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Subprime lending refers to the extension of credit to higher-risk borrowers, a practice also commonly referred to as “B/C” or “nonconforming” credit. Loans to subprime borrowers serve communities that may have been underserved by other lenders in the past. In recent years, subprime mortgage lending has grown dramatically, with over 90% of all subprime mortgage loans made in or after 1993. By the end of 1996, the total value of outstanding subprime mortgage loans exceeded $350 billion. In 1997 alone, subprime lenders originated over $125 billion in home equity loans. Subprime loans have become a significant and growing part of the home equity market. Subprime originations constituted 11.5% of the total home equity lending market in 1996; by the first half of 1997, they had grown to 15.5% of this market. At the same time, the composition of companies involved in the subprime market is evolving. One of the dramatic changes in this market has been the growth in subprime mortgage lending by large corporations that operate nationwide.

The subprime mortgage market has flourished because such lending has been profitable, demand from borrowers has increased, and secondary market opportunities are growing. Lenders typically price subprime loans to consumers at rates of interest and fees higher than conventional loans. Higher rates and points can be appropriate where greater credit risks are involved, as is often the case with subprime loans. Critics assert, however, that the interest rates and fees charged by some subprime lenders are excessive, and much higher than necessary to cover increased risks, particularly since these loans are secured by the value of a home. Some attribute lenders’ high rates on first mortgages in part to federal deregulation of certain state interest rate ceilings in 1980.

The relatively high profit margins in the subprime mortgage industry have fueled demand in the secondary market from investors seeking higher-yielding securitized assets, especially in an environment of generally low interest rates. In 1996, the subprime mortgage sector issued over $38 billion in securities, the largest increase in securitizations for any lending industry sector in that year. The secondary market’s expansion has, in turn, helped to sustain growth in the industry by enabling lenders to raise funds on the open market to expand their subprime lending activities. Freddie Mac, one of the primary government-sponsored enterprises involved in the purchase of mortgages, recently announced plans to enter the secondary market in subprime loans by purchasing significant numbers of “A minus” subprime mortgages by 1998 and the higher-risk “B and C” loans by 1999.

The market for subprime loans is expected to continue growing. Credit card delinquencies are rising and personal bankruptcies are at record levels, which negatively affect borrowers’ credit histories, pushing more consumers into higher risk categories. Meanwhile, consumer spending continues to be strong. Together, these factors increase the market for subprime loans. In addition, more borrowers generally may be seeking home equity loans due to the change in the tax code limiting allowable interest deductions to those on a first mortgage.

Use A Mortgage Calculator To Guide Your Home Equity Loan Decision

The difference between a home loan and a home equity loan lies mainly in that the home equity loan, also known as a second or even third mortgage, is issued at a higher interest rate. This interest rate is lower than you could expect to pay on a credit card, but it will be still higher than the original interest rate.

Use a home equity mortgage calculator to see what releasing different percentages of your equity makes to the payments required. The mortgage calculator then allows you to compare whether this is the best course of action open to you.

The alternative which may be more attractive financially is refinancing your home completely. This is where the mortgage calculator can really work for you. There are a number of options when refinancing, especially if you have a substantial amount of equity in the home. By inputting these, one at a time, into a mortgage calculator you can create a list which will allow you to clearly see which option benefits you best.

Home equity loans often seem far more attractive to the home owner than they actually are. This is because the lender is hoping to seduce you into signing your property into his hands. Find out all the details and use your mortgage calculator. See if what you calculates matches what they want you to sign for. Later you may find that it wasn’t such a good idea as your home suddenly becomes under threat of foreclosure because of some contractual obligation that you hadn’t fully understood.

Only in extreme circumstances should you even consider a home equity loan that completely strips your property of any value over mortgage total. Keep your payments affordable by using the mortgage calculator and always factor in an additional percent or two on the interest rate.

Refinancing your home is a major step, but as with a first mortgage this is the only claim on your property. If you take out a home equity loan instead, then you will have an additional lender who has a financial stake in your home. If you decide that you much prefer the terms on the home equity loan, and the mortgage calculator seems to bring it well within your budget, then make sure you read the small print carefully.

You need to know what the payments are for: are they just interest which will leave a large capital balance payable at a later date, for example? Make sure you can afford these additional monthly payments.

Here are a few don’ts that will help you in the long run:

* Don’t lie to yourself or your mortgage calculator.

* Don’t over-estimate your income under any circumstances; treat overtime money as “extra” if possible, and not part of your usual salary.

*Don’t over-estimate the equity in your home in the mortgage calculator. This can lead to false hopes which your property appraiser will quickly dispel.

If you are hoping to use the released capital to make home improvements, these should add value to your property. Look into this carefully to find out approximately how much you’ll be increasing your property’s value before committing to either the loan or having the work carried out. Failure to carry out the work means you are still responsible for the loan, but that you have not created any new equity.

In todays market, it is fairly easy to obtain a bad credit loan even though the rates of such loans are high as compared to the conventional loans. Lenders would be more than happy to grant you a home equity loan in such a case because the loan amount will be secured by your home and if you default in repaying, your property will be foreclosed.

Since the process is not very difficult, you can shop around and compare the credit offers to get the best deal. Because of the increasing competition among the home equity loan providers, you can easily find good deals if you conduct some research. You can get quotes on the Internet and compare. But before you decide on a lender make sure that you check with the Better Business Bureau to ensure that there are no complaints lodged.

There are several lenders in the market who try to take advantage of consumers who do not have good credit and proper knowledge of how a mortgage works. So when you shop around for bad credit home equity loans, make sure that you do not buy anything based on impulse.

Make sure that you know everything about the specifics of mortgage and how loans can differ from one lender to another. For instance, adjustable rate mortgage comes with a low monthly rate in the initial period of three to seven years, but then it increases. On the other hand, balloon mortgage has also got low payments in initial years but in the end the entire mortgage is due in full.

It helps a lot to scrutinize the closing costs. You need to remember that every reputable lender provides a Good Faith Estimate with details of the costs according to law. You should have an idea of the charges and be aware of the origination fee that can bloat anytime.

There are a lot of lenders who would be willing to give you as much as you want, but they do not care if you have to make huge monthly payments on the loan. Hence, you need to make sure that the loan you are planning to take benefits you in the long run and helps you to bring your finances back into shape so that you can qualify for loans the next time.

Remember to make this the ultimate goal of any financial transaction you make. Even though you can get a bad credit home equity loan, you should remember that you can get the best deal only when you are a smart shopper.

If you have credit problems in your past and a low credit score, if you decide you want to refinance or get a home equity loan, you will probably need to work with a subprime mortgage lender. Subprime mortgage lenders are willing to work with those with lower credit scores and past credit problems. They charge interest rates that are slightly higher than the prime rate. When you work with a suprime lender, you will need to be careful of a few things. Subprime mortgage lenders sometimes take advantage of borrowers with poor credit and charge excessive fees or offer terms that are not reasonable.

Be careful of these things when applying for a new refinance or home equity loan:

1. Watch Out For The Pre-Payment Penalty – Most sub-prime mortgage loans have a pre-payment penalty attached. That means that if you decide to either sell your home or refinance your home anytime within the designated period of time, you will have to pay a penalty which is usually equal to about 6 months of interest or mortgage payments. If you are ok with a pre-payment penalty, make sure you know exactly how long that allotted amount of time is and exactly how much the penalty is. A penalty is usually for anywhere from 6 months to 2 years. But, a penalty that is two years or longer, in some cases, might be considered excessive.

2. Watch Out For Junk Fees – Many times in sub prime mortgage loans, a broker will tack on excessive fees that are not completely necessary. Have your mortgage broker go through all of the fees one by one and make sure you understand where all the fees are going. Educate yourself on what fees are completely necessary and which ones are not. Go to http://www.mortgagesanity.com for a list of junk fees that sometimes get added to mortgage loans. Also, educate yourself on the average cost of such fees to avoid being charged an excessive amount.

What is a stated income second mortgage? A stated income second mortgage is one that does not require the borrower to prove income stated on the application. This is most advantageous to self employed and contract workers who receive a 1099 instead of a W-2 as they would have a difficult time proving their income. Stated income mortgage loans are the most commonly used and usually the least expensive of the no documentation types of mortgages.

Mortgage lenders understand that it is difficult for individuals who are self-employed or operate a one-person firm to verify their income. Different types of no income loans are offered including state income or no income verification loans.

Inquiries should be made to a loan officer as to the types of reduced documentation information required to secure the loan. Lenders may require anywhere from 3 to 6 month reserve for principal interest taxes and insurance (p.i.t.i.). If the monthly p.i.t.i. payment is $ 2,000 a month; the lender may require proof of assets anywhere from $6,000 to $ 12,000.

A fixed rate second mortgage is a way to refinance higher adjustable rate second mortgages or home equity loans. If the interest rate on the second mortgage is below the adjustable rate, lower payments monthly would be a benefit of the second mortgage.

Home equity loans can serve a number of purposes. They can be used to reduce credit card debt, consolidate high interest credit lines, make home improvements and pursue educational endeavors.

Stated income lines are available to all borrowers but the lenders usually require the borrower to have a minimum credit score. The higher the credit score the better the interest rate offered.

A stated income second mortgage loan is suitable for borrowers who have no verifiable income and have assets to meet minimum reserve requirements of the lender. The stated income on your application must be reasonable in terms of your assets. Qualifications for no income verification loans require the borrower to have a minimum credit score. While it varies from lender to lender, most lenders will require the borrower to have a credit score above 580.

The lower the credit scores the higher the interest rate the lender will require. If your credit score is high you may be able to take advantage of a fixed rate second mortgage before the interest rates increase above 7%.

Consideration is usually given to the tax consequences of the different types of loans. A tax adviser should be consulted before a borrower commits to a mortgage whether he is a first time buyer or an experienced homeowner refinancing.

We know debt is bad. We know it could take us forever to pay off interest. But we make quick purchases to keep up with the Joneses, anyway. We go on a shopping spree because something looked good on TV, or simply to reward ourselves for getting through the workweek. We buy cars, home stereo systems, and self-twirling spaghetti forks we certainly could live without. By the time we find ourselves staring at a hefty bill less than 30 days later, we rue our impulsive decision to buy, buy, buy.

Some things, however, are worth getting into debt for. If you’re a wage earner, nothing spells security just as much as land or a house does. You need never fear being homeless again, and secured home equity loans make it possible.

The Basics
A home equity loan gives you the opportunity to use your home’s equity as collateral, in order to borrow money. Collateral is property that guarantees you will pay back a debt. To get your home’s equity value, you subtract how much you still owe on your mortgage from your home’s value. A home equity loan qualifies as a secured loan, as it is secured against a major asset. In this case, the asset is a home, although it may also include other properties.

The Second Mortgage
A secured home equity loan is also referred to as a second mortgage. Like the first mortgage, your property secures a home equity loan. In a nutshell, this loan transforms equity into cash, which people use for a variety of purposes. Home improvements, a popular choice, add equity to your home. Other common reasons for taking out a secured home equity loan include paying for your children’s college education, medical expenses, family emergencies, and huge purchases; or consolidating your debt.

The Terms
Before you take out a secured home equity loan, you should be aware of the terms. You receive the loan in one lump sum at one time. Also, once you take out the loan, you cannot borrow again from the loan. In addition, it is possible to take out more than one loan on the mortgage of your home. But if you do that, make sure to notify your lenders.

The Payback
The benefit of taking out a secured home equity loan is that you can make investments that will last a lifetime. The drawback is that you have to pay the money back. The payments remain the same every month. While first mortgages must be repaid in about 30 years, second mortgages must typically be paid back in half that time. Nonetheless, that figure is not carved in stone, and the repayment period can range from five to 30 years.

The Risks
If you take out a secured home equity loan, you naturally have every intention of paying it back. After all, you know that if you default on payments, you could lose your land or your house. Thankfully, lenders of secured home equity loans often understand when borrowers have short-term problems with their payments. Conventional wisdom says that if you are willing to put your house on the line, then you are willing to give your heart and soul to make payments.

Though debt has become a dirty word in society, repayment need not be a nightmare. Secured home equity loan can help give you a fresh start in life.

Poor Credit Home Equity Loans – What Are Your Options?

If your credit is less than perfect, you probably think that it is impossible to get approved for a home equity loan. However, thousands of people with poor credit are able to get loans. Because home equity loans are secured loans, lenders are willing to offer money to those with bad credit. There are several options available to those looking to get a home equity loan.

Pros and Cons of a Home Equity Loan

There are various reasons to get a home equity loan. However, there is one important reason not to get one. For starters, home equity loans are ideal for people who are hoping to consolidate their debts and eliminate unnecessary expenses. Home equity loans have a low percentage rate, but a shorter term than most first mortgages. The monthly payments on home equity loans are very low. Those who use the loan to consolidate debt are able to get out of debt by spending less money each month.

The downside side to home equity loan is that these loans are secured by your home. If you are unable to maintain regular payments, the lender who granted your loan may foreclose your home. Thus, it is vital to carefully evaluate your money situation. If you are not confident in your ability to repay the home equity loan, avoid applying and accepting a loan.

How to Find a Home Equity Loan Lender?

If you have poor credit, finding a good home equity lender may be challenging. Nonetheless, it is possible. As you begin your search, contact your mortgage lender and inquire about their home equity rates. Most home equity loans are fixed rate mortgages. Thus, your monthly payments are predictable. If your lender offers acceptable terms, request a quote.

Along with requesting a quote from your mortgage lender, complete a quote request with an online mortgage broker. Broker companies will help you find the best lender. If you have bad credit, your best option is to choose a sub prime lender. These lenders offer the best home equity rates for individuals with a low credit score. By using a broker, you will receive at least four offers from various loan lenders. Quotes will include rates, terms, and loan services. You pick the home equity loan package with the best rate.

Poor Credit Home Equity Loans – Avoiding Home Equity Loan Scams

Obtaining a home equity loan makes it possible to payoff credit cards, finance a home improvement project, etc. In fact, one of the benefits of homeownership is being able to tap into your home’s equity for large expenses. Many lenders offer great rates on home equity loans and lines of credit. Yet, homeowners should beware home equity loan scams that place them at risk of losing their home.

Understanding Home Equity Basics

A home equity loan is essentially a personal loan that is secured by your home’s equity. The amount you are able to acquire will vary. For the most part, you are able to obtain a loan up to the amount of your home’s equity. However, lenders will usually review your credit and income to ensure that you qualify for the requested amount.

Home equity loans are beneficial because the funds may be used for a multitude of purposes. If you are looking to payoff credit card balances, a home equity loan will help you achieve this goal. Nonetheless, exercise care when applying for such a loan. Because your home serves as the collateral, failure to maintain regular payments will result in foreclosure. Sadly, some lenders are betting on your inability to repay a home equity loan.

Common Home Equity Loan Scams

Lenders use an array of fraudulent schemes to steal your equity. For starters, there are lenders who cleverly convince homeowners to borrow more than they can afford to pay.

Moreover, a lender may encourage homeowners to exaggerate their income in order to qualify for a larger amount. Instead of having your best interest in mind, these lenders knowingly position their clients for defeat. Hence, when you can no longer afford the payments, the lender forecloses.

If applying for a home equity loan, it is important to read the loan agreement carefully. If possible, have the contract reviewed by an attorney. Some home equity loans involve a large balloon payment at the end of the loan term. The typical homeowner cannot afford to pay this amount. Regardless of whether you maintain timely payments, the home equity lender may claim your home if you are unable to make the final payment.

Manage Your Finances – Get A Low Debt Consolidation Loan Rate

No one wants to see their family hurt by their own mistakes and parents in particular, tend to do everything to avoid causing their children grief. Unfortunately, when debt spirals out of control and the monthly payments become increasingly difficult to make, radical measures are often considered. However, rather than selling up and moving to a cheaper neighborhood, pulling your children out of school or college or doing anything else to disturb your family’s equilibrium, you can consolidate your debts into one loan at a low debt consolidation loan rate. This one action could free up enough money every month to make a significant difference.

You can save a lot of money on interest charges simply by combining your current debts into a loan that has a low debt consolidation loan rate. Not only will your monthly payments decrease (possibly very substantially), you will save thousands of dollars over the loan term, have the convenience of only one payment, and have the guarantee of being debt free at the end of the term of the loan (if you use a fixed term loan to consolidate).

There are different ways you can solve your financial problems by benefiting from low debt consolidation loan rates. Home equity loans can give you highly competitive interest rates if you have adequate equity in your home. The only risk is that your home is security for the loan and if you default the lender can foreclose. You need to be honest with yourself about your payment history and likelihood of paying late. If you are consolidating debt to avoid family upheaval, you certainly dont want to lose your house because of a missed payment.

An unsecured personal loan is the most popular consolidation option, offering a lower debt consolidation loan rate than the average credit card and line of credit. Most family debt problems are caused by high credit card balances and lines of credit, both at high commercial rates. Multiple monthly payments on different loans can add up to a lot of money and place a lot of stress on every member of your family, but particularly you and your partner.

However, as soon as you have combined all your credit cards and debts into one loan at a lower debt consolidation rate, you will be relieved of an enormous amount of stress. You will be finally in a position to move out of the red and into the black. The monthly and long term savings from debt consolidation will help you take back control of your finances. If you are wise and cancel all your credit cards and any lines of credit once you have paid out their balances, you will be out of debt at the end of the loan term and the whole process will have been painless.

With such an easy solution to your problems readily available, why continue to suffer? The balls in your court.

There are two types of mortgages, fixed rate mortgages and floating rate mortgages. As is obvious from their names, the fixed rate mortgages are ones where the monthly mortgage payment amount remains the same for the entire life of the mortgage i.e. till the end of mortgage term; whereas floating rate mortgages float/ change throughout the life of the home mortgage loan. The mortgage interest rate on the fixed rate mortgage loan is fixed at the start of Connecticut home mortgage loan term. Whereas, the mortgage rate on a floating rate mortgage is dependent on a pre-decided financial index. This predecided financial index factor is on economic, financial, political and many other factors).

So, which type of mortgage is better?

Well, the opinion seems divided and is mainly based on the preferences of the individual who is getting the home mortgage loan. However, the general recommendation is that you should go for a floating rate mortgage loan if you plan to live in the home for a shorter duration. For long durations, you will need to make a decision on how low the current fixed mortgage rate is and whether its low enough to be beneficial for locking-in for a long period.

Owning a home is a matter of great pride; and in todays world, owning a home has been made really easy through mortgages. However, when you buy an home through the home mortgage route, you dont actually get the total (100%) ownership of the home till you have paid your mortgage completely.

As you make your monthly mortgage payments, your ownership level increases and when you pay back your entire mortgage loan (which might happen 20-30 years after you start your mortgage), you then become 100% the owner. So, mortgages are long term investments where the home is the asset that you create over a long period of time. But that does not mean that you are blocking all your money in the making of an asset that matures over very long term. If you need money during the tenure of your mortgage loan e.g. for home improvements, you can actually make use of your investment (your ownership in the house) in order to get the cash you need. This happens in the form of an home equity loan.

Getting a good mortgage deal is one thing and bettering that mortgage deal is another thing. In simple words, Mortgage refinancing means ending your current mortgage to get into another mortgage for the same property.

Of course, you would go for mortgage refinancing only if the current mortgage interest rates are lower than the mortgage interest rates that you are paying on your mortgage which you took a few years back. However, that doesnt mean that you go for mortgage refinancing every time you find that the mortgage interest rates have gone down a bit. There are costs involved with mortgage refinancing and these costs make mortgage refinancing unfeasible unless the mortgage rates have gone down significantly.

Various mortgage industry analysts suggest different figures for the gap (between current mortgage rates and the rates on your existing mortgage) that would make mortgage refinancing a practical option.