California Home Equity Loans
Second Mortgage:
A person living in a house after taking a mortgage loan sometimes earlier, and faithfully paying all the installments, generally does not think of another California home equity loans and goes on paying the installments till the loan finishes.
If however it so happens that the rates of interest falls and the present rate is much lower than what he had taken or the price of the property increases during his tenure of loan then a condition arises when for the same installment payment he can get a higher loan and use the extra money for other purposes. In case he uses the money for his own home improvements, not only he is more comfortable but the value of his house is also pushed up. At these times every one advises to take this loan known as Home equity loan or the second mortgage loan. Since we are discussing this in California this is known as California home equity loans.
The average salary in California is estimated to be $40000 per annum which comes to approximately $3400 per month and if both husband and wife are earning then with this payment a loan can be taken to finance a reasonably good home. The value of an average home in California is apx. $495000 nowadays. It is natural that the homes brought earlier for lesser amounts can be mortgaged for higher money and the difference in price can be used for other purposes. Since there is a reduction in interest rates, as the banks etc. want to take full advantage of this boom, the monthly payments are also less.
California is a rich state, its economy is greater than many economies in the world.
It is home to rich economic regions like Hollywood, Silicon Valley, Wine producing regions etc. Per capita income is as high as $33,403; however it does have economical weak regions also in central valleys having large no. of farm workers. Coastal cities like San Francisco etc. are the wealthiest. Even the high-technology sectors in north e.g. Silicon Valley are now emerging from the recession period. Though the rate of growth is less than the national level of 3.9 %, yet the future looks bright. The international boom in the housing prices is very much apparent here with an average house costing about half million dollars.
In general following are the main reasons people go for California home equity loan.
1. When interest rates fall. This means California home equity loans interest rates are lower now than when the loan was first taken. 1% lower rate should be O.K.
2. If the loan is adjustable interest rate loan and now the interest rate looks lowest and it is thought that it will rise, then the loan is changed to fixed rate loan.
3. If cash is needed for say home improvements, or childrens higher education or a good holiday.
Following self explaining chart gives the rates of interest for some type of loans. From this one can get an idea about what is prevailing in the, market now a days. In the chart Conventional loans, have the loan amount pertaining to the standard list compiled by Fannie Mae and Freddie mac companies, and the Jumbo loan, is the loan amount offered which is more than the standard list.
Conventional Loans Jumbo Loans
30 or 20 Year Fixed
Rate Total Points APR Monthly Payment$1,000 Loan/360 months
6.125% 0 6.19% $6.07
15 Year Fixed
Rate Total Points APR Monthly Payment$1,000 Loan/180 months
5.875% 0 5.99% $8.37
7/1 ARM (7 yr Fixed + 23 yr ARM)
Rate Total Points APR Monthly Interest-Only Payment$1,000 Loan/84 months
6.625% 0 6.69% $5.52
5/1 ARM (5 yr Fixed + 25 yr ARM)
Rate Total Points APR Monthly Interest-Only Payment$1,000 Loan/60 months
6.5% 0 6.55% $5.42
1/1 ARM (1 yr Fixed + 29 yr ARM)
Rate Total Points APR Monthly Interest-Only Payment$1,000 Loan/36 months
6.00% 0 6.05% $5.00
30 Year Fixed
Rate Total Points APR Monthly Payment$1,000 Loan/360 months
6.375% 0 6.41% $6.23
15 Year Fixed
Rate Total Points APR Monthly Payment$1,000 Loan/180 months
6.00% 0 6.08% $8.43
7/1 ARM (7 yr Fixed + 23 yr ARM)
Rate Total Points APR Monthly Interest-Only Payment$1,000 Loan/84 months
6.625% 0 6.69% $5.52
5/1 ARM (5 yr Fixed + 25 yr ARM)
Rate Total Points APR Monthly Interest-Only Payment$1,000 Loan/60 months
6.5% 0 6.55% $5.42
1/1 ARM (1 yr Fixed + 29 yr ARM)
Rate Total Points APR Monthly Interest-Only Payment$1,000 Loan/36 months
6.00% 0 6.05% $5.00
As a thumb rule the refinancing rate should be apx. 2 points lower than the mortgage already on the property, if a refinance is to be planned. If the rates are not so low but they offer a reduction in fees then even the deal can be entertained. Refinancing means going through the whole process again. Hence one must be sure that refinancing is worth while and there is strong reason to do that.
Brokers
It is always good to hire a broker to examine the loan papers, this is because there are many hidden things in the deals that are to be taken care of. If a not so perfect deal is signed then one can find oneself in a very tight corner later on. This is because these California home equity loans go on for a very long time.
Which broker to use is in itself a tough decision The best way is to consult friends or others in locality, who has experience. Careful interviews should be conducted and only then the decision should be finalized.
3 day rule
Even if after signing the deal some point arises or is pointed out which can be dangerous later on, the US Govt. allows you to withdraw the deal after informing the lender in writing within 3 days. The lender has to refund everything and cannot operate the securities given in this period.
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