Mortgage : Home Loans : Refinance : Home Equity Loans

By Jill Kane

Home equity loans are available for homeowners or property owners. This is the kind of loan where the homeowner uses his property as collateral or a guarantee that the loan will be repaid. As such, it is a form of secured debt. If the borrower defaults on the loan, he loses his house and may be forced to move. The home equity loan is based on the amount of equity the owner has in the property. Equity refers to the amount of the principal that has been repaid on the mortgage, if there was a small down payment. It is the amount of value that is not mortgaged (appraised value of the home less the principal remaining of the mortgage). The greater the amount of equity the home owner has, the larger the amount of money he can borrow using the home as collateral.

There are advantages and disadvantages of home equity loans. First of all, it is usually a way of borrowing at a low interest and is available to any home owner with a good credit history. The lender looks at the debt-to-income ratio in determining eligibility. The big advantage for the borrower is that he can use the borrowed funds in any way he wants. He does not have to give a reason for borrowing or an account of how the borrowed funds are used. This is why home equity loans are so popular. In many instances, homeowners use home equity loans as a form of debt consolidation. Instead of having bills coming in at different times of the month with different due dates and different interest rates, they have one monthly payment at one interest rate. (The problem here is that they are turning short-term unsecured debt, like credit cards, into long-term secured debt.) Finally, depending on the borrower’s situation, the interest on the home equity loan may be tax deductible.

The disadvantages of the home equity loan are that the size of the loan is limited by the amount of equity the homeowner has. For someone who is just beginning to repay their mortgage and has made the first few payments, they have very little, or no equity and cannot get a loan, unless they made a sizeable down payment on the house. The other drawback is the house is being used for collateral for the loan. If there is a default, the homeowner loses his house.

Home equity loans are attractive to the public because they are relatively easy for the homeowner to obtain. Since the home is used as collateral, the approval time for the loan is rather short, usually a few days and they don’t have give a reason for wanting the loan. Home owners can obtain these loans in a variety of places. They can check with their own bank and other banks and lending companies. There are also many online lending companies and banks that provide home equity loans.

For more helpful information on home equity loans and mortgage loans visit http://www.1st-low-rate-loans.com/

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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By Jill Kane

Bad credit loans are not impossible to obtain. People with bad credit can still obtain home loans, auto loans and personal loans. Having bad credit doesn’t mean that the consumer can’t obtain credit, it just means the terms won’t be as favorable and it may take a little more searching to find the best deal. Bad credit ratings can result for several reasons; bankruptcy, too many credit cards with missed or late payments, defaults on loans, etc. Whatever, the reason bad credit loans may still be available.

The easiest way to look for a loan is to look in the phonebook or online. A bank may not be willing to loan to someone with bad credit, but it doesn’t hurt to begin by talking to your own bank. If they are not willing to make a loan, the internet has many websites with businesses that will. There are many entities that specialize in loans to people with bad credit. There are also many entities that act as credit finders. The consumer completes an online application. The application is evaluated and the consumer is matched with a lender.

Bad credit loans will usually carry unfavorable terms. This means that the consumer may be required to have a co-signer. The rate of interest may be higher on the loan or the consumer may have to have some form of collateral. The loan may also be for a shorter term, to lessen the risk of default for the lender. This is why the consumer should shop around and find the best deal. Not all credit providers offer the same terms.

If recovering from bankruptcy is the problem, then the consumer is in a position where he has to reestablish credit. Since the bankruptcy will stay on the credit record for seven year for a Chapter 13 filing and ten years for a Chapter 7 filing, it is important for the consumer to rebuild his credit history and prove himself credit worthy. The consumer should begin to do this as soon as the proceedings are complete. The best way to do this is to join a credit union and make regular deposits. This will not only look good on the credit report, but it may allow the consumer to obtain the loan from the credit union on more favorable terms. Also, sign up for a credit card and make the monthly payments on time without missing any payments. Again, this will improve the consumer’s credit report and allow the consumer to find a loan on more favorable terms. The consumer has to prove that he is not a bad credit risk.

Whatever the reason is for a bad credit history, loans are not impossible to obtain. Bad credit loans are available even from banks. Many entities specialize in bad credit loans. This is their niche in the market. The consumer should make sure that he is dealing with a reputable lender and closely read any document before signing it.

For more information on obtaining Bad Credit Loans and Bad Credit Mortgage visit www.1st-bad-credit-loans.com/

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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By Ray Prince

Having looked at the quality of cover, we now turn our attention to:

How to get the right level of protection

Using our example again, Dr Cureall has a clear idea now on the quality of protection he wants, and now needs to make a decision regarding the level of cover he requires.

He is a family man in his late thirties, his wife, 3 years younger, is not working, and they have two children, Mat and Laura aged four and two.

We suggested to him that he should follow a simple process to work out how much cover he should buy:

- Find out what income they need to create

- Work out what they already have

- Decide on the time period to be covered

We asked Dr Cureall to fill in a detailed spending plan of what his wife would need if he had died yesterday ? and vice versa.

This is to ensure that they would have enough income between now and retirement and into old age, should either of them die prematurely.

The Solution

Mortgage ? it is decided to fully cover the interest only ?200,000 mortgage with level term assurance over the 20 years of the loan. Since it is only slightly more in premiums, Dr Cureall decides on two single life policies instead of one joint life plan. This would mean on either death, the surviving partner would still have their cover intact.

Since the strategy we have created for him involves overpaying on the mortgage (he has a flexible mortgage) we could have used decreasing term assurance to mirror the reducing debt. However, Dr Cureall feels he may not reduce the debt all the time, and will reduce the sum assured on the level term assurance when he feels it is appropriate.

Dr Cureall already has sufficient critical illness cover therefore no additional cover was required.

So, on either death, the surviving partner would be free of debt.

What’s next?

Living expenses ? this is where the spending plan comes in. This, together with a forecastig tool we use, Dr Cureall is able to see how the next 50 years will look on the scenario of either/both deaths.

Clearly their main priority is to provide for the children. This means being able to give them the life they would have had if the grim reaper had not called. So any school and university fees are built in as well as holidays and general living expenses.

Due to the children’s ages and university costs being anticipated, the Curealls look at their projections (?financial map’) and decide on 22 years as the optimum time period. This also would give Mrs Cureall enough to live on into her old age.

The projection takes into account all NHS benefits, which are considerable now that Dr Cureall has 14 years service, including spouse and child payments. (In addition we recommend that the NHS death in service benefit is placed into trust which will potentially save the family ?60,000 in Inheritance Tax).

Because we have built in these NHS payments, the amount of cover required on Dr Curealls life is nowhere near what he expected. They decide on more lump sum cover, with the balance to be provided by Family Income Benefit (pays out an annual income).

(Article continues below)

HOME LOANS ADVERTISEMENT

This time instead of level protection, the Curealls decide on indexed cover to protect against inflation. After all we can’t plan when we are going to die, and in payment the amounts would increase as well.

We recommend all these policies are written in trust to minimise Inheritance Tax, as well as ensure the monies are paid to the right people quickly on death.

Other points

Their strategy could also include:

- downsizing the home, or selling a business or property

- Mrs Cureall going back to work

You also need to be aware of:

- From April, Pension Term Assurance changed and we recommend you review your protection. Up to 40% tax relief will be available on premiums. UPDATE: ON 6 DECEMBER 2006 THE GOVERNMENT ANNOUNCED THAT TAX RELIEF ON PREMIUMS MAY BE REMOVED, NO FINAL DECISION HAS BEEN MADE AT THE TIME OF WRITING.

- Beware Dentists! If you have or are considering leaving or reducing your NHS work, your NHS cover will reduce.

In Summary

So what have we achieved?

Well, the Curealls now have the correct amount and quality of cover. It is over the appropriate time period, and has the right mix of level and indexed protection. It is written in trust, and the Curealls ensure they pick the right trustees.

The Financial Tips Bottom Line

Make sure you consider ALL your options before you buy any type of life assurance, critical illness or income protection. Just buying a policy may not be enough. Seriously consider whether you should place it under trust, which will potentially save you Inheritance Tax.

In the next article we’ll look at the actual claims experience of insurance companies and the reasons why people are claiming on critical illness and income protection. It makes interesting reading!

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Ray Prince is an Independent Financial Planner with Rutherford Wilkinson plc, and helps UK Resident Doctors and Dentists get the best deals on mortgages, protection and investments, as well as helping them achieve their financial objectives. Click here for Financial Advice for UK Doctors and Dentists and to get your free retirement guide, How To Avoid The 7 Most Common Retirement Planning Mistakes. Rutherford Wilkinson plc is authorised and regulated by the Financial Services Authority.

Ray Prince is an Independent Financial Planner with Rutherford Wilkinson plc, and helps UK Resident Doctors and Dentists get the best deals on mortgages, protection and investments, as well as helping them achieve their financial objectives.

http://www.medicaldentalfs.com

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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By Jill Kane

It is so easy to get into debt today when the average American has five to nine credit cards which are used for everyday living expenses. All of those charges accumulate and the monthly bills get bigger and bigger. Eventually, the consumer’s income doesn’t cover all of the monthly bills. Throughout the month the consumer has bills arriving with different due dates and different interest rates and different finance charges and penalties. Leaving one bill go for a month in order to pay a different bill results in finance charges or penalties. The consumer who is going into debt deeper and deeper begins to look for a solution to his problems.

The consumer may benefit from debt consolidation. Debt consolidation is when the consumer borrows money and uses the money to pay off his bills. Then he has one monthly payment at one rate of interest to pay, instead of bills straggling in throughout the month with different due dates and different interest rates. One way of doing this is with a home equity loan. The consumer has to be a homeowner in order to qualify for a home equity loan because the house is used as collateral for the loan. The amount of the loan is determined by the amount of equity which the homeowner has. The borrower should be aware of something when he obtains a home equity loan for purposes of debt consolidation. Most consumer debt is short-term unsecured debt, like credit cards are. It is unsecured because there is no collateral. A home equity loan is a long-term secured debt, because the house is used as collateral. This method of debt consolidation results in short-term unsecured debt being converted into long-term secured debt. In case of default, the borrower can lose his home.

Debt consolidation may also be possible for those who are not homeowners. It is possible to obtain an unsecured personal loan to use for debt consolidation purposes. These are referred to unsecured debt consolidation loans. In this situation, the consumer is not converting short-term unsecured debt into long-term secured debt as with the home equity loan. The consumer doesn’t have any collateral and has to find a lending entity that will make this kind of loan. The consumer can look in the phonebook or better yet on the internet. There are many lending companies that offer these kinds of loans. Because they are unsecured forms of lending, the consumer can expect a higher rate of interest and a shorter term. There are also credit companies that act as a go between or a finder of credit for people. The consumer completes an online application. The credit company evaluates the application and if approved, finds a lender for the consumer.

A debt consolidation loan solves the problem of a myriad of bills with different terms coming in over the month. It makes the situation easier for the consumer because he has one loan with one interest rate. Whether it is secured or unsecured, the loan funds are used for debt consolidation.

To read more about href=”http://www.1st-bad-credit-loans.com/debt-consolidation.htm”>debt consolidation loans, visit Jill Kane’s site at href=”http://www.1st-bad-credit-loans.com/”>1st-bad-credit-loans.com

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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By Reginald Sinevet

Most people who buy homes get mortgages where they pay principal, interest, taxes, and insurance. They are taught that they must pay down the debt and have their equity–their investment–in the house.

Now, let’s think about this for a moment. On a 30 yr mortgage with a fixed interest rate, most of your payment will go towards paying the interest with very little towards the principal. You don’t start making a major dent on the principal until year 20 or so.

Second, by having the money in the home, is it working for you and making you more money? The answer is no! What happens if you need some of that equity for an emergency? You have to either get an equity line of credit, get another mortgage, or refinance to get cash. That money, your money, that you’re borrowing, you will have to pay interest on it. You’re already paying interest on your mortgage but now you’re going to pay payment to borrow your money?

Does that sound right?

NO!

What’s the solution you ask?

Here it is: You get an interest only loan and never pay it off–never pay off the principal.

You get the money out of the house. By not paying the principal, you use that principal payment–money you would have paid in a regular 30 yr mortgage–and invest it in a mutual fund that’s earning you 8-10%. Your money then is working for you making you money.

Your money now becomes more liquid–you can access it easier and you don’t have to pay interest on it when you want to use it, unlike a HELOC or a second mortgage. In essence, you’re using the bank’s money to create wealth for yourself.

You’re probably wondering, how do I build equity? Do you know that the mortgage has very little bearing on whether or not your home will appreciate? Your home will appreciate regardless whether you pay down the debt or not. The thing to remember is that you’ll use your mortgage to build wealth. However, the key aspect to creating wealth is to invest regularly and consistently.

If you have not been thinki!
ng about
harnessing your mortgage to create wealth, then this is your introduction to it. But first, learn about the new rules of money and how it affects your mortgage by visiting http://ezleadcapture.com/member/wlg.htm

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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