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Home Equity Loans Theres Gold In That There House
...... payment at the end of the month is less than the minimum payment that was required on each card. Once you have done this, get out your scissors and cut up all of the cards except one bank credit card for emergencies. Remember the plan!
Balloon Loan
This type of loan can be difficult. The first few payments are low with low interest rates. The last payment however is exactly as the name describes; a balloon. It is a very large payment at the end of the repayment period. It is essential to stick to your financial plan because in this case you may need another loan to pay off the balloon amount.
Interest Rate
The periodic fee charged for a loan. This is expressed as a percentage point and some financial institutions are offering approximately 5.6% on a thirty year fixed $150,000.00 home equity loan. The lower the interest rate the better the deal, just make sure you arent negotiating a balloon loan though.
Transaction Fee
Unfortunately no matter how good the deal on the loan you get, there is no free ride. In the business of credit management someone has to make money in order for home equity loans to exist. There will be some type of transaction fee built into the loan application. Lenders have costs and these costs are passed along to the consumer as a transaction fee. Depending on the loan company you decide to use, a transaction fee can be lower or higher, so make sure you shop around.
FICO Score
A sliding scale based on a point score created by the Fair Isaac Corporation. This score is used to determine a borrowers behavior and potential risk factor.
Credit Rating
Using the point system based on the FICO score, a credit rating can be anywhere from poor to excellent. With a good to excellent FICO score, a persons credit rating can determine how much money can be borrowed and what interest rate will be charged.
Re-Financing - Finding A Gold Mine In Your Home
Many people consider their home to be their castle but few consider that they could be living on a potential gold mine. If you have lived in your house for 10 years and have been making payments, especially bi-monthly payments, you have built up a considerable amount of equity. Pair that with a good FICO score and there is indeed gold in that there house.
Whats Your Fico?
Mortgage Brokers use a FICO scale to determine the amount of money you can borrow against your home and at what interest rate you can borrow this money. This number is between 300 850 points and showcases a persons credit history.
This scale was developed in California by the Fair Isaac Corporation, a global decision management company. A credit rating of 700 points is considered good and based on a $150,000.00 fixed thirty year mortgage, your rate of interest would be 5.7 percent VS 9.3% if your FICO score was below 600 points. Having a high FICO entitles you to borrow more money at a better rate.
Improving Your Fico
Youve taken the test, (which is available at most lenders websites), and your score is not as stellar as you had hopped it would be. There are a couple of ways to improve this score:
1. Pay all your bills on time.
2. Keep a small balance on one credit card to keep it active.
The FICO website gives you all the who, what, where, when and why of the two above suggestions. You can read about the rationale in great detail at that site.
Buyers Beware
With todays credit options and a good credit rating, you can borrow a lot of money against your home. This ability if not used responsibly and with a good solid financial plan can be ruinous. Some borrowers have gotten over their head and ultimately had to file for bankruptcy. So beware of potential risks.
Home Equity Loans - A Golden Opportunity
As you can see, a home equity loan is a great way to improve your living space, go on a holiday, plan for retirement or pay off some debts. With the right combination of a good FICO score and proper planning, there really is gold in that there house.
2005 http://www.home-loans-101.com
About the Author
Lillian Fuller is a talented and successful freelance writer for hire providing tips and advice for consumers about personal finances including mortgages, home equity loans, credit reports, and more. Her numerous articles offer valuable insight and informative views on many different topics.
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