Mortgage Rate News

Bank of America is expected to see some serious losses with regards to home equity loans. Why? Because second home mortgages are connected to home value, and that means that as home values fall, losses due to home equity loans rise. Bloomberg reports on the current state of Bank of America:

The bank expects losses to top 2.5 percent of its $118 billion in loans linked to home values, Liam McGee, president of the Charlotte, North Carolina-based company’s consumer and small business division, said at a conference in New York sponsored by UBS AG. The bank previously projected a loss rate of between 2 percent and 2.5 percent.

Bank of America, the nation’s largest credit-card issuer, is also seeing a “recent sharp increase” in spending on necessities by its credit-card customers. That has curbed retail, travel and entertainment purchases, McGee said. Economists and bankers have said the economy may be teetering near a recession as consumers struggle with job losses and gasoline prices topping $4 a gallon.

You can also see that problems may be arising in the area credit cards as well. As more people have to turn to credit cards to cover the necessities, there could be real problems ahead.

This presents a combination problem: Home equity is tapped out, and credit cards are moving toward being maxed out. This is a trend that is sweeping the nation. The question is this: How long until Americans as a whole move from managing their debt to actually drowning in it? And consider: with home equity loans getting harder to come by, it will make it difficult for Americans to use debt consolidation to get a handle on their credit card debt.

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second home mortgages, debt consolidation, credit cards

Whether it’s a first home mortgage, or a second home mortgage, it is possible to save money by going green. A product called a green mortgage is being offered by more and more lenders around the country.

Citi, Bank of America and JP Morgan Chase all offer some version of a green mortgage. And if you look around, you might find local mortgage lenders that do as well.

Green mortgage

A green mortgage is one in which the mortgage lenders offer special terms if you buy a home that meets certain environmental standards. If you buy a home that was built using green building practices, or if you have an energy audit before buying, it is possible to have the interest rate reduced — or the loan origination fees waived. It just depends on the green mortgage program in question.

Save money on green home improvements

This is an area that can help you save a great deal of money in the long run. Some mortgage lenders give you special rates on a second home mortgage that you take out to make green home improvements, like adding insulation or better windows. These green home improvements can also extend to getting new EnergyStar appliances and installing solar panels.

Not only are there green mortgage products available in terms of a home equity loan, but there are other savings as well. Many states offer grants to those wishing to build a wind power turbine or install solar panels. There are grants for energy efficient windows and insulation. Additionally, there are federal (and state as well) tax benefits when you make green home improvements. Speak with your accountant or other tax specialist to find out what you can do to take advantage of these tax offerings.

Going green doesn’t have to mean that you lose money. Indeed, many green home improvements pay for themselves in a few years, and then you start saving big over the long run.

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second home mortgage, green home improvements, mortgage lenders

One of the most common reasons that people get a second home mortgage is for home remodeling. However, with banks pulling back on what they will offer in terms of home equity loans, and Americans in general worried about the economic slowdown, home remodeling is falling in popularity.

I think that the biggest reason is the fact that there is less home equity available. After all, with home prices (and values) heading down, negative equity is becoming more of a problem. There just isn’t enough equity to take out a second home mortgage for improvements. No wonder many mortgage lenders are worried.

Are American consumers finally “getting it”?

I’m a generally optimistic person, so I’m hoping that another reason that home equity loans are falling is because American consumers are starting to take a long, hard look at their finances. This would be a good thing, since an honest evaluation of where one’s finances are headed may result in substative changes in lifestyle.

This would also include the problem of using home equity loans for debt consolidation and to pay for frivolous things like vacations. It is very important that individuals figure out what they can do to start building savings, rather than be constantly spending themselves into debt.

In any case, this is a good thing. Hopefully it encourages home owners to think twice about what they “need” in terms of home equity loans. Quite honestly, this could be a chance for all of us to take a close look at where we could be improving in our personal financial lives.

Although it is worth noting that in some cases, home improvement loans are gaining in popularity. Amongst those with good credit, who are still able to obtain personal loans, remodeling may not be a lost cause.

Tags: home equity loans, home equity, home mortgage loan, home second mortgage,
second mortgage, debt consolidation, mortgage loan blog