A second mortgage is not the same as a remortgage. There is a lot of confusion about this. Second mortgage and remortgage are different ways of getting hold of the equity in your property.
If you have had your mortgage for a fair length of time, you have probably noticed that the value of your property has increased. The most likely way to find this out is if a neighbour’s house similar to yours goes on the market, and you get a surprise when you see how much it is going for.
If this increase has in fact taken place, the difference between the amount of the outstanding mortgage (plus any other loans secured on your property) and the current value of your house is the equity. Using this equity is one of the most sensible ways of raising extra cash if you need it for any reason.
Basically there are three ways of using your equity:
- Refinance your mortgage with your existing lender
- Remortgage with a new lender, for a larger loan.
- Keep your existing mortgage as it is and take out a further loan secured on the equity in the property. This is what is called a “second mortgage”.
Each of these methods has its pros and cons.
- The advantage of staying with your existing lenders is that they are familiar with you and your payment record, and also with the property. So there should be fewer checks and formalities to go through, to refinance the loan. However, if it’s a long time since you took out the first mortgage, they may still need a new valuation. They may also need a check on your finances – they know whether you’ve kept up your mortgage payments or not, but they don’t know what other financial commitments you may have.
- Sometimes you can actually do much better by switching to a new lender – you may get better rates, as lenders often reserve their best rates for new customers! It quite often happens that people remortgage with a new lender for a much bigger loan, and actually end up with lower monthly payments than before. The lenders will of course need surveys, valuations, credit checks, etc.
- If you take out a second mortgage, this becomes a “second charge” on the property, with the lenders of the original mortgage keeping the deeds. This means that if the house is sold or repossessed, the lenders of the first mortgage have first claim to repayment. The holders of the second charge then have the next claim to recover what is owed to them. The lenders of the second mortgage thus have a higher level of risk, and so their interest rates may be higher than those for the first mortgage. However, they are still competing for your business, so you can still get very good deals on your second mortgage if you shop around. And the rates will certainly be better than for an unsecured loan.
Whichever of these methods of utilizing your equity you choose, lenders are very unlikely to release the full value of the equity. They will always wish to retain some equity in the property in case of a fall in value or other emergency. However, if you are looking for a second mortgage, it is possible in some cases to find a lender who will go up to 100 per cent – at much higher rates, to reflect the higher risk.
Whether a second mortgage or a remortgage is better for you will depend on your individual circumstances. A broker or financial adviser will help you decide what’s best for you.
Increased gasoline prices are here and they’re here to stay. It’s been over 3 years since we’ve seen prices that are consistently under $2.00 a gallon, and they don’t seem to be headed down anytime soon. Instead of griping about the high cost of gasoline, we should instead adopt a positive attitude and look at ways that we can reduce our personal consumption of gasoline to bring the cost of fueling one’s vehicle back into the realm of reason. Here are some ways that you can make a gallon of gasoline take you a lot further.
Check Your Air Filter – Having a clean air filter can improve your gas mileage by up to 10%, and studies indicate that one out of every four vehicles desperately need a new filter. Purchasing a new filter will save you the equivalent of 25 cents per gallon alone!
Properly inflate Your Tires – The NHTSA says that the average car tire is under-inflated by 7.5 lbs of air pressure, causing a loss of 3% in fuel efficiency. Making sure your tires are properly inflated will save you 7.5 cents per gallon in gasoline
Get Your Car Aligned – If your vehicle is improperly aligned, your tires will wear out more quickly and your engine will have to work harder. This can reduce your gas mileage by up to 10%, or 25 cents per gallon!
Get a Tune Up – Getting your vehicle properly tuned up can improve your gas mileage by 4% according to the National Highway Traffic and Safety Administration. It might not seem like much, but that’s 10 the equivalent of 10 cents per gallon if the price of gasoline is $2.50
Keep Your Foot Off The Breaks – By avoiding using your breaks, you will reduce the wear and tear on them as well as dramatically improve your fuel efficiency. If you have a “heavy foot” you could improve your fuel economy by up to 35%
Drive the Speed Limit – For every 5mph of speed that you drive on the highway, you will reduce fuel consumption by 7%. If you switch from driving 70 on the highway to 65, you’ll save 19 cents per gallon of gasoline.
A lot of people think they need to purchase a new car to get better fuel economy, but that’s just not the case. You can do a lot with the car that you already have to improve the efficiency of your engine.
The need for Life Insurance
Why do we need Life Insurance? Consider this. Under any circumstances, the loss of a loved one is a traumatic experience. But, if your family is also left without sufficient money to meet basic living needs or prepare for future goals, they will have to cope with a financial crisis at the same time. If faced with an economic crunch, your family might have to move to a less desirable home, cut back on the quality of life, your children might have to abandon higher studies plans. Your family might even be forced to go into debt to pay the expenses, like medical bills, that result from your death. I hope that by now, you realise that the lack of sufficient life insurance coverage when a loved one dies can have devastating consequences for a family, results that can last for years. Hope now you get why we need life insurance.
What is Life Insurance?
You read about why we need life insurance. Now you must be wondering what life insurance is, after all? Life Insurance is a way of transferring the risk attached to your life to the insurer. In other words, life insurance is a policy bought from a life insurance company, which provides financial stability to a family after a member’s death, usually the breadwinner of the family. Its function is to help beneficiaries financially after the owner of the policy dies.
If the policy owner dies while the contract is in force, the insurance company pays a specified sum of money free of income tax to the person or persons you name as beneficiaries. The cash benefit helps provide for your family’s future needs as well, including college education for your children and part or all of your spouse’s retirement needs.
Life Insurance can also be a form of savings in the long run if one purchases a plan, which offers the option of contributing regularly. Additionally, a little known function of life insurance is that it can be tied in with a person’s pension plan. A person can make contributions to a pension that is funded by a life insurance company.
Types of Life Insurance?
You read about why need life insurance and what is life insurance. Now, let’s discuss the various types of life insurance available in the market:
The cheapest Life Insurance – Term Insurance
Term life insurance also called pure insurance, is the most straightforward type of life insurance and the easiest to understand. It protects for a specific term period – ranging from 1 year to 25 years or more. If the policy owner dies during this period, then the insurance company pays cash benefits (as decided upon policy subscription) to the nominees of the policy owner. However, once the term is over, coverage ceases.
The policy has no financial investment value. If you are looking for the maximum amount of coverage at minimum cost, term life insurance will give you the most “bang for your buck”.
Life Insurance with Returns Endowment Assurance
An endowment life assurance policy covers risk for a specified period, at the end of which the sum assured is paid back to the policyholder, along with the bonus accumulated during the term of the policy. An endowment life insurance policy is designed primarily to provide a living benefit and only secondarily to provide life insurance protection. Therefore, it is more of an investment than a whole life policy. The premium on endowment life insurance policies is payable for the full term of the endowment policy unless the insurer dies earlier. When compared to pure life policies, the premium rates for endowment life insurance policies are higher. But one of the significant attractions of endowment policies is that they provide a return on premium payments when the plan comes to an end.
Money-Back Life Insurance
Money-Back Life Insurance offers the critical benefit of cash lump sums at periodic intervals of five years, ensuring that you can meet any of your financial obligations. Such a plan not only provide life cover but also entitle you to a guaranteed addition and bonus on maturity. Money-back Life Insurance plans like these not only let you enjoy regular cash flows during the policy term; they also get you a life cover.
ULIPs are a category of insurance cum investment solutions that combine the safety of insurance protection with wealth creation opportunities. In ULIPs, a part of the investment goes towards providing you life cover. The residual portion is invested in a fund which in turn invests in stocks or bonds. The value of investments alters with the performance of the underlying fund opted by you.