Refinancing home mortgages | Happy new year 2008

we wish you happy new year 2008. Hope my contribution would be better thanks

Home Equity Loan | With A Reverse Mortgage, Your Home Pays You!

The home equity loan has become quite popular in the last five years, and Americans have tapped into the equity of their homes in record numbers from many other countries. The reasons vary, although home improvement and debt consolidation are the most common reasons for borrowing against a home's equity.

In the last fifteen years or so, a new twist has arrived in the home equity market ?- the reverse mortgage. Like a traditional home equity loan or line of credit, a reverse mortgage allows you to borrow against the equity in your home. Unlike those other options, you don't have to make payments in order to pay it back. The repayment takes place when you die, when you move, or when you sell your home. You must be at least 62 years of age to qualify, but unlike other loans, you do not have to have any appreciable income in order to get a reverse mortgage.

There are a number of advantages of a reverse mortgage over a traditional home equity loan:

Your options of receiving the money from the loan include a monthly payout, although you may also elect to receive a lump sum or a credit line. A monthly payout would effectively provide you with a regular "income" during the remainder of your time in your home.

The loan isn't due until you move, sell the home, or die. There is no repayment schedule, as with regular installment loans. At the time of your death or when you sell the house, the loan must be repaid with interest.

The amount you have to repay cannot exceed the value of your home. With this feature, you are protected should your home decline in value. The lender cannot force you to pay more than the value of the home.

Due to the age restrictions on reverse mortgages, they are not for everyone. But if you qualify, it could provide an excellent opportunity to have an income during your retirement years.

Home Equity Loan | When Does Refinancing Make Sense?

For the last two years, interest rates have been much lower than anytime during the last thirty years and the tendency is going low. This has resulted in an unprecedented boom in real estate sales, home refinancing and home equity lending, as borrowers try to take advantage of these rates for the long term. But refinancing or even borrowing against your home's equity may not make sense for everyone. When is it a good idea to refinance your home? When is it not advisable?

Traditionally, lenders advised homeowners not to refinance unless doing so would lower the interest rate on the loan by 1-2%. While anyone who can save 2% on their interest rate would almost certainly benefit from doing so, others might find refinancing worthwhile even with a smaller reduction in the interest rate. Increased competition among lenders has brought the costs of refinancing down in recent years, so homeowners can realize a significant reduction in their home payments with reductions of ½% or so, depending on the size of their mortgage.

The key to whether or not refinancing makes sense is how long the homeowner intends to remain in his or her home. The costs of the refinancing, which can run $1000-2000, are amortized over the life of the loan. For many people, a reduction of $50 or more in the house payment would be more than enough to justify a new mortgage. If payments cannot be reduced by at least that much, or if the homeowner plans to live in the home only a short while, refinancing may not be a good option.

Refinancing may also make sense for those with Adjustable Rate Mortgages (ARMs.) At the moment, at 30-year fixed-rate mortgage is quite competitive with an ARM, and may actually be cheaper. With rates at historic lows, an ARM can only adjust upward, making it a less desirable choice in comparison with a fixed-rate loan.

Anyone considering a home remodeling project or debt consolidation might ordinarily think of a home equity loan or line of credit. These are often wise choices, as they offer deductible interest and great repayment flexibility. On the other hand, a chance to obtain a 30-year loan at 5% might make a complete refinancing with a cash-out option a better choice, as home equity rates are somewhat higher than first mortgages.

A new mortgage might also make sense for anyone with a second mortgage or a piggyback loan. A piggyback loan is a second loan used at the time of a home's purchase to help the buyer avoid paying the sometimes-expensive private mortgage insurance. Simultaneous payments on two mortgages will be higher than paying on one, so this might be a great time to roll them together on a refinance. The same applies to anyone carrying a large credit card balance; that money could be rolled into a home loan with deductible interest at a lower rate. Anyone considering such a move should be careful, however, as failure to repay that debt could lead to home foreclosure.

Now is a great time for any homeowner to consider whether or not a new mortgage could help lower their payments. With interest rates as low as they are now, the timing is great, and there's nowhere for the rates to go but up.

Refinancing home mortgages | Home Equity Loan Vs. 401(k) Loan -- the comparison

Home Equity Loan vs. 401(K) Loan, the conmparison

You've finally decided to add that patio you've always wanted to your home. Now you can enjoy barbecue outdoors and get a little fresh air every now and again. But how are you going to pay for it? If you're like most people, you don't have cash for home repairs just lying around the house. You'll have to borrow. So where should you go to borrow? Mortgage rates are low these days, so a home equity loan would be pretty affordable, as would a home equity line of credit (HELOC) if you have a number of remodeling projects in mind.

Then it occurs to you -- "What about my 401(K) money? I can get good terms on a 401(K) loan and borrow the money from myself!" That seems like a good idea. You can borrow the money from yourself and pay yourself back with interest! What could be better than that?.

On the surface, borrowing from your retirement savings may seem like a better idea than taking out a home equity loan. The terms are good either way, and the interest rates are probably comparable. So, why not borrow from your 401(K) account?.

There are several reasons why it may not be desirable to borrow from your retirement account:.

Most Americans fail to save enough for retirement, so borrowing from your retirement fund may leave you short later should you default. No one wants to be broke when they retire.

If you have a diversified 401(K) account, you will probably be earning interest on your retirement money. In fact, the interest rate you are earning on your retirement fund may exceed the interest rate you would pay for a home equity loan. In that case, you take out a home equity loan, leave the retirement money where it is, and you should earn a net gain between the two.

If your retirement fund is earning good interest, and in the late 1990's many were earning upwards of 20% per year, then borrowing on your principal could hurt you tremendously in the long run. Due to the nature of compounding, the amount you lose by borrowing from your retirement account could be far more than simply the sum of the loan amount plus interest.

The interest on a home equity loan is tax deductible, up to $100,000. The interest on a 401(K) loan is not.

There are certainly some circumstances where you might benefit from borrowing from retirement funds instead of taking out a second mortgage, but those situations are fairly rare. A substantially higher interest rate on the home equity loan than the 401(K) loan would be one such example. If in doubt, you should consult with a financial planner.

home equity loan | Home Equity Loan Tax Deductions

Interest - is an amount you pay for the use of borrowed money. so don't borrow too much

Several lenders are currenty offering amazing deals for 125% home equity loans. As highly advertized as these loans are they don't highly advertize that the interest payments on these loans are not neccessarily fully tax deductable.

To understand why these interest payments don't qualify as tax deductable lets look at what is considered a tax deductable interest payment. The IRS website states that to be considered for full tax deductable interest your mortgage must fall into one of these three catagories:

Mortgages you took out on or before October 13, 1987 (called grandfathered debt).

Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).

Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2).

As described by the IRS to be considered as home equity debt the amount of the loan must be equal or less then the Fair Market Value of your home minus any outstanding debt from your first or second mortgage up to a loan amount of $100,000.

For example, your home's fair market value is $150,000 your outstanding debt or mortgage is $115,000. This means the equity that you have built from your home is $35,000.

Now your looking to cash in and a lender offers you a 125% home equity loan, 125% x $150,000 = $187,500 subtract your outstanding debt of $115,000 and you have qualified for a $62,500 dollar loan. So finally lets divide this loan into two parts.

First $35,000 is your secured home equity debt and $27,500 is your unsecured home equity debt. The problem lies that as discussed before the tax exemption for interest paymentsonly covers the secured home equity debt amount, leaving you with the financial liability of paying off the interst on $27,500 of your loan.

*Their is a notable exception in regards to the purpose of the home equity loan. If the loan is used for home improvement it can possibly be considered as a "home aquisition debt" and the interest payments may be deductable for a loan greater then your actual equity value.

The best course of action is to always speak to a tax advisor regarding any type of home loan. Being aware of tax deductions and liabilities can save you a huge headache and possibly thousands of dollars!

Home Equity Loan | Still A Better Idea Than A 401(k) Loan

Anyone who borrows money is always looking for the cheapest source of funding, anyone even the richest man. That makes sense; no one wants to pay more in interest than is absolutely necessary. And anyone with a sizeable amount of debt, such as credit card debt or a student loan, would be wise to consolidate their debt with a lower interest loan. One source of such a loan is a 401(K) account, which many consumers may have through their employer. Since the interest rate on Federal student loans rose on July 1, many students who missed that deadline may be wondering if consolidating through a 401(K) loan is a good alternative. Is it?

In a previous article, we have outlined several reasons why borrowing against a 401(K) account may be less favorable than using a home equity loan instead. The reasons include the fact that the interest on a 401(K) loan is not tax deductible, and that the borrower loses the ability for his or her investment to compound over time. If you have borrowed the money, it can't earn interest and the cost over twenty or thirty years could be dear. In addition to those, there are other reasons why a home equity loan would be a better source of consolidation funds.

The 401(K) loan is tempting. There is no credit check, the interest rate is usually favorable, and you are paying the interest back to yourself. The additional disadvantages are considerable, though. The money you borrow from your retirement account was money invested before taxes. The money you pay back is after-tax money, effectively increasing the amount that has to be paid back. Worse, should you lose your job, the 401(K) loan must be paid back immediately, in full. Should this not be possible, the loan is treated as a distribution, requiring the payment of a 10% penalty in addition to state and Federal taxes. With the job market still rather volatile, the additional risk of borrowing against a retirement account is substantial.

Borrowing against a tax-deferred retirement fund is rarely a good debt consolidation option. The tax disadvantages, the threat of penalties and immediate repayment and loss of compounding generally make such a loan a bad idea. Those with existing student loans should probably keep them; the interest is tax deductible and the rate is still lower than with most other consumer loans. For most anyone else, a home equity loan would be a better choice, offering deductible interest, fewer risks, and a fixed repayment schedule. Anyone considering a consolidation loan should consider all of these options carefully, as the cost of choosing poorly could be substantial.

Home Equity Loan | The Risks

Home equity loans give individuals a tool to extend their existing credit line by securing debt on the equity value of their existing homes, it does not matter how many home do you have. This access to easy and cheap money can lure the borrower into securing a debt for reasons which otherwise could have been funded through wise money management.

Following are some home equity loans risks:

Risk of losing one's home:

The biggest risk involved in home equity loans is that of the borrower being rendered homeless. In the case of the borrower being unable to make timely payments of the interest and the principal, the lender can claim the existing house of the borrower. Thus a default in payment can lead to the loss of the home, which is used as collateral for the loan.

Hidden loan conditions:

Consumers who do not pay careful heed to the fine print may fall prey to the intrinsic conditions of the home equity loan, particularly those pertaining to principal and interest payments. For example, a balloon payment of the principal may add to the debt burden of the borrower and the inability to make the payment may result in foreclosure and thus loss of the borrower's house. The lender may also impose legal and procedural fees later on in the term of the loan, which may affect the actual amount payable by the consumer.

Higher interest payments:

If the equity loan is financed at a floating or variable rate, then it is subject to changes depending on the interest rate scenario in the economy. This may be because the interest payments fluctuate out of the bounds of the borrower's reach.

Besides these major risks, the home on which the loan is secured cannot be leased during the term of the loan. The loan on home equity will also effectively increase the time required to pay off the debt on the existing home.

Many times, the easy availability of an equity loan can tempt a consumer to take the loan for day-to-day expenses, which actually add to his existing debt burden.

The investment made by the money raised through raising an equity loan should be financially more rewarding than the interest paid on the loan.

All these factors should hence be taken into consideration before taking a home equity loan.

Home Equity Loan Or Home Equity Line Of Credit the comparison

The most common type of home equity loan is the term loan, Pay this stuff carefully . This loan is set for a fixed amount of time, anywhere from five to fifteen years. Such loans are typically granted for up to 80% of the value of the home, but some lenders will lend up to 125% of the home's value.

Is this type of loan right for you? The term loan works best for those who need to borrow a fixed amount of money for a specific purpose ? paying for a wedding, a home remodeling project, a fixed educational expense, or debt consolidation. This would give the borrower a fixed repayment schedule, where he or she would pay a set amount of money each month for a specific period of time.

An increasingly popular alternative to the home equity loan is a line of credit. This type of loan works like a credit card, and has a revolving line of credit, in which the borrower may borrow against the principal more than once over the life of the loan. The borrower is usually given special checks that he or she may use to write checks against the loan amount. The borrower may borrow a little at a time, or borrow all of the loan amount at once. Unlike the term loan, the interest rate on lines of credit tends to be variable. This type of loan works best for recurring expenses ? a complicated remodeling project accomplished in several stages, or a recurring educational expense such as annual tuition.

Each type of loan has its advantages and disadvantages; you simply need to decide if you want a fixed interest rate and fixed payments, or more flexibility in terms of when and how you pay. Your needs will determine which type of loan is best for you.

Either way, under current Federal law, the interest on a second mortgage is deductible from your income taxes up to $100,000.

Home Equity Loan | Not Just For Home Repairs, And Tax Deductible, Too!

Thanks to the combination of low interest rates and skyrocketing property values, home equity loans are more popular than ever, or few years ago. The value of home equity loans taken out by Americans has doubled in the last two years, and the market for them shows no signs of slowing down. Obtaining a home equity loan is usually a fairly simple process involving some paperwork, a credit check, and a home appraisal, and the entire process can often be done in just a few weeks. Lenders will often lend up to 80% of the value of the home's equity, and some lenders will even lend up to 125% of a home's equity.

Home equity loans are quite useful, and have several advantages over other types of loans, such as credit card loans or more traditional secured loans. The biggest advantage is that the interest on home equity loans is tax deductible. The interest rates on home equity loans are already pretty competitive, but the addition of the tax deduction makes them pretty hard to beat. But do you have to use a home equity loan to improve your home in order to qualify for the tax deduction?

Many people do not realize that improvements on your home are not necessary in order to take the tax deduction. While home improvement is probably the most popular reason for taking out a home equity loan, many people use them for any one of a number of other reasons -- buying a boat or RV, taking a dream vacation, or even just using the money for to debt consolidation. The relatively modest interest rates charged for home equity loans are far more favorable than the 20% or so charged by many credit card companies, making debt consolidation a pretty smart use for a home equity loan.

Whatever the reason for taking out a home equity loan, be it home improvement or otherwise, the tax deduction makes it a pretty good way to borrow money.

Home Equity Loan | Is It For You?

A Home equity loan has become an easy way to not only payoff other non-deductible debt, but to come up with largewads of cash for remodeling projects, vacations and more, many more subjected.People have financed college educations with a home equityloan, so your imagination is your only barrier. There arefew if any restrictions on a home equity loan because inessence you're using your own money. With housing marketsbooming over the last several years, and no definitive endin sight, the higher prices we find attached to our homeshas sent the equity soaring too. It's no longer necessary togamble in the stock market if you're looking for largereturns: just own a house, and then use a home equity loanto fund your particular needs.

A home equity loan can offer many attractive features, butthere are a few things to be keep in mind. Be aware that inan inflated market, your home's value could at some pointtake a dive and you find yourself in a situation where yourloan exceeds your home's worth, particularly if you've takenadvantage of one of the 100-125% offers you see so oftenthese days. Just be aware that it is never a good idea touse all your appraised equity unless absolutely necessary.Also, try and go with the home equity loan that costs theleast. If you're going to tack on several thousand dollarsin fees, then it could really not be worth it. Peoplesometimes get blinded by the prospect of easy cash, and paythese fees without thinking. Shop around. A home equity loanis part of an extremely competitive market, and if yourcredit is okay, or sometimes even not so okay, a directlender can offer a home equity loan with few if any costs.Typically, mortgage brokers are unable to do this.

A home equity loan can be your ticket to not only changingnon-deductible debt to deductible, but an easy source ofavailable cash to help start a business, finance a vacation,remodel or more. Check out a home equity loan today!

Home Equity Loan | How To Use One Wisely

Using a home equity loan to get out of debt or make improvements to your home is usually a smart move, Many expert do it wisely. You have earned the equity, so it only makes sense that you put it to good use. Usually this type of loan offers a lower interest rate than credit cards or traditional loans, so it is a wise move for many circumstances. Perhaps one of the smartest uses of a home equity loan is for home improvements. You can take a $10,000 dollar loan, put it towards a new kitchen, and then turn around and sell your home for a profit. There are a few tips to getting the most out of your home equity loan. Use your head and ask questions, and you should have no trouble making the right decision.

First, you need to do your homework. We cannot stress this enough! The more you know about the process and your lender, the better prepared you will be come closing time. Get quotes from several lenders, which will give you a bargaining chip when it comes time to secure a loan. If you have found other lenders that can offer you a better deal, use that to your advantage. Always get it in writing.

Second, understand what the market is doing at the moment. Research the current interest rates available as well as the government prime rate. This will help give you a picture of where the economy is headed. Understanding the value of your neighborhood will also come into play during the process. For instance, if a golf course or park is in the process of being built, you may find that the value of your home will skyrocket once the feature is in place. Consider waiting until the construction is complete, to get top dollar for your home.

Lastly, know where you are going in the next 10 years. Sure, you may be able to swing the second mortgage now, but where will you be in 10 years. While nothing is ever certain, there are a few life altering events that could drastically change your finances. These include:

1. A spouse changing jobs or deciding to quit working to stay home with children

2. A spouse or child attending college

3. The birth or adoption of a child

4. Illness or death in the family

So make sure to discuss your current situation with your friends and loved ones. If you plan on having another child or moving to one income, you may be better off waiting for a while. On the same note, if you or your spouse will graduate college or receive a promotion, you can probably go ahead with the loan.

When the time comes to decide on a loan product, do not get pressured into signing something that you don't understand. Even if the lender says that the document is "standard" read through it cover to cover before signing. The final piece of advice for you would be to not take more than you need. Let's say that you have about $5,000 in home repairs that need to be done. Even if the lender says that you can borrow $30,000 dollars, you shouldn't do it. Borrow only what you need. That way, you can be sure to repay the loan in a timely fashion. Put any excess money into a savings or money market, so that you have a cushion should another emergency arise.

Refinancing home mortgages | Home Equity Loan Improvements

There's more Regulation Z compliance on the way, courtesy of the Home Equity Loan Consumer Protection Act, Please pay attention. This fall banks will have to implement the new home equity loan disclosure rules the Federal Reserve Board was required to issue under the act.

The Federal Reserve released the final version of the home equity regulation on June 5. The rules were made effective June 7. However, compliance is optional until Nov. 7 because Congress gave institutions five months after finalization to start. However, there's no time like the present.

This column is devoted to bankers' most common questions about the demands of this complicated rule. You should, of course, check the regulation and consult legal counsel before acting on these suggestions.

Product Design

Q. This is a disclosure regulation. Does that mean that, while we must provide customers lots of information about home equity products, we are free to design them as we see fit?

A. No. The regulation leaves many design matters to lenders and provides options in a number of other areas. At the same time, however, it creates three absolute restrictions on design:

(1) If you offer a variable-rate program, you must use a base rate beyond your control. Information on that rate must be generally available to the public. Examples include the prime rate as published in The Wall Street Journal or rates on U.S. government securities.

(2) Lenders generally may not terminate the plan and accelerate the balance before the loan's scheduled expiration. There are three exceptions: customer fraud or misrepresentation; failure to meet repayment terms; or action or inaction adversely affecting collateral.

(3) Lenders may not unilaterally change any but insignificant terms of a home equity plan, with the following exceptions:

* You may make changes provided for in the contract, as long as both the triggering event and the resulting changes are stated specifically in the contract.

* You may substitute a new index if the original index becomes unavailable. This is subject to two conditions: the new one's historical fluctuations must be substantially similar to the old one and it must produce a rate similar to that in effect when the old index became unavailable.

* You may prohibit further advances or reduce the credit limit in four circumstances: if the value of the dwelling falls significantly below original appraised value; if you have a reasonable belief, based on evidence, that there has been a material adverse change in the customer's ability to repay; if the customer defaults on any material obligation he's agreed to under the plan; or if government action--such as a reduced usury ceiling--either precludes imposition of the agreed upon annual percentage rate (APR) or adversely affects the priority of your bank's security interest.

If you impose restrictions based on these four situations, you must reverse your action if and when the problem is eliminated. Preparing Early Disclosures

Q. What are the basic early disclosure requirements?

A. The heart of this regulation is a new requirement that customers be given detailed disclosures and a general brochure about home equity plans when provided with an application form. The only exceptions are for applications contained in magazines or taken by telephone or through third parties. In these cases, the lender can mail or deliver the disclosures and brochure to the customer within three business days after receiving the application.

Q. Do these disclosures have to be in a form the customer can keep?

A. Not when they are provided with the application. This means that you have the option to simply print the disclosures on the application form. If you do so, however, you must include a statement suggesting that the customer make a copy.

Q. Must early disclosures be presented in any particular format

A. Yes. You must be sure that certain required terms are grouped together and are segregated from other information. These terms include the following (assuming they are applicable); the first four must precede all others:

* The customer should keep a copy of the disclosure.

* Any time limit within which the customer must apply to receive the terms described. Alternatively, include a statement that terms may change. In addition, the lender must state that the customer has the right to a refund of any fees if any terms change and if, as a result, the customer decides not to enter into the plan.

* A warning that the lender is acquiring a security interest in the customer's dwelling and that the customer could lose his home if he defaults.

* An advisory that, under certain circumstances, the lender may terminate the plan and accelerate any outstanding balance; prohibit further advances; reduce the credit limit; or otherwise change the plan, as provided in the loan agreement.

* A discussion of the plan's payment terms. This should include: the length of the draw period and any repayment period; an explanation of how the minimum payment is determined, the timing of payments, and whether making only minimum payments would not repay any or all of the principal balance; and the fact that the plan permits conversion of the balance to a fixed-term loan.

You must also include an example, based on a $10,000 outstanding balance and a recent APR, showing the minimum periodic payment, balloon payment, and the time needed to repay the $10,000 loan making only the minimum and balloon payments, with no additional advances.

* For fixed-rate loans, the APR must be one that was in effect within the previous 12 months. For variable-rate plans, the historical table satisfies this requirement.

* A description and itemization of loan fees that the lender charges to open, use, or maintain the account. These can be stated as dollar amounts or percentages. You must also give a total dollar estimate of fees imposed by third parties and invite the customer to request more specific information.

* The fact that negative amortization may occur and that it increases the principal balance and reduces the customer's equity.

* Any limits on the number and size of credit extensions within any time period and any minimum balance or draw rules, stated as a dollar amount.

* A statement that the customer should consult a tax advisor regarding the deductibility of interest and charges.

Q. If we offer a variety of home equity plans, are we required to have a separate disclosure notice for each one?

A. No. The bank can choose to devise a separate plan disclosure for each home equity product or to use a more generic disclosure to cover all of them.

If you use individual disclosures, you must inform customers that they should inquire about other options.

If you use a single generic disclosure, you are required to spell out any linkages or relationships affecting the availability of certain terms. For instance, if you tell the customer that your home equity loans are available with certain payment plans, and if the customer's opportunity to select these payment plans varies based on other loan terms, these restrictions would have to be explained.

An example of such linkages: Say a bank offers two plans, one with a five-year term and the other with a ten-year term. The bank permits interest-only payments under the five-year plan, but requires payments of interest and principal under the ten-year plan. A generic disclosure would have to point out such a difference.

Q. Where do we get the brochure that must be given out?

A. You can either use the model brochure provided by the Federal Reserve Board or develop your own that is "substantially similar." If you want to use the Fed's version, you can obtain a limited number of original copies from your Federal Reserve Bank and reprint them verbatim. You could also reprint the Fed brochure with the bank's name and logo.

Q. The disclosures that go onto application forms seem fairly straightforward. But I foresee difficulties sending the required notices out within three days for telephone, third-party, and magazine insert applications. Is this going to be a management problem area?

A. Undoubtedly. You need to have a system and training for handling these applications. Staff should be directed to note them on a special log identifying the applicant, the time of receipt, and the source of the application. You then need to generate the required disclosures and record the date they were sent.

Q. We must disclose the circumstances under which we can change the terms of the plan and what the changes may be. These could grow quite lengthy. Must they all be included in the early disclosures?

A. No. You can include them all if you want to; if you do, you need not group them with the other early disclosures. However, if you prefer, you can simply disclose that the borrower may obtain a list of the conditions under which the lender could take these actions.

In either case, the segregated disclosures must state that the lender has the right to terminate, accelerate, prohibit new advances, reduce the credit line, or make other changes. You must also state the fees for termination.

Management tip: Designate which employees have the authority to terminate or change the plan terms. Then make sure these employees understand the rules. Permitting decentralized decision-making could lead to legal and customer relations problems.

Q. Our bank's home equity lines can be accessed with a credit card. Do we have to incorporate the new credit card early disclosures (ABA BJ, June, p. 14) into those for our home equity plan?

A. No. The Federal Reserve's new credit card rules specifically excluded such plans.

Initial Disclosures

Q. What is the difference between "early" disclosures and "initial" disclosures?

A. The early disclosures are the ones added by this regulation--those that must be provided with the application. The initial disclosures are the main Truth-in-Lending disclosures that have always been required at or before loan consummation.

Q. Does the new rule affect the initial disclosures we must make?

A. Yes. You must include in the initial disclosures the early disclosure terms that do not duplicate already-required initial terms. In addition, the initial disclosures must include the full list of the conditions under which the bank can terminate or modify the plan, incorporating, of course, the restrictions described earlier. It is not sufficient here to simply tell the customer that he may obtain such a list, in contrast to the early disclosure requirements.

Loan Agreement

Q. Does the regulation require changing our standard loan agreements?

A. Very likely. As explained earlier, you must assure that the agreement uses a publicly available index beyond your control; that it only permits early termination within the circumstances permitted by the regulation; and that any provision for changing terms spells out specifically both the triggering event and the resulting change. An example of the latter: For an employee preferred-rate plan, the contract must provide that a specified higher rate will apply if the borrower's employment by the lender ends.

Advertising

Q. Does the regulation change our ability to advertise these loans?

A. Yes. The rule adds new "triggering terms" to the advertising provisions of Regulation Z. "Triggering terms" are terms you cannot use in an advertisement without having to disclose additional information. For home equity loans, the new triggering terms are all of the terms required in the initial disclosures (except the security interest), as well as any payment terms. You may not make either positive or negative statements (such as "no annual fee") about these items without including, in the same ad, a clear and conspicuous statement of the following:

* Any loan fee that is computed as a percentage of the credit limit and an estimate of other fees for opening the plan, stated as a single amount or range.

* Any periodic rate used to compute the finance charge, expressed as an APR.

* The maximum APR, if it is a variable-rate plan. Q. There have been problems in the past relating to advertising the tax benefits of home equity loans. Are these addressed?

A. Yes. If you advertise that interest may be tax-deductible, you must assure that the ad is not misleading. The Fed suggests, for instance, that you also add that the customer should consult a tax advisor to determine the impact in his or her own circumstances.

Q. Are there any other advertising rules?

A. Yes. If your advertisement mentions a discounted initial rate, you must state how long that rate will be in effect and display a "reasonably current" undiscounted APR with equal prominence. If you advertise a minimum payment, you must also disclose that a balloon payment will result from it, if that is the case. Finally, you cannot refer to a home equity plan as "free money" or use any other misleading terms. Other Issues

Q. We are required to refund fees to customers who back out of an application because terms change. What is involved in handling this?

A. You must refund all fees, including credit report and appraisal charges, if the customer decides not to take the loan because terms changed between application and consummation. The only exception is if the APR has changed in accordance with a properly disclosed variable-rate feature.

Q. Third parties, such as loan brokers, distribute some of our application forms. Are they affected?

A. Third parties are obligated to provide the home equity brochure and, if they have them, the lender's early disclosures. However, the lender is not obligated to supply them with either. Nevertheless, it is probably a good idea to furnish at least the brochure.

Q. Once we have put the compliance machinery for this regulation into place, what problems may we encounter in staying in compliance?

A. For variable-rate plans, one problem will be the need to update your historical $10,000 example every year. This needs to show how the indexed rate would have moved every year for the previous 15 years (not beginning in 1977, as is required for closed-end adjustable rate mortgages). The historical example must be updated each year. A second maintenance problem will, of course, be the need to revise all your disclosures whenever program terms are changed for new accounts or when you offer new programs. When this happens, you need to review all steps taken to put together the initial compliance plan.

Home Equity Loan | Home Theater Adds Fun And Value

In days gone by, the family typically spent their evenings watching television in the den or living room, crowded around a black and white television set that may have measured no more than nineteen inches in diagonal size, It's fun and exciting. For decades, this scenario was pretty much the same in most American homes, with the only change being the replacement of black and white televisions with color models. This worked fine for many years, when most cities only had two or three stations, and most homes didn't have cable television. With the introduction of high definition television (HDTV), DVD movies, high performance surround sound systems, and affordable video projectors and flat-screen plasma displays, many homeowners would like to have a dedicated room, or home theater, for audio-video use. In today's housing climate, adding a home theater to your home is a smart move.

Few homes have a room that is naturally suited to use as a home theater. Most rooms that might be used for such purposes either have a fireplace or inappropriately located windows. By building a dedicated home theater, the homeowner can build a room that suits the specific needs of audio video systems ? limited outside light, darker-colored walls, a mounted screen or plasma TV, and special wiring inside the walls, where it cannot be seen.

Adding space to your home is a bullish move, and the extra square footage will add value to your property. You can finance the construction with a home equity loan or line of credit, which allows you to deduct the interest from your tax return. And the inclusion of a theater in your house may make the home easier to sell in the future, as more and more families are finding a theater to be a useful feature to have in a home. If you are not sure about how to go about designing such a room, you might check the Yellow Pages for stores that sell audio and video equipment. They can provide you with information regarding what kind of equipment you might need, wiring requirements and so on. They might also be able to recommend a contractor who can do the work for you.

The introduction of affordable big-screen televisions and HDTV has made a home theater THE must-have home accessory. With interest rates still at affordable rates, now is a great time to add that dedicated viewing room that will make you the envy of your neighborhood when the next Super Bowl comes around.

Home Equity Loan | Good Choice For Luxury Purchases?

Home equity loans or lines of credit have increased dramatically in popularity in recent years, and next years ahead. One of the reasons is that interest rates are at or near historic lows; borrowing money has rarely been more affordable. Another reason is that Americans are enjoying record amounts of equity as home values have skyrocketed in recent years. Given that the loans are affordable and the equity is available, many homeowners are wondering if a home equity loan would be a good way to finance expensive lifestyle items. Would borrowing against your home be a good way to purchase that Dodge Viper you've always wanted? How about that around the world cruise you have always dreamed about? Is taking out a home equity loan for luxury purchases a good idea?

As with any financial transaction, there are good points and bad points to borrowing against your home to buy luxury items. The good points are numerous. Unlike a credit card or standard auto loan, a home equity loan offers deductible interest on your tax return, provided that the loan does not exceed $100,000. If you pay taxes in the 28% tax bracket, you are effectively getting a 28-cent rebate on every dollar you pay in interest. That is certainly appealing. The fees associated with a home equity loan have come down in recent years, and the application process is much simpler than in the past.

The good points make it seem like a good idea, but the bad points are considerable. Most home equity loans have terms that extend quite some time, typically ranging from 5-15 years in duration. Do you really want to pay for a car for fifteen years? It is quite likely that you'll still be paying for that luxury car long after it has gone to the junkyard. The same applies to that around the world cruise, which will be long forgotten by the time it has actually been paid for. It may make sense to fund a luxury car with a home equity loan if the term of the loan is only five years and you actually plan to keep the car for that long. Otherwise, funding the purchase with a more traditional loan would be a better choice.

Of course, if you have already made the purchases and you are maintaining a balance on a high-interest credit card, it might be wise to consolidate your debt with an equity loan. Trading a 20% loan for a 6% loan is certainly a smart move. The best advice for anyone considering funding a luxury purchase through a home loan would be to consult with a tax advisor.

Refinancing home mortgages | Home Equity Loan Considerations

In other words, the benefit of the loan must outlast the loan period, you must ensure that. Taking a loan for financing that elusive vacation is a strict no-no. Moreover, home equity loans must also never be taken for day-to-day expenditures. This option should be saved for emergency needs only.

When applying for a home loan, all credentials of the lender must be keenly checked. The local consumer protection agency could be contacted for providing a list of lenders with an honest repute. All fine print must be carefully scrutinized, and one must avoid signing documents without having read them or which have blank spaces in them. Moreover, it is also advisable to keep a copy of all documents for future references.

Avoid the temptation of applying for a home equity loan wherein your monthly income is inadequate to finance your debt obligations. In such an eventuality, the lender can foreclose on your home because of a default. Hence never let your greed overtake sound common sense when applying for that home equity loan.

A home equity loan is normally a second mortgage. Hence one must carefully take stock of one's financial conditions and analyze whether one can afford extra debt. This is because once a home equity loan is undertaken, loan repayments must be made a top priority, as it is your home that could be taken away from you in the event of a default.

Moreover, one needs to maintain a good credit record, as banks that have advanced you credit can freeze your credit limits in case your credit record takes a turn for the worse.

Having said this, it does not in any case deny the fact that home equity loan products are indeed very attractive.

Home Equity Loan | Beware Of The Lingering Lien!

A problem that often arises when people try to refinance their home is the discovery of a pre-existing lien from a previous loan that was not removed by the lending company, at least according some expert. The cost of removing a lien and returning the title to the homeowner, a process known as reconveyance, is usually included in fees associated with a home equity loan. When the loan is paid off, the lender is generally responsible for removing the lien, so that public records show the property to be unencumbered.

There are various reasons for why the lien isn't always removed ? oversight on the part of the lender, especially during heavy periods of refinancing, is often the problem. Occasionally, the problem can arise when a lender is sold to another company or when that lender goes out of business. No matter what the cause, a lien that hasn't been removed can come back to haunt a homeowner.

If a homeowner is in the process of refinancing a home and discovers an old lien that hasn't been removed, the entire refinancing process can be held up for weeks. This can be critical if the owner is trying to lock in an interest rate prior to closing. The problem can also arise when a homeowner is trying to take out another home equity loan, perhaps to facilitate debt consolidation or home improvements.

Here are a few things you can do to avoid this problem:

Get a copy of your credit report. If there are any errors, particularly errors showing an open line of credit or a home equity loan that has been paid off, contact your lender.

Keep your paperwork from all real estate loans, even if you have already paid them off. Then you will have them at hand should you need to demonstrate that you have fulfilled your obligations.

If the lien shows up on public records or a credit report, but the original lender says that you have paid it, have them send you a copy of their documentation regarding your reconveyance.

As with most issues that come up when financing or refinancing a home, this one can be resolved by remaining diligent and keeping proper paperwork. As always, it's a good idea to check your credit report regularly, particularly if you plan on taking out a loan in the near future.

Home Equity Loan | Beware Of Equity Stripping Scam

The market for mortgage refinancing has been brisk during the last few years, I don't know for years ahead. The boom in business can be attributed to interest rates that have been at or near historic lows, and to lenders who have more money to lend now that they aren't investing in risky tech stocks anymore. Low rates and agreeable lenders are certainly good for consumers who might be interested in refinancing their home or taking out a home equity loan. Those considering such loans should be aware that the booming market for refinancing has led to increased competition among lenders. And when the competition increases, so does the number of lending scams.

These days, lenders are surprisingly aggressive. It's not unheard of to have people knock on your door, asking if you would be interested in refinancing your home. Lenders that are eager to lend you money are great, provided that you are actually interested in borrowing. If you are, then you should be careful Make an effort to thoroughly investigate your lender if you do not have a previous relationship with them.

A scam that is increasingly common in today's market is a lending scheme known as "equity stripping." A homeowner applies for a home equity loan, or perhaps applies to refinance their home. A lender then encourages the homeowner to borrow more money than they can afford, and perhaps "assists" by falsifying some information on the application. The lender does this with hopes that the homeowner will default on the loan. When the homeowner defaults, the lender forecloses on the property, sells the property, and keeps the home's equity as profit.

This is one of many scams that can currently be found in the mortgage industry, and one that can be avoided if potential borrowers will take the time to do a bit of research before signing on the dotted line. Homeowners who are interested in refinancing their home should investigate prospective lenders before doing business with them. Contacting friends who have recently refinanced or the local Better Business Bureau would be a good place to start. Lenders who call you out of the blue or knock on your door are probably best avoided.

Home Equity Loan | A Reverse Mortgage Could Provide A Comfortable Retirement!

While only comprising about 1% of all mortgages, the reverse mortgage has gained in popularity in recent years and for many years ahead. Federally insured since the late 1980's, the reverse mortgage allows owners of paid-off homes to borrow against the equity in their homes in the form of a lump sum, a line of credit, or in the form of monthly payments. The loan is repaid when the owners die or when the home is sold or no longer occupied.

In the early years of its existence, the reverse mortgage was regarded as a "last resort" step to avoid foreclosure, pay medical expenses or keep the home from disrepair. More recently, however, retirees have been finding creative ways to use the equity in their homes to allow their retirement years to be more enjoyable.

The huge growth of the housing market during the last five years has left millions of homeowners with large amounts of equity in their homes. Californians who bought homes in the early 1960's at modest prices are now retiring; many of them have home equity in the mid-six figures. With that sort of equity, homeowners are using their equity to buy recreational vehicles, boats, luxury vacations, and even second homes. The structure of a reverse mortgage makes it possible for some homeowners to pay cash for a vacation home, while continuing to live in their primary residence for as long as they like, or are able. Once they die, the primary residence would be sold to pay pack the loan, while the second home would become part of their estate.

This has provided a rare opportunity for many couples, who struggled to raise families and pay mortgages during the working years, to enjoy a few luxuries in their retirement years. Couples who could never afford to travel can now dip into their home equity and see Europe or take that cruise that always eluded them.

While this may seem like a win-win situation for all involved, those in the lending industry express caution. For most people, the equity in their home is their single largest asset, and borrowing against it should done only after careful consideration. What if a lengthy hospital stay became necessary? Would the homeowner have sufficient funds to pay for that after buying a second home through a reverse mortgage? What if a husband or wife became incapacitated and required permanent housing in a nursing home? These are things that must be considered before using home equity for a houseboat or RV, and those considering such a move should consider discussing their plans with a financial advisor.

Despite the potential drawbacks, the use of the reverse mortgage to fund a fun and adventurous retirement seems to be growing. With interest rates still near all-time lows, the trend will almost certainly continue in the near future.

Refinancing home mortgages | Home Equity Lines Of Credit Vs. Other Conventional Loans

When it comes to getting money, you have two basic options, not only 2 of course. If you are a homeowner you can choose to take out a home equity line or credit (HELOC), or you can take out a conventional loan. Both of these products will provide you with the funds needed, but the similarities end there. With varying interest rates and repayment options, you have a wide array of choices. We will discuss the differences between these two options, and then decide on which one is best for the typical homeowner. Remember, that everyone's situation is different, so use your best judgment when choosing a loan product.

You may already be familiar with a traditional loan product. These are usually based on your credit rating and your ability to repay the loan. The lender will review your past tax returns, credit score, as well as your salary. They may also factor in your income potential in the near future, if you are currently enrolled in a higher education program or up for a promotion soon. The main benefit of such a loan is that you have little at stake if you fail to repay the loan. They may have the ability to garnish your wages or hurt your credit rating, but you will be able to keep your home. The main disadvantage to this type of loan is that you can expect to pay a much higher interest rate than that of a home equity loan. You may also find yourself unable to take out as much as you would with a HELOC.

A Home Equity Line of Credit is a completely different time of loan. The bank will determine the amount of equity that you currently have in your home (value of the home- amount of liens= equity). They will then allow you a credit line that is a percentage of your equity. You will likely receive checks or a bank card that will allow you to make withdrawals on your own schedule. You can borrow as little, or as much as you want as long as it is within your credit limit. You will then make monthly payments based on the balance of the loan. Most lines of credit will require a minimum payment to cover interest, but the actual payment amount is up to you. The process is very similar to that of a regular credit card, except that you have your home backing up your purchases. The main advantage to this type of loan is that you can usually enjoy a much lower interest rate, and pay as much or as little during the life of the loan. The main disadvantage is that if you fail to pay the balance off, you could lose your home. So it is important to only take out what you can repay.

Which one is better? It all depends on your personal situation. If you have had trouble in the past with credit cards and revolving credit, a HELOC could be a very dangerous thing. Maxing out your HELOC has a lot more at stake than maxing out a typical credit card. So it is important that you have your finances and budget in place, prior to taking out such a loan. If your credit is poor, a HELOC may give you options where a traditional loan would not. Bottom line; understand your situation and you should have no trouble deciding the right loan product for your needs.

Refinancing home mortgages | Home Equity Lines Of Credit - The Basics

A Home equity line of credit is a loan which is similar to a credit card, yeah very similarly . These often have a very low interest rate (In most cases even lower than home equity loans). A Home equity lines of credit acts as a form of revolving which your home equity services.

For example,

-You take out a Home Equity Line of credit for $10,000

-You purchase a car for $8,000 with your revolving line of credit.

-You can now only withdrawn $2,000 until you can pay back the $8,000 to increase your limit to $10,000.

*Some lenders might have a minimum withdrawal amount.

There are many types of payment plans a lender may choose to offer you. You will pay interest on what you owe. However once the loan term ends, usually around 10 years, you must pay back the balance owed. If you were to take out an interest only loan, this will be you. If you decide to pay some principal in your repayments you can avoid this. You must pay off the loan when you sell your house even before the loan term ends.

How much can I borrow?

Usually if the amount you wish to borrow is above $25,000, with both loans you can usually borrow up to 80% of what your house's market value minus what you owe. For example if your house is worth $200,000 and you still have a mortgage of $100,000 to pay off, you would use the following calculation:

$200,000 * 0.8 = $160,000

$160,000 - $100,000 = $60,000

You can borrow up to $60,000 dollars in theory. The lender will take other factors into account such as your ability to repay the loan. This will be determined by your income, other financial obligations, debt, and previous credit history.

If you want to borrow below $25,000 you can usually get the loan if you have $25,000 in equity.

Fees:

An Appraisal fee. An independent valuation of what your house is worth is needed to establish how much equity you have in your house. Usually around $200USD.

An application cost. This may not be refunded if your request for credit is denied. May also include property appraisal costs and credit report costs.

Closure costs which may include fees for attorneys, mortgage preparation, and filing property, title insurance, and taxes.

You may also have to pay transaction fees for every time you withdrawn money from your line of credit and possibly an annual membership fee.

Refinancing home mortgages | Things To Do With Your Homes Equity

If you are wanting to get a home equity loan, rates are still low enough that you may want to make use of that equity in your home, and maybe not so low for a next years. Do you need some ideas on what you could do to multiply your equity or make some extra money off of the capital that could be available to you?

Here are some suggestions of ways to put the equity to good use when you go to take out a home equity or cash out refinance loan.

1. Do a home improvement that will increase the equity in your home more than the cost of doing the improvement. As an example, I have heard rumors that adding a deck to a home, because of the amount it increases the homes resale value, can add up to 4 times the cost of actually installing the deck.

2. If you have a low interest rate on your home, invest your equity in a low risk investment that has a much higher return on your money.

3. Buy an existing business or start a new business with the equity capital in your home. If you can start a low risk business, take the opportunity to let your equity work for you.

4. Use the equity as a down payment on an investment property or a rental.

5. Use it to consolidate high interest debt and possibly save yourself hundreds of dollars a month to put toward something else.

6. Use it to finance your education and increase your earning power.

7. If you live in an area zoned for this, you could finish a basement or area of the house to rent out. You could create a separate living space or apartment on your property.

Just be careful to not do anything risky with the equity in your home. If you can get a low enough rate, it may be worth taking that money and investing it somewhere else.

Refinancing home mortgages | Home Equity Line Of Credit ? Great Idea For Rainy Day Emergencies

Most Americans tend to live on a paycheck-to-paycheck basis, and the typical household has nearly $10,000 in credit card debt, trust me. Adding to that is the fact that Americans are saving money at the lowest rate in history. We spend what we earn, when we earn it, and there's little or nothing available when a disaster or an emergency strikes. How can the average American make sure there will be money available for that "rainy day" emergency?

One possible solution would be to open a home equity line of credit. The equity in a home is the difference between the value of the home in the market and the amount owed on the mortgage. Rising real estate prices across the country have left Americans with record amounts of home equity, and record numbers of homeowners are borrowing against the equity in their home. There are two main types of home equity loans; the traditional loan and the line of credit. The traditional loan lends a fixed amount of money that is repaid at a fixed interest rate over a fixed amount of time. This is ideal when the money is borrowed for a specific purpose, such as a home-remodeling project.

The home equity line of credit, on the other hand, gives the borrower great flexibility. The amount of money is capped at a certain amount, but the borrower writes checks to use the money when they need it. The borrower only makes payments when he or she actually writes a check to use some of the money, and the interest rate on the loan is adjustable. The line of credit is the perfect source of funds for that "rainy day" emergency. The costs of obtaining a line of credit are minimal, and the paperwork is much less involved than the paperwork associated with obtaining a primary mortgage. The beauty of a line of credit is that there are no additional costs if the money isn't used. The homeowner is under no obligation to use any of the money, but he or she can simply sleep soundly, knowing that it is available should an emergency arise in the future.

Americans, as a group, tend not to save much of what they earn. But even poor savers who own their own homes can prepare themselves for unexpected financial emergencies by taking out a home equity line of credit. One never knows when an emergency will strike, but it is always a good idea to be prepared to face one.

Refinancing home mortgages | Home Equity Line Of Credit ? Great For Remodeling Projects

Many homeowners are lucky enough to find a house that represents exactly what they want in a home, including me maybe you. They buy it, make the payments on it, and live more or less happily ever after. Others are not so fortunate. Some buyers who live in a pricey market may have to settle for less house than they need, hoping to find a solution to their lack of space later. A third group of buyers may find that their housing needs change over time, as their family size increases. What can be done in these situations?

A common solution to these problems is to add on to the house, often accomplished by converting a garage to a room, adding a room over the garage, or simply adding a room somewhere else on the property. For these projects, a home equity loan is a great source of financing. The home itself is used as collateral for the loan, and the addition actually increases the value of the house. As most of these projects involve a fixed cost, the payments can be structured at a fixed interest rate over a specific period of time. But what about the do-it-yourself project? What if the problem with the home isn't a lack of space, but a lack of taste on the part of previous owners? Is there a better financing choice in these situations?

If your problem is gold appliances, lime green carpet, and smiley face wallpaper, you may be looking at a remodeling project of indeterminate duration. For such a project, a better financing choice would be a home equity line of credit, or HELOC. A line of credit offers greater flexibility, both in interest rates and repayment terms, than a traditional line of credit. The loan amount is based on the amount of equity in the home, but the funds aren't dispersed all at once. Instead, the borrower is given a checkbook, a special credit card, or both and can use them to draw upon funds at his or her leisure. Payments only apply when money is actually borrowed, and the repayment plans can be arranged with both fixed and adjustable interest rates, depending on the lender. This is ideal financing for someone who has purchased a fixer-upper home that needs a variety of changes, repairs, or modifications. The credit card can easily be used to purchase paint, drapes, flooring, appliances or whatever the homeowner requires to make the home fit their needs.

If you just need to hire a contractor to add a gameroom to your home, a traditional home equity loan would work well. For ongoing projects with indefinite timeframes and budgets, a home equity line of credit may be the best choice.

Refinancing home mortgages | Home Equity Line Of Credit - Finding The Best Home Equity Lender

Borrowing against the value of your home using a revolving credit account is known as a home equity line of credit just credir. Lenders offer home equity lines of credit in several ways with either fixed or variable interest rates. Information on obtaining a home equity line of credit is available to you from many sources, including online lenders. Make sure you compare loan products and lenders, and review the terms of your loan contract carefully before signing.

Lending institutions offer loan products that vary in terms and cost. Ask your lender about the upfront costs involved in obtaining a home equity line of credit. Are there annual costs? Balloon payments? Make certain you receive that lowest interest rate possible for your individual situation. Even with adverse credit, if you have built equity in your home by making payments over a number of years, you can apply for a home equity line of credit.

A home equity line of credit requires you to use your home as security for the loan, so make sure you can afford to make your monthly payments according to the terms of your contract. The amount you can borrow against the equity in your home will depend on the particular lender, the value of your home and your credit score. If you have bad credit you will pay a higher interest rate.

The money you borrow can be used for a variety of reasons including home improvements, to pay off credit cards or medical bills, for college, or any reason you desire. Home equity lines of credit are an excellent way to have access to large amounts of cash for unexpected or emergency situations. Just be sure you understand the terms and conditions of your loan contract and ask your lender any questions that may arise during the lending process. Choose your loan product and lender carefully. Be sure to get the lowest possible interest rate and terms that fit your lifestyle and your budget. A home equity line of credit can be a wonderful way for you to realize your financial goals and dreams. Getting the best loan product available to you is imperative. Lenders are competing for your business.

Refinancing home mortgages | Let The Market Eliminate Your Private Mortgage Insurance

In decades past, most people who were interested in obtaining a home loan were required to put down at least 20% of the purchase price or acquisition . Those days are gone, and as home prices have risen faster than incomes, the average down payment required by lenders has dropped. In fact, it is often possible to buy a home with no down payment at all. Nationally, the average down payment is a 3%. It's nice to be able to buy a home with such a small amount of ready cash, but there is a downside ? if the down payment is less than 20%, the lender requires that private mortgage insurance (PMI) be added to the house note.

No one likes to pay PMI; the payment doesn't go towards paying off the house and the payments aren't tax deductible. And the PMI payments aren't trivial; the monthly PMI payment on a home priced at the U.S. median price of $206,000 with a 3% down payment is $129. Lenders require that borrowers pay PMI until the borrowed amount becomes less than 80% of the value of the home. In years past, this has meant that homeowners had to pay PMI until they had paid enough of the loan balance to reduce the debt to less than 80%. Times have changed, however, and many homeowners may be eligible for a faster way to avoid the monthly PMI payments.

The exploding real estate market has driven home prices higher than ever. Not only are the prices high, but the rate at which they are increasing is astonishing. In some parts of the country, home prices have doubled or even tripled in the last five years alone. The savvy homeowner should keep an eye on the price of housing in their local market, as the equity in his or her home may rise above 20% through market appreciation alone. In most markets, this is often happening quickly enough that homeowners may be able to eliminate PMI less than two years after purchase, even if they put a minimum amount of money down on the home.

A home appraisal is required to establish the equity to debt ratio of the loan, and this typically costs several hundred dollars. As that figure represents only a few months' PMI payments, most everyone would be glad to pay for an appraisal. Before doing so, contact your lender, as some lenders require PMI for a specific length of time before it can be dropped. No one likes to pay for private mortgage insurance, and thanks to an unusually aggressive real estate market, few homebuyers today should have to pay it for very long.

Refinancing home mortgages | Home Equity ? Is It Time To Cash Out And Move?

During the last five years, home prices have increased nationwide and all country . In some parts of the country, notably California, home prices have doubled or even tripled. The median price of a home in the Los Angeles area is now nearly $450,000 and in the San Francisco area, the price is approaching $600,000. As the economy continues to improve, the price of housing continues to rise in California and elsewhere. Many people who have owned their homes for more than three years are suddenly finding themselves with hundreds of thousands of dollars in equity. Of course, equity is only a theoretical gain, and if the price of housing goes down, equity can go away. You only get to keep your equity as cash if you sell your home. Many homeowners are doing just that.

Home equity loans are increasingly popular these days, and many people with large amounts of equity in their homes are borrowing against it and using the money for home improvements, dream vacations or other luxury items. Others are simply cashing out and moving elsewhere. While prices on both coasts are rising at a breathtaking rate, price increases in most of the country are still more modest. A homeowner in California who bought a home five years ago for $200,000 may have a home worth $500,000 today. If that homeowner were to sell that home and move to Texas, or Iowa or even parts of Florida, he or she could buy a comparable or even larger home, pay cash, and probably keep a healthy profit to invest. For most Americans, the equity in their home is their single largest asset. Examining that equity to see if it can be used more wisely would be a sound move, particularly as real estate experts warn of a housing "bubble" that may soon reduce prices to more realistic levels. Should this "correction" in the market take place, homeowner equity could be seriously reduced.

Obviously, selling a home and moving just to pocket the equity is not something that suits everyone. While it may make sense from a financial standpoint, it will mean finding a new employer, finding a new home, finding new friends and moving children to new schools and friends. Anyone considering such a move would be well advised to carefully consider all of the ramifications of simply picking up and moving. On the other hand, the opportunity to extract several hundred thousand dollars in cash from a home is a rare one, and investing it wisely could go a long way towards financing a better lifestyle or a more comfortable retirement. Homeowners should be aware that there might be capital gains taxes to be paid on the sale of a home. Those considering selling their home to extract their equity would probably benefit from a consultation with a financial advisor.

Refinancing home mortgages | Home Equity Increases $1 Trillion In Five Years ? Is The Market Peaking?

A new survey reveals that in the last five years, the equity in the California real estate market has increased by more than one trillion dollars. A trillion dollars is a large number to ponder, but put in concrete terms, it can be represented by a stack of one hundred dollar bills that is six hundred thirty one miles high! This astronomical increase in California home values isn't all that unique, however. Prices on the East Coast, particularly in the Washington, D.C. area, are increasing just as rapidly. There are areas on both coasts where home prices have tripled during the last five years. This, along with the dramatic increase in interest-only mortgages among homebuyers, suggests that home prices may be peaking.

In California, 35% of all mortgages written are interest-only mortgages. In Washington, the figure is a whopping 48%. With an interest-only mortgage, the homeowner pays only the interest on the home loan for the first few years of mortgage payments. After the agreed-upon period of time ends, the amount of the payment is adjusted to include a portion of the principal. This typically increases the amount of the payment by about one-third. Interest-only mortgages have gained in popularity as home prices have increased, mostly because buyers otherwise would not be able to afford to buy homes. The problem with these mortgages is that for the first few years of payments, the buyers aren't actually paying anything for the home itself!

What these statistics tell us is that in California, more than one third of buyers cannot afford a mortgage that allows them to actually contribute to paying for the home when they move in, and in Washington, the figure is nearly one half. Experts disagree on exactly when the hot real estate market will collapse, but it would seem to the casual observer that when half of all buyers can't actually afford to make payments on the home they've just purchased, the collapse may be near.

What does this mean for potential buyers? Anyone considering purchasing a home in the red-hot markets in California or on the East Coast should carefully consider whether or not they can actually afford to purchase a home. Qualifying for a loan isn't good enough if you can't actually make payments that will reduce your principal. If may be wiser to buy in a cheaper outlying area and commute. Others may wish to rent in the short term in hopes that the prices will soon decline. It is always difficult to predict which way the real estate market will go, but a market where one-third to one-half of buyers can't actually reduce their principal should set off an alarm for anyone considering a real estate purchase.

Refinancing home mortgages | Home Equity Can Create A Never-ending Money Cycle

What could you do with $10,000 or $100,000? Well, you can have it, now in a new home equity loan! Did you know that if you have been in your home for just one full year, you may already have the opportunity to take out huge dollars in equity from your home -- tens of thousands, even! Did you also know that you can get this money with no closing costs, use it any way you like, and, best of all, it will cost you as little as the price of your cable bill each month, and you can create an amazing money cycle that will give you an endless supply of cash.

Unlike conventional mortgages, home equity loans are paid back with interest-only payments, and have no taxes or insurance added, which make for extremely low payments. This means you can get tens of thousands of dollars for as little as $33 per month on your equity loan. Imagine having 10,000 dollars and paying this little to get it! What's more, if you use this equity properly, you can pay off debt, saving hundreds monthly. Then, in a few years, you can get a new home equity loan, with the new equity you have built in your home from simple appreciation in value.

A real-life home equity loan example. . .

Here's a great story about the power of equity. I had a client once, who was going to sell his beautiful home, which he loved, because he needed money for his daughter's college education. Little did he know that the money was right at his fingertips, locked away in the vault inside his home. All he needed was the right combination to get it out. When I showed him how he could get a $50,000 home equity loan for less than $180 per month, he was astonished. "I figured it would be like a whole new mortgage," he said. You know, around $500 per month, and I could never afford that, on top of my current mortgage payment."

The Money Cycle. . .

He was even more excited when I taught him how to pay that loan off later, using his house again, while taking even more money. This is what is called the Money Cycle. Your home equity loan can create this never-ending cycle. Imagine paying off a car, a credit card and another loan, all at high interest with combined payments of over $600 monthly. Your home equity loan payment is $180, saving you over $400 per month and $5,000 yearly. Now, instead of spending this extra cash, what if you go to your financial planner and have him invest the money for you? Suddenly, you're building wealth and creating cash flow. Now, in a few years, your home appreciates, and you either sell or refinance to a new loan, getting more cash and starting the cycle over again. Learn all about it in the wealth-building system, Winning the Mortgage Game.

Refinancing home mortgages | Home Construction Loans

You can maximize your savings by shopping for a lender that can provide you with a combination loan, take the change. The combination loan starts as a construction loan. During this phase, your lender cuts checks to your builder and their subcontractors as they successfully reach significant steps in the building process. Once your home nears completion, your lender activates a traditional mortgage.

The new loan pays off your construction loan and rolls the remainder into the assessed value of the new property. The first way a combination loan can save you money is by eliminating a second set of closing costs. By handling both deals simultaneously, you save yourself and your lenders considerable time and money, savings that lenders are happy to pass along in the form of preferred rates.

Many banks let the commercial side of their business handle construction loans, while the consumer division oversees the mortgages. Therefore, the best place for you to start your hunt for the best deal is with the branch manager of the banks with offices in your area. Unlike traditional mortgages that can be handled over the phone or the Internet, construction loans require significant local oversight.

Fortunately, commercial lenders enjoy the opportunity to plant more roots in their communities. In fact, the commercial banker handling your quote for the construction loan may be able to pull strings to get you a more competitive quote for your eventual mortgage.

When shopping for construction loans, understand that the commercial lender will charge a much larger administration fee to compensate for the step-by-step management of your building process. Sometimes, you can expect to pay three, four, or five points (percentage points of your home's value) as a fee to the bank. Considering the amount of work involved in communicating with builders and subcontractors, most administration fees actually pay for themselves by freeing up your own valuable time. As an incentive to keep all of your business under the same roof, many banks will actually rebate much of your commercial loan's administration fee when the time comes to roll it over into the mortgage. You may receive a personal mortgage with no points, or you may even receive rebate points that you can apply to the principal.

Throughout your planning process, involve local banking professionals and ask your builder about positive experiences they have enjoyed on past projects with your contender lenders.

Refinancing home mortgages | Home Buying ? What Can You Afford?

Okay, you've decided to buy a home and are trying to figure out what you can afford. Before you go home buying, you need to carefully consider what you can afford as far as a mortgage payment seriously .

Mortgage Payments

The first step you should take in determining what you can afford is to talk to a mortgage lender. In fact, the best step you can take is to go through the loan process to the extent required to get a pre-qualification letter. A pre-qualification letter tells you and a seller how big of a home loan the lender will give you.

So, once you have the loan in hand, that must be the amount you can afford? The answer is maybe or maybe not. The prequalification letter is based on a number of factors such as your earnings and credit. It is not based on a picture of your life, which can lead to problems.

Other Expenses

There is nothing worse than buying a home and straining to make the monthly mortgage payments. This situation occurs when a homebuyer relies solely on the pre-qualification letter or their own wishful thinking. You may have purchased your dream home, but don't let the payments be a nightmare.

In determining how much you can afford to expend on a home purchase, you must consider your overall financial situation. Although you may be in a decent financial situation at the moment, do you have future expenses that will put pressure on your finances? Such situations might include:

1. Planning to have kids in the next year or so?

2. Are your current children going to college soon?

3. If you own a business, is the financial outlook stable?

4. If you work for a company, are you reasonably sure the company is headed in the right direction?

5. Do you have any concerns regarding the dreaded downsizing?

6. If you are the sole bread winner, what would happen if you were unable to work for a few months because of health issues?

These general questions are intended to wake you up to the possibility of over extending yourself on a mortgage. Every situation is different, so make sure you take a careful look at your life to make sure you are committing to a loan you can afford now and in the future.

Refinancing home mortgages | Home Buyers Face Decisions That Affect Their Long-term Financial Picture

Taking the step for prospective home buyers.into home ownership is one of the most important financial decisions a person will make in their lifetime. There are many factors to consider when embarking on this venture. Literally hundreds of loan programs are available, and it is important to find the one that best fits your personal long-term goals. yes very important

First and foremost, you must have a mortgage consultant in your corner that is willing to take the time to know what your long-term goals are. Communication is the key factor here.

Curious prospective home buyers sometimes turn to Internet-based services just to see what current interest rates are. But a faceless web site will not take the prospect's future financial planning into consideration or guide the potential borrower through the many nuances of the loan process. When shopping for a home loan, be wary of web-based services that offer programs to reel prospects in with attractive rates that are based upon unrealistic time frames.

If a lender is offering a terrific rate based on a 10-day lock-in period, it is unlikely that the potential home owner would actually be able to find their dream home, get through the negotiation process and win approval from a lender within such a short period of time. This is called short-pricing, and when it comes time to close the transaction, the rate that was originally offered is simply no longer available. As a result, the unfortunate prospect is bulldozed into a loan program with a higher interest rate.

It is highly unlikely that a qualified loan originator whose business is based upon referrals will use unscrupulous tactics such as this to get new customers in the door!

Once you have found a mortgage consultant that you feel comfortable working with, lay your goals out on the table because it will have a tremendous impact on choosing a loan program that meets your specific needs. One of the most important factors to consider is how long you wish to borrow the money for. For example, if you know you will only be in the home for five years, it wouldn't make sense to opt for a 30-year loan program or pay points up front to secure a lower interest rate. You would not be in the home long enough to benefit from such action.

Your mortgage consultant should be able to narrow down a selection of programs based on the information that you have provided, and present you with an easy-to-read spreadsheet that clearly defines viable options for your interest rate and amortization schedule, monthly payment and any potential savings you may realize by paying points up front.

Moreover, a reputable loan originator will not hesitate to share this information with your tax consultant or financial planner so they may offer additional feedback on your behalf.

Home ownership imparts a rewarding vehicle for building wealth and a strong financial future. The mortgage consultant that you choose should be there not only when your loan closes, but should also provide you with ongoing service to assist you in managing that debt over time.

Refinancing home mortgages | Home Buyer Beware ? Know The Signs Of Real Estate Market Trouble

Lots of articles have appeared recently about the booming real estate market in the United States or any other country. Home prices, especially on the East and West coasts, are not only at record levels, but are increasing at record rates. In some areas around Washington, D.C. and San Francisco, home prices have tripled in the last five years. While many homeowners have been enjoying huge increases in their equity, realized when they either sell their home or borrow against it, the market has become increasingly difficult for those trying to buy homes. It may get worse, as there are now some strong signs that the market may be near its peak:

The prices of homes in many markets are so high that few buyers can purchase them using traditional mortgages. In Washington, D.C., for instance, 48% of new mortgages are of the interest-only variety, where the buyer pays only the interest on the loan for the first few years. This keeps the payments low enough that the buyer can qualify for the loan. The problem is that the buyer is only paying interest and not actually contributing to the purchase price of the home. The fact that so many buyers are obtaining interest-only loans suggests that prices in those markets may be too high to be sustained.

Many home appraisers have complained that lenders are constantly pressuring them to "make the numbers" when appraising homes. Appraisers in some modestly-appreciating markets, such as Buffalo, NY, say that they are often given a value when assigned an appraisal, with the unspoken understanding that their appraisal is expected to come in at or above that figure. The lending industry is competitive, and lenders want to issue as many loans as possible. It would appear that quite a few of them are even willing to lend money when the home doesn't appraise for the asking price. Appraisers point out that if they don't provide the "requested" figures, then the lenders will simply hire other appraisers.

The foreclosure rate is increasing. The rate increased in March and April over the same months last year, suggesting that more buyers may have discovered that they have mortgages on which they cannot make the payments. The foreclosure rates are the highest in Florida and Texas, which have foreclosure rates that are nearly triple the national average. With interest rates near historic lows, mortgages are more likely to become even less affordable as interest rates increase.

What this means for prospective buyers is that they must do even more research before buying a home. Buyers should genuinely consider whether or not they could actually afford to make home payments that include a reduction in principal. If a buyer can't afford a home without taking out an interest-only loan, the buyer probably can't afford the home. Buyers should be suspicious of home appraisals and should, if possible, ask the appraiser if they are being pressured to provide a predetermined figure. Every buyer wants his or her home to appraise for at least the amount of the loan. But the current market is one where buyers are straining to make payments on prices that are at record levels. The last thing any buyer wants is to strain to make payments on a mortgage that exceeds the value of the home. The real estate market is in a precarious state at the moment, and prospective buyers should do as much research as possible to make sure that they can both pay for, and keep, their new home.

Refinancing home mortgages | Using A Sub Prime Lender Online

Sub prime lenders handle high risk mortgage loans that traditional lenders refuse to touch. Through slightly higher interest rates, sub prime lenders protect themselves from the higher rates of foreclosures or other matter. With sub prime lenders online, you can easily compare rates to find reasonable financing for your mortgage.

The Role Of Sub Prime Lenders

Sub prime lenders offer people who have poor credit due to a job loss, foreclosure, or bankruptcy a way to rebuild their credit. By making regular payments on a mortgage, people can reestablish a good credit history.

High risk mortgages are seven times more likely to foreclose, so sub prime lenders charge higher rates and fees to protect themselves. Some sub prime lenders charge excessive rates and fees, which you should look out for.

Help Your Odds

Sub prime lenders determine mortgage rates with the same factors as prime lenders. Your credit history is important, but so are your debt load, cash reserves, and down payment. To improve your mortgage rates, close unused credit card accounts, keep three months of living expenses in reserve, and have a down payment of 5% or more.

Shop For Lenders

Half of all consumers begin their mortgage loan process online. You can easily compare rates and fees through mortgage lender websites. The rates listed are for a traditional borrower with a good credit history, which is a fast way to compare rates. To get quotes for your particular situation, you will need to enter your personal and financial information.

Get The Details

Several factors determine a mortgage loan's rates and fees. Everything from your credit history to the home's location will impact your mortgage rate. In order to get details about a mortgage loan, you will have to enter all the detailed information requested by the mortgage company.

Fortunately, online mortgage applications allow you to fill out the form at your own pace. Mortgage lenders also offer support through online chat rooms, email, or over the phone.

Finish The Deal

Once the hard part of choosing a mortgage lender is over, you can quickly finish the deal. With your online application completed, your final paperwork will be sent to you through the mail. Once you have signed the paperwork and have it notarized, your loan application will be processed and you can buy your new home.

Refinancing home mortgages | High Risk Home Mortgage Lenders Online

Online high risk home mortgage lenders specialize in offering loans to people with adverse credit due to bankruptcy or other financial problems or any other problem. By analyzing online quotes, you can find a reasonable mortgage loan even with poor credit. Loan approval is then just a matter of filling out your online application and reviewing some final paperwork.

High Risk Home Mortgage Lenders

High risk home mortgage lenders, also called sub prime lenders, provide a service for people with poor credit. Through slightly higher mortgage rates and fees, lenders are able to offer mortgage loans to high risk lenders. There are predatory lenders who charge extremely high rates and fees, but you can avoid them with comparison shopping.

Finding Lenders

The internet makes finding high risk home mortgage lenders easy. Through mortgage comparison websites, you can request quotes from several lenders by answering a few basic questions. You commit to no obligations when you requests quotes online.

These generic quotes will help you narrow down your list of possible mortgage lenders. Once you have picked a few possible mortgage lenders, you will need to request a detailed quote from them to make real comparisons.

Comparing Financing

Many factors besides your credit score are used to determine a mortgage rate. You will need to fill out an application with detailed information in order to receive a real mortgage quote. These applications can be filled out online for speedy processing.

Once you receive your mortgage quote, compare both rates and fees. Fees often hide the true cost of a loan. The easiest way to compare mortgage loan costs is to add up fees and the interest you will pay over the course of the loan.

Online Application

After you pick the best mortgage financing offer, you can quickly finish the application process online. After your application has been reviewed by your mortgage lender, you will receive final paperwork in the mail for your approval.

Think About The Future

With a high risk mortgage loan, consider refinancing after establishing good credit history for three years. Making regular payments, building cash reserves, and lowering your debt will allow you to qualify for lower interest rates in the future.

Refinancing home mortgages | Helpful Mortgage Advice

Mortgage advice overwhelming you, Suck it? Many people get advice from everyone on the planet when they talk about purchasing a home. People tell them their version of advice on most important factors and expect the potential home buyer to do as they have instructed.

What is good advice and what is bad advice? Use common sense. Here is some mortgage advice from us. We think this will help you find the best loan and avoid the issues with family advice along the way!

• Get a mortgage pre-approval before you get your hopes set on a home. When it comes to purchasing a home, you have to know how much mortgage you can afford. When you do, you can find your dream house that you can afford. So, get to the lenders before you see the real estate agent!
• Find the best interest rate. No matter what type of mortgage you decide to take out, our advice is to shop around and compare interest rates. A small difference in one bank or lender to another is thousands of dollars over the course of the mortgage term. Advice is the most important feature to help you save money.
• Compare apples to apples, but compare them all is our advice. Finding a balance in the amount of money you pay each month and the shortest loan is our advice. Again, shop around for all of these different options and their rates.
• When it comes to advice on deciding on the right lender and the right mortgage, take the time to consider all aspects of the mortgage. Take this advice, it will help you! This includes the cost of the closing, the fees involved, and all terms of the mortgage. The best mortgage advice is that you should choose the mortgage term that is the best option for you.

The next time you get advice about your mortgage purchase from your uncle or a long lost cousin, think about what really matters. You need a lender that offers you the best rates, terms, and the best overall service. You need advice on which lenders to choose, but you know that the best lenders for one person aren't necessarily the right choices for you. Mortgage advice needs to be solid, full of good advice, free of biased advice, and the attitudes need to be left out!

You'll find great mortgage advice starts with simply doing basic research to find the answers you need. Don't go with Aunt Sue's bank because she has been there for 30 years if an online mortgage can offer you a mortgage at a fraction of the cost. Take our mortgage advice; do your research before obtaining a mortgage. That is the best advice you can get!

Refinancing home mortgages | Helocs And Second Mortgages: Which One Should I Choose?

Whether you need some extra cash to pay off some credit card debts, or to make some home improvements, home equity lines of credit or second mortgages can be great ways to get started, Just do it.

Many people looking to borrow money often opt for home equity line of credit, or HELOCs, for short. They are a tempting first choice, because they can often give you the much needed cash at a low interest rate. Another advantage to taking out an HELOC, or a home equity line of credit, is that they may provide the borrower with a certain tax break, but you would need to verify this with your lender or accountant.

One drawback to HELOCs, however, is the fact that borrowers are expected to put their homes up as collateral. So, it is important that you think this decision through, before finalizing the loan, because you may be at risk of losing your home- and its equity- if you are late or cannot make your monthly payments. Finally, if you decide to sell your home, must HELOCs will require that you pay off the balance, before completing the sale.

You can also take out a second mortgage, if you need some cash. Like the HELOC, second mortgages usually pay out the loan in one sum, which makes it a convenient option. Second mortgages also have the added advantage of having set payments, at a fixed interest rate. Many companies will charge a lending fee, which will vary from company to company. These fees are usually based upon a percentage of the loan and are frequently referred to as 'points.' If one fee seems too high, don't be afraid to shop around to find one which is better suited to your budget.

Remember, however, that adding a second mortgage to your home carries with it certain risks. Like with home equity lines of credit, you could lose your home, if you fall behind in the payments.

Refinancing home mortgages | Reasons Why You Might Want To Try Applying With A Subprime Mortgage Lender

Before you apply for a hard money loan, try applying with a subprime mortgage lender first for lower rates and fees, you must try it very soon. Hard money lenders charge excessive fees to high-risk borrowers, but will only lend 50% to 75% of the value of the property. On the other hand, subprime lenders offer loans to similar high-risk groups, but with better terms.

Lower Rates

Subprime lenders specialize in B, C, and D class loans. Even with a bankruptcy in your financial records, you can still be approved for a mortgage with a subprime lender. To protect themselves from the higher risk of foreclosure, subprime lenders charge a couple of interest rates higher with additional fees.

Hard money loans are funded by private individuals, who require high interest rates somewhere between 12% to 18%. This is nearly double what a reputable subprime lender would typically charge. You can also expect to pay higher fees upfront with hard money lenders.

Reasonable Terms

Subprime lenders offer mortgage loans similar to that of traditional mortgage lenders. You can expect regular payments and terms, such as no early payment fees. Subprime lenders also require smaller down payments, even zero down if you have a FICO score of 600.

However, hard money lenders may require a balloon payment in one to two years or other difficult terms. Hard money lenders also require as much as 50% of a down payment for the loan to ensure they will make a profit even if they foreclose on the property.

Refinancing Option

Subprime lenders also offer refinancing, unlike hard money lenders. Many subprime lenders will automatically offer refinancing after three years of regular payments so you can reduce your mortgage interest rates or tap into equity. Hard money lenders are interested in high profits, so they will only deal with high interest rates and terms profitable to them.

The Reason For Hard Money Loans

Hard money loans have their place in the financing world. Primarily used for property speculation and development, hard money loans make sense for short-term borrowing. They can also be successfully used for purchasing non-traditional properties such as ranches, where the property value is not realized by a traditional bank.