Understanding the Difference Between Home Equity Loans and Home Equity Line of Credit

Understanding the Difference Between Home Equity Loans and Home Equity Line of Credit
By [http://EzineArticles.com/expert/Alfred_Ardis/663300]Alfred Ardis

Property owners often wonder how they can use the value of their house to access low-interest financing. A loan or a home equity line of credit are two options available to you. To figure out which will better suit your needs, see some of the differences below.

Home Equity Loan (HEL)

A loan tapping into the value of your house is a good way to borrow money. This option allows you to get a fixed amount and receive it in one lump sum. The amount you receive is based on your home's value, payment terms, verifiable income, and credit history. You can get it with a fixed rate, fixed term, and even a fixed monthly installment. In addition, interest payments are 100 percent tax deductible.

Home Equity Line of Credit (HELOC)

With a home equity line of credit, you do not get your money all at once. Instead, you open a revolving credit, which allows you to receive money as you need. Your house is used as collateral to open the credit account. Companies approve this type of account based on the appraised value of the property and subtracting the current balance of the existing mortgage. Some consider income, debt ratio, and credit history.

Unlike a HEL, on a HELOC you withdraw the funds as needed over a period of time, usually five to ten years. Plans vary and you may have special checks or a card to use in order to access your funds. Depending on your account, you may have to borrow no less than a set amount each time you access it. You may also have to maintain a minimum balance outstanding. Some plans require a specific initial withdraw as well.

After the "draw period" ends, some HELOC providers will allow you to renew the terms of the account. Not all lenders allow you to renew the plan. In addition, once the "draw period" has ended, you enter the "repayment period." Your lender may require you to pay back the entire amount at this time. Others allow you to make installments.

How Do They Differ

While both a HEL and an HELOC allow you to tap into the value of your property to gain access to financing, there are two major differences. That is the interest rates and the repayment terms.

With a HEL, you get a fixed interest rate. This means you know what your interest rate is from month to month. This also makes your payments fixed, making it easy to budget each month.

However, a home equity line of credit usually has an adjustable rate. This means that the monthly interest payment can shift based on the index. Lenders traditionally add a margin of a few percentage points to the prime rate. You should ask the lender what index is used, what is the margin charged, how frequently does the rate adjust, and what the cap and floor on the rate is.

Since the interest is adjustable, monthly installments fluctuate. In addition, during the draw period you could be responsible for repaying the monthly interest only, not paying on the principle until after the repayment period begins.

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Article Source: [http://EzineArticles.com/?Understanding-the-Difference-Between-Home-Equity-Loans-and-Home-Equity-Line-of-Credit&id=9332454] Understanding the Difference Between Home Equity Loans and Home Equity Line of Credit

Helpful Reverse Mortgage Information for Potential Borrowers

Helpful Reverse Mortgage Information for Potential Borrowers
By [http://EzineArticles.com/expert/Alfred_Ardis/663300]Alfred Ardis

As people live in their homes for many years, the thought of utilizing the equity is often a consideration. This extra money is often used for major expenses, such as house renovations, education costs, or to pay off debt. A reverse home mortgage is an option for those who have owned a house for many years. There is quite a bit to know about the process, so the following is pertinent reverse mortgage information that may be helpful.

What Are Reverse Mortgages?

This payment arrangement is a specialized loan that allows homeowners to change a portion of their equity into a liquid asset. This equity that builds up over years of making payments on a loan can be paid out to the owner. Many people confuse this with a standard home equity loan. There is a significant difference, however. With this type of arrangement, borrowers are not required to repay the money until the borrowers are no longer living in the house as their primary residence.

What Is the Difference Between a Home Equity Loan

In addition to the above, there are some additional differences between these two arrangements. With a standard equity borrower, the homeowner must make regular monthly payments on both the principal and the interest. A reverse mortgage is different in that it pays the homeowner. There are no payments to be made. The owner, however, will be required to pay all utilities, insurance premiums, and real estate taxes.

What Type of Loans Are Eligible?

The house must be a single-family dwelling or a unit with at least one unit occupied by the borrower to be eligible for this type of equity loan. Condominiums and any manufactured dwellings that meet FHA standards are also eligible. All reverse mortgage information and requirements must be followed in order to qualify.

Will the House Be Inherited?

One primary piece of information people have questions about is whether or not the house can be inherited after taking out a reverse mortgage. Once the house is sold or is no longer being used as a primary residence, the money paid out, the finance charges, and the interest must be repaid. Any additional money will belong to the estate and can be transferred to heirs. There will be no debt passed into the estate.

Can the Arrangement Be Cancelled?

According to federal law, the owner has three calendar days to change their mind and cancel out the loan. This process, called a three-day right of rescission, will be included in the reverse mortgage information provided by the lender. Always reiterate the need for this information and have it thoroughly explained. Lenders will often differ on how they approach this process. Make sure to have all contact information for the person or people who will be handling the cancellation as well as a copy of the lender's policy.

This reverse mortgage information is just the tip of the iceberg. It is crucial to discuss the process with a reputable lender to ensure there are no questions before moving forward.

When collecting reverse mortgage information, homeowners visit Reverse Mortgage Northwest. Learn more at [http://www.reversenorthwest.com/rm-basics]http://www.reversenorthwest.com/rm-basics.

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Divorce and Eliminating a Joint Mortgage

Divorce and Eliminating a Joint Mortgage
By [http://EzineArticles.com/expert/Michael_Zuren_PhD./1966583]Michael Zuren PhD.

If you are going through the process of divorce and previously signed for a joint mortgage with your spouse, this article will give you the information needed to remove your liability on the joint mortgage and show you how to protect your credit. Even if your spouse is legally assigned ownership of the martial house, if they fail to make the mortgage payments on time, your credit will be negatively affected and it may prevent you from obtaining a mortgage loan in the future. Also, the division of assets and liabilities in the separation agreement will likely impact your income and debt ratio, thereby affecting your ability to qualify for mortgage financing.

If you are going through a divorce, there are two main options to eliminate your liability on a joint mortgage. They include: selling the property and paying off the mortgage or obtaining court approval in the separation agreement for the assignment of the mortgage to one of the spouses. There are potential pitfalls with this option, because assigning the mortgage and ownership of the property to one of the spouses could lead to possible credit issues in the future for the other spouse. The spouse assigned ownership of the house and responsibility for the mortgage will likely be required to refinance the mortgage within a set period of time, thereby paying off the joint mortgage and establishing a new mortgage just in their name. If late payments occur prior to the refinance of the house, the other spouse's credit will be affected. In addition, the other spouse will be required to sign a quit claim deed, thereby giving their ownership in the property to the spouse keeping the property. The quit claim deed does not remove liability, just ownership in the property.

The separation agreement and divorce decree may also impact your ability to obtain a new mortgage. Mortgage lenders will require and review your separation agreement and divorce decree to verify which party is financially responsible for marital debts. These may include: credit cards, installment loans, auto loans, and student loans. Your mortgage lender should omit the monthly payment(s) on debts that were assigned to the other spouse, but any derogatory credit will affect your credit scores. They will also account for the division of assets in the divorce decree and separation agreement. These include: bank and retirement accounts, real property (marital house, rental property, and vacant land), and automobiles and motorcycles. Either party to the divorce can be assigned debt obligations or granted additional income, such as: spousal support or child support (these are usually disclosed in the separation agreement).

Depending on the mortgage type used to finance the marital house, you may also have the option of one spouse assuming the mortgage. FHA mortgages allow one party to assume the mortgage, thereby releasing the liability of the other spouse, unfortunately conventional financing usually does not allow for assumptions. You should contact your mortgage company regarding this option.

Prior to signing your separation agreement or divorce decree it is important to understanding the ramification of court assignment of the marital house and mortgage. Quit claiming ownership of the marital dwelling to one spouse prior to an assumption or refinance of the mortgage into the other spouse's name may lead to severe credit issues for both parties. Take the time and thoroughly discuss your concerns with your attorney, so they can find the best solution to minimize possible negative ramifications in the future.

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Getting the Best Mortgage Rate

Buying a home is an expensive endeavor so getting the best possible mortgage rate should be one of your main priorities. By deciding to get the best mortgage rate possible you will be making a positive decision to help you for many years to come. However, just deciding to get the best mortgage rate available is not going to get you the best mortgage rate available. Instead, you will need to learn the tips and tricks for negotiating with your mortgage lender in order to receive the best possible mortgage rate for your personal situation.

Mortgage Rate Tip #1 Origination Fee
Your mortgage rate might be low in your mind, but you must take the origination fee into account as well because this can increase your APR. Lenders frequently charge 1%, but you can always negotiate the mortgage rate origination fee lower. Also, if the origination fee is much higher than 1% you need to either negotiate it down, or find another lender with a more favorable overall mortgage rate.

Mortgage Rate Tip #2 Lock in the Rate
When negotiating your mortgage rate, make sure your lender is prepared to lock in your rate for at least 30-60 days. This way you will be guaranteed a particular rate even if rates skyrocket the next day. Another not trick many individuals are not aware of is to include a clause that also will allow you to take a lower rate if rates fall during this period. This is a great mortgage rate tip because you get your mortgage rate locked in so it can’t go any higher, but if the average mortgage rate goes lower you receive the lower rate.

Mortgage Rate Tip #3 Fight
If the mortgage rate drops significantly and you have already signed a deal locking in a particular mortgage rate and don’t have a clause that ensures you will receive the lower rate, then you need to fight. You simply need to call your lender and say that while you signed the lock in agreement you want the lower rate. This will take some negotiating, but your lender wants you business and might be willing to negotiate the mortgage rate with you.

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ABOUT THE AUTHOR

Jay Moncliff is the founder of http://www.mileniummortgages.com a website specialized onMortgage Rate, resources and articles. This site provides updated information on Mortgage Rate. For more info visit his site: Mortgage Rate

Understand the Mortgage Before Purchasing a Home

Understand the Mortgage Before Purchasing a Home
By [http://ezinearticles.com/?expert=Kimberly_T._Michelle]Kimberly T. Michelle

If you are thinking about purchasing a home, it is very important to understand mortgages. The benefits of owning a house are manifold. For example, it allows you to build equity and there is a tax deduction benefit for the tax payer on mortgage interest that is paid. In addition, the pleasure of staying in your own house is one of the biggest advantages of investing in the purchase of a home. The monthly payouts increase when you purchase a house and money needs to be kept aside for unexpected expenses.

Clear Existing Debt

As soon as you decide to purchase a home, you first need to check your credit report. It is better to close the credit cards that you never use. If there is any discrepancy in creditors' reporting, you should have it corrected. It is important to save as much money as possible for the down payment, however, you should not overlook the high interest rate debt. Do not use credit cards that have high prime rates and pay off all existing debts.

Choosing a suitable Lender

You can look for lenders online and can easily find details of lenders in your area. Narrow down your choice to three to four lenders and then obtain a copy of a good faith estimate or HUD-1 form from them. Analyze the charges on the HUD-1 form and once you finalize your choice of lender, allow them to check your credit report. You can negotiate on the loan origination, processing and underwriting fees with the lender. Avoid a lender who charges points, as when you pay points, the amount of down payment is increased.

It is better to hire a knowledgeable real estate agent who can tell which costs are flexible and can be eliminated and which ones you may need to bear.

Why Lenders charge PMI

Most lenders charge first-time buyers PMI (Private Mortgage Insurance) if they do not make an initial down payment of 20% or more. This insurance does not cover you but provides cover to the lender in case you default on the loan. On average if you take a loan of $200,000 and make a down payment of 10%, the PMI charges per month are around $100. When you reach an equity percentage of 20% of your home, you can cancel the PMI.

How to arrange for the Down Payment

In case you cannot afford a down payment of 20% and do not wish to pay PMI, you can take an additional home equity loan. The additional loan that you take must be paid off first, as it is likely to have a higher rate of interest.

Types of Loans

There are two main types of loans:

1) Fixed-Rate Loans

The most common loan is a 30-year, fixed-rate loan in which the interest rate does not change. The 15-year loan is becoming more popular as the total amount of interest that you pay is less, although these loans have a high rate of interest.

2) Adjustable-Rate Loans

These offer a lower interest rate for a fixed time period and should be considered if you plan to stay in the new home for a short time only. These are listed as 3-1, 5-1 or 7-1, which means the loan rate is fixed for an initial period and then changes every year, based on market conditions.

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Understanding the Ins and Outs of Payday Loans

Understanding the Ins and Outs of Payday Loans
By [http://ezinearticles.com/?expert=Maria_Marilyn_Madrid]Maria Marilyn Madrid

Financial problems can be extremely stressful especially if you need the money instantly. Emergency expenses such as for health reasons, tuition, bills, repairs, mortgage on imminent due date, and more can strike when you least expect it. For average-earning employees, facing these financial deadlines could mean sleepless nights and inevitable headaches. So, what could be a possible solution? You may opt to apply for what is referred to as payday loans.

Definition

Payday loans are generally short-term loans that offer a quick solution to your financial woes and can be paid on your next payday, hence, the name. Most of these payday loans are offered to people who needs money urgently and are willing to repay during the next payday with a hefty interest factored in. Payday loan companies are now growing at a considerable rate, making it one of the industries often searched on the web. Availing this loan is considered simpler as compared to other loans that banks and financial institutions offer.

The Criteria

Payday loans are unique in terms of the application, processing, as well as the turn-around time. While most of the lenders boast 'a no credit checking' system, borrows still need to pass certain criteria to qualify. For example, borrowers must be of legal age and must possess a bank account. Another important requirement is to provide a document that would ensure that you have a steady earning and would be able to repay the amount loaned on time. Many lenders require completion of a document before the loan is processed. One of the easiest and most convenient method to apply is by sending all forms and requirements online. It is also vital to point out that such type of loan is far more lenient than traditional loans you know. For instance, people with awful credit score may still avail of the services.

The Amount and the Payment Terms

Generally, the loanable amount varies per state or per country. For instance, in the US, there are still states where payday loans are deemed illegal. However, in some states, borrowers can borrow between $50- $10,000 depending on the credit score. It is important to understand; however, that even if you borrow a hefty amount of money, you still have to repay it within a short period of time.

Lenders also charge borrower's interest rates called the APR (short for the Annual Percentage Rate). Although states have their own ways of imposing strict APR's on loans, the interest rate calculated on payday loans is still considerably higher than the regular type of loans. An average of 20% of you loaned amount is a conservative estimate of the interest that could be possibly added to your loan principal. A rolling interest is imposed once a borrower fails to pay right on time. It is always best to check whether your state has specific restrictions on payday loans to avoid any unnecessary charges. Get to know the local regulations and you would be able to apply for a loan with no problem at all.

The Benefits

Availing short-term loans can be advantageous, too. Check the following list to further understand the upside of this type of loan:

• Easy processing of the loan. As most applications can be completed online, approval and release of loan can be done within the day. Most providers deposit the amount loaned within 24 hours or the following business day. Having a quick access to money is one of the biggest advantages of this loan.

• Convenient repayment channels. There is no need to go to the office as borrowers can repay their loaned amount through an auto-debited account. This is why an active current or checking account is necessary to provide upon the application period.

• Having a bad credit history is not a problem. Most banks would turn down applicants with bad credit standing. With payday loans, this point is waived.

• No collateral required. No hassle and no other documents required apart from the application form ad banking details.

The Downside

• Not all states are legally authorized to offer payday loans. You must check this info first.

• The cost and fees are considerably high. The APR, as well as processing fees, can be higher than other types of loans. If you are unwilling to pay for massive interest rate, then it is better to study your other options well.

• Being unable to pay on time also leads to bigger penalties and interests.

With a number of payday loans providers, it is a must to make comparisons. For instance, reading reviews will be helpful. Borrowers must also remember that these loans are designed to provide a solution. Therefore, it is a must to repay on a timely manner. Otherwise, a bigger financial problem may come your way. In other words, use payday loans as a way to resolve the problem and not as a platform to get into a bigger one.

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Using a Reverse Mortgage For Purchase to Help Seniors Find a New Home

Using a Reverse Mortgage For Purchase to Help Seniors Find a New Home
By [http://ezinearticles.com/?expert=Alfred_Ardis]Alfred Ardis

Using a reverse mortgage for purchase to buy a new home has been an option since 2009. That's when the Federal Housing Administration introduced the Home Equity Conversion Mortgage for Purchase (HECM), which makes it easier for seniors to purchase a new residence. While the overall number of these transactions and of Americans who are reaching retirement age continues to increase, the program has been underutilized.

How Does It Work

A reverse mortgage for purchase combines a purchase with a reverse mortgage. In these cases, a homeowner has to be at least 62 years old. This streamlined process eliminates closing costs, helping make the acquisition of a new apartment, condo, or FHA-approved manufactured home speedier. On the other hand, the buyer must be able to afford property taxes, homeowners' association dues, insurance premiums, and other property expenses. Many consumers use the HECM to facilitate the purchase of a new place to live without the taking on monthly mortgage payments.

While the reverse mortgage for purchase seems like an attractive alternative to conventional financing, there are a number of factors that a potential buyer should take into account before signing on the proverbial dotted line.

The Down Payment Requirement

The purchaser is required to make a down payment. Often, this can be as much as 50% of the purchase price. The reason for this fees is that there is no equity in the new purchase. It is this equity that is used in lieu of monthly payments. Additionally, these funds cannot be borrowed but can come from the sale of existing property, savings accounts, or other sources.

The Cost Factor

Using this method to purchase a new property can be complex. Homeowners will still be required to pay taxes, keep the required insurance, and maintain the parcel in order to prevent foreclosure by the lender. Because there are no monthly payments, the overall balance is higher and compound interest accrues.

Additionally, if the borrower lives long enough, the underlying equity supporting the loan could be exhausted, which may result in a demand to repay the loan early. Individuals considering this type of financial move are required to receive mandatory free counseling from a third party or agency approved by the Department of Housing and Urban Development.

Is This The Right Step To Take?

As the economic climate continues to change and evolve, options, such as the reverse mortgage for purchase, may be a viable way to find a new home. It is important to remember that this may not be right for everyone. Doing the research first and defining one's objectives is an important step in the process to ownership.

When considering a reverse mortgage for purchase, visit Reverse Mortgage Northwest. Learn more at [http://www.reversenorthwest.com/rm-basics]http://www.reversenorthwest.com/rm-basics.

Article Source: [http://EzineArticles.com/?Using-a-Reverse-Mortgage-For-Purchase-to-Help-Seniors-Find-a-New-Home&id=9276945] Using a Reverse Mortgage For Purchase to Help Seniors Find a New Home

The Ins and Outs of the Fannie Mae Homestyle Renovation Mortgage

The Ins and Outs of the Fannie Mae Homestyle Renovation Mortgage
By [http://ezinearticles.com/?expert=Michael_Zuren_PhD.]Michael Zuren PhD.

The Fannie Mae Homestyle� renovation mortgage allows a home buyer or homeowner to improve and or repair their property with just one loan. If you are purchasing a bank owned or short sale residential property, or your home is in need of repairs or improvements, the Homestyle� renovation mortgage may be your best option for financing. This mortgage type allows a single mortgage to encompass the sales price plus repairs and improvements into a single mortgage, based on the completed appraised value of the house. This option is extremely beneficial considering other more costly financing options, such as: obtaining secondary financing or financing home repairs with unsecured revolving credit. For new and current homeowners in need of funds for improvements or repairs, the Homestyle� Renovation Mortgage is a welcomed financing option.

Below are some of the benefits of the Homestyle� Renovation Mortgage:

• Various Terms Offered - Fixed rate 30 and 15 year terms and variable rates are offered under this program.

• Purchase or Refinance - This loan options is available to both current homeowners who want to repair or improve their current house as well as new home buyers who want to repair or improve their house right after they take ownership of the property.

• Eligible Properties- Principal 1 to 4 unit residential properties, second homes, and single-family investment properties are eligible. Condos, co-ops, and planned unit developments may also be eligible, if they meet certain requirements.

• Down Payment - Borrowers can finance up to 95% of the as complete value of the property. As little as a 5% down payment is needed. The required down payment is based on the borrower(s) middle credit score.

• Financeable Mortgage Payments - Up to six months of mortgage payments for owner-occupied properties can be rolled into the mortgage to cover non-occupancy costs during the renovation process.

• Second Mortgages Available - Borrowers can qualify for up to 105% of the as completed appraised value of the property, if they also qualify for a simultaneous community second mortgage.

This program requires that the borrower must choose their own licensed and registered contractor to perform all the repairs, improvements, and renovations. The contractor must also complete the contractor profile report form and be approved by the lender. The repairs and improvements cannot exceed 50% of the completed appraised value of the home. Renovation costs include: material, labor, fees, permits, licenses, and a 10% contingency reserve. For more information on this loan product, please contact Fannie Mae or a local Homestyle� Renovation Mortgage loan specialist.

Article Source: [http://EzineArticles.com/?The-Ins-and-Outs-of-the-Fannie-Mae-Homestyle-Renovation-Mortgage&id=9277107] The Ins and Outs of the Fannie Mae Homestyle Renovation Mortgage