A Loan Modification May Be The Stupidest Thing You Could Do – Warning
Why doing a loan mod on your home may be stupid! If someone could provide you with information that would put you in a position to make the best financial decision for your family 2 years, 5 years, and even 10 years down the line, would you make it? Remember this answer, because I’ll be asking the same question again at the end of this article. My hope is that this article will bring to light a perspective that you haven’t considered when comparing a loan mod to short sale or foreclosure.
You can even get approved for a streamline refinance, in some cases, without having to get another appraisal. However, if you choose the no-appraisal route, there is no cash-out option. The loan amount can only be as high as your current mortgage amount plus any closing costs and escrows. Many mortgage companies also offer another variation of the streamline refinance – a no cost streamline refinance. Although the interest rate is slightly higher than a typical streamline, the borrower does not incur any costs at all along with no underwriting guidelines or appraisal requirement.
FHA also has another wonderful product that not a lot of borrowers take advantage of called a 203k loan. A 203k loan is an FHA insured mortgage that allows borrowers to include the cost of renovating a house into the initial loan amount. The loans will work for one to four units of residential space as long as the borrower intends to live in one of the units. An example of a 203k loan would be a young couple looking to buy a home for the first time.
In fixed rate products, the rate is fixed, and does not vary, even if the BoE interest rate fluctuates. The benefit of a fixed rate mortgage deal is that you know from the start what your monthly remortage repayments will be, and you’ve got the security that these monthly repayments will stay fixed for a fixed period.
Most lenders have got fixed rate deals for length between 3 and 10 years. The shortcoming of fixed rate deals is that your mortgage doesn’t benefit of a drop in the Bank of England interest rate, like the one we have seen recently.
Variable rate mortgages however don’t have a fixed rate. The interest rate goes up and down with the BoE base interest rate. The interest rate is as general rule determined by the BoE interest rate plus a fixed increment, for example 0.5% (BoE rate) plus 2%(increment) which gives you an interest rate of 2.5%.
Because we currently are in a period of low interest rates, variable rate mortgages are an interesting option. But there is always the possibility that the Bank of England rate might rise, and this would in return increase the rate of variable mortgages.
In this example, Bob scored a slightly larger home The other difference between the two approaches is that Bob had to move his family two times, whereas Alan was able to stay in the same home and not deal with the hassle of packing and relocating. SO…if you knew this example had validity, would you make the decision to deal with the hassle of moving it meant it would put your family in a far better position, 2 years, 5 years, 10 years from now? The decision is yours – good luck!
Harris Smith offers advice on home equity line of credit and obtaining credit. Contact us today to find out more about Debt Consolidation.
