Home Mortgage Refinance Loans
Things You Need To Know Before Refinancing Your Mortgage
What are the reasons for refinancing?
There are many benefits to refinancing; it just depends on what your objectives are. Some of the most popular reasons are:
Refinancing may put money back in your pocket every month.
If rates are lower now than when you originally financed your home, or if you choose an adjustable rate mortgage with a lower initial interest rate than your current rate, your monthly payment will go down (assuming you don't shorten the term or increase the loan balance significantly). That means you can save more every month or afford those dance lessons or dinners out or new suit you've had your eye on. Not only that, but you probably won't have to scrape together money to bring to the closing table either, because you can usually include all of the costs to close your loan in the new loan amount.
Refinancing may put a lot of money in your hands today.
If you have significant equity in your house, you could get a cash-out refinance and walk away from the closing table not only with a new loan but with a large amount of money to invest or to use for a once in a lifetime opportunity - like an extensive vacation, college, home improvements or the purchase of a boat or anything else you've been dreaming of all your life.
Refinancing may get you out of debt faster!
Refinancing your current loan to a fifteen year or a bi-weekly loan may be possible without even raising the payment significantly, particularly if rates were high when you first bought. You could save thousands and thousands in interest and own your home many years before you would with a standard 30 year loan.
How much can I borrow?
You can borrow up to 100%. In some cases even more of your home's appraised value.
When is a good time to refinance ?
The best time(s) to refinance your home is when the mortgage rates are you are in need of fast cash for any reason.
How does a refinance closing work?
The refinance closing will be conducted the same way that your loan was closed when you first purchased the property. Soon after your loan is approved your loan consultant will send a list of documents you'll need to bring to the closing. You'll also be sent an Estimated Settlement Statement that tells you the amount, if any, you'll need to bring to closing in the form of a cashier's check, as well as an outline of how the funds from your new loan will be disbursed. If this is a refinance of a primary residence, the loan won't actually fund until three business days after signing the loan documents, due to the borrower's right of rescission.
Four Things You Need To Know Before You Refinance
Refinance to Lower Your Monthly Mortgage Payment
A percentage drop of just one half to three quarters of a percentage point can lower your mortgage payment. If you don't refinance, you may be paying to much every month for your loan, and that's never a good financial move.
There are three ways refinancing can lower your payment. The first is simply to refinance at a lower interest rate. You can also change the term on your mortgage to lower your payment. Switching from a 15- to a 30-year term can significantly lower your mortgage payment. But, if long-term savings is more appealing to you, refinancing from a 30-year to a 15-year mortgage can save you thousands of dollars over the life of your loan. The third way to lower your payment is by switching from a traditional mortgage with principal and interest payments to a mortgage program that allows interest only payments.
Refinance to Access Cash
Think of the equity in your home as a savings account that you could access through cash-out refinance. You may want to finance an important home improvement that will increase the value of your home, pay for college or pay off high interest credit card debt. Whatever your reason, this may be the right option for you.
Refinance to Pay Off Credit Cards And Other Debt
The difference between credit card debt and a mortgage can, financially speaking, mean thousands of dollars. Why? Credit card debt is compounded where the interest on a mortgage is simple, and often tax deductible. Using the equity in your home rather than credit cards to finance expensive purchases can save you money paid in interest in the long run. Be sure to consult your tax advisor.
Refinance to Convert An Adjustable Rate Mortgage (ARM) to a Fixed-Rate Mortgage
Use the length of time you plan on being in your home to your best financial advantage. If you only plan on staying in your home for a few years, paying a higher interest rate for a 30-year fixed-rate mortgage may be costing you money. Consider refinancing to an Adjustable Rate Mortgage (ARM) instead, and pay a much lower amount each month. Likewise, if you have an adjustable rate mortgage and will be in your home longer than the initial 3- or 5-year fixed period, it might be a smart move to convert to a fixed-rate loan.
The Market And Your Interest Rates
1. When Greenspan lowers "rates," he lowers the "Federal Funds" rate. It's the interest rate at which large banks lend funds to one another and is a "short-term" rate. Mortgage interest rates are long-term - up to 30 years. Longer-term interest rates are sensitive to expectations about inflation. When short-term rates fall - like the ones the Federal Reserve controls - borrowing and spending usually increase, which can actually cause inflation. Longer-term rates, like mortgage interest rates, can rise when concerns about inflation increase.
2. Markets are often ahead of the Federal Reserve. Mortgage interest rates are determined every day in active public markets. If those markets believe the economy is slowing, interest rates may fall as markets anticipate that the Federal Reserve might lower short-term rates. This happened in the last half of 2000 when mortgage rates began steadily dropping, even though the Federal Reserve left their short-term rates unchanged. The opposite can happen as well. Mortgage rates can rise well ahead of the Federal Reserve increasing short-term interest rates.
It's almost impossible to accurately predict the future of something as complex as the U.S. economy. However, it is important that we, as mortgage consumers, understand some of these market dynamics. Sometimes, a lack of understanding can cost us a lot of money.
Refinance Your Way Out Of Debt!
Sometimes it makes good financial sense to use the equity in your home to consolidate debt. Depending on your financial goals, it may be just the thing to do if you want to:
Make your debt tax deductible
Pay off your credit cards
Consolidate many small payments into one
Reduce the interest rate on your high-interest debt
Lower your total monthly payment amount
There are a several ways to access the equity in your home to consolidate debt:
A cash-out refinance
A home equity Loan
A home equity line of credit
When you refinance to get cash out, you're essentially refinancing to a loan amount more than you currently owe and taking the difference in cash. Depending on your current interest rate, you may actually be able to lower your payment and pay off other debt with the cash. It's possible to lower your overall monthly payments with a cash-out refinance.
A home equity loan is a second loan to tap into your equity. Commonly referred to as a "second mortgage," a home equity loan allows you to get cash for your equity without refinancing your first mortgage and usually in less time.
A home equity line of credit is very similar to a credit card except that it uses your equity as the revolving line of credit. You pay only if and when you use the money. You can get a home equity line of credit in as little as ten days.
When you use the equity in your home to consolidate debt you do not reduce the amount or your debt. Instead, you lower the interest rate you pay. It's important to not run up your credit card debt again. It may be a good idea to close your credit card accounts and keep one for emergencies only. If you increase your monthly cash flow by consolidating, think about saving, investing or paying down your debt faster.
Are You Looking Into Refinancing Your Home?
Mortgage interest rates are lower now then they have been for years. In the near future, interest rates may increase. Higher interest rates will increase the total cost of a home mortgage. If you refinance your home with a lower interest rate you could save hundreds every month on your mortgage payment. This means that over the life of the home loan you could save thousands! There may also be a tax benefit for refinancing your home!
When Should You Refinance?
Whether it's to lower your your monthly payment, interest rate, consolidate other bills or pay for a child's education, we can help you get the best rate and loan program to fit your needs.
If refinancing lowers the interest rate on your home loan, this could save you thousands over the life of the loan. Refinancing can be used to reduce your interest rate, change the term of your loan, to consolidate other debts or to pay for a child's education or other expense.
When the interest rates are lower than any of your other consolidating options, such as credit cards ( which can get you into more trouble), then refinancing is good choice. If you have lot's of equity and good to excellent credit, then this may be your best option.
What Is A Home Equity Loan?
A home equity loan is a loan that uses your home as collateral. Your home equity is the part of your home that you actually own and this is the guarantee for your loan.
Your home equity is calculated by taking the current value of your home and subtracting your mortgage. For example, if your home is worth $150, 000 and you have a $100,000 mortgage, you have $50,000 of equity in your home. A home equity loan allows you to borrow money using your equity of $50,000 as security for the loan.
A home equity loan, often called a second mortgage, reduces your equity or ownership in your home. Since your home guarantees your loan, if you default on the payments, you can lose your home.
Need To Get Out Of Debt? Have Bad Credit?
Debt consolidation is simply a process by which an individual obtains a loan in order to use it to pay off other non-secured consumer loans and credit cards.
The main objective is to obtain a low interest rate loan, with low monthly payments, while not adversely affecting your overall credit rating or putting other assets that you may have at risk. In many cases, individuals have numerous credit card and loan debts at varied (but usually high) rates of interest, so debt consolidation is definitely a smart way for these individuals to ease their monthly debt payment obligations, and reduce their long term payback commitments.
When To Make Extra Mortgage Payments
Many people routinely add $100 or $200 to their mortgage payment each month. It's a good feeling to know they are closer to paying off their home or apartment. For some of them, however, it may not be the best move, financially speaking.
Those whose mortgage interest is tax-deductible, should make another choice. Their interest payments are actually reduced by the income tax deduction. For them, funding retirement accounts is a better idea, especially if the funding is tax-free. Financial planners say safe municipal bonds offer yields that are greater than extra mortgage payments would offer.
Paying down a mortgage loan IS a good idea if your mortgage interest is not tax deductible.
In 2006, if you are married filing jointly, and your total itemized deductions including mortgage interest comes to $9,700 or less, you will end up taking the standard deduction instead. You receive no tax break for your mortgage interest.
You might also want to make extra principal payments if you have an adjustable-rate mortgage. If the interest rate rises by two points or more, your monthly payments will be much higher. To offset that, you may want to reduce the balance with higher payments.
If you lack the self-discipline required to invest elsewhere, you would also benefit from extra principal payments. It's easy to procrastinate when you should be investing. But you have to write that mortgage check every month anyway, so you might as well make it a little bigger.
We can help you find the lender that can get you the best deal for your financial situation including setting you up with most competitive lenders based on your loan type and zip code.
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