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When to Refinance Your Mortgage

During tough economic times, a lot of homeowners are having a hard time making their monthly mortgage payments. They inevitably look for sources of funding in order to keep their homes. Unfortunately, the economic crisis today caused millions of people to lose their jobs and their cars. Most are afraid that their home is next to go.

It is a good thing that the government, together with the lenders they tapped, is now trying to find ways to help people keep their homes. Although it may not look that way, today might be the best time to refinance your home. There are certain considerations to look into though.

Home Mortgage Loans Online wrote a post titled “Home Loan Remortgage: Is Refinancing Your Home Right for You?” The blogger basically suggested that home loan remortgage might be a viable alternative because it can offer better terms and lower interest rate on your mortgage. Likewise, some guidelines are offered about timing.

Amy Nutt @ Family Finance Help has written a post, “When is the Best Time to Refinance Your Mortgage” that is closely related to this topic. She talked about assessing your current financial condition to know if refinancing is a good solution for you. Also, according to her, now might be a good time to refinance if you have a high mortgage rate.

Prasusit @ Flixya offered some tips on how a person with poor credit can still refinance his home. The blog post titled “Refinance Home Mortgage Loan with Poor Credit” outlined 3 tips that can help a struggling homeowner keep his own. The tips included checking out the rates, doing some preventive measures on the credit report, and opting for easier terms.

All these sources can provide you with sufficient tips to get your mortgage refinancing application approved by the bank or other financial institutions.

Credit Card Act of 2009 – The Effects

Last May 22, 2009, the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 was put into effect. Otherwise known as the Credit Card Act of 2009, this law was put into place to stop banks from taking advantage of consumers. It is basically designed to end the days of “unfair rate hikes and hidden fees.” Unfortunately, the actual effect of this law was not exactly what the President and Congress have hoped for.

Since it was signed into law, the big banks have thought of innovative ways to get around it. Major credit card insurers significantly revised their terms and conditions of use. Numerous consumers reported that instead of going down, some companies have even raised their fees, increased their interest rates, and restricted credit card benefits in anticipation of the Credit Card Act going into full effect.

For example, Chase has increased the minimum required payment to 5 percent from 2 percent. Meanwhile, other card companies have increased the balance transfer fees to 5 percent though it used to be offered for free in the past. In addition, credit card limits continue to go down while interest rates continue to climb. All these raise a crucial question – how did a law that was designed to protect the consumers have an opposite effect?

There are two issues in the provision we should look into:

Interest Rate Hikes – the new law significantly hinders the ability of card companies to increase their interest rates on outstanding balances. There are only three circumstances in which the balances can be increased: (1) when introductory rate ends, (2) minimum payment remains unpaid 60 days after the due date, (3) and when the underlying index that was used to determine the interest rate changes (variable rate).

Given this, it comes as no surprise that credit card companies would take advantage of the loophole extended to them in the system. Fixed rate credit cards are now becoming outdated as card issuers try to minimize their risk. Variable rates will insulate their portfolio from unnecessary risks while ensuring their continual profitability.

Balance Transfer – there are currently a lot of no-interest balance transfer offers in the market today. But the new law changed all that. Previously, when a consumer makes purchases at regular interest, his payments above the minimum are allotted to the no-interest balance transfer. As a result, consumers will actually pay interest on his purchases (those with regular interest) until the whole balance is paid.

From a policy point of view, the Credit Card Act is good because it requires excess payments to be allocated to the loan with highest interest rates. But consumers are actually paying a steep price for this now because the introductory 0 percent offer is no longer offered as widely as it once was. And the balance transfer fees have steeply gone up.

Big Banks Back to their Bad Ways

After receiving billions in government bailout and being humbled for a few months, it seems that banks are now back to their old bad ways. But probably the most grating result of the previous year’s financial crisis was that credit became harder to get for individual Americans and businesses.

Contrary to popular perception that banks have become too “weak” because of the crisis, they have actually grown, perhaps at the taxpayers’ expense. For example, Wells Fargo & Co got Wachovia Corp., JPMorgan acquired Bear Sterns Cos, and of course the infamous Bank of America, which got Merrill Lynch & Co. Over the short term, these acquisitions might have helped alleviate financial and political pressure. However, with too much power vested in too few banks, problems are bound to occur in the future. In addition, “bigger” isn’t necessarily better for the end-consumers.

It’s simply part of how the market works. If the big banks already have significant market share, they have “less incentive” to offer longer credit terms, lower fees on opening regular accounts, and they won’t offer high savings rate. There is simply no reason for them to do that. Washington’s “too big to fail” theory might have worked backwards.

Average Americans today might already be experiencing these consequences, but they have not yet experienced the full brunt of it. Taxpayers are being treated as if they’re begging for money. And indeed, it seems that way because they don’t have a choice. Banks today are making more money. However, they aren’t really making credit available to those who need it. This tactic prolongs the recession and is bad for everyone.

Will this situation improve in the near future? It isn’t very likely. If anything, it might even become worse. The big banks are still trying to recoup their losses. They are likely to increase credit card fees, bank account fees, and shift their risks using high mortgage rates and lower credit limit to the consumers. The situation looks pretty grim. And the government needs to do something to right its wrongs.

Credit Score Problems? We Have Some Suggestions

Credit problems are nothing new. But what makes it worse these days is the number of errors, inaccurate reporting, and systematic flaws in the credit scoring structure. Traditional scoring methods that were used decades ago are no longer reasonable in today’s environment because of the changes in the financial industry and the country’s macro-economic structure. As a result, many Americans are experiencing credit difficulties.

It is, for this reason, that credit repair has become a widely popular service in the country. Many might argue about the legitimacy of this service. After all, credit repair is not really as difficult as many credit repair companies make it look like. Even ordinary Americans can take specific measure to improve their credit. However, there are also people who champion the concept of credit repair services because it can potentially improve your credit drastically.

Banker @ Money Ning wrote a very informative post “Carry Debt to Improve Credit Score”. The specific techniques that were highlighted in this blog can be very helpful for individuals with moderate to bad credit. The blogger was confident enough to contradict some popular advice in the market. After all, even bankers can be wrong. Following his tips can get you on the road to financial recovery.

The blog Personal Finance Ezine uploaded an article titled “Never Pay Strangers to Raise Your FICO Credit Score”. Basically, it reasoned out that the legislation known as the “FACT Act” states that all Americans are entitled to one free copy of their personal credit report annually. The information available on this report includes your credit history (past and current debts), bankruptcy, and payment history among others. Proofing this report and calling the credit bureaus if there are any errors can give a significant improvement to your credit score.

Meanwhile, the site Get Student Loan Now has a blog entry “The Credit Repair Road to Success”. In essence, it highlights the three steps Americans need to go through in order to locate inaccurate information about their payment and credit history. It gives tips on how to get credit repair help. At the end, the article provides encouragement so that those who are deep in debt will not give up hope.

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