Cash Out Christian Mortgage Loan
A cash out Christian mortgage loan can be a great help for the home owner looking for a way to take advantage of the piggy bank that he lives in. After all, as time rolls along, all but a few mortgages like interest only pare down the principle of the loan giving more and more of real house ownership to the property holder. But life is never static and is always changing so that financial needs, greeds and emergencies pop up on the radar screen and often take our full attention until resolved or satisfied. A cash out mortgage loan can help with that very tunnel vision problem by allowing the property holder to turn the house upside down and shake out all the coins deposited there over the years known as home equity. This lending agreement has its own set of pros and cons and needs to be understood before being implemented.
First, the decision needs to be made about how long the property holder plans on living in his residence. Any length less than seven to ten years will be a waste of money because the amount of interest paid on the new lending agreement will not be smaller than the cost of the points and origination fees needed to secure the new lending agreement. Leaving a house before that time will put the owner in an upside down position and a cash out mortgage loan will be a millstone rather than a stepping stone to financial health.
How does a cash out mortgage loan work? Take Mr. and Mrs. Joe Wish I Had More Money. These two folks have worked hard to get where they are in life and now have thirty thousand dollars in equity based on the buying price of their house ten years ago. Interest rates on mortgages are pretty much the same as they were ten years ago, so the couple is thinking about taking out a borrowing agreement for one hundred and thirty thousand dollars again and running off to Aruba with their easy thirty thousand profit. Also, the husband has an eye on a sports car, but the wife wants to give the grandchildren a nice Christmas this year. Upon preliminary discussion with their bank officer, the twosome has been rudely slapped with a couple of realities.
First, if the couple takes all of the equity in the house, they will have to pay for Private Mortgage Insurance (PMI) which will cost thousands of dollars over the life of the new mortgage. Any agreement over eighty percent of the total equity is required to have PMI. So the equity available without adding PMI is now down to twenty four thousand dollars. Goodbye sports car. In addition, the twosome has also discovered that because of a couple of late payments over the years and because of a backyard in ground swimming pool loan from three years ago, the bank has now declared that the couple will have to pay a higher rate of interest on the cash out mortgage loan. This higher rate is due to a lowered credit score due to the late payments and a higher debt to income ratio. Both of these issues can be loan killers for borrowers seeking any kind of lending agreement, especially with a bank.
Suddenly, their new cash out mortgage loan is going to be a hundred and seven dollars more a month than they have been paying for the past ten years. Gulp. The final reality about this lending agreement is that the cost of this mortgage will not only be a higher interest rate, but the cost of just getting the loan will be three and a half points. A point represents one percent of the loan's value, so for this now every unhappy twosome the price of just getting the privilege to borrow more expensive money will be four thousand five hundred and fifty dollars. Every mortgage, even if it is a second mortgage like a home equity loan will have points associated with it, although sometimes the language is not points but a number of fees. It's all the same. "For what is a man advantaged if he gain the whole world and lose himself or be cast away?" (Luke 9:25)
If the couple uses equity money gained from the cash out mortgage loan, the actual amount available for the loan could be close to eighteen thousand dollars. A long way from the once dreamed thirty thousand. These costs and restrictions are the reality of a cash out mortgage loan. But for the right set of circumstances this lending agreement can help fund an operation not covered by insurance, college tuition, a dream vacation for a golden anniversary or other important time in the life of a homeowner. But one important final reminder is in order.
No one should take the first offer that comes across the negotiating table. Not only should a borrower seek out three or four different mortgage lending agreement offers and have each lending company try and beat the others, but a real estate expert or a financial advisor or both should be retained to help advise anyone seeking such an important fiscal decision. After all, this involves money that represents thousands and thousands of hours of employment and a person's place of refuge and comfort. To make a decision that could hasten foreclosure or loan default would indeed be tragic for a family. Even more tragic however is a person facing death without the certainty of heaven.
Cash Out Christian MortgagesTurning to cash out mortgages can be a quick fix for homeowners who need money fast. The reasons for taking advantage of these loans can vary. Whether the funds are earmarked for home improvement needs or sudden unexpected expenses, the equity in a home is an asset many homeowners choose to tap into. These loans basically involve a refinance of a specific property that allows the borrower to receive more than is owed on the house as long as there is sufficient equity. Some borrowers use the extra money to pay off high interest loans or cover expenses such as a child's education or family medical debt. Different lenders will have varying guidelines on the terms of these mortgages. Some may require that the borrower have owned the property for a certain period of time. Timely monthly payments may be another prerequisite. Whatever choice a potential borrower might make, careful research is required before a homeowner should pursue cash out mortgages. Some new home buyers may also take advantage of this lending possibility when purchasing property that is priced below market value. By taking out a mortgage that is higher than the selling price of a house, the buyer can attain funds that might be needed for home repair or any other reason.
Whether a homeowner has owned a specific property for a short period of time or for many years, the possibility of drawing on a home's equity could provide a needed financial solution. A homeowner can figure out the amount of equity that they have in a home by subtracting the amount of money that is still owed on the property from the home's current market value. Most providers of cash out mortgages can help a potential borrower determine how much money can be borrowed. Using an important asset like the family home as a kind of big ticket automated teller machine is not necessarily a wise move. But there can be sound reasoning behind pursuing cash out mortgages. Of course, such a step should never be taken lightly. Good spending habits and a responsible plan of attack when it comes to retiring debt are always the best approach to family finances. But for many families, unexpected expenses can leave them with little choice.
If a consumer has racked up a good deal of credit card debt, they are most likely paying out a lot of money in monthly interest charges. Using cash out mortgages to pay off these high interest cards can be a sound financial move. If a child wishes to go to college, but there seems to be no way to fund the sometimes astronomical tuition expenses, these loans can provide an answer. Home repair could be another reason to pursue this type of financing. Since making needed home improvements can actually increase the value, and therefore the equity, of a home, borrowing on the existing equity can actually make sense. Any homeowner who finds that they are facing a large amount of debt will generally experience a good deal of stress as well. The Bible talks about the peace that is available to believers. "I will both lay me down in peace, and sleep: for thou, Lord, only makest me dwell in safety." (Psalm 4:8)
Of course, there are always drawbacks to any kind of business transaction including cash out mortgages. The most obvious risk is that the house itself will serve as collateral for the loan. If a borrower defaults on the increased mortgage payment, the house is at risk. In a worst case scenario, the lender could take possession of the house. For this reason, potential borrowers should make sure that they will be able to comfortably make loan payments and are not put the family home in danger. The lure of relatively quick cash can sometimes tempt even the most conscientious individual to lose objectivity. A borrower should not forget that the money they are receiving still represents debt and the monthly house payment will rise. Any consumer who indulges in poor spending habits and careless use of credit should never see cash out mortgages as a quick fix for careless and uncorrected financial habits. Expenses such as vacations or other luxuries should never be seen as justification for tapping into the valuable equity of a home.
While obtaining funds through cash out mortgages can be a tempting alternative when extra money is needed, a Christian borrower should not ignore the importance of hanging on to the equity in a home. Many homeowners have found themselves in financial trouble by constantly turning home equity into cash. Not only are these consumers paying more and more in interest, they could find themselves completely unable to ever pay off their home. How sad to spend a lifetime paying on a property and end up no further along in terms of ownership than when the homeowner started. On the contrary, with continued borrowing, the home related debt will have multiplied over the years. A major drawback of using home equity to pay off high interest credit cards is that the house itself is put at risk. Credit card companies can't touch a card holder's house, no matter how much interest they are able to charge. But once the debt has been thrown onto the house itself, that house is put at risk. The additional closing costs and administrative fees that any kind of mortgage loan entails can be extremely costly to the borrower as well. If at all possible, reduction of debt rather than taking on additional debt is always the best way to go.