In recent years, individuals seeking to take advantage of low interest rates have lined up to refinance their mortgages. In fact, refinancings hit an all-time high in 2003, and remained high in both 2004 and 2005.
But while it's true that refinancing has the potential to help you reduce the costs associated with borrowing money to own a home, it is not necessarily a strategy that makes sense for every individual in every situation. So before you make a commitment to refinance your mortgage, its important to do your homework and determine whether such a move is the right one for you.
To Refinance or Not
The old and arbitrary rule of thumb said that a refinanving only makes sense if you can lower your interest rate by at least two percentage points for example, from 10% to 8%. But what really matters is how long it will take you to break even and whether you plan to stay in your home that long. In other words, make sure you understand -- and are comfortable with -- the amount of time it will take for your overall savings to compensate for the cost of the refinancing.
Consider this: If you had a $200,000 30-year mortgage with an 8% interest rate, your monthly payment would be $1,468. If you refinanced at 6%, your new monthly payment would be $1,199, a savings of $269 per month. Assuming that your new closing costs amounted to $2,000, it would take eight months to break even. ($269 x 8 = $2,152). If you planned to stay in your home for at least eight more months, then a refinancing would be appropriate under these conditions. If you planned to sell the house before then, you might not want to bother refinancing. (See below for additional examples.)
All Mortgages Are Not Created Equal
Don't make the mistake of choosing a mortgage based only on its stated annual percentage rate (APR), because there are a variety of other important variables to consider, such as:
The term of the mortgage -- This describes the amount of time it will take you to pay off the loan's principal and interest. Although short-term mortgages typically offer lower interest rates than long-term mortgages, they usually involve higher monthly payments. On the other hand, they can result in significantly reduced interest costs over time.
The variability of the interest rate -- There are two basic types of mortgages: those with "fixed" (i.e., unchanging) interest rates and those with variable rates, which can change after a predetermined amount of time has passed, such as one year or five years. While an adjustable-rate mortgage (ARM) usually offers a lower introductory rate than a fixed-rate mortgage with a comparable term, the ARM's rate could jump in the future if interest rates rise. If you plan to stay in your home for a long time, it may make sense to opt for the predictability and security of a fixed rate, whereas an ARM might make sense if you plan to sell before its rate is allowed to go up. Also keep in mind that interest rates hovered near historical lows in recent years and are more likely to increase than decrease over time.
Points -- Points (also known as "origination fees" or "discount fees") are fees that you pay to a lender or broker when you close the deal. While a "no-cost" or "zero points" mortgage does not carry this up-front cost, it could prove to be more expensive if the lender charges a higher interest rate instead. So you'll need to determine whether the savings from a lower rate justify the added costs of paying points. (One point is equal to one percent of the loan's value.)
Stick With What You Know
Finally, keep in mind that your current lender may make it easier and cheaper to refinance than another lender would. That's because your current lender is likely to have all of your important financial information on hand already, which reduces the time and resources necessary to process your application. But don't let that be your only consideration. To make a well-informed, confident decision you'll need to shop around, crunch the numbers, and ask plenty of questions.
Summary
* The decision to refinance should only be made if the long-term savings outweigh the initial expenses. To calculate your break-even point, divide the cost of the refinancing by your monthly savings. The resulting figure represents the number of months you will need to stay in the home to make the strategy work.
* Don't select a new mortgage based only on its annual percentage rate.
* Also evaluate the term of the loan, whether the interest rate is fixed or variable, and the relative merits of paying up-front fees in exchange for a lower rate.
* Your current lender already knows you and has your financial information on file, so you may be able to get a better deal that way, instead of going to a new lender.
* To get the best possible refinancing deal, you'll need to shop around, crunch some numbers, and ask a lot of questions.
Source: http://finance.yahoo.com/how-to-guide/loans/12821
Types of Loans
Secured Loans: A secured loan is a loan in which the borrower pledges some asset to secure this loan as collateral. Housing loan and most of the time auto loans. In these cases, encumbrances or liens are placed in the title and in the case of default or non-payment of the amortization, the financial institution has a right to reposes the house and resell it.
Unsecured Loans: Unsecured loans are usually monetary in nature and the borrower need not to secure against their asset/s to the financial institution. The most common type of unsecured loan is the use of credit cards.
Unsecured Loans: Unsecured loans are usually monetary in nature and the borrower need not to secure against their asset/s to the financial institution. The most common type of unsecured loan is the use of credit cards.
Mortgage Loan Rate and Annual Percentage Rate (APR)
Mortgage Loan Rate and APR. The Mortgage Loan Rate is simply the amount of interest directly charged on the loan with no other costs such as fees, etc. to be included in the cost of transaction.
The Annual Percentage Rate is a much more detailed than mortgage loan rate. The Annual Percentage Rate was introduced so that customers could easily compare rates from different lenders in the market, which makes it not suitable to evaluate the loans vendors. Annual Percentage Rate figures are used by financial institutions such as banks, lending firms, etc., to market their interest rates.
How to compare
You should first consider the mortgage loan rate, then ask for the bank to itemize the upfront costs. Compare each on a line by line basis, rate compared to rate, closing costs to closing costs. This is the only true way to compare two mortgages. Unfortunately for the consumer, we are led to believe that the APR is standard which could not be farther from the truth.
The Annual Percentage Rate is a much more detailed than mortgage loan rate. The Annual Percentage Rate was introduced so that customers could easily compare rates from different lenders in the market, which makes it not suitable to evaluate the loans vendors. Annual Percentage Rate figures are used by financial institutions such as banks, lending firms, etc., to market their interest rates.
How to compare
You should first consider the mortgage loan rate, then ask for the bank to itemize the upfront costs. Compare each on a line by line basis, rate compared to rate, closing costs to closing costs. This is the only true way to compare two mortgages. Unfortunately for the consumer, we are led to believe that the APR is standard which could not be farther from the truth.
Business Capital: Where to get the money
There are two basic sources of capital for your business: internal and external. Internal source is your personal savings, while external source may come from financial support of friends and relatives, and from credit, loans or mortgage from a lender such as a financial institution.
Should we finance our start-up or business expansion capital fully? Loan Guru expert suggests for start-up business, we should use a combination of both personal savings and borrowings. Its a thumbs up if the bulk of the capital comes from an internal source. In finance, this is called debt equity ratio. For business expansion, it is more complicated. There are more factors involved, especially to be considered is the industry, is the business now ready to expand or is the existing business ready to cover the probability of losses in case the expansion fails. It basically comes down to the knowledge or experience of the management.
Should we finance our start-up or business expansion capital fully? Loan Guru expert suggests for start-up business, we should use a combination of both personal savings and borrowings. Its a thumbs up if the bulk of the capital comes from an internal source. In finance, this is called debt equity ratio. For business expansion, it is more complicated. There are more factors involved, especially to be considered is the industry, is the business now ready to expand or is the existing business ready to cover the probability of losses in case the expansion fails. It basically comes down to the knowledge or experience of the management.
From cash to credit cards. Facts
Travel cards, gasoline cards, shopping cards...a collection of credit cards of all types. Credit cards gives us spending power and the international and local banks all wants a piece of a pie, in turning a nation into a credit card society. I've run across the internet to see some figures and its amazing!
CREDIT CARD ISSUER STATISTICS
Market share
Top 10 issuers of general purpose credit cards, 2007
1. Bank of America
2. JPMorgan Chase
3. Citigroup
4. American Express
5. Capital One
6. Discover Card
7. HSBC
8. Washington Mutual
9. Wells Fargo
10. USAA
Note: JPMorgan Chase in 2007 became the nation's largest issuer of Visa and MasterCard. However, Bank of America is the largest when American Express cards are factored in. Chase does not issue American Express cards.
(Source: Nilson Report, February 2008)
U.S. market share ranked by major card type, based on credit card receivables outstanding:
1. Visa -- 46 percent
2. MasterCard -- 36 percent
3. American Express -- 12 percent
4. Discover Card -- 6 percent
(Source: Nielson Report, May 2008)
Largest debit card volume in the U.S., 2007
1. Bank of America -- $106.03 billion
2. Wells Fargo -- $54.67 billion
3. JP Morgan Chase -- $37.26 billion
4. Wachovia -- $37.16 billion
5. Washington Mutual -- $35.03 billion
6. US Bank -- $23.03 billion
7. Regions Bank -- $15.29 billion
8. Fifth Third Bank -- $12.19 billion
9. USAA Federal -- $12.03 billion
10. RBS Citizens -- $11.51 billion
(Source: Nilson Report, April 2008)
2007 global market share of general-purpose cards (purchase volume)
1. Visa -- 60 percent
2. MasterCard -- 28 percent
3. American Express -- 10.5 percent
4. JCB -- 0.9 percent
5. Diners Club -- 0.5 percent
(Source: Nilson Report, May 2008)
2007 global market share of general-purpose cards (cards in distribution)
Total among these five brands: 3.03 billion, up 13.6 percent in one year
1. Visa -- 65 percent
2. MasterCard -- 30 percent
3. American Express -- unknown
4. JCB -- unknown
5. Diners Club -- unknown
(Source: Nilson Report, May 2008)
Ranking of U.S. banks' reputations
1. Washington Mutual - 64.04
2. SunTrust Banks - 63.56
3. Wachovia - 61.22
4. National City - 58.83
5. Wells Fargo - 57.38
6. US Bancorp - 54.18
7. Bank of America - 50.94
NOTE: Rankings were part of a survey of 600 of the world's largest companies.
(Source: Reputation Institute Global Pulse survey, June 2008)
Miscellaneous
There were 984 million bank-issued Visa and MasterCard credit card and debit card accounts in the U.S in 2006. (Source: Visa USA, MasterCard International)
The top 10 credit card issuers controlled approximately 88 percent of the credit card market at the end of 2006, based on credit card receivables outstanding. (Source: FDIC)
U.S. Visa cardholders alone conduct more than $1 trillion in annual volume. (Source: Visa USA internal statistics, 4th quarter 2006)
Consumers carry more than 1 billion Visa cards worldwide. More than 450 million of those cards are in the United States. (Source: Visa USA internal statistics, 4th quarter 2006)
HISTORICAL INFORMATION
Industry history
The first widely accepted plastic charge card was issued in 1958 by American Express.
The first general-use credit card that allowed balances to be paid over time was the BankAmericard (which in 1977 changed its name to Visa), issued in 1959. (Sources: PBS Frontline; American Express, Visa USA)
How did MasterCard begin? In 1966, a number of banks formed the Interbank Card Association. In 1969, the Interbank Card Association bought the rights to use "Master Charge" from the California Bank Association. It was renamed MasterCard in 1979. (Source: MasterCard.com)
After all the information what does it mean? We'll this simply means in a point of view of a multi-billion financial institution, the more our clients' spend the more we profit. So we basically make a loan every time we use our plastic cards and we should use it properly to our advantage.
CREDIT CARD ISSUER STATISTICS
Market share
Top 10 issuers of general purpose credit cards, 2007
1. Bank of America
2. JPMorgan Chase
3. Citigroup
4. American Express
5. Capital One
6. Discover Card
7. HSBC
8. Washington Mutual
9. Wells Fargo
10. USAA
Note: JPMorgan Chase in 2007 became the nation's largest issuer of Visa and MasterCard. However, Bank of America is the largest when American Express cards are factored in. Chase does not issue American Express cards.
(Source: Nilson Report, February 2008)
U.S. market share ranked by major card type, based on credit card receivables outstanding:
1. Visa -- 46 percent
2. MasterCard -- 36 percent
3. American Express -- 12 percent
4. Discover Card -- 6 percent
(Source: Nielson Report, May 2008)
Largest debit card volume in the U.S., 2007
1. Bank of America -- $106.03 billion
2. Wells Fargo -- $54.67 billion
3. JP Morgan Chase -- $37.26 billion
4. Wachovia -- $37.16 billion
5. Washington Mutual -- $35.03 billion
6. US Bank -- $23.03 billion
7. Regions Bank -- $15.29 billion
8. Fifth Third Bank -- $12.19 billion
9. USAA Federal -- $12.03 billion
10. RBS Citizens -- $11.51 billion
(Source: Nilson Report, April 2008)
2007 global market share of general-purpose cards (purchase volume)
1. Visa -- 60 percent
2. MasterCard -- 28 percent
3. American Express -- 10.5 percent
4. JCB -- 0.9 percent
5. Diners Club -- 0.5 percent
(Source: Nilson Report, May 2008)
2007 global market share of general-purpose cards (cards in distribution)
Total among these five brands: 3.03 billion, up 13.6 percent in one year
1. Visa -- 65 percent
2. MasterCard -- 30 percent
3. American Express -- unknown
4. JCB -- unknown
5. Diners Club -- unknown
(Source: Nilson Report, May 2008)
Ranking of U.S. banks' reputations
1. Washington Mutual - 64.04
2. SunTrust Banks - 63.56
3. Wachovia - 61.22
4. National City - 58.83
5. Wells Fargo - 57.38
6. US Bancorp - 54.18
7. Bank of America - 50.94
NOTE: Rankings were part of a survey of 600 of the world's largest companies.
(Source: Reputation Institute Global Pulse survey, June 2008)
Miscellaneous
There were 984 million bank-issued Visa and MasterCard credit card and debit card accounts in the U.S in 2006. (Source: Visa USA, MasterCard International)
The top 10 credit card issuers controlled approximately 88 percent of the credit card market at the end of 2006, based on credit card receivables outstanding. (Source: FDIC)
U.S. Visa cardholders alone conduct more than $1 trillion in annual volume. (Source: Visa USA internal statistics, 4th quarter 2006)
Consumers carry more than 1 billion Visa cards worldwide. More than 450 million of those cards are in the United States. (Source: Visa USA internal statistics, 4th quarter 2006)
HISTORICAL INFORMATION
Industry history
The first widely accepted plastic charge card was issued in 1958 by American Express.
The first general-use credit card that allowed balances to be paid over time was the BankAmericard (which in 1977 changed its name to Visa), issued in 1959. (Sources: PBS Frontline; American Express, Visa USA)
How did MasterCard begin? In 1966, a number of banks formed the Interbank Card Association. In 1969, the Interbank Card Association bought the rights to use "Master Charge" from the California Bank Association. It was renamed MasterCard in 1979. (Source: MasterCard.com)
After all the information what does it mean? We'll this simply means in a point of view of a multi-billion financial institution, the more our clients' spend the more we profit. So we basically make a loan every time we use our plastic cards and we should use it properly to our advantage.
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