Home Equity Lines of Credit - the Basics
By John Whiteside

A Home equity line of credit is a loan which is similar to a credit card. These often have a very low interest rate (In most cases even lower than home equity loans). A Home equity lines of credit acts as a form of revolving which your home equity services.

For example,

-You take out a Home Equity Line of credit for $10,000

-You purchase a car for $8,000 with your revolving line of credit.

-You can now only withdrawn $2,000 until you can pay back the $8,000 to increase your limit to $10,000.

*Some lenders might have a minimum withdrawal amount.

There are many types of payment plans a lender may choose to offer you. You will pay interest on what you owe. However once the loan term ends, usually around 10 years, you must pay back the balance owed. If you were to take out an interest only loan, this will be you. If you decide to pay some principal in your repayments you can avoid this. You must pay off the loan when you sell your house even before the loan term ends.

How much can I borrow?

Usually if the amount you wish to borrow is above $25,000, with both loans you can usually borrow up to 80% of what your house’s market value minus what you owe. For example if your house is worth $200,000 and you still have a mortgage of $100,000 to pay off, you would use the following calculation:

$200,000 * 0.8 = $160,000

$160,000 - $100,000 = $60,000

You can borrow up to $60,000 dollars in theory. The lender will take other factors into account such as your ability to repay the loan. This will be determined by your income, other financial obligations, debt, and previous credit history.

If you want to borrow below $25,000 you can usually get the loan if you have $25,000 in equity.

Fees:

An Appraisal fee. An independent valuation of what your house is worth is needed to establish how much equity you have in your house. Usually around $200USD.

An application cost. This may not be refunded if your request for credit is denied. May also include property appraisal costs and credit report costs.

Closure costs which may include fees for attorneys, mortgage preparation, and filing property, title insurance, and taxes.

You may also have to pay transaction fees for every time you withdrawn money from your line of credit and possibly an annual membership fee.

This article is owned by http://www.use-your-equity.com and written by John Whiteside. Learn more about real estate investing, and how to create and use the equity in your home! The original article can be found at http://www.use-your-equity.com/heloc.html

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Things that You Need to Know before Financing Your Home
By George Tesfa

Frequent Asking Questions:

What are Points? A. There are several types of mortgage related costs called “points” and their definitions and purposes vary. Generally, points are costs that must be paid to a lender in order to receive mortgage financing under specified terms. One point means 1% of the loan amount. 1% Disount point means, it will cost you 1% of the loan amount to buy the rate down by mostly .25% ( 1/4 of a rate ). 1 point origination fee means, it will cost you 1% of the loan amount by a lender or a broker to do the loan for you.

What does it mean to “lock” the interest rate? A. Due to interest rate movements, mortgage rates can change between the day you apply and the day you close. To protect against uncertainty, a lender can ” lock-in ” and gurantee you or 30, 60, 90, or 120 days. The longer the days are the higher the rate will be.

What is the lowest down payment I can use or a down payment on my home purchase? A. A 20% down payment used to be a standard, and most lenders today allow the buyer to put down as little as 5% down, or $5,000 on $100,000 loan. In fact, over 75% o the borrowers are now putting 0% down payment. If you put 20% down, then you will not pay PMI ( private mortgage insurance ) monthly to insure the loan for the lender. However, if you have a credit score below 620 and aquire a sub prime loan ( higher rate ), you will not pay PMI. PMI is only applied on prime loans ( prime rates ) with less than 20% down payment. The more down payment you put, the less will the monthly payment on the mortgage.

George Tesfa. Sr. Loan Officer
American Mortgage
http://www.Amerimort.com
http://www.CashMyEquity.com

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Option ARM ? The World?s Most Dangerous Mortgage
By Charles Essmeier

Home prices have reached record levels, and in many parts of the country, homes have become nearly unaffordable. Real estate has replaced the tech stocks of the late 1990?s as the hot investment, and everyone has sold their stocks and jumped into investment property. Real estate prices have increased at a far greater rate than salaries, and the lending industry has attempted to solve this problem by introducing a tremendous number of mortgage options for borrowers who barely capable of purchasing a home. Most of these loan types feature adjustable interest rates and minimum down payments. One of these, the option ARM, is the most dangerous type of loan ever introduced. Borrowers who are considering an option ARM should be aware that this loan could leave them with a loan that is worth far more than the home it?s used to buy and with a loan that he or she cannot afford to pay. The option ARM is not for the squeamish.

So what, exactly, is an option ARM? An option ARM is a mortgage with an adjustable interest rate that typically gives the borrower four different payment choices each month. The first choice is based on a 30-year amortization table; the second on a 15-year amortization table. These would correspond to payments for adjustable-rate 30 and 15 year mortgages, respectively. The third choice is an interest-only payment, which pays the interest that accrues during the month but pays nothing towards reducing the loan amount. The fourth choice, the one that makes this loan so dangerous, is called the ?minimum payment.? The minimum payment is calculated upon the first month?s interest rate, which is usually a very low ?teaser? rate that can be as low as 1-2%. Most borrowers with an option ARM opt to pay the minimum payment each month, and that?s where the trouble comes in.

The loan carries and adjustable interest rate, and this rate can adjust as often as every month. If the borrower is paying only the minimum payment, then he or she isn?t even paying enough to cover that month?s interest on the loan. What happens then? The unpaid interest that has accrued is added to the loan principal. The principal can actually grow larger, and as interest due is calculated on the loan principal, the interest due will increase, as well. Interest rates are currently near all-time lows and are sure to increase. A buyer who continues to make minimum payments on an option ARM will find that the principal on the loan is actually increasing over time! This is known as negative amortization.

In a negative amortization situation, only bad things can happen. The lender can require refinancing under certain conditions stated in the loan agreement. The buyer may find himself unable to pay the loan and may have to default. And the lender could find himself holding a note that is worth far more than the house that it represents.

The option ARM is a loan that is best suited to investors and homeowners who only intend to keep the home for a short time. It is not a good choice for anyone who may be using it to buy more home than he or she can afford. Unfortunately, that describes a lot of buyers who are taking out this type of loan. Anyone who is considering a home purchase should be very careful if this type of loan is offered, as it could leave you both bankrupt and homeless.

©Copyright 2005 by Retro Marketing.

Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to personal bankruptcy, debt consolidation and credit counseling, and HomeEquityHelp.com, a site devoted to information regarding mortgages and home equity loans.

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Home Loan Refinancing - What Lenders Don’t Want You To Know
By Carrie Reeder

Refinancing lenders seems to hold all the cards. They have the money and their own system for determining which type of credit you can qualify for. What lenders don?t want you to know is that you can improve your credit rating in a matter of days.

Good Credit Factors

Good credit does not mean perfect credit. People assume a 30 day late payment means poor credit. Not true. You can still have good credit score if you have two 30 day late payments on a credit card or one 30 day late payment on a car loan within the last three years. After three years, the payment history will drop off your credit report.

While you don?t want too much debt when applying to refinance, having a credit card can help your credit score. Have at least one credit card and make regular payments on it. If you are worried about the interest charges, pay off the balance every month. Those regular payments establish your credit payment history, a large factor in determining rates.

Ways To Boost Your Credit Rating

Besides paying your bills on time, there are some quick ways to raise your credit score. First off, close any open credit card accounts that you don?t use. The less available credit you use, the better rates you can receive with mortgage lenders.

Second, include a note in your credit history explaining the situation for any late bills, foreclosures, or bankruptcy. Lenders will offer lower interest rates if the reasons were due to extenuating circumstances.

Lastly, check your credit report for errors. Creditors and credit reporting agencies make mistakes. Their mistakes can cost you thousands in interest charges, so get a copy of your credit report and read through it carefully. If you find a mistake, contact the creditor to have them fix it.

Refinancing Alternatives

Refinancing isn?t the only way to tap into low interest rates. If you simply want to access your home?s equity, then a home equity loan might be a better choice for you. Home equity loans offer flexibility to withdraw funds and pay them back. You can also write off the interest on your taxes, just like with mortgage interest.

To view our recommended sources for refinance mortgage loans online, visit
this page: Recommended
Refinance Mortgage Lenders Online.

Carrie Reeder is the owner ABC Loan
Guide, an informational website about various types of loans.

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