Refinance Tips
Read these 25 Refinance Tips tips to make your life smarter, better, faster and wiser. Each tip is approved by our Editors and created by expert writers so great we call them Gurus. LifeTips is the place to go when you need to know about Mortgages tips and hundreds of other topics.
Refinance Mortgage Rates
Lets fact it, many qualified individuals want to refinance mortgage rates. In the year of 2010, this is a strong possibility for many because mortgage rates have dropped to record low. This became evident on June 24, 2010, when reported rates among a large survey of lenders for thirty year fixed rate mortgages fell to 4.81 per cent.
4.88 per cent was the rate for the two weeks before this which was the prior reported record low. The last time that mortgage rates had been reported at a record low rate like this was in June and July of 1956 at 4.81 per cent and 4.78 per cent in May of that year.
The fifteen year mortgage rate is often desired. Currently, it stands at 4.26 per cent with the 5/1 adjustable rate mortgage at 4.13 per cent and the jumbo thirty year fixed loan rate at 5.63 percent.
Ironically, less people are applying for home loans with mortgage rates at a historically low price. Many blame the economy but industry experts have reported that most homeowners who are qualified to refinance have already done so.
If You've Improved Your Credit, Consider Refinancing
Do you have a high-interest rate loan because of bad credit? Home refinancing is an option, if you have worked to improve your credit since buying your home. Refinancing home mortgages can save homeowners thousands of dollars over the course of their loan.
Perhaps the only type of home loan you could get five or seven years ago carried a high interest rate. But you've settled down, and you pay your mortgage and other bills on time. When you refinance, lenders see your improved credit history on your credit report. If there is a steady and consistent pattern of improvement, you may be able to get better terms and lower your monthly costs.
Refinance Loan May Stabilize Your Interest Rate
A refinance loan helps you lower your monthly payments and get better interest rates. A refinance mortgage also may provide some peace of mind.
Let's say you went with an adjustable-rate mortgage (ARM) when you took out your loan. But the rates have increased. Refinancing is an option, so you can switch to a fixed-rate loan. You will not have to worry anymore that your interest rates will rise.
Home Improvements? Cash Out Refinancing!
If you are lucky enough to be a home owner who has built up home equity over the last several years, you have opportunities you may not be aware of. Have you been looking to expand that bathroom or put on a new roof? The equity that you have built up in your home is where you can go to quickly get the cash you would need to get those jobs done.
The best part is you are simply re-investing the money back into the property anyways! Refinancing a home loan to draw out cash equity for home improvements is something that many banks are lining up to provide. Because you are re-investing in the home, it makes the loan even more attractive to the banks. Be sure to tell the broker that you are working with that you are looking for a “cash out” refinance for home improvement.
Refinancing is about security, for you and for the banks. They feel much more secure in a borrower who shows they care for keeping their property in good standing. Look into refinancing your home mortgage if you need some cash for home improvements.
How to Decide to Refinance Your Home
To refinance or not to refinance? Don't answer that question yet. You need to figure out a few things first, namely what kind of money will you save refinancing your home.
* How long do you plan to own your home? It makes a difference, because the costs to refinance may be more than your savings from lower interest rates, if you don't plan to stay long.
* How many years will it take to pay off your current mortgage? If you are near the end of your loan, it may not be worth it to refinance.
* Will I go into debt with the refinancing costs?
Take a hard look at the costs and savings before choosing a refinance loan.
Build Equity in Your Home More Quickly
If you can afford higher monthly payments, you may want a refinance mortgage to build equity in your home quickly.
You can do this by refinancing for a mortgage with a shorter term. You may refinance a standard 30-year mortgage for a 15-year mortgage, for example. You still will pay toward your interest on the loan, with the rest going to the principal. But with the shorter loan term, you will have a higher payment. A larger portion of the monthly payment goes to the loan amount.
The Best Refinance Mortgage Options
Today, looking for a refinance mortgage is as easy as turning on the television, listening to the radio, or going to any major website. There are advertisements in every medium telling you about the low interest rates that are available these days. Well, they are all telling you the truth. If you are interested in the best refinance mortgage options for you, here are a few pointers.
First, ask yourself what matters most. Is it more important for you to have a lower payment or a shorter term? Would you like to perhaps take some cash out equity from your home's appreciated value? These are just two of the questions that will help decide the best options for your situation. Ask these questions of yourself, and then to a qualified mortgage broker or originator. You can take these needs that you decide on and then shop around for the best refinance mortgage options for you.
Refinance – Fixed or ARM
With interest rates for home loans as low as they are today, many people are taking advantage by doing a mortgage refinance. If you choose to take out a refinance loan, you will get a lot of options from mortgage brokers out there. There are two main options that you should know about; the difference between a fixed rate loan and an ARM. A fixed rate loan is exactly like it sounds.
The note is written for an amortization term of anywhere from 5-30 years at a fixed interest rate for the life of the loan. These types of loans are preferred for a refinance because they can reduce even the best mortgage rate from a decade ago by several percentage points. An ARM is an adjustable rate mortgage. As opposed to a fixed loan, an ARM will typically be fixed for a short term and them it will adjust based on one of the major financial indexes.
For people looking for a very low payment for only a few years, an ARM is a great solution because of the lower beginning rates. However, should the interest rate go up with inflation, you will see the adjustments on your loan's interest rate. Know the difference between these two types of refinance options before you decide how you will maximize your home value.
3 Reasons to Refinance Before it is Too Late
There are many reasons that people today are choosing to refinance their home loans. Many of these reasons are specific to the person's situation; however, there are some general reasons why people across the country are rushing to refinance their mortgages. Here are three of the most popular reasons, and there is nothing to suggest that they will all last forever. Financial trends change, so pay attention to these three factors and refinance before it is too late.
- Low Rates – Home loan interest rates hit 40 year lows a year or two ago. Although they have gone back up slightly, they are still lower than we have seen in a few generations. These low rates would be enough excuse for anyone, but there are many more such as….
- Home Values – With home values skyrocketing across the country, people are looking to take advantage of their home equity by drawing some out through a refinance. Many lenders will loan up to 100% of your home's value allowing you to take cash out above what you owe on your principle.
- Options – Banks have become very creative with home loan programs. For refinance options, you can even get loans today that give you multiple payment options, depending on what you feel like spending in a given month. With all of these options, it is easy for a person to find one that fits their ‘needs'.
Refinancing Home Mortgages to Extend Your Term
The math involved with home mortgages is easy to understand if you look at it in the right perspective. You start off borrowing a certain amount of money for a certain amount of years and agree to pay it off little by little. Let's say you are 15 years into a 30 year mortgage and interest rates have gone down, as they are now. You have spent 15 years reducing your principle balance on your loan, which means that if you choose to refinance, you will be paying the same amount of money off, but buying yourself an extra 15 years to pay it down… and at a lower rate, too.
Refinancing home mortgages to extend the term is a common way that people can reduce their monthly housing expenditure. It is also great for people with built up equity that wish to draw some of that out. If this interests you, talk to a mortgage broker about a ‘rate & term' option for refinancing home mortgages such as yours. You will have no problem getting their attention if you fit the description above.
Refinancing Your High Interest Mortgage
If you have owned your home for a number of years, chances are you missed out on the recent reduction on mortgage rates. If so, you are the prime candidate for refinancing your current higher interest mortgage loan into a lower interest rate. If you have had your property for many years, you probably even have a bunch of equity that you can draw out to take a vacation, add to the house, or whatever you like.
First, go over your current mortgage situation. Find your note and double check on your rate, term, and other vital information. Then, compare your current note with what you can find from great websites that provide free refinancing quotes. Chances are you can reduce your monthly payments greatly by lowering your interest rate and lengthening your term. Refinancing into a low interest or low payment loan is easy. Take advantage of the websites such as our sponsors to see just how much you could be saving each month on your housing expenditure.
Fannie Mae Partners Offer Automated Underwriting
Some lenders offer automated underwriting for home refinancing. Refinance loans may be approved in minutes.
Most lending partners of Fannie Mae, a private company established by the federal government, use what is known as Desktop Underwriter® (DU). With Desktop Underwriters, it may not be necessary to have your property appraised, which will save you time and money.
By visiting the Fannie Mae web site, you can get a complete listing of its lending partners and the loan products offered. Fannie Mae is not a direct lender, instead working with approved lenders across the U.S.
Spend Less Each Month – Refinance Your Mortgage
If you are like most homeowners, the best and worst day of the month is when you write your mortgage payment check. For most, their mortgage payment is the single highest expenditure every single month. For those of us in that situation, there is a solution today that we should all take advantage of. Home refinancing options that are now available can reduce those monthly payments by enormous amounts. Sometimes up to 70%. Maybe you can benefit from an interest rate reduction.
Perhaps an interest only loan is right for you. Or even extending the number of years in which you have to pay back the loan amount. Any of these reasons are more than enough to look into mortgage refinance options with a broker or Internet lender. All of these options can reduce your payment greatly and who couldn't use that?
Mortgage Refinancing
Typically, it is not difficult to find a lender to combine the two mortgages unless the combined total exceeds your property's value. During the past decade, second-mortgage lenders have been lending up to 125% of a property's value. For those borrowers it is often necessary to "bring money to the table" (add cash to reduce the balance) when they refinance or sell.
If you do not owe more than the property's value it can be helpful to contact a mortgage broker who has access to many different programs. Mortgage brokers are able to work around blemished credit and lower credit scores easier than a conventional bank. Be certain to verify that you are not over-paying with added fees or interest rate to make up for credit issues. If the cost is too high it is often better to sell your home and repurchase a home that provides comfortable payments.
Refinancing a Home Loan with an Interest Only Option
One of the most popular refinance loan options offered by banks these days are the ‘interest-only' loans. Interest only loans are just as they sound, you make payments only towards the interest each month, while your principle balance remains the same. There are upsides and downsides to refinancing home loans with an interest only option. Here are a few of each.
First, if you are only paying on your interest, obviously you will be required to pay less each month. Now, you still will always have the option to pay towards your principle, however, being required to pay less can come in handy. On the other hand, most people who choose refinancing home loans with an interest only option find themselves never making those extra payments and never lowering their balance.
If the housing market takes a downturn, they could be in trouble. Speak with a mortgage broker or a professional representative of a brokerage. They can present you with refinancing options for your home loan based on your specific case and needs. The right refinancing home loan is out there for you, and it may include the interest only option. Hopefully, you are a little more knowledgeable than before you read this.
Lower Monthly Payments May Cost You in the Long Run
Is a refinance loan right for you? Lower monthly payments are attractive. But they come at a price. Weigh your options before you make a decision.
* You may be able to lower your interest rate, but refinancing may increase your principal amount.
* Whether it's a good idea to refinance may depend on how long you plan to own our home.
If you plan to stay in your home for a while, refinancing may make sense, because of the cost savings of lower interest over several years. If you plan to sell your home soon, the cost to refinance may be prohibitive.
You May Want to Lock in Your Interest Rate
The interest rate on your refinancing home loan sometimes can float, or vary, before closing. The best way to curb this, and end any sticker shock, is to ask your mortgage company for a written statement guaranteeing the interest rate and number of points. This is called a lock-in.
A lock-in rate provides assurance that your lender will not increase costs even if the rate goes up before your closing. You also can ask your lender to allow for an interest rate drop before closing, but to guarantee it will not raise the rate on your loan.
What to Expect with a Refinance Mortgage
Refinancing your home is not that different from taking out a mortgage to buy a home. A refinance mortgage is the same basic process. But you may need to prepare for some new requirements.
You still need to fill out an application that include information on your finances. The application looks at your credit history, your property value, and the equity in your home. You also need to show your employment and income to the lender, and provide information on bank accounts.
You will need to get your property appraised and there will be a title search of your property. Your current mortgage will be reviewed, as will the status of your property taxes and insurance payments. So make sure both are paid.
If you are using a different lender, you will need to provide the name of your current lender and show information about your loan balance and monthly payments.
Second Home Financing Trends Recently Reported
Nearly one-half of all U.S. Home Sales in 2005 were second homes. Second home sales captured forty percent of the residential resale market which makes a strong statement about the real estate industry and consumer investment strategies.
Interestingly, the average borrower's income is $60,800 for primary residence buyers with median loans of $136,000. Second home purchasers have a median income of $101,900 and loan medians of $118,000.
Lenders classify second homes as a dwelling that the purchaser will not occupy as a primary residence. Second homes are classified as vacation or investment. During the years 2000-2004, loans for second homes grew from 8.6% to 14.2%. The number of loans for second homes doubled.
States enjoying the largest volume of second home purchases are Hawaii, Florida, Arizona, Nevada and Idaho.
When is the Best Time to Refinance?
Refinancing is paying off your existing mortgage and taking out a new one.
Why should you refinance? Here are some reasons:
* Obtain a lower mortgage interest rate and lower your monthly payment.
* Build equity faster.
* Change your loan.
* If you have improved your credit history and rating, you may want to refinance. It should lower your costs.
Home Equity Loan Refinancing
In contemporary America, home equity loan refinancing is expected. There are numerous home equity loan refinancing tips one needs to know when going through the process. Luckily, there are more benefits than consequences.
Just the fact that you are refinancing your home equity loan opens you to many benefits. A key benefit is securing a lower interest rate on your own equity loan than what you currently have. By refinancing the loan, one is saving a significant amount of money on a cheaper interest rate. Timing is everything though, you must time this process correctly.
There is also a strong possibility of lowering your monthly payment by refinancing your home equity loan. This is through interest rate reduction and the difference in the equity that has been accumulated. Believe it or not, gaining additional income is another possibility.
When one initially gets their home equity loan, they typically had to use cash for the equity. Instead of doing this, pay down the balance and then you will be allowed to borrow money for other purposes with a refinance available.
Refinance Home Equity Loan
A refinance home equity loan is typically low. Whether it is a thirty year of fifteen year fixed-rate, mortgages stay around five percent. This is a complex process and it is beneficial to know some key elements of the process.
The first key element is coming to a honest answer on if one should refinance their mortgage. If you think home refinancing can benefit you then by all means go for it. From saving thousands of dollars and consolidating debt, refinancing a home equity loan can be the answer. There are still dangers in the process.
Many brokers are dishonest and do not have much of a corporate conscious because they want to make money by any means possible. You should know your broker well and talk to others who have used them, look them up online if you have to and look over reviews.
Different loan mortgages types exist and are diverse. Each has a different and unique purpose. Flexibility and having the option to repay your mortgage faster might be more important than having stability of your repayments.
Best Refinance Mortgage Rate
Finding the best refinance mortgage rate can be a daunting task. It is much easier to simply identify the lowest interest rate. One’s ideal refinance mortgage rate should correlate with how long they plan to hold onto their mortgage and keep ownership of their property.
With this in mind, one should determine what refinance mortgage rate is best for them by figuring out if they want to pay point and fees or purchase the property in question. It is actually better to deduct points and fees because they have a favorable tax treatment in purchase transactions. This is much more favorable than refinancing.
In refinancing, the deduction of points is typically amortized throughout the life of the loan and is not reduced in the year they are paid as is typically the case in a purchase. Amortize means to reduce the value of an asset by prorating costs over a period of years.
The annual percentage rate is another key way to figure out the best refinance mortgage rate. The APR compares numerous loans by examining the total cost of the loan.
Expect Fees When You Refinance Your Home
Just like when you bought your home, you will have to pay fees when you refinance your home. Expect fees for your application, title search, title insurance, appraisal costs, and loan origination. There also may be prepayment penalties for home refinancing.
It's possible to reduce or waive some fees. An appraisal of your property, for example, may not be needed. Sometimes closing costs are waived, but ask ahead. If you refinance through your original lender, you may be able to negotiate some lower fees. Ask about lowering fees on the title search, application or credit report review.
Sometimes lenders advertise special refinancing with little or no upfront costs for processing. Watch out for higher interest rates with these deals.
Refinancing a Land Contract
Obtaining a mortgage to refinance a land contract is not very different than securing a mortgage for a regular home purchase. Follow the tips below:
• Rate shop – Rate shopping includes the process of comparing closing costs and mortgage fees. Lenders are required to provide you with a Truth-in-Lending Disclosure Form that will itemize all the fees related to the loan. It will also indicate the mortgage's "effective interest" rate. The "effective rate" includes all costs attributed to the loan.
• If a lender offers you a program that "seems too good to be true" it probably is. The government and current borrowing costs regulate lenders and their mortgage packages must fall within certain perimeters. Any lender who can cut your interest rate by more than a half- percent of another will be making up the difference in charges or fees.
• Determine if you will do best with a fixed rate loan or an adjustable rate mortgage. Interest-only programs are gaining popularity as a vehicle to increase buying power, but are riskier. Use a fixed rate program during times of lower rates and an adjustable when they are higher (eight and a half percent or higher). Only use adjustable loans that have a cap to prohibit limitless increases.
• For the land contract conversion, arrange financing up to 45-60 days prior to the deadline to be safe.
• Eliminate or reduce any revolving debt or other expenses that are not necessary. The less you owe, the stronger a borrower you will be.
| Guru Spotlight |
| Jennifer Mathes, Ph.D. |
