Mortgage Project

When applying for a home equity loan, homeowners have several options. Usually, loan applicants select loan packages that offer affordability, which generally consists of low monthly payments. For this reason, adjustable rate home equity loans are popular because they offer low initial rates. Homeowners may also choose an interest-only home equity loan because they offer similar low rates.

What is an Interest-Only Home Equity Loan?

Second mortgages or home equity lines of credits are types of home equity loans. Both options pledge your home as collateral. Ordinarily, home equity loans have fixed terms and interest rates. Because of low rates, these loans are more ideal than credit cards.

Interest-only home equity loans offer the same benefits. The only difference is that homeowners are allowed to make interest-only periods for a specified time frame. During this period, the monthly payments are considerably lower. Interest-only periods vary. The average length is usually one to seven years. However, some lenders will offer interest-only periods up to ten years.

Advantages of Interest-Only Home Equity Loans

If borrowing a small amount of money and selecting a short interest-only period, these loans may not present future risks. In some instances, homeowners who intend on selling their property will apply for an interest-only home equity loan, use the money to improve the property, which boosts the value, and then re-sell. In this instance, interest-only home equity loans are beneficial.

Disadvantages of Interest-Only Home Equity Loans

Many homeowners are attracted to interest-only home equity loans because of low monthly payments. Yet, it is vital to consider the pros and cons before selecting this option. Eventually, homeowners will have to begin paying the principle balance. If opting for an interest-only home equity loan option, it’s better to select a shorter period, perhaps one or two years.

Those who choose a longer interest-only period may be hit with significantly higher monthly payments. If this happens, affording the payments may prove challenging.

Of course, homeowners also have the option of refinancing for a standard fixed home equity loan at the conclusion of the interest-only period.

Go to http://www.homeequitywise.com for more information on an Interest Only Home Equity Loan.

Share This

Do you need money to finance home repairs and improvements, consolidate credit card debt, buy a new car, and pay for tuition or other expenditures? If you own a home, you can use your property as security and borrow the money you need. This is what a home equity line of credit is all about. A home equity credit line lets you use your biggest asset — your home — as collateral and be eligible for a substantial sum of money that you can access and use anytime the need arises. A home equity line of credit works similarly to a credit card wherein you can borrow up to your credit limit whenever you need to.

For many years now, the home equity line of credit has been one of the most profitable and rapidly growing sectors of consumer loans. Thus, many financial institutions offer home equity loans and a line of credits at varying rates and deals. The competition between these lenders mostly benefits borrowers. If you own a home, and you need access to a substantial amount of money, you should definitely consider a home equity line of credit. There is a wide range of financial lenders you can choose from.

To help you determine how much credit you may qualify for, you can use a home equity line of credit calculator. This calculator computes your potential line of credit based on a percentage of the appraised value of your home minus the balance due on your existing mortgages including first mortgages, second mortgages and other debt. The higher the value of your home, the larger the line of credit you can borrow.

There are some home equity line of credit calculators online that you can use for free. All you need to do is fill in important information, such as the value of your home, the mortgages you owe and the loan to value ratio. These online credit line calculators provide a fairly accurate report of the potential size of the line of credit you may qualify for.

Home Equity Line Of Credit provides detailed information on Home Equity Line Of Credit, Home Equity Loan Line Of Credit, Home Equity Line Of Credit Rates, Home Equity Line Of Credit Calculator and more. Home Equity Line Of Credit is affiliated with Home Equity Loan Line Of Credit.

Share This

There are more than 19,000 mortgage companies in the U.S. and some of the largest and most reputable of them specialize in subprime mortgage refinancing.

Steven Frank, Senior Vice President of Marketing at FlexPoint Funding identifies a subprime borrower as “someone with a FICO score below 620. He or she will pay between 1.5% and 2% higher interest for a mortgage, but there is no shortage of money or willing lenders in the subprime mortgage market.”

What trends do you see in the subprime mortgage market for 2006 and beyond?

Steve: We went through the biggest refinancing boom in history from mid 2002 through September of 2005. As many as 80% of Americans refinanced their homes during that time. Interest rates on adjustable rate loans dropped to under 4% during the boom with some homeowners opting for fixed rates as low as 5%.

Now both fixed and adjustable are back around 6.5% and will probably reach 7% for an A-grade 30-year fixed mortgage and 9% for a subprime mortgage by the end of 2006. The rate of appreciation is a more normal 6% - 12% annually. A typical home in most parts of the country stays on the market about six months, which means it’s a balanced market favoring neither buyers nor sellers.

What type of mortgage would you recommend for subprime borrowers?

Steve: Most subprime borrowers won’t qualify for a second mortgage or a home equity line of credit. They will have to refinance their first mortgage if they want to cash out some of their equity. Depending on their personal situation, a homeowner may be able to borrow up to 95% LTV (loan to value). More likely, it will be in the 75%-85% range. There are very few 125% LTV mortgages anymore, and subprime borrowers won’t qualify for these.

Subprime borrowers should work with a company that understands their particular needs; one that sees more than their past problems and that specializes in flexible, affordable mortgage solutions.

Mortgage Refinancing Advice

Check your credit - According to the government loan agency, Freddie Mac, up to 15% of subprime borrowers have credit scores that qualify them for traditional loans. Don’t settle for subprime rates if you can get prime-rate mortgage refinancing.

Watch your costs - Interest rates won’t vary much among subprime mortgages, however, there are some aspects of the loan structure that will impact the bottom line, such as:

- length of the mortgage term; 10, 15 or 30 years

- if it is a fixed-rate loan or an adjustable-rate loan

- whether any points have to be paid ( a “point” equals one percent of the loan)

- what kind of processing fees and closing costs are required

Look for good customer service - A good lender will walk potential borrowers through the application process, verifying personal information and making sure all the terms of the loan are understood. The lender will also recommend whether to lock in an interest rate during the processing phase or let the rate float until the closing.

Get a free quote - Prospective borrowers looking for refinancing can take advantage of sites like Bad Credit Mortgage Refinancing Now.

Mike Hamel is the author of three business books and several articles about mortgage financing. His material is featured on sites like Bad Credit Mortgage Refinancing Now.

Share This