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If you’re feeling 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 restricting you:
1) You have limitations on payments.
You simply have to pay the amount owed depending on your current debt and the interest rate you are maintaining.
2) You can have significant fluctuations in cash flow when during the year you have to sustain large recurring and expected annual expenses.
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 vacation).
Similar to the previous one but much larger. When this happens, and you know when it will happen, you simply need an extraordinary effort to manage your finances.
4) Oh, of course you may be paying very high interest rates and would just like to get better loan terms. But of course, your current conditions 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 loan with the new one.
Well, if you suffer from “loan repayment flexibility syndrome,” you’re in luck. In fact, there are currently home equity loans that are designed to help you. They are the “Flexible Home Equity Loans.”
These are equity loans that allow you to overpay installments to reduce debt (i.e. interest), pay fewer installments when you are short of money (if you’ve overpaid before), and skip a payment in the year if your Previous overpayments have given you enough margin. .
How are we going to replace our current loan with a new one? Well, refinance it, that is, request a new loan that pays the previous one with new terms. Therefore, it is a way of replacing the old loan with a newer one, based on the 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 spread 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, equity loans, and other loans change in rates. Search for lenders on the Internet and keep track of their offers.
3) Exploitation market offer
Since home equity loans and re-mortgages are common, there are a variety of loans to select from, and most have their own variations. Understand the market offer and what makes them different.
4) Exploit market competition
Mortgage companies compete with each other, and others offer some of the best rates on the market. Take advantage of this market competition for lower interest rates and almost zero loan costs.
5) Close the deal
First, apply for a refinance from your company. Use what you’ve gathered in the previous steps (that is, what your lender’s competitors are eager to do with you to win a new customer) to make your negotiation easier.
If your business 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. Later?
1) Take advantage of overpayments to reduce interest paid
Since flexible rate home loans give you the ability to overpay your mortgage, do so as soon and as often as you can.
In fact, overpayments will lower your debt, so you will pay less interest regardless of what is happening to interest rates.
2) Exploit underpayments
If you have overpaid “enough” (depending on the contract you have signed), you can also “pay less” on the mortgage, as long as you have made the minimum required amount and number of payments.
3) Take advantage of the vacation package
Since these loans also offer “vacation packages” for underpayments, go for it! So if you pay enough overpayments, you can suspend payments for a month to take a vacation. This will reduce the biggest cash flow problem we talked about.
Flexible rate home equity loans are certainly one way to leverage your resources to improve your home equity loan. If you think your home equity loans are too big of a limitation, take a look at this option.