How to Avoid Paying Mortgage Insurance

In today's world, a borrower should not be paying mortgage insurance (PMI) on their home mortgage with a few exceptions such as an FHA loan. Mortgage Insurance is a thing of the past.

Let’s first explain what mortgage insurance is. A lender requires a borrower to pay mortgage insurance if the loan amount is greater than 80% of the value of the home on a single loan. The reason this is the case is the loan is not sellable in the secondary financial markets as it does not meet certain guidelines. As a result, the lender makes you pay for their insurance in the event you default on the loan. The insurance will cover the lender for the balance of the loan plus expenses. The problem for borrowers is that mortgage insurance is expensive…..sometimes $100 or more per month.

Fortunately in today’s mortgage world, we have legal common ways to avoid paying mortgage insurance in most cases. Let’s say you are a first time home buyer and only have 5% to put down on a condo or house. A mortgage professional should do two loans for you. A First Mortgage Loan in the amount of 80% of the value of your home and then a Second Mortgage for the remaining 15% of the loan balance. This would be called an 80/15/5 (80% 1st Loan, 15% 2nd Loan, 5% Down)

The question you ask is why? Well, by doing two loans your payment every month will be cheaper so take a look at this example to see why.

For example, let's say you had 10% to put down, we would do a 1st loan at 80% and then a 2nd loan at 10%. The 2nd loan will always carry a higher interest rate, but when you break the numbers down, it's cheaper from a payment point of view to have the two loans.

Here is a $180,000 loan at 6% fixed rate for 30 years.

Option 1 with PMI
Single Loan 90%
P&I $1,079
PMI $ 85
Payment $1,164

Option 2 with 2nd note and no PMI
Two Loans 80% / 10%
P&I 1st Loan $971
P&I 2nd Loan $126
Payment $1,097

In this example, the borrower will save $67 per month by not paying Mortgage Insurance (PMI)

Depending on the type of loan, the Second Mortgage often times can have an interest only option where your payment would even be less on a monthly basis. The downside to this solution is your not paying down the principle on your 2nd mortgage, however if you’re a first time home buyer with limited cash flow, this would be a viable solution for you. A mortgage professional should lay out the various options for you in writing so you can make an educated decision as to the best solution for you.

If your currently in a loan with mortgage insurance, then you need to speak with a mortgage professional immediately so your not wasting money on a monthly basis. Your mortgage professional should provide an analysis to determine if doing the transaction is feasible for you with consideration of some closing costs.

(Per the FHA, all FHA loans require mortgage insurnace if the loan is 80% or greater. the mortage insurance will remain in effect for a period of 5 years. If after the 5 years and your loan balance has fallen below 78% of the value of your home, you will be eligable to stop paying mortgage insurance.

Mortgage Guide

You should always compare mortgage rates to find the best mortgage to meet your needs before refinancing. Comparison helps you identify the best lender. Compare Mortage rates by contacting at least two different mortgage lenders.

It will take some research and comparison in order to find both the best lender and the best in first time home buyer loans. Also, Calculate whether a fixed rate mortgage or an adjustable rate mortgage will benefit you in the short and long-term.

Record numbers of homeowners are jumping on the refinancing bandwagon in an effort to lower their mortgage interest rates. There are several tools that help you determine if it's worth chasing a low mortgage and refinance your mortgage, it’s best to mortgage rate compare before signing on the dotted line. Further, if you have poor credit, you’ll be required to pay a higher rate of interest than those who have a good credit rating.

Another important question is, Should you buy or rent When you get that urge to buy a house, the first thing to do is step back and ask whether it makes more sense to keep renting for a while. If you still want to buy, you need to figure out how much house you can afford.

Industry experts claim that homeowners are refinancing in record numbers. While this is all well and good for some it may not be for others. It’s true with a good refinancing package you can potentially shave hundreds of dollars off your existing mortgage but it isn’t for everyone.

When you apply for a loan, you and the lender will need accurate estimates of how much you will pay every month for property taxes and homeowners insurance. In the next chapter, we will describe these and other key elements of the monthly mortgage payment.

Further, when you buy a home with a reverse mortgage it is not considered taxable income and does not affect Social Security or Medicare benefits.

There are many factors that come into play when you consider the ultimate amount you may be able to save by refinancing. Such factors include whether you will be selling your home in the near future and what if any effects there will be on your taxes.

All the more reason to mortgage rate compare and gather information from various lenders. Being a knowledgeable homeowner is vital. Just knowing your interest rate and your monthly payment costs is not enough to win at the refinancing game. A wise homeowner will always mortgage rate compare and gather information about the same loan amount, loan term and type of loan so comparisons are easily made.

Look out for your own best interests and don’t feel pressured to stay with the lender of your original mortgage if their terms aren’t in your best interest. Ask the right questions, compare mortgage rates between lenders and negotiate the best refinancing deal you can.

Debt Consolidation

Debt is just as a quicksand, in which getting in is easier than getting out of it. Once the person is in the trap of debts,he gets in deeper and deeper. Then he only finds his life boat in the form of debt consolidation.

Debt consolidation refers to settlement of the debts of a person through a single manageable loan. In short, we can say that debt consolidation provides a help in avoiding the bankruptcy. It puts an end to the harassing calls made by the creditors regarding the payment of pending bills and debts. It also lowers the monthly payment which in turn enables the person to save a certain sum of money.

Debt consolidation is like a doctor to the debt problem. And it offers a fresh start to the debtor and also helps in attaining a more healthy financial position.

Whatever your debt problem may be, whether the personal debts or business debts or your credit card debts, you are only required to avail any debt management plan or program in order to get rid of your debts. Before going for any debt consolidation program the person must take advice from the professional credit counsellor. The credit cousellor will listen and analyse your problem. And then he will suggest you the best solution to your problem; that is, which debt management program to avail. Basically, these debt management programs try to reduce your monthly payments by way of reducing or freezing the interest on the loan. This will in turn help the person to eliminate the debts within few months.

A person can consolidate his debts by three ways:- debt consolidation loan, debt consolidation mortgage and debt consolidation remortgage. However, there are other ways also to consolidate the debts, such as Individual Voluntary Arrangements (IVA’s).but these are considered as the bad credit for a person.

A debt consolidation loan can be reffered as managing the debts by consolidating them. It lets you deal wth the single lender rather than dealing with the numerous creditors. On the other hand, debt consolidation mortgage refers to getting a loan on the basis of the equity in the house and paying back to its creditors against the debts. And, debt remortgage can be termed as extention of mortgage. It is the term of mortage which is usually negotiated to include the increase in the amount borrowed.

Above mentioned three ways of consolidating the debts do not necessarily mean that they suits everyone. They are merely an option for solving the debt problem. And it is upto the debtor which way he chooses to consolidate his debts. Debtors must choose the alternative which suits him the best, with regard to his financial situation.

5 Principles for Debt Management

Introduction

Debt consolidation and refinancing have become thriving industries in America these days. American personal debt is at the highest rate we've seen. Creditors are more and more willing to give out credit cards, or let people easily qualify for home equity loans so they can refinance or consolidate debt. Not that refinancing is bad, but often times, we feel that since we've reduced our interest rates, we can afford "a little bit extra" credit as a reward.

BusinessWeek says that total household debt in the US was more than 100% of our disposable annual income last year. The average person has more than $8000 in credit card debt.

The bottom line is that our personal debt is growing at an alarming rate. You can now charge your fast food meals at many restaurants, paying interest for years on something you consumed in one sitting. Many people have taken steps to address their debt problems, including consolidating debt to lower interest rate cards, or to home equity loans, or at worst case the dreaded "B" word, Bankruptcy.

5 Principles of Debt Management

1. Create an accurate assessment of your debt situation.
Make a list, chart or whatever you're most comfortable with, of all your debts. Be sure and include the amounts, interest rates, and expirations dates (especially on any no-interest for ## days type loans). Be sure and note any old accounts that you've got "laying around", such as that department store credit account that you opened to get the 15% discount. You can now get a free credit report online. You should make sure that you've got a credit report and FICO score from each of the 3 national credit bureaus: Experian, Equifax, and TransUnion. The FTC advises monitoring your CREDIT REPORT activity ON ALL 3 BUREAUS. Order your 3-bureau report from CreditReporting.com today. If you've got bad credit, paying down your debts is of utmost importance!! Click here if you need help understanding your credit score. Depending how bad your score is, you may also consider additional measures to repair your credit.

2. Make a budget and stick to it!
Making a budget helps keep from increasing your debt, while you're trying to pay it down. Be specific and detailed in your budgeting. Except for emergencies, you should only be spending what is accounted for in your budget. Some people have found it helpful to keep a 30 day log of their spending. Carry a little notebook, or some index cards with you, and write down everything you spend each day. You'll probably be amazed at how much money you spend on things you want, and don't really need. The smallest things, such as that $3 cup of coffee every day, can slowly eat away at your finances. This will help keep you from getting further in debt. Your budget should define how much money you'll send to each of your creditors monthly and how much you need for bills, and how much is left for discretionary spending. Try limiting your discretionary spending to things you can buy with "pocket cash". This may be hardest thing you've ever done, but you won't get further in debt if you only spend what you have.

3. Pay off the debts one by one.
Maintain minimum payments to the rest of the debts, but pick the debt with the highest interest rate, and send extra payments to pay it off. There is a proven psycological benefit to being able to take a debt off of your list.

4. Consider debt consolidation or debt restructuring and possibly refinancing your home mortage.
Lower your credit card debt by 70% by consolidating. With interest rates down, it also may be time to refinance your home mortgage loan and cut your monthly payment. You can get free mortgage loan quotes at LowCostLending. When you refinance, make sure closing costs and other fees don't outweigh the savings in your monthly payment. Another option is to get a Home Equity Loan. Home equity loans are good because they allow you to deduct the interest on your income taxes. Remember though, new credit is not a license to incur new or more debts. Once you've transferred a balance by consolidating, or refinancing, don't add more charges to the old account. If you've got a lot of open accounts, you may want to close some of them, but you shouldn't necessarily always cancel the old account. Having a good payment history with a few existing accounts can be better for your credit record than many cancelled and new accounts.

5. If necessary, get help.
You may choose a credit counseling service, or debt counseling and debt help service to help with each step of your debt solution. Credit counselors can add accountability to your debt solution, and also serve as a source of encouragement. They are used to dealing with people with bad credit or poor credit, and can help you create a custom debt solution. They can suggest money lenders that might be more willing to make a loan to someone with a lower credit rating. Once you start reducing your debts without incurring new ones, you'll start to see your credit score rise.

Alternative Mortage Financing

There are many reasons why a person would choose to go with an alternative mortgage financing plan rather than the traditional ones. Perhaps he or she is applying for a loan with very bad credit or cannot afford the 20 percent down payment required for traditional home loans.

Options

If, when applying for a mortgage loan, you cannot pay the required 20 percent down payment, you will need to pay for private mortgage insurance. This is to protect the lender in case the borrower defaults on the mortgage. This cost can, however, add up in the long run, as well as increase your overall monthly mortgage payments.

This private mortgage insurance fee is not easy to remove, but not impossible. One option for you is to refinance your loan and pay off your original mortgage using the equity in your home as security for your second mortgage. The problem with this option is the fact that second mortgage interest rates are generally one to two percent higher than the first mortgages. However, depending on how much you will be borrowing and the length of your new loan, it might still be less than the amount you will pay with the private mortgage insurance.

Another problem with this option is the fact that in order to qualify for a second mortgage without an insanely high interest rate, you will generally need to have a FICO score of at least 680. A score any lower than that will cause you to be charged with a higher interest rate than you would probably like.

Buying a home is a very important step in a person's life that requires thorough research and a lot of thought. You will need to look at all of your options before signing a contract that will commit you to a type of loan that will last for a long time.

What Kind Of Loan Do You Need?

At some stage in almost every ones life they ask themselves, what kind of loan should I get? It's true that this subject gets less attention than it deserves because it seems that nearly every one's in a hurry to get the money and move on to the higher priority which is whatever they wanted the loan for in the first instance. Let's start with this.

How much do you know about loans? This article intends to briefly describe the most important types of loans, so that you can get a global view over this issue.

The process of lending goes like this: the borrower receives an amount of money which he pays back to the lender within a fixed period of time. The cost of the service is referred to as interest rate. Loans may be secured or unsecured, with periods of time ranging from a week to even more than 20 years, and with annual interest rates of one up to three digit percents.

SECURED LOANS

Mortgage

A mortgage is a common type of loan generally used in purchasing properties. If you want to purchase residential or commercial real estate and you cannot afford to pay the full value immediately (and this happens in most of the cases), you can arrange a mortgage. You lend money and purchase the property and the financial institution is given security by the title of the house until you pay off in full.

Home equity loans

By using the equity in your home, you can receive a significant amount of money that you have to repay over a fixed period at a low interest rate. If you fail to repay, you may lose your home. However, this is a popular source of finance.

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Car loans

You can take out this kind of loan if you want to purchase either a new or a used car. The loan is secured by the car itself. The loan period is shorter than mortgages , as it corresponds to the useful life of the car.

UNSECURED LOANS

Credit card debt

The name of this type of loan comes from the small card issued to the user of the credit card system.You can pay those who accept credit cards without exceeding a preestablished credit limit. Basically, you borrow money from the issuer. With every purchase made, you agree to pay that amount of money plus an established interest.

The difference between a credit card and a debit card is that the former does not remove money from your account at each transaction. Every month you receive a statement indicating the amount owed for each purchase and the total one. You must pay at least a part of the bill by a due date. The interest charged by the credit issuer has a much higher rate than the ones charged in many other types of loans.

Personal loans

The most popular personal loans are the payday loans. You can borrow from $100 up to $1000 for a short period of time (regularly two weeks) and at a very high interest rate (you pay something between $10 and $20 for each $100 borrowed). If you can’t pay back at the established payday date, you can pay the finance charge again and roll the loan for another two weeks. For instance, if you borrow $400 for a two-cycle payday loan period (meaning a month, usually) and the finance charge is $15 you get to pay back a total amount of $520.

Bank overdrafts

You qualify for this type of loan if you have a bank account in good condition.When the withdrawals from your bank account exceed the balance, the account gets a negative balance and it means that your provider is offering you credit. In case you have a prior agreement with the provider and you have an established overdraft limit, any withdrawals within that limit are charged at an agreed rate. Otherwise, the interest rate might be much higher.

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Credit facilities or lines of credit

A line of credit is a flexible way to get extra funds for expenses such as house repairs, vacations, or even to purchase an object you desire but don’t have enough money for. In order to qualify for this type of loan you must have a “clean” credit history and a fixed income. The total amount of money you can make use of is established from the beginning and it depends on your income.

Corporate bonds

A bond is a loan in the form of a security. The issuer (the borrower) owes the lender (the bond holder) a debt and he must repay the principal and the interest (the coupon) within a fixed period of time. This fixed term is also called maturity and it is usually longer than one year. The bond issue might contain other stipulations too.

When you consider getting a certain type of loan, you must be very cautious regarding abuses. You must read the contract carefully, paying attention to each detail and make sure you understand all the terms. Otherwise you may find yourself in an awkward position relating to the loan by not being able to repay it.

Second Mortgage Debt Consolidation Loans For All Credit Types

Contrary to popular belief, not all consumers with debt are careless. Debt is an insidious phenomena. Even people, who manage their finances with care can start out with a $100 credit card bill and watch it grow to $10,000 in a few years later. Debt goes from "negligible" to "cause for concern" to "everyday stress factor" very quickly.

The precise point in time, when a manageable debt load becomes unmanageable is when you can only afford the minimum monthly balance or when your next month's bill is consistently higher than your current month's bill.

The Federal Trade Commission (FTC) agrees that debt consolidation can be a good resource for consumers struggling with debt. The most important aspect of debt consolidation is to realize that consolidating your debts does not make your debts vanish, rather, they make your debts manageable and payable.

Homeowneres can take advantage of their home equity to consolidate debts, regardless of credit history. Whether your credit score is 500, 600 or 720 - you can get a loan by doing your research.

You have two options when refinancing your home.

Option #1: First mortgage refinance debt consolidation loan. This option allows you to refinance your existing home loan and take cash out. It works as follows. Let's assume that you own a home with an appraised value of $200,000. You still owe $150,000 on your home loan. This means that you have $50,000 worth of equity in your home. You can refinance your existing home loan to take out $50,000. You can now use the $50,000 to pay off all your creditors. Your new mortage loan amount would be $200,000. You have now replaced your credit card bills, student loans, automobile loans, etc with one mortgage payment. Instead of paying Visa $500, Mastercard $250, Student loan $250, Sears $350, car dealership $425, etc - you will now have to pay only your mortgage company.

Option #2: Second mortgage refinance debt consolidation loan. Instead of refinancing your first mortgage, you can choose to take out a home equity loan or home equity line of credit (HELOC). The loan works the same way as option 1, except in this case you will have two loans. Your original loan of $150,000 and a second loan for $50,000. This means that you will need to make a payment towards both loans but you get rid off all your various credit card, auto loan and student loan creditors.

Tips for finding good mortgage refinance debt consolidation loan products, whether you have good credit or bad credit:

1. Shop around for the best loan you can find. The internet makes it extremely easy to complete one form and get multiple offers on your loan request. Take advantage of this resource.

2. Find a good interest rate. The lower the interest rate, the more money you apply towards your principal balance.

3. Get a loan type that is suitable for your situation. Get a fixed loan, if you plan to remain in your home for a long time. Consider an adjustable rate mortgage (ARM), if your home is a temporary abode. Beware of balloon payments with adjustable rate mortages.

4. Read your loan terms and understand stipulations such as pre-payment penalities, balloon payments, etc.