How Does a Fed Cut Affect Home Mortgage Rates?

Maybe you’ve been considering a refinance, and you’re waiting to move forward till the Fed takes action again. But be smart about waiting and watching. A Fed cut doesn’t directly affect long term rates (for instance a 30 year fixed mortgage), but it does impact long term mortgage rates. The problem is the impact might not have the result you’ve been waiting for.
Who is the Fed? Well, it’s really the Federal Reserve. And when the Fed cuts rates, it usually cuts the Fed Funds Rate, which is the rate banks lend each other money. However, when the Fed lowers the Fed Funds Rate, Prime Rate, the rate banks give their best customers, usually drops as well. Ok, that’s great. But what does that really mean to the average person on the street? It means that anything that has an interest rate tied to Prime is directly affected by the Feds’ rate cut. Typically, these are short term loans. For instance: a credit card or a Home Equity Line of Credit (HELOC). In general, these rates decline when the Fed lowers rates. On the flip side, a Fed rate cut means your savings will perhaps not yield as much interest and your CD (certificate of deposit) won’t be at such a great rate. So, it’s not all good.
Why aren’t mortgages directly affected? Because mortgage rates are typically longer term rates and are influenced by buyers and sellers in the bond market. Daily movements in the bond market cause mortgage rates to change. That’s why you might get a quote from a loan officer on Tuesday, and on Wednesday, your quoted interest rate has increased .125%. The Fed lowers rates to help stimulate the economy. Ultimately a healthy economy is good for the real estate market. Jesse Lehn, Senior Vice President for Mortgage Investors Group, believes,

How to Get a Low Rate Second Mortgage

You can improve your chances of qualifying for a low rate second mortgage by following a few simple steps. Before you apply for a loan, you should ensure that your credit history is clean, confirm you have enough equity to qualify, and determine which second mortgage is the best option for your needs and financial situation. Next you can shop for a low rate second mortgage lender and compare offers. With preparation, you may be able to close on your second home loan in as little as two weeks.

Confirm Your Credit History Is Clean

Even though you already own your home, prospective lenders will check your credit history to verify that you’re paying your current loan on time, haven’t recently taken on any large debts, and haven’t recently been delinquent on any debts or filed for bankruptcy.

Before applying for a low rate second mortgage, check your credit reports to make sure they don’t list any errors. If you have legitimate recent black marks, do what you can to correct them. Recent dings on your credit can result in a higher rate home equity loan. You should also check your credit score to see what rate you’re likely to qualify for.

Confirm Your Current Mortgage Balance and Home Value

When deciding how much money to borrow, you should first confirm that you and your primary lender agree on how much you still owe. If your numbers don’t match the banks, make sure all your payments have been processed properly.

You can use a variety of real estate websites to assess your home’s current market value. It may not be as much as you think if the market is on a downswing. A lower market value will limit the amount you can borrow against your equity. The combined balance of your first and second mortgages should never be more than 80% of your home’s value.

Determine Which Second Mortgage Option is Best

Before applying for a loan; decide what you plan to use the money for. Total up all the expected costs and add a little extra to cover unanticipated costs if you’re using the money for remodeling or college tuition, but not so much that you’re tempted to use the money for unrelated purchases. Remember that you are risking your home, so borrow wisely. Only borrow an amount you can afford to repay and only for items that will directly improve your home’s resale value, your financial situation, or your child’s or your future earning potential.

Once you’ve decided how much to borrow, you can decide whether a home equity loan

Or home equity line of credit is a better choice. A home equity loan lets you borrow a single lump sum and pay it back over time at a fixed rate. A home equity line of credit (HELOC) allows you to borrow smaller amounts when you need them and then pay them back over a period of time at a variable interest rate. If you’re consolidating debt or embarking on a small home remodeling project that will be completed quickly, then a lump-sum loan is preferable. If your remodeling project will take several months or you’ll need periodic college tuition payments, then a HELOC is a better choice.

Choose a Low Rate Second Mortgage Lender

Don’t automatically accept a loan from the first lender you find. Instead shop around on the Internet to determine what kind of second mortgage rate you can expect. You should approach two to three reputable lenders for estimates of your APR, fees, and other costs. When choosing your lender, compare all those factors and decide which is best. Once you’ve selected a lender and begun the application process, your preliminary work should help the process go smoothly and quickly.

For more articles and suggestions, visit http://www.bills.com/low-rate-second-mortgage/

Truth About Second Mortgage and HELOC: Are They One and the Same?

A lot of people often confuse second mortgage with home equity loan. While both are associated with each other, they have their own benefits. But distinguishing one from the other should not be difficult. A second mortgage is a type of home equity loan. Equity refers to the difference between the current appraised value of your home and the amount you have paid towards the first mortgage. The amount you can borrow on a second mortgage is usually based on the difference between the current value of your home and the remaining principal balance on your first mortgage. The second mortgage is an effective means of tapping the asset value of your home so that you can meet your financial needs and avoid acquiring high interest unsecured debt like the one offered by credit cards.Generally, one can get a second loan wherein the total loan-to-value ratio of your first and second loans equals 85 percent of your homes appraised value. On the other hand, there are lenders in almost all states that allow you to take out a second mortgage that equals to 125 percent of the appraised value of your home. Second mortgages usually have a fixed interest rate that runs.  Also, it is usually a 15- to 30-year loan. As with the initial loan, the rate of interest and points for a second mortgage will be based on credit history, home price, and the current interest rate. The second mortgage may have a higher interest rate, but the fees are typically lower. Furthermore, second mortgages are also used to pay out a fixed sum of money to be repaid on an appointed schedule. People who are in an emergency situation usually opt for a second mortgage. This is because when you get approved for such mortgage, you will receive a lump sum, which you can use for expenses like roof repairs and home renovations. You may also use the money from your second mortgage for expenses not entirely related to house expenditures, like school tuition, car repair, vacations, debt consolidation and other financial needs. Home equity loan is different. This is used to refer to a home equity line of credit (HELOC). A HELOC is often revolving and is similar to a credit card, wherein the interest is charged, and the amount you are allowed to borrow is based on your creditworthiness. Like the second mortgage, a HELOC may be used for any type of expense, but anything that is paid back above the interest owed will be returned to the account and can be used again when needed. Usually, home equity line of credit loan has a term of up to 15 years. If you sell your home before you have repaid the line of credit completely, you will then have to do it upon completing the sale. This feature is applicable to both the HELOC and the second mortgage. In determining the limit of your HELOC, lenders examine your homes appraised value and start calculations at 75 percent of that value. They then deduct the remaining balance owed on your mortgage. Your current financial needs will help distinguish the type of loan that is appropriate for you. For one-time expenses, you can opt for a fixed-rate second mortgage. But if you have a frequent need for extra money, a HELOC would be right for you.

Why the Lowest Mortgage Rate is Not Always The Best Rate For You

Many times I am contacted by mortgage clients asking about what my best mortgage rate is.  It is common to believe that everything is an apples vs. Apples comparison with regards to mortgage rates, and that the lowest rate is always the best deal.  However, this is often not the case.Borrowers often overlook the terms of the mortgage, or do not receive disclosure of items that are not attractive to an offer (particularly from Canadian banks).  Below are some of the situations where taking the lowest rate will often cost you money in the long run:-Many times the bank will not even approve you for the amount you need to buy the home you want.  However, there are other “A” mortgage lenders out there who will approve you and also give excellent rates.-I have also had clients who were with a bank who required that the money was taken from an account at their institution, which is not where they banked, and they found it very inconvenient to have to transfer money every month.-Your mortgage lender may offer you a low rate to get into the door, and then when it comes time to renew your mortgage provide you an offer that is significantly higher than the market is offering.  At that time it may be difficult for you to get an approval elsewhere and you could be stuck with their offer.-If you get a variable mortgage with the intention to lock in to a fixed mortgage rate at a later date, many bank lenders will only give you posted rates when you lock in, meaning your interest rate will be much higher.-Do you want mortgage life insurance coverage to protect yourself in case of death or disability? Many lenders including all the banks offer coverage that is strictly tied to their institution, so if you become sick during that coverage and try to move your mortgage, they will discontinue coverage and you will be paying much higher premiums to be re-insured elsewhere.-Home Equity Line of Credit (HELOC) mortgages are often reported on the credit bureau, particularly with the banks and credit unions.  It is generally much more favourable to have a HELOC mortgage that is not reporting on your credit bureau, as it is more favourable for your credit score.  This could save you money and allow you to borrow money easier in the future.-Sometimes a lender has a product that works with a strategy that is of benefit to you but may not offer the very lowest rate to get those benefits.  An example of this would be the TDMP mortgages, which is a structure to make your mortgage tax deductible in Canada, and can help to create a great deal more wealth than a lower rate may offer.Save Money on your Mortgage, Not Just on Your Mortgage RateThese are just a few examples of things that could cost you much more money than saving .1% on your rate will give you.   Keep this in mind next time you meet with your banker about your mortgage and often it is best to seek a second opinion from a mortgage broker who can give you helpful advice.

HELOC and Mortgage Rates in This Economy

A HELOC is a home equity line of credit. This is one way some people use to borrow money for large purchases such as their children’s college education or a large purchase that they would not otherwise use their credit card to purchase. Because this is a variable interest rate loan it will have some tie in with current mortgage rates.
It works like this. You apply for the home equity line of credit. Many things are taken into consideration like your credit score. But of course as the name implies the most important factor is how much equity you have in your home. Equity is the difference between what you owe on the property to the lender holding the note on the property and what the property is worth on the open market.
This is the amount you will apply for with a home equity loan. The collateral of course is your property. Keep in mind of the mortgage rates – if you fail to make the payments then the land will be foreclosed on. The first lender will get paid first and then the people who hold the note on the home equity loan.
Of course no one goes into such a loan expecting that to happen. But the long and the short of it is that people who are facing foreclosure because they defaulted on their home equity loan never planned to be in that position. The home equity loan works like a line of credit. You can borrow the agreed amount based on the equity in your home. You take this out as you need it and then you pay an interest rate on the amount you have taken out.
The interest rate you pay will be based on the prime market value at the time. This rate may be different than the current GIC rates, but it will be a variable interest rate. So you are taking a risk that the interest rates will stay low but they might shoot up also. One advantage this type of loan has over the basic credit card is that you can write off the interest on your income tax.
This is one reason some find it to their advantage to take out this type of loan verses using their credit cards. Some might be surprised to know that there was a time when people could deduct interest paid on credit cards from their income tax liability.
So if you are looking at a home equity line of credit you need to make sure you have a secure job. You definitely want to have at least six months of income liquid to pay your bills in case you lose your job or some other emergency occurs. You want to make sure you are counting the costs of such a loan. You will want to make sure the reason you are taking the loan is important enough to cover all the planning you will have to do.
And you have to be prepared for the worst. No one plans to go into foreclosure and lose their home. But remember when you take out any loan with your home as collateral you always have to be prepared for the worst case scenario.

Mortgage Rates

HELOC and Mortgage Rates in This EconomyFixed Rate Home Equity Loans, For Bad Credit »Mortgage Rates Q&A

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Home Equity Line of Credit USED for A Mortgage Reduction Strategies 11

The home equity line of credit (HELOC) and the traditional home equity loan are two entirely different things. Their difference can save you thousands of dollars and even slash 13 years from your mortgage.In essence, the traditional credit card and an American Express credit card are seen to be almost the same ” they ARE credit cards. How exactly are they different from each other?The difference is actually quite significant.A traditional credit card such as a Visa or MasterCard charges you a high interest rate but you’re allowed to pay only the minimum balance at the end of each month. With an American Express card on the other hand, you have to pay the balance in full at the end of each month otherwise there will be huge charges for the outstanding balance and interest.The American Express card will cater to your purchasing needs for 30 days but you need to pay off your balance as soon as it is due.So while credit cards seem to be just credit cards, they in fact serve two different purposes. If you do not plan your cash flow, you could be in trouble if you don’t make payments on your American Express card.The same is true with any HELOC and home equity loan account. When you do not know the difference between these two, you might end up paying thousands of dollars in extra interest payments. If you knew how to use it, you would actually be able to take 13 years off your mortgage balance.Lets begin.HELOC interest rates are variable. This line of credit can be secured through your home and you can consider this as your second mortgage.This means that the interest rate adjusts to the prime interest rate. Thus, if the latter increases, HELOC interest rates will also increase. So if your prime interest rate falls, you will get decreased HELOC interest rates as well. Depending on your present financial status, you will even be entitled to enjoy lower interest rates for HELOC which will be a few points lower than your prime rate. When you use a HELOC mortgage, interest is calculated based on the outstanding balance of your HELOC. So if you make payments during the month, the interest will be calculated every single day and is applied to your account. This system of calculating interest is called the variable method simply because the amount of your interest could increase or decrease daily.This makes the variable method completely helpful.You can pay off your HELOC and borrow from it anytime as long as you dont exceed the HELOC limit.Although the traditional home equity loan is quite similar to the HELOC, there are two characteristics that establish the difference.First, the home equity loan operates on a fixed time frame. You have to pay a fixed home equity loan interest per month and you will be paying a fixed interest rate. There are no fluctuations even when the prime interest rate changes. This mortgage will then be considered as a 30-year fixed loan account.The second difference with is once you borrow against it, you cannot borrow from the equity loan at any time. In order to draw funds from this equity loan you have to have sufficient equity in your home and refinance your home equity loan. The perfect time to use the traditional home equity loan is when you require lump sum payments up front and you plan to make small payments every single month. You can pay back both interest and pay extra towards principal. In all aspects, a traditional home equity loan is fixed. The interest-rate, the amount you borrow and the home equity loan payment term is fixed. You cannot change this and you’re expected to repay this mortgage over the life of the loan. The HELOC loan is variable. The interest rate as well as the amount you borrow can change over the repayment term of the loan.Each has its own significant advantages and disadvantages.The one significant advantage of the HELOC that no one talks about is that you can use it as a mortgage checking account. This means that you can deposit your paycheck in the HELOC, pay bills and make electronic bill payments every single month. As you can see this works just like a regular checking account.And heres another undisclosed fact.Do you know that by using the HELOC as a checking account, you can slash at least 13 years off your primary mortgage and save thousands of dollars? In fact, you will be able to get $63,000 worth of savings without spending more or changing your financial lifestyle.Because interest rates will vary and you will be able to withdraw and deposit money anytime, the HELOC is certainly one effective strategy that you can use in order to pay off your mortgage early and achieving a mortgage reduction strategy faster.To get all the latest tips, strategies, and tactics about mortgage reduction , be sure to visit us at mortgage reduction