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Refinance Your Home Loan-Some Useful Advice (Page 1 of 2)
To say that hundreds of thousands of Americans are struggling to keep up with their mortgage payments in the midst of the current housing market crisis would not be an exaggeration by any means. Foreclosure statistics at present are nothing short of alarming, and families continue to lose their homes at a very saddening rate.
Should you find yourself in a similar position, burdened by the weight of a mortgage commitment that you are battling to cope with, one option which may well be worth your consideration is home loan refinancing. Home loan refinancing is not the ideal solution for everyone, but it can certainly result in circumstances that are easier to manage and maintain in a number of cases.
When is refinancing appropriate?-There are various situations in which refinancing your home loan is worthy of consideration. In cases where an adjustable-rate mortgage is in operation and the interest rate has reset to a higher rate than the initial low rate, it may be a good time to refinance. The good thing about adjustable-rate mortgages is that the interest rate can be tweaked over the loan term. That can be advantageous at times when rates are in decline. However, it is important to bear in mind that you may still be paying more each month in spite of this flexibility than you would be with a fixed-rate mortgage. It depends on what interest rates are doing at any given point in time.
Considering the cost factor-When seriously contemplating the refinancing of your home loan, it’s important to consider how long you realistically see yourself living in your home. Closing costs associated with mortgage refinancing can often run into the many thousands of dollars. You need to think about what period of time it would take for you to break even again.
For example, consider a situation where a 1% drop in the interest rate would lower your mortgage payment by one hundred dollars. That represents a significant saving for many people. However, if the closing costs associated with your loan refinancing add up to three thousand dollars, it means that it will take a period of 30 months before you recover the cost. This is less of an issue if you know that you will be living in your current home for many years to come. The converse is also true of course. If you feel that there’s a strong chance that you would be moving in the next 2-4 years, then that refinancing option begins to look less attractive.
The equity in your home-Another important factor to bear in mind is how much equity you have in your home at the time you are thinking about refinancing. Most lenders will not entertain the idea of refinancing if there is less than twenty percent equity in your home. While it’s true that having an equity amount below twenty percent does not necessarily disqualify you, it does mean that you will not receive the best rate possible.
Furthermore, if you’ve been living in your home for quite some time and have accumulated a significant amount of equity, you may well be able to save even more by refinancing an amount that is significantly smaller than the initial loan that you qualified for. At the end of the day, that means more money in your pocket at the end of the month.
Unsecured Personal Payday Loans Are Not a Long-Term Solution
Unsecured personal loans are sometimes called fast cash or payday loans. The good news is that anyone with a steady paycheck, even those earning minimum wage, can qualify for these types of cash advances. Pay day lending however, can be a very short and painful way out of a temporary situation.
The bad news with unsecured personal loans were payday loans is that you almost never can seem to catch up. A payday advance is extremely expensive! How expensive, you might ask? Some companies charge as much as 25% or more, every couple of weeks. This comes out to 650% for a year. But that’s not the worst of it…
Think about this:
A payday cash advance of $100 for two weeks, would cost $125. So if you pay the loan back in two weeks. You pay them the hundred dollars plus 25 dollars in interest.
So you would think that in four weeks, it would cost an it would cost you $150, right?
WRONG!
The way payday cash advance loans work is that they loan you $100, in two weeks it would cost you $125. But if you couldn’t pay the hundred and $25 in interest, they would simply give you a new loan to pay off the old one.
So for the next two weeks, you would have $125 loan and owe $31.25 in interest.
So a 100 loan, for one month would actually cost $156.25. Here’s a quick look at it just three months for a hundred all alone could cost.
Weeks w/Loan Amount Owed
$100.00
2 weeks $125.00
4 weeks $156.25
6 weeks $195.31
8 weeks $244.14
10 weeks $305.18
12 weeks $381.47
So after four weeks. The typical payday loan of 100 dollars would cost $156.25. After two months it would cost $244.14. And after just three short months. A cash advance of only $100, would cost you $381.47.
This figures out to 650% interest over one year! That’s not the annual percentage rate or APR, but just flat interest-rate.
The last problem with personal payday type loans is that most want access to your checking or savings account. They say this is to make it easier for you but it also allows them full access to your bank accounts. If there’s an error, you fight them about it all the while they take your money.
If however, you are in need of a fast cash loan and are able to pay it off on time, there are several programs that offer your first loan free of interest. I you need a one time short term unsecured personal loan, maybe one of these no interest one-use options are for you.
Remember though, the payday loan businesses will continue to contact you trying to get you to get back in debt. You must be able to ignore these types of marketing plans that would only end up hurting you long-term financial future. Just if you decide to use a payday loan, just make certain you have a plan to pay it back on time.