Mortgage refinancing is when a homeowner gets a new home loan to pay off their existing one. The benefits of doing this are that they may be able to save money by getting lower interest rates or special deals. Refinancing is not the best option for everyone, though. For a person who is facing financial problems refinancing could spell trouble.
It is common for a person to want to save money on their home loan. A home is most likely the biggest purchase a person will ever make, but that does not mean they have to stick with one lender and pay the same high interest rates forever. Home owners have the option of refinancing to cut their home buying costs. Refinancing involves shopping around for a better deal then the one they currently have.
When shopping around it is advisable to approach a few good mortgage brokers that work with a large panel of lenders, not just one or two. This way they can search the market place to find the right deal for you. This is even more advisable if you have a bad credit history. A good broker will have access to a number of specialist adverse or sub prime lenders who will be able to offer you competitive rates. The same is true if you are self employed and have trouble proving your income.
Many times when a person is facing financial problems they see using their home as a way to clear their debts. While that is an option, refinancing to get out of financial problems is not a good idea. One reason is that should the person be unable to make the new loan payment, then their house is now in jeopardy.
Unless a person is truly sure that refinancing their home to get money to pay off debts is something they can afford and will truly solve their problems, then it is not a wise decision.
Some people refinance to change from a variable interest rate to a fixed interest rate. This can be very beneficial. Fixed rates mean that the mortgage payment never changes and is the same form month to month.
With a variable rate the amount of the mortgage can change drastically form month to month as the interest rates fluctuate. However, with a fixed rate a person has to be careful not to lock in on too high of a rate. They would then lose out when interest rates go down, unless they go through mortgage refinance again.
There are also many lenders out there who are not what they say to be. Mortgage refinance scams are common and can really be damaging. To avoid scams a person should always deal with a trusted lender and read every piece of paperwork completely. If a deal does not seem right then it is best to back out before ever signing anything.
Mortgage refinance can be a very good thing if done carefully. There are also many ways in which it can go wrong. Homeowners need to be aware of everything involved in mortgage refinance so they can get the best possible deal that will save them the most money.
They should also always be aware that they are risking their home should they not carrying through with their mortgage obligations. It is important to make sure everything is in place and understood before ever signing the papers.
Monday, November 1, 2010
Mortgage Refinancing Mistakes to Avoid
Mistakes when it comes to your mortgage can cost you a lot of money. Becoming a smart mortgage comparison shopper will help you avoid making these mistakes. Here are several tips to help you avoid making common mortgage mistakes that can cost you thousands of dollars.
The biggest mistake homeowners make is neglecting to shop for the best loan by researching interest rates and lender fees from a variety of mortgage lenders. Here are the most common mistakes homeowners make when it comes to refinancing a mortgage.
Timing Interest Rates
Interest rates are extremely difficult to predict. If someone tells you they can guarantee interest rates will go up or down at some date in the future they are simply speculating. Your time is better spent researching mortgage lenders than forecasting interest rate changes.
The Internet is an excellent tool you can use to easily compare the interest rates and lender fees advertised by mortgage companies. You can collect no-obligation quotes from lender websites to help you choose the best mortgage for your situation.
Not Comparing Interest Rates
Mortgage interest rates vary widely from one lender to the next. Every mortgage company sets their own interest rate with their own markup. This is why you will see a difference in the advertised interest rates when shopping for your new mortgage. Mortgage lenders also evaluate your credit differently; this is how they determine the interest rate you qualify for based on your financial situation. Because of this it is important to request rate quotes to determine the difference between what the lender is advertising and what your individual interest rate will be.
Assuming Refinancing Will Save You Money
There are costs associated with refinancing your mortgage. If you are receiving a better interest rate on your new mortgage it could take as long as 2-3 years to recoup the expenses of refinancing your mortgage. Mortgage loans are also front loaded with interest; this means the majority of your monthly payment is applied to interest in the early years. You will build very little equity in your home while this interest is being paid.
There are ways to increase your savings. If you refinance your mortgage to a loan with a lower interest rate and a shorter term length, your savings over the life of the mortgage will dramatically increase. Before you sign up to refinance your mortgage make sure you understand what your savings will be and how long it will take you to recoup the costs of refinancing your mortgage. Spend a little time doing your homework to find the right mortgage for your situation and you will save yourself thousands of dollars in finance charges. You can learn more about saving money on your mortgage and avoiding mistakes by registering for a free mortgage guidebook.
The biggest mistake homeowners make is neglecting to shop for the best loan by researching interest rates and lender fees from a variety of mortgage lenders. Here are the most common mistakes homeowners make when it comes to refinancing a mortgage.
Timing Interest Rates
Interest rates are extremely difficult to predict. If someone tells you they can guarantee interest rates will go up or down at some date in the future they are simply speculating. Your time is better spent researching mortgage lenders than forecasting interest rate changes.
The Internet is an excellent tool you can use to easily compare the interest rates and lender fees advertised by mortgage companies. You can collect no-obligation quotes from lender websites to help you choose the best mortgage for your situation.
Not Comparing Interest Rates
Mortgage interest rates vary widely from one lender to the next. Every mortgage company sets their own interest rate with their own markup. This is why you will see a difference in the advertised interest rates when shopping for your new mortgage. Mortgage lenders also evaluate your credit differently; this is how they determine the interest rate you qualify for based on your financial situation. Because of this it is important to request rate quotes to determine the difference between what the lender is advertising and what your individual interest rate will be.
Assuming Refinancing Will Save You Money
There are costs associated with refinancing your mortgage. If you are receiving a better interest rate on your new mortgage it could take as long as 2-3 years to recoup the expenses of refinancing your mortgage. Mortgage loans are also front loaded with interest; this means the majority of your monthly payment is applied to interest in the early years. You will build very little equity in your home while this interest is being paid.
There are ways to increase your savings. If you refinance your mortgage to a loan with a lower interest rate and a shorter term length, your savings over the life of the mortgage will dramatically increase. Before you sign up to refinance your mortgage make sure you understand what your savings will be and how long it will take you to recoup the costs of refinancing your mortgage. Spend a little time doing your homework to find the right mortgage for your situation and you will save yourself thousands of dollars in finance charges. You can learn more about saving money on your mortgage and avoiding mistakes by registering for a free mortgage guidebook.
Mortgage Refinancing
If you take a loan without examining all the available options and offers from different lending institutions, the new loan might cost you much more than you expected. Therefore, in order to save thousand of dollars, go through the following tips and guidelines carefully.
A significant decrement of interest rates in the early 21st century was one of the major factors that led to a growing number of refinancing applications. This boom in the number of borrowers who are interested in refinancing their existing mortgage loan still continues.
Following are the reasons why most of the borrowers have started to consider this option seriously.
o Savings that new loan could bring you could be significant. In case the current interest rates are lower than the rate on the existing loan, the savings brought to you by the new loan could be very significant.
o Besides, savings that the new loan could bring you prove to be significant also when your adjustable rate mortgage is set to adjust upwards soon.
o By applying for the refinancing process, some fresh cash can be obtained from equity build in home and this can be then used for all the major expenses like children education, renovation of the house, etc.
To conclude, there are a number of reasons for cash-out refinancing. However, before signing a new mortgage contracts, it is advisable to carefully examine the pros and cons of mortgage refinancing.
In order to make accurate calculations and for arriving at the right decision, you are required to compare you have to compare the savings that new term will produce with the entire loan related fees and possible prepayment penalty on your current mortgage.
That is, you should have a fair idea of the amount of money that will remain in your pocket after cash-out refinancing and the amount that you will have to pay as fees or as a prepayment penalty.
A significant decrement of interest rates in the early 21st century was one of the major factors that led to a growing number of refinancing applications. This boom in the number of borrowers who are interested in refinancing their existing mortgage loan still continues.
Following are the reasons why most of the borrowers have started to consider this option seriously.
o Savings that new loan could bring you could be significant. In case the current interest rates are lower than the rate on the existing loan, the savings brought to you by the new loan could be very significant.
o Besides, savings that the new loan could bring you prove to be significant also when your adjustable rate mortgage is set to adjust upwards soon.
o By applying for the refinancing process, some fresh cash can be obtained from equity build in home and this can be then used for all the major expenses like children education, renovation of the house, etc.
To conclude, there are a number of reasons for cash-out refinancing. However, before signing a new mortgage contracts, it is advisable to carefully examine the pros and cons of mortgage refinancing.
In order to make accurate calculations and for arriving at the right decision, you are required to compare you have to compare the savings that new term will produce with the entire loan related fees and possible prepayment penalty on your current mortgage.
That is, you should have a fair idea of the amount of money that will remain in your pocket after cash-out refinancing and the amount that you will have to pay as fees or as a prepayment penalty.
Home Mortgage Refinancing
The need for funds may be large, small, planned or unplanned. One needs to explore several opportunities and options to get the required money at the lowest possible cost. The tough financial situation throws further challenges to save more. Income levels are receding, costs are rising and each one has to make the most out of least. In this scenario home mortgage refinance offers a very effective alternative to get the desired funds. The funds obtained can be used as per the need. The benefits of a financial option have to be weighed as against the cost of obtaining it. Long term calculations are also necessary.
The cost calculations have not only to consider the home mortgage refinance rates but other aspects as setting up fees, the term, the repayment duration and so forth. Refinancing is being increasingly used to get the equity built in the house in the form of cash that can be used for any purpose or adjusting the term or the repayment. Medical emergency expense, higher education charges, home improvements or funding major projects are some of the popular reasons to refinance home mortgage. There are competent professional companies set up which specialize in this option and getting great offers using their services helps one get the funds at the lowest possible rates. This article highlights the features and factors which need to be considered to make this a viable and economic option to get cash.
Factors and Features of Home Mortgage Refinance
Any financial lien or mortgage comes with a cost and the more one can save on the cost the more funds are available at disposal. So when one has to get the funds by using the equity built in the house in the form of cash one needs to look to minimize the cost on the new loan. One may choose to refinance home mortgage if it brings down the monthly payments on the existing mortgage substantially. Only if the refinance is able to offset the cost of procuring it in the long term it is worth considering refinancing. For this one has to find professional company that can give the best possible rate and the lowest origination fees and other costs. The payments made towards redemption should also be considered to calculate the cost of home mortgage refinance option. The total cost of the loan will consider the following.
The Rate of Interest and the Term of the Loan
The rate of interest like any other loan would be based upon the credit rating of the individual. Better rating would mean lower rates and vice versa. The home mortgage refinance rates are the most significant and form big part of the total cost. The loan term or duration is another important contributor to the cost of the loan. The duration can vary from few years up to thirty or forty years.
Loan Closing Costs
When opting for a loan there are origination fees or set up charges. Similarly when one has to close a loan there are loan closing costs. These rates vary and it is imperative to understand these costs so as to calculate the total cost of the loan and the benefits. The costs as title search, documentation fees, appraisal fees and other should be clear and there should be no hidden charges. The services of mortgage refinance loans can significantly affect the total cost and if not calculated one may end up with an expensive proposal. Some costs are nonnegotiable and vary with the lender. Hence identifying the lender who can provide the lowest cost helps in lowering the total cost of the loan.
The refinancing option is very useful and can serve as a prudent option to get large amount of cash that can be used for the desired purpose that may be home improvements, education expense or some project. The cash is available and there are no restrictions. But it is also true that one has to use it judiciously. The decision to use home mortgage refinance should be very carefully weighed. It is basically intended to improve financial situation and not just as a repair measure. If it used as a short term tool it will not yield the desired benefits.
The cost of getting the refinance which consider the rate of interest, the origination fees, the closing costs, the term, should all be evaluated carefully to arrive at the cost of the loan. The total sum will also indicate the monthly payment one is required to make. One should consider the amount received and decide it is sufficient and appropriate for the intended purpose. One should make a detailed statement of account and understand the cost and benefit analysis so that one gets a loan that's meaningful. Internet search and professional guidance can help one in evaluation of the decision.
The cost calculations have not only to consider the home mortgage refinance rates but other aspects as setting up fees, the term, the repayment duration and so forth. Refinancing is being increasingly used to get the equity built in the house in the form of cash that can be used for any purpose or adjusting the term or the repayment. Medical emergency expense, higher education charges, home improvements or funding major projects are some of the popular reasons to refinance home mortgage. There are competent professional companies set up which specialize in this option and getting great offers using their services helps one get the funds at the lowest possible rates. This article highlights the features and factors which need to be considered to make this a viable and economic option to get cash.
Factors and Features of Home Mortgage Refinance
Any financial lien or mortgage comes with a cost and the more one can save on the cost the more funds are available at disposal. So when one has to get the funds by using the equity built in the house in the form of cash one needs to look to minimize the cost on the new loan. One may choose to refinance home mortgage if it brings down the monthly payments on the existing mortgage substantially. Only if the refinance is able to offset the cost of procuring it in the long term it is worth considering refinancing. For this one has to find professional company that can give the best possible rate and the lowest origination fees and other costs. The payments made towards redemption should also be considered to calculate the cost of home mortgage refinance option. The total cost of the loan will consider the following.
The Rate of Interest and the Term of the Loan
The rate of interest like any other loan would be based upon the credit rating of the individual. Better rating would mean lower rates and vice versa. The home mortgage refinance rates are the most significant and form big part of the total cost. The loan term or duration is another important contributor to the cost of the loan. The duration can vary from few years up to thirty or forty years.
Loan Closing Costs
When opting for a loan there are origination fees or set up charges. Similarly when one has to close a loan there are loan closing costs. These rates vary and it is imperative to understand these costs so as to calculate the total cost of the loan and the benefits. The costs as title search, documentation fees, appraisal fees and other should be clear and there should be no hidden charges. The services of mortgage refinance loans can significantly affect the total cost and if not calculated one may end up with an expensive proposal. Some costs are nonnegotiable and vary with the lender. Hence identifying the lender who can provide the lowest cost helps in lowering the total cost of the loan.
The refinancing option is very useful and can serve as a prudent option to get large amount of cash that can be used for the desired purpose that may be home improvements, education expense or some project. The cash is available and there are no restrictions. But it is also true that one has to use it judiciously. The decision to use home mortgage refinance should be very carefully weighed. It is basically intended to improve financial situation and not just as a repair measure. If it used as a short term tool it will not yield the desired benefits.
The cost of getting the refinance which consider the rate of interest, the origination fees, the closing costs, the term, should all be evaluated carefully to arrive at the cost of the loan. The total sum will also indicate the monthly payment one is required to make. One should consider the amount received and decide it is sufficient and appropriate for the intended purpose. One should make a detailed statement of account and understand the cost and benefit analysis so that one gets a loan that's meaningful. Internet search and professional guidance can help one in evaluation of the decision.
Mortgage Refinancing Tutorial
Unnecessary closing costs and mortgage interest cost homeowners $16 billion dollars every year according to the Secretary of Housing and Urban Development. Do you want to avoid being taken advantage of when mortgage refinancing? Here are several tips to help you avoid unnecessary closing costs when refinancing your mortgage loan.
When comparison shopping for a new mortgage loan it is important to request a copy of the Good Faith Estimate from each lender you consider before submitting your application. Use the Good Faith Estimate to compare loan offerings paying attention to the itemized closing costs; don't focus on the total closing costs because lenders often low-ball third party charges to make their loan offers appear more attractive.
Watch out for lender junk fees; if you find anything on the Good Faith Estimate that resembles an application fee, lock fee, or broker courier, these are junk fees that you should question your mortgage representative about. The origination fee found on your Good Faith Estimate should never be higher than 1-1.5% of your loan amount for a home you live in and 2-2.5% for an investment home. Finally, check your Good Faith Estimate for the loan processing fee. This processing fee should not be more than $400 and is frequently inflated by the mortgage company.
If there any charges found on your Good Faith Estimate that you do not understand, don't hesitate to question your loan representative about the validity of that charge. Also, if you think any of the third party settlement charges on your Good Faith Estimate seem to low, you can contact each company listed and ask them what their fee is. This will give you an accurate picture of the settlement charges you will be required to pay.
When comparison shopping for a new mortgage loan it is important to request a copy of the Good Faith Estimate from each lender you consider before submitting your application. Use the Good Faith Estimate to compare loan offerings paying attention to the itemized closing costs; don't focus on the total closing costs because lenders often low-ball third party charges to make their loan offers appear more attractive.
Watch out for lender junk fees; if you find anything on the Good Faith Estimate that resembles an application fee, lock fee, or broker courier, these are junk fees that you should question your mortgage representative about. The origination fee found on your Good Faith Estimate should never be higher than 1-1.5% of your loan amount for a home you live in and 2-2.5% for an investment home. Finally, check your Good Faith Estimate for the loan processing fee. This processing fee should not be more than $400 and is frequently inflated by the mortgage company.
If there any charges found on your Good Faith Estimate that you do not understand, don't hesitate to question your loan representative about the validity of that charge. Also, if you think any of the third party settlement charges on your Good Faith Estimate seem to low, you can contact each company listed and ask them what their fee is. This will give you an accurate picture of the settlement charges you will be required to pay.
Mortgage Refinancing Tips
Mortgage refinancing for self employed homeowners is not impossible; you will simply need to provide more documentation to the lender. There are a variety of reasons for mortgage refinancing regardless of the economy and mortgage interest rates. Here are several tips to help you decide if mortgage refinancing is right for you.
Convert Your Adjustable Rate Mortgage
Mortgage interest rates have been on the rise in recent years; as a result many homeowners are converting their Adjustable Rate Mortgage (ARM) loans to fixed interest rates. Converting your ARM to a fixed interest rate has the advantage of a predictable mortgage payment that will not change over time. As a self employed homeowner, having regular mortgage payments you can plan your budget around is a definite advantage.
Recouping Your Expenses
Because there are costs involved with mortgage refinancing it is important to determine how much you will save and how long it will take you to recoup the lender fees and closing costs. Generally speaking, the longer you plan on keeping your home, the more sense it makes to refinance your loan. A simple mortgage calculator will help you determine your new payment amount based on the interest rate and term length you choose.
Choosing a Shorter Term Length
As a self employed homeowner your financial objective might be to eliminate your debts as quickly as possible. Mortgage Refinancing with a shorter term length could help you reach this goal. By shortening the term of your new mortgage, 15 years is a popular choice, you will build equity at a much faster rate and qualify for a lower interest rate. Shortening the mortgage term length results in a higher payment amount and you will need to budget accordingly.
Documentation You Need When Mortgage Refinancing
Mortgage lenders tend to require slightly more documentation when approving self employed homeowners. You can save yourself stress and future headache by gathering the necessary documents before applying for a new mortgage. Here is a list to help get you started.
I. Tax Returns for the Last Two Years
II. Your Current Year Profit/Loss Statement
III. Your Homeowners Insurance Policy
IV. Bank Account and Investment Account Statements for the Last Two Years
V. The Payoff Balance and Contact Information for Your Existing Mortgage
You can learn more about mortgage refinancing while avoiding costly mistakes by registering for a free mortgage guidebook.
Convert Your Adjustable Rate Mortgage
Mortgage interest rates have been on the rise in recent years; as a result many homeowners are converting their Adjustable Rate Mortgage (ARM) loans to fixed interest rates. Converting your ARM to a fixed interest rate has the advantage of a predictable mortgage payment that will not change over time. As a self employed homeowner, having regular mortgage payments you can plan your budget around is a definite advantage.
Recouping Your Expenses
Because there are costs involved with mortgage refinancing it is important to determine how much you will save and how long it will take you to recoup the lender fees and closing costs. Generally speaking, the longer you plan on keeping your home, the more sense it makes to refinance your loan. A simple mortgage calculator will help you determine your new payment amount based on the interest rate and term length you choose.
Choosing a Shorter Term Length
As a self employed homeowner your financial objective might be to eliminate your debts as quickly as possible. Mortgage Refinancing with a shorter term length could help you reach this goal. By shortening the term of your new mortgage, 15 years is a popular choice, you will build equity at a much faster rate and qualify for a lower interest rate. Shortening the mortgage term length results in a higher payment amount and you will need to budget accordingly.
Documentation You Need When Mortgage Refinancing
Mortgage lenders tend to require slightly more documentation when approving self employed homeowners. You can save yourself stress and future headache by gathering the necessary documents before applying for a new mortgage. Here is a list to help get you started.
I. Tax Returns for the Last Two Years
II. Your Current Year Profit/Loss Statement
III. Your Homeowners Insurance Policy
IV. Bank Account and Investment Account Statements for the Last Two Years
V. The Payoff Balance and Contact Information for Your Existing Mortgage
You can learn more about mortgage refinancing while avoiding costly mistakes by registering for a free mortgage guidebook.
How Mortgage Refinancing Can Save Me Money
In this economy, people are always looking for ways to save money. Many think that they might be able to save with mortgage refinancing, but they are not sure. Actually, in some circumstances, a homeowner could stand to save significant amounts of money if they refinance their mortgage at the right time.
The most fundamental reason that people save money when they refinance their mortgage is that they usually get a lower interest rate. Typically, when someone refinances their mortgage, they can expect their interest rate to be lowered by as much as half a point. This may not seem like much, but when someone calculates how much they spend in interest each year and how much they would save with a half point reduction, they will be impressed.
Right now, many people have mortgages with low interest rates as a result of the economy. However, since the economy is improving, interest rates are bound to start going up for those who have adjustable rate mortgages. If someone has an adjustable rate mortgage with a low rate, they would save money in the long run by refinancing to a low fixed rate mortgage as soon as possible.
Another way that people save money by refinancing their mortgages is by borrowing more money on the new mortgage than they owe on the house. With the leftover money, they can pay off high interest credit cards. They will still need to make monthly payments on their new mortgage, but at a much more desirable interest rate than what they were paying on their credit cards.
There are other ways that people can benefit from borrowing extra money when they refinance the mortgage on their home. Some people take this route and use the extra money to make home improvements that will increase the value of the home. For example, someone could borrow money to add a deck to their house. When they eventually try to sell the home, they will be able to get much more for it because of the significant improvement.
When someone refinances the mortgage on their home, they can save money in a variety of ways. They could borrow extra money to pay off high interest credit cards and make home improvements, or they could save money each month with a lower interest rate. Once they understand what mortgage refinancing can do for them, a world of possibilities becomes available.
The most fundamental reason that people save money when they refinance their mortgage is that they usually get a lower interest rate. Typically, when someone refinances their mortgage, they can expect their interest rate to be lowered by as much as half a point. This may not seem like much, but when someone calculates how much they spend in interest each year and how much they would save with a half point reduction, they will be impressed.
Right now, many people have mortgages with low interest rates as a result of the economy. However, since the economy is improving, interest rates are bound to start going up for those who have adjustable rate mortgages. If someone has an adjustable rate mortgage with a low rate, they would save money in the long run by refinancing to a low fixed rate mortgage as soon as possible.
Another way that people save money by refinancing their mortgages is by borrowing more money on the new mortgage than they owe on the house. With the leftover money, they can pay off high interest credit cards. They will still need to make monthly payments on their new mortgage, but at a much more desirable interest rate than what they were paying on their credit cards.
There are other ways that people can benefit from borrowing extra money when they refinance the mortgage on their home. Some people take this route and use the extra money to make home improvements that will increase the value of the home. For example, someone could borrow money to add a deck to their house. When they eventually try to sell the home, they will be able to get much more for it because of the significant improvement.
When someone refinances the mortgage on their home, they can save money in a variety of ways. They could borrow extra money to pay off high interest credit cards and make home improvements, or they could save money each month with a lower interest rate. Once they understand what mortgage refinancing can do for them, a world of possibilities becomes available.
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