Discover your Steps to Freedom here! Using property investing techniques along with financing methods that benefit you, you can gain financial freedom in your life.
A line of credit is a type of loan, where the bank determines a limit amount. It differs from a normal loan in that it allows you the borrower to use the money available in the line of credit (LOC) at any time and then repay the amount outstanding at the your discretion.
Home Equity Line of Credit
Often the first form of this type of loan that a property investor discovers is the home equity line of credit. A home equity line of credit is sometimes referred to as a HELOC.
This is where the lending institution vvalues your home and uses the difference between the current value and the amount you owe on your home to calculate how much they will make available to you based on the equity you have in your home.
For example if you have a home valued at $500,000 and you owe $200,000 on it, the equity you have available would be $300,000. Your lending institution will then agree to loan you up to a limit amount determined by their lending criteria.
Why Would You Want One?
The first and most compelling reason why you would want to have and use a line of credit is the freedom and flexibility it gives you.
A conventional loan is linked to a specific purpose.
With a line of credit the lender has agreed to loan you a certain amount of money, but you are free to use that money for any purpose you decide, and you have the flexibility to draw upon your available balance at a time that suits you best.
You can use "draw downs" to fund the deposit and purchase costs for the purchase of property to meet a temporary shortfall in cashflow for funding the monthly payments on your property loans or to fund a tax free life style that the increasing values of your property portfolio will enable you to live.
Many people are talking about a home equity loan, at work, weekends and even at the dinner table. Why is it the flavor of the month and what should you know about a home equity loan to ensure you stay out of strife if you decide to enter this realm.
Owning your home is a valuable asset for anyone in a lifetime. If you agree to a home equity loan, you are in fact putting this great asset at risk. Home equity loans are appealing due to the low interest rates and (in some cases) the tax deductibility of interest, but they also represent a risky business.
It sometimes has to be faced, if things don’t work out. Consider a significant expense and not to having the necessary cash to cover it. Examples of such expenses are medical bills, major house repairs or a child’s college education. A home equity loan could be the solution to your financial problems, at least for a short term. By using the equity you’ve built in your home over time you can borrow a significant amount of money. You have to repay the amount borrowed plus a (usually) low interest over a fixed period of time. If you fail to do this, you may lose your house.
Usually, in order to pay off the entire loan until the fixed time, you are required to make equal monthly payments. The lenders are obliged to disclose all important facts of their home equity plan, all terms and costs, such as the APR, different charges, and payment terms. After you have received this information, lenders do not normally charge any other fee that has not been specified in the plan. When you take on a home equity loan, you have normally had a few days from the day the account was opened to cancel it.
There are some basic although important things you should consider when you’re considering a home equity loan, in order to avoid a life changing mistake sometimes.
Firstly, if you have money problems, you must consider other options too, before using the equity in your home. Talk to your creditors or contact a budget counseling organization. A plan that would consolidate or reduce your payments might be enough to get you out-of-trouble. Also ask the opinion of someone other than the lender offering the home equity loan. someone you trust and who is reasonably knowledgeable.
If you decide a home equity loan is what you want, you should research the offers of several lenders, including banks or a credit union.
There are many lenders who make use of abusive lending practices and you must be aware of these practices if you want to minimize your risks. Here are some scenarios of such practices.
• Equity stripping. You have built up equity in your home but you don’t have much income coming each month and you need money. A lender encourages you to make a home equity loan, even if you explain that your income is not enough to keep up with it. Of course, the lender doesn’t care if you are not able to pay, he has nothing to lose, on the contrary, he wins a lot. If you are not cerebral enough to get a realistic view of things and let yourself be easily persuaded you will probably lose your home.
• The balloon payment. You’ve already made a home equity loan and, fail to pay the mortgages and you’re very close to losing your home. Another lender offers to save you by refinancing and lowering your monthly payment. You have to be very attentive regarding the loan terms. The reason why the payments are lower may be that he asks you to repay only the interest rate each month. At the end of the term, you may find you still have to pay the entire amount that you borrowed. This sum is called a balloon payment.
• The home improvement loan. A contractor offers to remodel your kitchen, or install a new roof at a low price. You explain you can’t afford this, but he offers to arrange finance through a lender he knows. You agree and he begins work. At some point, you are being asked to sign a lot of papers without having enough time to read them and you sign them. Later, you realize you’ve signed a home equity loan, and even one with aberrant terms and interest rates.
By using the equity in your home, you can benefit by receiving a significant fixed amount of money, repayable over a fixed period, available for any kind of use and at a low interest rate. You may also be allowed to deduct the interest, under the tax law. At a first glance, the home equity loan sounds appealing. But, on the other hand, if you fail to repay, for one reason or another, you may lose your home. Bottom line is that a home equity loan is a good thing if managed and used carefully. If you are considering a home equity loan, you should carefully balance costs vs. benefits, before charging ahead.
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Did you know that you're being deceived? Right now, everywhere. On TV. In the newspaper. On the radio. In magazines. You're getting the same message over and over again: "buy now, pay later"; "consolidate your debt into one easy monthly payment"; "get a secure line of credit". Or the perennial favorite, "don't worry, it's good debt".
The truth is, there is no such thing as good debt. Debt is debt. It's money you owe someone, money that needs to be paid back at some point in the future. "Good debt" is a misnomer. There's better debt, sure, because there's also really bad debt. But debt is never good. Not really.
We Live In A Debt-Ridden Society
We're encouraged to buy things on credit all the time. Why? Because it's a profitable business for lenders. They're not doing it out of the goodness of their hearts. They're in it to make money, and their target is you.
Of course, it's hard to live entirely without debt. To buy a home these days you almost always need some kind of mortgage, this is true -- few people can afford a house outright, especially at the beginning of their careers and families. But you don't have to be in debt for the rest of your life. A mortgage is meant to be a temporary debt, one backed by the (normally) stable value of the property you purchased with it. It should be for a reasonable, affordable amount that can be paid back within 10 to 20 years of the purchase. And you should have some of your own equity in the house right from the start. But that's not what people do anymore. They get mortgages for 100% of the appraised value of the house. Worse yet, they get interest-only mortgages that leave the principal -- the amount you borrowed -- untouched. Is it no wonder that these people eventually find themselves drowning in debt?
It Goes Beyond Mortgages
But it goes beyond mortgages. A debt mentality pervades our society. Once you have equity in your home, for example, the banks urge you to "free up" the money with home equityloans and secured credit lines. Use the money to better your life, they say, by renovating the house, taking that big vacation you've always wanted, or -- here it comes -- consolidating your other debt.
Your Other Debt?
Your other debt? Sure. You think the only debt people have is mortgage debt? No, they have plenty of other debt. It's a banker's wet dream out there today... Credit lines. Cash advances. Overdraft coverage. Automatic credit card limit increases. Pay nothing now. If you're not careful, you can build up a lot of debt very quickly.
That's The Problem
And that's the problem: those debts have to be repaid sometime. Rack up too much debt and soon you'll be worrying about the monthly payments. Your peace of mind will suffer, and possibly other things like your marriage and your job. Is that the kind of price you're willing to pay in order to have things you couldn't otherwise afford?
The Solution
The solution isn't debt relief or debt consolidation. It's debt avoidance. You should do everything in your power to avoid debt. Because too much debt will tear you down, physically and mentally.
What if you already have a lot of debt? There are things you can do. Yes, you can consider consolidating the debt, but that will only work if you're able to stop accumulating more debt once your current payments are lowered. Otherwise, you need to attack your debt using a step-by-step plan that involves paying off the highest-interest debt as quickly as possible, then using the money you free from that debt payment to pay the next-highest debt, and so on. It's the snowball debt reduction method, and it works.
The key to all of this is willpower. Make the commitment today to be debt free as soon as possible. The peace of mind it gives you will make it all worthwhile in the end.
Knowing how a home equity loan works will help you determine whether a fixed-rate loan or a home equity line of credit is the best for your financial situation. With a little research you can get the best type of loan available.
Home equity loans are sometimes referred to as home improvement loans and equity loans. They are generally used for large purchased.
4 Important Aspects To Consider Before You Apply
When you apply for a home equity loan, it is wise to know how a home equity loan works in order for you not to put your home at risk. The difference will now be the amount of equity you have in your home, or the home equity. The lender will now use the value of your home equity to determine the potential amount you can borrow for a home equity loan.
Normally, a lender will base your allowable home equity loan on a percentage of your home’s equity. Traditional lenders will limit your home equity loan to 80 % of your home equity. However, more aggressive lenders allow borrowers a home equity loan which is more than the home’s appraised value.
If you are considering getting a home equity loan, you can either get a fixed rate loan or a home equity line of credit. Lenders usually base the rates on their home equity loans on their Prime Interest Rate, the interest rate they charge their most qualified clients or borrowers.
Lenders will then either subtract of add a percentage, usually 1-2 %, from their Prime Rate to determine the interest rate you will be charged. This percentage will, therefore, depend on your credit and the amount of money you wish to borrow.
Researching The Best Home Equity Loan Companies
The best way to get a good home equity loan deal is by choosing the right lender among lots and lots of home equity loan companies. There are lots of home equity loan companies to choose from.
Some home equity loan companies have variable interest rates. These interest rates are adjusted by the home equity loan companies depending on the interest rates changes in the market. Some home equity loan companies offers home equity loan deals that has flexible terms but always make sure that you understand fully what they are offering. Compare the rates of the home equity loan companies that have the same home equity loan terms.
Some home equity loan companies offer hybrid loans. A hybrid loan is another type of home equity loan that offers a fixed interest rate. Hybrid loans often have lower interest rates than most 15 to 30 year fixed rate loans. This type of home equity loan is ideal for a borrower who wants to have short term loans. These types of home equity loans have no prepayment fees.
Home equity loan companies are constantly looking for homeowners who want to refinance their home equity. The interest rates that these home equity loan companies offer are very low. If you want to shop for a home equity loan, there are lots of home equity loan companies found on the internet.
Several websites offer their services to homeowners who are looking for an ideal home equity loan deal. You can get many loan quotes within just a few hours in most cases.
Dean Shainin is a consultant specializing in home loans, strategies for loan financing, home equity loans, and consolidation loan information. To see a list of recommended loan companies, tools, resources, free quotes and articles, visit this site:Best Home Mortgage Loans
Get free valuable online tips for saving money from his: Best Home Equity Loans website.
Knowing how a home equity loan works will help you determine whether a fixed-rate loan or a home equity line of credit is the best for your financial situation. With a little research you can get the best type of loan available
Home equity loans are sometimes referred to as home improvement loans and equity loans. They are generally used for large purchased.
4 Important Aspects To Consider Before You Apply
When you apply for a home equity loan, it is wise to know how a home equity loan works in order for you not to put your home at risk. The difference will now be the amount of equity you have in your home, or the home equity. The lender will now use the value of your home equity to determine the potential amount you can borrow for a home equity loan.
Normally, a lender will base your allowable home equity loan on a percentage of your home’s equity. Traditional lenders will limit your home equity loan to 80 % of your home equity. However, more aggressive lenders allow borrowers a home equity loan which is more than the home’s appraised value.
If you are considering getting a home equity loan, you can either get a fixed rate loan or a home equity line of credit. Lenders usually base the rates on their home equity loans on their Prime Interest Rate, the interest rate they charge their most qualified clients or borrowers.
Lenders will then either subtract of add a percentage, usually 1-2 %, from their Prime Rate to determine the interest rate you will be charged. This percentage will, therefore, depend on your credit and the amount of money you wish to borrow.
Researching The Best Home Equity Loan Companies
The best way to get a good home equity loan deal is by choosing the right lender among lots and lots of home equity loan companies. There are lots of home equity loan companies to choose from.
Some home equity loan companies have variable interest rates. These interest rates are adjusted by the home equity loan companies depending on the interest rates changes in the market. Some home equity loan companies offers home equity loan deals that has flexible terms but always make sure that you understand fully what they are offering. Compare the rates of the home equity loan companies that have the same home equity loan terms.
Some home equity loan companies offer hybrid loans. A hybrid loan is another type of home equity loan that offers a fixed interest rate. Hybrid loans often have lower interest rates than most 15 to 30 year fixed rate loans. This type of home equity loan is ideal for a borrower who wants to have short term loans. These types of home equity loans have no prepayment fees.
Home equity loan companies are constantly looking for homeowners who want to refinance their home equity. The interest rates that these home equity loan companies offer are very low. If you want to shop for a home equity loan, there are lots of home equity loan companies found on the internet.
Several websites offer their services to homeowners who are looking for an ideal home equity loan deal. You can get many loan quotes within just a few hours in most cases.
Dean Shainin is a consultant specializing in home loans, strategies for loan financing, home equity loans, and consolidation loan information. To see a list of recommended loan companies, tools, resources, free quotes and articles, visit this site:Best Home Mortgage Loans
Get free valuable online tips for saving money from his: Best Home Equity Loans website.
This Simple Technique Can Help You Get Your First Investment Property
And Then The Next And The Next...
Refinancing Real Estate Investment is one of the best ways to begin real estate investing and keep progressing in your freedom steps with property investing.
If you are just starting out one of the best ways to get the money you need is to use the existing equity you have in your home. The best thing about refinancing real estate investment is that it allows you to get started without having to find out of pocket money for the property deposit and purchase costs.
You do this by first refinancing your home.
There are two ways you can go about refinancing real estate investment property:
Use your home or other property to secure a loan for the next property.
This is where you make a specific proposal to purchase a piece of real estate investment property using your home to secure the difference between the purchase price and the banks LVR (loan to value ratio) policy.
This will end up in your home being cross collateralized with the associated future difficulties that can lead to.
Request your bank of choice to set you up a home equity Line of Credit.
This is where the bank agrees to loan you any amount up to the limit determined by the available equity ou have in your home.
When refinancing real estate investment a cross colllateralized loan is the easiest to set up. It is probably the avenue that the bank or financial institution will assume you want to do it, but if you want to build a substantial real estate based portfolio, then request a line of credit be set up for you.
Then you will be able to access the money with ease and at your convenience.
For other advantages of a home equity line of credit or a line of credit generally refer to the HELOC page:
Lay the Foundations for Real Estate Investing Success
For the first investment property or maybe even the first two peices of investment real estate, a cross colllateralized loan is the easiest to set up. It is probably the avenue that the bank or financial institution will assume you want to do it, but if you want to build a substantial real estate based portfolio, then request a line of credit be set up for you.
Then you will be able to access the money with ease and at your convenience.
For other advantages of a home equity line of credit or a line of credit generally refer tothe HELOC page: Home Equity Line Of Credit
A brief outline of the specific advantages when refinancing real estate investment are that you can start with little on no money of your own and as equity builds you can continue with your refinancing real estate investment properties and purchase more.
In this way Your asset base continues to grow, and it can all be funded by your growing equity base.
The way this works best is to always plan on holding your investment properties long term. If you adopt that attitude and ride out the occasional volatility of thte market then you are almost guaranteed success.
When refinancing real estate investment it is important that your first properties be new, so that you can claim maximum tax deductability for depreciation and expenses. You will need competent advice on this for your particular country and area.
See my other pages for tips on how to best set up your financing and reducing our tax burden in the asset building stage.
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