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take your net worth into account when qualifying
you for a mortgage loan. Your net assets
represent a degree of security for them, as you
could tap into them to repay the loan even if you
can't pay through other means. This is especially
true if you don't meet other criteria (income) for the
loan.
Choose a Term that is Right for You:
Another issue to consider is the term of the
mortgage, or number of years you will be paying
off the loan. Generally 15 or 30 year terms are
available.
The advantage of the 15 year loan is you will pay it
off sooner, and avoid paying a large amount of
interest in the process. The downside is will have
higher monthly payments, and will possibly
qualify for a lower mortgage amount than you
would for a 30 year loan. The reverse is true for a
30 year loan - lower payments, more total interest
paid, but possible easier qualification.
This is an individual decision, as each borrower
may have different current income needs, and a
different desire for the use of their money for
different investment or other purposes. In general,
it is wise to choose the shorter term if one can do
that and meet all other current financial needs in at
the same time.
Other ways to save Money on Your Mortgage
One strategy to lower your interest mortgage costs
is to sign up for bi-monthly payments instead of
monthly. With a 30 year mortgage, you can cut
your interest cost slightly because your are
effectively paying off the loan sooner, having made
the equivalent of an additional payment every year.
Another strategy is to simply pay off your
mortgage more quickly than the 15/30 year loan
agreement. You pay more than your monthly
payment requires, thereby reducing your total
principal loan balance to lower than it would have
been. You'll shorten the number of months you
need to pay in this manner. Your lender may
impose some limitations on this.
For instance, if you have a 30 year mortgage on a
$150,000 home, with a 5.76% fixed interest rate,
you would pay approximately $876 per month.
However, if you raised the amount you pay each
month to $976, you would pay off your mortgage 6
years early and save yourself approximately $40K+
dollars in the process.
Exotic Mortgages: Over the past few years, other
mortgage types such as interest only or option
mortgages have become available. The headlines
scream of the dangers of these mortgages, as
many who borrowed under them were unaware of
the consequences of them. Even if available, I do
not recommend to anyone except the most
sophisticated borrowers and investors.
Refinancing:
Refinancing your mortgage is when you take out a
new mortgage loan on your home, replacing the
old loan. This usually includes a change in
interest rate, term and in many cases a withdrawal
of cash. Given the decline in the value of the
housing market, it has become more difficult or
impossible for many to refinance. Generally, you
will need to have at least 30% equity in appraised
value of your home to consider refinancing.
If you are refinancing to simply lower your
payments, the general rule of thumb is the new
interest rate should be 1 and 1/2% lower (or more)
than the old loan rate to make the transaction
worthwhile. Refinancing should be used
cautiously, as in many cases it may it will increase
your financial risk. During the real estate boom,
many people over-used it, placing them in a
tougher position now that real estate values have
dropped in many areas. However, for home
owners with a certain profile and needs,
refinancing can still be an attractive option now
that interest rates are very low.
Who Should Refinance
If you are thinking about refinancing your home,
some of the things that you should take into
consideration include the amount of money you
still owe on your current loan, the current
appraised value of your home, your credit rating,
the current interest rates and the terms of your
mortgage, whether it is fixed, an adjustable rate,
etc.
If you have built up a lot of equity value in your
home (even with the current decline in prices),
your credit is in good shape and you are looking
for a loan to make a big purchase such as college
or an investment, then refinancing your home may
be a good idea.
Who Should Not Refinance
Home owners that should not refinance are those
that are happy with their current mortgage terms
and rates and do not need the money for a
productive purpose, such as remodeling their
home. Also, those homeowners whose homes
dropped in value making their mortgage upside
down (meaning that you owe more money on
your mortgage than your home is worth), those
that have a poor credit rating, and those
homeowners in areas where prices are expected
to continue to drop.
Additional Credit Report Information:
Here is some information regarding credit reports
that can ultimately help you increase your credit
score.
Request Your Credit Report Each Year
You should request your credit report from at least
one of the big reporting agencies each year and
look it over thoroughly. By checking your credit
report, you can evaluate your credit score, look for
errors in reporting and guard against identity theft.
In the case of identity theft, if a loan was opened
that you are not aware of, you can contact the
lender, credit reporting agency and the police to
minimize the damage done to your credit score.
Reduce Your Debt
An easy way to increase your credit score is to
reduce debt. While having a small amount of debt
can be helpful when establishing credit history, if
your credit score is good to excellent, you no
longer have to carry debt to show lenders you are
at low risk. On the other hand having high debt
relative to your maximum debt allowed will lower
your credit rating.
If you owe a lot of money as compared to your
total income (not including a mortgage or student
loans), most lenders will be willing to lend you less
and / or at higher interest rates. Remember the
more debt you have, even if you pay it off in a
timely manner, ultimately means the more risk you
are to lenders. By lowering your debt, you can
raise your overall credit score.
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Have Questions? Our consultants are available to help you with
any financial question. We can also provide in-depth consultation
concerning any financial issue facing you. We can help. Please
contact: Best-Financial-Advice.com
Have Questions? Our consultants are available to help you with
any financial question. We can also provide in-depth consultation
concerning any financial issue facing you. We can help. Please
contact: Best-Financial-Advice.com
Have Questions? Our consultants are available to help you with any
financial question. We can also provide in-depth consultation
concerning any financial issue facing you. We can help. Please
contact: Best-Financial-Advice.com
Have Questions? Our consultants are available to help you
with any financial question. We can also provide in-depth
consultation concerning any financial issue facing you. We