Let’s say you already have your first mortgage from when you purchased your home, and maybe you took a second mortgage which could be either a home equity line of credit or a fixed rate second mortgage.
In case you are thinking of paying for both mortgages, you may want to know that the costs for such a combined repayment can get a little steep. It is a simple process which should be thought of as a first mortgage refinance.
When the mortgage closing time comes, the title company that handles your transactions is going to order a payoff from your existing first mortgage and from the current second mortgage on your home because they will want to get the amount for paying off the two loans combined.
It is just like taking a new mortgage without a second, with the same process involved such as qualifying for the loan, new appraisals which are followed by new payoffs on the loan which are the two mortgage payments combined into one, and it usually ends up in a payment savings and a better overall rate than what the rate may be between the two loans individually.
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A reverse mortgage is a special type of loan in which a financial institution (a lender) can convert your home equity into cash. Unlike traditional mortgages, a reverse mortgage is a type of mortgage in which the lender is the one that is paying you for your home equity instead of you paying them.
The payments and their amounts depend on your home’s equity and value but also on the age of the applicant. These payments can come in different forms such as a lump payment, monthly installments, a line of credit or any combination of these. There are also no repayments necessary unless the applicant sells his home, moves out of his home or passes away.
Some of the most common requirements for these types of mortgages are:
- The applicant must be at least 62 years old
- The applicant must have a lot of equity in his home
- The reverse mortgaged home must be the applicant’s primary residence
- The applicant must own the home, or have a very little balance on it’s mortgage
The good thing about these types of mortgages is that the applicant doesn’t need to show proof of income, and also they have a very low credit requirement.
Some of the disadvantages of these types of loans are that they’re quite expensive. They can cost you up to 10% of the value of your home over the course of the loan in fees, origination fees, appraisals, titles, insurance premium and you will still have property taxes and home maintenance expenses on your hands. Also if you intend to leave the property to your heirs, it is not a good idea to engage in such a loan because your heirs would have to pay the whole refund otherwise they will not be able to have the property.
People usually look for such of loan when they are completely out of other options like renting the house, selling it or are unable downsize their expenses any longer.
This is pretty much a last resort option for anyone but considering the bad economy going on these days, there are around ten thousand people that consider and engage in such loans each month.
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Up to $1,500.00
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Up to $1,500.00
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We are in an era when banks are turning away business owners due to tight credit, so the merchant cash advance style loan is gaining popularity, despite the fact that these loans usually cost a great deal more due to much higher interest charges. Business or merchant cash advance loans are a valuable resource for some business owners who find themselves in a tighter commercial credit market with shrinking or canceled lines of credit from banks – plus the intense financial challenge of an historically severe recession and credit crunch.
But in 2010 – as the market for business cash advance loans is expected to see phenomenal growth – the government is in the middle of its own effort to enforce more stringent regulations on the financial industry. So in the coming months it will be interesting to see whether the cash advance industry – which mainstream lenders and big banks often complain about because it is not very well regulated – will be given new guidelines to follow.
As a typical example based on actual loans made by cash advance companies in recent years, borrowing $30,000 might cost $10,000 in future repayments through card sales. But although that is a very steep rate of interest it is sometimes the only game in town for a business owner whose bank will not offer them a line of credit or other form of loan to help them raise the cash they need to run their operation.
For many business owners the choice to take out this kind of more costly loan comes down to a simple calculation. They can forego the business cash advance loan because it costs too much, or they lose a lot more business or even face the possibility of having to close their doors or declare bankruptcy. Sure, they would love to borrow elsewhere for a fraction of the interest paid. But if nobody else will give them a loan they have limited options and then a cash advance business loan starts to look attractive.
Using our example of a $30,000 that costs $10,000, for instance, a business owner might have to pay $10,000 but if doing so enables him or her to stay in business and make a $50,000 profit then they still come out ahead by $40,000. Or if they are having a really bad year due to the recession, they might wind up just breaking even. But they can stay afloat and when the economy turns around the expense of $10,000 to keep their business and avoid a foreclosure or bankruptcy might look like a really good bargain.
Some might call a pricey business cash advance loan the lesser of two evils – but when an entrepreneur is faced with hard choices then sometimes paying more to stay in business makes sense and can be justified in a number of different ways. You do what you have to do to survive, and if you can get past those major financial challenges then you have an opportunity to keep the business going for another season. Manage it well and with a little luck surviving can evolve into thriving, which is why many business owners who have used cash advance loans would not hesitate to do so again if the circumstances required it.
In the meantime most of the major players in the business cash advance industry are not waiting around to see what happens in Washington, but they are starting to take the matter of regulations into their own hands. Whenever an industry is threatened with tighter rules and regulations it is generally best for them to be proactive and start setting their own standards and policing themselves. That can convince regulators and legislatures to back off, and that is why this year we will see more and more changes in policy at business cash advance lending companies.
They will likely put limits on how much they charge their customers, and some are already taking steps to minimize the cut of profits or revenues that they require from certain businesses – like the grocery business – where owners typically operate on very thin profit margins. That all spells good news for the consumer, because whether the industry starts to adhere to more reasonable guidelines on its own or through official regulation, it will make the loans more affordable for business owners.
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