How using collateral can give you more favorable loan terms than doing it without a form of guarantee
- Home Equity
Using the home equity available in your home as collateral is one of the most common ways to offset the rate of your mortgage loan. By taking out a second loan or line-of-credit against the amount of equity in your home, you can use this money as extra savings to negotiate a better interest rate on your primary mortgage loan. Be sure to shop around for the best rates and terms when looking at different lenders for a second loan or line-of-credit.
- Vehicle Titles
Using the title of an owned vehicle can be another way to reduce the rate of a mortgage loan. By using a lien on the title with a bank or credit union, you can secure funding at competitive rates that can then be used toward reducing the interest rate on your mortgage loan. Just like with home equity loans, shop around for different lenders to find the best options for you when looking for title loans or pawn shop loans.
- Investment Accounts
If you have investments such as stocks, bonds, mutual funds and other securities, you may be able to leverage these accounts to lighten the interest rate load on your mortgage loan payments. Many banks offer competitive terms and will let you post these investment accounts as collateral so that if anything were to happen and missed payments were made, they could cash in these investments instead of foreclosing on your property.
- Retirement Accounts
Under certain conditions specified by the U.S law known as “The Mortgage Forgiveness Debt Relief Act” (MFDRA), using existing retirement account funds may be a good option in certain cases for obtaining lower interest rates on a mortgage loan without penalty or penalty fees. This enables homeowners who are experiencing financial difficulties to use 401(k) funds or IRAs for debt relief and lower payments on their mortgages. It is crucial, however, to contact your lender and consult with a qualified financial advisor before considering taking any action that leads towards this end goal.
Learn about the several options for lowering the rate of your loan
Whether it’s real estate, an automotive vehicle, or a valuable collection of items, lenders will often consider your collateral as a form of security for the loan and potentially give you a better rate for using it.
Additionally, having larger amounts of open credit also helps increase your leverage and gives you more room to negotiate more favorable terms with lenders. Therefore, contacting Aaron Kerscher from Fairway Mortgage can help you find the best options for you.
Ultimately, by opting for secured loans and managing your debt correctly over time, you can find yourself paying far less than what was initially offered to you.