Mortgage Refinance: Convert an existing mortgage loan into a low cost loan.

Mortgage refinance is the process by which you pay off an existing mortgage loan with another loan having more favorable terms and conditions as well as a low rate of interest. The new loan amount may or may not be greater than the outstanding loan balance. If it is greater than the outstanding loan amount, you can use it to pay the current mortgage and spend the remaining part to accomplish you other financial obligations. If the new loan amount or the refinance loan amount is the same as the outstanding mortgage loan, it is known as mortgage refinancing. However, if it exceeds the outstanding mortgage loan, it is known as cash out refinance. For example, if you have an outstanding mortgage loan of $500000 and you take a loan of $500000, to pay off the existing mortgage loan, it is mortgage refinancing. On the other hand if the second loan exceeds $500000, it is cash out refinancing and you can use the excess amount to pay off your other debts.

If you go for mortgage refinancing, monthly payment is reduced because of the low interest rate and extension of the loan term. Not only this, you will also have the option to reduce the loan repayment term. If you reduce the loan term, the monthly payment will increase but the total payments you make towards interest during the entire term of the loan will be reduced. Moreover, if there is an appreciation in the price of the property, and your home equity increases, you can take the second mortgage loan where your home equity will act as collateral. Home equity is the difference in the amount of the mortgage loan outstanding and the present value of your property. However, you should never go for mortgage refinancing if the value of your property has gone down because the new loan may not be sufficient to pay off the existing loan.

Mortgage: What is mortgage and what are the different types of mortgage?

Mortgage is generally the property you keep as pledge to obtain a loan for purchasing the property itself. Mortgage is not a debt in itself and it only acts as a security to obtain the debt. It is an agreement between the lender and the borrower, where the interest in land is transferred to the lender by the owner under the agreement that the lender will return the interest to the borrower once the loan is repaid or in other words the terms and conditions of the mortgage have been satisfied. Mortgage is therefore the security of the lender based on which he offers the loan. The lender is also known as the mortgagee and the borrower is known as the mortgagor. Since the lender considers your financial strength while advancing mortgage loans, they take into account various factors such as your credit score and your monthly income. A mortgage loan is generally repaid within a fixed period of time and ranges from 10 years to 30 years.

Mortgage can be classified into the following categories – fixed rate mortgage, adjustable rate mortgage, commercial mortgage, home equity line of credit, interest only mortgage, repayment mortgage, and the reverse mortgage. However, the most popular among them are the fixed rate mortgage and the Adjustable rate mortgage.

Fixed Rate Mortgage: In case of fixed rate mortgage, the repayment term varies from 15 to 30 years and the rate of interest remains fixed over the loan period. Although the interest rates are higher than that of adjustable rate of mortgage, it provides security to the borrower against any increase in interest rates. Moreover, the borrower can plan their monthly budget as the monthly payment towards the loan is already determined. The longer is the period of loan repayment; the lower is the monthly payment towards the debt. However, the initial interest rate on fixed rate mortgage is generally higher as compared to adjustable rate mortgage.

Adjustable Rate Mortgage: In this type of mortgage, the interest rate and therefore the monthly installments varies depending the monetary policies of the Federal Bank. Although these loans have low interest rates in the beginning, but they have the risk of increase in interest rate in later periods. However, the advantage of adjustable rate of mortgage is that if the market rate of interest goes down, your interest rate also goes down. This type of mortgage is beneficial only if you go for a short term mortgage loan.

Fraud alert: Protect yourself if your identity is stolen

Fraud alert is a service which is offered by all the three credit reporting agencies in order to help you get protected from misuse of your identity. Whenever you find your identity stolen or has been exposed in some way or the other, the first step is to activate the fraud alert services with the bureaus. For this you need not contact all the three bureaus separately. If you activate it with any one of the bureaus, the other two bureaus will be informed automatically. All you need to do is to call any of the credit bureaus and set an initial fraud alert service.

There are various ways in which your identity can be stolen. Firstly, the identity thief can steal your credit card statement or utility bills and collect information from there and secondly, if somehow your purse is stolen, the thief can get access to important documents like your social security number or your credit card number and use there details to open a new line of credit in your name and take financial advantage. So whenever you suspect that your identity is stolen, you should set an initial fraud alert service with the bureaus.

An initial fraud alert stays in your credit report for 90 days from the date of activation and you get a free credit report from all the three bureaus. You can fill up the fraud alert form online with any of the three bureaus. On activation of the fraud alert service, you will get a call from the creditors to verify your identity whenever there is an application for a new line of credit in your name and social security number. On getting confirmation from you, the new application for credit will be processed. You can also apply for an extended fraud alert services with the bureaus only if your identity is actually stolen. For this a copy of the valid identity theft report, which you have submitted with the Federal Trade Commission, is to be submitted with the bureaus. The extended fraud alert service remains active in your report for a period of seven years.