Welcome to Home Equity Loans
Bad Credit Equity Home Loan Ok Article
This is a selection made from among articles on Bad Credit Equity Home Loan Ok. For a permanent link to this article, or to bookmark it for future reading, click here.
from:
Cashing In Home Equity
By Richard A Baker
If you need extra money for making improvements to your house, for college funds, or other expenses, cashing in home equity is an attractive option. Generally speaking, you'll get a better interest rate than if you took out a bank loan for such expenses, and oftentimes you can cash in part of your home's equity without increasing your monthly expenses.
There are a number of ways for you to cash in your home's equity, each with its positives and negatives:
Home Equity Conversion Mortgages:
For those over age 62, a Home Equity Conversion Mortgage (HECM) may be the best way for cashing in home equity. Home Equity Conversion Mortgages are commonly called "reverse mortgages," because the amount of equity in the home decreases rather than increases over the length of the mortgage.
Reverse mortgages are best suited for those who have considerable equity in their homes, but who do not have substantial cash assets. There are a number of purposes for which reverse mortgages can be used, including making home improvements or simply supplementing Social Security benefits or other income.
Those who qualify for a reverse mortgage can choose to receive monthly payments to augment their income, or borrow a lump sum for home improvements, or establish a line of credit.
Reverse mortgages are available through commercial lenders, and are also available through a program from the U.S. Department of Housing and Urban Development (HUD)
Reverse mortgages have restrictions on who can qualify, the purposes for which the funds can be used, the amount of funds that can be borrowed, and how long the term of the mortgage will be.
FHA loans:
If you're looking to cash in part of your home's equity for home remodeling, you should consider home improvement loans backed by the Federal Housing Administration (FHA).
FHA home improvement loans are issued by FHA-approved commercial lenders. Because the loans are insured by the FHA, interest rates are often lower than rates offered by other lenders.
An additional advantage with FHA home improvement loans is that they're often available to those whose incomes or financial situations preclude them from getting a loan through private lenders.
FHA home improvement loans carry restrictions on the amount of money borrowed, the types of home improvements the loans can be used for, on how long the term of the loan can be, and on borrower eligibility.
Mortgage Refinancing:
If you're considering cashing in home equity, and interest rates are low, refinancing your mortgage may be a good option. If you can reduce the interest rate on your mortgage by one or two percentage points, you'll save a lot of money over the term of your mortgage. The amount you save by refinancing could easily exceed the amount that you're taking out in cash from the refinance.
Refinancing when you reduce your interest rate by less than one percentage point, though, makes little sense. The cost of the refinancing will outweigh the savings gained by such a small rate decrease.
One disadvantage to refinancing your mortgage is that you're essentially starting over. You'll be offered the same fixed rate or adjustable rate packages, and you'll pay the same types of closing costs.
You'll also be starting over with the amount of your payment that is applied to your principal balance. With every monthly mortgage payment you make, the amount of that payment going to interest decreases, and the amount applied to your principal balance increases. When you refinance a mortgage, you start all over again with nearly all of your monthly payment being applied to interest, and little being applied to principal.
Don't use refinancing to cash in home equity unless you can reduce your interest rate significantly. And, if you do refinance, consider doing a shorter term mortgage so that you will pay down the principal balance more quickly.
Home equity loan:
Rather than refinancing for cashing in home equity, you might want to consider a home equity loan. A home equity loan usually has lower closing costs. What's more, you won't go back to having most of your monthly mortgage payment being consumed by interest.
A home equity loan is an entirely separate loan from your mortgage. Home equity loan interest rates are usually higher than for mortgages, and the loans have shorter terms.
Home equity loans are best used for specific purposes, such as home improvements or other purposes for which you know the amount of cash you need.
Line of credit:
If you don't need a lump sum from cashing in your home's equity, you might consider a home equity line of credit.
A home equity line of credit allows you to determine how much money you're going to borrow, and when you're going to borrow it. Many people simply like having a line of credit available to them in case of emergencies.
Lines of credit often have lower interest rates than you would get through refinancing your mortgage. However, the introductory rates on lines of credit are often "teaser rates," just as you find with credit cards. While the interest rates on home equity lines of credit are lower than credit card rates, the rates on lines of credit can rise or fall.
Lines of credit are extended for a fixed period of time. After that period, the lender may or may not renew your line of credit, or may renew it at a different interest rate. While it's up to you to determine whether or not you want to renew your line of credit, your lender may require you to pay any outstanding balance in full if you do not renew.
If you're like most people, your home is your most valuable asset. Before you reduce the amount of equity you have in your home, be sure you're using the cash for a purpose you won't later regret.
Richard A. Baker is the publisher of http://www.buyyourhomeguide.com Other articles on mortgage-related topics written by Richard A. Baker can be found at http://www.buyyourhomeguide.com/mortgage_information.html
© 2007 BuyYourHomeGuide.com
Article Source: http://EzineArticles.com/?expert=Richard_A_Baker
http://EzineArticles.com/?Cashing-In-Home-Equity&id=844926
Bad Credit Equity Home Loan Ok Specific links
Bad Credit Equity Home Loan Ok News
QA with Zac Bissonnette, author of 'Debt-Free U'
Author Zac Bissonnette argues that the risks inherent in college loans far outweigh any benefit of a degree from a big-name school
Read more...His happy retirement is tied to BP's fate
DEAR BRUCE: I retired from Atlantic Richfield (ARCO) after 35 years of employment. I was receiving my pension and health insurance benefits from ARCO until a few years ago, when ARCO merged into BP.
Read more...Rising pension costs sink city's budget
Council members met with city staff in a special meeting Thursday in the David Gebhardt Public Meeting Room at the Public Works building.
Read more...Q&A: Patty Nooney
What started as a summer job for her family-owned business turned into an unexpected career for Patty Nooney.
Read more...Get Used to Unemployment
The U.S. has lost more than 8 million jobs since the Great Recession began in late 2007. San Diego County has lost more than 80,000. They aren’t coming back soon, say local economists. A high unemployment rate may be the new reality in the U.S. and San Diego.
Read more...Guest Post: The Purpose Behind Engineered Economic Collapse
By Giordano Bruno, of Neithercorp Press The Purpose Behind Engineered Economic Collapse “From now on, depressions will be scientifically created.” — Congressman Charles A. Lindbergh Sr. , 1913 Everyone loves money. Even people like myself who abhor the abuse of money and commerce, who understand the fraudulent nature of the system we live in, still work hard and save so that we might attain a ...
Read more...We don’t need stronger banks, we need stronger regulation
We don’t need stronger banks, we need stronger regulation. And if that doesn’t work we should have a super profits tax on the banks, writes Dr Richard Denniss .
Read more...Personal Finance: Conquer college bills with four simple tips
It's a bill like no other, frightfully huge, with perhaps $20,000 that has to be paid almost instantly. If your child is getting ready to start college and you have just received one of these bills, you're probably among the parents fixated on that price tag while trying to count sheep at bedtime.
Read more...As home equity erodes, borrowers resist payments
During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent, and struggling borrowers are unable or unwilling to pay it back.
Read more...Weighing the financial overhaul: Auto dealers, VC, small banks early winners
The final tally of winners and losers from the financial overhaul legislation that President Barack Obama signed into law Wednesday will take years, as complex sets of rules need to be written, interpreted and applied by regulators.
Read more...