With that in mind, you can see why finding the right mortgage is so important. It’s just as important as finding the house of your dreams. You don’t have to live in your mortgage, but you will be paying it off for 15 or 30 years or more. A good mortgage broker can help prospective home buyers find the mortgage that fits their lifestyle.

But how do you find the right mortgage broker?

First, let’s understand what a mortgage broker does. A mortgage broker:

• Pre-qualifies or pre-approves buyers for a loan. This lets buyers know the price range of house they can afford, narrowing the home search to realistic parameters before they begin.
• Offers a variety of mortgage options to meet your needs. Loans aren’t one size fits all, and a mortgage broker helps you sift through the vast array of options to find one that meets your needs.
• Helps you find the best interest rates. A mortgage broker should stay in touch with you throughout the loan application process, keeping an eye on interest rates in order to get you the best rate available. He understands the market trends better than someone outside the industry, so he can advise you to “lock in” your rate or wait to see if interest rates fall.
• Walks you through the loan application process. Mortgage applications can make filing taxes look simple. A mortgage broker will help you every step of the way. He can offer advice on how best to manage your finances in the months before closing on a new home, and lets you know what paperwork and documentation is necessary to complete the application process.
• Offers a “good faith estimate” of closing costs. Your mortgage broker should provide a line-by-line estimate of all costs associated with buying a home.
• Works hand-in-hand with the real estate lawyers, agent and any other necessary parties to bring the deal to closing.

A mortgage broker can save you time, money and hassles by helping you choose the right loan. But just as loans are not one-size-fits-all, neither are mortgage brokers. Before selecting a broker, consider your needs. Are you:

-          A first-time home buyer?

-          A real estate investor?

-          A home owner looking to refinance?

Make sure the mortgage broker you select is accustomed to dealing with customers in need of similar services.

Finding a Mortgage Broker

It’s easiest to find a broker by word-of-mouth; the real estate agent may be able to recommend a good broker. Otherwise, talk to family and friends who have recently purchased a home.

Most mortgage brokers get paid by the lenders; the broker should disclose all commissions or fees, which should not equal more than 2 percent of the total loan value.

Questions to Ask

When you narrow down your choices of brokers, consider the following questions:

• Does the mortgage broker answer all your questions and make you feel comfortable about the process?
• Is he readily available by phone or e-mail to address any concerns or questions? Brokers need not be “on call” 24-7, but you should be able to expect to hear from them within 24 hours.
• Does the broker work with a broad range of lenders, making it more likely he’ll be able to find the best loan for you?
• Is the broker willing to provide in-depth written information about the different loans that fit your needs?
• Do you feel as if the mortgage broker has your best interests in mind? A broker should not pressure you to select one mortgage product over another without disclosing his motivations and explaining the reasons clearly.

If you can answer “yes” to all the questions above — and that broker has a loan product that fits your needs – congratulations! You’ve found the right mortgage broker to lead you on your journey toward home ownership. If not, keep looking – the wrong mortgage broker is far worse than no mortgage broker at all!

Photo by Rev Dan Catt

First, let’s define a secured loan.

A secured loan is a loan backed by collateral, which is a property pledge to insure repayment of a debt. The bank or other lender puts a lien on a piece of property equal or greater in value than the loan.

For instance, in the case of a car loan or mortgage, the car or house is the collateral. In other cases, a borrower puts their house up as collateral in order to get cash for home improvements, furniture, or even to pay off other debt. This is a called a Home Equity Loan or a Home Equity Line of Credit.

While a lender may not be willing to lend such large amounts of money through an unsecured personal loan, a secured loan decreases the risk to the lender. It sounds like the perfect solution to buying a new car, new home,  investment property, or even your child’s uni fees.

People often get secured loans for:

- Houses (in the form of a mortgage)
- Cars and other vehicles
- Certain business equipment, such as farm equipment
- Land
- Home improvements
- To pay off non-secured debt

Benefits to Secured Loans

Secured loans, because they are a lower risk to the lender, typically have much lower interest rates than personal bank loans. For someone carrying a lot of high-interest credit card debt, a home equity loan can consolidate credit card debt into one easy home equity loan that is paid every month.

Unlike the minimum payments on credit cards, a home equity loan payment does not change each month. The borrower will see their debt go down with each payment, and know there is a definite end to the loan. For many people, a home equity loan provides a way out of debt. For some, it seems to be the only way.

Drawbacks to Secured Loans

A secured loan protects the lender, but can put the borrower at great risk. In today’s economy, largely sparked by the mortgage crisis in the U.S., lenders all over the world (including Australia!) have become more conservative. They hesitate to give even secured loans to borrowers who don’t have a good credit history and can’t show the means to pay the loan.

Certain types of secured loans pose a greater risk than others, including:

- Debt Consolidation Loans
- Interest-only mortgages
- “Honeymoon” (Introductory) rate mortgages
- Split-rate mortgages
- Car Loans

Whatever type of loan, whether it’s a car loan, mortgage or debt loan, the risk to a secured loan is that if the borrower can’t pay, he loses the collateral. In the event of a car loan, failure to make payments can result in re-possession of the vehicle. If the vehicle is worth less than the amount of the loan, the borrower may lose their car and still owe the bank money.

In the event of non-payment of a mortgage or a home equity line of credit, a borrower may lose his house to foreclosure.

The greatest risk exists when someone takes out a home equity loan or line of credit against their house to pay off non-secured debt. With credit cards paid off, the borrower may begin using them again, creating an endless cycle of debt. As minimum payments on the cards grow larger, the borrower may not be able to pay his home equity loan, either.

Using your home as collateral to pay off debt may seem like a smart choice, but be careful. If it is the first step to a debt-free lifestyle, be sure to stay on that path.

Be careful with secured loans. They may seem like a good idea to get out of debt, but think about the collateral at stake if you can’t afford to pay.

Photo by benprks

Who Needs a Debt Consolidation Loan?

Debt consolidation loans are primarily intended for individuals or families struggling to manage any form of outstanding debt:

• Credit card debt
• Personal loan debt
• Mortgage or housing debt, etc.

Despite sounding like a highly attractive option that, based on incessant advertising, seems widely available, obtaining a quality debt consolidation loan can be more difficult than one would expect.

Why?

Let’s face it, how many legitimate lenders want to invest in someone who has already gotten into such a tremendous financial predicament? As result of the difficulty born of getting an established, trustworthy company to issue a debt consolidation loan, many desperate borrowers unwittingly find short-term comfort and long-term pain in shady lenders that eventually lead to even more financial problems for down-and-out debtors.

Unfortunately, there is no shortage of surprisingly common debt consolidation mistakes that borrowers make when in the market for this particular financial product.

Avoiding The Dangers of Debt Consolidation

• Hidden Fees. Debt consolidation loans can often be packaged with exorbitant hidden fees and administration costs. Apart from the interest rate you secure, which may depend in large part on your financial history, there are typically processing fees, monthly service fees, and even a fee for each payment sent to your creditors. There is also a vast fleet of companies that actually charge a penalty for paying off your balance early. Be sure to read the fine print and know that every cent you provide pays off more of your debt than your loan provider’s “administrative fees.”

• Old Habits Die Hard. A debt consolidation loan can reduce the onerous process of paying multiple creditors every month. Unfortunately, many confuse a debt consolidation loan for a new beginning. In reality, your debt remains unchanged. Yet, because previously maxed-out credit cards and other lines of credit are now reduced to zero, without great caution, a reckless spender could soon find himself in an even worse position than before – with a debt consolidation loan and a new batch of bills created outside of it. Securing a debt consolidation loan is anything but a license to spend again.

• Trust But Verify. There are thousands of debt consolidation companies that want your business. Many should be avoided like the plague. How do you know which are legitimate, credible agencies? You won’t without conducting adequate research. Never, under any circumstances, take a company’s counselor at his or her word. If they claim to possess any licenses or registrations for conducting business, ask to see them. Apart from shopping around for the best financial arrangement possible, it is doubly important to double check everything you’re told and everything you read so that you know exactly how your debt consolidation process will play out in full.

The Most Important Lesson

Ultimately, no matter how successfully one sidesteps the common pitfalls of debt consolidation, what guarantees that a first loan of this nature will also be the last is seriously addressing the situations, lifestyles, or issues that led to the need for a debt consolidation loan in the first place. At the end of the day, it is just as important for the debtor as it is the creditor to take accountability and responsibility.

Photo by shoothead

How Does It Work?

While many individuals hire a professional debt negotiator to work on their behalf, you can also try to negotiate your debts by yourself. While you may not be able to reduce your debt by as much as a professional could, you will be able to offset some of the savings by not having to pay the negotiator a fee for their services.

A personal attempt at debt negotiation is fairly simple if you follow these 5 steps:

Step 1: Find out how much cash you can apply to each of your debts
Step 2: Collect the phone number for each of the credit card companies you use
Step 3: Call each company and explain your financial predicament
Step 4: Offer to pay back a portion of your existing debt in cash
Step 5: Close the credit card account and stay out of debt

How Can This Work?

Most people wonder: Why would a company accept less money than they are owed? The answer is simple—a credit card company would rather have 60% of your outstanding debt in cash than risk having you go bankrupt! The credit card companies know that there is always a risk that you won’t pay back your debt— they view your account as a potential liability. Once you explain that you may not be able to pay back your debt, the credit card companies will quickly negotiate with you to get as much as they can because they cannot be certain that you won’t go bankrupt.

Another Option For Negotiation

In the case that you do not have the cash on hand to pay off even a smaller amount right now, you can also try to negotiate the interest rate on your debt. Again, simply gather together the phone numbers of your creditors and give them a call. While it may be surprising at first, credit card companies will often lower your interest rate if your account is in good standing. Some factors that will increase your chances of reducing the interest rate:

• You have never missed a payment, and are rarely late
• You often pay more than the minimum payment each month
• Your credit score is in good standing
• You have not requested a rate change for that card before

For an in-depth look at what to say to your credit card company’s service representative, see http://moneyfor20s.about.com/od/creditcards/ht/lowerccinterest.htm (it’s an American link, but the advice holds up pretty well in Australia too.

Hopefully you will be fortunate enough to have one of these strategies work for you. If you can, try to negotiate to pay off all the debt at once for just a fraction of the outstanding value first; if that doesn’t work then you can try to persuade the credit card company to at least lower the interest payment on the debt. By explaining your financial predicament and alerting them to the fact that you may not be able to meet your obligations, you may be able to negotiate a favorable outcome for both you and the creditor. But remember, once you are out of debt, you need to evaluate and change your spending habits so that you do not end up in this situation again.

If you’re still not comfortable trying the DIY option, or you’ve already explored that avenue without success, it may be worth talking to a professional debt consolidation service like Fox Symes.

Photo by maveric2003