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Home Loans

What Happens When You Default On Home Equity Loans?

If the value of your home, or the amount you paid for it, is higher than your first mortgage or the principal, it means that you have equity in your home. You can tap into your equity by applying for a loan, secured by it. These can be a great option to acquire finance, but what happens if you default on home equity loans?

Here are the consequences if you default on home equity loans

1.The account will be sold to a collection company.

Unlike what other people think, foreclosure is usually not the course of action home lenders choose to recover the amount you owe. When you default on your debt, your lender may sell it to a collection company who will take it from there. They will call you, send collectors to your door steps or send demand letters to attempt to recover your outstanding balance.

standard-lawsuit2. Standard lawsuit

If the second mortgage holder decides not to foreclose, can it still recover the money it has lent you? Yes. In an attempt to recover payments, the lender may file a standard suit against you. It is less scary than a foreclosure where you will lose ownership of your home, but it can seriously hurt your credit score.

3. Foreclosure

In case of default, the holder of your second mortgage may initiate a foreclosure to recover the money it lent to you the moment your house is sold at a foreclosure sale. Since mortgage is a senior lien which takes priority over a home equity like a second mortgage (because the loan was registered earlier) the first lender gets paid first. But, what if you refinanced the loan—does it mean that the second mortgage lender becomes the first priority? It depends. Whichever lender has the certificate of title will be entitled for the payout first. If you were in the process of refinancing but it was never complete before the foreclosure on the property and you didn’t pay the previous lender out, they are not eligible for the funds. If your previous lender still holds the certificate of title, then they are the ones who need to be paid out.

avoid-consequences

Here are tips to avoid the above-mentioned consequences of not paying your home loan on time…

Don’t hide from your creditors.

They will not be so enthusiastic in working with someone who avoids their calls, ignores their letters and refuse to cooperate with their offer to help for a few months. Remember that most mortgage lenders will work with borrowers who are struggling to make payments to encourage payment. So, if you’re missing payments, contact your lender right away. Inform them about your current financial situation and express your willingness to work out a repayment plan suited to your condition. Your lender may modify the terms of your loan, lower or raise the interest rate, increase or decrease the monthly payments, depending on your situation and financial capacity. It can also be a combination of the abovementioned options to make the home loan more affordable.

Explore available options to avoid foreclosure

Are you struggling to make your second mortgage payments? If foreclosure is imminent because of default, check out some of the alternatives to foreclosure that Australian Lending Centre offers:

If you want to consolidate your debts into 1 easy-to-pay, low-rate loan with low monthly repayments, get your finances back into order with a debt consolidation loan. Learn more about home equity loans and the suitable financial solutions available for you by calling 1300 138 188 today!

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Mortgage Financial Fitness Financial Planning Home Loans

Will My Car Loan Affect My Mortgage Application?

A car loan can help you a lot if you plan to get your next car faster. However, a car loan can affect your mortgage application or other types of significant loans. If you are planning to buy an expensive car, this means that you will require a large loan. That car loan can impair your future borrowing power. But this doesn’t mean that you need to choose just one of these two.

Let’s see how a car loan can influence mortgage applications and how we can deal with such a situation.

First Things First

When you apply for a home loan, you will need to provide information regarding your financial status. This means that you will have to give documents regarding your monthly income, assets you own and other ongoing payments. This is how a lender will determine whether you can pay back the loan or not. Every lender wants to avoid doing business with people who might not be able to keep their word because of their financial problems. They want profit, not excuses.

If it were a personal loan, your mortgage application would be fine. But since we are talking about an expensive car loan, your mortgage application might get rejected due to your other massive loan. Either that or come with a lot of restrictions.

mortgage-application

Will My Car Loan Affect My Mortgage Application?

A car loan will have a high impact on your finances. Given all the taxes you need to pay, a car loan can take most of your monthly income. Still, aiming for a cheaper car might be of some help. Since cars tend to lose their value quite quickly, getting a very expensive one may not be a good idea, especially if you intend to apply for a mortgage.

Mortgage applications will act the same so that you will be left with little to no money. This is why a lender will probably have to refuse your mortgage application.

A lender wants to know that you will pay your mortgage and you won’t default on it. He will analyse your assets and other methods of income. If he sees that you have the financial power to afford a car loan and a mortgage at the same time, he might give you the green light. If not, it might be better for you if you only had one.

Defaulting on a mortgage is not a good sign for your lender and your finances. Car loans and home loans can quickly turn into uncontrollable debts, and you might end up losing everything. So don’t think of the lender as the bad guy, but be objective and calculate what you can and can’t afford, because in the end, if you are dishonest, you will suffer the most. Because banks and lenders make sure they never lose.

eligible-for-loan

Can I Still Be Eligible for a Mortgage Application?

Yes, you can. Your car loan will affect how much you can borrow, but if you don’t want an expensive house, that a limited amount of money can be just enough. If you can’t get the sum you need, you can search for an affordable home. When it comes to loans and money, flexibility is a must.

If you want to increase your chances of getting your mortgage application approved, then it’s time to clean a little bit of your credit file. Pay your debts and try to repair your bad credit. Also, consider debt consolidation as a possibility. Lenders will check your credit to find out who they are dealing with and also what other assets you own, just in case they might have to make up for that loan with something else rather than your money.

Having a savings account is a great idea. It makes you more trustworthy and responsible in the eyes of your lender. Let’s not forget that having some savings might help you quite a lot to reduce the amount you would apply for.

Also, try to talk to your lender. The more information he gets regarding your situation and income, the bigger the chance of getting your request approved. Don’t forget to tell him your exact plans.

suitable-car-loan

Final Thoughts

So, the short answer is that a car loan can influence mortgage applications and under certain circumstances, it can get your requests denied. But do not let yourself discouraged. Evaluate your possibilities, cut down on the unnecessary expenses and, if you can, try to pay ongoing debts before applying for a mortgage.

You can talk about these details with Australian Lending Centre. Our friendly consultants will tell you about your chances of receiving a loan and, if you fit our criteria, you may even get a good mortgage option. Advice never harmed anyone so you should not miss the chance of clarifying your options face to face with an expert.

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Mortgage

The Reality of Mortgage Repayments

In spite of the loan solution you carefully select, you should comprehend the way in which a loan works, and what it implies. Understanding the reality of mortgage repayments is the first step to making the right decision to fit your financial status.

Understanding Interest

Recently, Australians have benefited from low and attractive interest rates. So, how does this influence your mortgage repayments? Mortgage providers grow or diminish their rates, to mirror the movement exercised by the set cash interest rate. At the moment, interest rates are estimated at around 4.5 per cent, depending on the lender.

Although selecting fixed mortgage repayments over variable ones might seem the right choice, as it protects you from fluctuations, some other aspects should be considered. If you’re locked into a variable home loan, when the cash rate lowers, your interest will also decrease. Even though this is an unmatched advantage, Aussies should know that low rates don’t plan on staying this way forever.

To grasp the way in which this phenomenon influences your mortgage repayments, hear us out. A standard variable rate for a 25-year old loan of $200,000 would have a $1112 monthly payment, with 4.5 per cent interest rate. If this would change with as little as one per cent, it will either rise to $1228 or diminish to $1001.

Also, bear in mind that, over the life span of a loan, fluctuations may reach $100 per month. What we’re trying to say is that you should embrace a repayment plan with the right contingency measures, in the case in which the interest rate spikes.

When the Loan Matures

You should also note that the market conditions are due to change. That is inevitable. In this respect, you should take advantage of whichever opportunity you have to refresh your financial approach. An option might be to discuss with your financial advisor. But, before doing that, there are some solutions for adjusting your mortgage repayments:

  • Refinancing: When the interest rates are low, you can always consider refinancing. That may be a more convenient option. Even though there are exit and entry costs that should be factored in, as a general rule, you’ll recoup those expenses over the life of the loan.
  • Pay ahead: If the interest rates are low and your budget enables you, you should consider getting ahead on your mortgage repayments. If you manage to make a considerable repayment during this time, not only that you will decrease your overall loan balance, but you’ll save a lot on interest rate payments.
  • Fix your loan: If your credit conditions are permissive enough, we advise you to lock in the new low rate.

To conclude, comprehending the market conditions does pay off. When you sign a loan agreement, you should know what it implies, how the market is due to change and how it can affect you.

In spite of your current status, don’t hesitate to refresh your mindset, in the case in which the market alters in your favour. Why shouldn’t you take advantage of it? Nonetheless, bear in mind that you should discuss with your financial advisor before taking the leap.

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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.

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Refinance and Refinancing

Why Should You Consider Refinancing Your Home Loan?

People take a home loan refinancing into consideration when they’re no longer satisfied with their actual home loan or when they want to make some house renovations.

Refinancing becomes a choice when your lending needs have changed or when your home loan is starting to pose difficulties.

  1. Home Loan Refinancing has lower interests rates

This is the main reason why Australians take into consideration refinancing their mortgage. The easiest way to figure out if it’s worth the trouble to switch your home loan is to calculate if the costs of the refinancing will be paid off in the next two years.

Interest rates and fees can build up, so don’t just look at the lower interest rate that comes with refinancing. Take into consideration all the fees implied in the process.

  1. It’s more compatible with your renovation project

Home loan refinancing brings benefits to homeowners who desire to invest in structural renovations that aren’t compatible with personal loans.

Refinancing allows you to use the equity in your property as collateral. This is an option only if the value of the house outpasses the cost of renovations.

Some home loans don’t offer the option for a construction loan, so you may just have to go into refinancing in order to find one that fits your needs.

  1. Consolidating debts is a good option

Home loan interests rates are lower, and this is why many people add their personal loan or car loan to their mortgage. Dividing the payments over the course of the next 25 to 30 years will ensure much smaller monthly payments, but raise the interest rates.

You could benefit from this option of refinancing if discipline and regular payments are something that you’re used to. You could add a personal loan to your house loan, but instead of paying it off for 25-30 years, choose to pay it over the course of the next five years. This will allow you to sort your personal debt faster and even save almost 75% of the interest rate that you would have spent by prolonging the payments to suit your house loan.

  1. Refinancing offers flexibility

If you’ve come to the point where a fixed rate isn’t your best alternative, and you want and actually can pay out the loan faster, then home loan refinancing is an alternative. Being able to pay according to your income will get you out of debt faster, and it also comes with the split facility, a redraw facility, and an offset account.

  1. When mortgage payments are too big

Sometimes, our finances can’t support the mortgage payments and we’re forced to look for an alternative that requires a smaller amount per month. Even though the interest rates could go higher, there are times when our budget isn’t able to cover the payments, so refinancing is in order.

Home loan refinancing comes with advantages and disadvantages, so before taking the step, see if it will suit your needs!

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Debt Management Credit Card Consolidation Home Loans

Credit Card Debt and Mortgages Being Managed Properly

This year has been a profitable one for Australian credit card debt and mortgages. According to the latest percentages, Aussies seem to be managing much better with their mortgages; their mortgage repayment appears to be going along much better than when compared with the previous year. Reports from the ABS data showed that their credit card debt had already dropped by 2.4% in January.

In the Money Survey from 2016, Mortgage Choice has discovered that at least ¼ of the respondents were faced with almost 12% month’s worth of wages in their offset account or going towards paying their mortgage. When compared to this situation, around 13% of Aussies claimed that they were facing this exact financial position somewhere around last year.

Aussies Can Now Manage their Credit Card Debt

CEO John Flavell has come to the realisation that today’s mortgage holders have become much more comfortable when it comes to dealing with their credit card debt. He also added that this isn’t surprising in the slightest since interest rates are currently standing at 60-year lows, which results in drastic mortgage repayments. This, in turn, makes it easier for homeowners to pay off their debts.

So, it seems Aussie cardholders have become used to managing their card debts, keeping it 34% lower in the month that followed Christmas. Average balances have gone from $77 to $3,114, and the conclusion was that the users are now savvier regarding the use of their credit cards. They are now paying off their debt before their deadlines and maximise their loyalty points by using their cards.

Australians have also become more imaginative when it comes to creating strategies that keep their balance down. They are now mostly opting for cards that have a 0% balance transfer, and thus they can pay off their balances without creating even more debt in return.

Ways to Manage Your Credit Card Debt

In case you were also wondering how to keep track of your credit card repayment, here are some money and credit card tips that could prove very useful.

  • Check your budget and see if you can make some extra mortgage repayments to lower your debt in interest which is going to get built up over time. Find a good strategy that would suit you, or look up for repayment calculators that will allow you to do the necessary calculations.
  • Make your next repayment a little higher than you normally do in order to lower your credit card debt. This way, you will be paying less interest.
  • Make use of features that are relevant to your home loan. Make extra payments to minimise the interest, then redraw the facility to make it convenient for you.

While managing your debts can prove to be difficult at first, with a little bit of research, you can find out ways to properly manage your mortgage and credit card debt.

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News Home Loans

Interest Rate Cuts by RBA, Great News for Home Owners and Businesses

Earlier this week, the country’s two biggest banks passed on the latest interest rate cuts for loan customers. The Commonwealth Bank and Westpac have paved the way for other banks expected to follow suit on Friday, February 6. The Reserve Bank of Australia’s (RBA) official rate cut will begin its full effect on February 20, creating an opportunity for the cheapest home loans in more than forty years.

interest-rate-cuts

Since the steady decline in the Australian dollar and the fallen price of oil in the past few months, the RBA has reduced the standard variable rate to a record low of 2.25%. The RBA governor Glenn Stevens said the board judged that a reduction in the cash rate was “appropriate” due to the downward forecast of the economic growth and a peak in the unemployment rate. Commonwealth Bank of Australia was the first big bank to reduce its standard variable rate by 0.25% but Westpac reduced its SVR by 0.28%, making it its lowest level since 2009.

Interest Rate Cuts – What it means for Australians

The latest interest rate cut posed by the RBA opens the door for many existing and new homeowners as well as business owners. The new, lower interest rates provide homeowners with a better chance of being able to successfully make regular repayments on their home loans. However, banks and other traditional lenders will still check loan applicants’ credit files if they qualify for a loan. Blemishes on credit files can stand in the way of new and existing homeowners from being able to fully access the benefits of the new lower interest rates.

An alternative to traditional lenders is to apply for home loans through other financial institutions. Australian Lending Centre is offering similar interest rates through our range of products so applicants can enjoy the new lower rates. Our loan options include first home buyers loans, home equity loans, bad credit home loans, investment property loans, second mortgages and many more.

The RBA’s interest rate cuts provide exciting opportunities for new homeowners and businesses. And Australian Lending Centre can help you take advantage of this amazing opportunity. Call us on 1300 138 188 for a free consultation or enquire online today.

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Bad Credit Loans

Lock in Before Mortgage Rates Rise!

It’s time!!! If you have not locked in your fixed mortgage rate, now is the time. Economists have been predicting mortgage rates to rise in late 2015, but they are beginning to change their tune. Possibly rates will rise even sooner and that will raise the cost of variable rate loans. They now are saying it is the time to lock in a fixed rate. If you have not applied for a fixed rate mortgage because of a bad credit history, you may be surprised that a bad credit mortgage is available at a competitive rate!

Costly Variable Bad Credit Mortgage

Variable rates rising can make quite a difference in what you are paying out each year. A small increase in interest rates can raise the amount due each month quite a lot. When the rates begin to rise they will rise fast. It can be a shock to those families that have not budgeted for the inevitable rise in rates. Most Australians have held off getting a fixed rate mortgage due to the variable rates being so low.

With rates being lowered, it was a good environment to take a variable loan for a short amount of time but that will change soon. Australian consumers have been willing to take their chances and the variable rates have stayed low for a while. That is changing rapidly because of other market conditions.

Rising Mortgage Rates

The truth is with the variable mortgage rates on the rise it will affect a family’s budget and how much they have left after their mortgage payment for family necessities. Most Australians will not have to think back too far in the past to remember how high rates can get. Choosing a traditional fixed bad credit mortgage can end up saving you a lot of money over time.

Rates vs. Unemployment

Unemployment plays a big factor in the rise and fall of rates. If unemployment improves then the rates will begin to rise and rise quickly, but if the unemployment rate rises then interest rates will stay low for a while longer to stimulate employment. It is time to compare those mortgage rates and start saving now!

Lock in a Fixed Rate Bad Credit Mortgage

Locking in at a fixed rate, possibly even taking advantage of a bad credit mortgage at a competitive rate could potentially save your family a lot of money over time. Waiting may not be a smart choice and could end up causing financial stress.

We understand credit files aren’t always perfect. We try and work with your current credit and mortgage to get you a better deal. Grab your better fixed bad credit mortgage rate today! Call us on 1300 138 188 or Enquire Online Now!

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Interest Rates

4 Reasons Why the Australian Reserve Bank has not Cut Interest Rates

Australian Reserve Bank has not Cut Interest Rates

The Reserve Bank of Australia (RBA) has slashed interest rates to 3%, a record low, in November 2011. For the last 15 months, it has refused to increase or further cut it. The central bank has decided to leave the rates unchanged during its first policy meeting for this year, which was held in the first week of February. As it seems, the monetary policy of the country keeps the mode on a wait-and-see program.

Interest rates were last trimmed down to help spur possible growth after the then decade-long mining boom had indicated clear signs of losing its momentum. The economy somehow slowed in the entire 2012 because export demand for raw materials coming from the country eased.