Three Uses For Your Home Equity Loan

The home equity loan has become one of the most popular lending choices available to consumers. Remember that equity refers to the difference between what is owed in on the property and its value. If you’ve made a good investment, you could have a boatload of equity in your home but the question is how to wisely use that home equity loan.

Use #1 – Consolidate Debt

Probably the most common way to use a home equity loan is for debt consolidation. Most of the time, these loans have lower interest rates than other types of debt. For example, the average credit card interest rate is around 16%. If you are struggling to pay back all of those smaller examples of debt, you can use the funds from home equity loans to pay them all off and free up some cash. You’ll end up with a lower interest rate and a better debt to income ratio in some cases.

The biggest problem with taking this route is that if you’re the type of person who runs up a lot of debt, you may end up repeating the process once your credit cards are freed up thanks to the home equity loan. These actions could lead you down a financially disastrous road.

Use #2 – Children’s Education

If you have kids going to college, you may also consider using a home equity loan to pay for that education. College costs are increasing every year so this could be a wise choice and could help prevent your child from starting out in life with too much debt. While this is an idea worth considering, there are some drawbacks.

First, you also have to consider whether or not you’ll need to access your home’s equity during your own retirement. These two life milestones tend to go hand in hand and this might be a good time to put your own needs first, especially if your child has other funding options. Be sure that he or she explores all options, including federal grants, federal student loans, and scholarships. Another idea is for you to take out a federal PLUS loan using your home as collateral.

Use #3 – Fixing Up the Home

The second most common use for a home equity loan is repairs and improvements to the property. The basic idea is that the changes will actually improve the value of the home which means more equity. Plus, if there are major repairs needed and you can’t afford them in any other way, this is definitely a resort you can choose.

Be aware though that not all of the changes you add are going to boost the value of your home. You also need to realize that your home’s value is also closely tied to the neighborhood in which you live. If you are going to do repairs, consider focusing on the kitchens and bathrooms because these changes are the most likely to increase value.


Do you need additional good ideas on how to use the funds from a Home Equity Loan? You’ll find more ideas by visiting http://www.homemortgageloan-refinance.com/Home-Equity-Loan-Best-Deals.php.

SVR -v- Fixed Rate Mortgages - Is it Time to Switch?

If you're currently better off thanks to your mortgage provider's low standard variable rate (SVR), you probably won't be considering a switch to a new mortgage deal. However, with fixed rate deals currently at a low level, and the possibility that interest rates will start going up, you may want to think again.

What's next for rates?

No-one knows when - and how quickly - the base rate will rise, but it is quite possible that the next move will be upwards.

In fact, while the Base Rate looks set to remain at its current level for some months yet, it is widely anticipated that inflationary pressures will ignite a series of hikes potentially later this year - and on into 2010.

If rates do move up rapidly, this could prove very uncomfortable for anyone still on a variable rate - and particularly for those who have got used to making reduced monthly repayments.

Negative Equity

House prices are low at the moment, and are likely to still be low when rates do start to rise, which means that many homeowners will be at the mercy of higher interest rates without being able to remortgage, because of insufficient equity, or negative equity.

Negative equity is where the amount you have borrowed from your mortgage lender exceeds the value of your property - and can make it very difficult to remortgage. This is one reason why you might want to consider taking action before you find yourself in this situation.

Benefits of an SVR

As SVRs are typically around 2% above the Base Rate, this historically meant an expensive hike in mortgage repayments at the end of a mortgage deal period, which also meant you could usually save money by switching to a new deal. However, with the base rate on hold at an all-time low of just 0.5%, some lenders' SVRs have decreased dramatically - prompting many borrowers to delay tying into a new deal.

Nonetheless, while cheap SVR deals can be favourable for the short term - as this means low monthly repayments - these deals could become unaffordable very quickly if interest rates start to go up again, as your monthly repayments could rapidly rise.

Benefits of a Fixed Rate Deal

As it's unlikely that longer-term fixed rates are going to get much lower, homeowners might want to consider locking into a fixed product. A fixed rate mortgage lets you know exactly what your monthly repayments will be for the length of the deal, and allows you the peace of mind that repayments won't rise during that time.

Given that fixed rates have fallen quite a lot in the past year (five-year fixes at less than 5% are currently available), if you are interested, make sure you shop around for mortgage deals to find the right one for you.

And finally-

Before taking the plunge, make sure you do the maths to work out how much you could be paying on your SVR if rates start to climb, and then compare this with any potential savings you could make by remortgaging to a fixed rate deal.


Find out more about SVR vs Fixed Rate mortgages at http://www.confused.com/mortgages

Guide to Equity Release

Very simply, equity release is a scheme that allows elderly homeowners to free up some or all of the value (the equity) tied up in their place of residence. Despite their indisputable popularity, the Consumers' Association magazine Which? Has branded the schemes as expensive and inflexible, to be used only as a last resort.

Although there are currently more than 40 variants of equity release schemes, they all fall into one or other of two broad categories - "lifetime mortgages" and "home reversion" schemes. In the former, the owner is offered a mortgage secured against the property for the term of his lifetime. This is repaid by rolling up all the interest payments which fall due either when the owner dies or when the property is sold. The mortgage comes with a guarantee that this repayment figure will never be greater than the market value of the home and such lifetime mortgages are subject to regulation by the Financial Services Authority.

With a home reversion scheme, the homeowner sells part or whole of his property to a finance company, for a cash sum or an annuity, but continues to enjoy lifetime enjoyment of his home (or until he moves out), more or less as a rent-free tenant. When the occupier dies or moves out, the finance company sells the property to recover its outlay and passes on any remaining proceeds to the occupier's estate. Currently, such home reversion schemes are not subject to regulation by the Financial Services Authority.

So, what is wrong with either of these schemes, both of which give elderly homeowners the chance to enjoy the considerable amount of equity likely to be tied up in their home (when most properties are likely to have doubled in value since as recently as the 1990s)?

The answer - as is usually the case with all financial services products - is that there is nothing at all wrong in principle; it's all down to the detail of cost and benefit. In other words, it's absolutely imperative to do the sums, consider all the alternatives, and judge whether the amount being offered by way of a lifetime mortgage or home reversion fairly represents the present and future value of the property. Critics have described the schemes as "expensive" because of the generally "high" rates of interest attached to lifetime mortgages and the generally "low" prices offered to homeowners in home reversion schemes.

But the terms "high" and "low" are of course relative. Competition with the market and the proliferation of products to suit different needs means that "fair" is whatever the market will sustain.

Given the particular nature of these types of scheme, it makes sense to discuss any interest in equity release not only with a trusted independent financial adviser, but also with members of your own family. Clearly, many such schemes will affect any expectations of inheriting the "family home" that other family-members might have. Similarly, any younger partner, relative or friend who might be sharing your home with you at present might (depending on the terms of the particular scheme) be obliged to find other housing if you die.

So, here's what to remember about Equity Release schemes:

* Suited for older homeowners who may have a lot of equity tied up in their home

* There are two types: lifetime mortgages and home reversion schemes

* This type of borrowing has attracted a lot of negative press due to high costs, so always thoroughly research the product before signing up

* If you sign up to an Equity Release scheme and have friends or relatives living with you, check out what their rights to the property would be when you die to ensure they are not without a roof over their head.


Find out more about equity release at http://www.confused.com/mortgages

Three Solid Reasons For Home Refinancing

If you've been debating about whether or not home refinancing is the right choice for you, the best way to decide is by exploring a few of the best reasons available. Below are some of those reasons.

Reason #1 - Saving Money

Probably the best reason for home refinancing is to save money, but there are several ways to accomplish this effectively. First, you can simply get a new loan which has a lower interest rate and that translates into lower monthly payments. This can be a good choice if you took out a loan when rates were higher or when your credit score was lower.

Another way to save money is by extending the life of your loan. If you currently have a 15 year mortgage, you can cut your monthly payments drastically by doing your home refinancing with a 20 or 30 year loan. Of course, you will pay more in interest over the life of the loan but if you need those lower payments today, this is a good option.

Reason #2 - Accessing Equity

Another popular for home refinancing is to gain access to the equity in your home. Equity is the difference between what is owed on the home and its value. For example, if your home has been appraised at $250,000 and you have an outstanding mortgage for $175,000 on the home, then your equity is $75,000. By doing home refinancing, you can sometimes tap into that equity to help pay off bills, pay for your child's college, or do major home renovations that could increase the value of your home.

Basically, you'll be taking out a larger loan but if you've played your cards right, then the monthly payments should be more reasonable than taking out financing to cover those other expenses separately.

Reason #3 - Consolidating Debt

Many people choose to do some type of home refinancing when they have a great deal of excess, high-interest debt they need to get out from under. Generally, the interest rates for home loans are a great deal less than for personal loans and for credit card debt. If you want to cut your overall costs and improve your credit score quickly, taking out this loan and using the equity in your home to pay off some of these bills is a wise choice.

If you choose this option, you need to make sure you aren't going to make the cardinal mistake of running up all of that debt all over again. That usually leaves you with a higher monthly mortgage payment, as well as more of those bills. Plus, if you've succeeded in improving your credit picture, you could access even more credit which could deepen your troubles. Again, this is not a good idea.

Other Reasons

Besides the reasons listed above, people do home refinancing for a wide range of reasons. You need to decide if the choice is right for your finances before you make this commitment, however.

Don't jump into Home Refinancing without considering some of the best reasons to take that plunge. You can learn more about them at http://www.homemortgageloan-refinance.com/Bad-Credit-Home-Loan-Refinance.php.

Patriotic Refinancing

Offering a silver lining to the cloudy economy, President Obama encouraged Americans to take advantage of the lowest mortgage rates on record by refinancing their homes. According to the Associated Press, Obama said in a recent press conference, "The main message we want to send today is there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates."

With Americans who had recently refinanced their homes by his side, Obama encouraged homeowners across the nation to use the low mortgage rate to their advantage. "That is money in their pocket," he said of those homeowners who refinanced.

Thanks to efforts by the Federal Reserve, current rates on 30-year mortgages have fallen to 4.78 percent, the lowest on record. This means that rates are down by more than a full percentage point from just a year ago.

However, the president doesn't necessarily mean all homeowners. The president's Making Home Affordable program is geared to help borrowers whose loans are held by Fannie Mae or Freddie Mac refinance into a more affordable mortgage. It is also meant to help homeowners who are struggling to pay their mortgage after their interest rate has increased or they have less income. The government Web site makinghomeaffordable.gov offers all the details.

According to the Web site, the Obama administration considers stabilizing the housing market to be one of the key components to reviving the nation's struggling economy. The program is designed to pinpoint those Americans who are most likely headed to foreclosure despite having kept up their mortgage payments. The president stressed the importance of not only keeping Americans in their homes, but also giving them money to spend on something other than over inflated mortgage payments.

President Obama himself during the press conference, as well as the Making Home Affordable Web site, stressed the importance of watching out for refinancing scams. "If somebody is asking you for money up front before they help you with your refinancing," Obama said, "it's probably a scam." The Web site stressed the following:

* There is never a fee to get assistance or information about Making Home Affordable from your lender or a HUD-approved housing counselor.

* Beware of any person or organization that asks you to pay a fee in exchange for housing counseling services or modification of a delinquent loan. Do not pay - walk away!

* Beware of anyone who says they can "save" your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.

* Never submit your mortgage payments to anyone other than your mortgage company without their approval.

"The Obama Administration has launched a coordinated effort across federal and state government and the private sector to target mortgage loan modification fraud and foreclosure rescue scams that threaten to hurt American homeowners and prevent them from getting the help they need during these challenging times."


Jill works on a website that has information on real estate in Fort Worth. It provides a free search of the Fort Worth MLS along with a real estate blog.

Mortgage Rates Hover Near All Time Lows

There was not much movement in most of the major mortgage products this week. The 30 year rate dropped from 4.86 to 4.82. This is only slightly above the 4.78 all time low that was reached a few weeks ago. The 15 year rate dropped from 4.52 to 4.50. There was some interesting movement with the 5 and 1 year arm. The 5 year arm dropped from 4.82 to 4.79. At the same time the 1 year arm rose from 4.71 to 4.82. This is the first time the 1 year arm has been above the 5 year arm. Regardless both rates are pointless because they are at or near the same rates for a 30 year arm; therefore there is no reason to get an arm instead of a 30 year mortgage in the current market. Below are mortgage rates for the last few weeks and from 6 months ago on November 20, 2008.

May 21, 2009

30-yr 4.82 15-yr 4.50 5-yr ARM 4.79 1-yr ARM 4.82

May 14, 2009

30-yr 4.86 15-yr 4.52 5-yr ARM 4.82 1-yr ARM 4.71

May 07, 2009

30-yr 4.84 15-yr 4.51 5-yr ARM 4.90 1-yr ARM 4.78

Apr 30, 2009

30-yr 4.78 15-yr 4.48 5-yr ARM 4.80 1-yr ARM 4.77

Nov 20, 2008

30-yr 6.04 15-yr 5.73 5-yr ARM 5.87 1-yr ARM 5.29

As we can see rates have not experienced much movement in the last month. They have continued to hover around all time lows for the month of May. They remain substantially lower than what we saw 6 months ago. In addition to rates we always like to look at actual mortgage payments. We took today's rates and translated them into a mortgage payment for a 200k mortgage. We did the same thing with rates from last week and rates from November 20, 2008.

May 21

30-yr $1051.74

15-yr $1529.98

5-yr ARM $1048.12

1-yr ARM $1051.74

May 14

30-yr $1056.59

15-yr $1532.03

5-yr ARM $1051.74

1-yr ARM $1038.47

Nov 20

30-yr $1204.24

15-yr $1658.67

5-yr ARM $1182.43

1-yr ARM $1109.36

A mortgage payment this week is slightly lower than what it would have been last month. This is nothing compared to the saving one would get compared to 6 months ago. For a 200k house a mortgage payment is $152.50 less a month now than it would have been on November 20, 2008 for a drop of 12.66%. This is often forgotten when the media talks about home prices being down 15% to 20%. After one factors in mortgage rates along with falling house prices the actual payments could be down over 30%.

So what do we expect to happen over the next few months? As long as the economy stays week mortgage rates will probably continue to hover around just under 5%. Once the economy starts to recover the general expectation is that rates should start to rise. It's hard to know how high mortgage rates will go once the economy recovers. Estimates have ranged from 10% to 18%. Most of this will depend on how quickly the economy recovers and if the FED moves quickly enough to changes policies from boosting the economy to slowing inflation.


Ki lives in Austin Texas. He website provides a free Austin home search. He also provides a mortgage calculator widget along with a few other mortgage widgets that show updated information on mortgage rates.