Archive for November, 2009

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Home Equity Loans in California

November 29th, 2009



Home equity loans are regulated in California to limit fees and caps.
No matter where your financial company is based, they will have to
follow these regulations if you are living in California. By expanding your
search to national financing companies, you can find competitive rates
and terms that still follow California law.

Providing Full Home Equity Disclosure

Many of the basic ideas of the federal “Truth In Lending Act” are based
off of California financing law. By using lenders who follow California
financing laws, you can protect yourself from predatory lending.

For example, one such California principle is the idea of full
disclosure, listing out interest rate, fees, and terms before signing a loan
contract. In California, lenders must offer contract copies before
application and before using the credit.

It is a good idea to look over the fees and terms to be sure they are
fair and meet your needs. For example, if you find a prepayment penalty,
then you may want to negotiate a waiver or find a different lender.

Placing Caps on Home Equity Loan Fees and Terms

California laws also place caps on fees and terms, particularly with
sub prime loans. For example, interest cannot be charged on a loan until
one day after closing. There are also limits on late fees and early
payment.

Large financial companies have been prosecuted in California for
failing to meet regulations. So even with the biggest names, look over the
terms to be sure they are not overcharging you.

Shopping Outside of California for Best Home Equity Loan

Even with local laws, you can still search outside of California for
low rates. By expanding your search online, you can find competitive
rates and terms than still meet California law.

Start with a broker site that will link you to several lenders. By
providing your address, financial companies will be aware of the unique
laws related to your loan quote.

Be A Smart California Home Equity Loan Shopper

Your California address won’t protect you from unscrupulous lenders. Be
sure that you practice good credit habits by reading and understanding
all your loan terms. Also, compare rates and fees with other lenders to
be sure they are inline with the market.

By: Carrie Reeder

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California and home equity loan and law

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Interest-Only Home Equity Lines of Credit and Second Mortgage Refinancing

November 29th, 2009



Interest-only home equity loans are second mortgages that you pay only interest for the first 3, 5, or 10 years of the loan, significantly lowering mortgage payments during the first few years. Home equity lines of credit have been increasing in popularity because the mortgage lender only requires the borrower to make an interest only payment that tends to be less than the standard principal and interest payment.

Interest-only second mortgage loans:

• Increased cash flow with reduced mortgage payments during the first few years than conventional mortgages, because initially you’re only paying interest.

• Increased purchase power to buy a higher-priced home than you could otherwise afford.

• Can help you in an emergency.

• Lower monthly payments with debt consolidation.

• Enable you to access funds for investing in a rising real estate market.

Interest only equity loans are not just for purchase loans. Many people refinance with interest-only loans to lower payments and consolidate debt.. There are also several varieties of interest-only home equity loans or second mortgages. These work in a similar way as those offered for first mortgages, including lower payments for affordability during the first few years of the loan.

Interest-only loans can be good for people whose income is sporadic, either because they are self-employed, are paid on commission or because they receive annual bonuses. This allows them to pay only interest during lean months, and make higher payments against the principal later on when they get their bonuses or commissions.

“These loans can be of value for people who want to save or invest the money they would have paid in principal,” said Keith Gumbinger, vice president of HSH Associates, a publisher of loan information in Butler, N.J. Thus, interest-only loans also make sense for investors who invest the money they save into their stock portfolios. Additionally, they could work well for real estate speculators who buy property only to sell it later on when the property appreciates in value.

According to Brendon Daly, of BD Nationwide, “there is usually no prepayment penalty on interest-only loans, but look out for early termination fees.” In short, interest-only loans are for those who are more interested in freeing up immediate cash flow than in building equity in the home. At this time interest only options are not available with government mortgage like FHA or VA.

By: Maria Ny

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The Difference Between Home Equity Loans and Home Equity Line of Credit

November 27th, 2009



Using your home equity is a very savvy way to borrow large sums of money at a very low cost. While there are different types of loan products that lenders offer, the two most common and popular are the home equity loan and home equity credit line.

Before jumping into these two types of loan products, it is important to understand the nature of these two types of lending. Two terms that are extremely important are equity and collateral. Equity is a term that is used to describe the difference between the current appraised value of your home and the amount of the money that you owe (mortgage). For instance, if your home is currently valued at $300,000 and you own $100,000, your equity is equal to $200,000.

Collateral is another term that you should be aware of, whether in home equity loans or a home equity line of credit, it is important to note that you are putting up your home as collateral. Collateral is a way to secure your loan. If you are unable to repay your loan, the bank uses your home as collateral and can sell it to recoup its losses.

The main difference between these two different types of lending is that home equity loans are a one time loan for large sum of money. A home equity line of credit is an open account similar to a credit card where you can borrow money at various installments. Another important difference between both products is that the loan usually always has a fixed loan rate. The rate of the loan always stays the same for the life of the loan. In a home equity line of credit, the interest rate is variable and can increase or decrease throughout your repayment.

Most people use these two products very differently. For instance, for people looking to purchase one large item using their home’s equity, a loan is preferred. For instance, loans are used for adding an addition to your home or paying for college tuition. A line of credit is usually used for smaller sums of money that are withdrawn over a period of time. For instance, many homeowners might use a line of credit to manage debt or to renovate their home piece by piece over the course of a couple of years instead of all at one time.

By: Connie Barker

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