If you require money to start a new business or to put a hike to your existing business then you can always use the help of loans. Here comes the need for Commercial Mortgage Loans for the sake of commercial requirements of money. This type of loan is often used for buying real estate and commercial properties that can be used for commercial purposes. They may be office buildings, theaters, shopping malls and many other such real estate for businesses.
Commercial mortgages as the name states are borrowed by businesses and not by individuals and thus the collateral is a business property rather than a residential plot. The seekers first need to file their requirements to the lender organizations. Wealthy individual investors and some privately owned lenders offer hard money, commercial mortgage platforms. The tenure of such loans generally vary from 3 to 10 years, but in some cases you can even stretch it up to 25 to 30 years.
Unlike personal mortgage loan, commercial mortgages is a bit difficult to apply for. You may take the help of loan brokers to find out more about the market. The lender generally decides how much to lend to the borrower depending on the later’s credit history. The interest rate is a bit high in such loans than compared to other mortgage loans in the market. But the major advantage is the rate of interest of the loan does not change accordingly and always remain the same throughout the time. People who do not have adequate amount of money to increase or grow their business, commercial loans are of a great help to them. If you are suffering from a financial crisis and need to stabilize your business, you can always take the help of such loans.
But there comes the decision to be taken solely by you. How will you find a proper commercial mortgage loan lender? There are many available lenders in the market. You can always take the help of a financial advisor by searching over the internet and take the advice of them. They will personally guide you through the loan process and help you to decide what type of commercial loan suites best to you according to your financial conditions.
Foreclosure is a situation in which the lender or the mortgagee, seizes and sells the property, if the homeowner or the mortgagor fails to make principle and/or interest payments on the mortgage. Under mortgage a borrower pledges to lender as security, an asset, like a house to secure the loan.
If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. In some cases, creditors try to make adjustments to allow the homeowner to retain ownership. This situation is known as a special forbearance or mortgage modification.
Deed in Lieu Of Foreclosure is a potential option taken by a mortgagor (a borrower) to avoid foreclosure under which the mortgagor deeds the collateral property (the home) back to the mortgagee (the lender) in exchange for the release of all obligations under the mortgage. This is done with the consent of both sides.
APR or Annual Percentage Rate should be known to everyone, at least by those who are having loan, mortgage, credit card etc., which deals with interest rate. In order to avoid bugger lenders or different credit card companies and compare the percentage rates on different loans or credit cards.
What is APR?
APR is the Annual Percentage Rate is the interest rate calculated for a whole year, rather than just a monthly fee/rate, as applied on a loan, mortgage, credit card, etc. APR tells you how much you are going to pay annually for the amount borrowed, so it is the cost of loan in terms of percentage. If your loan has a 10% rate, you’ll pay $10 per $100 you borrow annually. All other things being equal, you simply want the loan with the lowest APR.
Why it is necessary to know APR?
The fees included within the APR vary from one lender to another. The fees included within the APR involve charges related to the making of the loan and other fees such as title fee, escrow fee, attorney fee, tax service fee, home inspection fee, recording fee and credit report fee. The fees for the preparation of loans include loan processing fee, underwriting fee, document preparation fee, private mortgage insurance, loan application fee, credit life insurance and appraisal fee. Lenders often mislead borrowers by charging hidden fees. In order to reduce the confusion, US Government made the provision that the lenders have to quote APR to potential borrower, as per the Truth in Lending Act.
For example if the APR is 36%, the percentage is 3% per month, but the interest rate or cost of funds for the entire year may be greater than 36% due to the effects of compounding. By law, a credit card company or other lender must inform the customer of the APR before any agreement is signed. The APR provides the customer with a convenient number against which to compare the cost of funds for other loans or investments.
So you have to do some research work before applying for any loan, mortgage or credit card and find out which is having lowest APR.
How is APR Calculated?
APR is the equivalent interest rate considering all the added costs to a given loan. Naturally, it is a function of the loan amount, the interest rate, the total added cost, and the terms. The APR would equal the interest rate if there is no additional costs to a given loan.
1) For example, consider a $100 loan which must be repaid after one month, at 5% interest, plus a $10 fee. If the fee is neglected, this loan has a (year-long) effective APR of approximately 79% (1.05^12 =~1.7958). If the $10 fee were considered, the interest increases by 10% ($10/$100) for the month, with the effective APR being approximately 435% (1.15^12 =~5.3502, as 535%-100%=435%). Hence there are at least two possible "effective APRs": 79% and 435%.
2) For example, a credit card company might charge 1% a month, but the APR is 1% x 12 months = 12%. This differs from annual percentage yield, which also takes compound interest into account.
What are APR Limitations?
Unfortunately, all other things are not equal. APR can include more than just the interest cost of a loan. On a mortgage, APR might include Private Mortgage Insurance, processing fees, and discount points. There are other fees and charges that may or may not be included in a given APR quote. Therefore, you need to look closely at each and every APR.
You can’t simply rely on an APR quote to evaluate a loan. You need to look at each and every charge and expense related to your prospective loan in order to judge whether or not you’re getting a good deal. In addition, look at the bigger picture – you need to know how long you’ll be using a loan to make the best decision. For example, one-time charges up front may drive up your actual cost on a loan – even though an APR calculation might assume those charges are spread out over a longer lifetime (and therefore the APR would look lower).
APR Calculator:
1) Loan Amount (C):----------- 2) Extra Cost (E):---------- (The Extra Cost (E) is the lump sum of all extra costs involved in the loan, which include points, application fee, closing cost, processing fee, title fee, and so on. In short, it's the money you borrowed that you never saw.) 3) Interest Rate % (R):------- 3) No. of Months (N):------- 4) APR (A):------------------- 6) APR (A):----------------- Calculator
The calculator first calculates the monthly payment using C+E and the original interest rate r = R/1200:
P = (C+E)r(1+r)N/(1+r)N-1
The APR (a = A/1200) is then calculated iteratively by solving the following equation using the Newton-Raphson method:
For Creditors all secured debts are Good Debts and for Debtors Good Debts are those which builds wealth over the long run.
Question: Can Debts build wealth?
Not all debts are bad. If used precisely Debts can be huge source in wealth building. Good Debts can be considered as a sort of investment, which generates income at a later stage.
Good Debts is secured with a valuable asset, like a home mortgage or, perhaps, a car loan, and so considered an investment. Home loans are good because over time a home’s value increases. Student loans are also considered Good Debt because they are also like an investment. Students who graduate with a college degree earn, on average, higher incomes than those that don’t. Home loans and college loans are good for another reason: they usually have very agreeable terms. Both types of loans come with very low interest rates, and borrowers repay the debt over a long period. The typical home loan, for instance, carries a 30-year term. The interest on college loans is so affordable that the graduate can repay their loans slowly over a long period as they gradually earn more money and build their personal wealth.
"Mortgage debt is Good Debt. You're borrowing money, but you're getting a tax advantage and can write off interest on an asset that's appreciating over time. Plus, you get to live there."
One of the secrets, therefore, to being smart with your money is to differentiate between Good Debt and Bad Debt.
1) Good Debt: Having a mortgage, getting a home equity loan or line of credit to fund a home renovation or remodeling job. Bad Debt: Borrowing money to trick out your car to impress your friends, or just yourself.
2) Good Debt: Getting student loans to attend college. Bad Debt: Using your credit cards while at school to buy groceries, throw parties or accumulate stuff. Many students are saddled with insane amounts of debt after they graduate. Average credit card debt after graduating from college: $3,000.
3) Good Debt: Leverage in real estate or using the bank’s money to invest in real estate. You can use leverage by borrowing funds to get into real estate investing with the expectation of turning in a profit. Bad Debt: Leverage in Wall Street or borrowing money to buy stocks. In my opinion, buying stocks on margin is a bad idea. This is a subjective opinion because I’m sure there are a lot of successful margin players out there. As an average investor, I’d avoid trading on margin like the plague. There’s a difference between using a loan to invest in real estate versus investing in the stock market: if the real estate market drops, you are not forced to pay off a mortgage in short notice. With a drop in stock prices, you’ll be subject to margin calls that will force you to raise more money to hold on to your position or else force you to redeem at poor market prices. Using leverage takes a good amount of risk, the question here is if the risk is reasonable and if you’re fairly comfortable taking it.
4) Good Debt: Applying for a business loan and borrowing for business. Many ventures need cash flow that they don’t have at the moment to run their operations or expand their facilities. Using loans to grow a business is a sensible approach to take. Bad Debt: Using your credit card to go on vacation, travel or to just have a good time; borrowing for pleasure. Once the vacation is over, you’re left with fun memories and a financial obligation to pay up.
While the differences often seem logical, it is a logic that is apparently missed by many people.
Therefore, Good Debt helps borrowers by increasing their wealth and by building a healthy credit history. Borrowers who repay their debt diligently earn a good credit score and become eligible to borrow more good debt in the future. Good Debt is investment debt that creates value.
Bankruptcy is the legally declared financial status of an individual or an organization, who is unable to pay off their debts. Generally, Bankruptcy is initiated by the debtor, in order to get relief from the creditor’s permanently, but in order to recover their substantial amount of debt the creditors as well can file Bankruptcy case against the debtor. The Bankruptcy case initiated by the debtor is called Voluntary Bankruptcy and the one filed by the creditor against debtor is called Involuntary Bankruptcy.
A Harvard Study reported that half of US bankruptcies were caused by medical bills. The study was published online in February of 2005 by Health Affairs. The Harvard study concluded that illness and medical bills caused half (50.4 percent) of the 1,458,000 personal bankruptcies in 2001. The study estimates that medical bankruptcies affect about 2 million Americans annually — counting debtors and their dependents, including about 700,000 children.
Bankruptcy is a federal court procedure that is designed to aid businesses as well as the consumers to wipe out their debts or repay them under the protection of the Bankruptcy court. Businesses don’t like it, but for consumers, it can be a life saver. Bankruptcy is the last option and should be the last option while trying to get hold of yours scattered financial situation, since it has a very negative impact on yours credit report and affect you in the future for all your financial dealings, as most lenders view this differently. But for sure it allows you to start over again.
Let's start by exploring the different types of bankruptcies. There are four different filings you can make: Chapter 7, Chapter 11, Chapter 12 and Chapter 13.
Chapter 7
Its the most common form of Bankruptcy in US. Chapter 7 Bankruptcy, sometimes call a straight Bankruptcy is a liquidation proceeding. As per this chapter, the debtors are allowed to keep certain type of property, this kind of asset is known as exempt property and the property they must give up is known as non exempt property. The debtor turns over all non-exempt property to the Bankruptcy trustee who then converts it to cash for
distribution to the creditors. The debtor receives a discharge of all dis-chargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick "fresh start". One of the main purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by wiping out his or her debts.
Non exempt property may include:
1. Pricey musical instruments provided the debtor is not a professional musician. 2. Family heirlooms. 3. Collections of valuable items like stamps and coins. 4. Bank accounts, bonds, cash and other investments. 5. A second or vacation home 6. A second car or truck.
Exempt property include: 1. Household appliances. 2. Vehicles, up to a certain value. 3. Reasonably priced requisite clothing. 4. Reasonably priced requisite household goods and furnishings. 5. Jewelry, up to a certain value. 6. Pensions. 7. A part of unpaid but earned wages. 8. Equipments (up to a certain value) that are needed in the debtor’s profession. 9. Damages awarded for personal injury. 10. A part of equity in the debtor's home. 11. Public benefits, including social security, and unemployment compensation, public assistance (welfare) that is accumulated in a bank account.
If a debt is secured by property, such as a home mortgage or an automobile loan, then you get to decide how to handle that debt. For example, in the case of a vehicle, you could: Keep the automobile and the debt as long as you are current and continue keeps your payments current.
* "Redeem" the automobile which means pay it off at its current "fair market value"
* Return the vehicle, include any balance due in your Bankruptcy and pay nothing further on the vehicle. The choice is yours.
Essentially what the new laws ask of people who are filing a Chapter 7 Bankruptcy is twofold. First, they must take an approved credit counseling course within six months before filing. They must also complete an approved financial management course before any debts can be discharged.
What are the most common reasons given for filing a Chapter 7 Bankruptcy? Well, of course, it's the accumulation of excessive debt! But seriously, here are the most common reasons why people get into such debt:
In 99% of the Chapter 7 cases, the person filing Bankruptcy keeps all of their property.
Chapter 11
Chapter of the Bankruptcy Code that is usually used for the reorganization of a financially troubled business. Used as an alternative to liquidation under Chapter 7. Chapter 11 Bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities. Bankruptcy affords the debtor in possession a number of mechanisms to restructure its business.
Chapter 12
Chapter of the Bankruptcy Code adopted to address the financial crisis of the nation's farming and fishermen community. Cases under this chapter are administered like Chapter 11 cases, but with special protections to meet the special conditions of family farm operations and fishing.
Chapter 13
Chapter 13 is more commonly known as a reorganization Bankruptcy. Chapter13 Bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years.This type of Bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.
There are many reasons why people choose Chapter 13 Bankruptcy instead of Chapter 7 Bankruptcy. Generally, you are probably a good candidate for Chapter 13 Bankruptcy if you are in any of the following situations:
1. You have a sincere desire to repay your debts, but you need the protection of the Bankruptcy court to do so. You may think filing Chapter 13 Bankruptcy is simply the "Right Thing To Do" rather than file Chapter 7.
2. You are behind on your mortgage or car loan, and want to make up the missed payments over time and reinstate the original agreement. You cannot do this in Chapter 7 Bankruptcy. You can make up missed payments only in Chapter 13 Bankruptcy.
3. You need help repaying your debts now, but need to leave open the option of filing for Chapter 7 Bankruptcy in the future. This would be the case if for some reason you can't stop incurring new debt.
4. You are a family farmer who wants to pay off your debts, but you do not qualify for a Chapter 12 family farming Bankruptcy because you have a large debt unrelated to farming.
You have valuable nonexempt property. When you file for Chapter 7 Bankruptcy, you get to keep certain property, called exempt. If you have a lot of nonexempt property (which you'd have to give up if you file a Chapter 7 Bankruptcy), Chapter 13 Bankruptcy may be the better option.
You received a Chapter 7 discharge within the previous eight years. You cannot file for Chapter 7 again until the eight years are up.
A Chapter 13 can be filed if:
* The debtor received a discharge under Chapter 7, 11 or 12 more than four years ago. * The debtor received a discharge under Chapter 13 more than two years ago. * You have a co-debtor on a personal debt. If you file for Chapter 7 Bankruptcy, your creditor will go after the co-debtor for payment. If you file for Chapter 13 Bankruptcy, the creditor will leave your co-debtor alone, as long as you keep up with your Bankruptcy plan payments. * You have a tax debt. If a large part of your debt consists of federal taxes, what happens to your tax debts may determine which type of Bankruptcy is best for you.
As of October 17, 2005, new Bankruptcy laws took effect for all three types of Bankruptcy. When it comes to Chapter 13, you cannot file this way unless the following conditions are met:
* The debtor received a discharge under Chapter 7, 11 or 12 more than four years ago. * The debtor received a discharge under Chapter 13 more than two years ago. * When a motor vehicle was purchased within 910 days (2 1/2 years) of the filing and a secured creditor has a lien on it, the creditor retains the lien until payment of the entire debt has been made.
The following debt is NOT discharged:
* Debt for trust fund taxes; * Taxes for which returns were never filed or filed late (within two years of the petition date); * Taxes for which the debtor made a fraudulent return or evaded taxes; * Domestic support payments; * Student loans; * Drunk driving injuries; * Criminal restitution; * Civil restitution or damages awarded for willful or malicious personal actions causing personal injury or death.
All tax returns for the four years prior to filing Chapter 13 must be filed.
Disadvantages Of Bankruptcy --> Of course, there are disadvantages to filing for Bankruptcy. As per the Fair Credit Reporting Act, a record of this stays on the individual's credit report for up to 10 years. During the pendency of a Bankruptcy case the debtor is not permitted to obtain additional credit without the permission of the Bankruptcy court. Moreover, creditors may not be willing to risk lending money to such an individual.
There are some advantages to filing for Bankruptcy. By far the most important advantage is that debtors may obtain a fresh financial start.
Debt Settlement (DS) --> It is a process, which involves negotiating with your creditors to settle your debt for amounts significantly less than you currently owe. People not able to bear the burden of huge debts anymore or on the verge of bankruptcy are advised for debt settlement.
Debt Consolidation (DC) --> It is a process in which all the bills and debt whether secured or unsecured are combined together into a single payment, usually resulting in lower monthly payments. Often debt consolidation involves many unsecured loans (such as credit card bills, medical bills, etc.) into a single payment but with collateral backing it up. This is then referred to a secured loan. There are two types of programs under debt consolidation, i.e. Debt Consolidation Service and Debt Consolidation Loan. a) Under Debt Consolidation service, debt solution companies negotiate with the creditors to lower down the interest rates and monthly payments. b) Under Debt Consolidation loan, a lower interest loan is provided to the debtor in lieu of multiple high interest loans and bills, in order to pay off his debt quickly.
Lets come to the differences between Debt Consolidation (DC) and Debt Settlement (DS), which are given below:
1) In DC debt isn't reduced, it remains the same, only interest rate is reduced, but in DS debt is reduced to substantial level and also the interest rate is reduced.
2) In DC interest rate can be reduced to 50-75% depending on the debt, whereas in DS the interest rate can be reduced down to 40-60%.
3) In DC though the rate of interest is reduced, one has to pay the whole amount, but in DS once you repay 40-60% of your outstanding dues, you're legally out of debt.
4) In DC the credit score of the debtor isn't affected and in some cases there is a positive impact on it, if the bills are paid on time, on the other hand DS can severely damage one's credit score.
5) In DC all the secured and unsecured loans are combined together into a single secured loan, which are associated with collateral. So in case debtor fails to pay the loan he has to loose his property. But in DS creditors are at constant risk in loosing their money.
6) Usually, you can be out of short term credit card debt consolidation in five years or less but in DS the payment period is more.
7) If good credit manners are maintained a debtor with DC can apply for fresh loan and can get it, but a person with DS will affect their ability to get credit at favorable interest rates for couple of years. In fact, the Fair Credit Reporting Act states that negative information must remain on a credit report for a minimum of seven years.
Now its upto debtors and also depends on their financial position which plan to go for.
The cashout refinance is a mortgage refinance which is a greater amount than your present mortgage amount. You can go for a cashout refinance to get the home equity that you have gathered throughout years. Suppose you have a mortgage balance of $ 50,000 and you have home equity of 70,000 dollars. So to get the home equity, you can go for a cashout refinance. You can take out a mortgage loan of 100,000 dollars. Thus your new mortgage loan is greater than your existing mortgage balance.
Why would you for a cash out refinance?
There may be several reasons for doing a cashout refinance but it depends upon your needs and situations.
1. If you want to buy a new property or a car and you want easy cash, you can use your home equity and go for a cashout refinance.
2. You can invest the money that you get after cashout refinance to gain more profit.
3. You can pay off your high interest rate credit card debts through the money that you get after cash out refinance.
4. If you need immediate cash to pay off your medical bills or your child’s college fees then cashout refinance is a good option available for you.
5. You may even lower the interest rate of your existing mortgage through the cashout refinance.
So depending upon your situation, if you need easy cash and you think that cashout refinance is a good choice for you then just do a bit of research on the market and talk to different lenders so that you can get the best rates and terms available in the market. Hope it helps learn about cashout refinance. Feel free to ask any questions and share you suggestions.
Can bankruptcy stop foreclosure? In this financial crisis, foreclosure is a common phenomenon. So how can we stop foreclosure? Can bankruptcy stop foreclosure? Yes, definitely; bankruptcy can stop foreclosure but it should be your last option to choose. There are other options available which can stop foreclosure, like- short sale, loan modification, loan repayment plans, forbearance, deed in lieu of foreclosure etc. If any of these options don’t help you to stop foreclosure then you can choose to file bankruptcy . How can bankruptcy stop foreclosure?
There are different types of bankruptcy but you can choose to file bankruptcy chapter 7 or chapter-13. You should better hire an experienced bankruptcy attorney who can help you to file the bankruptcy properly. As soon as you file bankruptcy, the creditors cannot harass you and foreclose on your property.
If you file bankruptcy chapter-13 then you will be able to pay off the creditor with an affordable repayment plan made which will be made by the bankruptcy court. It will affect your credit score and you may not be able to get a loan in nest 3 to 5 years but the best thing is that you can avoid foreclosure which can affect your credit score much more than bankruptcy chanter-13.
Bankruptcy chapter 7 is really your last option to choose. It will affect your credit report almost like a foreclosure. Your credit score will be dropped by 250 to 300 points and bankruptcy chapter-7 will be shown on your credit report for 7 to 10 years. All your non exempt properties will be sold to pay off your creditors, but the creditors will not be able harass you or they will not be able to demand the deficiency judgment.
So if you are facing foreclosure then check out all your options available and talk to your lender as soon as possible. If no option suits and your lender is not co-operating with your then filing bankruptcy is the option that you can choose to avoid foreclosure. Hope it helps. Please share your thoughts and feel free to ask if you have any questions in your mind.
We all know that a deed is a kind of document that is used to transfer property from one person to another or from one entity to another. A quitclaim deed is a special kind of deed that is used to transfer a property among the family members or friends. After singing the quitclaim deed, the owner of the property quits all his claims on the property but he remains liable for any secured debts against the property. The owner of the property who is signing the deed is called the Grantor and who is receiving the property is called the Grantee.
How does a quitclaim deed work?
Now if you want to transfer your property to your wife’s name or to your child’s name then you can simply sign a quitclaim deed but to make sure that the deed is valid, you need to notarized and record the deed in the County Recorder’s office in your state. If there is a mortgage or any secured debt against the property then even after signing the quitclaim deed, you will be liable to make the mortgage payments. By the way, if there is any mortgage against the property then you should better inform your lender and take his permission from the lender before signing the quitclaim deed.
Always read the offer documents carefully before submitting
It is always better if the Grantee can refinance the mortgage loan on his or her name when the Grantor is signing quitclaim deed to the Grantee because this can eradicate most of your problems that a Grantor can face after signing the quitclaim deed. Hope it helps. If you have any questions feel free to ask and please share your thoughts.
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We all know what refinance is. Cash out refinance is a type of refinance that we can choose if we are in need of some easy cash. Now the question may come - what is Cash- out refinance?
What is cash out refinance? If you refinance and take cash out more than the existing unpaid loan amount, then it will be called cash-out refinance. So to get the Cash-out refinance, you should have enough equity on your home to back it. Most lenders and banks will not approve you for the cash-out refinance if you have not completed one year or more after taking the existing loan.
Pros of Cash- out Refinance:
1. You can utilize the money after cash out refinance to fulfill your sudden needs like paying medical bills or your child’s college fees.
2. You can invest the money and get better returns.
3. You can buy a new property or some thing else with the money.
4. You go out for a vocation. You can go for a world tour which can be your life time experience.
6. You can pull cash out to make improvement on your house.
Cons of Cash-out Refinance:
1. It is not always too easy to get approved for cash-out refinance. At least you will have to wait for a year after taking the loan to get a cash-out refinance.
2. The interest rates may get higher than your existing loan after the cash-out refinance.
3. You may have to pay pre-payment penalty if you go for Cash-out refinance.
Like all the other things, cash-out refinance has also some pros and cons, but it is a great help if you are in need of urgent money and you have enough equity. If you have completed one year after taking the loan and you will have to pay medical bills or your child’s tuition fees or you want to pay off your credit card debts, then the Cash-out refinance is the best solution that you can choose.
The lenders, who charge higher interest rates to the borrowers and want to derive their benefits only even by abusing the lending practice, are called predatory lenders. Their main concern is to make huge profit. You may come across such lenders anytime in the mortgage market. So be aware of those Predatory lenders. They target mainly the borrowers who are in debts and are in need of easy cash. They fall easy prey of the predatory lenders.
You be in such a situation that you require immediate cash for your medical bills or you may be in some credit problems and don’t find any lenders who can lend you money. In this situation, you may easily become a prey to the predatory lenders.
How can you recognize a Predatory lender?
1. He will charge you higher interest rates and points.
2. He can change the terms and condition even after the closing.
3. He may not provide all the documents and receipts of your mortgage payments which can ultimately create problems later.
4. There are some lenders who assure you to give a loan so that you can pay off the existing mortgage dues and avoid foreclosure. But after signing the deed to his name, it will not come back to give you the loan amount. This is a perfect case of mortgage fraud.
They will not only charge you higher interest rate but they can even harass you and your family and take your property away. Predatory lenders have played a huge role and are mainly responsible for this nation-wide financial crisis. So I would suggest you to go for only government backed loans and also try to improve your credit report so that you do not need the kind help of the predatory lenders.
Bankruptcy is the last option to choose to avoid foreclosure. If no other options help you to avoid foreclosure, then you can opt for bankruptcy. But you cannot just file bankruptcy on your own. You can file bankruptcy only if you pass the eligibility criteria. You can take help of an attorney to file the bankruptcy. There are two different kinds of bankruptcy - Chapter-7 and chapter-13. So the attorney can also help you to choose which chapter is appropriate for you to file. Bankruptcy chapter7
If you file Bankruptcy chapter7 then all your non-exempt properties will be sold to pay your creditors. Chapter7 hurts your credit report heavily but the lenders cannot come after you for the deficiency judgment. If you file chapter7 then your credit score will be doped by 250 to 300 points. Also you may not get approved for mortgage for 5 to 7 years after filing bankruptcy chapter7.
Bankruptcy chapter13
If you can file bankruptcy chapter13 then the lenders cannot foreclose or harass you. You can be able to pay your lender with an easy repayment plan with an affordable rates and terms. It does not affect your credit as much as the bankruptcy Chapter7. It will drop your credit score by 100 to 150 points and you may be able to get approved for a new mortgage within one year after you file bankruptcy chapter13. But the best thing is that you can keep your dream home as your are filing chapter13.
Foreclosure has become a daily phenomenon in our life. Actually foreclosure is considered even worst then Bankruptcy. The lender can sell your house to get his money back. It will also affect your credit report and cause to drop your credit score by 250 to 300 points. So we should have a clear idea about how can you avoid foreclosure if the worst happens. So I have tried to point out some useful ways through which you can avoid foreclosure.
1. Whenever it seems that you can’t afford the mortgage, first of all contact the lender and check out what are the options that are available for you.
2. You can also request the lender for forbearance that is a formal agreement between the lender and the borrower for delaying the payment.
3. You can even request for a repayment plan and to change the terms and condition so that you can catch up the missed payments.
4. If you want, you can sell the property and pay off the lender to avoid foreclosure.
5. Now if the property value is lower than what you owe to the lender, then you will have to take permission before selling the property. This is called short sale. This is another way to avoid foreclosure. But here the lender can ask you for the deficiency judgment.
6. If you cannot even sell the property then you can request the lender for Deed in lieu of foreclosure. But in this case the lender cannot come after you for the deficiency judgment.
If you pay off your present loan with another loan with different terms and condition, this is called Refinance. This is mainly done to reduce the interest rates or cost of the loan. Sometimes it is also done to pull out the home-equity so that it can be used to pay off some high interest rate credit card debts. It can also be done to increase or decrease the time period of the loan. You can also turn the mortgage from ARM to FRM by refinancing. Even you can opt for refinancing to lower the monthly mortgage payments by increasing the total duration of the loan period. And if you want to pay off the loan early as you are getting a lower interest rate, you can opt out this option of refinancing.
By the way, sometimes your lenders can claim prepayment penalty if you are going for refinancing before a certain period of time. So you have to calculate whether you are actually getting any benefits after refinancing as you will also have to pay the prepayment penalty. Last but not the least, if you want to refinance then first go to your lender and check out whether he can offer you what rates and terms you want. If he or she can’t offer you what you want then you can shop for the lenders and check out who can offer you the best rates and terms. There is another kind of refinance which is called Cash-out refinance. This type of refinance is mainly used for home improvement or paying off any credit card debts or student loan.
Debt to income ratio is also called DTI. Debt to Income Ratio means the percentage of gross income of the consumer that he uses to pay his debts. This is one of the most important factors that a lender or a lending institute checks before approving a loan or mortgage. If your debt to income ratio is less then 36 percent then you have a very good chance to get approve for a loan program with affordable rates and terms.
There are other factors also which a lender checks before approving the loan but it certainly help if you have a lower debt to income ratio. Like, for FHA loan, your DTI ratio should be between 28 to 36 percent.
How to Calculate Debt to Income Ratio:
Calculating a Debt to income ratio is not time consuming or difficult task. Just calculate all your monthly debts, mortgage expenses, home insurance and divide it with your gross monthly income. But don’t count your expenses towards utilities food, entertainment.
Are you renting for a long time and thinking that you can't afford a home loan? When you are renting, your are just spending the money and giving it away to the landlord. But if you are buying a home then you are actually investing the money and can use it when it is needed the most. So I think an affordable mobile home loan is the solution for you.
You can get a mobile home loan as a personal property loan. But there are some requirements to qualify for the mobile home loan, like your credit score should be above 680, your mobile home should have a permanent foundation, you should make at least 10 percent down payments etc. BTW the interest on mobile home loan is tax detectable. So you can get the tax benefits too. So what are you waiting for... if you are still renting a home, then simply go for a mobile home loan
Reverse Mortgage is one of the popular ways to get out the home equity and use it in time of dire needs. This is very impotent to know how does a reverse mortgage work.Reverse mortgage provides a steady flow of tax-free income. By the way you can get the money on monthly basis or one time lump some amount. This is just the contrary of the tradition mortgage.
Interest rates of Reverse Mortgage:
Reverse mortgagee are mostly adjustable rate mortgage and the rate changes on monthly basis or quarterly basis. And the closing cost is also a bit higher than the traditional mortgages. Reverse Mortgage may also affect your eligibility for Medicaid benefits. But this is a non-recourse loan and this is tax free. So this is actually a helpful way to pay off a huge debt or someone's education fees.
In this nationwide financial crunch, people rather like to opt for Fixed Rate Mortgage, than Adjustable Rate mortgage. Economists and Critics even blaming the predatory lending practice and the Adjustable Rate mortgage for this financial down fall. So the Government also coming forward to help the defaulted borrowers so that they can refinance and turn the Adjustable Rate mortgage into Fixed Rate Mortgage. The main features of Fixed Rate Mortgage are -
1. The loan term usually varies between 15 to 40 years.
2. The monthly payments and interest rates remain same throughout the loan period
There are different types of Fixed Rate Mortgages available like 40 year mortgage, 30 year mortgage, and 15 year mortgage. But it is not that you should always go for Fixed Rate Mortgages. If your situation demands Adjustable Rate Mortgage then go for it. Suppose that you are going to stay in that house for 2 or 3 years then it is better to opt for Adjustable Rate Mortgage than Fixed Rate Mortgage.
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