If you feel too constrained by your current home equity loan repayment plan, it’s time to reconsider your opportunities.
Let’s look at the four ways your current home equity loan is holding you back:
1) It has restrictions on payments.
You simply have to pay the amount owed based on your current debt and the interest rate you are holding.
2) You may have significant fluctuations in cash flow when you have to bear large recurring and expected annual expenses during the year.
This gives some problems in the cash flow of the period and shortage of money.
3) You have large cash flow fluctuations due to large annual expenses (for example, summer vacations).
Similar to the previous one but it is much larger in size. When this happens, and you already know when it will happen, you simply need an extraordinary effort in managing your finances.
4) Oh sure you may be paying very high interest rates and just want better loan terms. But of course, your current terms tie you to your current payment.
The two steps to a better way
1) Find a type of home equity loan that gives you more and allows you to overcome these problems.
2) Refinance your current home equity loan with the new one.
Well, if you suffer from “loan flexibility syndrome,” you’re in luck. In fact, there are now home equity loans that are designed to help you. They are the “Flexible Mortgage Loans”.
These are principal loans that allow you to pay overpayments to reduce debt (hence, interest), underpay payments when you’re low on money (if you’ve overpaid before), and skip a payment in the year if your payments previous excesses have given you enough leeway. .
How are we going to replace our current loan with a new one? Well, refinance it, that is, request a new loan that with new terms pays the previous one. Therefore, it is a way to replace the old loan with a newer one, based on new contractual terms. It is important to take advantage of the new terms for three different points:
1) contractual flexibility (what you are looking for);
2) interest rate paid (for fixed-rate mortgages) or margin paid (for base-tracking principal mortgages);
3) lower costs.
So what are the 5 steps that allow us to do this?
1) Ask your current lender
Ask if they offer flexible loans and what can be done if you need more flexibility.
2) Research the market
As you can see, searching the market is essential when considering loans, as flexible loans, home equity loans, and other loans all change in rates. Search for lenders online and keep track of their offers.
3) Take advantage of the market offer
Because home equity loans and remortgage loans are common, there are a variety of loans to choose from, and most have their own variations. Understand the market offer and what makes them different.
4) Take advantage of market competition
Mortgage companies compete with each other and offer some of the best rates on the market. Take advantage of this market competition for lower interest rates and near zero borrowing fees.
5) Close the deal
First, ask your company for a refinance. Use what you’ve gathered in the previous steps (ie, what your lender’s competitors are eager to do with you to get a new customer) to help facilitate your negotiation.
If your company is deaf, ask another company to offer better terms and use the new money to close the old debt with the old lender. Pay attention to the closing costs of the previous contract (there are usually penalties related to early termination).
So, we have a new contract. So?
1) Take advantage of overpayments to reduce interest paid
Since flexible rate loans give you the ability to overpay your mortgage, do so as soon as you can.
In fact, overpayments will reduce debt, so you’ll pay less in interest regardless of what happens to interest rates.
2) Take advantage of underpayments
If you have overpaid “enough” (depending on the contract you signed), then you can also “underpay” the mortgage, as long as you have made the required minimum amount and number of payments.
3) Take advantage of the vacation package
Since these loans also offer “vacation packages” for insufficient payments, go ahead! So if you pay enough overpayments, you can suspend payments for a month to take a vacation. This will lessen the biggest cash flow problem we talked about.
Flexible rate home loans are certainly a method of leveraging your resources to improve your home loan. If you think your home loans are too much of a constraint, take a look at this option.