Are you burdened with rising monthly payments and seeking better terms and conditions on your mortgage? Or, are you looking to consolidate your unpaid debts and get rid of them faster? All these mortgage scenarios and many more can be accomplished by mortgage refinancing. To get the basic idea on refinancing, go through these topics:
With mortgage refinancing, you can replace your original mortgage with a new one with better terms and conditions but the new mortgage should be within your affordable limit. The same property that you used as collateral to secure the original mortgage is used to secure the new loan also. The new loan proceeds are utilized to pay off the existing mortgage. In case there is any remaining money after paying down the original mortgage, that amount can be used to meet other financial obligations.
Example: Suppose each of the two borrowers A and B took out mortgage loan worth of $500,000. Again, say after 5 years, both A and B paid down $250,000. So, for both these borrowers, remaining unpaid mortgage amount is $250,000.
Borrower A then took out another loan worth of $250,000, so as to repay the remaining balance on the existing mortgage. This depicts a case of simple refinance.
Borrower B then took out another loan worth of $350,000. Out of this new loan amount, B used $250,000 to pay down the original mortgage. B could use the remaining $100,000 to meet other financial obligations. This describes a case of cash out refinance.
The first scenario is a simple refinance while the second is that of a "cash-out refinance".
There are some strong reasons which make mortgage refinance a very sensible move. Here we delve upon 5 of those -
To reduce monthly payment: If the mortgage rate is lowered or if the mortgage term is extended, your monthly payment amount gets reduced. With reduced monthly payment, you can pay off your mortgage with more ease. In case the term of the loan is extended, you have to however pay more in interest during the whole life of the loan.
To switch from ARM to FRM: Fixed rate mortgage (FRM) offers you the certainty of making fixed payment over the term of the loan. Whereas, in case of adjustable rate mortgage (ARM), the monthly payment amount may rise or fall, depending upon the prevailing mortgage rate. So, in case of ARM, the monthly payment amount is not fixed; rather it is uncertain. If you are looking for certainty in payments, then you can convert your existing ARM to an FRM through mortgage refinance.
To repay mortgage faster: If you want to pay down the mortgage early, then you can shorten the term of the loan. However, here your monthly payment amount increases. Here, over the term of the loan, you save more in interest payments. You also attain property ownership early.
To combine two loans into one: If you have adequate equity in your property, you can then consolidate your first mortgage and the second mortgage into a single mortgage. The main advantage of this type of consolidation is that the monthly payment on the single loan is less than the combined payments on the 1st mortgage and the 2nd mortgage.
To pay off high interest debts: If you have sufficient equity in your home, you can opt for a cash out refinance. You can use the remaining money to pay high interest debts such as credit card bills, car loans, installment loans etc.
You may not always be eligible for refinancing or the situation may not always be conducive for refinancing. You have to time your move correctly so as to reap its benefits. You need to check out these crucial things carefully before applying for mortgage refinancing -
If you have built up equity: You may be eligible for refinancing when you have built up equity of at least 10% in your home. However, for mortgages owned by Fannie Mae, the equity requirement is 5%. It is possible to get the refinance approval even with less than 5% equity, but in that case you may have to pay a certain sum of money to compensate for the deficiency in equity.
If the refinance rate is sufficiently low: If the current mortgage rate is sufficiently lower than the rate on the original mortgage, then it may be wise to opt for refinancing. Here, you need to follow the 2% Rule. As per the 2% Rule, refinancing is beneficial for you in case the refinance rate is 2% lower than the rate on the original loan. Here, the savings accrued from low rate outweigh the costs of the new loan after a certain period of time, which is called the break-even period. To get benefits of refinance, you have to stay in the house at least till the break-even period.
If you have removed negative items and paid off debts: Before plunging into refinancing, obtain your credit report from the credit bureaus and review it carefully. If you find some negative items such as collections or late payments, dispute those items immediately and get those items removed from your report. Prior to refinancing, pay down as much debts as possible. All these will work in your favor in getting the refinance approval.
If you have no late payments in past 1 year: If you have history of late payments in the past 1 year, then your refinance appeal may be rejected. So, before refinancing, make sure you don't have any late payments in the past 1 year.
Despite the fact that refinance has several benefits, it is not always a good idea to go for mortgage refinancing. There are some cases when your refinance appeal is rejected by the lender or it may not fetch the desired returns. Here are some cases when refinancing is not a good idea at all-
If the property value has declined sharply: If the value of your property has declined appreciably, the remaining balance on your original loan may be higher than the refinance loan amount. In other words, with the new loan proceeds, you won't be able to pay down the original mortgage loan.
If you have already used up your equity: Your equity is the key to get approved for refinancing. If you have already used up your equity by taking out a home equity loan (HEL) or a home equity line of credit (HELOC), then going for refinancing would not be a good idea.
If you have only a few years left on the existing loan: It does not make good sense to go for refinancing if you have only a few years left on your existing loan. It is not rational to refinance the loan which you have almost paid off. If you have almost paid down a 30-year fixed rate mortgage, then it is unwise to opt for refinancing. After all, refinancing is just like taking out a new loan and all the costs associated with taking out a fresh loan are applicable here too.
If you have the right reasons and if the time is right, then you can surely seek for mortgage refinance. However, before making the final decision, do the necessary research, take quotes from different lenders, make a comparative analysis and choose your lender.
Post subject: Pay Option ARM dominates the California Refinance Market
A large number of borrowers in the California mortgage industry seem to refinance their mortgages using a Pay Option adjustable rate mortgage (ARM). With this kind of an ARM you can get full control over your monthly mortgage payments.
The Pay Option ARM provides you with the choice to make low monthly-deferred interest payments or an interest-only option along with the 15 year amortized payment and 30 year amortized payment options. It benefits all kinds of borrowers, especially self-employed or commissioned borrowers and those who are in such a financial position that does not allow them to go after huge payments. The program is specially meant for those who have fluctuating income and can support high payments on a monthly basis.
The California refinance Pay Option ARM is such that the monthly payments cannot increase more than 7.5% above the previous year for the initial 5 years of the loan period. There is also the option to convert into a fixed rate mortgage after the first 3 years.
With this kind of a refinance home mortgage loan, you get the chance to make fully amortized payments when you are financially strong and then shift to the low deferred interest payment scheme if required. You get the flexibility to make payments depending upon your monthly cash flow. And, in case you are a first time buyer or looking for a new home, then this can be the best option to fulfill your dreams with the lowest payment possible. All you need to do is find out the best refinance home mortgage loan rate.
You can refinance your existing mortgage loan with some discount points to get a lower interest rate. A portion of the loan paid should be deductible on that financial year and the balance must be deducted or amortized throughout the loan period.
For example, Kathleen has a mortgage loan balance of $60,000. She decides to refinance the original loan borrowing $80, 000 so that she has an additional $20,000 to conduct repair work on her principal residence. She paid $3,000 in points.
Since, she actually paid the points so she will be allowed to deduct 25% of the total points (i.e, 25% of $3,000 = $ 750) in the year and the remaining $2,250 in points would be deducted (amortized) over the life of the loan.
Post subject: reverse mortgage for disabled 52 year old?
Is there a program for a 52 year old permanently disabled single parent as of Dec 1999? I am prevented from making additional money to continue making my monthly payment to Colorado Housing and Finance Authority as a hardship loan due to multiple operations. I have lived here 24 years. I have considered bad credit home loan mortgage refinance wih CHFA but concerned they might say no and request sign off of my loan because my financial income has recently changed due to the operations and inability to earn more money as the loan was originally set up with. Reverse mortgage or any similar program for "non senior" but permanently disabled would help.
Let me tell you that a reverse mortgage is not generally offered to those below 62 years of age. We can obviously try and help you regarding any other loan program. But for that please request for quote with us and let us know about your loan requirements so that we can forward all the details to the Customer Care Department. They will do their level best to help you and contact you as soon as possible.
Colorado Housing and Finance Authority (CHFA) has a statewide Hardship Refinance program which is used to provide financial assistance to borrowers facing foreclosure due to unforeseen & temporary financial crisis. It provides opportunity of paying off the existing delinquent mortgage and start a new 30 year mortgage.
A streamline refinance mortgage would be possible if the mortgage is a fha insured mortgage and is not in default plus the refinance is to result in lowering your monthly mortgage payments. You can get useful information on fha mortgage insurance refinance home loans from internet. Another thing is that it cannot be a cash out refinance.
Second thing you asked is about appraisal. Yes streamline refinance mortgage is possible without appraisal but one condition should be met. The condition is that the new loan amount cannot be more than the original principal amount. If you are going to refinance for the same amount then appraisal will not be required.
If I were to refinance my condo and know that HOA is presently in litigation with developer. is it possible that I would be able to refinance my present mortgage? Also is it the right time to refinance? I would also like to know how much does it cost to refinance a house
Homeowner's Association can be venerable to legal action if it does not act on genuine problems in the building & disclose them to all unit owners.
Your chances to obtain financing can be affected by the fact that association is suing the developer. But you should inform your lender beforehand if development is in litigation.
Usually, obtaining finance is possible in such situations but the number of lenders willing to provide finance would be limited. Some lenders can ask for higher interest rate than current mortgage refinance rates and require higher equity percentage.
Post subject: when should I refinance my mortgage?
me and my wife want to divorce , if she quit claims the house to me does that release her from that debt and would i have too refinance then? I don't even have a single clue regarding how to refinance a mortgage.
If your wife quit claims the house to you that means she is quitting her interest from that house. If her name is not on the loan, then you are completely free to refinance home mortgage after quit claim process will complete.
Mortgage Rate Comparisons are powered by MortgageLoan.com (MLD). MLD is not a lender, nor is it responsible for the accuracy of the interest rate quotes offered by its network of lenders. We are not engaged in direct marketing through email or phone to entice customers. If you have any query or if you are suspicious of any deceitful activities, feel free to contact us at this mail: email@example.com.