helpmycreditreport.com

A lot of low income families have been faced with the questions as to whether or not they will be able to apply for a mortgage loan or afford a home of their own. In order to assist low income families the federal government has made available federal housing grants by working in conjunction with state and local developments to assist communities and individuals to secure their own homes.

U.S. Housing Grants

The US department of Housing and Urban Development (HUD) each year spends close to $1 Billion each year on housing grants. However the HUD does not work directly with individuals. It works with local and state governments who are in direct contact with low income families and communities. The Department of Housing and Urban Development sets up finance facilities for these governments (such as Lines Of credit or Accounts) thereby giving them access to the funds from federal grants. The local and state governments in return draw on these funds to assist local residents who meet the criteria of these programs. The most common variety of such federal housing grants is the HOME Investment Partnerships Program also commonly known as HOME. Most information about existing and new grants is posted on the Federal Government website (1)

Applying For A Federal Grant

Listed below are a few easy steps to being able to get a federal housing grant:

1. Contact the Department of Housing and Urban Development and ask them for the application pertaining to the type of federal grant for housing you want to apply for. Remember most of these applications are available online.
2. Having read the application, complete it and make sure that you have provided all the requested supporting documentation.
3. Make sure that you check the application for completeness and accuracy and book in an appointment with the department to ensure that is completed accurately. Ensure that you have provided them with all supporting documentation as requested.

Tips To Secure The Housing Grant

Having ascertained the type of federal housing grant you would like o apply for it is time to understand some of the tips on getting a federal housing grant:

• Genuine Need: It is vital for applicants to prove to the HUD that they are in actual need of the federal grant for housing. Provide ample supporting documentation to support your reasons. For instance provide them with employment documentation if ou are a low income earning member or if you have been affected by a natural disaster provide proof of that etc.
• Do Your Research: When an application is received by the HUD a grant panel reviews it. There are certain specific criteria that are expected to be met in the application. Research the HUD website and see how you can accentuate or highlight those qualities or criteria in your application.
• Correspond With HUD: The department of housing and urban development has been known to be an extremely helpful organization. Liaise with the department to ensure that our application is complete and which is the best grant for your circumstances and needs.

The federal government has numerous grants to assist individuals. These grants could be the boost that you require to help you obtain your first property.

References:

1. Federal Housing Grants – Federal Grants
2. Grants – U.S. Department of Housing and Urban Development

Continue Reading

Ever so often clients ask the questions as which is the better option, a mortgage refinance or a mortgage loan modification. There is no definitive answer to this question. The only response would be that it is entirely dependent on the individual’s circumstances. While a mortgage loan modification is carried out with your existing home loan provider and involves no or little cost a refinance involves dealing with another lender and comes with additional break costs for breaking your existing mortgage and also extra refinance costs if applicable. Hence it is entirely dependent on what the client is trying to achieve.

Mortgage Modification Plan

Mortgage loan modifications are carried out with your existing bank or mortgage lender. In this case if you have been struggling with your repayments and your mortgage loan account has been delinquent, you may seek the help of your mortgage company and ask them for a mortgage modification plan. There are several ways this can be done. For instance in certain cases the bank might increase your subsequent 12 months payments in order to help you catch up on your missed payments. In other words they will be amortized over a 12 month period. In other cases the bank might add the missed payments to the balance of your loan and allow you to pay it out over the life of the loan. This will increase your payments by a bit. If however you qualify for one of the mortgage loan modification programs which your mortgage provider o bank has you might be able to reduce your interest rates and subsequently mortgage repayments on your home loan.

Mortgage Refinance Loan

With a mortgage refinance loan, things are a little different especially if you are considering a streamline mortgage refinance. In this case you might change your home loan provider or bank for mortgage refinancing. Clients usually do this owing to the fact that another bank or lender is offering a better product or interest rate. With a mortgage refinance you pay out your existing mortgage provider and another bank or mortgage provider places a charge over your property under the newly signed agreement. In the current economic climate owing to the fact that the property market is not doing as well as it was I is possible for your property to be valued less than it was may be a year or two ago. If this is the case then you might not be able to refinance your mortgage owing to the fact that the bank will not have the same value o work with as your previous lender did when you first got the mortgage. In addition to this factor clients also need to consider that there are additional costs which are associated with a mortgage refinance such as refinance charges and break costs.

Obama Loan Modification And Mortgage Refinance Loan Programs

This is a new initiative introduced by the Obama government to help consumers in this tough credit climate with mortgage modifications and mortgage refinances, depending on what their situation demands.

Obama Mortgage Loan Modification

In order for a client to qualify for the Obama mortgage modification program, the loan must be under the under the jurisdiction of Fannie Mae or Freddie Mac. In addition to this the property in consideration should be the primary residence of the applicant and the mortgage should have come into existence prior to 1st January 2009 with an overall balance of less than or equal to 729,750 for a single family. Some of the features of the program are:

• The government shares the costs of the loan modification whereby the costs of the mortgage get lowered from 38% of the gross income to 31%.
• The client receives $1000 for staying current on the loan.
• If the lender has a successful qualifying loan for the loan modification then the lender receives $1,500

Obama Mortgage Refinance Loans

In order to qualify for the Obama government’s mortgage refinance loans the client needs to meet the following criteria:

• The mortgage refinance property should be an owner occupied property.
• Once again it must be a Fannie Mae or Freddie Mac loan.
• The mortgage payments should be up to date and should be able to support the new repayments.
• The existing mortgage loan to value ration should be between the 80% and 105% mark to qualify for this program.

Hence it is very important that the client assesses what they are trying to achieve prior to applying for a modification o refinance. Both mortgage refinances and mortgage modifications can be very advantageous and at the same time help the client achieve diametrically opposite results.

References:

1. Home Affordable Modification - Making Home Affordable
2. Home Affordable Refinance – Making Home Affordable
3. Obama’s Loan Modification Plan – US News

Continue Reading

Consumers who like to manage their mortgage loan efficiently and like to have the freedom to draw down used equity or surplus funds in their home loan account, might just find that a line of credit mortgage product is just for them.

Definition: Line Of Credit

A line of credit is popularly referred to as an LOC. This is probably one of the most popular forms of revolving credit, second only to credit cards. In the formal sense the definition of line of credit is a credit contact between a client and the financial institution whereby the client can readily access funds as if it were their own savings account. Interest on lines of credit is only charged on the used portion of the loan. In other words if the total limit of the line of credit is $500,000 and the consumer has only used $300,000 then the interest will only be levied on the $300,000 and not the full loan amount like a normal standard variable home loan/mortgage. This is quite advantageous owing to the fact that if you have been making larger repayments into your mortgage, in effect over time you will be reducing your interest repayments as you are constantly reducing your Line Of Credit outstanding balance.

Common Uses Of A Home Equity Line Of Credit

Being as versatile as they are a home equity line of credit can be used for a variety of purposes. Some common uses of lines of credit are:

1. Managing your home loan better
2. Using the available redraw in your line of credit to make investments.
3. Using the surplus available in your LOC for repairs, improvements and payment of bills around the house.
4. To meet unexpected and urgent expenses.
5. Consumers at times use the surplus/redraw available in their LOCs to pay for holidays etc. This is owing to the fact that the interest rate on an LOC is much lower than credit cards and in addtion not only do you get a much longer term to pay of the amount (over your home loan period) but you also do not have to tap into your savings.

Pros & Cons Of A Home Equity Line Of Credit

The following are a few advantages of a line of credit loan:

• You always have easy access to the money as it is sitting in your home loan account and you do not need to go though the process of applying for a new loan etc.
• LOCs give you the ease of making a single repayment for several bills, as you are only paying off your line of credit or mortgage account.
• The interest rates on a line of credit are much lower and expenses paid of your redraw can be paid back over the course of your mortgage.
• As long as consumes are cautious that they do not exceed the limit on their LOCs the can keep drawing down on the funds.

As is the case with all good things line of credit loans aren’t free from a few flaws either. Some of them are as follows:

• The interest rates on LOCs are open to fluctuations and as a result of that you might find your repayments varying with interest rate changes.
• In case of a residential loan for a main/principle residence consumers must ensure that over the course of the loan the principal component of the line of credit is reduced.
• Sometimes having a lot of credit/redraw available might lead to clients developing a habit of overspending.

Home Equity Loan Line Of Credit & Your Credit Report

A line of credit loan can be very beneficial for your credit report. If you have successfully managed to pay down you outstanding balance with larger and timely repayments, this stands you in good stead with the credit reporting agencies like Experian, Equifax and Transunion. Moreover if you have a large limit on your line of credit and are only using a portion of it with a decent amount unused, this will also help boost your FICO score.

Hence as we have discussed that a line of credit can be a very powerful tool to help you manage not only your home loan better but will also help you manage a lot of your own personal finances. It is however essential that consumers evaluate their situations before getting a mortgage product as this is a matter of personal choice. Lines of credit are powerful financial tools designed to give consumers the advantage and freedom of managing their finances and credit effectively.

References:

1. What is the Advantage of a Secure Line of Credit? – All Business

Continue Reading

Consumers generally tend to be of the opinion that once an individual has been declared bankrupt, it spells the end of the road for them as far as new credit contracts are concerned. This is not quite true. Nowadays it has become much easier for an individual to obtain an after bankruptcy home loan. However it must be remembered that there are a few factors you should consider prior to applying for a new home credit loan.

Getting A Home Loan After Bankruptcy

At the very outset you should remember that once you have been discharged from bankruptcy it is best to wait for at least 2 years prior to applying for a bankruptcy morgage loan.  If however you do decide to apply for a after bankruptcy home loan prior to the 2 year gestation period, ensure that you have flawless repayment history and that all your contractual obligations associated with the bankruptcy have been paid and are up to date. Once the 2 year wait period is up it is fairly easy to get a bankruptcy mortgage loan and in certain cases you can even get up to 100% finance. Lenders when considering bankrupt client applications look at the following things:

• Repayments history post discharge from bankruptcy.
• Timely payment of all financial obligations related to the bankruptcy, especially government debt if any.
• Source of deposit for property.
• Employment and stability of income.

These are a few things which lenders keep a close eye on. One thing that you might have noticed is that lenders nowadays are very particular about the source of the deposit on the property. This is particularly important owing to the fact that in the past clients have tried to defraud banks when getting a home loan after bankruptcy by misstating the source and details of the deposit. If your bankruptcy mortgage loan deposit is from a relative, the banks might need you and your relative to get a signed statutory declaration stating that the funds are a non-repayable gift. This is done so that the bank is satisfied with the source or else it will also constitute another loan or credit contract.

Home Loans With Bankruptcy – Tips

Applying for an after bankruptcy home loan is not the same as applying for a regulr home credit loan. Listed below are a few tips to help set yourself up well for home loans with bankruptcy, after you have been discharged from bankruptcy. This should ensure that you are in a good position while applying for a after bankruptcy home loan.

• Budget: One of the most important things post bankruptcy is budgeting. Take into account all of your fixed overheads. Then take your income and subtract your expenses from it. This will give you a residual surplus which you can use to start a savings pattern or use to reduce bills faster before you apply for an after bankruptcy mortgage loan.

• Rectify Mistakes On Your Credit Report: Quite often consumers emerging from bankruptcy find that there are still a number of accounts which appear as delinquent, overdue or open on their credit reports when in fact these should actually be closed and are credit report errors consumers are often unaware about. Take these issues up with the appropriate credit bureaus and try and resolve them as soon as is possible. This will ensure that your credit report looks a lot healthier when applying for a home credit loan.

• Apply For Small Chunks Of Credit: By applying for small amount of credit you will put yourself in a position to repay these small loans like car loans and personal loans a whole lot sooner and thereby build your repayment history and increase your credit score. This will work in your favour when applying for a bankruptcy mortgage loan.

• Use Your Credit Card Sparingly: Having a credit card and using it only as required is another way to build up your credit score as discussed in the post about credit card balances. When you use your credit card sparingly and pay out the credit card debt in full each month, this adds a lot not only to your credit score but also your repayment history, making it possible for lenders to trust you when you apply for a bankruptcy home loan.

Consumers must remember that your bankruptcy might be on your credit report for a period of 10 years, but it will not be there forever. It will eventually come off and your credit report will go back to being normal. It is prudent to ensure that all your bills are up to date and that you are trying to build your credit report every step of the way. With these simple steps consumers who have just been discharged from bankruptcy should have no problem applying for an after bankruptcy home credit loan.
References:

1. Bounce back fast after bankruptcy – MSN Money
2. Personal Loan after Bankruptcy - The Dolar Stretcher

Continue Reading

With the rising costs of tuition fees a higher education student loan might be the only way to invest in your future. However if these college student loans are not managed efficiently and your student loan debt is not paid back promptly it can negatively impact your credit report. There are a variety of student loans available, but it is up to the consumer to decide which is best suited to their circumstances.

College Education Loan: How Do They Work

Higher education student loans are, as is obvious from the name, a way to pay for your higher education. No matter what your circumstances, college student loans can be the light at the end of the tunnel when there is no other way out. In order to get a college education student loan, clients need to fill out what is called an FAFSA (Free Application For Federal Student Aid) form and submit it with the possibility of correcting any details later. Students should then aim to visit their respective school’s student centers and try and gauge the kind of assistance they might be capable of getting.

Nowadays Perkin Loans are very popular owing to their lower interest rates.  As long as students are enrolled at least at a part-time status they can defer the repayments on their student loan debt.  Once students graduate they enter what is known as a “grace period”. This is generally 6-12 months long and allows students the time to find employment. Once this is over, the repayments on the college student loan (the principal plus the capitalized interest) comes due. At times, when consumers experience tremendous financial difficulty they can temporarily defer paying student loans without hampering their credit reports.

The Student Loan Types

The student loan can be of various different types, each designed to serve a specific purpose. A student must choose their higher education loan depending on their needs.

• The College Student Loans Made Directly To Students (Federal): These higher education loans are quite similar to the ones described above. As long as the student is enrolled at least in part-time status the student loan debt repayments do not come due. However, if the student falls below part-time status they enter the grace period which can be waived once they enroll again as part-time at least. In the event the student falls below the part-time status again the grace period cannot be re-instated and repayments for the college student loan are due.

• The Student Loans To Parents (Federal): These loans are directly made out to parents. However the interest rates on these college student loans are much higher and the repayments fall due immediately.

• The Private Student Loans: These higher education loans are usually used as supplements to federal student loans owing to the fact that the federal loans are sometimes insufficient to cover all expenses. These loans usually have higher limits and the student loan debt repayments are deferred until after graduation.

Paying Student Loan: Impact On Your Credit Report

Student loans are usually one the first credit agreements people enter into. It is essential that this credit contract is managed efficiently or else it can hamper your overall credit score and it can be default to improve your credit score after these defaults. Irregularities on paying student loans will sit on your credit report for as long as 7 years in certain cases, hence it is of utmost importance that consumers try and repay student loan debt as soon as possible and in a timely manner. Below a few tips to help you manage the student loan better:

1. Pay Off Your Loan: It is in the best interest of consumers to pay off their college student loans as soon as possible. This creates good repayment history and at the same time boosts your credit score.
2. Interest Payments: In the event that you have a non-federal higher education student loan, ensure that you are making the interest payments regularly. Your expenses schedule should include all these expenses and your interest payments should be a part of your calculations.
3. The Grace Period: If you have been able to find a job before the expiry of the grace period, accumulate a fair sum of money and deposit a large amount into your college student loan. This will help you stay on top of your student loan debt repayments and ensure that you do not fall behind.
4. Defaulting is Not An Option: For those who are wondering what the consequences on defaulting on a college student loan are, the answer is an unequivocal “severe”. Even in the event of filing for bankruptcy, college student loans are usually still required to be paid. Moreover bankruptcy will sit on your credit report for a period of 10 years and will put your FICO score behind by about 240-280 points and this is always a matter of public record. If you have defaulted on your student loan debt, prepare for a barrage of collection agencies hounding you. In certain cases your employer may use part of your salary to pay off these college student loans and also use your taxation refunds for the same purpose.

Now that we have established the effects student loans can have on our credit report, consumers should be careful while managing this credit contract. It is always best to shop around and look for option that suits you best. Essentially you should factor your college student loan repayments into your expenses and make sure that you work with the view to paying it off as quickly and as smoothly as possible. These few simple steps should ensure that you have a blemish free, goodcredit report.

References:

1. Ensuring Continued Access to Student Loans – Federal Student Aid
2. New changes will do you good if you have student loans -USA Today

Continue Reading

In recent times, streamline refinances are gaining a lot of ground and are increasingly beind used to avoid home foreclosures in USA. A refinance streamline mortgage is extremely beneficial because not only does it not require a complete credit report or an appraisal but it can also refinance any Federal Housing Administration (FHA) loan which has decent repayment and mortgage history. A streamline refinance is quick and hassle free and requires minimal documentation. It is however a rule of the FHA that the repayments on the new streamline FHA refinance must be lower than those of the existing loan. Consumers must bear in mind that it is in their best interest to see an FHA credit officer or lender to discuss your mortgage loan and the possibility of streamlining it.

FHA Loan Refinance Streamline Program

In most FHA loan refinance streamline programs, no underwriting is required owing to the fact that the loan balance is not increasing. However if the loan balance does increase underwriting will be needed and the HUD (Department of Housing and Urban Development) will be required to submit repayment history for 12 months. Streamline FHA refinances allow for individuals to be added to the loan without a review of their credit report. However in the event that you are looking to take someone off the loan, consumers might need to get the loan re-assessed.

Standard FHA streamline refinance requirements are listed below:

• There should be no cash taken out via the streamline refinance.
• There is usually no income or asset verification.
• The mortgage loan being refinanced must be insured by the FHA.
• The borrower’s repayment history must be current and up to date.
• The payments for the refinance streamline mortgage must be less than the existing mortgage unless the balance is increasing.
• In order to qualify, the borrowing party should own the property in question and must have had it for at least 6 months.
• The new refinanced streamline mortgage will have a term of 30 years or the remainder of the existing mortgage term plus another 12 years.
• A complete credit report is not required and there is very little underwriting that is required as well.
• It is mandatory that the client has not defaulted on any form of federal or government debt.

VA Streamline Refinance Program

IRRL (interest rate reduction loan) is another common name for the VA streamline refinance program loans. Most credit analysts regard this as one of the best loan products on the market as it is easy to qualify for and is designed for people serving active duty and for veterans with existing VA loans. This streamline refinance allows service members to get a lower rate and it is easy to qualify for. As long as the borrowers do not have more than 1 thirty day late payment on their credit report they can qualify for the VA streamline refinance. Just as streamline FHA refinance loans, these too do not require credit or income qualification and are quite easy to enter.

Feature of the VA streamline refinance include:

• There are no transaction costs involved in the VA streamline refinance loan.
• There is no income, job or asset verification.
• No credit qualification required.
• Borrowers are allowed to skip up to 2 payments
• The borrower’s existing loan must be a VA loan.
• Although no cash out is allowed with the loan, up to $6,000 in energy efficient improvements are allowed to be included with the loan.

A loan refinance has always been an alternative to bankruptcy and as you can see both FHA and VA streamline refinances are financial tools that can help borrowers get on top of their mortgages. With no credit qualification and minimal underwriting these loans are not only easy to qualify for but are also beneficial as they ensure that the interest rates are lower than the existing mortgage and so are the repayments. These refinance streamline mortgage loans will help consumers and service people get back in front of their existing mortgages and allow them to rebuild or maintain healthy credit reports.

References:

1. Home Loan Guaranty Services – United States Department of Veteran Affairs
2. Streamline your FHA Mortgage – U.S. Department of Housing and Urban Devlopment

Continue Reading

Margin loans are extremely powerful investment tools which can help investors accelerate their wealth in a rising or bullish market. However, just as all good things have a down side margin loans have one too and this may affect your credit report.

Margin Trading: What is Margin Lending

Before we talk about the advantages and disadvantages of a margin loan, it is important to fully understand what is margin lending. Margin loans are investment loans which are backed by the client’s securities or investments. In margin trading, typically, clients offer their investment portfolio as collateral and can borrow funds against that for a wide variety of purposes ranging from buying additional securities, to paying off bills with higher interest rates or mortgage loans for real estate and purchasing new assets such as artwork or holiday homes etc.

Margin loans gained a lot of popularity prior to the dot com era crash as it enabled consumers to purchase investments beyond what their own capital would allow them to afford. With the market seeming to raise again, margin lending once again seem to be gaining ground. A lot of brokerage houses encourage their consumers to obtain margin loans and pay down debt with higher interest margin rates as high value margin loans can be obtained for cheaper interest margin rates than most available rates in the market.

Margin Lending Rates

Margin lending rates have been know to vary between single figures for margin loans with a value of more than $1 million plus o a bit over 10% margin rates on margin lending less than $25,000. Just to give consumers an idea of margin loan rates, a large investment firm might offer margin loans at a margin interest rate of 8.0% for variable rates and from 7.9-7.95% for fixed margin rates.

Margin Trading: Advantages of Margin Lending

Obviously, margin trading is and has been very popular among consumers. Margin lending has a lot of advantages; a few of these are listed below:

• Accelerate you Wealth Quickly: Margin loans allow investors to quickly accelerate their wealth in a rising market as the value of your portfolio increases with market increases. Moreover margin lending enable investors to invest more than they have at their disposal.

• Variety Of Uses: Funds from a margin loan can be used for a variety of purposes, such as paying off bills, buying real estate and other assets or decreasing debt at a higher interest rate. Being able to decrease existing debt ensures that your credit history looks better and also reflects well on your repayment capacity.

• Lower Interest Rates: Margin lending offers margin rates on certain larger amounts that are cheaper than most other interest rates available in the market.

Margin Trading Disadvantages of Margin Lending

While margin loans have numerous advantages, margin trading also comes with its fair share of disadvantages:

• Margin Calls: The biggest disadvantage margin loans have are margin calls. Most margin loan facilities require your portfolio to be at a certain predetermined level. If owing to a fall in market your portfolio falls below a certain level, the margin loan provider can either ask you to put cash back in your portfolio or provide additional security as collateral or in a worst case scenario might sell down your portfolio to recover funds.

• Deceleration of Wealth: In a falling market margin loans can very easily increase your losses drastically. This is owing to the fact that margin loans are directly linked to your investments and they need to be paid back to the lender.

Margin Trading: Impact Credit Report

Adding further to the points stated above, although margin loans are believed not to have any direct effect on your credit report, they might have an indirect effect. If after selling down all your securities and assets, you are still unable to pay off the margin loan provider, the margin loan lender might issue a default against you or might be even declare you bankrupt. This needless to say has a very damaging impact on your credit history as it can set your credit report back by anywhere between 130-280 points back depending upon the type of charge issued on the account and rebuilding a credit report can be a tough job.

It is essential as it is with any investment to weigh your options out before making an investment decision about margin lending. One must remember that while margin loans have a lot of potential advantages they also come with their fair share of drawbacks. Investors must remember that there might be long term damage to their credit history should they be unable to pay back their margin loan obligations. Adjudicate your financial health and credit status before making decisions as it is always beneficial to have a good clean credit report.

References:

1. Margin Trading: The Dreaded Margin Call – Investopedia
2. Margin Loans Make A Comeback – The Wall Street Journal

Continue Reading

Nearly 70% of all new cars purchased are on finance, making car loans one of the most popular types of consumer loans at present. However, despite the initial attraction of car financing, several borrowers later have trouble keeping up with their loan repayments, which ultimately affects their credit scores. As per a recently conducted Kelley Blue Book study, sixty per cent of car loan shoppers are now choosing longer term car loans as a way to reduce monthly repayments. While this is a smart move, reduced repayments alone cannot keep things in control and some other factors must be considered as well.

[...]

Continue Reading

When Tevita Henare came in for some professional advice regarding her mortgage loan the only questions on her mind were “How can I manage my mortgage loan better?” and “How can I improve my credit report” . Needless to say, in recent times more and more mortgage loan holders seem to be affected by this, hence this might be a good time for mortgage holders to learn how to manage their mortgages better and thereby improve their situations and credit reports.

Mortgage loans are one of the most important credit contracts consumers can get. It is mandatory that you manage this credit contract the best you can, so that it does not negatively impact your credit report or impair it any further. Below are a few points that would help you manage your mortgage loan better.

1.    Timely Payments

The first and probably most important step towards managing your mortgage loan efficiently is making timely mortgage repayments. Analyze your individual pay cycle and depending on whether you get paid weekly, fortnightly or monthly, talk to your bank to arrange your mortgage repayments accordingly. These can be arranged either via a direct debit or via self credit (this is where you pay the nominated mortgage loan account yourself). Try to ensure that the payments fall a day after the money from your salary or wages have come into your bank account. This will ensure that you never miss a payment.

2.    Contact Your Funder

If you think that you are going to struggle with your mortgage loan repayments for a specified period, contact your mortgage lender immediately and inform them of the situation. They may be able to defer your mortgage interest payments or allow the interest payments to be capitalized Capitalizing means that the interest payments get added to your loan amount for the duration that you are unable to make the repayments. The last thing you want is for a missed repayment to appear on your credit report.

3.    Increased Contributions

If you have received a pay rise, have worked overtime or find that that at the end of the month you have surplus monies left over, put these extra funds towards your mortgage loan. This will help you build up a buffer (surplus of cash in your mortgage account which can be drawn down later at the mortgage holder’s discretion) for future contingencies and unexpected commitments.

4.    Use an Offset Account

An offset account could be a very handy tool in helping you combat the rise in your mortgage loan repayments. An offset account, in most cases offers you the same interest rate as that of your mortgage loan. Hence it is wise to have surplus funds in your mortgage loan offset account as this will help reduce the interest payments on your mortgage loan.

5.    Don’t draw out equity unnecessarily from your home

This is a very common mistake which mortgage clients make. Most mortgage clients do this in order to combat their spending habits. Drawing out the unused equity from your home is not a good idea.

Let us assume that your home is worth $350,000 and you have taken out a mortgage loan on it worth $280,000.00 (80% of the property value to avoid Loan Mortgage Insurance Implications, also known as LMI). In about 2 years time your home is worth $385,000 assuming a 10% increase over 2 years and your mortgage loan is down to about $250,000. In this situation the available equity in your property is 80% of $385,000 = $308,000 less your mortgage loan balance of 250,000 which is equal to $58,000. This means that you can increase your mortgage loan by getting an additional $58,000 from the mortgage lender without having any LMI implications.

Doing this is a bad idea because the progress you had made towards repaying your home off sooner will have been undone. This not only leverages mortgage clients further but also adds another credit enquiry to your credit report.

6.    Understand the Mortgage Product You Are In

It is very essential that you understand the type of mortgage loan product you have. Mortgage loans can be of various types. Most mortgage clients use the standard variable options in which the bank provides you with a product that uses the bank’s standard variable rate. In most cases these products have user and management fees, which can be charged to your mortgage loan account.

It is essential that you are aware of the fees and charges related to your mortgage loan account. These fees and charges can sometimes make your mortgage loan appear to be in arrears, which looks detrimental on your home loan statements and if ignored can trickle down to your credit report. Another situation is where in certain cases banks might charge you a penalty for excessive mortgage contributions. Banks can set a ceiling on the amount a client can contribute over and above the minimum repayments in a year. Mortgage clients should be aware that they do not exceed this limit or else they are running the risk of being penalized by the bank.

Another very powerful mortgage loan product is a Line of Credit, also known as an LOC. A line of credit allows the mortgage loan client to make the minimum repayments while allowing the mortgage interest to  capitalize as long as the loan amount stays below the master or the global limit (Master/Global limit is the maximum loan amount that is allowed under the particular facility for the mortgage loan client). This can be a very useful mortgage loan management tool.

7.    If Interest Rates Fall Do Not Reduce Your Contributions

A common mistake mortgage holders make is to reduce their repayments as interest rates fall. Keep your mortgage loan repayments constant as this will allow you to pay off you mortgage faster and this helps reduce the overall debt levels on your mortgage loan. Clients must remember that if interest rates are falling owing to troubled economic conditions, they will rise once the economy starts to stabilize. Hence it is better to get used to higher repayments rather than have to adjust with a sudden increase in mortgage repayments.

8.    Fixing of Interest Rates

In certain cases if you feel that you are comfortable with the current interest rates and mortgage loan repayments and you are anticipating future mortgage interest rate rises, it might be a good idea to lock in your interest rates for a fixed period depending on your mortgage lending facility. This will help you get on top of all your mortgage repayments and prepare for when you come out of the fixed rate period.

9.    Budgeting

It is always a good ploy to create a budget around your mortgage loan repayments. Once you have factored in your monthly mortgage loan repayments you can work out how much of a surplus of funds you have to meet all your other expenses. Once you have worked this out and have estimated your total monthly expenditure you can work out if you are in a situation to make extra contributions towards you mortgage loan or offset account.

10.    Refinancing

In certain cases it might be better for clients to refinance out of their existing mortgage facility. This is more common in cases where existing mortgage loan clients are in a product which has an excessively high interest rate or the mortgage loan product they are in does not provide them with the flexibility and ease of management when compared to some of the other mortgage loan products available in the market.

These tips provide you with a guideline to better manage your mortgage loan. Do not forget that mortgages are very important consumer credit facilities and it is advisable that mortgage loans should be managed efficiently. Missed mortgage repayments, mortgage arrears or mortgage defaults and court judgments can irreparably damage your credit report and your ability to get a consumer loan.

Take these few simple and easy steps towards better managing your mortgage loan facility and improving your credit report.

Continue Reading