World Economy Archives – Refinance – Mortgage Refinancing Rates And Information

Loan Modification or Debt Consolidation, what are the choices?

September 8th, 2009 No comments

The current credit crisis has caught the whole world by surprise. Loans, credit cards, mortgages and the secondary loans that they secured all trembled when the whole world got a reality check on the world economy. The prices of homes seemed to never stop rising and banks were fighting each other to lend out money without caring too much about credit rating and income / expense ratios.

Of course when mortgage securities failed, people couldn’t afford to pay their credit cards, loans and mortgages and homes started to lose value things got bad. Millions of families now face losing their home. Many would say that it is part of life. That owning a home is not a civil right, it is a privilege and there is no shame in renting. I wholeheartedly agree, I have rented most of my life and my parents at 67 still rent and they are the happiest couple you will meet.

However 9 million families facing mortgage foreclosure is a big number for any economy to face, even the United States economy. The effect on consumer spending, and the economy as a whole is huge and there is also a case for the government to try and stop some of these foreclosures for the greater good.

This has caused the government to start a number of loan modification programs to try and alleviate the situation. However the progress has been slow and some feel that the measures taken are simply not what the economy needs. Some have pointed out that the we are facing a credit crisis not a housing or mortgage crisis. You could compare it to giving away water to people in a sinking boat. The water is going to help but what they really need is a raft and some water.

Loan modifications help home owners that tied themselves to a bad interest rate to have access to premium interest rates and reduce monthly payments. It also provides bonuses to borrowers and lenders when the loan modifications are successful. This is useful and has helped many. However if you are financially underwater with other debts and loans, getting help on one of these debts might not be enough to make a difference.

Debt consolidation can provide a more suitable lifeboat for those that are crushed by numerous debts that drain their monthly income. Debt consolidations consist of a large loan that pays for all the debts a borrower has. Debt consolidation loans typically have a lower interest rate than car loans and credit cards although generally higher than premium mortgage rates. The new debt consolidation loan helps to put all debts into one manageable monthly payment that can provide real help to borrowers. The only problem is that they can be very expensive and cause borrowers to re-mortgage their home sometimes putting their home at risk for loans that did not have a home as security.

Share At:

Hide Sites

How To Land A Good Deal On Your Loan Modification

July 25th, 2009 No comments

We live in a dog eat dog world that works for the loans, mortgages and DVD rental companies when you are late in returning a DVD, there is no mercy, you have to look after yourself and know what you are doing or get ready to lose some serious money. Finding a good deal in a competitive and complicated market like the credit industry is no easy task, fortunately it is not impossible and you don’t have to be a MENSA member to find a good loan modification for your mortgage or loan. You do however have to understand the basics of mortgages, loans and their respective modifications.
It is useful to view mortgages as the most basic investment a bank can make, that is an investment in you. They give you cash and get a steady return on their investment in the form of interest payments while they get their initial capital back with your principal payments. The rate of interest will depend on the going rate when you contracted the loan, how good your credit record was, how savvy you were when negotiating the loan conditions or a combination of all three of those factors.
Depending on the world economy, the going interest rate set by governments and a number of other factors banks are willing to lend at a lower or higher interest rate. If you can find a bank (it can be the same lender you are using now, or another one) that will lend you money at a cheaper interest rate you might be able to modify your mortgage to a lower interest rate. Similarly if you are struggling to make your mortgage payments you might be able to find a lender that will lend you the same amount but allow you a longer period of time to pay back, this will have the effect of lowering your monthly payments while increasing how much interest you pay on your mortgage. You can also modify your loan to increase the amount of cash you borrow or you could decide on any combination of all three options, lower interest, longer tenure and larger loan.
The key to find a good deal on your loan is to first check how expensive modifying your loan will be. To find this out you will need to know all the fees and costs your current lender is planning to charge you (a.k.a prepayment penalty fee) for paying early and depriving them of the interest you promised to pay and the fees your new lender will require to process the new loan with the modification you want. If you use a middleman business to process your application you will have to pay for their fee also. We don’t necessarily recommend this as most people can handle the paperwork themselves and the application businesses can’t do anything for your mortgage that you can’t do yourself.
Once you know the cost of a loan modification you need to know how much you are going to save with the loan modification. Savings can come in the form of lower interest rates or a shorter tenure. If you pay lower interest rates your overall interest payments for the mortgage can drop considerably and pay off your loan modification expenses in a matter of one or two years reaping substantial savings.
Of course the reason you want to modify your loan maybe not so much to save money but to make your payments affordable and this might involve lengthening your mortgage which will make your mortgage more expensive but at least you won’t lose your home.
It is as simple as that, compare the cost (real cost) of the loan mod and compare it to your savings, if there is a substantial saving you have found yourself a good deal.