Example: Refinancing Vs Home Equity Loan
Let’s say that 10 years ago, when you first purchased your home, interest rates were 5% on your 30-year fixed-rate mortgage. Now, in 2020, you can get a mortgage at an interest rate of 3.5%. Those one-and-a-half points can potentially knock hundreds of dollars a month off your payment, and even more off the total cost of financing your home over the term of the loan. A refinance would be to your advantagein this case.
Or, maybe you already have a low interest rate, but youre looking for some extra cash to pay for a new roof, add a deck to your home, or pay for your child’s college education. This is where a home equity loan might become attractive.
How To Use A Home Loan Eligibility Calculator
Potential borrowers can easily use an online housing loan eligibility calculator following some quick steps as mentioned below.First, individuals need to enter their date of birth and city of residence in the respective fields of the calculator.Next, one needs to set a value for some parameters on the home loan eligibility calculator. These include:
- Net monthly salary
- Other sources of monthly income
- EMIs of any existing loan along with other obligations
Before going forward with a loan application, individuals must assess all eligibility criteria prescribed by various lenders. This will help one to opt for a lender that can provide housing loans at attractive terms to make repayment comfortable with EMIs spread over a favourable tenure.
Warning Signs Of Predatory Lending
|The Promise||The Result|
|Bad Credit? Use the equity in your home to get the cash you need.||Even with an imperfect credit history, you can usually find better loan terms elsewhere if you look.||Your credit score suffers even more when you fall behind on payments.
You lose your home to foreclosure.
|Low payments, low fees and low interest rates.||The interest rates and loan processing fees are 3-4 times higher than honest lenders charge.||These higher rates and fees lead to higher monthly payments than you expect.|
|Low-cost insurance to protect you in case you cant pay.||The total cost for years of credit and disability insurance is added to the loan principal.||You pay finance charges and interest on insurance policies, as well as on the loan.|
If youre still not sure that you need the loan or that its a good dealor that you can even afford itcall InCharge Debt Solutions at 877-251-1882 and talk to a mortgage counselor before you possibly sign your way into foreclosure and credit dismay.
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What Factors Go Into A Credit Score
Its important to know your credit score and understand what affects it before you begin the mortgage process. Once you understand this information, you can begin to positively impact your credit score or maintain it so you can give yourself the best chance of qualifying for a mortgage.
While exact scoring models may vary by lender, some variation of the standard FICO® Score is often used as a base. FICO® takes different variables on your credit reports, such as those listed below, from the three major credit bureaus to compile your score. FICO® Scores range from 300 850.
From this information, they compile a score based on the following factors:
- Payment history
How Your Mortgage Choices Can Affect Your Future
Mortgage lenders charge a penalty fee when you break your contract. This means, if you sell your home, you could owe the lender thousands of dollars in penalty fees.
You could also pay penalty fees if you pay off your mortgage early. Unless you plan on owning your home until you pay it in full, you may need flexibility on your mortgage.
Options related to mortgage flexibility include if your mortgage:
- is open or closed
How Long Is My Mortgage Rate Good For
Once you do find that magic mortgage rate, youll probably be wondering how long its actually good for.
If youre not asking that question, you should be because rates arent set in stone unless you specifically ask them to be.
By that, I mean locking in the mortgage rate you negotiate or agree upon with the bank/lender so even if rates change from one day to the next, your rate wont.
Otherwise, youre merely floating your mortgage rate, and thereby taking your chances. Without a rate lock, its really just a quote.
Think of a quoted mortgage rate like a stock price until you actually buy/sell it, the price is subject to change. So until you lock, rates may worsen or improve.
Rates can generally be locked in for anywhere from 15 to 90 days or longer, with shorter lock periods cheaper than longer ones.
Types Of Mortgage Loans For Buyers And Refinancers
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Many types of mortgage loans exist, and they are designed to appeal to a wide range of borrowers’ needs.
For each type of mortgage listed below, youll see its advantages and the kind of borrower it’s best for. This page concludes with a glossary of terms describing different types of mortgage loans.
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What Is A Mortgage Refinance
As the name implies, refinancing simply means obtaining new financing for something you already own .
Its kind of like a balance transfer where you move your loan from one lender to another to get better terms, except its a mortgage payoff.
If you currently have a rate of 6% on your mortgage, but see that refinance rates are now 4%, a refinance could make sense and save you a lot of money.
Youd essentially have one lender pay off your existing loan with a brand new loan at the lower interest rate.
There is also the cashout refinance, which allows you to tap into your home equity while also changing the rate and term of your existing mortgage.
So if you currently owe $200,000, but your home is worth $500,000, you could potentially take out $100k cash and your new loan amount would be $300,000.
Your monthly payments may not even go up if interest rates are favorable, and youd have that cash to use for whatever you wish.
Be sure to use a refinance calculator or payoff calculator to help guide your decision, and consider the loan term, otherwise known as your expected tenure in the property.
Do I Need To Pay Mortgage Insurance
Good question. The answer coincides with down payment and/or existing home equity, along with loan type.
Basically, you want to be at or below 80% loan-to-value to avoid mortgage insurance entirely, at least when it comes to a home loan backed by Fannie Mae or Freddie Mac.
That means a 20% down payment or greater when purchasing a home, or 20%+ equity when refinancing a mortgage.
However, the FHA is sticking it to everyone regardless of down payment, so if you get an FHA loan, mortgage insurance is unavoidable.
And even if mortgage insurance isnt explicitly charged, you can argue that its built into your interest rate or closing costs if you arent at 80% LTV or lower.
This is yet another reason to come to the table with a larger down payment if at all possible.
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How Much Home Loan A Salaried Person Can Get Minimum Salary Required For A Home Loan
There are very few businessmen in the country, some are either extremely successful while others manage somehow. People who are working 9-5 jobs have a steady income. While some choose to stay in their roots, others want a fresh start.
Your monthly income determines the loan that you can avail of. It is a crucial aspect according to the Kerala state housing board. It also depends upon the credit score, any existing EMIs, and so on.
The price of a house in Kerala is a lot. A minimum of Rs. 40 lakhs.
The bank must make sure that if you avail of a loan, you should have the ability to repay it. This avoids additional financial pressure. Hence the minimum salary should be enough to suffice your lifestyle as well as your EMIs. Unless you can make some extra money with rent-out homes in Kerala.
Therefore according to RBI norms, it is at least Rs. 25,000.
Now to calculate your home loan, let us say that your monthly salary minus the gratuity, PF, Esi, etc is Rs. 25000. With a rate of interest of 10% for 10 years, you can get a home loan of Rs. 18.6 lakhs.
This is applicable for a home costing Rs. 40 lakhs.
Hard Money Loans For Investment Properties
You can obtain hard money loans from professional individuals or companies that lend money specifically for real estate investing purposes. The best thing about these types of loans for investment properties is that they are faster to secure than conventional mortgage loans. Moreover, hard money lenders donât look at the real estate investorâs credit score â instead, they evaluate the value of the income property youâre planning on buying to decide whether or not to grant you the loan.
Looking to buy an incomeproperty? Click here to analyze and find the best investment properties in your city and neighborhood of choice!
Although this is one of the common types of loans for investment properties in real estate, it does come with a list of formalities, documentation, and guarantees. Another thing to keep in mind before approaching hard money lenders is that these are short-term and they come with higher interest rates .
As a result, these loans for investment properties are not suitable for any type of income property. Hard money loans are a good financing option for property investors who aim to buy cheap investment properties, renovate them, and quickly sell them for a profit and pay off the loan in due time . On the other hand, you wont possibly be able to pay off a hard money loan on a long-term residential investment property in only 3 years.
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What Is A Tracker Mortgage
A tracker mortgage goes up and down with the Bank of Englands base rate. For example, you can have a tracker that is base rate plus 2%, meaning the interest you pay will always be 2% above the Bank of England base rate.
Tracker rates can be for the entire length of the mortgage, or just for an introductory period after which the rates revert to the lenders standard variable rate .
This type of mortgage can sometimes present the best value option. Its also the most transparent you know that if the base rate increases by 0.25%, so will your repayments. On the other hand, if the base rate falls, anyone on a tracker mortgage will see their repayments fall too. This is important, because lenders have been accused of not passing on discounts to customers on standard variable mortgages when the base rate has fallen in the past.
However, because the base rate can change, a tracker mortgage is still unpredictable. If youre on a tight budget, you may prefer to choose a fixed rate mortgage instead.
Lic Housing Finance And India Post Payments Bank Announce Strategic Partnership To Offer Home Loans
On Tuesday, LIC Housing Finance and India Post Payments Bank announced a strategic partnership for providing home loan products. It will help IPPB which has a robust and extensive network of 650 branches and more than 136,000 banking access points in making LICHFLs home loan products accessible to its customers across the country. As per the Memorandum of Understanding , credit underwriting, processing, and disbursement for all home loans will be handled by LICHFL with IPPB responsible for sourcing. It needs to be mentioned here that LIC Housing Finance offers home loans starting from 6.66 percent for loans up to Rs.50 lakh for salaried individuals. The rate of interest is linked to the borrowers creditworthiness.
09 September 2021
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How Do You Calculate A Mortgage Payment
At some point in the mortgage process, youre going to be searching for a mortgage calculator to figure out your proposed payment.
You can see how monthly payments on mortgage loans are truly calculated using the real math, or you can simply find a payment calculator that does all the work and tells you nothing about how it comes up with the final sum.
Just make sure you use a mortgage calculator that considers the entire housing payment, including taxes, insurance, HOA dues, and so forth. Otherwise youre not seeing the complete picture.
There is a lot more that goes into a mortgage than just the principal and interest, and taxes and insurance can be quite costly depending on where you buy. Budget accordingly!
How Can I Apply For A Mortgage
When applying for a mortgage for a primary residence, second home or investment property, here are some common steps:
Choose a mortgage lender and apply: When you first start looking for mortgages, you may see offers from lots of lenders. Compare rates and services before choosing the one that’s right for you.
Borrowing From Retirement & Life Insurance
Those with retirement funds or life insurance plans may be eligible to borrow from their accounts. This option has the benefit that you are borrowing from yourself, making repayment much easier and less stressful. However, in some cases, failing to repay such a loan can result in severe tax consequences.
Learn more about retirement accounts.
Each Has Pros And Cons That Homeowners Need To Weigh
Lea Uradu, J.D. is graduate of the University of Maryland School of Law, a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, Tax Writer, and Founder of L.A.W. Tax Resolution Services. Lea has worked with hundreds of federal individual and expat tax clients.
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The Six Main Types Of Mortgages
Not all mortgage products are created equal. Some have more stringent guidelines than others. Some lenders might require a 20% down payment, while others require as little as 3% of the homes purchase price. To qualify for some types of loans, you need pristine credit. Others are geared toward borrowers with less-than-stellar credit.
The U.S. government isnt a lender, but it does guarantee certain types of loans that meet stringent eligibility requirements for income, loan limits, and geographic areas. Heres a rundown of various possible mortgage loans.
Fannie Mae and Freddie Mac are two government-sponsored enterprises that buy and sell most of the conventional mortgages in the U.S.
What Kind Of Mortgage Should I Get
In the world of mortgage lending, there are many different types of loans and loan terms. How can you decide which loan best fits your financial circumstances? Knowing what goes into your loan application and what happens when you submit it will help you become a more knowledgeable participant in the lending process.
Youve determined what you need and want in a home and you have a ballpark figure on how much you can afford to spend. Now its time to ask a loan officer exactly what youre worth as far as a home loan goes. Lets peek inside the loan officers magic bag of tricks.
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State Bank Of India Announces Special Interest Rates For Home Loans In Its Festive Offer
State Bank of India has announced special interest rate concessions for its home loans under its festive offer. For home loans of up to Rs.30 lakh, the interest rate starts at 6.90% p.a. while for home loans above Rs.30 lakh the interest rates start at 7.00% p.a. Those applying through the banks YONO mobile application will receive additional interest rate concession of 5 basis points. The interest rate concession will also be linked to the credit score. For home loans ranging from Rs.30 lakh to Rs.2 crore, there will be an interest rate concession of 20 basis points. For home loans of above Rs.75 lakh, there will be an interest rate concession of 25 basis points.
23 October 2020
How To Increase Home Loan Eligibility
Listed below are some of the ways to increase home loan eligibility and improve the chances of availing of a housing loan at favourable terms and interest rate.
- Improve CIBIL score: Lending institutions tend to provide home loans at attractive interest rates to individuals who possess an ideal CIBIL score above 750. Timely payment of bills, EMIs, credit card dues and not applying for multiple credit products simultaneously are some ways to improve CIBIL score.
- Clear existing loans: Lenders also assess loan repayment capacity by gauging an individuals debt-to-income ratio. Hence, clearing existing loans before applying for a new one can increase home loan eligibility.
- Opt for a joint home loan: The home loan eligibility improves if one applies for this credit product jointly with an earning co-applicant or spouse.
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