Archive for June, 2010
Getting the Best Home Equity Loan is Easy
So, you have a beautiful home and you are looking to make it even better through improvements. But where is the cash for it? Well, the cash is in the home itself. Yes, it really is. And the concept of generating cash through your home is called home equity loan.
Home equity is the extent of ownership a home owner has in the home. This is a concept that is very popular in the mortgage industry. Home equity can be used to generate cash when you need it. This is done through home equity loans. So, home equity loans are the mortgage loans wherein you utilize the home equity to get loan for home improvement, debt consolidation etc. However, like any type of mortgage loan, you need to get your basics right and look for the best deal on home equity loans.
Even if you wouldn’t dream of running your credit-card balance through the roof, chances are you have no qualms about borrowing heavily against the roof over your head.
And why not, when you can so effortlessly take out a home-equity line of credit, or HELOC, and draw on it as needed up to a preset limit? They’re fast, simple and, given booming home prices, seemingly inexhaustible.
To be sure, we’ve often said on this Web site and in our magazine that they’re good for certain things. But there are ways that these seemingly innocuous loans can come back to bite you.
Risk No. 1: Those low payments balloon
HELOCs are structured as interest-only loans, so the minimum payments can be enticingly small. Currently, someone with a balance of $36,427 (the national average) would owe only about $200 a month. Put the same amount on a credit card charging 13 percent and the minimum would be around $1,000.
While a HELOC’s interest-only payments feel relatively painless, they have a serious downside: You’re not retiring any principal. If you borrowed $20,000 the day you opened the line of credit, you’d still owe $20,000 when the interest-only payoff period ends, generally after 10 years.
At that point, you would have to start paying down the principal, which means your monthly payments would spike. Of course, you could roll the balance over into a fresh HELOC. Many people do.
“The risk is that you make small payments on a big debt forever and never make a dent,” cautions Fritz Elmendorf, vice president of the Consumer Bankers Association.
The solution: Start paying off the principal in advance by exceeding your minimum payment each month.
Risk No. 2: That low rate rises
You may figure that even if interest rates edge up, the hike will barely register on your monthly HELOC statement. But interest-rate moves tend to happen in clusters as the Federal Reserve seeks to get the economy on track.
Since June 2004 the prime rate, which HELOCs are pegged to, has climbed from 4 percent to 6.25 percent. The results are quite visible: On that $36,427 average HELOC balance you’d pay about $70 extra a month.
If rate hikes continue, as many experts expect, it will be like water torture for HELOC holders.
“A quarter point here, a quarter point there, and soon you start to feel the pain of significantly increased monthly payments,” says Keith Gumbinger of HSH Associates, a financial research firm in Pompton Plains, N.J.
The solution: If you expect to take more than three years paying off your debt, skip the HELOC and use a fixed-rate home-equity loan instead.
Risk No. 3: You’re hit with hidden fees
Increasingly, banks are burying extra costs in the fine print. One of the most onerous is the early-termination fee, aimed at consumers who jump from loan to loan in search of better terms.
In response, lenders have begun to charge a fee if a line is closed within a specified period, typically three years. Today more than 60 percent of lenders have early-termination fees vs. around 45 percent in 2000, according to HSH Associates.
Usually an early-termination fee is a few hundred dollars. But some lenders charge a percentage of the outstanding balance or even force people to fork over transaction costs that were supposedly “waived” when the credit line was first opened. Either of these scenarios can end up costing you thousands.
The obvious loophole is to keep the line of credit open with a balance of zero or a few dollars rather than closing it down altogether, but lenders have thought of that. Accounts that remain open but unused for a set period (usually one year) get stuck with inactivity fees, typically around $50. You can also expect to pay an annual fee, again about $50.
The solution: Shop around for a lender that doesn’t impose heavy fees — or at least be aware of the fees written into your loan and avoid them.
Risk No. 4: You lose your equity
Most HELOC tappers assume that some day they’ll just sell their home and the loan will effectively disappear. But there are no guarantees — and there doesn’t have to be a bubble for this assumption to put your equity in danger.
Let’s say you bought your house for $200,000 but it was recently appraised for $300,000. Sell for anything close to the appraised value and you’ll reap a tidy profit. Now throw a $75,000 HELOC balance into the equation. Suddenly the local market need only sag a bit and you can be in trouble, unable to net enough on the sale of your home to pay off both the mortgage and HELOC balances.
The solution: Leave yourself an equity cushion of at least 20 percent.
Risk No. 5: You borrow and overspend
No question, HELOCs offer better rates than bank loans, credit cards and most everything else out there. But whether they’re truly a good deal depends on how you use the money.
In a 2004 survey by Synergistics Research, based in Atlanta, 57 percent of respondents reported using HELOCs for home improvement. This can be a sensible use of HELOCs, as can some debt consolidation (cited by 35 percent of respondents) and paying for education (13 percent).
“If you’re going to pull money out of your home, make it count,” says Nan Sabel, a financial planner in Bedford, Mass.
But what if you are simply siphoning off your home’s equity in order to live beyond your means? According to the Synergistics survey, for example, 13 percent of HELOC holders have tapped the lines for travel or other leisure pursuits.
Bottom line: Your Hawaiian idyll will truly be more than just a memory if you end up paying it off over many years with interest.
The solution: Resolve to use your HELOC only for expenses with long-lasting benefits: education, home improvement or debt reduction.
As we already know, internet is the source of knowledge and information on everything. And something like mortgage loans is a favorite topic on the internet. There is a lot of information available on all types of mortgages, including home equity loans.
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The Costs Of A Reverse Mortgage
Many of the seniors have the same vacant reaction once they heard the term reverse Mortgage, but that’s not how it has to be. Reverse mortgages are not inherently complicated and scary, let me enlighten you with reverse mortgage.
The concept behind a reverse mortgage is simple, it enables senior to take the equity in their homes and convert it into cash. This concept is sometimes referred to as “The loan that pays you” A reverse mortgage does not require borrowers to make any payments to the lender until he or she sells the home or passes away.
There is no monthly payments, no annual payments, nothing due to the lender. Furthermore, instead of making a monthly payment to a lender, many borrowers choose to receive a monthly payment from the equity in their home. For example, a borrower might decide to receive $1,000 a month every month for the rest of her life. Other borrowers might choose to receive a large lump sum payment. Still others might keep the money in a credit line that they can draw upon as they need it. The method of payments to you is at the borrower’s discretion.
Like all loans, reverse mortgages have costs. A major cost is the interest you pay (or don’t pay) on borrowed money, and there may be other costs as well. Most costs can be bundled with the loan so you do not pay out of pocket. Many of the same costs that someone pays to obtain a home purchase loan, or to refinance their existing mortgage, apply to reverse mortgages too. You can expect to be charged an origination fee, up-front mortgage insurance premium (for the FHA Home Equity Conversion Mortgage or HECM), an appraisal fee, and certain other standard closing costs.
In most cases, these fees and costs are capped and may be financed as part of the reverse mortgage. Some of the most common reverse mortgage fees are lender fees, Origination fees are related to establishing your loan. The exact use can be unclear, but the fee ultimately compensates your lender or broker for putting your loan in place. The appraisal fee pays for somebody to do an appraisal on your home. An appraisal is an investigation into the value of your home. The appraiser gives the lender an idea of how much your home is worth. The home’s worth helps determine how much money you can receive. Next are mortgage insurance, title search and insurance, then Credit report fees and ongoing service fees
Everything has a cost. Just know your choices and the total price before committing. Reverse mortgages have helped hundreds of thousands of homeowners like you; improve their quality of life in retirement. A Reverse Mortgage can help you retire more comfortably. It can provide you with money when you need it most. No Monthly Mortgage Payments, Easy Qualification, Tax-Free Money and No cash needed for closing costs. Can it get any better? If you’d like to find out how much money you qualify for and if you’re eligible, give us a call at (800)630-0650.
Tim Jacobs
Golden Years Mortgage Solutions
Your Money…When You Need It
www.GoldenYearsMortgageSolutions.com
(800)630-0650
tim@goldenyearsmortgagesolutions.com
Tim Jacobs @ Golden Years Mortgage Solutions www.GoldenYearsMortgageSolutions.com (800)630-0650 tim@goldenyearsmortgagesolutions.com Golden Years Mortgage Solutions is a reverse mortgage approved FHA Lender. We’ve helped thousands of senior homeowners solve their financial problems. Our agents and brokers collectively have over 60 years of experience in Reverse Mortgage Loans and general financial services, including managers who are industry pioneers with more than 12 years of reverse mortgage experience. Our dedication to providing financial solutions for seniors is evidenced by the number of referrals that come from our existing clients.
Home Equity Loan : Loansmagician
Real estate prices across the country have skyrocketed in the last five or six years. Low interest rates, combined with a lack of trust in the stock market has led to a tremendous inflow of capital into real estate. To put that in perspective, take into account the median household income, which is a little over 44,000,dollar and compare that with the national median home price of 216,000 dollar, a very high multiple. Of course, in many metropolitan areas ( http://www.ixs.net ) where a large fraction of the nation’s population lives, the rise has been even more spectacular. San Francisco has seen the median home price rise from 395,000 dollar in 2000 to 713,000 dollar in early 2005
For those who did not get in at the right time, the situation is lamentable, many others, on the other hand, find themselves sitting on potential gold mines – in many cases they have witnessed the doubling, trebling or even quadrupling of their investments in a matter of a few years. Walking and sleeping on land that has appreciated under your eyes is a satisfying experience, and some people are quite happy to count their chickens without wanting to cash-in on their gains. Others, for whatever reasons want to enjoy their newfound wealth. Home equity loans offer an opportunity to do just that.
The fact that property prices have risen means that more Americans than ever before are eligible for home equity loans. Let me illustrate that by an example – say you bought a home for 300,000 dollar five years ago, putting down 20% (60,000 dollar) at that time. If you have a typical thirty-year fixed mortgage then you have not made a significant dent in the principal (in this case the loan principal is 240,000 dollar) in the first five years. Now suppose, quite realistically in many cases, that the house value has appreciated from 300,000 dollar five years ago to 500,000 dollar today. In this case your equity in the house would have jumped from 60,000 dollar (your down payment) to 260,000 dollar (down payment plus unrealized capital gains). You would be eligible to take a loan against that increased equity. Most institutions are willing to extend home equity credit for upwards of 50% of total equity in the home.
Now that we have established that a rising real estate market has produced many more potential candidates for home equity lines of credit, let us show why this is a financially savvy way of consolidating loans or of securing financing. Whether the reasons are personal, such as Ferrari you have been drooling over, or for your home business, home equity loans are usually the best first option for obtaining liquidity. First, home equity loans take advantage of tax breaks that the federal and state governments give all homeowners – all interest payments made to service the loan are tax exempt.
This advantage alone warrants serious consideration – a family in the 30% federal income tax bracket will stand to save a substantial amount on a typical home equity loan. The implications of the tax advantage are such that many people with no need for additional credit take out home equity loans and invest elsewhere just so they can take advantage of Uncle Sam’s generous handout. Second, home mortgages are handled a little differently from other consumer loans because of two reasons. First, the loan is “secured” by a tangible asset (i.e. the house, comprising of the value of the land and the material with which the house is constructed) and second, there is a huge industry that deals exclusively with home mortgages and home loans, resulting in a fiercely competitive environment. To the consumer, this results in significantly lower interest rates on home loans.
So, let us recap the win-win situation for a home equity line of credit. Rising real estate prices have made more people eligible for bigger loans, in many cases significantly bigger loans than ever before. Relatively low interest rates, thanks to the Fed and a competitive home mortgage industry has kept the cost of borrowing low. And finally federal and state tax breaks on home loans further reduce the cost of borrowing.
If you are thinking of borrowing money and you are a homeowner, be sure to consider a home equity line of credit before pursuing alternative methods of financing.
For more information about Home Equity Loan visit http://www.loansmagician.com/home-loan.php
Jill Murtha hosts http://www.loansmagician.com and expresses her passion for loans through writing and discussion. She works for Less Corporation at http://www.sofizar.com/click-fraud.php . Copyright Jill Murtha
Understanding Reverse Mortgage
When it comes to helping our aging loved one with financial decisions, we want to make sure we take time to understand all aspects of the transaction. One option for seniors that is becoming very popular is to use the equity from their home to increase their cash flow. Some seniors need to pay off old home equity loans; others have credit card debt that they would like to eliminate. Some elderly parents need additional cash flow to pay in-home caregivers, and some need the money to simply be able to afford to pay their daily living expenses. Regardless of the reason, a reverse mortgage is a big decision for seniors and their family members.
Let me offer some background, For the purpose of our discussion, a reversed mortgage is designed specifically for homeowners who are age 62 and older. Through this product, you can receive loan money from your home in the form of a lump sum, regular monthly checks or a line of credit. The money is typically repaid with interest when you sell your house, permanently move away, or pass away.
Reverse mortgages are regulated by the federal government (HUD and FHA). This is a “non-recourse loan,” which means that the heirs of the seniors are not responsible for repaying the loan. In fact, a reverse mortgage is a loan that does not have to be repaid unless both homeowners (assuming a couple) leave the home permanently, or pass away. No monthly payments are required. The senior is the one who gets paid.
The money the elderly receive from a reverse mortgage is tax free, and does not interfere with SSI or Medicare benefits. For the elderly parents that are having trouble making ends meet, this can be a life saver.
You might be wondering, what’s the difference between a reverse mortgage and a bank home equity loan. With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
You don’t make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes, insurance and other conventional payments like utilities. With an FHA HECM you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.”
Now that you understand the reverse mortgage you are now thinking how much money you can get from your home. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
Reverse mortgages have helped hundreds of thousands of homeowners like you; improve their quality of life in retirement. A Reverse Mortgage can help you retire more comfortably. It can provide you with money when you need it most. No Monthly Mortgage Payments, Easy Qualification, Tax-Free Money and No cash needed for closing costs. Can it get any better? If you’d like to find out how much money you qualify for and if you’re eligible, give us a call at (800)630-0650.
Tim Jacobs
Golden Years Mortgage Solutions
Your Money…When You Need It
www.GoldenYearsMortgageSolutions.com
(800)630-0650
tim@goldenyearsmortgagesolutions.com
Tim Jacobs@GoldenYearsMortgage Solutions www.GoldenYearsMortgageSolutions.com (800)630-0650 tim@goldenyearsmortgagesolutions.com Golden Years Mortgage Solutions is a reverse mortgage approved FHA Lender. We’ve helped thousands of senior homeowners solve their financial problems. Our agents and brokers collectively have over 60 years of experience in Reverse Mortgage Loans and general financial services, including managers who are industry pioneers with more than 12 years of reverse mortgage experience. Our dedication to providing financial solutions for seniors is evidenced by the number of referrals that come from our existing clients.
Chicago Home Equity Loans
Chicago home equity loans are the type of loans where the borrower uses the equity in his Chicago home as collateral. You can lose the home and be forced to move out if you don’t repay the debt. Such loans are often used by families in need of financing help to make major home repairs, pay medical bills or college tuitions. Chicago home equity loans create a lien against the borrower’s house. Equity is the difference between how much the home is worth and how much you owe on the mortgage (or mortgages, if you have more than one on the property). Such loans require an excellent credit score and reasonable loan-to-value ratios. An individual can apply for an equity loan, no matter the type of home he has. It can be a condo, house, apartment, or townhouse.
The maximum amount that you can borrow through a home equity loan depends on your credit score, monthly income, and the appraised value of the collateral, among others. It is possible to borrow up to 100% of the appraised value of the home. Chicago home equity loans can be of two types, closed- and open-end. Closed-end home equity loans generally have fixed rates and can be amortized for periods usually up to 15 years. The open-end loans, also known as HELOC (home equity line of credit) loans, are at a variable interest rate, but here the borrower chooses when and how often to borrow against the equity of the property, with the lender setting an initial limit to the credit line.
But when comparing the two, keep in mind that you cannot simply compare the Annual Percentage Rate (APR) for a loan with the APR for a home equity loan because the APRs are figured differently. The APR for a regular loan takes into account the interest rate charged plus points and other finance charges. The APR for a home equity line is based on the periodic interest rate alone. It does not include points or other charges.
Here are the steps you should follow when considering a home equity loan in Chicago:
1) Check your options – home equity loans are not the only method of financing. Remember, if you decide to get a home equity loan and can’t make the payments, the lender may foreclose and you would lose your home.
2) Do the research – if you are keen on getting such a loan, then talk with several lenders, including at least one bank or credit union in your community. Compare their offers. Comparing loan plans can help you get a better deal. Beware of loan terms and conditions that may mean higher costs for you. Keep in mind the following parameters:
-Can you afford the interest rate and monthly payments?
-The period of the loan, or how long you have to pay it back
-Check the penalties for late or missed payments
3) Double check – think twice before signing the contract. Have an attorney review the loan papers and make sure the terms are the same ones you agreed on.
For more information, please visit The Chicago Real Estate Report.
Reverse Mortgage Income After Retirement
As you approach retirement age you may want to think about getting a reverse mortgage loan to supplement your retirement income. After going through a long and tiring life filled with hard work, you may look forward to retiring with a stable and steady stream of income and being able to live off it comfortably. For many Americans, this means income derived from retirement plans, Social Security and any investments they may have made during their working lives.
One of the other most popular and widespread ways of supplementing retirement income is to take out a reverse mortgage on your property. There are many banks and reverse mortgage lenders in the market today that provide reverse mortgages, and the market has become very competitive which makes the programs more beneficial for the customer.
We know we should begin planning for retirement early. To ensure you survive retirement comfortably it is best to plan as early as possible. For many, the best way to enhance your retirement plan is through a Reverse Mortgage. A reverse mortgage is quite simply a way to access the equity in your home to provide you tax free income with no monthly payments. Most importantly senior home owners age 62 or above are federally eligible to apply and qualify for reverse mortgage loans after going through a mandatory counseling process.
There are several options for receiving payout from a reverse mortgage. You can receive fixed, monthly payments for a period of time; get a lump-sum payment; open a line of credit that you can draw against; or you can receive some combination of these options. You don’t have to stick with a payment option forever. You may be able to change your payment option in the future. The money doesn’t have to be paid back to the lender during the lifetime of the borrower. The principal and interest become payable only when the home owner passes away or moves out of the reverse mortgaged property.
The additional or extra line of income derived from a reverse mortgage can help put seniors at financial ease and enable them to gain confidence about their social position and spending ability in retirement. The money can be used any way they see fit – be it for travel, vacation, medical expenses, education expenses of grand children, home remodeling, anything!
The additional level of available money from a reverse mortgage offers senior home-owners peace of mind and stability so they can live their pre-retirement lifestyles without any fear of cash deficiency.
Reverse mortgage income is not taxable either; for the government considers it inappropriate to tax you on property you already own .Taken in perspective, reverse mortgages are good as an additional line of income for the senior home-owners looking to improve upon their lifestyles with a more money in their pockets. The homeowner doesn’t pay a mortgage; instead he receives payment from the lender in exchange for a stake in the value of the home. Check how much you can get from your Reverse Mortgage? We’ve helped thousand of senior homeowners solve their financial questions, it’s time we help you.
For FREE reverse mortgage counseling, Give us a call. We will be more than happy to answer any questions that you may have. Or if you’d like to find out how money you qualify for and if you’re eligible, feel free to give us a call at (800)630-0650.
Tim Jacobs
Golden Years Mortgage Solutions
Your Money…When You Need It
www.GoldenYearsMortgageSolutions.com
(800)630-0650
tim@goldenyearsmortgagesolutions.com
Tim Jacobs @ Golden Years Mortgage Solutions www.GoldenYearsMortgageSolutions.com (800)630-0650 tim@goldenyearsmortgagesolutions.com Golden Years Mortgage Solutions is a reverse mortgage approved FHA Lender. We’ve helped thousands of senior homeowners solve their financial problems. Our agents and brokers collectively have over 60 years of experience in Reverse Mortgage Loans and general financial services, including managers who are industry pioneers with more than 12 years of reverse mortgage experience. Our dedication to providing financial solutions for seniors is evidenced by the number of referrals that come from our existing clients.
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