Category: Refinance

125% Home Equity Loan

Before you decide to refinance with a 125% home equity loan there are some you should consider. The main concern with these programs is that you will owe more on the home then it is actually worth. This may cause a problem if you want to move in the near future

Qualifying for a loan that is 125% of the value of your home is much harder and more strict than applying for a mortgage loan that is 100%, or under, of the value of your home. Normally, you will not be able to have any late payments over the last 12 months, and many times no late payments during the last 24 months. Your credit scores should definitely be over 700 and some lenders will require even higher credit scores for 125% financing.

This may be an excellent way to finance any improvements that need to be made in the home. The improvements in turn may increase the value of the home after they are completed.

For some consumers, financial burdens may make this an attractive choice for debt consolidation. If you aren’t planning on moving for awhile and your budget is stretched to the limit, this would be an alternative.

Talk to your loan professional today about the pros and cons of using this loan product in your situation.

Remember that if you are taking equity out of your home in amounts over $100,000 that is not related to the improvement of the home nor to purchase additional property, then you are not able to deduct the interest payments on your taxes.

Be very careful when using the 125% loan. If you don’t gain back the extra 25% through appreciation or making improvements, then you will be obligated for the extra amount if you sell your home. Can you handle the thought of owing more on your home than your home is worth? If not, then this loan probably isn’t for you.

Lenders offer 125% Home Equity Loans in markets where property values are on the rise. The loan is made with the expectation that the property will increase in value and give equity protection to the lender. Lenders become very hesitant to offer these kinds of loan programs in markets where property value are stable or declining.

These are great loans for paying off debt and to make your interest a tax write off.

If you are trying to pay down credit card debt and have high enough credit scores to qualify for a 125% home equity loan you may want to look at low interest or zero percent credit cards as another option. 125% loans come with an interest rate normally over 10%, some are even variable rate HELOCS. By using a credit card with a low interest rate or even a zero percent rate you will save significant money and pay down your debt faster.

Why are some interest rates higher | Guide to your states down payment assistance programs 1 | How to rebuild your credit after a bankruptcy | Misleading marketing to watch out for | Consolidating Debt – Refinance or 2nd Mortgage

Common Reasons to Refinance

Common Reasons to Refinance

There is an old adage that says if you can improve your interest rate by at least two percentage points, then it is a good time to refinance. While that may work as a general rule of thumb, the truth is there are other reasons to refinance:

Lower your interest rate
Securing a lower interest rate is one of the top reasons for refinancing. This can make a big difference in your monthly out-of-pocket costs for housing and save money on financing fees.

Build equity faster
If you are in a position to make higher monthly payments due to an increase in salary or other good fortune, you may want to switch from a 30-year loan program into a 15 or 20-year loan structure. This enables you to build equity faster and save a tremendous amount of money on financing fees.

Change your loan program
Many homeowners who start with Adjustable Rate Mortgages desire to move to the stability of a Fixed Rate mortgage later on down the road. As interest rates fluctuate, making original deals less attractive, people will change their loan programs in order to capitalize on the best rates available.

We can provide you with loan comparison charts to find out what you can save with various loan programs.

Credit score has improved
If your credit score has improved as a result of making your mortgage payments on time and in full, you may be in a position to take advantage of your improved credit standing.

We can review your current credit score, the terms of your existing mortgage, and review options for other loan programs that could not only reduce your monthly payment, but also save on interest fees paid over the life of the loan.

Use the equity you have established
A cash-out refinance allows you to tap into the equity you have built up in your home. You may want to pay off revolving credit card accounts, send a child to college, or use the money for home improvements or personal expenses.

Regardless of your reasons for wanting to refinance, my team and I are interested in helping you make a decision that works best for you.

We will begin by reviewing the terms of your existing mortgage program. It will be important for us to know the purpose of the refinance and how long you plan to stay in the home. This helps us to determine whether or not it is beneficial for you to pay points up front to secure a lower interest rate on your new financing.

Throughout the process, we will present you with spreadsheets outlining various loan programs, and continue to monitor rates in order to inform you of the best time to refinance.

What Should I Look For In A Loan Officer?

In today’s ever changing real estate market, it just doesn’t make sense to gamble with your home loan. When evaluating a potential loan officer it is important to understand the background of the individual loan officer as well as the company they represent. Don’t be afraid to ask questions like:

How long has your firm been writing residential mortgages?

Are you licensed in my state?

What types of loans can you offer?

Do you process and underwrite in-house?

Do you offer automated underwriting?

It is important to know that your loan officer and his/her company are experienced and well-established so they will be there for your closing, and hopefully many future transactions

Available Mortgage Loan Products

Purchase Transactions including first and second trust mortgages

Refinance Transactions for Rate and Term as well as Cash-Out Refinances

Stand-Alone Second Mortgages (Home Equity Loans -HELOAN and Home Equity Lines of Credit -HELOC)

Construction Loans

Government Loans such as VA and FHA

Five Ways To Pay off Your Mortgage Faster | Choosing a Realtor | Creative ways to buy a house | First Time Buyer Mortgage Rates | Frequently Asked Questions – Credit | Million Mortgage Loan | Current Mortgage Rates California | Creditworthiness