Archive for February, 2010

Good tips to save when shopping for your next home loan

By admin On February 15, 2010 No Comments

How do I decide on the right mortgage for myself? Find out some of the factors that you need to consider before choosing a mortgage:

1. The Mortgage Type: There are basically two types of mortgages: one carrying a fixed rate and the other with an adjustable rate of interest. The fixed rate mortgage has less risk because you have to pay the same amount every month, but the interest rate is slightly higher than what is offered initially by the adjustable rate mortgage. Adjustable rate mortgages (ARMs) have a lower interest rate initially but the rates can change with market fluctuations. You can also get a combination of the two types, where you can get a fixed rate for three years or so, after which it is converted into Adjustable Rate Mortgage.

2. The principal amount: The mortgage principal is the money that you would be borrowing so that you can buy the house. So, it is the price towards the home minus the downpayment. The principal amount is decided based on your credit score and the income.

3. The interest rate: Though most people like to go for mortgage with a low interest rate, it should not be the ultimate deciding factor. A loan that has a low rate of interest but high closing costs will be more expensive. Factor in the Annual Percentage Rate to decide which takes into account the interest rate and other loan costs.

4. The term: Mortgages that are for a short-term may have high monthly payments but you end up paying less on a long-term basis because you save money on interest payments.

5. Monthly payment: Make sure you buy a home that has affordable monthly payment options. There is a tendency of people to go for loans with the lowest payments on a monthly basis like say, interest-only mortgage. But the flip side is they do nothing to minimize the principal amount and you will see after a period of time, that you still owe as much you did when you took the loan in the first place. So make sure that you take the right mortgage that is affordable over a long-term period.

6. Discount Points: Lenders offer ‘discount points’ that help lower the interest rate of your mortgage. 1 point is as good as 1 percent of the principal amount, so if you are taking a $100,000 loan, one point will be of $1000 value. For every point you buy, you reduce your rate by 0.25 percent. You should make use of these discount points if you want to stay in the house for long.

7. Closing Costs: Mortgage lenders charge a lot of fees as a part of closing mortgage deals which result in a huge amount as addition to your borrowing costs. These closing costs depend on the area that you want to lie and the reputation of the lender. So the best thing to do is check with your lender in advance for an estimate of closing costs. If you do not comprehend any charge, ask them to explain you clearly.

An assessment of the above seven factors will help you get a good mortgage deal.

Learn how to finance your home improvement projects

By admin On February 4, 2010 No Comments

Choosing an appropriate home improvement financing plan has a lot to do with the kind of home renovation plan you have in mind and how much you’d like to invest in the project. It is commonplace that if you want to extend the repayment terms, you have to shell out more as the interest rate increases, but the flip side is the monthly repayment fees will be less. So make sure you choose the right home financing plan that is easy on your budget. Here are some sources of home improvement financing:

1. Home equity loans: These involve borrowing against the equity in your home. You can get a fixed sum of money to fund your renovation project. It is good to go for a fixed rate because it makes repaying the loan much easier. If you are not able to make the payment, you may risk losing your home.
2. Home Equity Line of Credit: This type of loan is about giving the borrower an open line of credit. Home Equity Line of Credit does not normally have a fixed rate, so the interest rate is dependent on market conditions.
3. Home Improvement Mortgage Refinance: You can choose to refinance your mortgage at a fixed rate. This makes it easy to utilize the extra money for the renovation project. Depending on the term of your mortgage, you can choose to repay across a span of 20 to 30 years
4. Secured Loan: A secured loan is a loan that takes advantage of the borrower’s assets to make sure that he or she is able to repay the loan. This means, due to the collateral factor wherein your money is secured against a vehicle or a house, the lender has the peace of mind to get his money, if you are not in a position to make the payment
5. Unsecured loan: Unsecured loans, also known as personal loans, are loans that are not secured against any collateral, but against your credit rating. If you are making use of home improvement finance for small project, you can use the unsecured loan. You can get a personal loan from a lender or a bank. The interest rate can fluctuate according to market conditions.
6. Banks loans: You can take bank loans to fund small renovation projects as they have to be paid relatively quickly, in a matter of few years.. It is better to go for a fixed rate loan so that the interest rate is not dependent on market fluctuations

It is important to make sure that you are in a financial position to make the repayments. Prepare a list of monthly expenses including mortgage so that you have no speck of doubt about the inability to pay the loan. Find out the amount of money, you can pay every month. To come to the final costs that you have to pay, add up all the costs that are connected to the home renovation, do not overlook any single thing. When it comes to choosing a lender, do comparison shopping. Go online and find out competing lenders, and choose the one who gives a better deal. Also, make sure that you choose a reputable lender with good credibility in the market. Go through the fine print of the document of the lender so that you are aware of everything in the contract. Researching is the key to find a home improvement finance resource who will not only give you best terms but also help in building your home the way you want.