Getting Cash From Refinancing A Home Mortgage
January 24, 2010 by · Leave a Comment
If you have an adequate amount of equity in your home then the majority of loan programs will allow you to get cash back when you make the decision to refinance. If for example, you have a Fannie Mae conforming loan then the rate will be increased a little bit if you decide to borrow what works out to be more than 70 percent of what your home is worth.
There are some good points and some bad points to using money obtained through equity and refinancing of your home. The good points are that the cash can allow you to pay down or pay off other debts, it can give you more money with which to invest and it can make it possible for you to do the home renovations that you have been wanting to do for a long time. As well, having more cash at your disposal can provide you with a greater sense of peace and security. Often times the interest on the second mortgage is tax deductible.
The biggest downfall of this financial transaction however is that when you refinance your home you use up all of the equity that you have built up in it. So as far as equity is concerned, you end up with a much lesser amount. For some people this is enough of a reason to choose not to refinance their home.
Be aware of course that your home does not really belong to you until you have paid it off. In other words, refinancing your home is analogous to taking out a loan based on the equity in the home. It is comparable to using a secured credit card whereby the bank holds a portion of your money already.
If you decide to refinance your home, bear in mind that there is a three day rescission period. That is why it is important to plan ahead. If you need the money by a certain date then make an appointment to sit down with a mortgage professional at least a week to two weeks in advance.
When refinancing day arrives, be honest with the mortgage specialist about what your intention for the money is and where your financial future is going to take you. Show that you are level headed, responsible and have direction. The needs you have for the money might be better accommodated with another financial option. For example, if you want to consolidate some debts or make improvements to your home then you might be better off applying for a home equity loan instead. Or in some instances, if you have ongoing financial needs you might want to look at getting a home equity line of credit.
If your lender understands where you are coming from, he or she is in a better position to help you make the right decision regarding your money. Cash-out refinances are loans that either pay off debts or take money out of closing. For example, a rate term refinance is one in which the borrower receives $2000 or the lesser of two percent.
You are entitled to more cash when you refinance your primary residence then when you refinance a second home or investment property that you own. The reason for this is because investment properties carry a higher degree of risk to lenders.
A cash-out refinance loan is an excellent method of paying off high interest credit cards. You can also decrease your monthly expenses this way and the interest from the mortgage will be tax deductible.
If you decide to borrow more than 80 percent of your home’s value then you will be expected to pay private mortgage insurance (PMI). The higher your loan to value (LTV) is, the more you will notice your rate climbing. This is what happens when you go with a cash-out refinance loan.
If you choose to go the route of a cash-out refinance it may be in your best interest to do so as a first and then second mortgage. Another option is to just go for the second mortgage. Yet another option is to choose a home equity line of credit (HELOC). If you do the latter you will avoid both PMI as well as a rate increase to your first mortgage.
Be very careful with how you spend the money you get out of the loan. Do not squander the equity that you have built up in your home for years. In the most extreme of cases, if you end up in debt again and cannot pay, the bank can foreclose on your home.
Work closely with the mortgage professional to find a financial solution that is most fitting to your circumstances. Together you can find a way to pay off your debts and still retain ownership of the home you love.
Home Equity Loans To Make Home Improvements
January 24, 2010 by · Leave a Comment
If you have built up equity in your home and want to make some much needed improvements to your home then a home equity loan is one way to do it. There are two forms of home equity loans- a one time loan and a line of credit.
A one time loan means that the borrower will receive a lump sum of money and then must repay the loan in equal monthly payments. On the other hand, a line of credit for a home equity loan works very much like a credit card. When you need money from the line of credit you take it out and if you so choose you can pay the interest on the balance and not the principal right away.
Most people decide to apply for home equity loans because they want to build an addition onto their home or they want to renovate but you can also apply for such a loan for an abundance of other reasons. If you wish to start a small business, buy a new vehicle, travel, consolidate your debts or even just have money put away for a future purpose, a home equity loan can be a good way to do this.
The reason you wish to apply for a home equity loan can dictate the kind of loan that you best qualify for. A home equity loan or home equity line of credit can be an effective way to get the work done that you need. However if the renovations you plan to do are very big and very expensive you might want to consider a rehab loan. A rehab loan will create a base for your home equity loan at the “as completed” value attached to your property. Some rehab loans allow the borrower to do the renovations themselves whereas others stipulate that a licensed contractor must be hired to complete the work.
It is important to make improvements in your home that will add value to it. Some improvements may give the home a better aesthetic look but really play no role in the value of the home. To find this out ahead of time talk with a local appraiser and/or a mortgage broker.
Most home equity loans that are used to make home improvements or pay off mounting debts can be deducted on your taxes. This is very good news when you are contemplating remodeling your kitchen or bathroom or putting in a hot tub in the basement! Remember that although you are using the equity in your home, you are also doing things that will increase its overall value.
A home equity line of credit will allow you to take the money out as you require it and not all at once. In this way you pay the interest on smaller amounts in smaller increments.
Compare Mortgage Rates , The Basics
January 24, 2010 by · Leave a Comment
You do your homework when it comes to buying a car or taking a trip so it makes sense that you would do the same when you are looking to buy a home. It is essential that you compare rates from one financial institution to another to ensure that you are getting the best mortgage package that you can.
When you compare loan rates make sure that you compare interest rates for the same day. Do not compare loan rates for two companies on Monday and two other ones on Wednesday. The reason for this is because interest rates go up and down and are subject to change from one day to the next. Interest rates sometimes change as often as different times throughout a given day.
Compare Loan Rates of the Same Kind
When you compare loan rates compare those that are the same as opposed to different. Do not look at a fixed mortgage rate at one bank and an adjustable rate at another. This defeats your purpose and will do nothing but confuse you. Compare loan rates of products that are the same, such as the rate for a 30 year fixed mortgage or the rate for a 20 year adjustable rate mortgage.
As you compare loan rates, make sure that you compare a selection of lenders at the same interest rate and with the same lock-in period (which is generally 30, 45 or 60 days). The interest rates and points you can be offered will vary from lender to lender. Most lenders will also allow you to choose the lock-in period that is best for you. This is why it is essential to compare loan rates from one lender to another.
Lending Fees
Take the total that you are quoted for lending fees and add it to the points and all of the other fees connected to the home loan. Not all lenders use the same names for all of the applicable fees. For that reason, when you compare loan rates it is essential that you carefully review the total sum of every fee.
What are the fees that are attached to every mortgage? Before you attempt to compare loan rates you have to understand what you are comparing. The fees can include:
· Appraisal fee
· Processing and underwriting fee
· Mortgage insurance premium
· Application fee
· Fee for a credit report
· Tax service fee
· Commitment
· Wire transfer fee
· Any other applicable fee unique to the transaction
Any number of fees can be a part of a mortgage package so it makes sense to compare loan rates in every way that you can. This will help you secure the best deal and save you money in the process!
Improve Your Credit Score One Step at a Time
January 24, 2010 by · Leave a Comment
If you plan to apply for a mortgage or a loan in the future but you have had credit problems in the past then you need to improve your credit score before you can do anything else.
Your credit score is a very important number. Every time you apply for any kind of financial assistance a lender will take a look at your credit score. If you are approved for credit then the number will play a role in the terms of the loan and the interest rate.
A higher credit score is much more advantageous than is a lower one. If you have a lower score you may be approved for credit but you will have a higher interest rate because the lender considers you to be a high risk. This is one reason that you need to work as hard as possible to improve your credit score.
Before you can figure out how to improve your credit score it helps to understand what it is made up of. Your credit score is made up of five specific areas:
· Payment history makes up 35 percent
· Your debts make up 30 percent
· The length of your credit history accounts for 15 percent
· New credit makes up 10 percent
· The credit that you are using at present accounts for 10 percent
In order to improve your credit score one of the most important things you can do is to get into a habit of paying all of your bills on time. This is the most vital aspect that plays a role in your credit score. If you have any payment that is past due by 30 days or more then this can be a black mark on your credit rating. Negative marks such as this can show on your credit report for as long a period as seven years. Don’t let this happen to you. If you want to improve your credit score then pay all of your bills on time. Do not let a credit card bill or utility bill cause you problems with your credit.
The money you owe on any given debt makes a difference in your credit score. To improve your credit score do not live beyond your means. Do not overuse credit and do not borrow more money than you can afford to pay back in the allotted period of time.
If you presently have a great deal of debt then it would do you well to take steps to cut back on extravagant spending. To improve your credit score you must become responsible financially. Pay your bills in a timely way. Pull up your financial straps and improve your credit score. Take it one step at a time and you will find that you are making progress.
Home Mortgage Foreclosures
January 24, 2010 by · Leave a Comment
Sadly many are experiencing Home Mortgage Foreclosures. A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.
A foreclosure on your credit history does not have to stop you from getting the financing you seek. There are still investors in the non-conforming arena that will consider doing a new purchase or refinance (called a foreclosure bail-out loan) even one day out of foreclosure (or in foreclosure proceedings in the case of a refinance). You will have to keep in mind that these types of lenders will charge higher interest rates and fees, as well as expect there to be generally at least 30% equity in the home depending how your credit history works out.
Before a Foreclosure proceeding, a Notice of Default (NOD) must be sent out to the homeowner. It notifies the homeowner that unless back payments are brought current within a time frame (at least 30 days), the bank would initiate a Foreclosure process.
Foreclosure begins with the filing of the Notice of Trustee Sale (NTS), which states when and where the property is to be sold. By law, the foreclosure sale must be advertised on newspapers several times before the scheduled sale. The NTS is sent to the homeowner, alerting him that the property is now in foreclosure. The NTS also itemizes the amount owed, plus attorney fees and other charges.
Foreclosure is legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms and conditions in the mortgage contract. The foreclosure procedure brings the rights and obligations of all parties to a final conclusion and passes the title in the mortgaged property to either the holder of the mortgage or a third party who has the option to purchase the property at the foreclosure sale. At this point the property is free of all the past encumbrances affecting the property subsequent to the mortgage.
When a Notice of Foreclosure is served, a homeowner has basically three options.
Bankruptcy- Filing bankruptcy delays the mortgage repayment. It does not eliminate the debt. Therefore, it is only a temporary measure.
Sell the property- While selling the home and pay off the mortgage effectively eliminates the debt, in a soft real estate market, the homeowner may have to sell the property at a distressed price to keep within the time frame of the foreclosure proceeding.
Refinance- The homeowner can also refinance and pay off the current mortgage. As long as the homeowner has enough equity built in the home, many lenders are willing to finance the property to help the owner out of foreclosure.
The last two methods would save the homeowner’s credit ratings. After the homeowner has a chance to attend to his financial matters, he can purchase another home when he feels ready.
Many lenders will count 120 day lates on your credit a foreclosure, even if a NOD was never received.
Depending on the state the property is in and thereby the types of security instruments, Mortgage or Deeds of Trusts, the lender may or may not have to go to court to foreclose upon the property. In state where trust deeds are used, because titles to properties are held by the lenders, lenders do not have to go through court proceedings to foreclose on properties. In states where mortgages are used as security instruments, banks must go through court proceedings.
When you are 90 days late the lender will file a notice of default onto the title of your house to start the foreclosure proceedings on your house. At this time you have a short amount of time to bring your mortgage current on all the late payments otherwise your house will be sold.
The foreclosure process is not immediate. If your house is in foreclosure, you do have options.
Normally when a home goes into foreclosure there are many legal fees that are associated. Keep this in mind if you plan to try and sell the home or if you try to refinance out of the foreclosure. You should obtain a payoff statement to check and see how much is owed to payoff the mortgage completely.
A legal process to enforce a lien, by the selling of property, to satisfy the debt.
It is important to know that foreclosure is not automatic. Due to the high cost of foreclosure to lenders some of them will try to work with you to find other options especially if they feel you can provide a valid solution to the problem.
This will usually happen when you are three or more months late on your mortgage
The most important part of having a home in foreclosure is to do something, anything. Sitting still will not make the problem go away. Call your lender and speak with their homeowner’s assistance department. This will at least give you the chance to save your home. Many times you will be surprised by what the lender is willing to do.
A borrower facing foreclosure may seek a foreclosure bailout. This is a loan from a lender that specializes in stopping the foreclosure process. These loans can be expensive, with a rate of 11.99 to 13.99% and two or three points in origination fees. The foreclosure bailout will allow the borrower to rebuild their credit history, and refinance in the future at a much lower rate.
An increasing cause of foreclosure is the violation of the due on sale clause. This results from selling the property and not having the lender’s approval to do so. For example if you did a contract for deed and did not get approval from the lender. Foreclosures in this case is rare but investors that do a lot of these types of transactions are running into this. Also a lease option is considered a sale.
Not only does your mortgage company holding the note on your property have the right to foreclose but also your taxing authority may do the same. If you do not pay your property taxes then the taxing authority can foreclose. If this happens there is usually a redemption period which allows your to pay the debt along with fees and interest. Different states will have different methods for this process. One way is to sell what they call a tax certificate then after a set time period the investor who bought the certificate will get the deed to the property. The other way is where the investor acquires the deed at the auction but will not be able to sell the property until after the redemption period.
There are different options to get out of foreclosure. Refinance your mortgage or a lease buyback program. Typically you will need at least 25% equity to refinance out of foreclosure and sometimes more depending on your credit scores. Or a private investor can buy your home from you and lease it back to you for a set period of time. In that time you are to get your credit to the point where you can purchase the home back from the investor.
If for any reason you are having difficulties or problems making your monthly mortgage payments, call, write or otherwise contact your mortgage company as soon as possible. Your lender wants to help you avoid foreclosure, so explain your situation clearly and honestly. Have your key and actual financial information ready, such as your income and expenses as well, as this information may be necessary for the lender to offer you assistance.
When faced with letters from your lender, it is important not to ignore letters notifying you of late payments, default, or otherwise describing delinquency on your mortgage payments.
