When is a Good Idea to Refinance?

What Is No Cost Refinance?

You have just seen the house of your dreams but you have had credit problems.  The ability to find home loans with bad credit can be difficult but not impossible.

Previous to 1990 if you did not qualify for a FHA or VA home mortgage it was very difficult to get a mortgage.  This since has changed and there are companies providing home loans with bad credit on a daily basis.  These loans were introduced to help high risk borrowers to secure a mortgage and become homeowners.

When you are looking for home loans with bad credit you will probably want to look into what is called a subprime loan.  This is a loan to persons with a damaged credit history and would be considered a high risk borrower.  Because of the higher risk, subprime loans normally require a larger down payment and a higher interest rate.  The higher the risk the lender feels you are, based on credit scores and other factors the higher the rate to borrow will be.  If the risk seems lower you could receive a lower rate and lower down payment even if you are still considered a high risk borrower.

Most subprime loans have .1% up to .6% higher rates than those of a conventional loan.  This may not seem like a lot but when thinking in terms of a $100,000.00 dollar home the difference is in thousands of dollars.  So even if you are considered a candidate for a subprime loan it is important to shop for the best rate available.

Home loans with bad credit are made because lenders know that often a person with less than perfect credit did want to make their payments but because of illness, loss of employment or some other event out of the borrowers control may contribute to late payments or foreclosures.

If you were searching for home loans with bad credit you will want to keep in mind a couple of important tips.   You will want to plan on keeping this loan, for about two to five yearsYou will want to be using this time to help increase your credit worthiness by cleaning up old debts and obligations.  You will want to be sure to make your new mortgage payments on time.  After this process you can try and qualify for one of the more common and lower rated loan.

If you already own a home, and had some financial difficulties a subprime loan may help you to regain your credit status.  By refinancing with home loans for bad credit you can refinance for more than you owe.  Take the cash back on the equity you have and use this to pay off high interest credit cards, liens, or collections.  You would save money each month and be rebuilding your credit rating at the same time.

As you can see finding home loans with bad credit is a bit costly but it is not impossible and the final outcome is with good money management you increase your credit rating and own the home of your dreams.

In simple terminology, a home equity loan is a loan taken against your house. A home equity loan is also called a mortgage or a second mortgage. Another synonym for home equity loan is equity release schemes.

While taking a home equity loan you are actually borrowing the worth of your house. If the house is completely owned by you, then the term used for home equity loan is “mortgage“, otherwise if your house is not fully paid off but has equity, it is called a “second mortgage“. From now on we will use one term for both to facilitate better understanding. We will call them Home Equity Loans.

A home equity loan is an extra loan that you take against your home in addition to your mortgage; hence this is called a second mortgage. This enables a home owner to encash equity without refinancing the first mortgage. Most people are under the impression that the only way to raise cash is by selling their homes. However reality differs and factually one can take a second mortgage to free up the first mortgage also.

Equity is the difference between the amount you owe on your current home mortgage and the current value of your home.  Furthering this definition, suppose you sell your home, the amount of cash left in your pocket after paying off the mortgage is called Equity. This equity when taken as a loan from a lender, without actually selling your home comes to be known as home equity loan.

Many lenders or loan companies allow you to borrow bigger amounts calculated by subtracting the balances of outstanding mortgages from 125% of the market value of your home. However the actual equity is the difference between appraised worth of your home and the balances of your outstanding mortgages.

There is no bar on how you can use the home equity loan. You can use it for any purposes as it suits you. A home equity loan is usually a one-time fixed interest rate loan, which is paid out at one go.

The rates of interest or the cost of the loan will depend on options you choose viz. the term of the loan and the amount; of course another important factor has always been your credit rating. The longer the term of the loan, the more you pay out as interest, also if the amount is more, the more interest you pay.

As always with any liabilities one undertakes certain words of caution are advised. Check all your options thoroughly before making a decision. Choose the amount carefully and take only what you need and specify the term which you think would be comfortable for you to repay in. No point accumulating liabilities in exchange for spending on pleasures or acquiring unnecessary assets.

Home equity loans are easily accessible to people with poor or bad credit rating since the lender is taking a lesser risk as the loan is secured against their home. A Home Equity Loan usually means that you get the best interest rates on the loan, i.e. you get the loan at a lesser cost compared to other loans because of assured security, but one should always remember that the house is at risk lest you fail to repay the Home Equity Loan.

There’s no way around it. If you took out student loans to pay for college, you have to pay them back. That can be hard to do, whether you’re still in school, trying to start your life outside it, or even 10 years down the line. You borrowed the money, you used it, and you have to pay it back.

What happens when that means you have to choose between paying all your bills or just those? What happens when those outstanding debts get in the way of putting money together for a house, or a car, or a family? It just doesn’t make sense to walk through life incurring the debts of living while you’re still dragging around the ones from school.

Fortunately, there’s a solution. You still have to pay back what you borrowed, but with a student loan debt consolidation make monthly payments to just one lender.

Think of it as refinancing. The money you borrow from one lender pays off the money you owe to all those other lenders. No more juggling what’s due to whom and when. Not only that, the interest rate on the student loan debt consolidation is the weighted average of those other loans, making it lower overall and bringing your monthly payment down accordingly. Some student loan debt consolidations are settled at a fixed rate, so you don’t have to worry when July 1 rolls around each year that your payment will go up.

Among the student loan debt consolidation available, there are actually four different student repayment plans to research and one is bound to be just what you’re looking for.

If the idea of a fixed rate really appeals to you, consider either the Standard Repayment Plan or the Extended Repayment Plan. The Standard Repayment Plan gives you a maximum of 10 years to repay, but payments are divided within that time limit at a fixed interest rate.

Extended Repayment Plans relieve the burden of monthly payment amounts still further by stretching the time to pay off the loan to between 12 and 30 years (depending on the total amount borrowed). Again, the interest rate is fixed for that time period, and the payments are lower. Be aware that over time, you will end up paying a larger amount, but the monthly payments will be easier to bear.

The Graduated Repayment Plan also allows you to spread your monthly student load debt consolidation payments over a period of between 12 and 30 years, but in this case, the amount of your monthly payment will increase every two years.

The fourth plan appeals to a number of people because it takes into account what’s going on in your life. In the Income Contingent Repayment Plan, a reasonable monthly payment amount is determined based on your annual gross income, family size, and total direct student loan debt. Another advantage of this student loan debt consolidation repayment plan spreads the payments over 25 years.

If you’re close to the end of your student loans, consider carefully whether taking on a new loan is worth the time and effort. However, if you still have a long time to go and many payments ahead of you – and you’ve already exhausted the deferment and forbearance options on your existing loans – making a fresh start with a student loan debt consolidation may actually be to your benefit.

Bankruptcy is an ugly word, but a very real possibility to many people struggling to pay a laundry list of bills that never seem to end. At times, that pile of bills seems impossible to deal with, a mountain you’ll never get out from under without taking drastic measures. But bankruptcy isn’t the only alternative to a life chained to the never-ending cycle of bills, late fees and more bills.

Think about consolidating your debt in a single loan, a form of refinancing that helps you put your finances back in your control and your life back in order. But refinancing is for people who own a home, right? What if you don’t have a home, or you don’t want to risk losing it by putting it up for collateral? That’s where an unsecured debt consolidation loan comes into play.

Unsecured debt consolidation loans do not require collateral. You can pay off all your other creditors and keep your house – or lack thereof – out of it. Lenders are able to stay in business by covering their risk with higher interest rates than they offer on secured loans.

But this can still translate into lower monthly payments for you, especially if your credit cards carry high interest rates to begin with and you’ve fallen into the trap of paying late and accruing late payment fees. Those disappear when you pay off that debt with the moneys from your are competitive and you may be able to negotiate a better interest rate. It helps to have a good unsecured debt consolidation loan. And don’t forget, shopping around always pays off; lenders credit score since lenders do look at your credit and employment history when they consider you for a loan.

If you shop around, negotiate, and still find that the interest rate is not going to make enough of a difference in your monthly payment to make life comfortable again, consider choosing a long-term loan. While you will generally end up paying out a greater total amount by the end of the loan, lengthening the life of your unsecured debt consolidation loan will lower your average monthly payment. That right there could make all the difference in the world.

Unpaid or slow-paid bills wreaking havoc on your credit score? Some lenders will consider you despite your credit history. A good employment history proves stability, and even if you don’t have the best employment history there are, again, lenders who will offer unsecured debt consolidation loans to almost anyone. While the interest rates are higher and the limits to what they’ll loan are lower, your credit score will improve when you get the loan, and having all those creditors paid off will do nothing but increase your credit score.

If you bills are getting the best of you to the point that you’re actually considering bankruptcy, stop. Gather up those credit card bills, utility bills, department store card bills, medical bills and any other bill that’s costing you sleep at night. Look into an unsecured debt consolidation loan and see how easy it can be to save your credit and peace of mind.

100% Mortgage Loans – The need to put 5, 10, or even 20% down on a home no longer exists. Many mortgage professionals have the ability to offer their customers 100% financing in a variety of ways.Buying a home has become much easier because mortgages with no down payment required have become much more available in the mortgage market.

Lenders have increased the loan amounts they are willing to lend with no down payment. Some lenders have reduced the credit score required. In addition, some lenders are offering interest-only payments to make qualifying easier.

We offer loans with no down payment required up to $1,400,000 with a credit score as low as 620. We also offer loans with no down payment required up to $700,000 with a credit score as low as 580. Full documentation and stated income loans are available.

If you decide to take a single, 100% loan you may have to have Private Mortgage Insurance. This is usually required when a loan amount is greater than 80% of the homes value. Ask your preferred Mortgage Professional if PMI is right for you. 100% financing programs have brought the reality of owning a home to many people who thougt they never could be homeowners.

You may want to check with your loan officer and ask if you may be able to receive better pricing with the 70/30 combo instead of the 80/20. Any of the combo loans will avoid the mortgage insurance. 100% financing is not only availabe when you are purchasing a home. It is also available through refinancing or a 2nd mortgage on a home you already own.

You can obtain 100% financing by obtaining a 1st and a 2nd mortgage. This is commonly referred to as an 80/20 loan. One of the main reasons for obtaining this type of 100%, zero money down, financing is to eliminate the need to pay mortgage insurance, or PMI. With this type of financing you are still able to obtain nice low interest rates and avoid the costly premiums associated with mortgage insurance.

With 100 Percent financing, you may end up paying a high interest rate. By splitting the loan into an 80% First Mortgage and a 20% Second Mortgage, you may be able to lower your overall or “blended” rate.

2/28 Adjustable Rate Mortgage – A 2/28 arm is a mortgage that has a fixed rate for the first two years, and then the interest rate adjusts for the next 28 years. This completes the full 30 year term of the loan.2/28 ARMS will have a cieling rate that is often times upwards of 13%. This means that your rate could potentially go as high as the cieling rate over time if you do not refinance out of the mortgage.

Verify the pre-payment penalty term when closing.

The 2/28 is used quite often as a “band-aid”, or 2 step type of loan. What is meant by this is, many people who are put on a 2/28, are put on the loan as a temporary thing with the intention of refinancing in the next 2 years. These types of loans are used quite often by sub-prime lenders to get borrowers into a home at a lower rate and payment upfront for the first 2 years, and then once a borrower has had a chance to establish more credit or repair their credit they can look into qualifying for a mortgage with a great fixed rate.

These types of mortgages help make the payment lower than a traditional 30 year fixed. You will want to make sure you understand the cap limits and margin so that you are prepared for the first adjustment. Your fully adjusted rate will be the current index plus the margin which was set at the closing of your loan.

Because the initial interest rate of a 2/28 is often lower than a 30-Year Fixed Rate Mortgage (FRM), many property investors who look to sell the house within the next years usually prefer the 2/28 ARM. These type of home buyers often know that they would not keep the mortgages beyond the 2-year fixed rate periods.

Some lenders will offer the broker a rebate if the prepay is longer then the 2 year term. Make sure you work with an honest mortgage professional.

The 2/28 loan is what they call a hybrid mortgage. It’s a combination of the fixed rate and adjustable rate mortgages.

When you are purchasing a home, the 2/28 is often times used as an 80/20. The 2 year ARM is the 80%, and the 20% is often times a 15 year fixed with a 30 year amortization (balloon payment). The 2/28 is great for 100% purchase transactions.

Consolidating Debt – Refinance or 2nd Mortgage? – Homeowners who need to consolidate their high interest unsecured debts often wonder what is the best way of doing it. Is it best to refinance your first mortgage or take out a second mortgage or Home Equity Line of Credit?

Recent increases in the Prime Rate have made the Home Equity Lines of Credit much less attractive than they were a few years ago. Don’t use a home equity loan as a way to manage your outstanding debt. Instead, use it as a way to eliminate your debt entirely. Find a good mortgage broker that will show you how to use your monthly savings to pay off all of your debt, including your mortgage, in a much shorter period of time. In today’s rising rate environment, Home Equity Loans, Lines of Credit and other short term interest rate-linked forms of financing are increasingly risky liabilities to have on your creditand your home. Consider consolidating all of your revolving and secondary debts into a single loan.

Taking advantage of refinance programs which allow you to consolidate your debts and modify the rate and term of your first mortgage, such as adding a minimum payment option, can allow you to really boost your cashflow or focus your finances. We have had customers who were paying 2500 a month in mortgage + credit card & car payments drop down to making one minimum payment of 1100 dollars a month after debt consolidation refinancing. In the same situation, a second mortgage would have only reduced their total monthly spending to 2150 a month.

One thing to watch out for. Many home equity lines of credit will report on the borrower’s credit report as revolving debt rather than mortgage debt. This can often cause a substancial detriment to a borrower’s credit score.  Typically home equity lines of credit are reported as revolving debt if the loan amount is under $50,000.00 (check with your local lender guidelines). Most home equity lines of credit are also interest only payments that adjust on a monthly basis which may make things even more difficult for a homeowner over the long run.

In that case, refinancing your debts into one mortgage may make more sense than obtaining a high interest, fixed rate second mortgage or a home equity line of credit.

A good mortgage broker can work out a cost analysis breakdown for you to show you the pros and cons of refinancing your first mortgage to consolidate your debt versus taking out a second mortgage or home equity line of credit to consolidate your debt. One advantage of a home equity line of credit is that many times you can obtain one without any closing costs at all. In the right situations this can be very beneficial to a consumer instead of paying the closing costs on a first mortgage, especially if there is any chance of not keeping the loan very long or moving.

Often you can get a lower combined rate and a lower payment by refinancing your mortgage instead of getting a 2nd mortgage or a home equity line of credit. Your mortgage professional can make these calculations for you.

Consolidating debt with your first mortgage generally will improve your cash flow situation, particularly if you can lower your first mortgage a bit in the process. Using a mortgage refinance to consolidate your debt can be prudent because on interest mortgage debt is tax deductible. Consolidating your debt with non-deductible interest like credit cards or auto loans can lower your payments and increase your deductions.

You can consolidate your debt with a simple debt consolidation mortgage and make the payment tax deductable. And if you are wise, use that loan to manage and pay-off your mortgage in half the time. Consolidating Credit Card Debt into Your Mortgage – Some financial “gurus” have advised against this because you are turning unsecured debt into secured debt. While this is basically true the fact is that defaulted unsecured debt can be secured against real property very quickly once the debtor is sued for it and a judgment is received.
Consolidating credit car debt into your mortgage can save a homeowner hundreds and sometimes even thousands of dollars per month by lowering their total monthly obligations. When you consolidate credit cards into your mortgage you also are able to lower your interest rates on those credit cards which essentially saves you a lot of money but you are able to write off the interest on your tax returns from your mortgage and you can not do this with your credit cards.

If you want to use a refinance loan to consolidate some of your debts, you’re going to have to borrow more than the actual amount remaining on the loan that you’re refinancing. This additional amount will be used to pay off those debts that are being consolidated and will affect the monthly payment of your refinanced loan. By doing this, however, you can make your finances and outstanding debts much more manageable and will likely become debt-free much faster.

A mortgage agent can help you decide if refinancing credit card debt into a mortgage is your best option. Using financial calculators available, they can compare how long and how much it will cost you to pay off credit card debt using your current monthly payments vs refinancing the debt into a new mortgage. Very often the monthly and lifetime savings is large.

You can consolidate your credit card debt through use of your first mortgage or by obtaining a second mortgage or a home equity line of credit, also known as a HELOC. A HELOC works with the same basic principals of a credit card. It is a revolving account that as you pay the equity line down, you have that money available to you to use again. With a second mortgage you simply have a set term (5 years, 10 years, 15 years, etc…) that you will pay on the loan for and when it is paid off you are relinquished of your obligation to this debt and the account closes. All three (1st mortgage, 2nd mortgage or HELOC) are excellent choices for debt consolidation but you and your mortgager broker will need to figure out which one makes the most sense for your particular situation.

Remember not to stop making regular payments towards credit card debts simply because you are in the process of consolidating them. Defaults and late payments can negatively impact your credit and jeopardize the consolidation loan.In order to decide if a debt consolidation is your best action, you should figure what you are paying now and how that will translate in the length of time it will take you to pay off those credit cards. You may find that rolling those debts into your mortgage will save you thousands of dollars in interest payments.

If you have gotten buried in a hole with credit card debt it could be a necessity to refinance your home and pay off your credit card debt. It has been known to save thousands of dollars. On the other side of the spectrum, if you only have 5 months left on a credit card bill it is note wise decision to bury that into a mortgage. If you are planning on selling your home in the near future, you may want to rethink consolidating. You need to make sure that you have enough equity to pay for realtor’s commission and down payment or closing costs on the new home.

When deciding to refinance for debt consolidation you might want to consider how long you will have to pay your credit cards if you are only making the monthly minimums. This can take you much longer in most cases than paying on a traditional 30 year fixed mortgage. Another option if you do not have enough equity in your home to pay off your credit cards is to refinance to a pay option ARM. The money you can save by making minimum payments on your mortgage can be applied to your credit cards to help pay them down quicker.

During most refinances you will be able to skip a month, or two, of your mortgage payment. It would be a good idea to take some, or all, of that payment and apply it to your credit card debt. Remember, you have a three (business) day right of recission before you can receive the cash from your refinance.

If your decide to consolidate credit card debt in the state of Texas you must wait 12 days from the time of application to close on your cash out loan, also Texas Cash-Out loans are limited to an 80% LTV (Loan to Value). This law only applies to homestead properties and it may be different if the property is a second home or investment property.

If you refinance to pay off credit cards it is wise to have the limits on the credit cards lowered to avoid the same situation you are refinancing out of. Unless you have many cards open avoid closing the accounts. If they have been open for a long time closing them could negatively impact your credit.

If you are paying the minimum payment on your maxed out credit cards every month, it could take 15 to 22 years to pay off those cards. Consolidating credit cards with higher rates, such as 16%, 18% or 21%, into your refinanced mortgage with a rate of, say 6.25%, you could dramatically decrease your total monthly payments. The money you save every month could be used to pay off other credit cards or other loans quicker. At that point, the extra money you have every month could be paid to reduce the principal on your mortgage or you could refinance into a shorter term loan, say 15 years, at a lower rate and pay off your home much quicker.

If you do choose to consolidate your credit card debt, remember to bring your most recent balance statements with you to the closing (your mortgage consultant will advise). This way when the lender’s attorney is making out the checks to the creditors, the numbers will be exact. You should remember that the interest you pay with your mortgage is tax deductible, where the credit card’s interest payment is not. Consolidating your debt using your equity can save your money even more.

Although you are extending your debt by refinancing credit card debt into your mortgage, you generally will be increaing your cash flow so you are not going “backwards” each month.

Most financial gurus don’t recommend using the equity in your home to pay off unsecured debt because if you do that, you won’t need to buy their program. Think about it. They are in business to sell you software, subscriptions to their websites and books. The program they recommend deals with cutting back on spending and devoting yourself to getting out of debt in a long period of time. Sure it will work, but most people don’t have the discipline to not have cable, or not go out to eat for 6 years. The one key to getting out of debt is to put yourself in a position where you don’t have to use your credit cards. Once you stop spending on credit cards, the best way to pay them off is to consolidate them into the lowest monthly payment possible. From that point you need to take the savings and re-apply it towards your existing debt and your mortgage. If you do this, you could be debt free, including your mortgage, in a little as 5-7 years. I challange any financial guru to find a quicker way to be completely debt free.

If you want to see even greater savings on a monthly basis for a fixed period of time, ask us about using a minimum payment option loan to consolidate your debts. This can provide you with enough cash to pay off your debts while actually reducing your housing payment AND all of your monthly payments. Consolidating credit card debt into your mortgage can be prudent to lower your monthly payments. You gain the advantage of paying down mortgage debt that is tax deductible. However, if high credit card debt is an indication that you are spending beyond your means, you must address this issue to become financially sound.