Refinancing refers to applying for a secured Loan intended to replace an existing loan secured by the same assets. The most common consumer refinancing is for a home Mortgage .
Definition
Advantages
Risks
Points or premiums
References
External links
2/14/07
2/13/07
External links
U.S. Department of Housing and Urban Development - Streamlining your Mortgage
U.S. Department of Veteran's Affairs - Mortgage Refinancing Information
U.K. Refinancing Information
U.S. Department of Veteran's Affairs - Mortgage Refinancing Information
U.K. Refinancing Information
References
Refinancing your Mortgage Information From the department of Housing and Urban Development.
www.in.gov/sos/securities/investmentwatch/pdf/loan_brokers.pdf
Points or premiums
Refinancing lenders often require an upfront payment of a certain percentage of the total loan amount as part of the process of refinancing debt. Typically, this amount is expressed in "points" (also sometimes called "premiums", with each "point" being equivalent to 1% of the total loan amount. Therefore, if the refinance option selected involves paying three points, then the borrower will need to pay 3% of the total loan amount upfront. Most refinancing lenders offer a variety of combinations points and interest rates. Paying more points typically allows one to get a lower interest rate than one would be capable of getting if one paid fewer or no points. Alternately, some lenders will offer to finance parts of the loan themselves, thus generating so-called "Negative points" (also called discounts).
The decision of whether or not to pay points, and how many points to pay, should be taken in consideration of the fact that with points, one tends to trade a higher upfront cost in exchange for a lower monthly premium later on. Points can be paid out of the cash saved by refinancing the loan in the first place.
The decision of whether or not to pay points, and how many points to pay, should be taken in consideration of the fact that with points, one tends to trade a higher upfront cost in exchange for a lower monthly premium later on. Points can be paid out of the cash saved by refinancing the loan in the first place.
Risks
Certain types of loans contain penalty clauses triggered by an early payment of the loan, either in its entirety or a specified portion. In addition, there are also closing and transaction fees typically associated with refinancing a loan or mortgage. In some cases, these fees may outweigh any savings generated through refinancing the loan itself. Typically, one should only consider refinancing if one stands to save a substantial amount of money from doing so, either in the short or long-term, or if there is a need to extend the loan in order to pay for unexpected costs such as medical expenses.
In addition some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan, depending on the type of loan used to refinance the existing debt. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance
In addition some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan, depending on the type of loan used to refinance the existing debt. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance
Advantages
Refinancing may be undertaken to reduce interest costs (by refinancing at a lower rate), to pay off other debts, to reduce one's periodic payment obligations (sometimes by taking a longer-term loan), to reduce risk (such as by refinancing from a variable-rate to a fixed-rate loan), and/or to liquidate some or all of the equity that has accumulated in real property during the tenure of ownership.
In essence, refinancing a mortgage or other type of loan can lower the monthly payments owed on the loan either by changing the loan to a lower interest rate, or by extending the period of loan, so as to spread the re-payment out over a long period of time. The money saved can be used to pay down the principal of the loan, thus further reducing payments. Alternately, refinancing can be used to transform available equity in one's house into ready cash, available for other purposes or expenses.[1]
Another use of refinancing is to reduce the risk associated with an existing loan. Interest rates on adjustable-rate loans and mortgages shift up and down based on the movements of the various prime rates used to calculate them. By refinancing an adjustable-rate mortgage or so-called "Balloon" mortgage into a fixed-rate one, the risk of interest rates increasing dramatically is removed, thus ensuring a steady interest rate over time.
Refinancing a loan or a series of debts can assist in paying off high-interest debt such as credit card debt, with lower-interest debt such as that of a fixed-rate home mortgage. The net savings between the two interest rates can then be applied either towards further paying down the debt, or other purposes. In addition, non-tax deductable debt, such as credit card or car loan debt, can be transformed into tax-deductable debt such as home mortgage debt, potentially lowering one's taxes or shifting one into a more advantageous tax bracket. This type of arrangement is often associated with a Cash-Out Refinance. [2]
In essence, refinancing a mortgage or other type of loan can lower the monthly payments owed on the loan either by changing the loan to a lower interest rate, or by extending the period of loan, so as to spread the re-payment out over a long period of time. The money saved can be used to pay down the principal of the loan, thus further reducing payments. Alternately, refinancing can be used to transform available equity in one's house into ready cash, available for other purposes or expenses.[1]
Another use of refinancing is to reduce the risk associated with an existing loan. Interest rates on adjustable-rate loans and mortgages shift up and down based on the movements of the various prime rates used to calculate them. By refinancing an adjustable-rate mortgage or so-called "Balloon" mortgage into a fixed-rate one, the risk of interest rates increasing dramatically is removed, thus ensuring a steady interest rate over time.
Refinancing a loan or a series of debts can assist in paying off high-interest debt such as credit card debt, with lower-interest debt such as that of a fixed-rate home mortgage. The net savings between the two interest rates can then be applied either towards further paying down the debt, or other purposes. In addition, non-tax deductable debt, such as credit card or car loan debt, can be transformed into tax-deductable debt such as home mortgage debt, potentially lowering one's taxes or shifting one into a more advantageous tax bracket. This type of arrangement is often associated with a Cash-Out Refinance. [2]
2/11/07
Useful Links
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www.electroitems.blogspot.com
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www.refinancing4u.blogspot.com/
www.insuringhealth.blogspot.com
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www.loan4students.blogspot.com
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Finance
www.refinancing4u.blogspot.com/
www.insuringhealth.blogspot.com
www.creditcardfacilities.blogspot.com
www.loan4students.blogspot.com
Health
www.familyhealth4all.blogspot.com
www.cancertherapies.blogspot.com
www.insuringhealth.blogspot.com
Shopping
www.getonlybest.blogspot.com
www.electroitems.blogspot.com
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www.himtour.blogspot.com
Other
www.thehelpingheart.blogspot.com
1/27/07
10 Ways to deal with Debt.
The number of people facing difficulties with debts is rising, with many so desperate that they are willing to seek a new start through bankruptcy. But despite the relaxation of bankruptcy rules, this should still be the last resort. Follow our top ten tips to help you to start dealing with your debt problems:
1. Acknowledge that you have a problem Add up your borrowings and assets to get a clear picture of your financial state. The Consumer Credit Counselling Service (www.cccs.co.uk) has an online quiz designed to help you assess your debts. BackgroundTen ways to get back into the black What is an IVA? Ten ways to improve your credit rating Ten ways to deal with debt
2. Stop being afraid of debt collectors Do not be intimidated by a nasty voice on the telephone demanding payment. Debt collection agents are under investigation by the Office of Fair Trading (OFT) after officials uncovered evidence of heavy-handed tactics. If you have a complaint against a debt collection company, call the OFT on 08457 224499.
3. Never just pay the bank that shouts loudest Prioritise debts. Make your mortgage and debts secured on your property a priority — you risk losing your home if you default on these loans.
4. Seek free, informed advice Obtain professional help from someone who is not trying to relieve you of even more money. You can consult debt advisers from organisations such as Citizens Advice and adviceUK. Debtors can call the National Debtline helpline on 0808 8084000.
5. Beware of commercial debt companies offering help Debt advisers have attacked debt management and loan consolidation companies for exploiting customers with expensive fees and charges. Not all these companies are sharks but they are in the business of making money. At best, the solutions offered are appropriate for a tiny minority of borrowers.
6. Do not rule out going to the wall You may not believe that the stigma of bankruptcy has gone, but it has become easier to go bust. The period over which a bankrupt can discharge debts was cut last year from three years to one. Going bankrupt can mean losing your house and any vehicles you own, so it should not be taken lightly. It may also affect your chances of employment. There are severe penalties for those who have run up debts in a profligate manner and see bankruptcy as a mere formality.
7. Beware of firms offering an alternative to bankruptcy There has been a 70 per cent year-on-year rise in the number of people signing up to individual voluntary arrangements (IVAs). However, an IVA, a legally binding agreement in which an insolvency practitioner formulates a five-year repayment plan with a debtor’s creditors, suits only a small minority of debtors. The schemes typically levy fees of £7,000.
8.Discipline is crucial Some high street banks are encouraging customers who are suffering repayment difficulties to enter into agreements that consolidate all their borrowings into one loan. This can be a solution, but only if you stop spending.
9. Take a close look at free ways to escape debt Free debt management plans can be set up by Payplan (0800 0854298) and the Consumer Credit Counselling Service. They will organise monthly payments on your behalf and help you to negotiate with banks and credit card firms. 10. Stop using shopping as a form of therapy If your idea of stress relief is a spending spree with your flexible friend, find another hobby.
1. Acknowledge that you have a problem Add up your borrowings and assets to get a clear picture of your financial state. The Consumer Credit Counselling Service (www.cccs.co.uk) has an online quiz designed to help you assess your debts. BackgroundTen ways to get back into the black What is an IVA? Ten ways to improve your credit rating Ten ways to deal with debt
2. Stop being afraid of debt collectors Do not be intimidated by a nasty voice on the telephone demanding payment. Debt collection agents are under investigation by the Office of Fair Trading (OFT) after officials uncovered evidence of heavy-handed tactics. If you have a complaint against a debt collection company, call the OFT on 08457 224499.
3. Never just pay the bank that shouts loudest Prioritise debts. Make your mortgage and debts secured on your property a priority — you risk losing your home if you default on these loans.
4. Seek free, informed advice Obtain professional help from someone who is not trying to relieve you of even more money. You can consult debt advisers from organisations such as Citizens Advice and adviceUK. Debtors can call the National Debtline helpline on 0808 8084000.
5. Beware of commercial debt companies offering help Debt advisers have attacked debt management and loan consolidation companies for exploiting customers with expensive fees and charges. Not all these companies are sharks but they are in the business of making money. At best, the solutions offered are appropriate for a tiny minority of borrowers.
6. Do not rule out going to the wall You may not believe that the stigma of bankruptcy has gone, but it has become easier to go bust. The period over which a bankrupt can discharge debts was cut last year from three years to one. Going bankrupt can mean losing your house and any vehicles you own, so it should not be taken lightly. It may also affect your chances of employment. There are severe penalties for those who have run up debts in a profligate manner and see bankruptcy as a mere formality.
7. Beware of firms offering an alternative to bankruptcy There has been a 70 per cent year-on-year rise in the number of people signing up to individual voluntary arrangements (IVAs). However, an IVA, a legally binding agreement in which an insolvency practitioner formulates a five-year repayment plan with a debtor’s creditors, suits only a small minority of debtors. The schemes typically levy fees of £7,000.
8.Discipline is crucial Some high street banks are encouraging customers who are suffering repayment difficulties to enter into agreements that consolidate all their borrowings into one loan. This can be a solution, but only if you stop spending.
9. Take a close look at free ways to escape debt Free debt management plans can be set up by Payplan (0800 0854298) and the Consumer Credit Counselling Service. They will organise monthly payments on your behalf and help you to negotiate with banks and credit card firms. 10. Stop using shopping as a form of therapy If your idea of stress relief is a spending spree with your flexible friend, find another hobby.
From Times Online
1/13/07
Asset
In business and accounting an asset is any economic resource controlled by an entity as a result of past transactions or events and from which future economic benefits may be obtained. Examples include cash, equipment, buildings, and land.
Debt
Debt is that which is owed; usually referencing assets owed, but the term can cover other obligations. In the case of assets, debt is a means of using future purchasing power in the present before a summation has been earned. Some companies and corporations use debt as a part of their overall corporate finance strategy.
A debt is created when a creditor agrees to loan a sum of assets to a debtor. In modern society, debt is usually granted with expected repayment; in many cases, plus interest. Historically, debt was responsible for the creation of indentured servants.
A debt is created when a creditor agrees to loan a sum of assets to a debtor. In modern society, debt is usually granted with expected repayment; in many cases, plus interest. Historically, debt was responsible for the creation of indentured servants.
Interest
Interest is the "rent" paid to borrow money. The lender receives a compensation for foregoing other uses of their funds, including (for example) deferring their own consumption. The original amount lent is called the "principal," and the percentage of the principal which is paid/payable over a period of time is the "interest rate."
Mortgage Loan
Mortgage loan is the generic term for a loan secured by a mortgage on real property; the "mortgage" refers to the legal security, but the terms are often used interchangeably to refer to the mortgage loan. Mortgage loans generally refer to a loan secured by residential property, often for the purpose of acquiring the residence. Mortgage loans may be lower priced than other forms of borrowing because the value of the property reduces risk for the lender.
Mortgage lending is the primary mechanism used in many countries to finance private ownership of residential property. For commercial mortgages see the separate article. Although the terminology and precise forms will differ from country to country, the basic components tend to be similar:
Property: the physical residence being financed. The exact form of ownership will vary from country to country, and may restrict the types of lending that are possible.
Mortgage: the security created on the property by the lender, which will usually include certain restrictions on the use or disposal of the property (such as paying any outstanding debt before selling the property).
Borrower: the person borrowing who either has or is creating an ownership interest in the property.
Lender: any lender, but usually a bank or other financial institution.
Principal: the original size of the loan, which may or may not include certain other costs; as any principal is repaid, the principal will go down in size.
Interest: a financial charge for use of the lender's money.
Foreclosure or repossession: the possibility that the lender has to foreclose, repossess or seize the property under certain circumstances is essential to a mortgage loan; without this aspect, the loan is arguably no different from any other type of loan.
Many other specific characteristics are common to many markets, but the above are the essential features. Governments usually regulate many aspects of mortgage lending, either directly (through legal requirements, for example) or indirectly (through regulation of the participants or the financial markets, such as the banking industry), and often through state intervention (direct lending by the government, by state-owned banks, or sponsorship of various entities). Other aspects that define a specific mortgage market may be regional, historical, or driven by specific characteristics of the legal or financial system.
Mortgage lending is the primary mechanism used in many countries to finance private ownership of residential property. For commercial mortgages see the separate article. Although the terminology and precise forms will differ from country to country, the basic components tend to be similar:
Property: the physical residence being financed. The exact form of ownership will vary from country to country, and may restrict the types of lending that are possible.
Mortgage: the security created on the property by the lender, which will usually include certain restrictions on the use or disposal of the property (such as paying any outstanding debt before selling the property).
Borrower: the person borrowing who either has or is creating an ownership interest in the property.
Lender: any lender, but usually a bank or other financial institution.
Principal: the original size of the loan, which may or may not include certain other costs; as any principal is repaid, the principal will go down in size.
Interest: a financial charge for use of the lender's money.
Foreclosure or repossession: the possibility that the lender has to foreclose, repossess or seize the property under certain circumstances is essential to a mortgage loan; without this aspect, the loan is arguably no different from any other type of loan.
Many other specific characteristics are common to many markets, but the above are the essential features. Governments usually regulate many aspects of mortgage lending, either directly (through legal requirements, for example) or indirectly (through regulation of the participants or the financial markets, such as the banking industry), and often through state intervention (direct lending by the government, by state-owned banks, or sponsorship of various entities). Other aspects that define a specific mortgage market may be regional, historical, or driven by specific characteristics of the legal or financial system.
Mortgage
This article is about the legal mechanism used to secure property in favor of a creditor. For loans secured by mortgages, such as residential housing loans, see mortgage loan.
A mortgage is a method of using property (real or personal) as security for the payment of a debt.
The term mortgage (from Law French, lit. death vow) refers to the legal device used in securing the property, but it is also commonly used to refer to the debt secured by the mortgage, the mortgage loan.
In most jurisdictions mortgages are strongly associated with loans secured on real estate rather than other property (such as ships) and in some cases only land may be mortgaged. Arranging a mortgage is seen as the standard method by which individuals or businesses can purchase residential or commercial real estate without the need to pay the full value immediately. See mortgage loan for residential mortgage lending, and commercial mortgage for lending against commercial property.
In many countries it is normal for home purchases to be funded by a mortgage. In countries where the demand for home ownership is highest, strong domestic markets have developed, notably in Spain, the United Kingdom and the United States.
Definition > Advantages > Risks > Points or premiums > References > External links
A mortgage is a method of using property (real or personal) as security for the payment of a debt.
The term mortgage (from Law French, lit. death vow) refers to the legal device used in securing the property, but it is also commonly used to refer to the debt secured by the mortgage, the mortgage loan.
In most jurisdictions mortgages are strongly associated with loans secured on real estate rather than other property (such as ships) and in some cases only land may be mortgaged. Arranging a mortgage is seen as the standard method by which individuals or businesses can purchase residential or commercial real estate without the need to pay the full value immediately. See mortgage loan for residential mortgage lending, and commercial mortgage for lending against commercial property.
In many countries it is normal for home purchases to be funded by a mortgage. In countries where the demand for home ownership is highest, strong domestic markets have developed, notably in Spain, the United Kingdom and the United States.
Definition > Advantages > Risks > Points or premiums > References > External links
Loan
A loan is a type of debt. All material things can be lent but this article focuses exclusively on monetary loans. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower. The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt.
Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply.
Definition > Advantages > Risks > Points or premiums > References > External links
Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply.
Definition > Advantages > Risks > Points or premiums > References > External links
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