Are you stuck with increasing monthly payments and looking for favorable rate and terms on your loan? Or, do you want to consolidate your debts and pay off faster? All these and more can be done by mortgage refinance or refinancing. If you wish to know what refinancing is all about, check out the following topics:What is refinancing?It gives you the chance to replace your current mortgage with a new loan having favorable rate and terms that you can afford to manage. The new loan is offered against the same property as the collateral and may or may not exceed the current loan balance. The new loan funds are used to pay down the current mortgage while any remaining cash can be used to your best advantage.
For example: Mr. X and Mr. Y both took a mortgage loan worth $400,000. After 4 years, both of them paid off $200,000. Mr. X then took another home loan worth $200,000 in order to repay the existing balance on the loan. On the other hand, Mr. Y opted for a second home loan worth $300,000 in order to repay the unpaid loan balance which is $200,000. Mr. Y could use the remaining balance in order to fulfill other financial obligations.
The first scenario is regarded as mortgage refinancing and the second scenario where the new loan amount is higher than that of the existing loan balance is cash-out refinancing. 6 Reasons why you should refinanceIf you're thinking "Should I refinance my house?", check out the 6 reasons as to why you may take such a decision. - You want to save more:
Your monthly payments will be reduced if you get a low rate or when your loan term is extended. However, with an extended term, your monthly savings will increase but you'll be paying more in total interest for the life of the loan.
- You want to pay down your mortgage quickly:
You can shorten the length of your mortgage by reducing the loan term. Monthly payments will no doubt go up, but you will be able to save more in the overall interest payment. Moreover, you'll be debt free in a shorter time.
- You need extra cash to pay off credit cards:
If you have enough home equity, you can borrow more than the current loan balance. With the extra cash, you can pay off high interest debts such as credit card balances or installment loans. You gain out of it as the interest on such debt is not deductible unlike mortgage interest.
- You wish to consolidate 2 loans into one:
If there's enough equity (due to high appreciation), you can consolidate first and 2nd mortgages and refinance into a single first mortgage. The monthly payment on the new loan is likely to be lower than the combined payments on the first loan and the second mortgage.
- You want to convert an ARM into FRM:
This allows you to lock in at a low rate. You can thus repay the loan with stable monthly payments rather than variable payments over the loan term.
- You want to get rid off PMI:
If your current loan balance is below 80% of the new appraised home value, you can go for a home refinance and stop paying the PMI.
Tips on when to refinance a mortgage"Should I refinance my house now?" – This is what most people ask when they're willing to reduce their mortgage payments by taking advantage of low rates. To find the answer, check out the mortgage refinance tips given below.
- Build up equity:
It is feasible to go for a refinance when you have built up at least 10% equity in your home (For Fannie Mae owned mortgages, the value is 5%). It is also possible for you to choose the option if your equity is less than 5%, but you may have to pay a certain amount of cash in order to make up for the difference in equity.
- Check if mortgage refinance rates are low:
It's better to follow the 2% Rule which suggests that you can enjoy the benefits of a home refinance if your mortgage refinance rate is 2% lower than that on your current loan. The interest savings will help you recoup the costs you've paid for the new loan provided you stay in the property for a certain period of time (break-even period). However, there are no-cost as well as low-cost refinance loans wherein the costs are included into the loan. But you can expect comparatively higher rates on such loans. Moreover, these loans are limited when the market is in a credit crunch. Know more about when to refinance rule of thumb.
It is advisable that you compare mortgage refinance rates offered by different lenders in order to find the best rate that you can afford. This will help you save more in interest over the life of the loan.
- Pay off any late payment:
There is no such limit on the number of times you can go for home refinance loans. Most lenders prefer that you have no late payment for the past 12 months before you switch over to a new loan.
- Remove negatives and improve credit score:
Pull your credit report from the bureaus and review it for any negative items (late pays, collections etc) and inaccurate detail. Try to dispute negative items and remove them from the report. If required pay off any unpaid debt. Otherwise, you won't get a low rate and may not even qualify. Of course there are lenders in the subprime market who may offer you a bad credit refinance loan, but it's better to avoid them as they'll possible charge higher rates and fees.
When not to refinance
Refinancing does not make sense under the following situations:
- Your property value has gone down:
If your property value reduces and you refinance up to 80% of the reappraised value, your original mortgage amount may be higher than this amount. Thus, the new loan will not be sufficient enough to help you pay down the existing one.
- You are paying off the first loan for a long time:
If you are making payments on a long term loan, say, 30 year mortgage for the past 10 to 20 years, then refinancing to another 30 year loan will not be a good option as it may increase your overall payment.
- You have used up enough equity:
Refinancing may not be that useful if you have already used up 90% or more of your home value in taking out a mortgage or any home equity loan. You won't be able to get the best rates available in the market as when you refinance a 90% LTV loan, you will probably require a loan of that value or higher. This will be quite closer to being a 100% financing option and hence mortgage refinance rates will be comparatively higher. Moreover, 100% loans are hardly available in times of mortgage market crisis.
- You have a few years left on the current loan:
If there are only a few years left on your current loan, it's no use refinancing with a long term loan. You may need extra cash but with a long term loan, you'll end up paying more for the entire loan term.
Refinancing will make sense if you are into it for the right reasons and at the right time. You need to decide whether you'd go for a simple refinance or take out extra cash too. And in case you'd like to check out what mortgage refinance rates and terms are available, you may request for no-obligation free mortgage refinance quotes from the community lenders and brokers.
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Caron
Moderator
Joined: 19 Jul 2005
Posts: 1562
Location: florida
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Post subject: Pay Option ARM dominates the California Refinance Market |
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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 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. |
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helping_user 123
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Post subject: Discount Points in refinance |
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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. |
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Elizabeth Lennox
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Post subject: reverse mortgage for disabled 52 year old? |
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| 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 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. |
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Jessica
Community Mentor
Joined: 08 Jun 2004
Posts: 813
Location: OHIO
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Post subject: RE: |
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Hi Elizabeth,
Welcome to the forums.
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.
Regards,
Jessica. |
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heggelund
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Post subject: |
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| how does the CHFA's statewide Hardship Refinance program work thanks |
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colin
Moderator
Joined: 30 Jun 2006
Posts: 602
Location: Waltham, Massachusetts
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Post subject: |
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Hi Heggelund,
Welcome to Mortgagefit forum.
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.
Please go through this page to know more about the eligibility requirements to qualify for this loan as well as the procedure to apply - http://www.colohfa.org/documents/hf_hardship_factsht.pdf
Colin |
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Knauss
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Post subject: Streamline Refinance |
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| what are the conditions/requirements for streamline refinance of fha loans and can a streamline refinance possible without going for a appraisal? |
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miller_st
Joined: 17 Jan 2007
Posts: 917
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Post subject: FHA streamline refinance |
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Hi Knauss,
A streamline refinance 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. Another thing is that it cannot be a cash out refinance.
Second thing you asked is about appraisal. Yes streamline refinance 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.
Miller |
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pan_kul
Joined: 13 Mar 2007
Posts: 12
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Rundgren
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Post subject: |
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| 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? |
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blue
Joined: 21 Oct 2005
Posts: 1138
Location: MARYLAND
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Post subject: |
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Hi Rundgren,
Welcome to Mortgagefit discussion board.
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 normal and require higher equity percentage.
Do let me know if you have any other questions.
Thanks
Blue
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james the retard
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Post subject: quit claim deed |
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| 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 |
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helping_user
Joined: 31 Mar 2006
Posts: 815
Location: Hawaii
154.76 Dollars($)
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Post subject: |
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Hi James,
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 the refinance the existing mortgage after quit claim process will complete.
Thanks |
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Niicss
Joined: 03 Oct 2005
Posts: 2579
Location: New Jersey
402.93 Dollars($)
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Post subject: |
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| Quote: | | 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 |
If she is on the loan then a quit claim deed will not release her from mortgage responsibility.
She will remain on the loan.
And as title ownership will change because of the quit claim deed the lender would require you to refinance the mortgage in your name.
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Good is the Enemy of Great. |
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