Financing Home Loans in 2008

Be ready for a tough year financially...

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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

Video - Home Equity Loan Officer Will Dance for Biz!

When a Home Equity Loan is Good

Published December 3, 2007
[ From Lansing State Journal ]
Fearing a layoff? Prepare finances for jolt

John Waggoner
Gannett News Service

You can't help but notice the little signs at work that layoffs are coming. The closed-door meetings. The buzzards in your parking space.

The economy is slowing, and that means you need to be prepared. You need to make sure that your household can withstand the loss of income.

• Your first step: Make a rainy-day fund. Financial planners often recommend that you keep three to six months' worth of salary as an emergency fund. They're talking about the amount of money you need to pay your bills each month.
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Keep the cash in a money-market mutual fund or a bank money-market account. The average money fund yields just 4.2 percent, but you're not investing for the yield. You want access to your money whenever you need it.

• You also will need to reduce your expenses. Pay down your debts aggressively. Think of your debts as good debts and bad debts. Good debt is your mortgage, or any other loan that charges less than 6 percent in interest.

Bad debt is pretty much anything that charges more than 6 percent. A credit card balance that charges 18 percent interest? Bad debt.

• Consider taking out a home equity loan to get rid of your high-interest loans, if you don't have enough in savings to pay off the debt.

The catch: It's a lot easier to get a loan when you have a job. If you suspect you're going to be laid off, run to the loan office.

If you don't have a home equity loan available, cut up the card and stop making new charges on the account. Pay 5 percent of your balance this month. Pay the same amount each succeeding month.

• It could make sense to stop pouring money into your 401(k) plan and using it to pay down high-interest rate debt, said Kurt Brouwer, a Tiburon, Calif., financial planner. If your company matches your contribution, however, you should contribute at least enough to get the match.
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Basics of Getting a Home Equity Loan

Home Equity 101

People who are not able to earn that much working or have bad credit will have a hard time getting a loan from a creditor. The only way to borrow will be through home equity that uses the house as collateral.

Lenders perceive home equity loans as relatively safe. This is because the bank can simply confiscate the house of those who fail to pay.

Studies have shown many avail of this to consolidate high interest debts, finance the purchase of a second home, pay for the tuition in college and renovate or remodel the house.

Despite the risk of losing the house for those who are unable to pay, many still avail of this because it is for anyone to qualify for and get a huge amount. The interest rates are very affordable and this can be written off as a tax deductible.

One program that is gaining popularity is the 125% equity home loan. This is considered to be a second mortgage that allows the individual to borrow one fourth of the value of the home. If the house is worth $100,000, this allows the person to borrow up to $25,000.

Knowledge can give you a real advantage. To make sure you're fully informed about Mortgage, keep reading.

Many of these firms can be found online. The individual may only qualify after achieving a certain credit score and under certain guidelines, which is up to the lender.

The basis for those who qualify for this loan will be up to the lender. These firms can look at the length of time the homeowner has lived there as well the individual’s current credit score. These things will influence the amount that will be given when the application has been approved.

The lender will not require the applicant to have the property appraised when requesting for a home equity loan. The purchase price will be used as the indicator if the person has lived there for less than a year.

An automated value model, recent tax assessment or simple drive by appraisal will be utilized if the applicant has lived there for a number of years.

A home equity loan may last from 10 to 30 years. It is best to shop around and compare the rates of various lenders before signing anything on paper.

Everyone in the household must understand what will happen in getting this type of loan. This means making some sacrifices to cut down on costs to be able to pay on time rather than losing the house.

Home Equity Info

Can you get a Home Loan with Bad Credit?

Home Equity Loans

Getting a home loan is just like getting recognition at the end of each academic year in school. Before you are awarded of any recognition, you must comply with the requirements for such recognition. For instance, before you will be given an academic award, you must first satisfy the required general weighted average on each or all subjects. Other awards also follows particular criteria before it would be awarded to deserving students at the end of the school year.

The same thing also goes in securing a home loan. There are certain requirements that you must meet before you will be able to secure a home loan. One of which is that you must possess a good credit rating.

However, despite the wide availability of home loans, there are still thousands of individuals who failed to secure home loans merely because they possess a bad credit score. They are not fully aware that any delinquency in paying their outstanding loans caused the “stain” in their credit record, thus they would be having a hard time securing a good home loan.

In other words, possessing a bad credit score simply means you are giving the lender reason to get more money from you through giving you home loans with high interest payments. You want to secure a home loan because you do not have enough money to finance the purchase of your new home, and yet you will be given a financial burden if you insist on getting a home loan despite of your bad credit score. That would be a terrible situation for your part.

Fortunately, there are still loan options for you despite your possession of a bad credit score. There are commercial lenders who offer bad credit home loan for individuals who are having a hard time securing a loan to finance the purchase of their new home. However, bear in mind that because of your bad credit standing, you will automatically become a “great risk” to the lender. Thus, expect that they will charge you higher interest rate as an assurance that you will be able to repay your home loans in the agreed period of time.

Bad credit score will really put you in a situation wherein it is you who is on the bottom of the wheel. Thus, you need to strongly convince your preferred lender that you are still worthy of another chance and not be a risk to them. How to do it? Have a look on the following guidelines and make sure that you will follow them.

• Research for the best available bad credit home loan offer in the market. You may prefer visiting various commercial lenders and financial institutions in your local area to know their terms and conditions as well as their rate of interest for home loans with bad credit score. In addition, a personal contact inside these financial institutions could be of great help in your credit problem.

• Cleanse your credit rating while there is still time for you to do so. If there are incorrect entries posted in your account, it is best that you call the attention of the authority with regards to this matter and have them clear your record of any incorrect rating. You may also ask for some certification from your previous lenders clearing you of any financial obligations. In this way, the recovery of your credit rating will be in place before you can secure another loan.

Getting a home loan with bad credit score could really be a daunting task. But if you manage to clear your rating in the shortest time possible, you will be able to secure a home loan that will not be a financial burden to your part later on.

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