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The Best Way to Obtain a Home Equity Line of Credit

February 16th, 2010 by Matthew C. Keegan | 1 Comment | Filed in Consumer Financing, Home Financing

A home equity line of credit (HELOC) is type of revolving credit. When selecting a HELOC, your residence serves as collateral for your loan. If you have accumulated equity in your home and have a good credit rating, a HELOC can be easy to obtain. But first, you will want to get organized and create a strategy to help you secure financing through a financial institution.

Shop carefully for a line of credit.

Consult with your accountant. You may think that a particular, low-rate HELOC may be the most effective approach for you, nevertheless your accountant may not share your view. For some property owners the tax benefits of a HELOC may not be advantageous while a home equity loan (HEL) or other funding arrangement may be worthwhile over time. Talk to your financial adviser to come up with a borrowing strategy with the best tax implications.

Evaluate your needs. Your financial adviser will probably persuade you to borrow only what you may need. What this means is creating a spending plan outlining how much money to access. Even though a HELOC does not require you to tap all of your available funds, you may want to consider a line only large enough to pay for the money necessary for refurbishments or other work you need to have done on your house.

Check around for lines of credit. Your financial institution and your mortgage broker are two resources to seek out your HELOC. You will also want to examine their particular rates and compare those with what other lenders have to offer which means broadening your search accordingly. The majority of lines of credit offer adjustable interest rates; compare those rates along with fees and closing costs to figure out the best HELOC for you. Have potential lenders explain the terms of their contracts; negotiate for a lower rate or fees wherever possible.

Apply for a HELOC. Once you have found the HELOC you want, then apply for it. Your lender will obtain your credit information before granting approval and may ask for other documentation prior to closing.

Close on your credit line. Once you are satisfied with the terms of your line of credit, then arrange with your lender to close the deal. Consult with your financial adviser as needed.

Considerations

The Truth in Lending Act (TLA) may allow you to cancel your HELOC within three business days if you change your mind. Your contract should explain the procedure for invoking a rescission.

Caution

Be careful of lines of credit with an initial teaser rate. You may pay more for your HELOC over the long term once the rate resets.

Resources

The Federal Reserve Board: What You Should Know About Home Equity Lines of Credit

    Bankrate: 4 steps to take before borrowing


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      How to Negotiate With Your Creditors

      January 19th, 2010 by Matthew C. Keegan | 3 Comments | Filed in Consumer Financing, Consumer Tips

      If you have significant debt and are finding it difficult to reduce your financial burden, then negotiating with your creditors can help you manage your finances better. An important aspect in any plan involving financial management is working to lower your interest rates or even possibly having some of your debt forgiven.

      Assemble your credit statements. Financial documents such as your credit card and loan statements can be useful in helping you determine what you owe and how much interest you are being charged for each debt. Review your statements and come up with a plan to have your high interest rate credit cards reduced. (see The Wall Street Journal: Credit Woes Hit Home)

      credit cardsFor example, if you are paying 21.9 percent for one credit card, you can save money monthly simply by having that rate reduced to a more manageable 12 percent. That lower interest rate means that less money is being paid out monthly to cover interest charges while a larger portion of your payment can be used toward the loan principle. You may be able to reduce the amount you pay on your debt every month while helping yourself get out of debt faster.

      Contact your creditors. Each of your statements includes contact information outlining how to reach your creditors. Contact your creditors and ask that your interest rate be reduced. According to Brad Dakake, a consumer advocate with Massachusetts Public Interest Research Group, “There’s no incentive for them to lower your rate unless you call. The squeaky wheel gets the oil.”

      Will you get the lower rate? That’s hard to say. But, you won’t get a lower rate unless you ask. You may be paying a higher rate because you were late making payments or you deemed as a higher credit risk. No matter, credit card companies will sometimes reduce your interest rate just because you asked.

      What about loan forgiveness? Now for the tricky part: can you get your loan balance reduced or forgiven? If so, what will that mean when it comes to your personal credit?

      A lender may write off your loan if you have no way of making payments. But that comes with a price: your credit will take a major hit which means that you’ll have this mark on your credit for many years to come. While you did not declare personal bankruptcy, some lenders will view this action similarly.

      Your credit score will be reduced and you may find it difficult to obtain new financing, rent an apartment, buy a home, even get a job. Yes, even employers can check up on your credit to see if you are a responsible with your debt.

      Planning Ahead

      Finally, if you are deeply in debt, what got you there? Poor spending habits? Job loss or reduced income? Mortgage problems? Seeking the assistance of a qualified financial adviser such as a debt consolidation specialist can help you resolve these issues and put you back on the path to financial freedom. (see SmartMoney.com: 4 Ways to Help Shrink Your Debt)

      Just make sure that the person you find has the skill sets you need (degree, licensing, references) and presents a plan that will repair your credit not destroy it.


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      Home Loan Rates? Going Down!

      September 2nd, 2009 by Matthew C. Keegan | 2 Comments | Filed in Consumer Financing, Home Financing

      If you’re looking for good news these days in the housing market, then you may have heard that home sales are up and prices have stabilized in some markets. But, you may  have also heard that come 2011, there could be a rash of new foreclosures as a fresh batch of variable rate loans come up for an adjustment.

      Signs of relief are beginning to appear in the housing market. HARP and HAMP programs from the federal government could help to keep you in your home.

      Signs of relief are beginning to appear in the housing market. HARP and HAMP programs from the federal government could help to keep you in your home.

      Several markets remain depressed including Detroit, Las Vegas and much of Florida. However, sections of Southern California, Texas and various cities dotting the south and midwest are holding their own. Likely, the performance differences between these markets will continue as unemployment and other issues weigh in.

      Additional Help For Home Buyers?

      When Congress returns from their break next week, they’ll have a number of issues to take up besides national health care. One issue that should be on the mind of potential homeowners, particularly first time buyers, is the $8000 federal tax credit which must be taken by December 1, 2009. There has been talk about extending and expanding the credit to allow all home buyers to participate while also increasing the rebate to as high as $15,000 per purchase. We’ll let you know more about this information should a bill be presented over the coming weeks.

      Meanwhile, the rate for a fixed-rate thirty-year mortgage continues to slide, dropping to 5.17% nationally according to the Zillow Mortgage Rate Monitor. Even better, the rate on a fifteen-year fixed-rate mortgage is 4.57% while 5/1 adjustable rate mortgages can be had for just 4.17%. Keep in mind that these rates apply only to the most creditworthy customers. Shop around for a deal that is most favorable for you.

      HARP or HAMP

      For homeowners struggling to keep up with payments, the federal government’s “Making Home Affordable” program could help you modify your current loan or seek out an all new loan. The government’s HARP – Home Affordable Refinancing Program – and HAMP – Home Affordable Modification Program has helped thousands of homeowners keep their homes thus far. Visit the related website to learn more including confirming your own eligibility to participate.

      Finally, if you’ve been getting the run around when it comes to refinancing your home, then going the traditional rate of refinancing may help you out especially if your personal economic situation has improved over the past several months. Private lenders are still looking for customers, so first verify that your credit is good by obtaining copies of your credit reports to see where you stand. Who knows, the help you’re wanting could be within your reach!

      Adv. – Are you considering a loan modification? If so, this mortgage medication website could offer just the prescription you need to improve your financial health.

      See Also — Will Nearly Half of Mortgages be Under Water in 2011?


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      Will Nearly Half Of Mortgages Be Under Water In 2011?

      August 10th, 2009 by Matthew C. Keegan | 6 Comments | Filed in Consumer Financing, Consumer Tips, Debt Management, Home Financing, Money Management

      Deutsche Bank, which is also one of the largest and most respected financial institutions in the world, recently made a prediction that by 2011, nearly half of all US homeowners with a mortgage will be “under water” by then. Under water (or underwater) is a financial term which indicates that a home is worth less than what is owed on the loan. Holders of these types of loans are considered “upside down” and would lose money if they were to sell their homes.

      mortgagesWhen the real estate market has a significant number of underwater homes, default rates rise. With more defaults, lenders lose money and borrower’s find that their creditworthiness has plummeted. All of this bodes poorly for the economy which is very fragile right now and poised to absorb trillions of more debt should Congress pass its national health plan.

      The thinking coming from Deutsche Bank regarding home loans two years hence is that quite a few adjustable rate mortgages (ARMs) will be resetting in 2011, which means that homeowners will be faced with higher mortgage payments. That problem began to surface in 2006 and 2007, when ultra low-rate variable mortgages began to reset, forcing the first wave of what is now millions of homeowners to default on their loans. Faced with the twin problems of higher mortgage payments and a loss of income, homeowners have been losing their homes in droves. Deutsche Bank sees that problem surging once again in 2011.

      Steps To Strengthen Your Position

      But with any national problem, the issue is certainly individual although the collective collapse of the housing industry could lead to the ruin of our nation. Though 2011 isn’t so far away, homeowners who believe that they will be underwater now should keep some things in mind and take action as appropriate including:

      Review Your Mortgage Terms – When will your mortgage rate reset? At what rate do you expect it to rise to at reset date? Use a mortgage calculator to compare your current monthly payment with your anticipated monthly payment to see what your price differential will be. Perhaps in your situation the difference won’t be so great, allowing you to absorb the increase.

      Keep Tabs On Your Market – The Deutsche Bank survey makes a broad assertion, but as most everyone knows housing conditions are localized. Even in your regional market, a home in one neighborhood could drop in price more significantly than a home in another neighborhood. As always, location is the key as is home condition, neighborhood attractiveness, local job availability, etc. A strong job market can stabilize the housing market.

      Work On Your Bottom Line – If you’ve lost your job or have taken a significant salary cut, then you’re immediate priority is to make money. If you are beginning to fall behind on payments to your lenders, communicate to them that you are working to resolve the problem as soon as possible. If you are working right now, then examine your spending habits to see what can be scaled back. Apply for a lower, fixed rate mortgage if your credit is good. In other words, be proactive – not reactive.

      The forecast made by Deutsche Bank is, on the surface, a frightening one. But it doesn’t have to be the fate of every homeowner. Though we can’t impact what happens on a national level on a very personal level you may be able bring about the right kind of change to help improve your situation.

      Adv. – Are you considering a loan modification? If so, this mortgage medication website could offer just the prescription you need to improve your financial health.

      See Also — 48% Underwater? Lawler Challenges Deutsche Bank Report

      48% Underwater? Lawler Challenges Deutsche Bank Report

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