Using Your Mortgage For Other Expenses
A mortgage is often the cheapest form of debt. So if you qualify for extra mortgage room, it may be tempting to roll other expenses into your mortgage. Maybe even consolidate other debt. The advantage is that you can get everything you want, at what might seem like a manageable monthly payment and low interest rate.
Get Coronavirus Mortgage Support From Your Lender
If you’re struggling to pay your mortgage as a result of the coronavirus pandemic your lender may be able to help.
The support youll get will be based on an assessment of your financial circumstances, but could include:
- a pause on payments for a temporary period
- a reduction of payments for a temporary period
- changing your mortgage term to make payments more affordable.
Your lender should inform you of any consequences of these options. For example, further payment deferrals or reductions will result in it taking longer and costing you more to pay off your mortgage. These measures may also be reflected on your credit file.
Consider A Debt Relief Order
A DRO is a way to give yourself some breathing space as while the order is in place you dont have to pay off most debts and any included debts will be written off after a year.
There are some pretty tight eligibility criteria though, including not owning your own home and having assets of less than £1,000 and disposable household income of £50 or less each month.
You also cant get a DRO if youre going through an IVA or bankruptcy .
Find out more: Citizens Advice has a useful guide to how a DRO works and how to get referred for one.
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Switch Your Insurance To Cut Your Costs
Remaining loyal to any one insurer year after year will only hurt your pocket. Insurance deals, whether it be for your home, car or annual travel policies will be better for new customers.
So you should make sure youre not unnecessarily increasing your outgoings by spending more than you need on insurance. A few weeks before your policy comes up for renewal, look around for the best deal that works for you.
Find out more:best and worst insurance whatever youre looking to insure we explain how to find the best deals.
Borrowing For Other Major Purchases
If youre looking to pay for something expensive other than home improvements or investment property start by looking at your options where the loan is not secured against your home.
For example, you could:
- take out an unsecured personal loan or other unsecured lending, which means your home isnt at risk
- apply for car finance, if you want to buy a car read our guide to Car finance
- save until you can afford to pay for whatever it is you want without borrowing money.
Although in some cases these options might not be as cheap as getting a further advance, they wont be secured against your home.
Its important to understand the true cost of borrowing and the consequences of not keeping up with your repayments.
Read Also: How Much Have I Paid Off My Mortgage
Qualifying For A Va Mortgage
VA loan eligibility vs. qualification
Being eligible for VA home loan benefits basedon your military status or affiliation doesnt necessarilymean youllqualify for a VA loan.
You still have to qualify for a VAmortgage based on your credit, debt, and income.
Minimum credit score for a VA loan
The VA has established no minimum credit score for a VA mortgage.
However, many VA mortgage lenders require minimum FICO scores of 620 or higher so apply with many lenders if your credit score might be an issue.
Even VA lenders that allow lower credit scores dont accept subprime credit.
VA underwriting guidelines state that applicants must have paid their obligations on time for at least the most recent 12 months to be considered satisfactory credit risks.
In addition, the VA usually requires a two-year waiting period following a Chapter 7 bankruptcy or foreclosure before it will insure a loan.
And borrowers in Chapter 13 must have made at least 12 on-time payments and secure the approval of the bankruptcy court.
VA loan debt-to-income ratios
The relationship of your debts and your income is called your debt-to-income ratio, or DTI.
VA underwriters divide your monthly debts by your gross income to come up with this figure.
- If your gross income is $4,000 per month
- And your total monthly debt is $1,500
- Then your DTI is 37.5%
A DTI over 41 percent means the lender has to apply additional formulas to see if you qualify under residual income guidelines.
How Much Does It Cost To Buy A House
When buying a home, it is important to understand all the costs involved. The purchase price that you negotiate when buying a home is the starting point, not the final amount.
Most people immediately think of closing cost when assessing home ownership which generally makes up about two to five percent of the purchase price. Based on the median sales price of $321,100 for a home in the U.S. in 2017, you might pay between $6,422 and $16,066 in closing costs.
Moving will add, on average, an additional $1,100 to $5,630 to your tab, depending on whether youre relocating within the same or to another state, according to the U.S. News and World Report.
Typical buyers of existing homes spend around $8,233 on furnishings, appliances and remodeling during the first year after closing, according to the National Association of Home Builders. Buyers of new-construction homes, the group says, spend $10,601 in the first year after purchase.
In other words, buying a median-priced home could cost up to an additional $38,719, after you factor in the costs of closing, moving and furnishing. And there could be more.
Dont let the extra expenses come as a frustrating surprise. In this article, we break down the most common costs you need to anticipate when buying a house. Well highlight which are negotiable, which occur once, and which, as a homeowner, you might face throughout the life of your home.
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Are Further Advances A Good Idea For Paying Off Debts
Increasing your mortgage for home improvements might add value to your property but using a further advance to pay off debts is rarely a good idea.
Consider the alternatives first.
The additional loan would be linked to your property, which you could lose if you werent able to keep up your extra loan payments.
Even though interest rates on mortgages are normally lower than rates on personal loans and much lower than credit cards you could end up paying more in the longer term.
Before looking to borrow against your property, try to prioritise and clear your loans.
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Not Shopping Around For A Mortgage
Homebuyers can leave a lot of money on the table when they dont shop around for a mortgage. Applying for a mortgage with a few different lenders gives you a better sense of what you can afford and lets you make an apples-to-apples comparison of loan products, interest rates, closing costs, and lender fees. More important, shopping for a mortgage puts you in a better position to negotiate with lenders to get the best deal possible.
As you shop lenders, pay attention to fees and closing costs, which can add up at the closing table. While some of the pricing variances may not seem big on paper now, they can add up to significant cost savings over the lifetime of your loan. Keep in mind that some lenders will offer you discount points, a way to buy down your interest rate upfront. This increases your closing costs. And other lenders that promote low or no closing costs tend to charge higher interest rates to make up the difference. Homebuyers in the U.S. pay, on average, $5,749 for closing costs, according to a 2019 survey from ClosingCorp, a real estate closing cost data firm.
How Do Insurance Companies Pay Out Claims On Mortgaged Homes
When you file a home insurance claim on a house you’re mortgaging, your mortgage lender will have an active role in the payout distribution. Once you’ve filed a home insurance claim and it’s found valid, your insurer will issue a check made out to both you and your loan company.
Mortgage companies usually want to maintain some control of home insurance payouts after a claim due to their financial interest in the state of your house. Many mortgage lending agreements include a clause that gives the lender control over funds for a home insurance claim payout.
When you sign your mortgage agreement, your lender will usually require you to list them as a “loss payee” on your home insurance policy. Loss payee status allows them to receive home insurance claim payouts in order to secure their financial interests and ensure proper repair of the house. Mortgage companies may then put the funds into an escrow account to disburse for needed repairs.
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Take Care Of Your Mental Health
Approximately one in four people in the UK will experience a mental health problem each year and worrying about debt or money can exacerbate the problem.
The good news is there are steps you can take to improve the situation youre in, even if you currently feel unable to take even the tiniest of steps.
Find out more: mental health charity Mind has a wealth of useful information, and a supportive Side by Side community.
What Should You Put On Your Mortgage
Heres a scenario builders are sometimes confronted with by move-up buyers with an abundance of cash from their current houses buy the appliances and carpeting outright from the builder and pay for the rest of the house with a mortgage.
On the surface, the idea makes good sense. Appliances and carpeting dont last, certainly not for 30 years. So why pay double, or maybe even triple, their actual cost with a home loan that goes on for well beyond their expected lives?
According to the National Association of Certified Home Inspectors , your brand new refrigerator might make it for 13 years if you take good care of it, but your range might not see its 13th anniversary. Dishwashers usually last only nine years, NACHI reports carpeting, for maybe 10 years a heat pump, 10 to 15 years and HVAC systems possibly 15 years at the outside.
If you plan to remain in your new house beyond, say, 13 to 15 years, you will be paying with interest for these key items long after they fail and you have to replace them. So, to some buyers, it seems like a good idea to remove these products from a long-term mortgage by paying cash for them to the builder and having him or her reduce the total cost of the house by that much.
Say, for example, that the house costs $250,000 and the appliances and carpeting run $10,000. You pay that $10,000 out of pocket and mortgage the rest. So, in this example, if you put 20 percent down, the loan would be for $192,000.
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Switch To A Cheaper Mortgage
Mortgages are secured debt. This means when you take out the loan to buy your home, you offer your property as security.
As a form of debt, theyre also much more of a long-term commitment. That doesnt mean you need to stick with the same provider for the duration of the mortgage. In fact, if youre coming to the end of a fixed-term deal or youre unhappy with the standard variable rate youre paying then remortgaging could be a good way to lower your monthly repayments.
Find out more: remortgaging: how to save thousands on your mortgage
Its Perfectly Normal To Be Excited About Finally Purchasing The Home Youve Always Dreamed Of
Now youre ready to ditch the hand-me-down furniture youve used for years and pick up that new matching bedroom set. Theres only one problem. Your mortgage loan hasnt closed yet. Its common to think that buying a few pieces of new furniture is OK as long as youre not paying any interest or dont have to make any payments until after your mortgage loan closes.
Unfortunately, even with 0% financing and no payments until the following year, the furniture store is still going to run your credit, which could cause a temporary drop in your credit score.
New federal regulations require mortgage lenders to run a borrowers credit again right before closing, even after the loan has already been approved. If you were close to the credit limit for your particular rate, simply buying that new furniture before your mortgage loan is closed could be enough to cause your loan not to close on time with the rate you wanted. Likewise, taking on new scheduled debt payments regardless if youre paying interest or not could affect your debt-to-income ratio. If your ratios were close, the extra payments could cause you to no longer qualify or at the very least, delay your closing.
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Should You Take Out A Loan To Furnish Your New Home
by Maurie Backman | July 23, 2021
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Need furniture? Here are the pros and cons of borrowing to buy it.
Moving to a new home can be exciting. But if you’re upsizing your living space, you may end up with too many rooms and not enough furniture.
If you’ve bought a home you need to furnish, you may not have the money to pay for it right away. Especially if you emptied out your savings account to make a down payment and cover the cost of moving.
You could take out a loan to finance your furniture, but is that a smart idea?
Cut Existing Loan Costs
It may be possible to swap your personal loan to a provider that charges a lower rate of interest although youll need to crunch the numbers to see if its worth it.
Youll have to call your existing lender and ask it for a settlement figure which will be the total of the debt still owed plus a settlement charge for paying it off early.
Youll then need to compare this figure to the interest rate on the best new loan you may be able to get, and see if the saving stacks up.
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Reject Increases In Your Credit Card Apr
If you withdraw cash from a cash machine with your credit card or pay off anything less than the full amount on your statement, you’ll normally be charged interest by the card company.
If your credit card company decides to increase your interest rate, it must contact you at least 30 days beforehand to give you time to decide what to do. You should be given 60 days to reject the hike, cancel the card and pay back what you owe at the old rate.
Find out more: discover how credit card interest is calculated and how to find the best credit card deal that suits your circumstances.
How To Pay For Furniture For Your New Home
Congratulations, you just bought your dream house! Now its time to make that house a home. Step one: furnishing the place. Unfortunately, furniture costs can get expensive fast.
According to real estate agent Sarah Bowles of Urban Habitat, furnishing a new home from scratch can cost up to 25% of your homes value. Furnishing a new home will require some financial planning. The question is, how will you foot the bill?
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