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4 good reasons to refinance now

Mortgage rates are going up and some homeowners who were thinking about refinancing this summer may have missed the boat.

Our most recent survey found the average rate for a 30-year fixed-rate loan is now over 6.6%. A search of our extensive database of the best mortgage rates from across the country shows that even the most qualified borrowers will now pay 6.375% or 6.5% for such a loan unless they want to pay thousands in fees.

But if you have an adjustable rate mortgage, that's going to reset, or are thinking about taking some cash out of your home, now's the time to act. Some economists are expecting 30-year fixed-rate mortgages could average 7% by the end of the year.

Indeed, there are four good reasons to consider refinancing now:

  • You're paying 7.5% or more on any kind of mortgage.

  • You have an ARM that has recently reset or is going to over the next year. This is especially important if you've been enjoying an introductory rate of 4% or 5% and you'll soon be paying 7.5%, 8.5% or more. Just be sure either you don't have a pre-payment penalty clause in your mortgage, or it's one that you can handle.

  • You have significant equity in your home and can use a cash-out refinancing to make improvements or payoff high-interest credit card bills. This is still a cheaper way to get that money than a home equity loan or line of credit.

  • You can afford higher monthly payments. Swapping a 30-year loan for a 15-year loan will save you a pile of money in the long-term.

Although rates are important, the key to a successful refinancing is to be sure that you stay in the house long enough to recover the cost of a new loan.

If, for example, refinancing cuts your payments by $100 a month, but you paid $2,000 in closing costs to obtain the new loan, you would have to live in that house for 20 months before you actually begin saving.

With that in mind, take a look at your mortgage and see if refinancing can:

Lower your monthly payment.

An old rule of thumb says that you shouldn't refinance unless you can save two percentage points on your mortgage rate. But if you can save even one percentage point, you're throwing money away every month by not refinancing.

If, for example, you have a mortgage for $165,000 at 7.5%, you're paying about $1,154 in principal and interest each month. Refinance to 6.5% and you'd be paying $1,043 a month. That's $1,332 a year less, or $6,660 less over five years.

Now subtract the cost of the refinancing, let's say $1,000, and you'd still save $332 in the first year and $5,660 over five years.

Consider the same loan with only three-quarters of a point rate reduction. A 30-year loan at 6.75% would cost $1,070 a month in principal and interest, saving $84 a month or $1,008 a year.

If you can get a new loan cheaply enough-fees of $1,000 or less -- that's still a good deal. You would probably save enough to pay off a credit card or do some much needed home repairs.

Get you out of an increasingly expensive adjustable-rate mortgage.

Many borrowers over the past few years were given artificially low introductory or "teaser" rates on adjustable-rate mortgages. If that rate is about to end -- or has already ended and begun to rise -- you should refinance.

While that initial rate was probably less than you could get on a fixed-rate loan, the new rates will be higher.

That's because lenders determine how much they charge on an ARM by taking a benchmark interest rate -- such as what the government is paying to borrow money for a year -- and adding a premium or margin. If your credit is good, that might be 2.5 percentage points. If your credit isn't so good, it might be as much as 7 percentage points. (If you're unsure about your loan, check the mortgage documents. The formula is spelled out in there.)

Even with good credit, many ARMs are adjusting to more than 7%. Some loans may take a couple of years to get there because they have a cap that limits annual increases to 2 percentage points. But that's where they are headed.

Although you might want to refinance to a 30-year fixed-rate loan, the lower your credit score the more difficult it will be for you to qualify. Borrowers with credit scores below 620, who must apply for high-cost subprime loans, will have the toughest time.

Lenders will want documents that verify every aspect of an application, especially your income and assets, something they frequently ignored just six months ago.

They're also demanding that you have at least some equity in the home -- a huge problem for borrowers who put no money down and financed the entire purchase with negative amortization loans that allowed their debt to grow faster than their homes appreciated in value.

To save them from foreclosure, Ohio has a new state-supported program that allows homeowners with little or no equity to refinance into 30-year fixed-rate loans at 6.75%. Other states will likely follow this lead, so ask your lender if he or she is aware of any such programs.

When you refinance avoid especially dangerous loans such as option ARMs or interest-only mortgages, no matter how cheap the initial "teaser rate" or payments might be.

Click here for more advice on what to do if your mortgage payments are going up.

Free up cash from your home.

High on the list of reasons to refinance is the popular "cash-out" refinancing that allows you to borrow more than you owe on your current loan and pocket the difference.

Let's say you owe $100,000 on a $200,000 home. You could refinance for $125,000, pay off the $100,000 balance on the old mortgage and keep $25,000 for yourself. That was an attractive option when you could refinance to a lower interest rate or one that was close to what you were paying. But soon that might not be possible.

With good credit, most lenders will allow you to refinance up to 80% of your equity -- in this case, $80,000. In most cases we do not advise taking 80%, but it's there if you need it.

There are lenders out there who will lend you up to 125% of the value of your home. Bad idea! Suddenly you owe more than your home is worth, making it difficult to sell without coming up with a lot of cash.

According to Freddie Mac, the government-backed agency that buys, packages and resells mortgages to investors, 82% of all the refinanced loans it bought between January and March 2007 were cash-out deals.

Used responsibly, it is often a less expensive way to tap into the equity in your home than by getting a traditional home equity loan or line of credit, which will cost you in the neighborhood of 7.75% to 8.25% right now. But spending that money on home repairs, credit card debt, unexpected medical bills or your kid's college tuition makes good financial sense.

Here's what we consider to be the six best and five worst ways to spend the equity from your home.

Reduce your interest payments.

If you can handle higher monthly payments, you can save in the long run by refinancing into a shorter-term mortgage.

Switching from a 30-year to 15-year loan means your total monthly payments would grow from $632 to $844 for every $100,000 you owe because you'd be paying the principal back twice as fast.

But you'll ultimately save money two ways:

  • The shorter the loan, the lower the interest rate. While the average rate for a 30-year mortgage is right around 6.5%, it's only 6% for a 15-year loan. That will save about $40 a month in interest for every $100,000 that you borrowed.

  • The faster you payoff the principal, the less interest you'll pay over the life of the loan. Instead of spending $127,544 for every $100,000 you borrow, your total interest costs on a 15-year loan would be less than $51,900.

But only do this if you are in the first 10 years of your 30-year loan, or if the 15-year rate is extremely low. Have your lender run some numbers on how much you would save in interest before you decide.

If you can't swing the 15-year payments, check the numbers on a 20-year mortgage.

By Carolyn Siegel Associate Editor

Five Helpful Tips for Debt Management

By Greg Mischio

Some people say that money makes the world go round. But if you're heavily in debt, the only thing money does is make your head spin. The following five tried and true tips can help you regain your financial bearings.

Keep track of the greenback

If you're on the hunt for ways to save money, start acting like a hunter: Track your debts. Keep a budget, tabulating all the areas where you spend money. From that point, it's easier to prioritize and decide where to cut back.

Higher interest rate, higher priority

If you've got a lot of debt, chances are that it's spread out over numerous types of loans and credit cards. Your top priority is to pay off the balances on whatever card or loan carries the highest interest rate. All those high rates-even if they're on smaller balances-add up to one hefty payment.

Transform bad debt into good debt

Not all debt is created equal. There are good debts, such as loans for education and home mortgages. These debts increase in value as you pay down the principal on your loan. A college education, for example, boosts your earning power. And a home appreciates as you pay down your mortgage. Try to consolidate the bulk of your loans into these types of vehicles.

The minimum costs you the max

Most credit cards require only a minimum monthly payment. However, by paying more than the minimum, you increasingly chip away at the principal each month. You'll pay off your debt faster and reduce your long-term interest.

There's no debate: consolidate

Remember all that we've mentioned about paying off high-interest debt and using good loans to get ahead? It all comes home to roost when you use a home equity loan or mortgage refinance for debt consolidation. You move from high-interest credit card debt to one loan with a lower, tax deductible interest rate.

If you're committed to follow these five simple steps, give yourself a high five. You'll soon be working your way out of debt, saving hundreds-and perhaps thousands-of five dollar bills in the process.

Bad Credit Mortgage Loans - How To Get Approved

Persistence is the key working toward getting approved for a bad credit mortgage loan. There are many factors that you, as a borrower have control over that can help you get approved faster and easier. There are guidelines that most sub-prime lenders go by that, if you know them, can help you move through the process without getting stuck, unable to get financing.

If you have a bankruptcy or foreclosure, even if they are recent, do not despair. Many sub-prime or bad credit mortgage lenders have what’s called, guidelines for bankruptcy or foreclosure seasoning. That means that they have a set amount of time that must go by from the time of a bankruptcy or foreclosure before they will lend to a borrower. Usually this time is 2-3 years, but many sub-prime lenders have no seasoning time, which means, if your credit score is above a certain point, you could get approved the day after your bankruptcy discharge. Other sub-prime lenders have bankruptcy or foreclosure seasoning of 6 months or a year. The biggest factor here will be your credit score.

Sub-prime or bad credit mortgage lenders will look closely at your credit score. In order to get 100% financing with bad credit, lenders will usually need to see you have a credit score of at least 600 or higher. There are quite a few things you can do to raise your credit score to be above this 600 mark. Here are a few suggestions:

1. Check your credit report for inaccuracies. Make sure all accounts included in bankruptcies and foreclosures are reporting accurately. If they show up as an open collection or unpaid account, charge-off or something else, this could be unnecessarily hurting your credit score. It will look like another, separate credit blemish instead of just the one. Make sure the bankruptcies and foreclosures are reporting accurately. Make sure accounts that are paid off, show up as being paid off, or accounts that are closed, show up as being closed.

2. Pay-off any small collection accounts or past due accounts that you can. Every account that you pay off will help boost your score. Once you have done this, get a letter of notification that the account is paid off and talk to your lender. Most lenders have programs where they can, for a £75 fee per item, provide proof to the credit bureaus that an account has been paid off and have your credit and credit score appropriately adjusted within a day or two. This program is sometimes called a “wrap it up” service. If you are in a hurry to get financed, this may be worth it to you.

3. Pay down open credit line balances. If you can even pay down the balances on any open lines of credit, this will boost your credit score. Your credit score is lowered when lines of credit are maxed out. You can make good use of your money by paying down credit card balances to boost your score.

Once you have used some of these techniques to boost your credit score, be persistent about contacting and applying with many different bad credit mortgage lenders. Many bad credit mortgage loan brokers claim that if they can’t do the loan, then no one can. That is simply not true. All mortgage loan brokers have connections with many different lenders and loan programs. What may be impossible with one, can be very possible with another broker. If your score is around 600 or slightly higher, you will probably have a pre-payment penalty. Pretty much all bad credit mortgage loans will come with a pre-payment penalty. Talk to your lender about the details of the pre-payment penalty. Find out how long the penalty will last and exactly how much money the penalty is. How much is the fine for pre-payment on the loan? This is an important factor to consider when comparing lenders.

To get a approved for a bad credit mortgage loan, be persistent, work on your credit score as much as you can to get it above that 600 mark and apply with or contact many lenders to compare mortgage loan programs.


Bad Credit Mortgage Refinance Tips

Not to long ago if you had bad credit it was hard for you to get a loan to buy a house. There were not as many options as there are today. That is not true today. Many lenders have programs for first mortgage loans and refinancing as well. Here are some tips on how you may be able to refinance your mortgage if you have bad credit.

First of all try and work with a mortgage professional who specializes in mortgage refinancing for those with bad credit. You may have more options available than you realize. A mortgage loan consultant who deals with bad credit applicants everyday is going to be on top of the different types of loans just for your situation. Your job is to provide all of the information to them in an honest and timely manner. Hiding something that may come up later does neither of you any good.

Did you know you can get a copy of your credit report from the major credit bureaus one time each year. Knowing how your credit score is improving can impact whether you want to refinance as well. Over time previous things that had a negative effect on your credit can go away or be removed. It is to your advantage to know your credit score before you refinance your mortgage.

There are 3 types of mortgage refinancing loans. A fixed rate loan has an interest rate that stays the same over the life of the loan. An adjustable rate mortgage loan is know as an arm for short. In an arm your interest rate adjusts over a period of time. In a hybrid loan the interest rate is fixed for a period of time and adjusts for the rest of the loan. A point is equal to 1% of the total loan amount. Determining whether you want to purchase points when you refinance is one thing to discuss with your mortgage expert. Understanding the 3 loan types will help you decide which interest rate to choose.

As property values have risen over the years many lenders will loan people with bad credit money if they feel secure in the value of the property. If you are refinancing and have seen the value of your home increase since you last refinanced or since your loan originated then you have options. A bad credit mortgage refinance may be possible for you. Consult with a mortgage advisor to see if this is true for you.

Article Source: ADB Article Directory

By: Jeff Schuman

6 Tips To Help Your Home Refinancing Decision

Home refinancing proves to be an intelligent financial move if you make the decision at the right time. On the other hand, if you make a bad refinancing decision, you could be faced with complexities and problems that could drag you into financial tangles and even to bankruptcy. The tips below will hopefully prevent you from taking such a bad home refinancing decision.

Weigh Advantages And Disadvantages Of Several Lending Institutions

A few decades ago, only the banks and a few building societies were there to offer home refinancing loans. But today you have a wide range of options for obtaining a loan from other credit institutions like RAMS. Consider all the alternatives to find the most suitable credit institution.

Compare Loans

Never settle on a particular loan product that initially grabs your attention first. Different products come with different features, terms and conditions, and interest rates. You have to compare between different loan products to find out which of the combination of all these features work best to your advantage. The internet is the best place to make such comparisons and locate the loan products and lenders that best match your individual needs.

Do Not Decide On Loan Product Based Solely On Interest Rate

The best home refinance loan may not come with the lowest rate of interest. You have to take into consideration the other features and services as well. For example, there are some low rate loans that will charge you an exorbitant application fee. Then there are other cheap loans where you pay lower rate per month, but over a longer span of time, thus forcing you to shoulder a heavier burden in the long run.

Referrals A Good Way Of Securing Information

It is a good idea to seek information from friends and relatives on the matters of home refinancing loan. In fact information from family and friends make for the largest source of home loan information.

Consider The Services Offered

There are big financial giants who make tall promises about flawless services only to take weeks to give a clearance to your loan. In most cases paperwork gets lost or delayed. These situations will be more manageable if you deal with a representative who can keep a constant tab on the lender on your behalf.

Consult With Your Mortgage Provider

Last of all, before resorting to refinancing; speak to your first mortgage provider. They may offer you a better deal than any one else.

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Bad Credit Home Loans for First Time Home Buyers

By: Joe Ramirez

Is bad credit keeping you from owning a home? Many people are fed up with renting and feel that their credit situation is keeping them from purchasing a home. If you feel this way, you are definitely not alone. Thousands of individuals and families across the US think that they are stuck in a rental due to bad credit. There is good news. In many of these cases, the individuals think that their situation is much worse that it truly is. Examining your credit report, finding out your credit score, and speaking with a mortgage professional are three basic steps that you can take to begin improving your situation. Once you know your current credit picture, you will be in a position to begin improving it.

Obtaining a copy of your credit report will allow you to see in detail the items that make up your credit profile. The first thing you will want to look for is errors and incorrect information. If you see accounts that aren't yours or information that is not correct, all you will need to do is contact the credit agencies and have the information updated or removed. Be prepared to send documentation to the agencies as well to support the changes that you are requesting.

Many companies provide credit scores as well. A score of 500 Or below is typically considered bad credit. A score between 501-580 is considered poor credit. A score of 580-620 is considered average. A score of 620-720 is considered good credit and scores above 720 are excellent credit. Scores can be deceiving at first glance, don't read too much into the report as there are a number of things you might be able to do to drastically improve your score in thirty days or less.

In many instances, mortgage brokers will be happy to evaluate your credit with you to determine the best steps for you to take in order be able to qualify for a home loan. Mortgage brokers are a great resource as they can direct you on how to improve your situation from a bad credit borrower to a good or even excellent credit borrower in the eyes of the lending industry. Also, many mortgage brokers have access to lenders and banks who specialize in helping people with not so perfect credit. A mortgage broker can also help you determine what type of payment and loan you can afford. With this information you can begin looking for homes in your price range and avoid spending time on properties with price tags and payment that may be out of your reach.

Don't be afraid to ask questions when speaking with a mortgage broker. Also, be sure to give the broker honest answers. Be sure to discuss possible rates, payments and fees with your broker. As a rule of thumb, the better your credit, the better the loan. If you can improve your credit, you will have a good chance of receiving a lower rate and less fees. Also, if your credit score is below 620, you may need to make a down payment on the property of up to 20% of the purchase price. If your score is above 620, you have a good chance of qualifying for a zero down home loan.

Even if you have bad credit, you may be able to qualify for a new home loan. If you do have bad credit and have the ability to put money down to purchase a home, you may want to take a look at making the purchase even if the loan terms aren't exactly the best on the market. Once you have a mortgage reporting on your credit report, you begin demonstrating to the credit agencies and to future lenders that you are not as risky of a borrower as you once were. However, you have to be sure to pay the mortgage on time as paying it late will keep you in the bad credit bracket.

Remember, if you have bad credit, but are willing to take the necessary steps to improve your financial situation, you could be closer than you think to qualifying for a home loan. If you haven't done so already, obtain a copy of your credit report and contact a mortgage broker to discuss your situation and identify the steps that you can take to transform yourself from a bad credit renter to a good or even excellent credit homeowner.

Article Source: ADB Article Directory

Refinancing Your Home Equity Line of Credit

These days, borrowers use Home Equity Lines of Credit (HELOCs) to assist with all sorts of expenses. Some of the most popular reasons for taking out a HELOC are college tuition, medical expenses, home remodeling, and debt consolidation. Because the interest is tax-deductible, a HELOC can be a very attractive option when you need to borrow money. You may also take out a HELOC at the same time that you secure your first mortgage when buying a home in order to finance a greater percentage of what the home is worth without the need for mortgage insurance.

Whatever the circumstance were when you took out your HELOC, the time may come when you decide to refinance it. The factors pertaining to why and how you go about refinancing your HELOC will be as individual as you are. Make sure you have clear goals as to why you are refinancing, and be certain those goals can be met by the program you choose.

One reason to refinance a HELOC, and the first one that comes to most people’s minds, is the interest rate. This may or may not be a good reason depending on a few factors. Your HELOC carries an adjustable rate; therefore if rates go down, so should your payment amount. If rates are steadily rising, however, and especially if they’re expected to continue to rise, refinancing your HELOC back into your first mortgage, or into a closed-end second mortgage with a fixed rate, might make the most sense.

If you originally took out your HELOC for a project or expense such as college tuition or home remodeling and that project is now completed, you may just be looking to refinance your first mortgage and your HELOC into one loan with a low fixed rate to avoid the potential for a rising rate and increasing payments in the future. Having a single loan with a fixed rate offers you the satisfaction of knowing that your payment amount will never go up.

Conversely, if you’ve come to the conclusion that you need to be able to draw more from your HELOC than you’d first thought, you can refinance it or, more correctly speaking, take out a new HELOC for a greater value. Keep in mind that you’ll have to pay additional closing costs, and that unless you can start making much larger payments, it will take you longer to pay back the larger HELOC amount. You should carefully consider your needs and options before opting for a HELOC with a larger credit line.

When the time comes to refinance your HELOC, don’t hesitate to consult with a financial planner or a loan officer. These professionals can advise you on whether your reasoning is financially sound and about the kind of program you should choose to meet the needs and goals you’re setting for yourself.

Find Home Equity Credit Line Rate

The intro to this find home equity lines of credit review is going to include the basics, that is pursued with an even more intense look on this branch of learning.

Mortgage as a source of a line of credit

If the time comes that you are in need of a loan, a sensible and efficient means of cash to borrow is a home equity line. For starters, a home mortgage can provide you a large sum of capital with a relatively low rate of interest. Also it gives you a degree of tax reflief not available from other types of loans.

HELOC always require possessions or land to be placed as security for the borrowed funds. Obviously, this type of a move might endanger your house if you default on a loan or even if you are in arrears with the payments.

A loan with a `balloon payment`, i.e., a big payment when the entire loan is due, may result in your borrowing a larger sum of capital in order to pay off the loan. It may place your home in danger, too, if, in the procuring of the first loan, you are deemed ineligible to get equity loan. If you put your home on the market, the provisos of the majority of loans oblige you to pay off all debts on your credit line at that. While home loans online provide you with ready money very simply, you tend to take loans more freely, as well.

Other alternative Substitute to home equity lines of credit

It`s good to remember that there might be many additional means of borrowing capital besides home equity loans. Second mortgage loans are an example of a viable alternative. Certainly, subsequent mortgage plans place an extra onus on your house or land, in terms of an added home payment. But, the money lent is typically delivered as a single large payment, not as advances through continuing charges to a card or bank account. In addition, a home equity line usually has a rigid rate and rigid scheduled payments.

One more alternative, favored over getting a loan directly, is a credit line that doesn`t employ your possessions as security. Under the right circumstances, this might be available to you with a charge card, or an unsecured credit extension, letting you pay by check if you need money. Facts about loans for particular items, for example, purchasing an automobile or tuition costs, is available whenever you need it.

How to Get a Home Equity Line of Credit

by Staff Expert

A home equity line of credit is like a special checking account that taps into the equity in your home, allowing you to make improvements, pay for education, buy a car or whatever you want. And the best thing is, the interest is tax deductible!


Difficulty: Moderately Easy

Step One

Contact your banking institution. If you are already doing business with this organization, it might be more willing to keep you as a customer.

Step Two

Contact local banks or savings institutions, which are more likely to do these types of loans.

Step Three

Contact a local real estate mortgage broker for references of lenders who offer credit lines.

Step Four

Look for the credit line with the lowest interest rate.

Step Five

Compare terms. Most credit lines have a "draw period" (the period during which you can write checks and tap into your equity) of 10 years, and an additional repayment period of five years, for a total of 15 years.

Step Six

Provide the documentation required by the lender. If the lender is a local bank or savings institution - rather than a mortgage lender - the time, fees and documentation required to complete the transaction may be significantly reduced.

Tips & Warnings

  • Typical lines of credit require a minimum monthly payment of 1 percent of the used portion of the loan.

  • If you don't use the money in your credit line, you don't pay on it. You only pay interest when you actually use the money.

  • A line of credit is secured by your home. Failure to repay could result in foreclosure and losing your home.

  • Protect your checks! The checks that the lender provides you draw money directly from your equity.

Choosing the Right Home Equity Loan Option


Are you bewildered by the staggering number of loans designed to let you tap into your equity? The options seem endless, but they don't have to be "too much of a good thing." The first step toward choosing the right home equity loan option is deciding how you want the money. The following loan choices are described in terms of whether you want money in a lump sum (ideal for short-term needs like home improvement projects or a vacation), or smaller, incremental withdrawals (perfect for college tuition payments).

Cash-Out Refinancing-Lump sum

If you're looking for a lump sum of money, and rates on first mortgages are low, the cash-out refinance is a great call. This involves refinancing your first mortgage and cashing-out a lump sum of equity. In this case, closing costs are higher than with a second mortgage. However, if rates for first mortgages are lower than what you currently hold, you could wind up with a hat trick: A lower monthly payment, long-term interest savings, and the cash you need. With a hat trick like that, your financial life won't be skating on thin ice.

Home Equity Loan-Lump sum

The home equity loan has a fixed rate and term, and, like its sister, the home equity line of credit (HELOC), is considered a "second mortgage." Because first mortgages must be satisfied "first," if a bank is forced to sell a house because of a loan default, lenders charge a slightly higher rate for second mortgages. However, if your first mortgage is at a low rate, the home equity loan might be just the ticket for a lump sum cash withdrawal.

Home Equity Line of Credit (HELOC)-Incremental withdrawals

A HELOC, like the home equity loan, carries a higher interest rate than a first mortgage. It's a popular choice for people who are looking to tap their equity for regular payments that spread out over time. Borrowers who need to make college tuition payments choose HELOCs because they work in a similar manner to credit cards: You have a pre-set credit limit, which you may draw upon when you need it. You're only charged interest on the amount you tap, and the rate is generally tied to the prime lending rate, which is relatively stable.

These are the three most popular ways to transform the equity in your home into cash. All you need to do is decide whether you want a lump sum or incremental withdrawals. Once you make that choice, refer to the general guidelines listed above. It should narrow down the vast universe of lending options to a home equity loan that meets all your needs.

Using a Home Equity Line of Credit to Reduce Debt


A home equity line of credit is a loan that is taken against the equity in your home. In practice, however, it operates more like a credit card than a mortgage. The collateral on the loan is your house and, depending upon where you live, local lending laws will regulate how much you can borrow.

The interest charged on a HELOC is usually equal to the prime rate plus an additional amount charged by the lender. The better your credit rating, the more attractive the interest rate generally will be. Therefore, it pays to shop around and find the best deal in town. At, we can help you connect to a lender who can help you meet your specific needs.

Home Equity Line of Credit vs. Credit Cards

How is a home equity line of credit different from a card line of credit? First, you're borrowing against the equity in your house. Whereas your credit card limit might top-out after you spend a few thousand dollars, a HELOC might be worth almost as much as your house. If, for example, your home equity line of credit is $150,000, you can borrow that amount and use it for whatever you want.

Your HELOC will have an adjustable rate, and the rate is normally calculated based on the going rate at the time you withdraw funds. You decide when you want to use the HELOC, and then access your credit line by writing a check or using a special debit card.

Debt Consolidation through a HELOC

One of the most popular uses of a home equity credit line is to consolidate high-interest credit card balances, and pay them off before the penalties, interest payments, and annual fees become an unwieldy burden. Many homeowners go into debt while paying for necessities, like furniture, landscaping, and appliances. Soon, they have maxed-out their credit cards, and the outrageous interest rates charged by credit card companies accelerates until the debt is out of control. By using a HELOC, it's possible to pay off all credit cards, and replace them with a single, easy-to-manage loan. And the HELOC can be paid off gradually, over a long period of time.

Check around for the best rates. A home equity line of credit can free you from debt, and help you improve your credit rating at the same time.

Four Good Reasons to Refinance your Home

By Jan Lindsey -

The effects of refinancing your mortgage can be dramatic, since it's a tool you can use to improve your financial situation. To take best advantage of it, look at where you are and assess your needs. Then explore the market.

Begin by asking your current lender about a mortgage refinance. They already know you, and you may get your best deal from them. But don't stop there. It's always important to shop around.

Here are four great things a mortgage refinance can do for you:

1. Lower your monthly payment

Simply exchanging a higher interest rate for a lower one will reduce your monthly mortgage payment. But you may also be able to lower your payment by changing from one type of loan to another.

Moving from a fixed rate to an adjustable rate may put more cash in your pocket each month, but it works best if you know you'll move before the initial rate ends.

2. Stabilize your mortgage rate

If you already have an adjustable rate mortgage and your initial interest rate period is about to end, you can refinance to a fixed-rate that may save you money over time. The interest rate on an adjustable-rate mortgage can keep climbing. A fixed-rate loan takes the guesswork out of budgeting.

3. Put cash in your pocket

You can get funds by doing a cash-out refinancing, where you can draw on your home's equity by borrowing more than you currently owe. It can be cheaper than taking a home equity loan or second mortgage, which generally carry higher interest rates.

4. Make your debt more manageable

If you have enough equity in your home to cover your other debts, refinancing to get the cash may work to your advantage. It may reduce your total monthly payments and the larger mortgage may be tax deductible, an advantage not available with credit cards. To make this plan work, you'll naturally need to refrain from running up credit card debt again.

It's important to define your needs and your abilities before refinancing. Once you know what they are, it will be easy to find the right refinance mortgage deal.

Top 2 Reasons To Use Home Equity Loans For Debt Consolidation

By: Susan Jan

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.

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Home Loan Refinance and Debt Consolidation

By Carrie Reeder

Refinancing your home loan and cashing out part of your equity can help you consolidate your debt with lower rates. By starting with a pay off plan, you can enjoy being debt free in a few years. As with any type of refinancing, check out loan terms before committing to a lender. Shopping lenders will save you money in fees and interest charges. But, don’t be afraid to lock in rates when you do find a great deal.

Create an Eliminate Debt Plan

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

Next, check your home equity balance to see if it will cover your short-term debt balance. Don’t forget to include your home’s appreciation. In some housing markets, a home’s value can increase by double digits in a single year.

Check Out Home Loan Terms from Multiple Lenders

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

When requesting quotes, just give basic information about your credit. You don’t want a lot of inquiries into your credit report since that will lower your score. One option is to get a free copy of your credit report and submit that information to lenders for a more accurate financing offer.

Apply Online to Lock in a Low Interest Mortgage Rate

Jump on an offer that you think fits your financial situation. Rates change daily, so you don’t want to wait too long before locking in rates. This is also the time to let lenders look at your credit report for a specific mortgage offer.

Saving money with a home equity line of credit calculator

With every mortgage payment, you’ve invested more valuable equity in your home. Depending on the amount of that equity, you could borrow cash to pay for home renovations or college tuition, or to consolidate high-interest credit card debt. How much can you borrow? Use our handy home equity line of credit calculator.

There are two basic types of home equity loans: the second mortgage and the home equity line of credit (HELOC) loan. A second mortgage is paid in a single lump sum, while a HELOC typically works more like a credit card account, allowing you to withdraw funds as needed. You repay a second mortgage at a fixed monthly amount; payments on a HELOC are determined by how much you have borrowed against your credit line, and the current interest rate.

Since HELOC rates are generally adjustable, a home equity line of credit calculator can help you estimate the amount of your monthly payments and budget for the change in your expenses. Often, the interest rate on this type of loan is substantially lower than that of a credit card account. If you use the HELOC to consolidate debt and pay off your credit cards, your overall monthly payments could decrease. Improved cash flow means more savings for you.

Using a home equity line of credit calculator can also help you decide which type of loan to choose. You may find that your needs are better served with the predictability of a second mortgage. Since the interest rate is fixed, your payments will never increase.

On the other hand, if you are paying for expenses over a lengthy period of time (for instance, four years of college tuition) and do not need to get all the cash at once, a HELOC could be the smart choice. After all, you only make HELOC payments based on the amount you’ve borrowed – not the total amount you are qualified to borrow.

Here’s an example of how the home equity line of credit calculator works: Say you’d like to borrow against your equity to consolidate some debt and contribute toward your daughter’s wedding expenses next year. The amount you can borrow depends on the appraised value of your home and the balance due on your mortgage. If your home is appraised at $400,000 and you owe $235,000, you could qualify for an $85,000 credit line.


Bad Credit Refinance Loans - Finding a Good Lender

by Carrie Reeder

Finding a good lender to help you with refinancing your home loan can be tricky if you have bad credit. There are plenty of predatory lenders out there who would like to take advantage of you with excessively high interest rates and fees. The key to finding a good lender is to know what are reasonable terms and to compare lending companies.

Look At Your Credit Record

Credit records are not perfect accounts. Before you apply to refinance your loan, you should check to see that all your information is correct. If you believe there is a false record, resolve it with the credit reporting company.

You also want to know what your credit score is. The lower the score the higher rate you will have to pay, but at least you will have an idea of what to expect from a lender. Paying three to five additional points is common for people with bad credit history.

Compare Lenders

Lenders offer different rates for the same type of loan, so shop around. The easiest way to compare quotes is to use an online website. By entering your information online, companies compete for your loan, offering you better rates. The internet also allows you to compare mortgage lenders outside your local area, possibly finding a better deal.

Once you receive offers, compare the rates and fees. Often the fees are where lenders make their money. Adding up the interest and fees, and comparing that figure will give you the true cost of the loan.

Look For A Good Deal

Mortgage lenders increase their profits by pushing loans with high interest rates and points. Some lenders will push these types of loans even if they aren’t best for you, so beware of fast-talking dealers. Be sure to read the terms and look for hidden fees before you sign the paperwork.

Online mortgage companies eliminate some of this risk by requiring mortgage lenders to state their terms online. Online quotes are also more competitive since lenders know you are probably shopping around to refinance your loan. Once you have an offer, print out the terms for your records.

Bad Credit Home Equity Line Of Credit

Bad credit can increase the difficulty that a homeowner encounters when seeking a home equity line of credit. Bad credit can be the reason for a poor credit score.

by Jonny Goldmann

Bad credit can increase the difficulty that a homeowner encounters when seeking a home equity line of credit. Bad credit can be the reason for a poor credit score.

What is a credit score?

The credit score varies between the values of 300 and 850. The credit score is the creation of the Fair Isaac Corporation. Lenders who arrange for a home equity line of credit use the credit score in order to set the interest rate that will be charged the homeowner.

Homeowners with a low credit score will need to pay higher interest payments. A score above 700 is assurance of good interest rates. The credit score also serves as an indicator of whether or not a lender should accept a homeowner’s application for credit. Decisions on credit limits for the homeowner are likewise based on the homeowner’s credit score.

The credit score is a function of the homeowner’s past line of credit. In the U.S., three different agencies keep a record of each consumer’s line of credit. Those agencies are Experian, TransUnion and Equifax. If a homeowner with a low credit score wants to raise that score, then the homeowner must contact each of those three agencies.

The effort to overcome a record of bad credit and to raise a credit score requires the contesting of false claims that money is owed. If the homeowner can prove that the claim for money is spurious then the homeowner has an opportunity to raise his credit score. This action should be taken if the homeowner who plans to seek a home equity line of credit has a score less than 640. Such a score would be a sign of bad credit.

The contesting of a credit score is not like a shot in the dark. A survey of credit reports in the U.S. showed that 80% of such reports contained mistakes. Thus, a homeowner could have good reason to question the credit score that is being used to determine the interest rate on a home equity line of credit.

The credit score for a couple, a pair that are joint homeowners, is based on three credit scores from the person with the most sizable income. This is the score that the homeowner needs to make correct. Such correction may require a written statement to each of the above-mentioned agencies. Those agencies will then contact the homeowner and indicate if more information is necessary. If the homeowner is lucky, then the credit score will be increased and the interest rate for the desired home equity line of credit will be lowered.

Once the homeowner has a good credit score then he will want to avoid slipping back into that region of bad credit. This means that the homeowners must avoid the sort of spending that carries them to the borders of their credit limits.

Cash out Refinancing

In simple terms, refinancing a loan means getting a new loan. When new interest rates fall below your current interest rates then you need to take benefit of the lower new rates by refinancing your current loan. If after taking into account all the costs of refinancing you save at least $300 a month, it is worth doing it.

100% Cash out refinancing is a refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

In this case the homeowner would take out a new loan large enough to cover the first mortgage with enough left over to cover another large expense. The extra amount borrowed is based on home equity. Home equity is the value of your home that you own, in other words, the worth of your home above and beyond the mortgage that you owe. If your home would sell for $150000 and your mortgage is 100000, you have 50000 in equity. Many lenders will allow you to borrow up to 85% of your equity.

The interest rate you pay on a cash-out refinance loan will generally be the same as what you pay on a loan where you don't take cash out. However there may be a small fee associated with a cash-out refinance loan depending on the specific loan you choose and the loan-to-value ratio.

Generally, one gets 70% to 80% of home equity but in 100% Cash Out Refinancing unlike any other refinancing one gets 100% cash. In normal course, people don't know about 100% cash out refinancing, as they need 20 or 30% of equity in their home. So, getting 70% or 80% of the value of their house satisfies them.

However, 100% cash out refinancing is generally taken up by the borrowers who have other expenses standing at their head like bills such as high credit/debts cards, educational expenses, other loan payments etc. So you can get cash out refinancing and payoff all your high interest credit/debt cards and other expenses. Added to this you can also save many dollars each month.

Often mortgage lenders speculate the situation of homeowners who have other bills beside their mortgage payment. They then they offer up to 100% cash out financing option, thus giving those burred with bills peaceful sleep. Many lending company do not offer 100% cash out refinancing but then you can always find out people who do.

Suppose you decide to apply for 100% cash out refinancing then on the lender part it is an 80/20 loan or sometimes 100% one loan depending on your credit. On 80/20 loans, which is a 100%, cash out refinancing loan is amounts to receiving a first and a second mortgage at the same time. The first mortgage covers 80% of the home's value while the second mortgage covers the remaining 20%.

If your home would sell for $150,000 and your first mortgage is 100,000 and second amounts to 50000, thus a 100% cash out financing! After the first couple of years some homeowners realize that their home mortgage is not as good as they originally thought. Some families realize that low interest rate is no longer 'low' as compared to current rates.

Some other realize that a fifteen year mortgage results in monthly payments too high for them to meet or that a thirty year mortgage does not build equity quickly enough. Some may have an urgent requirement of money to spend on wedding, purchase a new car or educational purposes. Cash out refinancing is then an easy technique for such people because it allows the mortgage and the new purchase to be paid from the same monthly bill.

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