With the emergence of a housing affordability crisis in Australia the new ‘shared equity mortgage’ scheme for first home buyers and families is being touted as the new life line for prospective home owners.

A recent first home buyer survey in Australia conducted by Genworth Financial on 2000 adults discovered that 70% of participants surveyed would like to purchase a home within the next 3 years however only 43% of this group expect to be able to do so. A further 29% of non property owners in this group admitted that they believed it was unlikely they could save a deposit and cited rising rental costs as the main reason. Almost 66% of the first home buyers surveyed rent privately and one in four still live with their parents, the average age of the first home buyer was 27.

The survey findings concur with what many Australians already know that home ownership has become out of reach for the average Australian family and a helping hand is definitely needed to overcome this stigma.

One of the most recent housing affordability strategies is the ‘Shared Equity Mortgage’. Shared equity loans enable borrowers to purchase a bigger and better home than they would normally be able to afford. These types of loans are generally available for first home buyers and existing home owners who need relief from their mortgage repayments. The home owner takes out a 20% Equity Finance Mortgage (up to 40% is available) which effectively lowers their monthly loan repayments and frees up their cash flow.

When paying off the loan the borrower must pay the lender the original 20% plus 20% of the home’s appreciation as a substitute for no interest being charged on this portion of the loan over the loan term. If there has been no property growth or the property has declined in value then the lender will not receive any return on the loan or they may receive less than was initially lent to the borrower. Thus the lender shares in both the capital gains and the capital losses on the property. Because the shared equity loan is a mortgage product the lender never actually owns any part of the borrowers property.

The upside of the shared equity loan product is that first home buyers, individuals and families that faced little prospect of owning their own home do now have a life line available to them and this loan product may just be the one to realize the aussie dream of owning their own home. The downside is that you will need to share any equity gains in the property over the term of the loan or on the sale of the property with the lender. Ultimately the decision lays with the first home owner, if faced with a life time of renting the shared equity mortgage offers a viable option to home ownership.

© Rob Donald, Altrust Finance Group 30th August 2007
www.altrust.com.au

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The credit crisis is realality and has been absolutely devastating to commercial real estate investors. Large, conventional lenders such as national banks, Wall Street investment houses, Connecticut insurance companies and large multinational corporations (i.e. GMAC) have stopped making loans that can’t be sold to the Government or securitized. GSEs (Government Sponsored Enterprises) like Fannie Mae, Freddie Mac, Ginnie Mae, HUD (Housing & Urban Development) and FHA (Federal Housing Administration) are doing their best, providing as much liquidity as they can, but the bond market has stopped functioning as a provider of capital. There is still a massive shortage of money to lend. Hundreds of billions of good loans that should be approved are being turned away.

Desperate commercial real estate professionals are scrambling to find lenders who are actually willing to lend. Borrowers seeking alternative funding sources are increasingly turning to private equity firms to secure the funding they need.

Private equity firms are investment companies set up to invest the wealth of their sponsors and investors. They are similar to hedge funds in some respects but are structured a bit differently and can be more flexible and creative in their investment policy. Many private equity companies are flush with cash and hungry for good deals. Developers and property owners that have developed a relationship with private equity firms enjoy a reliable source of money for their real estate ventures.

Very few private equity companies are set up exclusively to be commercial mortgage lenders. Most are designed to use sophisticated LBO (leveraged-buy-out) strategies to acquire other successful businesses. However, many firms have real estate divisions that are willing to make loans and / or take equity positions in good deals they come across. These firms usually have a degree of expertise in commercial real estate and have a healthy appetite for mortgage paper.

Private equity firms are highly opportunistic and seek high returns. They charge interest rates in the mid-teens and usually tack on several origination points as-well. Private loans are not inexpensive, but at least they are available. Private equity companies lend based on the amount of equity in the collateral real estate; their loans are not driven by credit. Many borrowers with less-than-perfect credit are surprised to learn that they still qualify for an equity based loan from private equity.

Private equity is protective of its investment capital; they demand a significant amount of equity in any deal they fund. It is exceedingly rare for a private equity loan amount to exceed 65%-70% of the value of the target property. Most loans they make are “bridge” type loans that mature in less than 36 months. Before they lend money they must be confident that the borrower has a viable exit strategy.

With the banks and other big lenders out of the picture, private equity has been stepping in to take advantage of the huge commercial real estate mortgage market. For borrowers fortunate enough to know who they are and how to approach them, private equity can provide all the money they need. Borrowers without established relationships with private equity will need to use intermediary, agent or consultant that has Wall Street experience to gain excess.

MasterPlan Capital LLC (http://www.masterplancapital.com) offers private and institutionally funded commercial mortgage loans, equity financing and asset management services to commercial property owners and investors nationwide. CLICK HERE TO APPLY FOR FINANCING – Please visit out our blog.

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FANNIE MAE REDEMPTION
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Poor credit can really come in the way of loan approval. Records of missed payments, late payments, defaults, CCJs, IVAs and bankruptcy can damage your prospects in the financial world. However, with the help of your home equity, the scenario can be changed. There are loan schemes that allow you to avail financial backing even though you have an adverse credit history as long as the equity of your home is valuable enough. Such loans are called bad credit home equity loans.

Bad credit home equity loans are obtained by pledging your home equity as collateral. The equity of your home is its monetary value remaining after the deduction of any mortgage or claim upon it. By placing this market value as collateral, you can secure sufficient funds for any purpose- home renovation, auto financing, medical and education expenses, paying off outstanding debts, and so on.

Bad credit home equity loans can guarantee a loan amount up to 80% of your home equity. Though generally speaking, an amount fro £3000 to £100000 can be borrowed. Repayment period may extend up to 25 years. Due to the presence of collateral, the interest rate charged is comparatively low for a bad credit loan and remains fixed during the entire loan term, thereby allowing installments in small amounts. Still, it is better to complete repayment as soon as you can in order not to end up paying too much in terms of interest.

Home equity loans are offered by various banks, financing companies and online lenders. As the financial industry is a competitive world, loan offers come with viable rates and terms. Take out time to compare the quotes of different lenders to arrive at an idea of which loan scheme has the best terms of repayment and most affordable rates in the market.

Your home equity can thus rescue from getting trapped in a financial crisis. Moreover, by paying off the bad credit home equity loan that you have taken with its help, your damaged credit can be repaired and improved again.

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A home equity line of credit allows you to draw on your home?s equity without having to pay for closing rates. For those with bad credit, credit secured by your equity can provide you with low rates. Using your credit wisely, you can use a line of credit to reestablish a good credit rating. However, you need to choose the right lender to be sure you are getting a good deal on your rates and fees.

What To Look For In A Home Equity Line Of Credit

With poor credit, you need to be especially careful of the terms you agree to with a line of credit. With most lenders, you will not have to pay any closing fees. So you save on upfront costs of a second mortgage.

Your rates can be fixed or adjustable. With most lenders, adjustable rates start out lower than fixed rate loans. Lines of credit also allow you to borrow funds as needed. So you only pay interest on the amount you use.

Fees are also part of a line of credit. You may possibly have early payment, minimum balance, or other fees. Before signing a contract, understand how fees will affect your credit plans. For example, if you want to pay off your line of credit in a year, then ask for an early payment fee to be removed.

Different Lenders Mean Different Terms

Different lenders write their loan terms differently. Variations in rates should be expected, but so should differences in fees, payment schedules, and future refinancing possibilities.

While low rates are important, also take a look at terms when considering lenders. Savings can also be found by picking financing with low fees for balances and refinancing.

How To Compare Lenders

To compare lenders, you need to start by requesting credit quotes. With adverse credit scores, work with sub-prime lenders.

Most companies use a website where you can enter your information to get an instant quote. Besides looking at rates, also note the terms.

Most financial offers will disclose fees, payment structure, and refinancing costs. If they don?t list basic terms, then request additional information before committing to an offer.

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Home equity loans are a way of using the money that you’ve
invested in your mortgage by borrowing against it. Essentially,
a home equity loan is a ’second mortgage’ – a loan secured by
your property. If you don’t make good on your payments, the
lending company or bank can force the sale of your house to
recover their money.

There are two major types of home equity loans – home equity
loans and home equity lines of credit, also called HELOCs. Most
lenders that offer home equity loans offer both kinds. A home
equity loan for $10,000 and a home equity line of credit for
$10,000 are two completely different animals though they have a
lot of similar features.

Home Equity Loan

If you apply for and are granted a home equity loan for $10,000
at 7% APR for 15 years, you will receive a check or a deposit to
your bank account of $10,000. That is the full amount of the
loan that you can ever draw on that particular application.
Depending on the terms agreed upon, you may have one to several
months before you have to begin repaying the loan. You’ll pay a
fixed amount every month until the full amount of the loan and
the interest charge is paid off. You’ll know from the very start
how much you’ll be repaying.

Home Equity Line of Credit

A home equity line of credit – a HELOC – is much more like a
credit card. When you apply for and are granted a home equity
line of credit, the bank establishes a ‘line of credit’ – which
functions just the way that a ‘credit limit’ does on your credit
card. You may receive special checks or a plastic card with
which to access your line of credit – but you don’t receive the
full amount at one time.

In fact, you don’t have to take any of it immediately. You can
draw on the line of credit at any time, up to the full amount of
the line of credit throughout the agreed-upon life of the loan.
Suppose that you’re doing some home repairs. You can use your
home equity line of credit to pay for $2,000 worth of roofing
tiles. That leaves you $8,000 in your line of credit. Three
weeks later, you can use your line of credit to pay for $4,500
worth of windows – and still have $3,500 left that you can
borrow against.

If you then start paying back on your home equity line of
credit, that money becomes available to you again. If you pay
back $1,000 of what you’ve borrowed, you now have $4,500 on your
line of credit.

A home equity line of credit has two ‘phases’ – there is the
draw period, during which time you can draw against the credit
limit as long as you stay below the limit. During that time, you
can elect to only pay the interest that accrues – or you can
make payments on the principal to free it up. Once the draw
period is over, you go into the repayment period. During the
repayment period, you can’t draw against the line of credit any
longer, and must make full repayment.

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Careful equity loan rates shopping are the best way to get a good result for your loan.  There are many factors that enter into the rates charged to a prospective borrower. While the lender you pick can be very helpful in this process, you should also make a point of understanding and researching the subject yourself.  You won’t be surprised by a clause or term that you hadn’t considered if you have learned the basic terms, understand how the rates and terms work together and what impact your credit score has on the cost of your loan.

Check the prime rate

The prime rate is the amount of interest charged to the best banks for their loans.  Many equity loan rates and other loans are based upon the prime rate plus some factor.  This allows for a simple check or review of the pattern of increases and decreases in the loan rates.  There are other factors regarding the interest rate that will be charged on a specific loan, such as the credit score, the size of the loan and even the size of the funding available to the lender. You should not expect to receive prime rate for your loan, but a lower rate will be available to the best customers.

Know Your Lender

When you are shopping for equity loan rates for your loan application, it is important to know who the potential lenders are.  If you find an individual or company who offers a great loan rate, you should do the due diligence necessary to know whether the lender is one you will be able to work with. Check the reputation of the lender.  This can easily be done online at forums or other sites that specialize in consumer reporting. Another site to check is the Better Business Bureau.

Downsize the Loan

You will get better equity loan rates, generally, if you reduce the size of the loan. This must be balanced with the ability of the lending institution to fund the loans.  Some lenders will not take a small equity loan while others won’t be able to handle a super loan, no matter how eligible the borrower is in terms of creditworthiness.  A smaller loan typically is easier for the borrower to repay.  In shaky economic times, it makes sense to borrow no more than you are certain of being able to repay under normal income circumstances.

Look at the Big Picture

Equity loan rates for the refinancing of your home are just part of the economic picture for your household. You must also take into consideration the amount that you have been paying for credit card debt.  You may want to access the equity in your home to start or improve a business.  You may be planning on the remodeling or renovation of your home.  Perhaps you are planning for the equity in your home to provide a college education for yourself or your children. In any case, look at the special circumstances that apply to your home and use them to your advantage.

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These days, borrowers use Home Equity Lines of Credit (HELOCs) to assist with all sorts of expenses. Some of the most popular reasons for taking out a HELOC are college tuition, medical expenses, home remodeling, and debt consolidation. Because the interest is tax-deductible, a HELOC can be a very attractive option when you need to borrow money. You may also take out a HELOC at the same time that you secure your first mortgage when buying a home in order to finance a greater percentage of what the home is worth without the need for mortgage insurance.

Whatever the circumstance were when you took out your HELOC, the time may come when you decide to refinance it. The factors pertaining to why and how you go about refinancing your HELOC will be as individual as you are. Make sure you have clear goals as to why you are refinancing, and be certain those goals can be met by the program you choose.

One reason to refinance a HELOC, and the first one that comes to most people’s minds, is the interest rate. This may or may not be a good reason depending on a few factors. Your HELOC carries an adjustable rate; therefore if rates go down, so should your payment amount. If rates are steadily rising, however, and especially if they’re expected to continue to rise, refinancing your HELOC back into your first mortgage, or into a closed-end second mortgage with a fixed rate, might make the most sense.

If you originally took out your HELOC for a project or expense such as college tuition or home remodeling and that project is now completed, you may just be looking to refinance your first mortgage and your HELOC into one loan with a low fixed rate to avoid the potential for a rising rate and increasing payments in the future. Having a single loan with a fixed rate offers you the satisfaction of knowing that your payment amount will never go up.

Conversely, if you’ve come to the conclusion that you need to be able to draw more from your HELOC than you’d first thought, you can refinance it or, more correctly speaking, take out a new HELOC for a greater value. Keep in mind that you’ll have to pay additional closing costs, and that unless you can start making much larger payments, it will take you longer to pay back the larger HELOC amount. You should carefully consider your needs and options before opting for a HELOC with a larger credit line.

When the time comes to refinance your HELOC, don’t hesitate to consult with a financial planner or a loan officer. These professionals can advise you on whether your reasoning is financially sound and about the kind of program you should choose to meet the needs and goals you’re setting for yourself.

For more articles on HELOC, visit: http://www.bills.com/refinancing-your-heloc-article/

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Several options are available when deciding to refinance your home equity line of credit. You can opt to refinance all your mortgages into one. Or you can rollover your line of credit into a second mortgage. Available terms and rate structures also give you flexibility in structuring your payments. Make sure that when you refinance, you find the lender with the optimal financing for your selected terms.

The Decision To Refinance All Or One

While you are refinancing your home equity line of credit, it is also a good time to revaluate your other mortgage. Depending on your original terms, you may find that you also want to include your first mortgage as part of a refi. This way your line of credit refinancing will qualify for even lower rates while saving on closing costs.

But if you have exceptionally low rates on your first mortgage, then refinance your line of credit as a second mortgage. If you are undecided on the issue, request loan estimates for both types of refinancing and let the numbers tell you which is the best option.

Refinancing is also a good time to consider cashing out part of your equity. By doing so now, you save on additional processing fees for any future loans.

Available Term Options

Once you have decided on how much you want to refinance, you will also need to select appropriate terms for you financial goals. Rates can be fixed or adjustable, which affect your payment amount.

The length of your loan can be shorten or lengthened to give you a more manageable payment. But if you do decide on a short term, you may see your rates go down. You can also structure payments for every two weeks, further reducing your loan’s period.

No Lender Has The Best Deal On All Types Of Refinancing

No lender can guarantee to have the best deal on all types of refinancing, so shop around with your specific loan amount and terms. With risk free quotes, you can learn about loan costs without hurting your credit score. And with online lenders, the whole process just takes a few minutes.

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