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Posts Tagged ‘Refinancing’

Refi or Wait? How to Choose Between Refinancing Your Mortgage Now or Waiting Until You Need the Money

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Refi or Wait? How to Choose Between Refinancing Your Mortgage Now or Waiting Until You Need the MoneyRefinancing your existing mortgage may provide you with the opportunity to lower your interest rate, reduce your mortgage payment and adjust your loan term. For those homeowners who have lived in their home for more than a few years, pulling equity out of the property for everything from a luxurious vacation to making home improvements is a tempting potential benefit.

However, with property values and interest rates adjusting frequently, you may wonder if now is the best time to refinance your mortgage.

Using Equity From Your Refinance

One factor to consider when debating between refinancing now and waiting relates to pulling equity out of your home. If you need access to the cash now for home improvements or other purposes, refinancing now may be ideal. Even if you do not need access to your equity for several months or longer, you can lock in today’s rates and invest the money in other vehicles, such as CDs or bonds, until you need the cash.

Anticipating Market Changes

You may have heard that the interest rates for home mortgages have been slowly rising, and while they remain close to historic lows, they are projected to continue to rise. Nobody can predict with certainty how interest rates will adjust in the next few months and years, and locking in today’s rates may be beneficial. Keep in mind that if rates decline significantly in the near future, you can always look into refinancing again.

Reducing Your Principal

If you have a higher interest rate on your existing mortgage, your principal balance may be reduced at a slower rate than if you refinance to a lower interest rate. In addition, if you refinance from a 30-year term to a shorter term length, your principal balance will also be reduced more quickly in most cases. In many situations, refinancing your home mortgage today may establish a more efficient repayment schedule that allows you to accrue equity at a faster rate.

Each homeowner has unique factors to consider when refinancing based on property value, credit rating, existing loan terms and other factors. While many will benefit by refinancing an existing mortgage today, you can speak with a mortgage professional for specific advice and recommendations regarding your situation. Call your trusted mortgage representative today to inquire about the options and to begin working on your refinance loan application.

An Insider’s Guide to Reducing Your Remaining Mortgage Years Through a Smart Refinance

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An Insider's Guide to Reducing Your Remaining Mortgage Years Through a Smart RefinanceIs it always the best idea to pay off a mortgage over 30 years? While it may help a homeowner lower his or her monthly payment, it can mean paying more in interest and waiting several more years to build sufficient equity in the home.

The question is…how can a homeowner reduce the amount of time it takes to pay off a mortgage by refinancing his or her loan? A few methods for reducing your mortgage term are explained below.

Refinance From A 30-Year Mortgage To A 15-Year Mortgage

For those who don’t want to wait any longer than necessary to pay off their home loan, it may be possible to refinance to a shorter-term mortgage. Instead of taking 30 years to pay off the loan, a homeowner can opt to pay off the loan in 10 years or 15 years. The shorter the term, the less interest will be paid on the loan.

Get A Lower Interest Rate With A Shorter-Term Mortgage

Another good reason to shorten a mortgage term is because it could lower the loan’s interest rate. Instead of paying 4.5 percent over 30 years, it may be possible to pay 4 percent over 15 years. This gives the mortgage holder the chance to build equity in the home faster as they are paying more of the principal balance with each payment. While a mortgage holder can pay more than the minimum amount on a longer-term mortgage each month, it could still end up costing more overall due to the terms of the loan. Be sure to ask your mortgage professional about your options here.

Stop Paying Mortgage Insurance

Those who are paying mortgage insurance could be paying $200 or more per month for nothing more than the right to protect the lender against default. Homeowners who could qualify for a conventional loan should attempt to refinance to a conventional loan if possible to avoid making this payment. Instead of going toward mortgage insurance, put that money toward the principal balance on the loan. There are, of course, risks involved with this approach so be sure to fully discuss them with a professional.

How Can Someone Refinance A Loan?

Now that you know how to pay off your mortgage faster through a refinance, how can someone go about refinancing a home loan? Fortunately, refinancing is similar to the process of securing the home’s first loan. All a borrower will need to do is find a lender that he or she wants to work with, find an offer that works for that borrower and then close on the deal. Although there may be closing costs associated with the new loan, some lenders may be willing to waive some or all of them on a refinance.

Paying off a mortgage as soon as possible can help a borrower save money while building equity in the home at a faster pace. This gives a homeowner financial strength as well as the flexibility to sell the house in the future without worrying about losing money in the deal. To find out more about refinancing options, talk to a mortgage lender.

Five Questions You Might Want To Ask Before You Refinance Your Home

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Five Questions You Might Want To Ask Before You Refinance Your HomeRefinancing your home might be a great way to save money or tap into the capital needed to pay off large debts. However, a refinance can also be an expensive endeavor, and you could even risk harming your credit rating or risk foreclosure if you’re not careful.

Before you take the plunge with a refinance, here are five essential questions that you should ask before signing on the dotted line.

How Much Equity Do I Have In My Home?

Many homeowners today owe more on their mortgage than what the property is actually worth. For mortgage refinancing to be possible, a homeowner must have at least 20 percent equity in their home in order to avoid paying private mortgage insurance. The benefit of refinancing would be negated if PMI has to be added to the cost of the new loan.

 Do I Have A Good Credit Score?

The health of your credit score plays a huge role in the type of mortgage rate you’ll be able to qualify for.

Since mortgage rates operate on a sliding scale, the lowest rates tend to be offered to those with a credit score of 720 or more. Borrowers who have a score under 620 may have trouble qualifying for a decent rate, let alone getting approved at all.

Will I Qualify For The Rate I Want?

You might be able to get a general sense of the type of interest rate you could get for a refinance as quoted on major financial websites like BankRate.com, but your specific financial details, such as the type of loan you’d like to refinance into or your credit score, will influence the actual rates that will be available to you.

If you don’t qualify for the lowest advertised refinance rates, it’s important to determine if it’s still worthwhile to refinance your mortgage at the rate you qualify for.

Will I Have To Pay A Penalty?

Most mortgages have a number of rules attached to them, including penalties for breaking a current mortgage before it comes up for renewal. It’s in your best interest to find out if there are any penalties and, if so, what that dollar figure would be.

Some penalties are so high that that they no longer make the refinancing cost-effective. Reading the fine print on your mortgage contract is crucial.

Do I Have A Second Mortgage?

Borrowers who have a second mortgage might face additional challenges when it comes to refinancing their home. In this case, you may either pay off the second mortgage or combine both loans into a bigger first mortgage.

Otherwise, the lender providing the second loan has to agree to staying in second place behind the lender holding the first mortgage, which they might not necessarily be willing to agree to.

The bottom line is: refinancing might be a great way to help you pay off large debts or save money. However, it’s critical that you analyze your specific financial situation in order to avoid getting yourself into a worse position where the only party benefitting from the refinance is the loan officer.

Get in touch with an experienced mortgage specialist today to discuss your needs and to determine if refinancing your home is right for you.

It Pays Off To Refinance Your Mortgage

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It Pays Off To Refinance Your Mortgage To refinance a mortgage means to pay off your existing loan and replace it with a new one.

There are many reasons why homeowners opt to refinance, from obtaining a lower interest rate, to shortening the term of the loan, to switching mortgage loan types, to tapping into home equity.

Each has its considerations.

Lower Your Mortgage Rate

Among the best reasons to refinance is to get access to lower mortgage rates. There is no “rule of thumb” that says how far rates should drop for a refinance to be sensible. Compare your closing costs to your monthly savings, and determine whether the math makes sense for your situation.

Shorten Your Loan Term

Refinancing your 30-year fixed rate mortgage to a 20-year fixed rate or a 15-year fixed rate is a sensible way to reduce your long-term mortgage costs, and to own your home sooner. As a bonus, with mortgage rates currently near all-time lows, an increase to your monthly payment from a shorter loan term may be negligible.

Convert ARM To Fixed Rate Mortgage

Homeowners with adjustable-rate mortgages may want the comfort of a fixed-rate payment. Mortgage rates for fixed-rate mortgages are often higher than for comparable ARMs so be prepared to pay more to your lender each month.

Access Equity For Projects, Debts, Or Other Reasons

Called a “cash out” refinance, homeowners can sometimes use home equity to retire debts, pay for renovations, or use for other purposes including education costs and retirement. Lenders place restrictions on loans of this type. A refinanced home loan can help you reach specific financial goals or just put extra cash in your pocket each month – just make sure that there’s a clear benefit to you.

Paying large closing costs for small monthly savings or negligible long-term benefit should be avoided. Many lenders offer low- or no-closing costs options for refinancing. Be sure to ask about it.

4 Of The Best Questions To Ask Before Refinancing Your Mortgage

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The Best Questions To Ask Before Refinancing Your Mortgage1) Do I Have Enough Equity To Get A Mortgage?

To get a conventional loan, you will usually need to have at least 20 percent equity. This means that your house will have to be worth at least $250,000 to get a $200,000 loan. If you have less equity, you could end up having to pay for private mortgage insurance, which can easily add $100 or more to your monthly payment.

2) How’s My Credit?

Most lenders will look at your credit score as a part of determining whether or not to make you a loan. With conventional lenders, your rate will depend on your score and the higher it is, the lower your payment will be. Other lenders, like the FHA and VA programs have an all or nothing rule.

If you qualify, your rate won’t be based on your credit, but if your score is too low, you won’t be able to get any loan. Generally, 620 credit scores are the lowest that will qualify you for any loan.

3) What Do I Want To Accomplish?

Mortgages typically offer a choice as to their term. While the 30-year loan is the most popular, shorter term mortgages save you money since you pay less interest over their lives. They also get you out of debt sooner, at least as regards your house.

The drawback is that they carry higher payments since you pay off more principal every month. This can make them less affordable for some borrowers.

4) How’s My Current Loan?

If you have an adjustable rate mortgage, you may want to switch to a fixed rate mortgage simply for the additional security it offers you. On the other hand, if you are planning to move relatively soon, your current mortgage could be a better deal whether it’s fixed- or adjustable-rate.

When trying to decide what to do, compare the cost of refinancing with what it would cost you in additional interest to hold on to your existing loan. While the breakdown is different for every borrower, generally, you’ll need to keep your current house and loan for anywhere from three to six years to break even on the costs of refinancing.

Deciding what to do with your mortgage can be complicated. Working with a qualified loan broker that can consider every angle with you can help you to make a better decision.

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