In this down economy, obtaining a home loan for a first time homeowner, investor or repeat buyer may be too daunting. Or, lenders may assess your financial situation too risky to lend to because of previous bad credit. Or, perhaps you are a small business owner that does not have sufficient monthly income and lenders are afraid that you may not be able to make the payments monthly. Whatever the reason is, there are many alternatives for large purchases than taking out a traditional home loan. Here is a look at other viable options:
Life Insurance Policy – As long as you are making regular monthly payments on a life insurance policy, cash value is accumulated over time. Borrowing against the cash value of your life insurance policy is much easier than obtaining a home loan since there are little to no requirements and there is no loan qualification. Prior to borrowing money through your life insurance policy, you should determine the interest rate on the loan, the taxability of the withdrawal and the effect of the loan on your death benefits. Before borrowing from your life insurance policy, do not forget the reason that you took out the loan in the first place. Ensure that owning the property outweighs having less death benefits.
Payment Protection Insurance Claims – PPI claims are another alternative to home loans. This type of payment protection ensures that repayment on a debt is ensured even after the death of the borrower.. The amount of PPI claims are not only based on the payments but the interest incurred resulting from those payments. Determining whether you have any PPI claims is a great way to obtain the money needed for larger purchases.
Self-Directed IRA – A Self-directed IRA is a way to invest on non-traditional assets such as a home or property. Self-directed IRAs are different from traditional IRAs and Roth’s because they are broader and are most often controlled by the policyholder. Purchasing a home directly from your own self-directed IRA is against the rules of the IRS since this is considered self-dealing. However, a person who is not related to you or your business can lend you money though their self-directed IRA for profit or interest. It is common practice for property flippers to use both their own savings and borrow from someone else’s IRA to complete the sale on a particular property.
About the Author:
This article has been posted by Maria, a professional blogger. Catch her @financeport
The interest of lenders in secured homeowner loans is justified. No other loan covers lenders from as much risk involved in the lending process as a secured homeowner loan. But, what explains the surge of interest of borrowers towards secured homeowner loans. Don’t they fear that their home can be repossessed in the process? The only logical justification is that borrowers have shelved their fears for the several benefits that secured loans can produce.
The benefits on the use of Secured homeowner loans are the result of the reduced risk. When lenders find lesser risk involved in a particular loan deal, they are more open towards increasing convenience of borrowers. With lower rates of interest and faster approval, the loan providers will wear there preference for secured loan borrowers on their sleeves.
Secured homeowner loans are strictly designed for the people who have their own homes. The borrower must have a clear title to his home. Though the home may not be physically possessed in the loan transaction, loan providers will demand the property papers. These property papers will be kept by the lenders in their possession till the loan has been paid off. As soon as the secured homeowner loan is paid off, borrowers can claim their property papers.
Not having to move house in the process of taking loan forms one of the most important benefits of secured homeowner loans. Since, lenders specialise in finance, they find it difficult to manage homes. Thus, they use the equity inherent in home instead of the home itself. Consequently, borrowers can continue staying in their home even when it is pledged towards the secured homeowner loans.
Equity is the value of the house in the outside market. Thus, a plush house located in a posh locality will be termed as with high equity, since it can fetch a higher resale value. However, the intention is not to sell the home. The only idea behind this is to find the value of loan that the borrower qualifies for as secured homeowner loan. The calculation of equity is incomplete without deduction of the mortgages already present on home. The equity that is remaining after deducting earlier mortgages will be considered for conversion into secured homeowner loans. Generally lenders agree to offer 80% of the free equity available in home. The remaining 20% will cushion borrowers against any risk from over valuation or sudden drop in value of home. Proper search of loan providers can lead borrowers to lenders who offer as much as 100 or 125% of the equity. It is largely dependant on the lending policy of the lender and the borrowers’ personal credit.
Personal credit of the borrower may hold some importance in the decision for the amount of secured homeowner loan. Overall, personal credit history of borrowers is not as much important as in unsecured loans. With the borrower’s home in his possession, the lender has little fears of his amount sinking. Since the process of repossession can be both traumatic and uneconomical for lenders as well as borrowers, lenders will try to select applicants who have certain credibility; rather than the candidates who have been termed as intentional defaulters. Thus, borrowers who have a larger number of CCJs or have been adjudged bankrupt because of an improper management of finances will not find a place in the selected applicants. Preparation of credit score ensures that only the latter group of defaulters are ousted and not the ones who have had a few instances of defaults.
The credit score is also beneficial in deciding the interest rates that a borrower is eligible for. Interest rates are depicted as a range. The range includes borrowers of diverse credit scores. Borrowers with good credit score (above 600) are offered the lowest interest rate. The borrowers with bad credit get a lower credit score, i.e. below 500. Thus, borrowers with bad credit history have to pay a slightly higher rate of interest.
The equity that has accumulated in ones home can be best utilised through a secured homeowner loan. Additionally, borrowers with bad credit can use secured homeowner loans as a platform for improving their credit history.
Steve Clark can tell you how to look better, live better and breathe better by giving you tips to improve your finances.He writes on loans. His ideas can help you rejuvenate your money.To find Secured homeowner loans,bad credit homeowner loans,online homeowner loans visit http://www.easyhomeown erloans.co.uk.
About the author:
Steve Clark can tell you how to look better, live better and breathe better by giving you tips to improve your finances.He writes on loans. His ideas can help you rejuvenate your money.To find Secured homeowner loans,bad credit homeowner loans,online homeowner loans visit http://www.easyhomeownerloans.co.uk.
Written by: Steve Clark