If you are a homeowner and looking for a loan product that not only allows you to pay off your home, you might be pleasantly surprised at the many products available under the umbrella of refinancing loans. Refinancing loans in their traditional forms are second loans that allow you to pay off an older loan, using the same property as collateral. Besides this traditional type of loan, there are many others that not only give the homeowner the ability to pay off property, but give alternative ways to pay off these loans that can be extremely beneficial to homeowners – especially financially savvy homeowners.
Two types of loan products that offer alternative payment options are Interest Only Refinancing Loans and Optional ARM Refinancing Loans.
A standard refinancing loan only has one option; pay both the principle of the loan and the interest payment at the same time for a set period of time. Interest only loans allow a homeowner to pay less than the full payment (principle + interest), the homeowner can opt for paying the interest alone. This type of loan can free up cash flow worth hundreds of dollars or in some cases thousands of dollars per month. Extra cash flow for many financially savvy homeowners can help them invest this extra money in things such as their 401K, college tuition for a child or other expenses. In addition, a homeowner that has a seasonal job or career where income can fluctuate, can use the options to lower pressure during the lean times.
The other type of loan that can be also very useful to financially savvy homeowners is the optional ARM refinancing loan. This loan not only allows you to make interest only payments, but also offers a minimum payment option. Minimum payment means that not only can you skip paying the principle of the loan, but you can opt out of paying some of the interest of the loan as well. Sometimes this option is called interest deferred.
It should be noted that besides giving savvy homeowners the option to pay less per month, the optional ARM refinancing loan also allows a homeowner to pay off their loan quicker. It gives the homeowner the ability to pay off the loan in a standard 30 year term or even a 15 year term. The less time it takes to pay a loan off, the less money you need to repay.
By: Connie Barker
Posts Tagged ‘Loan Products’
Mobile Home Loan Refinancing
December 8th, 2009
If you have purchased a mobile home, you may have done so with a mortgage loan, a chattel loan or simply a personal loan. In any case, if your monthly payments have become too much of a burden or if you just want to repay your loan sooner or improve the terms and conditions of your loan because your credit has improved, what you need is refinancing.
It is possible to refinance a mobile home loan, yet, it is not such an easy task when compared to home loan refinancing. There are several reasons for this but the main ones are undoubtedly the fact that mortgage home loans are a wider market than mobile home loans that are simply a small niche of the financial industry and also due to the fact that mobile homes are still vehicles with values that are reduced over time.
Mobile Home Loans: Mortgage, Chattel or Unsecured Personal Loan
When you purchased your mobile home you may have done so with the aid of different financial products depending on the terms of the purchase. For instance if you purchased the mobile home plus the land in certain states you can obtain a mortgage loan and secure the debt with both the mobile home and the land, if the land is not included and only the mobile home secures the loan, then you are applying for a chattel loan and if there is absolutely no collateral then the money is obtained from an unsecured personal loan.
Refinancing each of these financial products is a different process and therefore has different costs. Some of these loan products are easier to refinance than the others and therefore you need to know these differences beforehand in order to understand which possibilities in terms of refinancing your mobile home debt you have. In any case, refinancing is possible but the costs may persuade you against the idea.
Issues with Mortgage And Chattel Loans
Unfortunately, refinancing a mortgage loan with your mobile home is not as easy like refinancing a mortgage loan with a regular property. The reason is simple, while most houses and condos maintain or increase their value over time and thus, equity builds due to that and due to the reduction of the debt secured by the property, mobile homes depreciate and thus, equity builds at a lower pace if it builds at all.
Chattel loans have exactly the same problem, the mobile home being used as collateral depreciates and the value of the property covers a lower portion of the loan each year even as the debt gets paid. Moreover, mortgage loans have an advantage over chattel loans because the land is included and the land usually does not depreciate thus maintaining an important part of the collateral’s value.
Personal Unsecured Loans
Personal unsecured loans are much easier to refinance because even if your current lender does not want to provide you with a new repayment program, as long as your credit is fair and your income allows it, you can obtain another loan with your desired terms and use the money to cancel the previous loan in advance. You should beware however of prepayment penalty fees.
Moreover, if you can obtain a secured loan instead (using your mobile home and or the land as collateral), you will get more advantageous terms on your loan and you will be able to cancel the previous loan while getting additional funds for any other purpose.
By: Hilary Bowman
Cash Out Refinancing Loans Vs Home Equity Loans
November 18th, 2009
One of the products that some homeowners find confusing is the Cash Out Refinancing Loan. Many people use Cash Out and Home Equity Loan interchangeably; however they are different loan products with some similarities. Here is some information on both of these types of loans.
Cash Out Refinancing
A cash out refinancing loan is part of the umbrella of refinancing loan products. A refinancing loan is a new loan to pay off an older loan, using the same property as collateral. With a cash out refinancing loan, you can “cash out” the equity of your home that has appreciated over the years. For instance, if your home is appraised at $200K and you only owe $100K on the original mortgage, you have $100K of equity built up. A cash out refinancing loan allows you to refinance the loan and also let you access some of the equity built up. In the above case, you can refinance your home for a total of $150K, cashing out $50K of equity.
Home Equity Loan
A home equity loan is different from a refinancing loan; it is a second mortgage that is secured using your home as collateral. The original mortgage is still in place. With a home equity loan, you do not refinance your home, but just cash out the equity. If you are happy with the interest rates or current terms of your mortgage and would just like to have access to your equity, a home equity loan is the right choice.
Pros & Cons
For homeowners that need quick access to their equity, a home equity loan is the much quicker way to access it. While a cash out a refinancing loan can take several weeks or more than a month to close, some home equity loans can close in as little as one week.
Another advantage of the home equity loan is that there are usually lower fees involved. You are usually not required to pay points, but only normal closing and administration fees.
If you are interested in repaying your loan over the long haul to reduce your monthly payment cash out refinancing loans is your best option. Most loans in this category have 15 year or 30 year terms and a low rate.
If you are looking for the lowest rate for a loan, the cash out refinancing loan is typically more competitive than a home equity loan. However, most refinancing loans include points that can make these rates less attractive.
By: Connie Barker