, the interest rate and annual percentage rate (APR) are calculated based your credit score , and the combined loan-to-value ratio (CLTV) . Generally, the lower CLTV ratio you have, the lower your interest rate and APR will be.
Your interest rate adjusts as the result of an index plus a margin . The index, which can change, is the Prime Rate as published in the Wall Street Journal at the time of the adjustment period . The margin, which can not change, will be determined at the time of your application.

Applying for a Home Equity Line of Credit

Here's how the Quicken Loans home equity line of credit application process works:

First, we ask for some basic information about you, your income and the property. Your Social Security number is necessary to pull a copy of your credit report. There's generally less paperwork involved, so closing on a home equity line of credit is quicker than a standard first mortgage .
Quicken Loans can approve you right over the phone, schedule your closing online, and close your home equity line of credit in as little as 7-10 days.
Closing fees are generally required; however, Quicken Loans has eliminated most closing fees. In order to close your loan, you will likely have to pay local city, county and state recording fees and taxes. Depending on the state you live in, you may also be charged attorney fees. These closing fees can either be deducted from your line of credit or you can bring a cashier's check to pay for them at closing.
If you would like to learn more about home equity lines of credit, call us at 800-251-9080 to talk to a Quicken Loans Home Loan Expert.

* Please consult your tax advisor.

VIA Quickenloans

Which Home Equity Loan is Best for You?

2007-02-21T10:45:00.000-08:00

Deciding which home equity loan is best for you depends on two things:

Do you want to receive your money in one lump sum?
What do you need to use the money for?
There are three ways to turn your home equity into usable cash:

1. Cash-Out Refinance
When you take a cash-out refinance, it means you're refinancing your existing loan to a larger amount than what you owe and taking the difference in cash. You receive your money in a lump sum and you might use the cash for home improvements or debt consolidation. If the mortgage interest rate on your existing home loan is higher than current rates, it may make sense to refinance this way.

2. Home Equity Loan
If you have a great mortgage interest rate and don't want to refinance your existing mortgage, a home equity loan might be the way to go. A home equity loan is a second loan that you take out in addition to your first mortgage . It allows you to get cash from your home equity.

A home equity loan takes less time than refinancing your first mortgage and is a good choice if you'd like your cash in a lump sum. Again, you might use this for home improvements or paying off high-interest credit card debt. You might also use it to pay medical bills or finance a second home.

3. Home Equity Line of Credit
A home equity line of credit (HELOC) is different from the first two options. It works similar to a checking account or credit card except that it uses the equity in your home as the revolving line of credit. You pay only if and when you use the money. But, unlike credit cards, the interest is usually tax-deductible.*

With a home equity line of credit, you have the choice of getting a lump sum at closing or only part of your money and drawing on the rest when you need it. Unlike a home equity loan or a refinance, you can get a home equity line of credit in as little as ten days.

A home equity line of credit can be a good choice if you need to access your money more than once, like when you're renovating your house and need to pay different contractors at separate times.

If you'd like to know more about choosing the right home equity loan, call us at 800-251-9080 to talk to a Quicken Loans Home Loan Expert.

* Please consult your tax advisor.

VIA Quickenloans

Remodeling with Home Equity Loans: The Advantages

2007-02-07T11:33:00.000-08:00

There are some real advantages to using home equity loans for home improvements. You can borrow enough to completely remodel your home, or just to make some small specific alterations. Lenders don't place restrictions on the type of project, as long as it conforms to your local building code requirements. Usually, you have the option to do the work yourself or hire a general contractor. However, if you aren't a licensed contractor, some lenders may require you to hire a licensed professional for the parts of the project that require technical knowledge, such as electrical wiring.

The right loan
Before you apply for a home improvement loan, consider the type of project the money will be used for. If the project has a set price that will be paid upon completion such as replacing the roof, a home equity loan for a fixed amount is a good choice. These loans give you a lump sum that you pay back in monthly installments with a fixed interest rate.

If the project is large, like remodeling the kitchen, where the cost can increase as the work progresses, a home equity line of credit (HELOC) is the better option. A HELOC has the same flexibility as credit cards. In the case of a HELOC, your lender would give you a credit card or a checkbook, and you could withdraw money in varying amounts, as needed.

Home equity loan rates
A home equity loan's low interest rate and tax deductibility are additional reasons why it's often used as a home improvement loan. Terms for such loans can range from five to 30 years. The minimum amount you may borrow is generally about $10,000. However, most lenders will limit a home equity loan for home improvements to a maximum of $1,000,000.

Remodeling your home can significantly increase its value. When you need to finance a home improvement project, regardless of the size, a home equity loan is a good choice.

Via MGL

Interest Rate Roundup

2007-02-06T10:23:00.000-08:00

Here's a look at the state of interest rates on five common consumer banking products and the latest rates from Bankrate.com's weekly national survey of large banks and thrifts conducted Jan. 31, 2007.

Mortgages
Rate: 6.42 percent (30-year fixed) Average points: 0.34
Mortgage rates took a big jump to their highest levels since the days when Karl Rove was bragging about keeping Republican control of Congress. That was in late October, to be more precise. Since mid-December, the economic news has been more good than bad overall, and that was the case this week. The highlight was the report of gross domestic product in the final three months of 2006. Total economic output increased during that period at an annual rate of 3.5 percent. That's much better than expected. But inflation was moderate. The strong economic growth, coupled with a fairly good inflation report, prepared the field for a modest increase in interest rates. The average 30-year fixed rate rose 10 basis points, to 6.42 percent. A basis point is one-hundredth of a percentage point. The average 15-year fixed, which is a popular option for refinancing, rose 12 basis points, to 6.19 percent. On bigger loans, the average jumbo 30-year fixed rose 7 basis points, to 6.63 percent. Adjustable-rate mortgages went up, too. The popular 5/1 ARM rose 9 basis points, to 6.3 percent, while the one-year ARM rose just 2 basis points, to 6.06 percent.
..............................................................
Home equity products
Rates: 8.13 percent (line of credit); 7.93 percent (loan)
Home equity products barely moved. The average home equity line of credit fell 1 basis point, to 8.13 percent. Fixed-rate home equity loans rose 1 basis point, to 7.93 percent.
..............................................................

Auto loans
Rates: 7.86 percent (60-month, new car); 8.68 percent (36-month, used car)
Car loan rates are in reverse -- going slowly but backward nevertheless. The 60-month new-car loan dropped 2 more basis points this week, to 7.86 percent. The 48-month loan also declined 2 basis points to 7.81 percent, and the 36-month loan is down 3 basis points, to 7.73 percent. Used-car loan rates also retreated 2 basis points: the 36-month used-car loan is 8.68 percent and the 48-month used-car loan is 8.79 percent. January sales are predicted to be higher this year than last, according to Edmunds.com, and others concur. Kelley Blue Book says traffic on its auto-pricing site has increased, too. If you're contemplating purchasing a new or used car, start with Bankrate's calculator to see how much you can afford.
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Certificates of deposit
Yields: 3.77 percent (1-year CD yield); 4.02 percent (5-year CD yield)
Another week of barely any movement in CD yields. This could start to change soon. The economy is looking pretty darn healthy and inflation, while sticking its neck out here and there, seems fairly tame. Additionally, Treasury yields climbed a bit recently and this all bodes well for CD yields in the weeks ahead. This week, the average one-year yield stayed right where it was last week, 3.77 percent. The six-month also didn't budge, coming in at 3.55 percent, and the five-year average dropped a basis point to 4.02 percent. On the jumbo side, the one-year held steady at 4.24 percent while the five-year dropped a basis point to 4.26 percent.

..............................................................
Credit cards
Rates: 13.36 percent (standard fixed); 14.56 percent (standard variable)
The average interest rates on all but the standard fixed-rate card declined this week. The standard fixed rate is 13.36 percent, up 3 basis points from last week. The variable dipped to 14.56 percent, down from 14.72 percent. For all cards -- standard, gold and platinum -- the fixed rate edged downward -- 0.14 percent to 11.75 percent, and the variable rate went to 13.84 percent, from 13.93 percent. Prior to the holidays, it was reported that more consumers expected to use debit cards than credit cards during their shopping. This week TransUnion's TrueCredit.com and GfK Roper Public Affairs and Media released a study indicating that 35 percent of consumers made fewer purchases by credit card, down from 43 percent in 2005. Eleven percent said they had more debt this year and 29 percent say they had less. Bankrate's Financial Literacy program has a work sheet that will help you deal with debt.

By Holden Lewis, Ellen Cannon and Laura Bruce • Bankrate.com

Via BR

Home Equity Loans and Second Mortgages: Is there a difference?

2007-02-06T10:12:00.000-08:00

A second mortgage is any loan where 1) your house is used as collateral in case you default on the loan, and 2) you already have a primary or "first" mortgage that's also based on the value of the home.

When you use a mortgage to purchase a home, that's your "first mortgage." Subsequently, you may decide to take out a home improvement loan or a home equity line of credit (HELOC). Since you already have one mortgage on your home, these home improvement loans that come later are "second mortgages."

Second mortgages mean increased lender risk
Because second mortgages or home equity loans are riskier for the lender, they generally carry slightly higher interest rates than you would expect to pay for a first mortgage. They represent more risk because if you stop making payments, the lender who holds the first mortgage gets paid before the lender who holds the second.

Types of second mortgages
In practice, there's no difference between a second mortgage and a home equity loan. But there are different types of second mortgages/home equity loans, and depending on which one you choose, you'll have different payment terms and home equity loan rates. For example, a HELOC works much like a credit card. You have a line of credit, and only pay interest on the amount you borrow. Once you pay off your balance, the interest stops accumulating. With a home equity loan, you borrow a lump sum and pay it back over time, the way you would for any other installment loan.

The good news is that you don't have to worry too much about the glossary of terms, because when you apply for a loan, your banker or mortgage loan officer will explain them clearly to you. The main thing to understand is that, when applying for a second mortgage, you have many choices. Make sure to shop around and learn as much as you can before picking the one that's right for you. That way, you'll ace this major test in your financial life.

By MortgageLoan.com

VIA Mtl

The Right Time to Tap Home Equity

2007-02-03T11:24:00.000-08:00

Do you think that you're sitting on a gold mine? If the value of your home has grown at dizzying speeds over the last few years, and your equity balance is looking juicy, it may be time for some prospecting. But is your timing right?

You Need It
If you have a major home improvement project, unexpected medical expenses, or lofty plans for your child's education, the equation is simple. After maxing out better options like Stafford loans for education, or secondary insurance plans for medical needs, it's just a matter of whether your home equity has grown enough to cover your needs. A home improvement loan or other second mortgage should fit, and foot, the bill.

For large expenses, when you know exactly how much money you desire, a home equity loan is often the best option. A HELOC can be a better choice when your expenses are spread out over a longer period of time in smaller increments. With a fixed-rate home equity loan, you're paying interest on the entire loan balance from day one. With a HELOC, you only pay interest on your current balance-not on the entire credit line available to you.

You Want It
If you don't have any pressing financial needs, but just want to lock in some of your real estate profits, you have a tougher decision to make. Home equity loan rates have been rising over the past few years, and you might want to lock in a lower rate now if you think the trend will continue. A fixed-rate home equity loan will do the job, whereas an adjustable-rate HELOC will do better in times of shrinking interest rates.

On the other hand, home values haven't stood still, either. You might get more money out of your property if you wait another year or two. Then again, you could take the plunge today, and refinance your home equity loan later on, if things look better.

Analyze your situation, and determine how you'd like to pay off the credit line. This could be the perfect time to apply for a second mortgage. There's no time like the present, especially if there's gold in "them thar hills!"

Via Mgl

What home equity debt is

2007-02-03T11:16:00.000-08:00

A home equity loan or line of credit allows you to borrow money, using your home's equity as collateral.

Wait. Don't click to another page. If the above paragraph seems like gibberish, you have surfed to the right place. We will explain what home equity is, what collateral is, how these loans and lines of credit work, why people use them, and what pitfalls to avoid.

First, some definitions:

Collateral is property that you pledge as a guarantee that you will repay a debt. If you don't repay the debt, the lender can take your collateral and sell it to get its money back. With a home equity loan or line of credit, you pledge your home as collateral. You can lose the home and be forced to move out if you don't repay the debt.

Equity is the difference between how much the home is worth and how much you owe on the mortgage (or mortgages, if you have more than one on the property).

Example:

Let's say you buy a house for $200,000. You make a down payment of $20,000 and borrow $180,000. The day you buy the house, your equity is the same as the down payment -- $20,000: $200,000 (home's purchase price) - $180,000 (amount owed) = $20,000 (equity).

Fast-forward five years. You have been making your monthly payments faithfully, and have paid down $13,000 of the mortgage debt, so you owe $167,000. During the same time, the value of the house has increased. Now it is worth $300,000. Your equity is $133,000: $300,000 (home's current appraised value) - $167,000 (amount owed) = $133,000 (equity)
House purchase price: $200,000
Amount borrowed: -$180,000
Down payment/equity: $20,000

Five years later
Amount borrowed:
$180,000
Principal paid: -$13,000
Amount owed: $167,000

House's appraised value: $300,000
Amount owed: -$167,000
Equity $133,000

A home equity loan (or line of credit) is a second mortgage that lets you turn equity into cash, allowing you to spend it on home improvements, debt consolidation, college education or other expenses.

Equity loans, lines of credit defined ...
There are two types of home equity debt: home equity loans and home equity lines of credit, also known as HELOCs. Both are sometimes referred to as second mortgages, because they are secured by your property, just like the original, or primary, mortgage.

Home equity loans and lines of credit usually are repaid in a shorter period than first mortgages. Most commonly, mortgages are set up to be repaid over 30 years. Equity loans and lines of credit often have a repayment period of 15 years, although it might be as short as five and as long as 30 years.

Via Br

Protect Yourself From Home Equity Loan Scams

2007-02-01T10:31:00.000-08:00

It's become almost instinctive these days for some people to rush to tap into the equity in their homes when they find themselves in need of cash. That's because of the growing awareness that home is where the money is. However, it pays to stay alert as you pursue funding, since your budget will be affected for years to come.

There are a wide variety of home equity loan scams out there. Whether you're planning to tap your equity through a home improvement loan, a home equity loan, or a home equity line of credit (HELOC), here are some tips to keep you out of trouble.

No rose-colored glasses: Don't be dazzled by dollar signs. Make sure that you've considered all the costs and conditions of any loan before signing on the dotted line. Since your intention is to solve a short-term problem with a long-term solution, consider whether the loan you choose makes sense over the long haul.

Don't succumb to pressure: Avoid being bullied into accepting home mortgage products that you don't want, such as credit insurance. Shop around for the extras that you do want before allowing them to be rolled into your loan. They may be cheaper somewhere else. If you can't reasonably handle the monthly payments or the loan costs, reject the offer. Follow your gut instinct-it's probably right!

Watch what you sign: Read everything carefully before you sign anything, and make sure that you understand it. Don't put your John Hancock on anything that has blank spaces that could be filled in later.

Don't deed your property: If you think that you should deed your property over to another party for any reason whatsoever, consult with an attorney first.

Even if you're desperate, act like you're not. Take your time, stay on your toes, and make a good decision. You'll need to live with it for a very long time. And you'd like to live with it inside your own home, not on the street because you inadvertently lost it.

Via mgl

Home Equity Loans: Just the Facts

2007-02-01T10:26:00.000-08:00

If Dragnet's Sergeant Joe Friday were to shop for a home equity loan, you could bet that he'd look past the fluff and go straight for the facts. Incorporating the legendary police officer's "just the facts" mentality is your best approach to solving the mystery of home equity borrowing. So put on your detective hat, and flip open that notepad.

HELOC vs. home equity loan
Home equity loans falls into two categories: home equity lines of credit (HELOCs) and home equity loans. Both are secured by a second lien on your property. A HELOC is a revolving credit line, while a home equity loan is a form of closed-end borrowing.

A HELOC allows you to advance cash or make principal payments at your discretion. The interest rate is variable, and minimum payments generally won't reduce the principal balance significantly.

A home equity loan provides a one-time sum of cash. It carries a fixed interest rate and monthly payment. Home equity loans are sometimes called home improvement loans, because they're well suited for fixed budget projects, like remodeling your living space.

Ups and downs of home equity borrowing
The number one advantage of a HELOC is its flexibility. You can access more cash or make principal payments without penalty. The low minimum payments are budget-friendly, as well.

A HELOC's variable interest rate structure exposes you to the risk of rising rates and increasing minimum payments. Also, since the HELOC offers you the option to pay only interest, you could be left with a lump sum due at maturity.

Alternatively, home equity loans amortize with a fixed rate of interest. As a result, you know exactly how much you need to pay monthly until the loan is paid off.

Evaluating the Trade-Off
If you want to tap into your home's equity, research prevailing HELOC rates and compare them to home equity loan rates. Consider how your situation may be affected if rates rise. Then, decide how important the flexibility is to you, and whether the trade-off makes dollars and sense.

The equity borrowing mystery is a tough case to crack, but the investigative style of Sergeant Friday should enable you to find the killer loan.

Via mgl

Conflicting credit scores cause confusion

2007-01-31T10:24:00.000-08:00

When you buy your credit score, it's almost certainly not the same number your mortgage lender will see.

Your lender might see a lower score, or even one calculated on a different scale. It means you could apply for a loan thinking you deserve a low interest rate, but end up paying a higher one because your score wasn't as good as you assumed.

Confusion arises because consumers and lenders often see different credit scores. As if that didn't create enough of a misunderstanding, customers, lenders and credit bureaus each view credit scores from their own perspectives.

When these viewpoints clash, consumers get frustrated. One Bankrate reader complained to financial advice columnist Dr. Don Taylor that she bought her credit scores from two of the big three credit bureaus as part of her search for a mortgage, only to discover that the scores were based on a scale that, from her standpoint, misleadingly pumped up her creditworthiness.

She thought she was buying a FICO score, developed by Fair Isaac Corp., and used by almost every lender in the mortgage business. Savvy consumers know that the FICO score is on a scale of 300 to 850 -- the higher the better -- and that certain scores serve as dividing lines between subprime (high-rate) borrowers and prime (lower-rate) borrowers.

She had really bought her VantageScore, which was jointly introduced this year by the three big national credit bureaus: Equifax, Experian and TransUnion. The VantageScore is based on a scale of 501 to 990. If any mortgage lenders use it, they don't talk about it. The woman had a VantageScore of 668, which made her think she was a prime mortgage customer. But it turned out that her FICO score was 574, casting her into the subprime category.

It's as if she turned on the radio, heard it was 32 degrees outside, put on a coat and stepped out, only to find that the temperature was 32 degrees Celsius -- about 90 degrees Fahrenheit.

Bad news for others
She wasn't the only person who got a nasty surprise. Another Bankrate reader, who asks to be called "Bob from New Hampshire" because he doesn't want everyone to know his credit score, says he recently bought a VantageScore and it was 754. Soon after, he discovered that his FICO score was 681 -- a most unwelcome surprise. (He says he quickly boosted the FICO score 20 points after paying off a credit card.)

Bob feels that the credit bureaus are bilking consumers by selling the VantageScore. "If the score they're giving you here, you're paying hard money for, and it's not being used, what is the point?" he fumes. "If it doesn't have any practical value, they should disclose that upfront: 'This is not the widely used FICO score.'"
If you know where to look for them, you can buy the equivalent of FICO scores on the three bureaus' Web sites. TransUnion calls it a credit score, Equifax calls it a FICO score and Experian calls it a Plus Score.

By Holden Lewis • Bankrate.com http://www.bankrate.com/brm/news/mortgages

No Closing Home Equity Loan

2007-01-24T09:38:00.000-08:00

by: Adam Jackson

One new innovative product in the home equity loan market is the "No Closing" home equity loan. These loans are a little different from traditional home equity loans, in the fact that they allow you to draw funds against the equity amount of your home. For example, you may be provided with a credit card or check book. The way to look at them is as a line of credit, you can use the line of credit when ever you need to, and in return for this the banks will charge you a little more interest than a traditional home equity loan.

One of the great things about a no closing home equity loan is that you only pay interest on the funds that you have used. So if you never use the line of credit, there is nothing to pay. Should you make a payment, you can decide to pay this back monthly (plus interest) or in one lump sum, similar to a credit card.

No closing home equity loans are becoming very popular loan products, mostly because of the flexibility they offer. There's also the added piece of mind, that should there be an emergency, that cash is available quickly to cover most eventualities.

Other popular reasons for a no closing home equity loan are for things that may involve random or unexpected costs such as home improvement projects or a student loan. Both of these activities require different levels of investment at different times, by being able to draw down the exact amount at exactly the time you need it, you will save money over the more traditional way of having all cash up front.

By Adam Jackson of http://www.besthomeequity.net is a home repair expert striving to bring you the best free home repair and improvement information on the web.

The Pros And Cons Related With Home Equity Loans

2007-01-24T09:35:00.000-08:00

By Petra Amelia

The Pros of Home Equity Loans

1. The advantage with a home equity loan is the ability to use the loan amount any way you want, such as funding emergency, paying off debt, college, a vacation, or home renovation.

2. Interest rates for a home equity loan tend to be lower than credit card rates or consumer loans. Another advantage associated with home equity loan interest rates is that it is tax deductible up to the equity value in your home or up to $100,000 - whichever is less. (note - the tax-deductible portion is based on a percentage)

3. Home equity loans are also quite flexible, in the sense that it allows you to choose when to use the money, and you may be able to decide when to repay the principal.

The Cons of Home Equity Loans

1. You may risk losing your home with a home equity loan if you can't repay or refinance the loan, since your home is the collateral for the home equity loan, similar to an additional mortgage on your home. Foreclosure can happen within 60 to 90 days of late/missed payments.

2. For people experiencing career changes, home equity loan can also been an advantage, putting your home at risk. If the value of your home falls, it is probable that you might be left with more debt on your property than it's worth.

3. Home equity loan interest rate is dependent on the change in economy, causing your monthly payments to rise or fall. So, it's important to know the cap on the home equity loan's interest rate, which determines how high your interest rate can increase each year, or over the whole loan time period.

4. Home equity loan lenders can charge several types of fees such as application, origination, and withdrawal fees.

Things to remember when getting Home Equity loans:

1. Home equity loans are ideal for people who want to borrow a lump sum amount and reap long-term rewards.

2. Home equity lines of credit, on the other hand, are more suitable for those focusing on the short-term.

3. When considering home equity loans as means to consolidate debt, pan on the long-term effects.

4. Consider your financial situation before applying for any type of home equity loan, and weigh down all the pros and cons.

5. Compare interest rates, fees, repayment conditions, loan amount, and additional costs between several lenders.

6. Read all the fine print

7. Do not accept offer for a credit card to access your credit line, which makes using your loan too easy.

8. Set up a systematic repayment schedule, and remember that it's best to pay more than the minimum required.

About the Author: Apply for home equity loan refinancing>and read reviews on the top lenders plus find more articles on home equity loans pros and cons on our site.

Home Equity Loans – A Great Source To Explore

2007-01-24T09:33:00.000-08:00

By Joseph Kenny

Investing in a home of your own is a sound decision and can turn out to be your most valuable asset. It creates equity on your home, which gradually increases as payments are made against the mortgage. For example, if you have a loan of $200000 against your home, and in course of time the balance on the mortgage stands at $140000, the equity on the home is $60000.This will keep growing as continued payments are made against the mortgage. This equity can then be used as collateral for getting a home equity loan.

When money is required for special needs like education, to pay off debts, or for home improvement, a home equity loan might be an excellent way to cover the costs involved. However, it is generally best when you know exactly how much it is going to cost you. It can help you by providing capital in the form of a loan against the accrued value of your equity in your home while allowing you several years to pay it off. The period of repayment can be from 5 to 30 years, though usually it is for 15 years.

On the other hand, Home Equity Lines of Credit may be a better option for taking advantage of your home equity for short-term borrowing. This allows access to funds as and when needed, without the necessity of borrowing anything extra. It suits anyone requiring a large sum of money to take care of some immediate expense, like repairs to plumbing in the house, or some other expensive eventuality. You may need the money urgently, if you have the means to pay it off in a shorter period it will allow you access to further credit in the future, if required. However, it should be understood that Home Equity Lines Of Credit are usually close ended, which allow you to use the credit limit for just about 10 years. After which, any debt in the account is amortized and treated like a term debt, which then ends up as regular repayments of principal and interest to retire the debt.

The approval for lending is usually easy as the lender has collateral to cover the loan amount. Moreover, the value of the collateral keeps increasing with the efflux of time. Even then, a bad credit rating would have a negative impact upon the approval of the loan application. A good credit rating, in contrast, would allow qualification for a low rate home equity loan that can give you substantial saving over the life of the loan. Therefore, one of the things lenders look into, and rely heavily upon, is the credit history of the borrower, to determine the appropriate rate of interest.

The most important decision for the borrower in the whole process of getting a loan would be the selection of the best lender. Various lenders have different terms, and a careful selection of a lender who has terms that offer a low fee, low interest rates, along with other incentives, would help save thousands of dollars. Contacting various traditional banks, credit card unions and online companies would be a great way to start. You could also use the Internet to search for information about various home equity lenders available.

Once you've selected a few home equity lenders, it is advisable getting at least three different quotes, which would allow you to compare the different terms and conditions, interest rates and fees each one has on offer. Choosing the best one that suits your needs then becomes pretty straightforward.

So go ahead, explore the possibilities offered by obtaining a Home Equity Loan to take care of your money supply needs.

Happy hunting!

About the Author: Joseph Kenny writes for the Personal Loans Store which offers information on loans and other loan types including home loans, secured loans and others. Visit Today: http://www.ukpersonalloanstore.co.uk

Home Equity Loans ? A Method to Unearth the Hidden Equity

2007-01-19T08:13:00.000-08:00

You never thought that your home can be worth anything except for living purposes. Yes, a real estate broker would have offered a large sum on this house. But you never planned to sell the house because of an emotional attachment with it.

One of the prime customer bases for home equity loan crops from this kind of people. These are people who have been living in the house for years, or it might be their first home. Having seen the joys and sorrows in the home together slowly converted the house from a brick and mortar structure to ones prized home.

You get the necessary cash through the sale of house. But, you lose your home for ever. If you are looking for a middle path whereby you can evade losing on your home and get the cash at the same time, then you would surely like the deal offered by home equity loans. Under a home equity loan, the loan provider agrees to lend to the borrower against his home. This amount will be returned with a certain interest after a certain time period.

This arrangement suits the residents of the UK the most. Every month the borrower makes a small payment towards the amortisation of the amount lent. It is the borrower who decides the monthly repayments. The logic behind this discretion lies in the inequality in the income levels of borrowers. While a monthly repayment of ₤1000 will suit some borrowers, other may not be able to make such high payments through their monthly salary, which has to pay off the other routine expenses too.

How does the loan provider ensure that he will safely receive the amount at the end of the term of home equity loan? It is by retaining the property papers with him. A borrower will not be able to sell home in the absence of the property papers. With the property papers in their possession, the loan provider is the legal owner of the house.

But, the loan provider does not exercise this right according to an agreement with the borrower. The agreement is for the return of home equity loan at the end of a stated term with an interest calculated according to a certain rate of interest.

During the period of the loan, it is not the home but the equity inherent in it that is being consumed. This explains the reason why the borrower of home equity loan continues living in the house even after pledging it. Home equity loans get the name from the equity consumption in the process. Equity is the value that one gets on selling home. For the calculations of equity, the valuer will undertake a survey to check the amount that will be received on selling it. Deductions for the mortgages already held against home will be made to get an exact figure for home equity.

It is a percentage of the home equity that is convertible into cash. The percentage hovers around 80-125% for borrowers with a good credit history. The borrowers who do not have as good a credit history and have undergone bankruptcy any time in the past years are sure to get a much lower equity conversion rate. When changed into currency, the equity in home will fetch anywhere between ₤5000- ₤500000.

Home equity loan is a secured loan. All secured loans are cheaper in terms of the rate of interest. Those secured loans, where home guarantees repayment are the cheapest. Sometimes, borrowers can hope to get an APR equivalent to that of mortgage. Some borrowers never relax on the APR front. Their worst fears are of the times when interest rates would rise unexpectedly. Rate locks on home equity loans have been especially designed for this kind of borrowers. A rate lock stabilises the APR at a particular level. However, borrowers who do not want to lose on the further fall in interest rate would continue using the variable rate method.

Is the equity in home completely consumed in the process? This is the question that most people ask while drawing home equity loans. Equity is only consumed temporarily. As the borrower makes repayments towards the home equity loan, equity in home gets replenished - readying the home for a new home equity loan.

by: Steve Clark Steve Clark can tell you how to look better, live better and breathe better by giving you tips to improve your finances. visit http://www.easyremortgageuk.co.uk.

The Basics Of A Home Equity Loan

2007-01-15T11:02:00.000-08:00

In general, the basics of a home equity loan are quite simple. A home equity loan is a loan secured against the equity of your home. The lenders will measure the equity amount of your home, by looking at how much of the mortgage remains (if any) and what the current value of the property is. Most high street lenders are happy to lend money of up to 75% of your home's equity. Similar to a mortgage, the loan will usually run for 10 to 25 years and have a rate of interest applied.

In most cases, a home equity loan is seen as a second mortgage. It will run along side your original mortgage and be paid in the same way. The more common reasons for taking out a home equity loan include home improvements, purchasing a second home or debt consolidation.

In fact, most lenders are now aggressively pushing their debt consolidation products. This has become a growth area in recent years, mainly due to people over spending on their credit cards. A home equity loan will allow the borrower to pay off all existing debts and loans and spread the low monthly payment across a number of years. Most banks are very happy with this situation as they are exchanging unsecured debt for secured debt. The security of course is the equity in your home.

If you're considering a home equity loan, there is one very important point that you should be aware of. The loan is secured against your property, if you fail to make repayments there is a very real chance of you losing your property.

by Adam Jackson of http://www.besthomeequity.net is a home repair expert striving to bring you the best free home repair and improvement information on the web.

A Second Mortgage Vs. A Home Equity Loan

2007-01-15T10:57:00.000-08:00

If you own your home and need a loan for whatever reason you have probably considered a second mortgage or a home equity loan to help you pay your bills, buy a new car, or pay for some other investment. However, you probably don't know whether a second mortgage is better or worse than a home equity loan for your particular situation. However, don't despair because there are some tips that will help you decide whether a second mortgage or home equity loan is for you.

Second Mortgage Tip #1 One Time Expenses

A second mortgage is the preferred option if you have a one time big expense you need to cover. Examples of this include remodeling your kitchen, paying for a wedding, or buying a new car. In these instances a second mortgage will probably work best for you; however this will depend on the equity in your home and your credit score.

Second Mortgage Tip #2 Recurring Expenses

If you are going to have recurring expenses then you might not want a second mortgage because a home equity loan will work out better for you. The second mortgage is best for large amounts of money at once while recurring expenses like tuition are better paid for with a home equity line of credit.

Second Mortgage Tip #3 Repayment

You will also need to consider your ability to repay and which option will suit you best. A second mortgage can be financed similarly to your first mortgage, while the home equity loan can be paid back more like a credit card. Consider your financial position and ability to make monthly payments before applying for either a second mortgage or a home equity loan.

If you still don't know whether a second mortgage or home equity line of credit is for you, then talk with your lender and see what is recommended for your equity, credit, and ability to repay the loan.

by Jay Moncliff is the founder of http://www.new-mortgage-center.info a website specialized on Mortgage, resources and articles.

Home Equity Loans - Friend Or Foe?

2007-01-11T10:42:00.000-08:00

Home equity loans are advertised on the airways, newspapers, magazines and just about anywhere else a homeowner may see or hear the advertisement. Some people feel that home equity loans are trouble waiting to happen. Others feel that home equity loans are a key to opening a stronger financial picture and better home.

There is no simple answer to this question. The truth of the matter is that it will depend on you specifically. There are many financial advisors who believe having equity built in your home is equivalent to keeping your money under a mattress. The mattress, however, is non-liquid which means you cannot necessarily get at the money as soon as you need it. They believe that keeping money under a mattress results in your inability to make your money work for you, though they do acknowledge the minimal risk in keeping your equity in such a safe place.

These same advisors would have you consider taking out a home equity loan in order to invest the income. If, for example, you can find a relatively safe investment at a greater interest rate than you are paying on your loan than you will have your money working for you. If, obviously, the interest rate you are paying on your home equity loan is greater than the interest you are earning on the money in the investment than it does not make financial sense.

Another time financial advisors would consider it smart business sense to take out a home equity loan is to pay off higher interest rate loans and credit cards. If your home equity loan is at 8% and you are paying off credit cards at 18% and other loans at 10% or more than clearly it makes economic sense to consolidate your debt through a home equity loan. It is important, however, to factor in closing costs in the decision making process. The closing costs may eat up a great deal of the savings, if not all of it.

There is a risk, however, for some homeowners. For example, there are some home equity loans that give you a checkbook. As you write checks the money is a loan against the equity in your home. This may cause people to overextend themselves unknowingly. Without a definitive plan in mind, a home owner with this type of loan may use the funds for items that do not necessarily make the best financial sense. They may exhaust all of the equity in their home and not have the ability to use the funds for consolidating their debts or making financial investments.

The personality of the home owner is key to making the right decision when it comes to home equity loans. It is also a good idea to speak to a financial professional in order to get a full understanding of your overall financial goals prior to making this important decision.

The structure of the home equity loan is important to. Make sure you pay careful attention to the interest rates and the closing costs. When applying for the loan request a full breakdown of any and all costs associated with the loan. Depending on how old your documentation is (title search, appraisal, etc) you may save money by using them again for the home equity loan. A title search needs to only be updated rather than started from scratch. If, however, a considerable period of time has passed since you first received your home loan than all documentation may have to be obtained from scratch.

It is also advisable to give your home loan officer a strong understanding of what your intent is with the funds. If you want to pay off other debts you can request that the bank prepares checks directly to the lenders you wish to pay off. This will minimize any temptation to then use the funds for other purposes. Some loan packages will require you to do precisely this.

As you enter the wonderful world of home equity loans it is important to have a clear understanding of what you want and expect out of the loan. It is important to do your homework and select the right loan package and understand how it works and its costs and obligations, then you can decide if you wish to home equity or not to home equity.

About The Author Max Hunter is the author of many credit related articles. If you are looking for help with Home Loans or any type of credit issue please visit us at http://www.homeloanave.com.

Home Equity Loans ? A Method to Unearth the Hidden Equity

2007-01-11T10:37:00.000-08:00

You never thought that your home can be worth anything except for living purposes. Yes, a real estate broker would have offered a large sum on this house. But you never planned to sell the house because of an emotional attachment with it.

One of the prime customer bases for home equity loan crops from this kind of people. These are people who have been living in the house for years, or it might be their first home. Having seen the joys and sorrows in the home together slowly converted the house from a brick and mortar structure to ones prized home.

You get the necessary cash through the sale of house. But, you lose your home for ever. If you are looking for a middle path whereby you can evade losing on your home and get the cash at the same time, then you would surely like the deal offered by home equity loans. Under a home equity loan, the loan provider agrees to lend to the borrower against his home. This amount will be returned with a certain interest after a certain time period.

This arrangement suits the residents of the UK the most. Every month the borrower makes a small payment towards the amortisation of the amount lent. It is the borrower who decides the monthly repayments. The logic behind this discretion lies in the inequality in the income levels of borrowers. While a monthly repayment of ₤1000 will suit some borrowers, other may not be able to make such high payments through their monthly salary, which has to pay off the other routine expenses too.

How does the loan provider ensure that he will safely receive the amount at the end of the term of home equity loan? It is by retaining the property papers with him. A borrower will not be able to sell home in the absence of the property papers. With the property papers in their possession, the loan provider is the legal owner of the house.

But, the loan provider does not exercise this right according to an agreement with the borrower. The agreement is for the return of home equity loan at the end of a stated term with an interest calculated according to a certain rate of interest.

During the period of the loan, it is not the home but the equity inherent in it that is being consumed. This explains the reason why the borrower of home equity loan continues living in the house even after pledging it. Home equity loans get the name from the equity consumption in the process. Equity is the value that one gets on selling home. For the calculations of equity, the valuer will undertake a survey to check the amount that will be received on selling it. Deductions for the mortgages already held against home will be made to get an exact figure for home equity.

It is a percentage of the home equity that is convertible into cash. The percentage hovers around 80-125% for borrowers with a good credit history. The borrowers who do not have as good a credit history and have undergone bankruptcy any time in the past years are sure to get a much lower equity conversion rate. When changed into currency, the equity in home will fetch anywhere between ₤5000- ₤500000.

Home equity loan is a secured loan. All secured loans are cheaper in terms of the rate of interest. Those secured loans, where home guarantees repayment are the cheapest. Sometimes, borrowers can hope to get an APR equivalent to that of mortgage. Some borrowers never relax on the APR front. Their worst fears are of the times when interest rates would rise unexpectedly. Rate locks on home equity loans have been especially designed for this kind of borrowers. A rate lock stabilises the APR at a particular level. However, borrowers who do not want to lose on the further fall in interest rate would continue using the variable rate method.

Is the equity in home completely consumed in the process? This is the question that most people ask while drawing home equity loans. Equity is only consumed temporarily. As the borrower makes repayments towards the home equity loan, equity in home gets replenished - readying the home for a new home equity loan.

by: Steve Clark can tell you how to look better ,home equity loans visit http://www.easyremortgageuk.co.uk.

Banks Just Love Those Home Equity Loans

2007-01-07T12:11:00.000-08:00

There are a number of great benefits to taking out a home equity loan; not least the opportunity to open a line of credit, pay existing debts or put your children through college, the list is endless. There are also positive tax benefits, if you're unsure about this you should speak to your accountant before taking out a home equity loan. So in a world of greedy banks making billions of dollars a year, why do they like it when we take out a home equity loan?

The simply reason is that home equity loans are the "loan of the day", they are very popular and as a result they make banks a lot of money. Another reason, and one that is perhaps more important, is that home equity loans are secured loans, secured on a tangible asset, your home. Therefore, there is less risk to the bank for lending you the money. This is great news for banks and its shareholders as they are making record profits with less risk. It's a simple formula to the banks; they'll lend you the money in return for an interest rate payment. If you fail to pay, they will take your property from under you and sell it, whatever happens they can not lose.

So as long as borrowers pay their home equity loan bills on time and they got what they wanted out of it, surely everyone is a winner, right? On paper, this certainly appears to be the case; however there is a growing concern that many people view the equity in their home as their spending money and are starting to fritter away, what in many cases is their only form of assets or savings. Experts argue that there needs to be more control on home equity loans and the reason for the loans.

About The Author

Adam Jackson of http://www.besthomeequity.net is a home repair expert striving to bring you the best free home repair and improvement information on the web.

info@besthomeequity.net

Home Equity loans; don't put your Home or Condo at risk!!

2007-01-07T12:02:00.000-08:00

Debt Consolidation may be a better alternative

Have you seen those bank and mortgage ads on TV and newspapers telling you to pay off those pesky high interest credit card bills by tapping into the equity of your home? They make it sound real simple, apply on-line, call-us toll free, answers within hours, etc. They almost sound too good to be true. We all know about the dangers of things that are too good to be true. So, what are the dangers of using your equity to pay off your credit card debt? A minor detail they forget to mention in those ads; while banks frequently advertise home equity loans as a way to consolidate other high-interest debt, these loans don't wipe the slate clean. You still owe the money, and now it's linked to your homeownership.

Before we start, let's understand some important financial terms: Unsecured debt is not guaranteed by the pledge of collateral. Most credit cards are an example of unsecured debt, which is why their interest rates are higher than other forms of lending, such as mortgages, which employ property as collateral.

Secured debt is secured by a lien on debtor's property which may be taken by the creditor in case of nonpayment by the debtor. A common example is a mortgage loan.

Equity is how much of the house you actually own. In other words, it is the price of your house on today's market minus the amount of any loans secured on the property. For example, if your house is worth $170,000 and your mortgage balance is $115,000, then your equity is the difference -- $55,000. This value can go up or down depending on economic conditions.

You can't sell that portion of the house that you own outright. It's a package deal with the part that you're still paying on. However, you can get a hold of some of that money through a home equity loan (also known as a second mortgage).

Lately, many of us have experienced an increase in the equity of our homes or condos because of an unprecedented increase in our home values. This is mostly fueled by the abnormally low interest rates. These low interest rates created a home buying frenzy since the monthly cost of ownership was so cheap. For the past year though, interest rates have been steadily climbing and the monthly cost of home ownership has been steadily increasing making it more difficult to purchase a home. This has resulted in a glut of homes on the market for sale. Remember the old supply and demand theory? More supply than demand for homes means the price of homes will fall and so will the amount of equity in the home.

Using our initial example, if you went to the bank and took a home equity loan for the $55,000 to pay off your credit cards, you have now secured all of this (unsecured) debt to your home. Taking this one step further, as interest rates go up, your home could go down. So, in theory you could owe more than the actual value of your home. This means if you wanted to sell your home and it was now worth $150,000 you would have to come up with an extra $20,000 just to be able to satisfy your financial obligation. In 1988, homes throughout the country were at their highest value. Then in 1989, due to economic conditions, many companies had laid off employees and the housing bubble burst causing homes in some parts of the country a loss of up to 50 percent of their value overnight! There is no reason why this could not happen again. This is not a healthy scenario. The good news about equity loans is that they have lower interest rates than credit cards because they are secured against your house. The bad news is these loans are secured against your house. If you miss a payment then you risk losing your home. Miss a credit card payment by itself and initially you will only have to listen to debt collectors, but you will still have your home.

The disadvantages of using a home equity loan to pay off your credit cards:

? By pulling money (equity) out of your home to feed your spending habits, you may end up homeless.

? If you use your home to pay off credit card debt you lose your safety net.

? Taking out more debt to pay off current debt is a loser's game.

Please note: If you borrow more than 100 percent of the value of your home, or if the home equity loan is more than $100,000.00, some of the interest will not be deductible.

According to Bankrate.com, the worst possible long-term cost of a home equity loan is foreclosure. If you cannot afford two mortgages on your house, especially if other debts pile up again, you can lose your home to the bank. Defaulting on only one of the mortgages can lead to this expensive conclusion.

Contact a reputable Debt Consolidation Company There is little or no cost for the services. Most of the agencies are called Debt Management Credit Counseling Service and they:

? Work with lenders to negotiate a repayment schedule you can afford -- including making efforts to get finance charges reduced or waived.

? Develop a payment plan you can afford.

?Help you re-establish credit when your current debts are paid off.

If you participate in a Debt Management Program (DMP) program, it will show up on your credit report. However, your credit is already blemished, your financial life is a mess, and you need to take drastic measures to get back on track. Since the bankruptcy laws have recently changed, the bankruptcy option may no longer be an option.

Copyright 2006 Debt Management Credit Counseling Corp.

About The Author

Pete Glocker is employed in the Education and Charitable Services Department at Debt Management Credit Counseling Corp. ("DMCC"), a 501c(3) non-profit charitable organization located in Boca Raton, Florida. Pete graduated from Florida Atlantic University with a BA in Multimedia Journalism and was a web producer Intern for Tribune Interactive products Sun-Sentinel.com and SouthFlorida.com. DMCC provides free financial education, personal budget counseling, and debt management plans to consumers across the United States. Debt management plans offered by DMCC help consumers relieve the stress of excessive debt by reducing credit card interest rates, consolidating and lowering monthly payments, and stopping collection calls and late fees. DMCC financial counselors can be reached for free education materials, budget counseling and debt management plan quotes by calling 800-863-9011 or by visiting http://www.dmcccorp.org . Pete Glocker can be reached by email at pete@dmcccorp.org.

Home Equity Loans - The 3 Deadly Sins of Bad Lenders

2007-01-05T11:22:00.000-08:00

You've heard of ?The 7 Deadly Sins', well here's a bit of a spin, but the consequences can be severe if you don't take these into consideration, or keep your eyes open for lenders who could possibly be doing this.

Now, there are other more varied approaches that lenders can take, but I'd like to make you aware of the 3 more common ones.

1. When NOT To Sign Over Your Deed

Ok, here's the situation, you're having trouble paying your monthly payments with your current lender. They've stepped up the game and have gone as far as to threaten foreclosure on your home.

Worried, and not sure what to do, another lender approaches you, and offers to help you out by refinancing and helping you out in your ?predicament'. But, because he can help you, he say's as part of the formality, he needs you to assign your deed over to him, saying something like it will mean that your current lender will not be able to foreclose.

DO NOT DO THIS! Once the lender has your deed, the financing will likely not come through, and you'll be left in a home you no longer own. The lender can then almost do whatever he wants, and will treat you as a tenant, not as an owner.

2. When NOT To Draw Down On Your Equity

You're in need of some money? maybe you've hit some medical bills that weren't expected. You've successfully built up a considerable amount of equity in your home over the years, and think that you'd like to use that.

A lender approaches you, and says they can do it, but even though you won't be able to afford the higher monthly payments, they tell you to "just bump up your income a little" to make it get through, then worry about it after.

The problem with this is that you'll likely lose your home. I'm not kidding, lenders like this don't care if you can't make the monthly payments, if you default, then they'll just take your home and sell it and pocket the difference. Stay CLEAR of these people.

3. The Hidden Balloon Payment Clause

If you're pressed for payments, and want to refinance, make sure you read the fine print of the contract. A lender might come to you and say that they can reduce your monthly payments and save you from foreclosure. That might be well and good, but in the fine print, you might find something that says that the balance of the principal amount is due at the END of the loan in one lump some payment.

If this is the case, be VERY careful, and don't do this, you'll likely face foreclosure anyway at the end of that loan.

I hope that this guide has been helpful for you, and opened your eyes to some possibilities that are out there.

About The Author

Ron Treveli

Thanks for taking the time to read this article. For more quality articles by Ron Treveli on Home Equity Loans be sure to visit www.home-equity-loan-guides.com where i'm constantly adding more content specifically on home equity loans.

Home Equity Loans - Are They Right For You?

2007-01-05T11:00:00.000-08:00

The bills are out of control and you need a new car. "Maybe we can get a new carpet and paint the house", you say to yourself. These are just a few reasons why home equity loans can seem like the solution to all your problems and are so popular.

Home equity loans can be a fantastic way to start your own business or to take advantage of an investment opportunity. They can also make your situation worse than it was before you got the home equity loan.

The reason's for taking advantage of home equity loans are the most important part of the process. Take the time to sit down and ask yourself, "Do I really need a home equity loan? Do I want to go on a spending spree or am I really trying to improve my life?"

A home equity loan is like having a second mortgage on your home. Suppose your home is worth $200,000 and you have a mortgage against it at $150,000, you will have $50,000 of equity available. Home equity loans allow you to borrow up to 80%, and sometimes more in certain situations, of your home value. In this situation you could borrow $80,000 as a home equity loan and still have only borrowed 80%.

This is why it is so important to take a good look at your situation before making a decision. You can see how easy it could be to get carried away with home equity loans.

Let's say you only need $20,000 for that new car and some home improvements. You decide to borrow another $15,000 of equity for that vacation to Hawaii you have been dreaming about. First of all, a vacation to Hawaii would not cost $15,000 unless you went on a first class, spare no expense vacation.

Using a home equity loan to buy a car may not be a great idea with today's 0% interest rates and no money down loans. There is no sense in risking losing your home to buy a new car with these type of loan programs that are available in todays market.

On the other hand, a home equity loan for home improvements may be a great idea. This will add value to your home as long as you can afford the higher loan payments.

A business that's doing great that you want to expand may be another good use of a home equity loan. As long as the business is already in profit and is not losing money.

Some solid investments can be a good idea if you have done your research before hand. The latest IPO may or may not be a great idea.

Consolidating high interest credit cards may be a great idea as long as you close the accounts and don't run them back up. You really only need one or two credit cards in case of an emergency.

Educational expenses may be a good reason to take a home equity loan to get your children started in the right direction. Someday this type of an investment can pay off.

These are just a few things you can do with home equity loans. It's very easy to borrow too much, only to find yourself having a tough time making the new payments.

The important thing to remember with home equity loans is to be logical and don't let your emotions get the best of you. Again, take the time to sit down and research all your options. This way you can rest well at night and not have to be concerned about losing your home. You can enjoy the things you do with your home equity loan knowing you've made a wise decision.

Copyright 2005 Dean Shainin

About The Author

Dean Shainin is a consultant specializing in home equity loan strategies and home mortgage loan information. To see a list of recommended home equity loans, advice and information, visit this site: http://www.homemortgageloantips.com.

Financial Advantages Of Home Equity Loans

2007-01-02T10:17:00.000-08:00

You may be fortunate enough to already own your dream home. From time to time though you may wish that you have additional funds on hand to help you attain your other dreams and goals. Owning a house may be the answer to your prayers in that it can provide you the basis for borrowing more funds to help you achieve your goals. This can be done simply by making a home equity loan.

But why is home equity loan the best option for getting additional funds? To understand the answer to this question it will help to first learn how it works. Even as you repay the mortgage amount for your house, your home builds up its asset value. This is the "equity" of the home. The equity refers to the difference between the current market value of the home and the outstanding mortgage amount. Even if your home is mortgaged to any financial institution, you are eligible to use this home equity as collateral to obtain a large amount of credit.

There are several reasons why you should consider home equity loan as the best option for getting additional funds. Firstly, you can get a loan at a reasonable home equity loan rate even though the interest rate may seem a bit higher than that of your first mortgage. This is because the bank providing the home equity loan would only have second claim on the property in case of default, and this is why the home equity loan providers charge a risk premium. This appears as the additional interest in your home equity loan agreement.

Secondly, a home equity loan allows you a significant tax deduction. As opposed to consumer loan interest, home equity loan interest is tax-deductible. For this reason, it makes more financial sense to use home equity loan to consolidate your loan rather than taking out a consumer loan.

You may also have others debts which involve paying off huge amount of interests. It will be much wiser to take out a home equity loan to consolidate these debts, such as credit card debt or debts incurred for expenses like paying off medical bills or paying off for your child's higher education.

There are a number of financial institutions that offer home equity loans and to get the best home equity loan rate, it is a good idea to shop around first. Various kinds of repayment methods are available depending on your financial situation and the type of interest rate you seek, namely variable or fixed rates.

Before taking out a home equity loan make sure that you have all the means at your disposal to repay the loan off as quickly as possible. Do not unnecessarily risk losing your home, unless you feel that this financial burden is surely going to add some long-term value to your life.

About the Author: If you are considering using your Home Equity to take out a Home Equity Loan then visit ezHomeEquityLoan.info.

Home Equity Loan Rates Guide

2007-01-02T10:14:00.000-08:00

Do you need to pay your college tuition fee? Does your home need massive repairing? Did the addition of a new baby in the family lead you to think of getting a bigger family car? Taking out a home equity loan may be the quickest and most practical solution to your sudden financial needs. However, you need to know that while taking out a loan with your home as collateral is not as simple as it looks.

A home equity loan does not come for free. You will have to pass certain documents, get through credit rating standards, and pay a variety of fees to get started.

What fees are these?

A home equity loan's costs consist of interest rates and transaction expenses, also called closing costs, or the rates linked with the successful closing of a home equity loan deal. These include lawyers fees, application fees, credit reports, title search fees, notary fees, insurance fees, property appraisal fees, loan document preparation fees, and other closing expenses.

Normally, closing expenses average at between 2% and 5% of the amount you loaned, so you should expect not to get everything you borrowed initially. Be careful of mortgage lenders that advertise no closing cost deals, because there is definitely no truth to this.

Whenever you take out a home equity loan, there is a price you will need to pay for the convenience of getting money at once. If the company says it offers no closing costs deals, it is likely that it has already factored the fees into the interest rate. If you're thinking of borrowing a huge amount, don't go into these kinds of deals. However, it should be relatively harmless if you're only planning to take out a small value.

In addition to the abovementioned fees, you will also have to pay so-called points on closing. Points are service fees you pay at only one time when the deal is sealed. They are related to interest rates, so the more points you pay, the lower your interest rates will become, which is not really a bad thing, when you think about it.

To be able to understand and appreciate the presence of points, mention it in dollar terms. For example, instead of saying you are paying three points on your $20,000 home equity loan, you can say you are paying $600 in points. This way, you will have a better grasp of the amount you're shelling out, and you can more effectively keep track of your cash outlay. Simply referring to your costs in terms of small value 'points' can cause you to lose track.

In sum, taking out a home equity loan is not really expensive, but you have to realize that it does not come for free. Whether you choose to take out a standard home equity loan or a home equity line of credit (the two types of home equity loans), you should expect to face significant costs.

About the Author: Home Equity Loan Rates are extremely important for home owners that wish to get a large loan, there are many different kinds of Home Equity Loan Rates, and there is sense in learning all the different risks involved.

Home Equity Loans - Can They Help You?

2006-12-31T08:14:00.000-08:00

Cash can be hard to get, at times, and the debt can pile up, but if you own your own home it may be much easier than you think. A home equity loan allows you to take out a loan based on the built up cash value of your home. Here is what you need to look for in order to get a good deal on a home equity loan.

How It Works

A home equity loan is worth the amount of money that you now have invested in your house. For instance, if you house is worth $250,000 on the market, and you still have $155,000 on your existing mortgage, then you have an equity value of the difference - $95,000, in this case. That means that many lenders would be glad to give you a loan worth up to $95,000, as a second mortgage, or home equity loan.

Two Kinds of Mortgages

When you apply for a home equity loan, there are two kinds that you might get. The first kind, called a home equity loan, simply gives you the money - like any other loan. You are free to use the money as you want. The other kind is called a home equity line of credit, often referred to as a HELOC. Both of these are also referred to as second mortgages, since they are secured by the house itself.

The Simple Home Equity Loan

A home equity loan, or second mortgage usually is tax deductible, and is often based on the entire amount of the equity of the home. Generally, it is at a higher rate than the first mortgage, and usually has a maximum of 15 years to pay it back. Many homeowners use a balloon payment with this type of mortgage, or a large payment that is due at the end, in order to keep their payments low.

Line of Credit

This type of home equity mortgage gives to the homeowner a credit line that they are free to draw on - when needed. The ceiling amount is pre-approved by the lender, and then they are free to draw out money as they need it - or if they need it. Up to 100% of the equity value can be borrowed, and interest is only paid on the amount borrowed. The rate of interest, though, will vary, depending on what the rates are at the time you withdraw any money. These loans are generally held open for up to 30 years.

Like with any other loan, you need to take the time to shop around in order to ensure that you get the best deal. Not only should you compare interest rates, but also the various fees that are involved. Separate the actual loan from the fees and compare them other loans - fee against fees and loan costs. Do not make the assumption that since the home equity loan has no closing costs, that they are not in there somewhere - they are.

About the Author: Joseph Kenny writes for the Loans Store who are specialists in finding the best loans in the UK and offer specific loan types including home loans, secured loans and others. Visit Today: http://www.ukpersonalloanstore.co.uk

Home Equity Loan - Factors To Consider

2006-12-31T08:12:00.000-08:00

Your home provides you a wonderful means of securing a huge amount of credit by using your home equity as collateral. In recent times, more and more homeowners are viewing home equity loan as the most convenient way to consolidate their other debts, to make repairs or extension to the home, or to meet additional expenditures such as wedding expenses, education expenses and so on. There are various reasons behind the growing popularity of home equity loan, such as the growing number of easily accessible financial institutions, fairly reasonable interest rates and fees, and reasonable terms and conditions, tax deductible features and so on.

Despite these benefits, home equity loans, like any other types of loans are not completely devoid of risk. And risk factors are even more magnified if you fall into the hands of unscrupulous moneylenders, who woo you with their lower interest rate, only to rip you off. But the security of your home should be your prime consideration and for that you should be careful of certain things before settling on any financial institution.

You are required to pay a fee to obtain your home equity loan, and this fee is generally low. The costs of obtaining home equity loan involve 1% origination fee in addition to fees for attorneys, surveys, and other related services. If any lending institution asks for an exorbitant fee, just stay away from it. It will be wiser to shop around and compare to find out the best deal.

You will find many institutions offering you a loan on an unbelievably lower rate of interest. But do not be deceived by this, as the payment period may actually be stretched over a longer period than you originally thought, and in effect extracting from you a larger payment amount. So carefully read all the clauses in the agreement before entering into a deal with any financial institution.

You might have heard of those balloon payments. It is the enormous amount due at the end of the loan period including both the interest and principal amount. This occurs when the lenders attract your interest with lower monthly payment rate by making you pay only the interest each month. There are even instances where the homeowner unwittingly assumes he only has to pay the interest only on the loan, only to discover the burden of the entire amount of the loan at the end of the loan period.

Comparison shopping over the internet can provide you with valuable insight of the terms of various financial institutions. This only can prevent you from becoming the target of predatory lenders. Referrals from friends are also an effective way of locating the good home equity loan provider.

About the Author: If you need a loan with low interest rate go to Great-Interest-Rates.info.

Can A 125% Home Equity Loan Really Help You?

2006-12-24T09:34:00.000-08:00

Lenders are making the market for new loans sound so good. Other types of loans are already on the market, and understood. So, how do you get new people to jump on your bandwagon? You offer something that sounds good, but one that not everybody yet understands. That seems to be the case of the 125% home equity loan, too.

The Promise

The promise that is made is to give you 125% of the value of your house for a second mortgage. This way you can enjoy having extra finances to use as you please. You can pay off other debt, fix up the house, combine both mortgages, go on a vacation, or whatever. The choice is up to you.

What, though, is the truth behind a 125% mortgage? Here are some details. Some of these companies actually want to lend you more money than your house is actually worth. Think about it. Are they really trying to help? With other lenders, it can actually be a little difficult to get 80% of the value of a house (they are the smart ones). Why are these agencies trying to push extra money in your face?

Extra Charges

A number of these companies charge 10% if you want to get a lower rate of interest than what is initially offered. That's just for starters. While they do offer lower rates than what credit cards usually go for, it actually may not be much more, since second mortgages are typically more than a first mortgage. Plus, there is an origination fee, closing costs, and more.

Stay Where You Are

With the extra charges, and owing considerably more than your house is worth, you can plan on not moving anytime soon. This puts you in a negative equity situation. Many people who bought houses even last year are finding out that this is not a good situation to be in. It is possible, in a day of unstable housing markets, that your house could also be devalued ? making it even harder, if not impossible to sell ? for years more. It could also mean going into greater debt.

It will also take you a few years just to recover from the various expenses of the mortgage - let alone bring your debt down to where you can make any profit on selling the house. And getting the downpayment for a new house while you owe so much - don't even go there - it will only be in your dreams.

An even greater problem may occur if you have an adjustable rate mortgage. Sooner or later, there is going to be a rate increase, and it could be as much as 50% higher than it is now.

Compare

If you still want to consider a 125% mortgage, then be sure to compare one company's product with another. You will be able to see the features that really stand out, and be able to see what features you may need, or want. Be wary of mortgages that promise no fees, because you can be sure that it has been added in there somewhere - and probably more things, too.

About the Author: Joe Kenny writes for SelectLoans.co.uk, a personal loans comparison site, visit us today for information on all loan topics including debt consolidation loans and links to leading UK providers. Our Site: http://www.selectloans.co.uk/

Top 2 Reasons To Use Home Equity Loans For Debt Consolidation

2006-12-24T09:30:00.000-08:00

Generations past used to enjoy tax benefits on their interest payments on certain loans such as consumer loans. Unfortunately, these tax benefits did not extend to this current generation, and even as we cough up a huge amount every month on interest payments on various debts such as your credit card debts, you can no longer enjoy the same level of tax relief. However, there is another option today that will allow you to consolidate all your high interest debts into one low interest loan and even to secure good tax benefits for repaying the interest on it. This option is the home equity loan, and it is open to any homeowner, who can then use the loan for more efficient debt management.

Homeowners often obtain home equity loans for the purpose of restructuring or repairing the house. It then becomes a kind of long-term investment. However, you may hesitate at the thought of putting your house up yet again for a second mortgage. But if you are to enjoy lower interest payments and some tax benefits, you should not hesitate at all at taking this loan, or even wasting your time looking into other forms of loans to consolidate your debts. If you are already struggling with managing all you debts, then a home equity loan is your best solution for refinancing and managing your otherwise unmanageable debt.

By arranging to refinance your debt through a home equity loan, you are not further adding to your existing debt amount. This debt consolidation plan allows you to transfer all your various debts such as your credit card debts, with all their different due dates and interest rates, to one lender. For the repayment of this consolidated second loan you are paying a lower interest rate as a part of a fixed repayment plan.

Thus the convenience of making a single payment at a lower interest rate to one lending institution is just one of the benefits of home equity loans. In addition to this convenience, you also get to enjoy a tax benefit. This tax benefit along with the financial gains of paying a lot less interest, indirectly adds to your net gain.

Before committing to home equity loan you should make sure that you are in a position to pay back all the debts within the given period. Otherwise you will be putting your home at stake. So be careful about your spending habits, and be particularly wary of accumulating debts on your credit card.

About the Author: For more information on how to use Home Equity Loans to consolidate debt, visit QuickHomeEquityLoan.info.

When You're Considering A Home Equity Loan

2006-11-28T11:01:00.000-08:00

The average American has about $10,000 worth of credit card debt. Consider the high costs of daily living that can be attributed to children, food, healthcare, high gas prices plus the extras, and it's quite easy to see why many Americans are struggling. Many people have turned to their most valuable asset, their home, in order to get out of debt and to get back on track. Home equity loans have helped many individuals do just that.

A home equity loan allows the homeowner to take out the equity in their home in one lump sum. The loan must be paid back after a set period of time at a fixed interest rate. Payments must be made every month. This type of loan is so attractive because it allows the borrower to secure a big amount of cash at a low interest rate. Home equity loans can be a very good way to pay off debts, make home improvements, secure a big purchase or simply cash out.

Another great advantage of home equity loans is that the interest one pays on the first $100,000 is tax deductible. This is in contrast to credit cards or other unsecured debts, where you get absolutely no tax benefit. It is important to note that a home equity loan is a secured loan. It uses ones' home as collateral. This means that if an individual fails to repay the loan, their home will be repossessed. It is for this reason that anyone contemplating a home equity loan be absolutely sure that they can re-pay the loan.

If they later find they cannot, not only will their house be lost, but any equity as well. Home equity loans can be a good option for individuals needing to borrow money in order to pay off credit card debt, pay for college tuition or make home improvements. This type of loan allows for a big cash out at a low interest rate with tax benefits. However,

home equity loans are not without their risks. Because this type of loan uses ones' home as collateral, it is absolutely imperative that anyone who chooses to use this type of loan is able to
repay it.

About the Author: For more information on getting better Mortgage Rates and great money-saving Second Mortgage tips, and resources, visit http://www.lenoxnationalmortgage.com/

Latest Information On Home Mortgages And Expert Advice On Home Equity Loans

2006-11-17T06:22:00.000-08:00

Latest information on home mortgages

Buying your first home is a huge milestone ? and often a scary one. Be sure you're getting the best value for your money by learning about the different types of home mortgages available today and seeing available rates from competing mortgage lenders.

There are three sides to a mortgage: the amount of money you borrow, the interest rate you'll pay on the loan, and the length of the mortgage.

The amount you borrow depends on the cost of the home and the size of your down payment. If you purchase a $300,000 home and make a down payment of $60,000, you'll need a $240,000 loan.
Mortgage Cycling Revealed. Learn How To Quickly Build At Least $40,000 Worth Of Home Equity And Pay Your Mortgage Off In 10 Years Or Less

The interest rate is one of the great variables when looking at mortgages and other home loans. There are two basic types of mortgages: fixed-rate and adjustable-rate mortgages (ARMs). Fixed-rate mortgages have just that ? a fixed rate of interest that never changes in the life of the loan, so your monthly payment will always be the same. An ARM has interest rates that tend to change according to the general credit market. This can work to your advantage when rates go down, but if market rates increase, the rates on your loan will likely increase at a similar rate. However, most ARMs have a cap on interest rates ? this will vary from lender to lender.

Nowadays buyers have much more flexibility in terms of the length of the loan. While most mortgages fall in the 15-30 year range, some lenders now offer 40 and 50 year mortgages. These longer term mortgages are ideal for people who want lower monthly rates and don't mind paying off their loan well into retirement. Of course, the longer the term of your mortgage, the more interest you'll pay in the long run.

About the Author: Find out more about Home Mortgages and Home Equity loan and compare rates from best lender in your state.

Easy Ways To Get Home Equity Loans:

2006-11-14T07:15:00.000-08:00

Sometime in your life you may need some extra money.
Some people get home equity loans. Equity is the difference between what you owe on your mortgage and the market value of your home. You build equity as that difference grows.
As you repay the mortgage principal to decrease the amount you owe or when your home's value increases, you build up equity.
You can borrow against it by making a home equity loan or establishing a line of credit.
Both have much lower interest rates than credit cards and personal loans. The interest you pay on a home equity loan or line of credit is usually tax-deductible.
A home equity loan provides you with a lump sum amount of cash. The terms are simple. You repay the loan over a specified time at a fixed interest rate. The payment rate is set at the time of the loan and it never changes. If the value of the loan is not greater than the value of the house, you may be able to deduct the interest on the loan.

A debt consolidation loan, another type of home equity loan,
lets you combine all your debts into one loan.
Having to make just one payment a month, you can better manage your debt.
If you're consolidating credit card bills, don't use them after you get the loan. Cut them up and destroy them. Better still,
contact the financial institutions that issued the cards and close the accounts. Otherwise, you might be tempted to overspend,
which is what got you in trouble in the first place.
A home equity line of credit has some advantages over installment loans.
There is a specified amount of money you can draw upon as you need it for up to 10 years. You only pay on the amount of credit that you use.
Payments are based on the amount you borrow and the interest has a variable rate.
As you repay the loan, you have more money you can borrow against.
Interest rates for lines of credit and payment amounts are adjustable over time.
Today you can apply for a home equity loan or line of credit online.
The minimum amount you can borrow is $5,000, although some online companies have set the minimum at $10,000.
The amount of your loan is determined by the relationship of the amount of the loan to your home's value. This is called the LTV (loan to value) ratio. Loans of $100-500,000 are not uncommon
The online process is usually very simple and takes little time.
You'll be asked some basic questions about yourself, your income and the mortgage property. Next, a copy of your credit report is obtained electronically.
You'll be asked which of your loans are related to the property being mortgaged. There will also be an electronic appraisal of your home's value.
Once the online company reviews all your financial data, it's just a matter of seconds or minutes until they approve or decline your loan
About the Author: Read more from this author at: investing-magazine.com

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