Categories
Mortgage

When Is It Best to Apply for a Mortgage Without Your Spouse?

Applying for a mortgage is a tough decision to make, especially when you have a spouse and/or kids. There are cases when in fact it’s best to apply for a mortgage without your spouse. We’ll tell you all there is to know about mortgages and what helps you get your application approved, or what could get it dismissed.

Although starting a marriage and looking for a home might be a dream come true for most of us, applying for a mortgage is a rational decision to make. This takes time and ultimately, it might be smarter to apply separately for it.

Let’s see when it’s the best time to apply for a mortgage without your spouse:

If One of You Has a Bad Credit Score

Applying for a mortgage with your spouse means that both of your credit scores will be put on display for the lender to check and compare. Unfortunately, even if one of you has an excellent score, the one with the bad credit can bring both of you down.

The bank will pay more attention to the negative score even if the other score could balance the negative one. As a general rule, it would be best for both spouses to have a medium rating, rather than big discrepancies.

In Case of Identity Theft

There’s nothing worse than applying for a mortgage and finding out that someone has used your name, destroyed your credit score, made many debts and, in addition, had a high credit usage.

To avoid this, check your credit score regularly. As rare as it is, identity theft is hard to prove and it also takes time to sort out the situation.

If your spouse has fallen victim to this sort of crime, but you’ve already found the perfect home, applying for a mortgage on your own is a wise decision.

In Case of Excessive Debt

A high credit card usage is considered to be over 20% of the current loan you’ve taken. Applying for a mortgage when your spouse’s debt has a high-income ratio might come with a denied mortgage application.

If the loan is still approved, consider that you’ll have to deal with higher interest rates, so it might be best to choose to apply on your own.

If There Is No Credit Score

Let’s say that maybe a person has saved money, and never had to take on a loan. From the bank’s point of view, that individual presents a risky application. By not knowing anything about his/her finances and not having any proof that the applicant is trustworthy, the bank will be sceptical in approving the loan.

Your spouse’s non-existent credit history or a short one will certainly be detrimental when applying for a mortgage.

Start by checking both of your credit scores and then talk to a mortgage specialist to give you some advice. He/she will surely tell you if it’s best to apply together, or on your own.

Categories
Refinance and Refinancing Debt Consolidation Home Loans

Top Reasons for Refinancing Your Home Loan

You may have heard a lot about the mortgage term ‘refinancing’. Used effectively, refinancning your home can be a great way to consolidate debt, release home equity and get a better interest rate.

Refinancing Explained

To refinance your mortgage (or home loan) refers to the replacement of an existing home loan with a new home loan, with different terms and usually increased savings.Top Reasons People Refinance their Home LoanThe top reasons people refinance their mortgage includes:

To get a lower monthly mortgage payment – this is achieved by refinancing into a new, lower-rate home loan. It could be a fixed rate loan, a variable rate loan or a split rate loan (which is a combination of both).

One of the best reasons to refinance is to lower the interest rate on your existing loan. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance.

Investopedia

Refinancing Your Home To Consolidate Debt

Like the majority of Australians you could have a number of debts – generally a home loan, personal loans, and the dreaded high interest credit card balance. These multiple debts involves juggling lots of different repayments of different amounts at different times of the month.

If you refinancing your home loan you could provide an opportunity to simplify your debt. This has the potential to reduce the high interest you may be paying on all your debts. This process is called ‘debt consolidation’. Debt consolidation combines several high interest debts into a single lower rate debt, possibly your mortgage, which could reduce, or at the very least simplify, your total monthly repayments.

Do note however that debt consolidation has some negatives. A short term loan such a personal loan becomes a long term debt (your mortgage), and that can result in interest on the balance for a longer period. If you aren’t savvy, it could cost you more in the long run.

Debt consolidation can be truly cost-effective, if you commit to making additional repayments to pay off the bigger loan as quickly as possible, thus taking advantage of the lower interest rate.

Refinancing a home loan to access home equity

Your home is probably one of your most valuable assets. With optimising you home equity you can work towards building additional wealth or achieve personal goals.

You can refinance your home loan to draw cash from your home’s equity for the purpose of either debt consolidation, home renovations, investments or simply to have access to some extra cash.

To reduce or alter risk

If you currently have a variable rate home loan, but now feel as though you would benefit from fixed payments, you can refinance your home loan into a new fixed rate loan to better meet your changing needs (or vice versa: change a fixed rate to a variable).

To pay off your mortgage sooner

If you want to pay your home loan off sooner, you can build up the equity in your home quicker by refinancing into a new home loan that allows you to accelerate your repayment schedule.