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Cleaning up credit to refi house
ganderla




msg:299649
 8:49 am on Jun 1, 2006 (gmt 0)

I am going to be refinancing my home in several months and I was hoping there is an expert around this here water cooler.

What are the best things I can do to raise my credit score?
Should I pay off all my cards and close the accounts?
I know I should not be applying for anything right now.
My main concern is the cards I already have. I am not late on payments, but I do have some pretty high outstanding balances.
Should I take the total and divide it by the number of months until I refi so it will all be paid by the time I do it?

I would appreciate any suggestions.

 

rj87uk




msg:299650
 9:00 am on Jun 1, 2006 (gmt 0)

I would like to knnow more about this stuff just for general sake of knowing it.

I am going to be refinancing my home in several months

Whats the point in "refinancing" your home? What does this mean and why?

RJ

larryhatch




msg:299651
 9:02 am on Jun 1, 2006 (gmt 0)

I wouldn't pay them all off completely.
I wouldn't close any accounts unless you have too many,
and then only silly smallish ones.

I WOULD pay the major ones down a chunk, something more than the minimum payment, maybe 20 percent.
This shows your determination to be a good creditor.
Make SURE there are no late payments. -Larry

ganderla




msg:299652
 9:03 am on Jun 1, 2006 (gmt 0)

When I bought my home the market was red hot and I had to do some creative financing. Right now I have 2 loans, one for 80% and one for 20% of the purchase price. They are 2 year ARM's and the 2 years is up in several months. When I first bought I only had one year of tax returns to show income, then I will have 3. I am looking to get a 30 year fixed and take some cash out.

larryhatch




msg:299653
 9:06 am on Jun 1, 2006 (gmt 0)

rj87:

When mortage rates are down, at least lower than when you took out the loan,
its nuts to NOT refinance at the lower rate.

For the first years especially, the overwhelming portion of a mortgage is interest.
If you originally mortgaged at say 10 percent, and you can refi at say 6 percent,
BINGO your monthly payment drops maybe 35-38 percent.
That's usually hundreds less, every month, in mortgage payments.

The downside is hassle, points (fees) etc. All that has to be factored in.
Its up to the borrower to sit down and work thru the numbers. -Larry

rj87uk




msg:299654
 9:10 am on Jun 1, 2006 (gmt 0)

Is this a flexible mortage or can you do this with any type?

How do you find out if the mortage rates are up/down?

heh, as you can tell I don't have a mortage and know little about them... But interested!

debvh




msg:299655
 12:31 pm on Jun 1, 2006 (gmt 0)

Ganderla - I don't know whether closing the accounts will make a difference one way or the other, but paying off credit card balances can only help. If you have the money to pay them off in a few months, why choose to pay all that interest?

rj - You can refinance any kind of mortgage. A mortgage is a loan. When you refinance you are taking out a new loan to pay off the old one - usually in hope of saving money by paying a lower interest rate. There are fees associated with refinancing so it can take awhile to start saving money paying the lower rate. Mortgage rates are commonly reported in the business news.

giggle




msg:299656
 12:31 pm on Jun 1, 2006 (gmt 0)

Just refinanced my flat in UK. Bought it for 85k (GBP) in 1990 they just valued it at 265k last month. Took out enough to pay debts and buy a car and my monthly payments are now lower due to a better interest rate.

Did the same when my first daughter was born and when I bought a house here in Thailand.

Guy living in the flat is paying slightly more than my mortgage payment so I'm making a bit of money every month.

That's my experience and it's a happy one!

vincevincevince




msg:299657
 12:51 pm on Jun 1, 2006 (gmt 0)

You can refinance any kind of mortgage

Perhaps it's different for you but in the UK mortgages are the most bank-weighted instruments available. They are stuffed full of early-repayment fees, penalties and clauses which are designed just to make it expensive to refinance. So far as I know nothing is being done about it, but I look forward to the day when there's a law to make all such clauses illegal - it's just not right - having to pay someone extra to pay your debts early!

rj87uk




msg:299658
 1:01 pm on Jun 1, 2006 (gmt 0)

Ah right ok now Im catching on, sounds interesting stuff. Im guessing the fee's would go to lawyers or the banks to stop you from doing it?

Your right about the UK putting stuff in the small print I think ive heard a few stories about trying to change but run up with problems, now I know its called refinancing!

pageoneresults




msg:299659
 1:03 pm on Jun 1, 2006 (gmt 0)

What are the best things I can do to raise my credit score?

Bills paid on time.

Should I pay off all my cards and close the accounts?

Pay off those cards that you don't use that much. Think about consolidating three into one, etc. Close only those accounts that you will not use again. But remember, your debt to income ratio will be a determining factor in loan approvals. If you have an account that has a $15,000 credit line, to a creditor, that means you owe $15,000. It doesn't matter that you have a zero balance.

My main concern is the cards I already have. I am not late on payments, but I do have some pretty high outstanding balances.

Most people refi their homes to pay off debt such as that so the creditor will have an understanding of what you are doing and having those balances should not be a major issue.

Should I take the total and divide it by the number of months until I refi so it will all be paid by the time I do it?

What's the purpose of the refi?

P.S. I've been CC free for 5 years now! If I don't have the money in the bank to buy it, I won't buy it. ;)

debvh




msg:299660
 3:16 pm on Jun 1, 2006 (gmt 0)

Perhaps it's different for you but in the UK mortgages are the most bank-weighted instruments available

Good point. It occurred to me after posting that I have only had experience (in the US) with plain-vanilla 30-year fixed mortgages and that fancier versions might have different rules.

LifeinAsia




msg:299661
 4:15 pm on Jun 1, 2006 (gmt 0)

Definitely pay down the balances. If you choose to close some accounts, close the ones you opened most recently- keep the ones with longer histories. But don't go crazy closing accounts, especially if you still have balances. (Even if you close accounts, they will still show on your report for months/years afterwards.)

If you haven't done so already, get a copy of your credit report and check very closely for any incorrect information. In the U.S., you are legally entitled to a free copy of your report from each of the 3 reporting agencies once/year. As they mostly have the same information, your best bet is usually to get 1 from each of the agencies every 4 months instead of getting all 3 at once and having to wai a full year before you can get another.

You can also get a copy of your credit score (FICO) for about $10-15. Most lenders will pull your credit scores from all 3 agencies and drop the highest/lowest.

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