As the debt becoming a major issue in many households, debt management gains importance. Homeowners may well have calculated their income and outgoings when they have acquired their mortgages and all may be in their means. However over the years credit card debt and personal loans may have sneaked in. It is very easy to turn plastic debt into a mountain.

Budgeting needs to be applied to overcome those debt problems. Since it is now much harder to increase the household income, the only way to increase the spending is through saving. That sentence does not seem to make sense. How can the spending be increased by saving? If the spending is divided to essential expenses and wasteful spending, it becomes clear what the sentence means. Save money where possible and channel those savings to cover much needed payments.

At the early stages of a debt problem, people could tackle the issue themselves. This will spare them to disclose their financial situation to third parties. Failing that debtor may seek advice from debt counseling and debt management agencies. There are free advices and paid professional advice. Normally the fees could be in the form of monthly membership or set fees to deal with a specific area. All relevant information must be disclosed to allow advisors to have a full review. These advisors are well experienced in dealing with credit card companies and banks. They may be able to put the debtor on a lower interest deal and reduce the debt by cancelling the late fees and penalties. They are taken seriously by the creditors. Credit card company takes debtor’s going to credit counseling as an indication of commitment. One of the well known debt management agencies is LowerMyBills.com. They offer initial free consultation.

The outcome may be a debt management plan which is an informal agreement of payment terms between the debtor and creditor. This information is not necessarily shared with credit agencies. As long as debtor keeps paying, there should not be a problem.

Debt settlement is a completely different concept. Debt settlement requires the creditor’s agreement to write off part of the debt in exchange for a immediate lump sum settlement of the remainder of the debt. Credit card company may agree to accepting part of the debt as a full settlement, if they are worried about their money. Debt settlement is recorded in debtor’s credit report and will effect credit score considerably. Especially, homeowners who are considering a refinance home mortgage loan in the near future should avoid going down a route that will impair their credit score. 

Whatever stage debtor may be in, there is always an action to take. Ignoring the problem will only make it worse.

Filed under: Personal Finance by JS Lee
Comments Off

Your credit score is probably the most influential factor for the lenders to decide on your refinance home mortgage loan application. I would not personally start the mortgage application process without checking my credit score first. There are many free credit score providers available, but I would suggest that you get a copy of your credit report and go through it. This would at least give you an insight to how it works. There may be something that should not have been there and it may be corrected by just calling your credit card company or bank.

Your credit score identifies you to the lender as a number. It really is that simple. John Smith becomes 708 to the mortgage underwriter. Looking after your credit score is a long, continuous process. However, if you failed on that do not despair, you can repair your credit in time. No not with the credit repair agents, just yourself. Starting from today, if you put your house in order, start making your payments in time and sorting out your financial affairs you can prepare yourself for a mortgage with good credit score 6–12 months down the line. If you have time, this would be much better option for you than trying to get a mortgage with bad credit.

OK, how can you improve your credit score? Here is how I would go about improving my credit score and I have done it in the past. It sure works;

• Put your banking and bank statements in order to start with. Do not have returned checks or missed direct debit payments
• Be organised, stay on top of your payments. Do not miss any payment, especially credit card and loan payments. They are the faster ones to score one against you.
• Do not apply too many credit cards. Cancel the credit cards that you do not use.
• Check your credit report regularly. This will at least show you where you are going wrong. 
• Set up direct debits if you forget to pay your bills in time.
• Keep clean and you will see improvement
• It is up to you to try to repair your score through some firms and programs
• Most sure way of repairing your credit score is if you start making real improvement. It will show soon enough (some may not need it sooner, sorry).

Please read other factors that determine a loan application (applies to most loan applications) on my homepage Refinance Home Mortgage Loan

Filed under: Credit Score by JS Lee
Comments Off

While focusing on the current mortgage interest rates, the fees involved with the mortgage process and house buying should not be left out. Mortgage fees are the outgoings that needed to be taken into account when calculating the amount can be spent on a house purchase. Some of these fees may be included in the mortgage and some needs to be paid by the borrower. There could be fees to pay even you have not closed on the property. Here are the lists of the fees involved;

1. Legal fees. In most countries, there is conveyance solicitor involved in the process of house buying. These solicitors will check the property title deed, the sale contract, get the property searches carried out and handle the payments. Once a solicitor employed, his fees and expenses needs to be paid even the purchase has not been completed.

2. Appraisal and/or survey fees. The property needs to be valued by an acceptable surveyor. The mortgage is based on this valuation. Once an offer accepted or possible before the offer accepted this survey must be carried out to evaluate the market value of the property. This will tell if the property is overpriced or bargain. Normally the surveyors do not value the property higher than the stated asking price.

3. When the buyer is happy to go ahead, there are searches needs to be carried out on the property. These include; the drainage and utilities search to make sure the property has no issues with its connection to essential services. Local authority search to make sure no restrictions or planning issues outstanding and the property has been built with proper permissions.  

4. At the time of completion of the sale, there are state taxes and government taxes to be paid. In addition, the property title registration fees and title insurance premium must be allowed for. The solicitor or the agent will be able to provide the buyer with the estimated fees and taxes. 

5. Then the property must be insured. No mortgage company will release the funds without a proper insurance in place.

There could be a number of additional expenses depending on the lender, the state and how much the borrower wants to look into properties history. These could be further structural surveys, subsidence survey, termite checks and so on. Right at the beginning of the home purchase process these fees must be estimated and accounted for. Fees are out of pocket expenses and will reduce the available down payment. Some of these fees may be paid by the seller or added onto the loan. Some lenders might charge a lending fee as well, usually maximum 1% of the borrowing.

Filed under: Mortgage Rates and Fees by JS Lee
Comments Off

At challenging economic conditions, businesses may find it hard or expensive to find loans. A recently laid off homeowner may want to tap into home equity to start a business. There may be many reasons why someone would want to refinance home mortgage loan and use the cash advance for business purposes. These could be sensible business decision or act of desperation. It needs to be closely looked at when should the home equity be used for business and when it is dangerous.

These could be good reasons to tap into home equity to for cash advance. 

1. Investment or expansion opportunity may arise for a profitable business. There may be a need to move fast to close the deal. A business loan would take much longer to get approved by banks, while it could be relatively straight forward to cash home equity. Since business is doing well, it would be easy for the business owner to asses the risk in this situation and decide that equity in home may earn higher return.

2. Leased business premises may come up for sale. In this case, the business owner may invest cash from refinance home mortgage loan in buying the business premises. It could be as simple as transferring the equity in home to a commercial property. Homeowner could still keep the premises under his name and let his business carry on paying himself rent. By doing so, he would keep the ownership of the property private and separate from his business. 

3. An opportunity may arise for an experienced professional to start his/her own business. For example an experienced beautician may find that a beauty shop near home is on the market and the owner wants a quick sale. Since the person would be familiar with the ins and outs of the business, she/he would be comfortable with using the family home equity to get into this business. Most banks do not offer business loans for leased premises and goodwill purchases. 

On the other hand, one could find several dangers in using home equity for business purposes. These could be dangerous propositions of type. 

1. Homeowner’s business may be failing fast and the homeowner may hope to stop the rot by cash injection. Especially small business owners get attached to their trade. Some may consider the business to be their off spring of a sort. They may not be able to see what is really coming and end up throwing good money after bad. The spouse or the partner of the entrepreneur may have to put his/her foot down and make him/her see that even with a cash injection there may not be an escape. Such businesses would not normally be able to get a business loan. 

2. Recently, laid off breadwinner may want to start a business out of desperation. There are many people who have turned the adversities of being unemployed to successful businesses. When it is done for the right reasons, starting a business is very fulfilling and financially rewarding. In saying that, there are many business failures as well. Some people are just not cut out to be business owners.

3. Investing the cash from home equity loan in to someone else’s business without sufficient due diligent. Especially, if the businessman requiring your investment is living in an expensive house and driving fancy cars, ask yourself how come he needs your cash. It does not make it safer to invest in your brother’s business or loan to your brother. You may loose your money and your brother.

In this low interest environment there are many business opportunities becoming available for the right minded homeowners. A business that required hefty premiums to get into just a few years ago may be available for almost nothing other than little bit of cash to get it going again. There is a saying; Ships are safe in harbour, but that is not what they are made for.

Filed under: Home Mortgage Loan, Refinance Home Mortgage Loan by JS Lee
Comments Off

Home provides a roof over family. Business brings the bread home. These two investments may be seen differently in the eyes of family members. Mother may be passionate about home, father about business or vice versa. There may be conflicts in using equity in home for business purposes. Most banks do not want to know that the borrower will use cash advance from refinance mortgage for business purposes. A mortgage advisor may suggest a different reason for refinancing in application form, since mentioning business may make things complicated. Simply because banks need to enquire about the business before offering the loan or refinance officers are not equipped to deal with business evaluations. Normally, refinance mortgage lending decision is not based on where the cash advance will be used, although this question is asked.

Surely leaving equity in home is safer option than investing in a business. However it is cheaper and faster to get a refinance mortgage or home equity loan than getting a business loan. Investing the advance in a family business may be accepted more readily instead of spending the money for a partnership or in someone else’s business.

Many families see no difference between spending their money on a home or business and comfortable at shifting funds between these asset types anytime needed. When they need to invest more on their business they tap in to home equity. If they do not see a better use in business, they park excess cash safely on property. This is seen as a business model by many traditional small business owners and has been practices for many generations.

Spouses or partners need to be in agreement or one needs to persuade other that taping in home equity is the better option in the circumstances they are in. Otherwise, there could be serious resentments later on or there may not be enough support for the idea. It is understandable that one party may feel secure with home equity left in place. Similarly, any sensible business man should consider all options and sources of capital for enterprise. At times it may be difficult to find business loans or may be too expensive. Home loans are almost always cheaper.

One other point to consider is tax implications. In most countries, interest on a home mortgage loan is not tax deductible, while the business loan interest payments can be shown as a normal business expense. Providing the business is generating profits, business loan may allow 20–40% tax savings. This point only applies when both loan options are available to consider. At times, business loans may be very hard to find, especially for start ups.

Filed under: Home Equity Loan, Refinance Home Mortgage Loan by JS Lee
Comments Off