Your Mortgage Refinance

Home Mortgage Refinancing, What are the Secrets?

Mar 092012

Refinancing your home mortgage comes with two main advantages, both of which come from refinancing at a lower interest rate. One, you can save some or a lot on your monthly payment. This can also allow you to pay off the full home mortgage faster, since you can now put more money each month towards the principle of the loan. Two, you can pull money out of your house to consolidate debt. Depending on what kind of debt you have this might not be a bad idea. See the video below for some thoughts on that.

There are a number of tools online that will help you with your mortgage search, mortgage calculators, for one. You might also want to look into the different types of mortgages that are available and what pitfalls to avoid.

Then, if you decide that you will be refinancing your home mortgage loan, make sure to consider these four important points to avoid possible problems:

Learn the terms of your current mortgage

Before shopping around for the appropriate home mortgage lender, ensure that your original mortgage does not have pre-payment penalties or any kind of early payoff penalty. Most loans these days don’t have such a penalty, but you need to be certain about yours.

Many people refinance their home mortgage not knowing that they will be charged for a pre-payment penalty. These penalties usually range from six months up to three years, plus another penalty for early payoff. Most likely you don’t have the penalty in your loan, but you need to be certain.

Although penalty amount varies, the average pre-payment penalty amounts to a six-month worth of mortgage interest. In order to justify refinancing mortgage loans with pre-payment penalties, you need to have significant payment and interest savings. You will need to do some math and calculate how much you will save with the new loan. Your mortgage broker or bank can help you to crunch these numbers.

Maximize your options

In order to ensure you’re getting the lowest rate in the market, apply for pre-approvals to several different lenders. This will give you a good idea of what it available and how much it will cost. You can even look up some of these numbers online.

There is a myth that checking your credit score, or a lender checking your score, will have an effect on your credit ratings. This is not true. According to credit.com your own credit checks do not have any effect on your credit score.

As far as the lender/brokerpulling your report, this is what MyFico has to say:

What to know about “rate shopping.”

Looking for a mortgage or an auto loan may cause multiple lenders to request your credit report, even though youre only looking for one loan. To compensate for this, the score ignores all mortgage and auto inquiries made in the 30 days prior to scoring. So if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping.

In addition, the score looks on your credit report for auto or mortgage inquiries older than 30 days. If it finds some, it counts all those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.

In addition, assess different lender offers concerning interest rate offerings and closing costs. Remember that these two factors will largely affect your lender choice. Choose a lender with feasible rates to maximize your mortgage refinancing benefits.

Choose your lender

Once you have compared different lenders and have made a decision make sure to get all of the interest rates and closing costs into writing. Ask your lender to provide you with a quotation in advance of all possible costs involved with your loan. They will do this anyway, but there will be a number of papers involved. If you have any questions, ask.

For example. ask whether your new refinancing loan has pre-payment penalties. Most (all?) lenders will readily tell you whether or not there is any penalty and exactly what the details are.

Different states and counties have different rules regarding mortgage loans. Be a smart consumer and understand what the rules are in your area and don’t hesitate to ask your broker or loan officer. Some people will suggest going with the best rock-bottom rate you can find, but consider that the person who does the best job of answer questions and explaining any detail involved might deserve your business, even if he or she doesn’t offer the absolute lowest rate.

Mortgage Refinance & Debt Consolidation Video

Here are some things to keep in mind when refinancing.

A Variety of Mortage Caclulators to Cover Any Need

Calculators 1 Response »

Mar 022012

You’ve decided that you’re interested in at least looking into a new mortgage or refinancing your old one. One very useful tool that will give you a clear idea of what you can afford is a mortgage calculator. These are much like the calculators that come with Windows or your SmartPhone, but they’re simpler (usually) and are already programmed with all the necessary calculations. All you have to do is plug in a few numbers.

The question then becomes, “what is the right mortgage calculator for you?” While your exact situation is particular to you, it probably fits within a few general scenarios, so you want a calculator tailored to your specifications. Contrary to what you may think, there are many ways to calculate a mortgage; you just need to find the right one for you! Below you can take a look at several types of mortgage calculators to see which one might help you find your way to a new home.

Just a note: the links below point to online mortgage calculators, but you can also buy hand-held calculators from Amazon or your local office supply store (and other places.) You can also set up a spreadsheet to do the work (see the video at the bottom of this post.

One type of mortgage calculator is the rent-vs-buy calculator.

You can see one here on Yahoo! While renting is paying money to someone else and buying is paying off something you’ll have forever, there might be advantages and disadvantages to either option that are not readily apparent from the outset. For instance, you will be responsible for home repairs, something that is usually the responsibility of the landlord. On the other hand, if you move around a lot then renting is probably a much better option. A rent-vs-buy calculator can help you figure out whether renting or buying is the best option for you at this point in time.

Another way to calculate a mortgage is a mortgage required income calculator.

This device determines if you will be able to qualify for a loan by calculating how much mortgage you can afford on your current income. This can be very helpful to people who may be considering new career options. You can find out if this is the best time to tackle that new career and what the advantages and disadvantages are. You can see one of these calculators here (Java is required to run this widget.)

For those who may have had financial problems in the past, using a mortgage debt consolidation calculator to calculate a mortgage might be the best bet. You can take into account other payments that you have to make and find out if using a mortgage to consolidate debt will reduce the payments and the total interest costs. Here’s one that will help you do that. Java is also required to run the widget.

Depending on your situation you might want to compare a fixed rate mortgage and an adjustable rate mortgage (ARM). A fixed rate offers predictable monthly payments for the life of the loan, while the ARM provides lower initial interest rates and lower payments in the first few years. This calculator is another good way to take a look at your life goals and plan for the future. Here’s a calculator which will help compare these two mortgage types.

There are other calculators that can help with this as well; they can determine the minimum amount of the initial monthly payment and the impact of the subsequent interest rate adjustments.

If you already have a mortgage and you want to take advantage of better rates, there are refinance interest savings calculators that can help you find out whether refinancing your mortgage is right for you. While a refi can reduce payments in the long run, it also requires an up front payment. Calculating mortgages can give you an idea of how feasible this is, and whether it will work better for you in the long-run.

In calculating a mortgage you can provide yourself with more opportunities and more ideas than you thought possible. You will be able to talk to your mortgage broker with a very clear idea of what you can afford and which mortgage product might be best for you. As you think about your new home, you’ll find that everything can fall into place exactly as you would like, with only a little bit of planning.

This video will walk you through using an online mortgage calculator

Here’s how to do it in an Excel Spreadsheet

What Types of Mortgages Are There?

Mortgages No Responses »

Feb 242012

There are more new home mortgage packages and plans today than in previous years. The ability to find new and creative ways to finance homes is what makes it possible for more people to own their homes. However, there are a few things that one needs to understand, first.

Adjustable rate mortgage

As lenders became more concerned about increasing upward trends in home mortgage rates, they searched for a way to lessen the impact on the reserves available. Because the lenders were locked into low interests rates loans and the ability to borrow money themselves was tied to the rising prime rate, they began promoting the adjustable rate mortgage for their home mortgage loans. The ARM floats to various economic indicators so that if the cost of money goes up, so does the amount the borrower will pay on their existing loan. Conversely, if the price of money goes down, the lender has the option of adjusting the loan payment downward.

Mortgage rates have been amazingly stable for several years, but that’s not always been the case. In the early 80s they ran 15%+ (and inflation was higher.) See here for some current and historic rates.

Fixed Rate Mortgage

As the name suggest, the fixed rate mortgage is a new home mortgage that remains at the original rate during the entire term or mortgage. It is typically a rate that is somewhat higher than the rate available with an adjustable rate mortgage to allow the lender some leeway for climbing interest rates making it impossible to meet future mortgage payment amounts. The lender, on the other hand may have the ability to make further loans compromised if interest rates climb. The big advantage to this type of mortgage, of course, is that you don’t have to worry about interest rates climbing out of sight.

Balloon

A balloon payment as part of the home mortgage is a larger than normal payment applied to the mortgage, usually at some point in the future in order to reduce the amount of payments early in the mortgage term. A balloon payment may also apply to the payoff amount of the mortgage with the expectation that the borrower will renegotiate the terms of the mortgage loan at that point. This can be a helpful mortgage tool if the desire is to improve credit so as to get a better rate in two years or four years, or whenever the balloon payment is due. It can also be a negative factor if the balloon payment comes due, especially if you’re not in a position to pay it off.

Negative equity

Unless the borrower understand the type of mortgage which they are taking on, he or she can end up with negative equity after paying mortgage payments for two or three years. This occurs when the borrower arranges for a loan payment that is not large enough to completely cover the periodic interest due to the loan. In this type of new home mortgage, the unpaid interest is added to the principal each month and the principal increases. This is known as negative equity in the house. Small monthly payments may seem like a good way to purchase a new home, but if you pay several months or years and owe more at the end of the period than when you started, it can make it even more difficult to refinance the mortgage.

At the height of the real estate bubble in the 2000s a number of mortgages in expensive areas used this type of financing. This allowed people to get into homes they wouldn’t be able to afford, otherwise. The assumption was that real-estate prices would continue rising as quickly as they had been rising, which would cover the equity issue.

Such proved not to be the case.

What types of Mortgage Loans are there?

LOAN OPTIONS – The following is from the YouTube page with the above video.

The traditional 30-year fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer.
f you plan to move within seven years, then adjustable-rate loans are usually cheaper. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.
Fifteen-Year Fixed Rate Mortgage: This loan is fully amortized over a 15-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate and you’ll own your home twice as fast. The disadvantage is that, with a 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 15 years. This approach is often safer than committing to a higher monthly payment, since the difference in interest rates isn’t that great.
Hybrid ARM (3/1 ARM, 5/1 ARM, 7/1 ARM): These increasingly popular ARMS also called 3/1, 5/1 or 7/1 can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans. For example, a “5/1 loan” has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable-rate loan, based on then-current rates for the remaining 25 years. It’s a good choice for people who expect to move (or refinance) before or shortly after the adjustment occurs.
Adjustable Rate Mortgages (ARM): An ARM is an Adjustable Rate Mortgage. Unlike fixed rate mortgages that have an interest rate that remains the same for the life of the loan, the interest rate on an ARM will change periodically. The intial interest rate of an ARM is lower then that of a fixed rate mortgage, consequently, an ARM maybe a good option to consider if you plan to own your home for only a few years; you expect an increase in future earnings; or, the prevailing interest rate for a fixed mortgage is to high.
2/1 Buy Down Mortgage: The 2/1 Buy-Down Mortgage allows the borrower to qualify at below market rates so they can borrow more. The initial starting interest rate increases by 1% at the end of the first year and adjusts again by another 1% at the end of the second year. It then remains at a fixed interest rate for the remainder of the loan term. Borrowers often refinance at the end of the second year to obtain the best long-term rates. However, keeping the loan in place even for three full years or more will keep their average interest rate in line with the original market conditions.
Annual ARM: This loan has a rate that is recalculated once a year.
Monthly ARM: With this loan, the interest rate is recalculated every month. Compared to other options, the rate is usually lower on this ARM because the lender is only committing to a rate for a month at a time, so his vulnerability is significantly reduced.

How to Wreck Your Mortgage Refinance

Your Mortgage Refinance No Responses »

Jan 112012

There are two basic ways to wreck your mortgage refinance. One, obviously, is to fail at actually getting the finance. For whatever reason the lending agency says, “no.”

The other is to wind up paying more overall than you were before.If you’re looking to refinance into a shorter term (30 yrs to 15 yrs, for example,) but the rates are higher, you’ll probably be better off keeping the old mortgage and just sending more money to the bank.If you do that, make sure you don’t have a pre-payment penalty of any kind.

Interest rates: Your new mortgage should be at a lower rate than the first. Obvious, right? But how much lower should it be? A 1/4% won’t save you enough to be worth it. A 1% reduction just might. (1% is $1,000 per year on a 100k loan.) The better your credit score, the more that you will save by being able to obtain lower rates.

Saving Money: After all is said and done and signed, you should be paying less money per month, overall, than before. If not, then what’s the point? All costs need to be considered, including Mortgage Insurance, if any.

Origination costs: There is a temptation to roll all costs into the refi to avoid paying much cash out of pocket. This lowers the up front costs, but the monthly costs become higher.

MInt.com provides seven tips that one should pay attention to before trying to get your Mortage refinanced:

Refinancing your mortgage is a great way to save money. As both a real estate investor and homeowner, I’ve refinanced mortgages about ten times in the last ten years. My wife and I are in the process of refinancing our mortgage on our primary residence now, for the second time in 12 months.

Through this process, including one failed attempt at a refi, I’ve learned a lot about how the process works. I’ve learned that it’s easy to mess up a home refinance. So, with that in mind, here are seven ways to wreck your next mortgage refinance.

See them here: 7 Ways to Wreck Your Mortgage Refinance

MSN Money has a few things to say about why you might not want to refinance, including such things as how long you’ve held you current loan, your spending habits, your credit rating and whether its changed, what your equity is, and more.

Mortgage refinancings keep hitting record highs as interest rates dribble to generational lows. That doesn’t mean everybody should join the party, however.

“Out of every 10 calls I get, probably three of them really shouldn’t refinance,” said mortgage broker J.J. Sims, owner of ABC Mortgage in Minneapolis and a member of the National Association of Mortgage Brokers’ board of directors. “A lot of people get caught up in the hype of lower interest rates and don’t really think it through.”

The most obvious case of when refinancing doesn’t make sense is when the homeowner won’t live in the house long enough for the savings from a refinancing to outweigh the costs of getting a loan. (I’ll tell you exactly how to figure that out below.)

Here’s the rest: 4 reasons not to refinance

More

Mortgage refinance tutorial with links to calculators
How to build and maintain your credit score:

What is a Mortgage Refinance?

Refinancing No Responses »

Dec 092011

Basically, you have an existing mortgage and you are looking to get a lower interest rate and/or take some money out of the equity of your home (the part of the home that you actually own.)

Before the financial crash refi-ing one’s mortgage was very popular. Changes to Government policy made mortgage lending much easier to obtain, even with poor credit. In addition, housing prices were rising quickly resulting in people accumulating large amounts of equity. People would then take cash out of that equity for any number of reasons.

Wikipedia says this about mortgage refinancing:

Refinancing may refer to the replacement of an existing debt obligation with a debt obligation under different terms. The terms and conditions of refinancing may vary widely by country, province, or state, based on several economic factors such as, inherent risk, projected risk, political stability of a nation, currency stability, banking regulations, borrower’s credit worthiness, and credit rating of a nation. In many industrialized nations, a common form of refinancing is for a place of primary residency mortgage.

If the replacement of debt occurs under financial distress, refinancing might be referred to as debt restructuring.

A loan (debt) might be refinanced for various reasons:

To take advantage of a better interest rate (a reduced monthly payment or a reduced term)

To consolidate other debt(s) into one loan (a potentially longer/shorter term contingent on interest rate differential and fees)

To reduce the monthly repayment amount (often for a longer term, contingent on interest rate differential and fees)

To reduce or alter risk (e.g. switching from a variable-rate to a fixed-rate loan)

To free up cash (often for a longer term, contingent on interest rate differential and fees)

Refinancing for reasons 2, 3, and 5 are usually undertaken by borrowers who are in financial difficulty in order to reduce their monthly repayment obligations, with the penalty that they will take longer to pay off their debt.

In the context of personal (as opposed to corporate) finance, refinancing multiple debts makes management of the debt easier. If high-interest debt, such as credit card debt, is consolidated into the home mortgage, the borrower is able to pay off the remaining debt at mortgage rates over a longer period.

(from Wikipedia)

Talking Mortgages with Kim Clugston

Kim covers some of the rules and regulations and so on about mortgages. She also discusses the “why” of refinancing and related topics. Also mentioned are mortgage rates, which are still amazingly low, considering that they were 20% plus in the Carter years.

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Second Mortgage Refinance Loans

Uncategorized No Responses »

Dec 082011

If you have some problems with your bills, or perhaps if you want to do some remodeling, you might want to consider getting 2nd mortgage refinance loans to help you out when you need it. These are usually not a problem, but there can be problems. The bank will still look at your financial history, and will look at how prompt you are when paying your first mortgage. Though there are some times when they will say yes right away, there are other times when you feel like you are going through your first mortgage application all over again.

You might have two different options when you get 2nd mortgage refinance loans. You are either going to pay more each month for your mortgage (either by a higher payment or by having two payments) or you are going to extend your existing payments into the future. That might be the hardest part of deciding if you want to get 2nd mortgage refinance loans in the first place. You may not be able to afford a higher payment, and you may not want to extend your mortgage past the age of retirement if you can help it.

You might also have to deal with a higher interest rate when you get 2nd mortgage refinance loans. If you do not have perfect credit, this might mean a jump in your interest rate. That is a huge consideration when you are looking over offers. If you can’t figure out how much more a higher interest rate will cost you, make sure you find something who can spell it out for you. Though all banks are honest for the most part, they don’t mind making more money off of you, and they may not explain what is going on if you don’t ask them to help you understand it.

Be careful where you look for 2nd mortgage refinance loans. You can find great offers online, but there are scams out there. Make sure you are dealing with a real company. If you can’t find any information on the company apart from what they tell you, you want to do your own research. If you can’t find any public and positive listings, you want to move on to someone else. You should always make sure you look on the Better Business Bureau’s web site if you have never heard of the company, and remember that some name their companies to sound like others just to reel you in. Do research so you don’t end up regretting what you have decided to do.