Feature Article: Refinancing to Pay Consumer Debt

Recent News: 1st Quarter Housing Market Results and Projections

In the Spotlight: Allstate Lending Group Introduces 30 Second TV Commercial

Mortgage Terms of the Month

Feature Article :.

WE THOUGHT YOU SHOULD KNOW...
How In Debt Are Californians? What Are Your Options to Get Out of Debt?

Everyone wants a piece of the California dream. For decades people have turned to the sunshine state for renewed lifestyles and attitudes, for inspiration and peace of mind. California has been a fast moving state economically, socially and politically. With a population approaching thirty-five million and a trillion dollar-plus economy, California has moved into the forefront as an international force in trade and commerce, scientific research, entertainment, technology, and virtually every other aspect of human creativity. It’s no wonder why median home prices throughout the state are at all time highs. All this growth and prosperity, of course, does not come without a price; and thus, Californians find themselves struggling with the onset of immense challenges, particularly getting out of debt.

HOW IN DEBT ARE CALIFORNIANS?

Higher interest rates can slow business investment, depress consumer spending and make heavy debt loads more onerous. Californians have taken on record levels of debt, accruing $33 billion in debt this year and projections are $50 billion by next year (www.commondreams.org), as low interest rates have lured them to buy bigger houses and fancier cars and to charge more on credit cards than ever before. But, now with the threat of increased interest rates and all time high consumer debt it is likely that Californians will face volatile financial stress.

Those Californians who have credit cards and usually only pay the minimum payment due are experiencing the consequences of credit card debt. For example, consumers owing $2,500 on their credit card at 17% APR will take 363 months to pay off their bill for a total cost of $7,773 if they make a monthly payment equal to 2 % of their balance. Consumers who owe $5,000 will end up making payments totaling $16,304 over 482 months if they make the minimum monthly payment (www.consumersunion.org).

Personal bankruptcies have reached all-time highs as well. For instance, in 1980, 313,000 middle class families in California declared "complete financial failure." That number jumped to 1,281,000 in 1999. At the same time, credit card debt in California as a proportion of outstanding debt for consumers has also risen. Credit card debt has increased from 2.8% of the average family's debt in 1989 to 3.8 % in 1998 (www.economyincrisis.com).

THE ANSWER

If you are lucky enough to own your own home, you have seen your home’s equity (the difference between what you owe and the home’s value) substantially increase over the last few years. Furthermore, your home is probably the biggest asset you will ever own and the equity in your home is where a substantial portion of your net worth lies. By accessing the equity in your home, you can pay off consumer debt like credit cards and automobiles. Additionally, interest accrued on consumer debt is not tax deductible, but mortgage interest is. (Contact a tax professional to determine the advantages and benefits refinancing may create for you) Debt consolidation loans are more popular than ever because it helps reduce your overall monthly payments. The buzz today is about cash flow, hence having more money at the end of the month!

Accessing the equity from your home can be easy. Any bank or credit union will assist you as long as you meet the traditional prime lending guidelines: you have a good credit rating (680 and above fico scores), and you are able to meet the proper debt-to- income ratio using W-2s and tax returns. However, those homeowners with lower credit scores, higher debt-to-income ratios, self-employment status, or other income challenges, are known as non-prime consumers and sometimes struggle to find a reputable lender who won’t take advantage of them.

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Recent News :.

1st Quarter Outcomes...
The Housing Market: Where We Are and Where Are We Headed

Today's housing market is fairly steady - prices aren't rising as they had been a year ago, but they are certainly not retreating. Housing experts indicate that the real estate market is healthy, countering some contentions that the sector is a bubble waiting to burst.

Southern California home prices in March 2005 failed to rise more than 20% for the first time in a year. The median price in March hit a record $439,000 for all houses and condominiums sold in the Southern California area. Additionally, the number of sales hit a record, with 32,674 property transactions closed, 43 short of the same month last year, which were the strongest March sales, DataQuick relayed. This, according to analysts, is attributed to continued strong demand from buyers — driven by relatively low mortgage rates — and a tightening of the supply of homes for sale.

Today, the number of homes on the market in Los Angeles and Orange Counties is only half the level of six months ago, when sellers rushed to list their properties amid fears that prices had already peaked. These housing market conditions are relatively similar to what was seen last spring. No one is anticipating a return to the hyperactivity of a year ago, when the Southland's median price rose nearly 6% between February and March 2004. Last month, the median rose 3.3% from the previous month.

According to DataQuick, four of Southern California's six counties saw median prices reach new records in March, while sales were flat or up slightly. In San Bernardino County strong job and population growth helped trigger a 34.8% year-over-year gain in the median price to $298,000 while sales rose 3.7%. In neighboring Riverside County, the median rose 26.3% to $379,000 while sales were flat. Orange County, the most expensive local market, saw its median climb 16.5% to $565,000, while Los Angeles County's median increased 17.3% to $440,000. Ventura County saw the median price rise 16.1% to $535,000. Yet in San Diego County, sales fell 5.5% and the median price was up just 12.5% on a year-over-year basis.

In Northern California, prices are going up at the fastest pace in 4 years. Home prices in the Bay Area rose to new highs in March, while sales for that month were at their highest level in 16 years. A total of 11,310 new and resale houses and condominiums were sold in the 10 county region in March. That was up 51.5% from 7,463 for the previous month, and up 2.7% from 11,015 for March last year, according to DataQuick. The median price paid for a Bay Area home was $568,000, a new record. That was up 3.5% from $549,000 in February, and up 19.8% from $474,000 for March a year ago. The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,566 in March, an all-time high, as well. A year ago it was $2,052.

Indicators of market distress are still largely absent. Foreclosure rates are low, down payment sizes are stable and there have been no significant shifts in market mix, DataQuick reported. Overall, demand still appears to be stronger than supply, which puts upward pressure on prices. People seem to be increasingly willing to let the homes they live in represent a higher portion of their net worth.

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In the Spotlight :.

Allstate Lending Group Live on TV...


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If you have more questions about the advantages and benefits refinancing can do for you, consult with one our refinancing professionals. Contact an expert at Allstate Lending Group at 1-800-648-5363 or visit www.allstatelendinggroup.com.

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