Mortgage-Refinance

Have you gone frustrated over the very expensive monthly payments that you

have to pay for your mortgage? If such is the case, why should you let

yourself worry that much? Many homeowners have already tried the home

mortgage refinance loan as an option. There are numerous mortgage lenders

out there in the market that specialize in mortgage refinancing so you

don’t have to fall short of choices.

Refinancing the Mortgage – An Explanation

Refinancing a home mortgage means applying for a second loan to pay off the

current home mortgage loan. This means that your second loan will be your

ticket to paying off your first mortgage.

So what happens when you apply for a mortgage refinance loan?

With this type of loan, your present mortgage loan will be erased and be

replaced with another deal. Of course, there will be new terms and

conditions. The great news is that you will only pay for a lower interest

rate.

What benefits will you get out of refinancing your mortgage?

There will be more benefits for you as the borrower. Firstly, the total

payment on the entire mortgage value will decrease. It means that the

payment scheme will work to your advantage because of its affordability.

The second benefit that you can enjoy is the refinance mortgage loan’s

assistance in building your home’s equity. You may either get a lump sum

payment or enjoy them in installments. Another benefit is that you can

shorten the term of your loan so you get to save more money from the high

interest rates.

Will there be any reason to worry when refinancing an existing mortgage?

The financial environment is generally affected by several factors. There

are times when the interest rates in the market fluctuate. So, if what you

avail of is the adjustable interest rates, you can expect that your payment

will change on a monthly basis. The best thing to do is to get the fixed

rate so that you will not suffer from fluctuating monthly interest rates.

When is the best time to apply for mortgage refinancing?

Experts say that the best time to refinance your mortgage is when the rates

in the market have dropped down quickly. Your monthly loan payments will

lessen when you exchange the higher mortgage interest rates with the lower

loan interest rates. Also, never apply for refinancing when you only have a

few more years left to pay off your previous loan.

Can you avail of mortgage refinancing loans despite a bad credit record?

It is normal for you to feel anxious especially if you suffer from a bad

credit score. However, there are mortgage lenders who are willing enough to

offer you the solution to your problem. There are risks that you will face

though. Technically, these lenders will offer you nothing but high interest

rates. One more disadvantage is when your property has been devalued. This

will lead to a higher mortgage rate compared to the first one.

You must be wise in choosing the best home mortgage refinance loan. Get

only the one that you think will positively work for you. It will help to

consult a trustworthy mortgage broker that has been recommended to you by a

relative or close friend. Once you get to talk to a mortgage broker, you

should look into every single option that is being offered.

Ask the lender a couple of questions about his or her products. Likewise,

it is best to shop around for the best mortgage brokers in town.

Mortgage

Whenever the rates are low, homeowners often ask this question: “Should I

refinance?”

While low rates are often tempting and may be a good indication that

mortgage refinancing is a good idea, that doesn’t mean it can apply to all.

Strange as it may seem, a lot of homeowners will be better off sticking to

their current loan and ignore the current low rates.

That said, there are certain situations when refinancing doesn’t make any

sense. Let us take a look at those scenarios:

• When you don’t plan to live in your home for long

This is really something you should heavily consider. A lot of homeowners

believe that refinancing is a good choice whenever the rates are low. The

fact is, there are certain fees involved in mortgage refinancing that could

only be recouped by staying in your property for a certain period of time

(called the ‘break-even period”) – which may take several years. Hence, if

you think that you will be selling your house a few years from now,

mortgage refinancing may not be for you.

• When the current market value of your property is low

Obviously, it makes no sense to refinance your mortgage if the amount of

new loan is not sufficient enough to pay for the existing one. In the same

manner, if the appraised value of your property is low, your monthly

payment for the new loan may be higher than your current loan.

• When you are paying for your loan for several years

Say you are on the tenth or twentieth of payment on a 30-year loan.

Refinancing it to another 30 years will only increase the overall cost of

your loan.

• When you have a few years left on your loan

Even if you’re in dire need of cash, it not a good idea to refinance your

home with only a few years left in it. Extending your payment terms will

push you to pay more. For example, you have 5 years left on your mortgage

and you apply of refinancing which will extend it to 10 more years (15

years loan), the total cost of the new loan will be more than what you

should pay for the 5 remaining years even if the monthly payment are

significantly lower.

• When you don’t know how to budget your cash well

It is a common strategy to use refinancing to pay for credit card bills.

While this may be a wise choice for some, others who cannot manage their

finances well may find it rewarding at first but very painful in the end.

Not only will you place your house on the line, you are also placing you’re

your whole financial standing at risk. (Take note: refinancing doesn’t

erase your credit, you are just restructuring it.)

• When you have already used up all the equity of your home

One factor that will greatly influence the rates of your new loan is the

amount of equity you have in your property. If you have already borrowed

ninety percent of you more of your equity, chances are, you are just adding

on your financial burden and not really benefiting from the advantages of

refinancing.

• When you have a bad credit score

Aside from equity, your credit score is a significant measure whether you

get a good rate or not. So if you have missed payments and pilled up credit

card bills, you may not be qualified to a better rate.

Mortgage

Mortgage refinancing has several great benefits if used properly. But if you made just a lapse of judgement, you might be in for a costly mistake and may place your entire house at risk. Here are 5 costly mortgage refinancing mistakes you must avoid.

Mistake #1: Not locking in your rate

Rates are very erratic. It can change while your loan is being processed. So if you did not lock your interest rate in, you might be given a different rate from what you’ve expected. Ask your lender to lock in the rate you are satisfied with, place it into writing and confirm it when the processing of your loan is done. Take note: lenders will not lock in your rate without your request.

Mistake #2: Not shopping around

There are hundreds of mortgage companies out there. Each may provide the same service but they are unique from one another. This is why you have to shop around to get the best rates. It may sound like comparing apples to apples but the truth is, even apples are different from one another. Spend some time comparing different companies. Do not hesitate to ask for the best rates. And if you feel you are not getting what you deserve, then move on and go to another company.

Mistake #3: Refinancing too often

While refinancing is a good way to take advantage of lower rate and thus save money on monthly fees, it is not good to take it every time the rate falls down a notch. Remember that terminating your existing loan and buying a new one involve fees. Closing costs will pile up which really defeat the purpose of refinancing.

Mistake #4: Not computing your break-even point

Again, there is a price to pay to terminate your existing loan and getting a new one, but far too many occasions where homeowners fail to recognize this.

Computing your break even point is simple. For example, your monthly savings for refinancing your mortgage is $200 and your closing cost is $2000. Divide the closing cost by monthly savings and you will get the break even point ($2000/$200). In this example, it will take you 10 months to recoup the cost of refinancing. In other words, you have to wait 10 month before realizing the savings. This is also connected to #3.

Before ‘re-refinancing’ your mortgage, you should know first if you have recoup the cost of your previous loan. Determining your break-even point will also determine how long you will have to stay in your home before starting to get savings.

Mistake #5: Refinancing just for the heck of it

Many homeowners believe that when the rate is low, it is time to refinance. This is wrong! There are other conditions to determine if it is the right time to refinance your home and not just by looking that the prevailing rate. Never refinance if you don’t plan to stay at your home after a year or two or before you reach the break-even point.

Never refinance if you have been paying for your current loan for several years or if you have only a few years left to pay for your home. Never refinance if you have a bad credit score or if the current market value of your home is low. And never refinance if you have already used up all the equity of your home.

Mortgage