Factors To Consider Before Refinancing a Home Mortgage
February 15, 2010 by · Leave a Comment
In the world of refinancing a home mortgage there is a rule of thumb that states that refinancing is only a wise move if the interest rate can be lowered at least two percentage points (for example, from nine to seven percent). However other factors make a difference too when it comes to refinancing a home mortgage. How long will it take you to break even is a relevant concern as is how long you plan to live in your house. Refinancing a 2nd mortgage may appear to cause more negativity to your financial situation in the beginning and this is important to bear in mind.
While the stated annual percentage rate (APR) of a refinance mortgage is important, so are other things. Let us take a closer look at these other important refinancing variables.
The Term of the Refinance Mortgage
The term of the refinance mortgage is the span of time it will take to pay off both the principal of the loan as well as the interest on the loan. Be aware that short-term mortgages may have the advantage of lower interest rates but they will also come with higher monthly payments. Refinance interest rates must be low enough to make the refinance option a viable one for the homeowner.
Interest Rate Variability
Mortgages fall into two different camps- there are mortgages with fixed interest rates and those with variable rates (the rates will change after a certain length of time, such as anywhere from one year to five years). An adjustable-rate refinance mortgage (ARM) may seem like the better deal in comparison with a fixed rate mortgage that has a comparable term. However, when interest rates shoot up the rate for the ARM could rise as well. Discuss your options with the refinance lender and figure out what is the best deal for you at the present time.
Points
Also sometimes called discount fees or origination fees, points must be paid to the refinance lender once everything has been done in regards to refinancing your 2nd mortgage. Be aware that one point equals one percent of the value of the loan. Do an evaluation with your mortgage broker or lender to decide if the savings you could get from a lower refinance interest rate would be worth the points you would be expected to pay.
Refinancing A Home Mortgage With New Rules
October 20, 2009 by · Leave a Comment
It is now the best time to refinance your mortgage? Obviously, home mortgage rates have never been lower and a successful refinance at this point may net the lowest interest rate on a refinanced mortgage in years. It was only a couple of years ago that securing a mortgage was easy and if you could sign your name, you could obtain a mortgage.
That may seem like an exaggeration, and it may be, but it’s not that far off.To refinance your home today requires much more effort. To refinance home mortgages today you must provide documentation and the standards for approval are much more strict than they have been in the past.
Home mortgage refinance rates can be expected to settle in around 5 1/2% for the rest of 2009, on a 30 year fixed-rate. The 15 year fixed-rate is about a half a point lower than the 30 year rate at 5%. Do people still use adjustable rate mortgages? Yes they do and a 5/1 or a 7/1 ARM might make sense if you plans to move or refinance again before the end of the initial fixed rate. In the event that you cannot make the move make sure you can handle the higher monthly payment in the future.
The lowest refinancing mortgage rates are the mortgages that are backed by the government, Fannie Mae or Freddie Mac. If you are trying to qualify for a conforming loan, meaning that the mortgage falls within guidelines and certain limits can also obtain the lowest refinance mortgage rates.
Credit scores matter when trying to qualify for a home mortgage or a refinance mortgage. You should have a credit score of 720 or more at equity in your home in excess of 20%.
You can save a lot of time and a lot of effort if you provide your FICO score to a prospective lender. You will need to provide pay stubs, bank statements and other financial statements for the past two months. You will also be required to provide W-2 statements for the last two years. If you are self-employed, you can expect to have to provide two years worth of tax returns showing a self-sustaining income. As we stated documentation is required for any home mortgage these days.
Filling out an application and paying for an appraisal ahead of time helps you to determine the value of your home. Essentially you can get a pretty good handle on what kind of interest rate you can obtain based on your property value and credit score.
Choosing a lender for your home refinance mortgage should include credit unions, regional banks and local banks in your area. It may be helpful to enlist a mortgage broker. Mortgage brokers generally represent multiple lenders and can be creative and may help if your qualifications aren’t within guidelines.
With interest rates on refinance mortgages so low, you may want to ask if you should lock in your rate. For most people it is a good idea to lock in the rate for your mortgage. Generally the deal that you agreed to for your refinance mortgage is the best deal you can strike. You would not want a higher interest rate or a interest rate bump to disqualify you from a mortgage. The risk at the rates will change before your lock. Expires is Heidi’s days because loans are taking longer to process. The best refinance rates in years are available for those who are willing to take the time and exercise diligence in obtaining a refinanced home mortgage.
How much equity must you have in your home to refinance ? To get a mortgage through Freddie Mac and Fannie Mae you are required just 5% equity in your home. However you must get private mortgage insurance if you have less than 20% equity. That rule essentially has not changed. PMI protects the lender not the borrower. The creative feedback mortgages that helped homeowners avoid PMI have essentially disappeared. Adding the PMI could disqualify you from refinancing your mortgage. Fannie Mae and Freddie Mac generally set the limit for mortgage loan payments at 36% of your monthly pretax income. FHA standards since its limit at 31%.
You can refinance your home mortgage. Expect to jump through a few more hoops, provide much more documentation, and be prepared for the process. The mortgage process has changed dramatically and the truth is that it’s probably a good thing
Finding The Very Best Refinance Mortgage Rates
October 15, 2009 by · Leave a Comment
Refinance lenders are in multiple places if you take the time to look. The Internet is an excellent place to start your search for the best refinance interest rates. The Internet allows for ease of convenience and comfort.
What must you do as you search for the very best refinance interest rates out there? Read on for some helpful ideas …
To begin, compare as many refinance interest rates as possible. This is a key point when it comes to refinancing a home loan. As a rule of thumb compare the rates for at least four refinance lenders.
To find the very best refinance interest rate you must look in enough places. Check online to find out what local refinance lenders have to offer consumers. Then you should create a comparison chart. Make sure the chart contains not just potential refinance interest rates but also the potential closing costs.
Do you know the differences between one mortgage and another? In order to refinance a home mortgage loan you have to know what you are dealing with. Knowledge really is golden when it comes to matters related to a refinance home mortgage rate and refinancing a home mortgage in general.
To get you started down the refinancing road here are a few essential things that you should know about mortgages:
· While 15 and 30 year mortgages are always popular with consumers, many homeowners are looking to the option of adjustable-rate mortgages (ARMs). An ARM will have an up-front interest rate that is very desirable but after a specified period of time it will be adjusted and will be higher.
· Refinance lenders will calculate the annual percentage rate (APR). The APR includes both closing costs as well as the note rate for the mortgage.
Refinance interest rates go up and down and there is nothing that consumers can do about this other than cope with it. The government sets the rates whether we like it or not. With this knowledge in hand, the smartest decision to make is to choose the mortgage interest rate that is most appealing to you and then down the line refinance your mortgage if you feel the interest rates make it worth your while.
It is always the most strategic move to wait to refinance your home mortgage loan when the absolute best refinance rates make themselves available to you. To do this you must check the Internet regularly and do your financial homework.
Refinancing a Home Mortgage – What is Right for You?
March 20, 2009 by · Leave a Comment
It was once a general rule that putting 20 percent down on a mortgage was the acceptable amount. Anything less than that was not acceptable. Things have changed and now there are more options than ever. Putting 20 percent down is still a good idea and often advisable, but there are other factors to consider when you decide to refinance a home mortgage.
Only borrow enough money as you can realistically afford to pay back. In most instances, refinance lenders will only allow homeowners to borrow in the area of 33 to 38 of their gross income calculated on a monthly basis. Before you move forward with your plans to refinance a home mortgage, sit down and figure out what you can afford that will not put you in the red.
If you are unable to put 20 percent down on your home then be forewarned that you will be required by the refinance lenders to purchase Private Mortgage Insurance (PMI). The reason for this? PMI is essentially a way to lessen the risk to the refinance lender. You can expect to pay in the area of $100 a month or thereabouts as part of your monthly payment for this insurance. For this reason, if you can come up with the 20 percent you need for a down payment then you are better off doing so.
There were closing costs when you first bought your home and the same can be said the second time around. Closing costs are a part of every refinancing of a home mortgage. You cannot escape them unless you decide not to refinance your home loan at all.
If you are refinancing a home mortgage loan after only a few years of buying your home then you might be able to use some of the original documents and save yourself some money. For example, your first appraisal could still be used in order that you would not have to get another one.
As you set about the task of refinancing a home mortgage make sure you factor in all of these extra costs. Remember that they add up. Refinancing a 2nd mortgage is not a cheap endeavor!
If you have questions then there are qualified refinance lenders who can answer your questions and give you all the information you need in regards to refinancing a home mortgage loan.
Is It Worth It To Refinance a Mortgage
March 19, 2009 by · Leave a Comment
Your mortgage can be reviewed at any time during the term if you wish to explore your options. You do not have to wait until the mortgage has had time to mature. You can if you wish but you do not have to.
While a fixed term mortgage is a non-negotiable contract and will incur refinance penalties, it is still a smart idea to ask for a mortgage analysis. This analysis can help you to decide if refinancing a home mortgage in order to get a lower monthly payment or to pay off debts is in your best interest or not. The mortgage analysis can help you to better ascertain the penalties versus the payoffs that will form the bulk of your decision making process.
When it comes to refinancing a 2nd mortgage you can do one of two things. You can pay out the penalty that exists on your current mortgage and then start anew with a refinance mortgage or you can go with the “blend and extend” option.
Before you even begin to ask how to refinance a home mortgage you must be aware that the rewards that come from refinancing a home mortgage will not be seen in the short-term. Instead you will see some penalties when you choose to refinance your mortgage.
If you plan to sell your home in a year or so then you might want to rethink your decision to refinance a 2nd mortgage. Refinancing a home mortgage if you plan to sell right away will not allow you to reap any benefits whatsoever. Refinancing a home mortgage will only yield benefits in the long-term.
Ask the refinance lender to accurately assess for you what your payback period for refinancing a home loan would look like. A payback period is the length of time that it would take to see any savings come from the decision to refinance a mortgage. This is largely based on the penalties and the difference that would exist between what your existing interest rate is and what your refinance interest rate would be.
Penalties play a role in the decision of whether to refinance a home mortgage or not. The penalties you would have to pay to refinance a 2nd mortgage would be either the greater of three months worth of interest on your home or else the differential in the interest rate. The interest rate differential could be quite high. You will need to discuss all of this with the refinance lender in order to make the best refinancing mortgage decision possible.
