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Posts tagged ‘Finance’

Mortgage Points

If you have ever gone looking for quotes on a mortgage in order to find out just what a mortgage might cost you, you have probably had the term points thrown at you. So what are points?

Each point is a fee and it is based on one percent of the total amount of the loan. There are a couple of different points, there are discount points and then there are origination points and lenders do not all charge the same amount of these points. Some lenders will charge you one point while others may charge you three.

Discount points are the points that are like prepaid interest on your loan that you are getting for your new home. Every point that you purchase will lower your interest rate to some extent. Most borrowers will be able to choose just how many points they want to purchase. There is a limit of course, usually around four points. The number of points that you choose to buy will depend on how much you want to lower you interest rate. One especially good point of these points is the fact that they are tax-deductible.

Origination fees are different. These fees are used in order to pay for the costs of giving you the loan in the first place. You don’t get anything out of these points so most borrowers don’t like them as they are not even tax-deductible. If you can try to get a loan that does not require you to get these types of points. Discount points on the other hand can be useful to you.

The choices that you make concerning the points to get will be affected by a couple of different things. For example, how long are you going to be living in this house? And how much of a down payment are you going to be putting down? If you are thinking of settling into this house for the long haul then perhaps discount points are a good way for you to go. Lowering your interest rate for years to come is always a good thing. Before making your decision take stock of your situation and see what suits your needs best.

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Top Ten Terms for Loans

Everyone knows that you should never sign on the dotted line without reading the contract.  This same term applies to loans.  Signing a loan without knowing the terms and what everything means can be detrimental to your finances, credit and future investments.  Before you sign on the dotted line, make sure that you know these terms and how they will apply to you. 

1.  Interest rate.  The interest rate is the percentage of your loan that is added on every month.  The percentage will vary according to the economy and will make a difference in your payments. 

2.  Fixed Rate.  A fixed rate will be an interest rate that stays at the same percentage throughout the entire period of your loan. 

3.  Variable Rate.  A variable rate will change according to the economy and the charts that are stating what the rates should be for interest.  A variable rate usually changes every year and adjusts according to a specific given range of percentages. 

4.  Principal.  The principal is what you will be paying on your actual house.  Whatever you pay on your principal is what you will see in the end as your investment. 

5.  Escrow.  This is similar to a savings account of your loan.  Whatever you put in escrow will accumulate without paying directly into the loan.  At the end of the term you can use it to finish paying off the loan or to invest in another loan. 

6.  Title.  A title will be what you get to your home after it is officially yours, stating that the property belongs to you. 

7.  Deed.  A deed will most often be used as a title for a commercial area.  Instead of giving ownership it shows that the property is leased to the one who is using it as a business. 

8.  Home Equity.  This is a loan or line of credit that you can get for your home.  It will finance up to eight percent of your other loan and get paid back later.  This helps if you want to consolidate loans or invest more into the property. 

9.  Appraisal.  After an inspection of the home is made, an appraisal will be made.  This will be an estimated value of what the home is worth. 

10.  Equity.  This will be the actual amount of the property that you own.  Most likely, it is what is being paid off of your principal amount. 

Once you know some of these basic terms, you will be able to expand on your knowledge and find the exact loan that will fit your needs.  These basic definitions will help you in making the right decision for the type of loan that you want. 

Home Finance – 20 Questions For Your Lender

Warning! Home finance has blossomed into an incredibly diverse and complicated industry. This is good and bad. There are at least a hundred ways to borrow the money for your next home now. There are also dozens of ways for lenders to take advantage of you, from hidden charges to prepayment penalties and more.

Let your lender explain all the various home loans and home finance options available. However, when you finally decide on a product you like, ask as many of the following as are relevant to your loan. These are the questions that will protect you.

Home Finance – Questions For The Lender

– What is the interest rate?

– What is the APR (annual percentage rate; includes fees, points and mortgage insurance)?

– What is the initial rate (if it is an ARM – adjustable rate mortgage)?

– What is the highest the rate can go to next year (ARM)?

– What are the annual and lifetime caps on the interest rate and payment (ARM)?

– How often is the rate or payment adjusted, and when (ARM)?

– What index is the rate based on (ARM)?

– What margin is added to the index (ARM – it might be the index plus 3%, for example)?

– Is credit life insurance required (this pays off the loan if you die)?

– How much would the payment be without it?

– Can any of the fees or costs be waived?

– Is there a prepayment penalty?

– How much is the prepayment penalty?

– For how long is the penalty in force?

– Are extra principle payments allowed?

– Is an interest rate lock-in available? (guarantees interest rate for a time)

– Can I have the lock-in in writing?

– Is the rate locked in at time of application or time of approval?

– If rates drop, can I get a lower rate locked-in?

– What inspections and/or surveys are required?

– Is a title search and/or title insurance required, and what is the cost?

– Can I get an estimate of prepaid amounts that I’ll have to pay at closing?

– Are there “points,” and what will these cost (discount points to reduce interest rate)?

– What state taxes, local taxes, stamp taxes and transfer taxes will I have to pay?

– Will a flood determination be required (to see if the home needs flood insurance)?

– What other costs will there be?

– Is there anything else I should know?

Lenders may not like getting two dozen questions thrown at them, but you have a right to ask before you agree to a loan. Did you know that a 1% higher interest rate on a $150,000 loan can cost you an extra $30,000 over the years? Home finance can be as important as a good price when it comes to saving money on your home.

Finding a Bargain on a New Vehicle

We have all heard that depressing statement that a new vehicle depreciates in value the second you pull away from the dealership. I used to think that was an exaggeration until my friend got into a wreck in her Dodge Durango a week after she purchased it. The insurance wouldn’t give her enough to cover buying a new one even though she was not at fault in the accident. She had to get an attorney and eventually she was able to get a new vehicle to replace it, but not without quite a circus taking place around the issue for a couple of months.

Buying a new vehicle is one expense that you have to consider very carefully. Those monthly payments can sure take a chunk out of your disposable income. You also have to consider the cost of license plates, insurance, gas, and regular maintenance on the vehicle. To help you find the very best bargains on the new vehicle of your choice you will want to conduct some research before you start negotiations with the salesman.

There are a variety of ways to find out the book value on a particular vehicle. You can go to www.NADA.com or www.KellyBlueBook.com. You can get a very detailed price by listing the make of the vehicle, the various accessories it offers, and the mileage. This information will help you find the lowest price you can expect to purchase that vehicle for.

Next, take a close look at your credit report so you know exactly what interest rate you can expect on a new vehicle. This way you don’t waste your time haggling with the sales. See what they offer you for a price and financing before you bring your information into play. If they match or beat it then great. If they want to give you higher price or interest rate, present your researched information. If they won’t sell you the vehicle for that price with that interest rate then go somewhere else.

October is a very good time of year to start considering the purchase of a new vehicle. This is because they want to start clearing out vehicles on the lot to make room for the next year’s models that will soon be arriving. Since many vehicle dealerships don’t see much in the way of sales over winter due to the cold and the holiday season, they are more likely to present you with the deal of the century to make the sale.

If you see other sales around the holidays they may be a good time to save money as well. The key to making sure it is a bargain is to make sure the cost hasn’t been inflated or your interest rated jacked up a percent or two to cover the promotional cost of the vehicle. Too many people get caught up in what they see on the windshield of a vehicle rather than looking at the big picture.

New vehicles often end up with a scratch or a dent on them soon after you buy them. While this can be very upsetting you really can’t do much about it. Someone leaving their shopping cart in the parking lot of the store can result in the wind running it into your vehicle. You can find great deals of new vehicles that have some body damage such as small scratches and even hail damage from a recent storm. In most cases you will save several times what it costs you to repair the damage.

To motivate customers to make a purchase of a new vehicle instead of just looking many dealerships offer incentives like 0% financing and cash back. Make sure you find out all the details of such promotions as they may be a good way to save money or they may cost you more in the long run. Take the time to calculate all the possible scenarios so that you get the bargain you were after with your new vehicle purchase.