Author Archive
5 Tips: Rates won’t change overnight but now is a good time to start positioning yourself.
Tip 1: Brace for higher mortgage rates
This is where you’ll see rates move first because mortgage rates usually follow the markets (particularly 10-year Treasurys), rather than Fed moves.
For that reason, you’ll want to lock in low rates now. According to Freddie Mac, the average rate is 5.68 percent for a 30-year fixed mortgage.
An extended period of rapidly rising rates could make homes more expensive for prospective buyers. If such a situation were to persist, home prices would actually fall. But home prices tend to be slow-moving, so it would take a long period of higher rates to impact home prices.
Tip 2: Beware HELOCs
Over the past few years, consumers have used their homes as a cash machine, taking out home equity lines of credit and other loans to pay for everything from flat-panel TV screens to a home addition.
Cashing out your home equity becomes an increasingly dangerous game as interest rates rise because, like credit cards, home equity lines have variable rates. That could be a problem if rates were to rise sharply.
However, now may not be the time to swap to a fixed-rate home equity loan if you already have a HELOC. The national average on a HELOC is currently 4.74 percent, while the national average home equity loan rate is 7.28 percent. The 2.5 percent gap, or 250 basis points, is quite large and it may be a couple of years before it narrows substantially and becomes disadvantageous.
Bankrate.com senior analyst Greg McBride says consumers currently choosing between home equity loans and lines of credit should consider a HELOC if the payback period is three years or less. If the payback period is longer than three years, consider a home equity loan.
Tip 3: Cure your credit card addiction
Rising rates will boost your credit card debt fast. Consider obtaining a fixed rate credit card if you currently hold a variable one. Be aware that this is no panacea as credit card companies can boost your fixed rate with just 15 days notice.
The best solution for saving yourself from the pain of higher rates? Pay down your cards. Also, remember you can negotiate a lower rate by calling the card company directly. You might even describe a recent low-rate card offer you’ve received to give them some incentive to give you a break. The average interest rate Americans pay right now is 12.9 percent, so your rate should be below that.
Tip 4: Silver lining for savers
If you’ve been trying to save money over the past few years, you’ve suffered through a period of pretty abysmal returns. Six-month certificates of deposit currently pay just 0.93 percent, while money market funds pay half a percent, on average. While the prospect of higher interest rates is enticing, it’s not here yet.
McBride says that until rates begin to rise there is no advantage of locking up money for the long haul. If you have to reinvest a certificate of deposit, you’ll want to reinvest for a short period, say three to six months, so you’ll be ready to put your money to work when rates are more attractive. Don’t forget to shop around for the best yield.
One savings alternative is stable-value funds. These mutual funds invest in high-quality bonds and fixed-rate contracts from insurers and pay 4.68 percent, on average, in 2003. Take care in shopping for these products as some require that you put them into an IRA.
The old fashioned way of hedging your portfolio against inflation however is buying stocks. A little inflation gives companies the ability to rise prices on products.
Tip 5: Bond investors: Proceed with caution
Rising rates is bad news for bond investors. One strategy that can help you side step the pain of rate fluctuations: laddering. That simply means buying bonds in staggered maturities so that as they mature you can put your money to work, resetting the overall yield of the fixed income portion of your portfolio.
Make sure you don’t buy bonds with maturities longer than your intended investment time horizon. In other words, if you’re saving for Junior’s freshman year at Harvard which starts in a decade, don’t buy 30-year bonds to finance his education.
Another good idea: Look at the Treasury department’s TIPS, or inflation protected securities. Yields on these bonds reset with inflation changes. Remember, bond prices move in the opposite direction of yields.
Gerri Willis is the personal finance editor for CNN Business News. Willis also is co-host of CNNfn’s The FlipSide, weekdays from 11 a.m. to 12:30 p.m. (ET). E-mail comments to 5tips@cnnfn.com.
How to Get the Best Mortgage
This is a guide on how to get the best mortgage deal. Do not rush into the first offer that is made to you even if you are in a hurry for a mortgage. Take your time, check out what is on offer from local banks, building societies and mortgage brokers. The more time you spend doing this will equate to greater savings on your mortgage. Remember for most people it is something that they will only do once, so do it right!
Shopping around for a mortgage will help you to get the best financing deal. A mortgage—whether it’s a home purchase, a refinancing, or a home equity loan—is a product, just like a car, so the price and terms may be negotiable. You’ll want to compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating may save you thousands of pounds.
Get quotes:
Different lenders may quote you different prices, so you should contact several lenders to make sure you’re getting the best price. You can also get a mortgage through a mortgage broker. Brokers arrange transactions rather than lending money directly; in other words, they find a lender for you. A broker’s access to several lenders can mean a wider selection of loan products from which you can choose.
Get Costings:
Be sure to get cost information about mortgages from several lenders or brokers. Know how much of a down payment you can afford, and find out all the costs involved. Knowing just the amount of the monthly payment or the interest rate is not enough.
Ask each lender and broker for a list of its current mortgage interest rates and whether the rates being quoted are the lowest for that day or week.
Ask about the mortgage’s annual percentage rate (APR). The APR takes into account not only the interest rate but also broker fees and certain other credit charges that you may be required to pay, expressed as a yearly rate.
A mortgage often involves many fees, such as underwriting fees, broker fees and closing costs. Every lender or broker should be able to give you an estimate of its fees. Many of these fees are negotiable. Some fees are paid when you apply for a mortgage and others are paid at closing. In some cases, you can borrow the money needed to pay these fees, but doing so will increase your loan amount and total costs. “No cost” loans are sometimes available, but they usually involve higher rates.
Negotiate:
Once you know what each lender has to offer, negotiate for the best deal that you can. There’s no harm in asking lenders or brokers if they can give better terms than the original ones they quoted or than those you have found elsewhere. Once you are satisfied with the terms you have negotiated, you may want to obtain a written quote from the lender or broker. The quote should include the rate that you have agreed upon and the period the quote lasts. When buying a home, remember to shop around, to compare costs and terms, and to negotiate for the best deal.
Don’t be afraid to make lenders and brokers compete with each other for your business by letting them know that you are shopping for the best mortgage deal.
John Mussi
Using Home Equity to Buy a Car
Consider Using a HELOC When Buying Your Next Car
A good case can be made that the flexibility and other inherent advantages of HELOC loans make them well-suited for financing automobile purchases. Here’s why:.
1. Interest Rate Advantages - The average interest rate on a HELOC is typically 1.5% - 2.0% less than the average 48-month new car loan. The spread between HELOCs and used car loans is even greater. Things to consider:
- first, take time to explore 0% or other special-financing deals that may be offered. Most often, when a choice is offered between 0% financing and a lump-sum cash discount, the buyer is better off taking the discount. However, each deal needs to be weighed on its own.
- second, interest on a HELOC is adjustable whereas the typical auto loan will carry a fixed interest rate. In a rising interest rate environment, the interest rate increases can - over time - eliminate the rate advantage of a HELOC. This is a risk you need to consider carefully.
- finally, interest paid on a HELOC loan is generally deductible on federal and state income taxes (consult your tax advisor). The benefit of this deduction varies depending on your marginal tax bracket. Here’s a table showing the effective interest rate for HELOC loans at different tax bracket levels.
2. Payment Flexibility I - The typical HELOC loan allows for interest-only payments. This can be a big flexibility advantage over the standard auto loan which requires fixed principal and interest payments. Of course, paying interest only will increase the total amount of interest you pay. We suggest that you pay your HELOC auto loan as if it were a standard auto loan and resort to the interest-only payment feature only in the event of true financial duress.
3. Payment Flexibility II - In addition to loan repayment flexibility, you also gain added flexibility when paying for the car. For instance, why not first put the car purchase on your credit card, earn significant cash back or other rewards and then pay-off the credit card with your HELOC?. This type of flexibility simply is not available with traditional auto financing methods. Here’s an article discussing benefits credit card auto purchases.
4. Title and Insurance - when you finance a car with a HELOC, title to the vehicle is in your name - not the bank or lender’s name. Auto lenders often require borrowers to maintain extra comprehensive insurance to ensure their risk is covered. When you purchase a car with a HELOC, you are in control of this and can determine what level of insurance is most cost-effective for your situation.
5. Price Negotiation - Finally, buying a car with a HELOC loan (or credit card/HELOC combination) puts you in a very favorable price negotiation position. From the dealer’s standpoint you are an attractive customer because you’re paying in cash. All discussion of dealer financing can be side-stepped and you can focus strictly on price matters.
The benefits of using a HELOC loan for a car purchase are clearly significant. However, these benefits must always be carefully weighed against the fact that your home is ultimately the collateral for the HELOC loan.
New Mortgage Options for Baby Boomers and Seniors
Sedona, Arizona, May 10, 2007 - Co-authors of Let Your Mortgage Make You Rich! - Lin Ennis and John R. Barker - will be featured on Internet radio Saturday, May 12, 2007, wherever Internet is available. The 7:00 a.m. EDT broadcast can be heard by clicking on “Listen Live” on the far right of the menu bar on www.wsbrradio.com.
The Anita Finley Show, “Boomer Times & Senior Life,” runs from 5:00-8:00 a.m. Saturday, Mountain Time, that’s 7:00-10:00 Eastern, according to station time on the website. (Click the link and “Listen Live” right now in order to see the station’s time as related to your timezone.) A replay later in the day, 8:00-9:00 p.m., will occur on www.wwnnradio.com (timezone unknown). Both shows play live from tape at the appointed time and are not archived on the radio station websites.
It’s telling that Finley, a former Real Estate Broker, sounded excited during the taping of an interview with Ennis, the primary author of what Finley calls “a course in managing your mortgage.” Finley seemed amazed at the quality of free information Ennis dispensed during the 27-minute conversation, which included a single tip that has the net result of lowering your mortgage interest by a whopping 2%.
Nevertheless, she was eager to get to the “most secret” of mortgage reduction techniques revealed in the 96-page notebook-like guide: the HELOC question. Ennis was generous with information and outlined for those who listen Saturday how to “use the paid-for portion of your house to pay off the unpaid-for portion.”
Finley, now a gerontologist who with her husband Bill publishes the monthly magazine “Boomer Times & Senior Life,” also reviewed Let Your Mortgage Make You Rich! on page 4 of the 36-page periodical. “It’s the small things that can mount up,” she writes, but you have to have wise instructors teaching you how to do it. That’s why I believe this book is so valuable.”
“Boomer Times & Senior Life,” South Florida’s only multi-media, marketing company targeting boomers and active seniors in the tri-county area of Palm Beach County, Broward/Dade County, and Treasure Coast, produces not only its two weekly radio shows online, but also its newsmagazine. The May issue can be read all month at www.babyboomers-seniors.com and the mortgage reduction book review at www.babyboomers-seniors.com/pdfs/may07/articles/coverbookofmonth.pdf. The article will print out on a single page and could be helpful to anyone with a mortgage, especially those who are less than 15 years and three months into their loans (the time when payments to principal begin to exceed payments to interest).
To preview the contents of Let Your Mortgage Make You Rich!, amazon.co.uk is the premier source. To read background on the material, what it includes and why it was produced, go directly to the Sedona company’s website www.letyourmortgagemakeyourich.com. For more information, call tollfree: 888-664-6651, or 928 282-1808.
About the Author
AUTHOR: Lin Ennis is a full-time writer specializing in personal finance, marketing and Internet marketing subjects.
Tips For A Commercial Remortgage
Commercial remortgage is just like a residential remortgage. Commercial remortgage can occur for many reasons. It can happen because the business owner wants to borrow money, they want to make improvements to the property or they want to try for a lower interest rate.
Whatever the reason commercial remortgage should be handled with the same care that would be given to a residential remortgage.
If a business owner is going to remortgage to take out additional money they need to really consider what this means. They will be financing more so they will be paying more. They should ensure that they will be able to afford it.
They should be pretty secure about their business finances and be confident that they will continue to have regular, good sales. Additionally, they should try for a lower interest rate at the time or remortgaging so they can try to reduce the additional costs.
If the business owner is refinancing simply to get a better interest rate then they really do not have much to worry about. Their payment should end up being less which is a good thing. This is an especially good option if rates suddenly fall or if the business finances are tight and the extra money is needed.
If the remortgage is to get a little extra money for repairs then this should definitely be brought to the attention of the lender. Lenders love giving help for repairing or improvements on real estate because it makes the property worth more money which is good for the lender, too.
The more equity that is built in a property, the more it is worth. Should the business owner default on the loan the lender will get that much more profit from its sale.
It is likely no matter the reason for the remortgage the lender will want to review the business finances. This is simply to let them evaluate if the risk of lending to the business has changed.
They will also likely want to know why the remortgage is being asked for. It is up to the business owner to prove to the bank that remortgaging is a good idea and will be beneficial for both of them.
Commercial remortgage is just as risky as residential remortgage. It is also basically like the original mortgage, as far as risk. If the business owner defaults on their payment s then their commercial real estate could be at risk for seizure by the lender.
The bottom line with any type of mortgage or remortgage is that the borrower has to make sure they can afford the loan and that paying it back will not be a problem.
About the Author
James Copper is a commercial remortgage advisor for www.commercialfinancespecialists.co.uk.
Do You Need a Refinancing
What is mortgage refinancing?
As a borrower, you may refinance your existing mortgage to repay your existing mortgages. The main purpose of mortgage refinancing is to acquire a mortgage at a lower interest rate and utilize substantial monthly savings for more immediate requirements.
Advantages of mortgage refinancing
Lower Monthly Installments- when you refinance your mortgage at a lower interest your payable interest rates are substantially reduced.
Reduce the Mortgage Term- By reducing the rate of interest you can shorten the length of the mortgage.
Use the equity of your home for your benefit - As an alternative to a home equity loan, you can choose to refinance your home for an amount greater than the remaining balance of your mortgage.
Consolidate your debts- by refinancing your mortgage at a lower interest rate; you can consolidate all your individual loans into one new mortgage at a lower rate of interest.
Types of mortgage refinancing you can opt for
Rate and Term Refinancing- This refers to a change in the rate and term of an existing loan or mortgage. Rate and term mortgage refinance allows you to secure a lower interest rate, change the terms, or opt for a lower payment plan…all without paying off any additional debts.
Cash-Out Refinancing- A cash-out refinance differs from rate and term refinance in an aspect that the new loan amount is larger than the existing loan amount due to the additional cash you take with the new loan. By opting for a cash-out refinancing, you can pay off your debts on top of their existing loan amount, and changing the rate and term of the existing loan at the same time.
About the Author
Myself webmaster of www.castlemortgagegroup.com dealing in all type of mortgage loans in Florida, Georgia & Alabama with home equity loans, Florida Home Equity Loans, refinance loans, constructions loans.