The Pros and Cons of Credit Card Balance Transfers

Credit card balance transfers can save you a lot of money if you consolidate your debts from other credit cards with high balances.

If used wisely, low interest credit card balance transfers can be an excellent way to reduce your interest payments. If used poorly, a balance transfer could cost you even more in interest and fees.

Home Line Of Redit

As always, you need to read the fine print in any balance transfer agreement before you sign the dotted line. There are a number of things you need to look out for.

The first thing you need to look for is the length of time the low interest rate on your transfer will be upheld. Some of the best offer the same low interest rate on the transferred balance for the life of the balance. Other cards will offer a low rate for a set period of time and then revert to the credit card's regular interest rate if the transferred balance is not paid off in full before the interest rate change. If you've transferred a large balance and don't pay it off in time you could wind up paying even larger interest payments than before you transferred the balance.

You also need to find out if you'll be charged a fee for a balance transfer. The fee could either be a flat sum or percentage of the debt you plan to consolidate. If you have time to shop around you may be able to find a credit card that offers free balance transfers.

The last thing you'll want to look for is a listing of the penalties for late or missed payments. Some companies will immediately cancel your low interest rate, jack up your rates as high as 20+ percent and charge you a hefty late fee if your payment is even minutes late getting to the payment processing center. If the credit card you want to transfer a balance onto has a "universal default" clause your interest rate could increase drastically if you are late paying any bill whatsoever. Pay your electric bill late and your interest rate could skyrocket!

As long as you make all your required payments on time you don't have to worry about the penalties for a late or missed payment. Being aware of the penalties should provide all the encouragement you'll ever need to try to pay all your bills on time.

You also need to keep in mind that any additional balance or purchases you make with the credit card will be paid for after your low balance transfer is paid off. If you have a ,000 transfer with a 2.9 percent interest rate and spend an additional ,000 in purchases on your credit card at a 12.9 percent rate, your balance transfer will be paid off first. Rack up too many additional purchases and you won't be saving as much money in interest as you originally anticipated.

A credit card balance transfer could be an excellent idea or a very bad idea depending on your circumstances and how long it may take you to pay off the transfer. Only careful planning and a full understanding of the potential pros and cons will help you maximize the usefulness of a balance transfer.

The Pros and Cons of Credit Card Balance Transfers

Virginia Home Equity Line of Credit (HELOC) Loans

If you're shopping around for new credit and you own a home, a home equity line of credit, or HELOC, is an option. Using the equity in your home, you can qualify for a large amount of credit at a fairly low interest rate.

A home equity line of credit is a revolving credit account that uses your home as collateral. Depending on the amount of equity you have in your home, it's possible to obtain a large credit limit, much larger than most credit cards allow.

Home Line Of Redit

With most HELOCs, your credit limit is calculated by using a percentage of the home's value and subtracting the balance of the mortgage. So, your HELOC limit might not equal the full amount of equity you have in your home. Even so, it's possible to have a credit limit of ,000 or more, depending on your home's equity.

The application process and fees associated with an HELOC are very similar to those of a mortgage. As such, it's common for initial fees to total several hundreds of dollars. So, when you're choosing a HELOC it's important that you shop around for the best terms, the same way you'd shop around for a mortgage. Because interest rate and fees vary from one lender to the next, getting a few loan quotes is important to minimize your cost in terms of interest rate and fees.

Shopping around for an HELOC by getting free loan quotes is a more effective way of finding a loan than simply choosing a lender through other arbitrary means. When you compare loan quotes from several different lenders, it's likely that you'll find lower interest rate and fees with a lender that you didn't first consider.

Get free loan quotes for different lenders before you make an application for a home equity line of credit.

Virginia Home Equity Line of Credit (HELOC) Loans

Home Equity - What You Can Do With It

Home Equity

Home equity is the value of your home above the total amount of the liens against your home. For example if you owe 0,000.00 on your house but it's worth 5,000.00, you have ,000.00 of home equity.

Home Line Of Redit

What You Can Do with It

Simple, you can borrow against it! You can either apply for a home equity line of credit (HELOC) - a form of revolving credit - or, obtain a traditional second mortgage. In both scenarios, your home will serve as collateral.

Naturally, you will have to qualify for this loan. The lender will evaluate your ability to repay the loan by looking at your financials. Lenders will approve a specific amount of credit. This amount is generally based on a percentage of your home's appraised value.

For example, if you were to apply for a HELOC using the numbers above, here is how it would look: your home appraises for 5,000.00 and the lender qualifies you for a line of credit of up to 80% of the home's appraised value or 6,000.00. Subtract the 0,000.00 that you owe on your first mortgage and you have ,000.00 left, thus your HELOC will be for ,000.00.

There are many different home equity plans and they change all the time; do your homework before signing on the dotted line.

A word of Caution

Just as with a first mortgage, you will lose your home if you don't pay back your line of credit. If you were to default on your payments, the lender will start the foreclosure process in an effort to recuperate the outstanding monies owed.

Conclusion

Borrowing against your equity can be a great source of extra capital, just make sure you do so responsibly. Before entering into a commitment, consider how you will pay back the money you are about to borrow.

Good Luck!

Dimitri Larno
Designated Broker - Realtor®

Home Equity - What You Can Do With It

Buying a Home afterwards Foreclosure - Ways to Get Approved

Before attempting to buy a home after foreclosure, it is important to educate yourself on the necessary steps, and improve your odds of getting approved. Certain situations are extremely damaging to your credit report. These include bankruptcy, foreclosure, repossession, etc. Fortunately, you can rise from a bad credit situation. Here are a few tips to help you get approved for a mortgage after a foreclosure.

Negative Effects of a Home Foreclosure

Home Line Of Redit

Aside from embarrassment and shame, having a home foreclosure will significantly decrease your credit score. Immediately following a foreclosure, it is difficult to obtain any type of credit, especially a home loan. Because many factors contribute to the inability to repay a mortgage loan, those who experience a foreclosure may be able to afford a new home loan.

For example, if foreclosure was due to loss of employment, once the previous homeowner finds work, they may be able to handle a new mortgage. The problem lies in getting approved. Lenders could careless about the circumstances surrounding bad credit. Their main concern is determining whether you are a good candidate for a loan. Thus, it is essential to improve credit before applying.

Maintain Regular Payments with Existing Creditors

The best approach for improving your credit score following a foreclosure is to keep up with regular payments to your other creditors. For example, if you have three credit cards, make an effort to pay the bills on time. If possible, payoff the credit card balances. This will increase your available credit, which is perfect for quickly boosting credit rating.

If you do not have a credit card, another tactic involves applying for a new line of credit. This might consist of an auto loan or secured credit card. Likewise, maintain on-time payments. Be aware that late payments or skipped payments will cause further damage to your credit rating.

Choose a High Risk Mortgage Lender

If applying for a mortgage after a foreclosure, many traditional lenders will not approve a loan request. For this matter, request quotes from several sub prime or high risk mortgage lenders. These lenders approve loans to people who have a difficult time securing financing.

Buying a Home afterwards Foreclosure - Ways to Get Approved

How Do HELOC's (Home Equity Lines of Credit) Work?

A home equity line of credit, or HELOC, is a secondary mortgage loan set up as a line of credit that lets homeowners withdraw funds for a variety of purposes. These mortgage loans are used to fund sporadic needs such as debt reduction, home improvements, college expenses, etc.

HELOC's have a withdraw period, wherein the borrower can draw on the line, and a repayment period, in which the funds must be repaid. Standard withdrawal periods are five to ten years. On the other hand, repayment periods are extended - usually ten to twenty years. The distinction between the two periods is that borrowers are only obligated to pay interest in the withdrawal period, whereas the repayment period includes a payment of interest and principle. Home equity lines of credits vary, and some require repayment of the entire balance once the initial withdrawal period ends.

Home Line Of Redit

How to Qualify for a Home Equity Line of Credit

To qualify for a HELOC, mortgage lenders look at the loan-to-value ratio. The majority of home equity lines of credit require a LTV less than 75%. In other words, if your mortgage balance is 5,000, and your home is worth 0,000, the loan-to-value is 50%, and you are eligible for the loan.

What's more, mortgage lenders have to ascertain that an applicant can pay back the withdrawal money. To meet the criteria for a home equity line of credit, the borrower's debt-to-income ratio, which includes payment for the HELOC, must be less than 55%.

Home Equity Line of Credit Disclosures

Disclosure statements contain important information about HELOC's. Terms vary according to plan, and each borrower should set aside time and review disclosure contents. The home equity line of credit terms are subject to change. For example, the interest rate can increase. Additionally, the mortgage lender can terminate the line if the following occurs:

1. If borrower defaults on repayment

2. If borrower's financial circumstances change

3. If borrower falsified loan documents

4. If the property's value decreases

How Do HELOC's (Home Equity Lines of Credit) Work?

Home Equity Loans vs Home Equity Line Of Credit

A home equity line of credit is quite similar to a home equity loan. However, there is a difference between the two and it is in your best interests to understand it so that you know which option is the best suited for your needs and requirements.

A home equity loan is very much like a mortgage wherein you can borrow an amount based on the equity of your home. In other words, home equity builds as you keep clearing the mortgage. It is the value of your home that you have already paid off and this is the part that you actually own. You receive the money in a lump sum after you close the loan.

Home Line Of Redit

Home equity line of credit is also based on the amount of the home you own but the loan terms are different. This works like a credit card where the amount you receive is limited to the equity you own in the home. You do not receive the money as a lump sum. Instead you can withdraw the amount as and when you need the money.

When you take a loan against the equity in your home, you already know the monthly payments you have to make. However, when you avail a line of credit against your home equity, the payments as well as the interest vary. You pay only for what you use.

If you need a lump sum to settle debts or you want to use the money for funding something, you should opt for a home equity loan. However, if you are not aware of an expense like that involved in traveling or starting a new business, you should opt for home equity line of credit.

Home Equity Loans vs Home Equity Line Of Credit

My Home Equity Line of Credit Was Just Cut Off - What Should I Do?

Lenders have been freezing or cancelling home equity lines of credit  (HELOC) for homeowners recently.  This has been in response to declining property values.  This can really be hurtful to a homeowner who has been using and depending upon their HELOC.  What can be done?

Well, a slowdown in consumer spending is not going to help our economy at this juncture, that is for sure.  Homeowners in debt, investors who buy and sell or build spec homes,  parents with children in college, the list goes on and on, but everyone will be affected. 

Home Line Of Redit

I know being told by your bank that your HELOC has been cut off comes as a shock.  Many consumers needed access to what remained on their credit line.  They have lost their "cushion".  What is they just got downsized and lost their employment and were using that HELOC money to pay their health insurance COBRA benefits every month until they can find work again?  Their only recourse now may be to utilize their credit cards, and that carries high interest and will ultimately push them farther into a "hole" financially.  Credit card, as consumer debt, is interest paid out that cannot be deducted for income tax purposes.

A study by the National Association of Securities Dealers has revealed that many people take HELOC's to invest in the equity and bond markets, there are certainly a lot of opportunities there right now.  Closing people's HELOC lines will have an impact on the financial markets now.

Now that property values are down, it is a buyers' market and an excellent buying opportunity indeed.  Many people planned on using HELOC funds for the down payment on investment properties or a second home or vacation cabin.

Well, here are some suggestion:

First, get a new appraisal done on your home.  Find out where you stand with regard to Loan To Value (LTV) because that is the figure that is going to be looked at by the lender.  Generally do not count on being able to take cash out of your home's equity if your LTV is greater than 80%.  Your current mortgage(s) balance(s) divided by current home value = LTV.

If your LTV is less than 80%, consider visiting your lender with specific plans for how you wanted to utilize the HELOC funds and your new property appraisal in hand.  Lenders are in business to lend and individual situations will certainly be considered.  Obviously it helps if you have good credit and have not missed/been late on any mortgage payments!

It may be possible, if you wanted to buy a second property, to set up a new HELOC that is liened to both properties, to give the lender more assurance.

As always, consult a good mortgage broker for guidance and suggestions.

My Home Equity Line of Credit Was Just Cut Off - What Should I Do?