Financing Home Loans in 2008

Be ready for a tough year financially...

Here are the latest Home Equity Loan Videos available.

Unless you are a high-income earner with little debt, the year ahead could be a tough one as inflation is expected to continue to rise in the short term.

January 12, 2008

By Laura du Preez


If you are struggling to keep your head above water financially now, it's time to implement some corrective measures, because difficult times are likely to continue, with some relief likely only towards the latter half of the year.

If you have incurred a lot of debt, your most immediate danger is keeping up high debt repayments while the cost of living increases.

Set up a budget
The first and most important thing you need to do is to draw up a budget. A budget showing your income and all your expenses will enable you to determine what is happening to your money.

This is a good time to add up all your expenses over the past year and work out on average what you are spending on your home loan or rent, electricity and water, groceries, transport, insurance, clothing, school fees, security, and so on.

You need to ascertain whether you are spending more than you are earning and, if so, to take the necessary steps to ensure that you live within your means.

Prem Govender, the chairperson of the Financial Planning Institute, says you should reduce your debts as much as possible.

You may, for example, need to trade in an expensive vehicle you are still paying for for one that is cheaper both to run and to repay.

Govender says you should put on hold any plans to buy luxuries, especially if you need to borrow funds to finance such items.

If you must incur debt for essential items, she says, make sure you can afford to repay that debt even if interest rates do go up further.

Consolidate you debts
There may also be ways you can reduce your debt repayments by consolidating your debts. For example, if you have a flexible home loan and have repaid some of the loan, you could borrow more from that loan to repay a credit card debt that is attracting a higher rate of interest than your home loan.

The higher home loan should incur less interest than the original home loan and credit card, but if you want to save on the interest you will be charged, you will need to make increased payments into your home loan to settle the additional debt over the same period as you would have repaid the credit card.


Source: http://www.persfin.co.za/index.php?fArticleId=4203435&fSectionId=596&fSetId=300

Link to a forum : Home equity line of credit rate?

08-15-2007

First comment from this forum :

" I am checking out rates for HELOC and citibank is giving a rate of prime-0.54%. Is this a good rate? I see some ads for prime-0.99% online but don't want to go everywhere and have them run my credit report (thats how they start)....Any advise on this one? I have currently some CDs at about 5% that mature in next few months. Do you think it is a good idea to borrow from HELOC and then pay it back when CD matures? I can just delay the expenses, if needed, so trying to figure out if it really make sense to have this line of credit. Please advise.
Thanks. Bill"

see this forum at : http://socialize.morningstar.com/NewSocialize/forums/thread/204845.aspx

Article : What Exactly is a Homeowner's Loan?

By Ezilon.com Articles
Nov 12, 2005, 20:15

What Exactly is a Homeowner's Loan?


The term "homeowner's loan" has created a lot of buzz in the past few years, mainly because it is not a formal tag for any kind of loan. Rather, it is a general label for many types of credit extended to a homeowner whenever he or she would use his or her own house as collateral to secure the grant of a loan. There are quite a number of homeowner loans that you could avail of, so it is not correct to say that you simply want to apply for a homeowner's loan. Determining which type of homeowner's loan is most suitable for you is the first step that should be taken with this general kind of loan agreement.


Home Mortgage Loans

The most popular kind of homeowner's loan is a mortgage loan. This isn't really a homeowner's loan, technically speaking, as your full ownership of the house would be suspended until such time that you fully pay off the mortgage. You only have inchoate rights to the housed pending full satisfaction of the mortgage loan. However, because of common usage, mortgage loans have been included under the general umbrella of homeowner's loan.

A mortgage loan is a great alternative to renting. The latter does not bestow any equity over the house. At the end of the lease agreement, the rent you have paid would be for naught, whereas with a mortgage loan, you would be able to use the house under a mortgage loan even during the period when you are striving to pay off the same.

The way it goes is that you would have to pay the down payment for the house you are considering. Make sure that you pay at least 20% of the total amount. This would assure lower taxes and levies for you. The balance would then be paid by the creditor. You would have to pay the creditor what is due to him in stated installments, plus stipulated interests. As security, the creditor would get to keep the deed to the house. This deed would be passed on to you upon full satisfaction of the mortgage loan.

And as we've mentioned earlier, you would get to use the house even during the pendency of the mortgage. This is indeed a better alternative to renting as you would get to gradually acquire equities to the house you have decided to buy through such a route.


Home Equity Line Of Credit

And speaking of equities, we have another kind of homeowner�s loan based on the same. It is called a home equity line of credit. Basically, a home equity line of credit is a credit line that uses your equity to a house as collateral. Equity simply refers to the rights to the house which you own. A house under a mortgage loan, for example, which you have paid 80% of would give you 80% equity over the same home. This 80% equity would be used as security for a home equity line of credit.

As is commonly practiced, once you have attained substantial equity over a house under a mortgage loan agreement, you could apply for a home equity line of credit to pay off the mortgage. This would extend the maturity date of the original loan as it would be replaced with the new one, and if the new loan imposes a lower interest rate, it would be a better alternative for you to pursue.


Basic Homeowner's Loan

There is, of course, the basic kind of homeowner's loan, that is, a loan that is granted with your house as collateral. This presupposes the fact that you are the full owner of the house. It should be under your name. Whatever purpose you�re planning for the loan, be it to pay for some existing obligations, or to establish a startup business, you would be able to avail of some credit by using your house as collateral.

It goes without saying that with any kind of homeowner's loan you want to avail of, you would need a good credit score to position yourself for favorable benefits like lower interests rates and other applicable fees. Also, you should be fully committed to comply with the terms of the loan. Loans are always a double-edged sword. They can be used to make life easier or harder for you. It all depends on how you use them.

source : http://www.ezilon.com/information/article_13636.shtml

"Subprime" is Word of the Year for 2007

'Subprime' is word of year 2007
"Subprime" has been voted word of the year for 2007 by linguists of the American Dialect Society.

Used to describe a risky loan, the word burst out of the banking sector as the home loan crisis in the US turned into a global credit squeeze.

It beat competition from Facebook, water-boarding and Googleganger.

The society says it just charts words or phrases that have become prominent in a particular year, and is not telling people how to speak.

"Subprime" means literally "less than ideal" and is the technical term used to describe loans - especially mortgages - made to borrowers with poor credit histories.

A series of defaults on such loans spread panic through much of the banking sector in 2007 as financial institutions realised they had bought many of these loans from one another without knowing how risky they were.

Creativity

American Dialect Society spokesman Wayne Glowka said: "When you have investment companies losing billions of dollars over something like bundled subprime loans, then you have to consider whether it's important.

"You probably also want to think about paying off that third mortgage."

Other words nominated for the award included "water-boarding" - a form of interrogation involving simulated drowning, that was much discussed in recent confirmation hearings - and "Facebook", a popular social networking website.

The society gave its "most creative word" award to "Googleganger" - meaning a person thrown up by a Google search on your name, but who is not you.

Among other citations this year:

* Ninja - a poorly documented loan made to a high-risk borrower - someone with No Income, No Job or Assets
* Wrap rage - anger brought on by the inability to open a factory-sealed package
* Tapafication - the tendency of restaurants to serve food in many small portions, like tapas.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/1/hi/world/americas/7173110.stm