Banks' inequity in home-equity loans Washington Post
You’re in shock. You can’t pay bills for work you’ve contracted, and you can’t touch the money you confidently thought you had. Plus, you know that housing prices in your area have been relatively stable since you took out the credit line. How could a bank effectively devalue your real estate using nothing more than a computer program?
Welcome to the world of what class-action lawyers estimate to be massive numbers of homeowners — 1 million customers at one national bank alone — who had their credit lines reduced, frozen or canceled without appraisals during 2009 in the tense months following the near-collapse of the capital marketplace.
Now a federal district court in Chicago has given the green light to clients of JPMorgan Chase to proceed with a consolidated lawsuit alleging that their equity lines were yanked or reduced illegally, costing them billions of dollars in lost borrowing power. Judge Rebecca Pallmeyer rejected the bank’s motion to dismiss the case, clearing the way for a possible giant class action.
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How does a home equity loan work?
I need to know all the details and if it is a good choice. I have payed off my vehicle and credit cards and have none, but I have alot of student loan debt. Our dilema are the student loans. And paying them. I have heard about home equity loans and heard about being tax deductible. How do they work? Do they look bad on your credit? How much can you borrow ? Does it add to the years to pay off your house? We only have eleven years left to pay as it is right now. Just wondering what is a good option. I even thought that after I graduate and am working that my pay checks can go all to my student loans. I am just looking for some good ideas without having to stress out about debt and bills and such. We are trying to pay our bills off and so far have done good. But those student loans are looming in the background.
I'm not sure why you would want to get a home equity loan to pay off student loans. Typically interest rates on student loans are much lower than home equity loans. It is true that you can use interest paid on a home equity loan as a tax deduction, but you can also use interest paid on student loans as a deduction.
Also, student loan interest is tax deductible.
Home Loan and equity loan? How does it work when a house is already paid off?
My mom has a home that she bought in 1997. She bought it for 81K and now it is worth about 350K. (It was built in 1991 and we are in southern California.)
She paid off the house back in 2004-just after her husband died she collected the 100K from the life insurnace policy. She is making about $8.60 an hour-full time-and now she will be bringing home less since her employer is going to take out about $50 a month for health benefits. She only made around 17K last year.
She is about 4 or 5K in credit card debt. Since her husband passed in 2004, she has paid down the credit card debt a lot from 7 or 8K - (most of the money came from the left over amount after paying the house off) but she is still struggling to pay all of her bills.
If my parents had not had the life insurance + if my mom had to pay the mortagage ($800.00 month) we would be living on the street now. There is no way she could afford that on her income. Is it worth it getting a home loan for 5K or 6K?
My mom has the '99 truck (it was dad's) and it is running and that truck is paid off. Her car a '99-not running is also paid off. I already asked her if she wanted to rent the room out-she would rather not with her 3 little doggies. They would bark too much.
I thought that interest payments would be lower than credit cards. She is paying 22% of one of her credit cards. that is crazy! I will show this to her tomorrow. Thank you all! If I could I would give you all best answer!
Regardless of your mother's income, she can save money by paying off her credit cards with a home equity loan or a home equity line of credit. You said her interest rate is 22%? That is ridiculous. With 350k of home equity (the value of her home), she can get a much lower interest rate to pay off her debt.'
And there is a very good chance the interest she pays on a home equity loan may be tax deductible (which the credit card interest isn't).
I say this all the time and I'll say it now. Your mother needs to find a mortgage professional she can trust and have them run the numbers on a home equity loan/line of credit. She will be shocked at how much she'll save over keeping her debt on her credit cards. I can't think of any reason to do so, even her low income. Just find someone she likes and can trust and I can't see how she can go wrong.
Options :
- getting a low-interest credit card and transfer the balance.
- Equity loans are good - make sure to calculate all fees.
Can she improve her income ? Rent a room to a student ?
Good luck !
Here are the numbers...
With a house worth about 350,000 and being that it is completely paid off you have a lot of equity in the house. ( what the house is worth minus what you owe on it )
In order to get the best rate on your Fixed Rate Home Equity Loan ( from here on out I will call it a FRHEL ) said... like Frail - then she can use up to 80% of that 350,000
which is still 280,000 - so she definetly has enough to do what she needs.
So what you would do is call your bank or have her go into her bank and talk to a personal banker ( which is what I am ) and tell them her situation. They will check her credit and debt/burden ration. Aslong as those are ok she will be able to get the loan.
2 other things you need to figure out....
1. If she gets a check for $10,000 ( which is the minimum you can get normally ) and she pays off those credit cards will she be bringing in more money then what is going out to bill and other needs? If YES then everything is ok - if NO then she needs a HELOC ( Home Equity Line of Credit ) which she will be able to access for the next 10 years and pay interest only payments on it for those 10 years.
There is a lot more to this, I cant go into it all really. The thing I can say is to have her go into her bank - go with her for help.
The first thing that originally popped into my head was a reverse mortgage, but that may not be practical in this situation. I like the HELOC idea too.....but the big danger is falling behind on the payments (you could end up losing your home). If her income is already stretched that becomes a possibility. I've seen people lose their homes for this reason.
And $17K a year is NOT a lot of money.
It might be time to discuss all this with a qualified financial advisor.
There are various ways to obtain debt consolidation loan. You could apply for personal loan or any unsecured loan with reasonable and lower interest rate as compare to your current debt's interest rate and consolidate your debts into this loan. But, to obtain an unsecured loan, you need to have a good credit score else you loan application most probably will be rejected.
The best way to consolidate your credit card debts or any other high interest debts is using a home equity loan. Of cause, you need to own a home in order to apply for a home equity loan. Home equity is ideal for you to consolidate your credit card debts because the interest is much lower interest rate than credit card and other unsecured loan. And the best part is it normaly have different terms or repayment periods for you to choose from. The longer the repayment terms, the lower the monthly payment is. If your current financial is tight, you could choose the longer repayment term and pay more when you are at better financial situation. Read more about it at: http://www.credit-card-gallery.com/article/134,Consolidate_Credit_Card_Debt_And_Eliminate_Debt_With_A_Home_Equity_Loan
I have been out of work for a few weeks due to back troubles. I am looking into a home equity loan?
Or refinancing my home? What is the difference and which is the best way to go?
You don't want a home equity loan at all because if you can't make your payments you can lose your house. When the interest rates fell dramatically back in 2000 my husband and I refinanced our home. We cut off 8 years from our mortage and we only had to pay like $20 more a month in mortage. If you refinance it may or may not bring the cost of your monthly payment you have to factor in interest rates now and for how long you want to finance.
Refinancing your home is usually a great idea if you can reduce your interest rate by at least 1%...the problems is that those 'savings' don't really show up for almost 2 years because of the costs incurred while refinancing. My understanding is that you are in somewhat of a money crunch and most likely don't have a large stash of cash sitting around, it doesn't make sense to go into debt to save money.
Home equity loans are great in theory, it just depends on how the money will be used. If it is for improvemetns in the house, it almost ALWAYS makes sense. If it is to pay down credit cards, it only makes sense if you won't recharge up your cards and will instead apply payments towards the home equity loan.
If you've reached the point of wanting to take out a home equity loan, you most likely don't have 3-6 mths living expenses saved up. It should be one of your first goals when you get back on your feet.
If you have no other way of getting your hands on money (credit card cash advances DON'T count) and your house valuse is more than likely to stay stable, then a home equity loan is your best bet...just make sure you pay back the loan when you get back on your feet.
I hope your back feels better!
Our debt settlment company deals with dozens of loan officers and we would be happy to recommend 1 for you.
www.totaldebtsolutionsllc.com
I deal with the home equity loans and we have our mortgage rep that deals with home refinances so I can generally tell you what the main difference is.
A home equity loan, you can only borrow so much of the value of your home. For example lets say you have a home valued at $100,000.00 and your lender will allow up to 80% of the value, then you could borrow $80,000.00. If your payoff balance is this amount or less then it would be okay to do a home equity loan, however lets say you owe 90,000.00, then you must do a refinance.
If I'm not mistaken, currently our home equity rates might be lower than a mortgage rate.
Just check through your lender for both different types of rates.
How exactly does a home equity loan work? I'd like all the details. What are the pros and cons?
Don't email me with loan offers. I zero equity in my home.
A home equity loan is simply a loan secured by your home. There are two main types of home equity products...a home equity loan and a home equity line of credit. With a home equity loan you typically have a fixed rate, fixed term, and fixed monthly payments (like a traditional 30 year fixed mortgage). With a home equity line of credit you get more flexibility on your payments and the use of the line (you can borrow against it repay it borrow again etc. during the draw period which is usually 10 years) but the downside is that the rate is typically a variable rate tied to the prime lending rate and can change at any time. A typical home equity line of credit has minimum monthly payments of interest only (you can make principal payments as often and as much as you like at any time) and is set up for an initial term of 10 years. Typically most banks will renew (roll over) your line of credit after 10 years assuming you pay on time, the value of your home hasn't decreased substaially, your credit score hasn't plummeted etc......i.e. you aren't forced to pay off the amount outstanding at the end of the initial 10 year term but they aren't required to roll it over. If they don't, bank's typiclly simply convert the principal owing into a 20 year home equity loan.
The rate and amount you might qualify for will be a result of your debt/income ratio, your credit score, the consistency of your income/employment, the amount of equity you have in your home etc. Bank's will typically offer the best rates up to 80% loan to value.....(Appraised value of your home x .80) - any underlying mortgage balance= the amount of equity you can borrow against)....some lenders will go up to 100% loan to value but the rates and terms will not be as attractive.
If you're a strong borrower with great credit you shouldn't accept an interest rate on a home equity line of credit much higher than the prime lending rate...For a home equity loan the rate shouldn't be much more than 1%-2% higher than the rates offered on 1st mortgages for a similar term.
There are 3 main benefits all due to the strenght of the underlying asset secured by the loan (your home): you can typically borrow more $ than you would otherwise be able to on an unsecured basis or by providing other lesser quality collateral, the cost of funds (interest rate) is typically lower than you could get on an unsecured basis or by providing other lesser quality collatera, and finally, assuming you qualify you can typically take advantage of the tax deduction of the interest expense on home equity products.
The cons are of course that if you don't repay the loan the bank can foreclose on you...If handled properly a home equity loan/line is usually the most cost effective means of borrowing.
(HELOC).
A HELOC is a loan that is taken out against the equity in your property, the difference is that you have a choice as to how much you want to use at one time. You pay the interest on the amount you use. You are given check to cash when you decide that you want to use more of your HELOC.
Now an equity loan is a closed in loan. Once escrow close you are given one lump sum of cash, after which in about 35-40 days you begin to make montly mortgage payments.
Now how you use this money is up to you. Most use it to pay off high interest credit card debt and other consumer debt, so they can start afresh.
This can be beneficial if one does not immediately go back into credit card or consumer debt. The other pro is that an equity loan is normally tax deductable. (Check with your tax consultant about tax matters)
You can also use the funds from an equity loan to invest in other properties, education for your child if you have any. You may use it for other investments as long as the investments exceed the interest rate you are paying for the equity loan.
You have to decide which is better for you situation and the purpose in which you will use the funds.
I hope that this has been of some use to you, good luck.
"FIGHT ON"
How does a home equity loan work for home improvements?
and is it really tax deductable
Yes, it is tax deductible under the same guidelines as your mortgage.
A home equity loan is normally preferable to refinancing, as most institutions don't charge any closing costs and underwriting is much quicker. A line of credit is more flexible than the loan, but is usually a revolving interest rate that actually results in more interest paid, even though the interest rate may be stated as lower. In some cases, you can get both, which allows you to get a simple interest loan for the amount you know you'll need, and a line for unforeseen expense.
Do not apply at multiple institutions. This may result in unnecessarily impacting your credit score and causing less attractive terms. Contact a local mortgage broker who can shop the market for you using a single credit report. Often, lenders will offer lower rates through brokers than they offer directly.
The equity is that portion of the home's value that you have paid off either through payments or increased market value.
It is deductible for certain things, check with a loan officer.
Interest and maybe some closing cost can be tax deductible. Ask your CPA / tax preparer. Don't ask loan officer. A lot of them don't know and/or will tell you what you want to hear to close the loan deal.
Can someone explaine home equity loan to me explaine the process and how does it work and what are the qualifi
cations for this loan.
A home Equality load is basically your borrowing against the value of your house. for example if your have a mortgage say 100k left and your house values at 250k then you have a equality of 150k most likely get up to 50% of that. anyways it works the same way as a morgue just your borrowing against the value of your house.
Is it better to get a home loan thru home equity line loan?
I am thinking of refinancing and Chase Bank is ready to give a 10 yr 170k home equity loan. Is this a better than my existing home mortgage loan. Is there anyone who has suggestions for this.
Typically home equity loans have variable interest rates ... the very same type of rate programs that a causing the havoc in the current banking and real estate market. If your rate is fixed for the term, you will have predictable payment streams that you can budget for. If the rates are variable, and the underlying market rate goes up again, you may be asking for trouble. Try to get low fixed rates that you can pay off as quickly as possible. Having your largest asset at risk in case you experience job loss or other financial loss really sucks ... believe me, I speak from experience.
I now use my home equity line of credit to buy a few houses cheaper because it's a cash deal. Then we refinance if possible to get as low a fixed rate as possible.
Debt in general is the Devil's Way to make sure 'The Poor you have with you always'. But if you can plan it so you make MORE money off of other people's money (ie, the bank's money) -- i say if you make more money than you are paying out in interest, then you are a capitalist!
Beware of interest rates climbing out or your reach.
Good luck.
First, avoid a variable interest rate. For almost the same APR you can get a fixed rate and not worry if rates go up.
Second, think hard about an equity line. Many people have gotten into trouble with these because they lack discipline and treat it as a source of 'free money'. They end up in even more debt. I'd suggest you determine how much you need and only borrow that amount, or if you do get a credit line, pretend that's all that's available. You'll still have the rest for an emergency.
Third, the interest rate on a home-secured loan is usually lower than any credit card. Using that equity line to pay down your credit cards is very tempting due to the lower rate. If you do this, keep your payment amount the same. It doesn't make sense to amortize a 3-year revolving line of credit over 10 or 15 years in a home equity loan even if the interest rate is lower. If you keep your overall payment amount the same as now (all credit cards + 2nd mortgage/home equity credit line), you'll retire the debt faster which is a good idea.
Whether you get a 2nd mortgage or a home equity line, keep your paid-off credit cards in a box instead of canceling them. You still have them if you have an emergency (such as losing or changing jobs or high medical bills) but don't take them out to buy a new tv or something similar. Also, even if you have great credit if all your existing accounts are maxed out or nearly maxed, your overall credit rating suffers. It's better to keep a couple of zero-balance credit cards for this reason, too.
Finally, read the fine print carefully. What happens if you're late with a single payment? You APR may double. Read the other terms and think about a worst-case scenario and how that would effect the loan.
For more on refinancing mortgage: http://www.4refinancemortgage.com/torefinancemortgage/refinancinghomeequity.html
http://www.4refinancemortgage.com/index.html
Can my wife take a home equity loan for personal use on a jointly owned home without my consent?
My wife earns more money than me. The home loan is in her name but the home title is in our joint names. Can she take a home equity loan without my consent?
If your home deed is in both your names, then no, she cannot take out a loan in only her name without your consent. She can only take it out in only her name WITH your consent legally. If your mortgage company has done this.. then they did something incredibly illegal. You need to call the mortgage company on this.. Best Wishes!
Home equity loan or refinance existing home loan?
My husband and I are looking into a home equity loan or refinancing our existing home loan. We own a doublewide on 4 1/2 acres that has been converted to real property.
Which is better? A home equity loan, or refinance our existing loan? Where do we start? What should we know? And what we should be careful of?
What are the benefits of a home equity loan?
What are some benefits of a home equity loan? How does it work? Whats a good interest rate for someone with OK credit? My is good, but my husbands is fair. We are planning on consolidating high interest cards and possibly using sometowards a newer vehicle.
The rate will be somewhere between 7-8% right now. The main benefit is its tax deductibility. You'll be able to finance high rate credit card debt at a much lower rate and get a tax deduction. You also be able to spread the payments over a longer period of time. Home Equity Lines of Credit generally only require an interest only payment while a home Equity loan is generally amortized over 10 years. Just be careful, you're potentially spending your home's equity on frivolous items.
home equity loan work - News
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The Risks of Leveraging Home Equity - Washington Post The Risks of Leveraging Home Equity The other drawback is that bank loans take more time to get, while home equity lines of credit are often granted quickly. "The Maliks need to also consider |
Home of Dallas man, 79, saved from foreclosure by mortgage broker - Dallas Morning News
Dallas Morning NewsHome of Dallas man, 79, saved from foreclosure by mortgage broker The program enables seniors who are homeowners to tap their home's equity through a lump sum, a monthly amount or a line of credit.
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As mortgage loan costs fall, refinancing perks up - Tampa Tribune As mortgage loan costs fall, refinancing perks up The Klines, who combined their original mortgage and home equity loan into one 30-year fixed-rate loan, had to pay for a home appraisal and closing costs, |
Not Immune: Credit unions feeling the squeeze - Winston-Salem Journal
Winston-Salem JournalNot Immune: Credit unions feeling the squeeze Keener said that about $15 million of the provision was related to home-equity loans in delinquency and default, mostly to members outside of the Triad.
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Transcript: Schmidt, Zandi on 'FNS' It needs to be longer so that people can work it out. The worst possible scenario is somebody loses their home and, as a result, the whole neighborhood gets |