Archive for Refinance Tips
Debt Consolidation with a Mortgage Refinance
Posted by: | CommentsIn these days of financial uncertainty, many American homeowners are working toward true financial freedom. However, budgeting can only get you so far when you have a large amount of credit card debt at high, revolving interest rates. The actual cost of the debt increases far faster than a normal person can pay it down, making it virtually impossible to get ahead. Many financial advisors recommend mortgage and debt consolidation. Consolidating debt with a mortgage refinance offers a chance to move that high interest debt to a debt consolidation mortgage. Home owners all across the nation are consolidating debt with a fixed rate refinance loan that lowers their monthly payment and slows the interest building up on the loan.
Mortgage refinancing can be a great vehicle for bill consolidation and saving money with a lower monthly payment. Consolidating debt is possible through refinancing your home mortgage, increasing the loan, and taking out cash to pay off credit cards or other high interest debts. This mortgage and debt consolidation makes it easier to plan out complete debt elimination. Lower monthly payments allow savvy home owners to pay extra each month, which is applied straight to the principal of the mortgage loan. This drastically reduces the amount of time it takes to pay off the loan. Consolidating debt with a fixed rate refinance loan can be a very effective route to restoring your financial peace and credibility.
However, consolidating debt with a fixed rate refinance loan should be paired with an overall financial plan, including a budget and savings as well as the mortgage and debt consolidation. Budgeting and avoiding additional debt is essential for achieving financial freedom. Savings is also an important tool in the fight for control of your finances, because an emergency can make you fall into the trap of credit card debt again if you do not have enough savings to cover unexpected expenses in addition to your debt consolidation mortgage. These loans are kind of like the opposite of a money mortgage that provides cash out to the borrower. The debt mortgage consolidates bills and loans rather than extending additional debt.
A consolidation mortgage is the cornerstone of a financial plan for those home owners who need to rid themselves of high interest, revolving credit card debt. Consolidating debt with a refinance loan that has a fixed interest rate provides clear and immediate relief from the stack of bills that multiply themselves through revolving calculating of extremely high interest rates. Mortgage and debt consolidation slices those interest rates so you can pay down the principal of the loan. Debt consolidation with a mortgage refinance also helps the organizationally challenged with only one payment each month, rather than many individual credit cards.
Mortgage Refinancing with a 5 or 7 Year ARM
Posted by: | CommentsMost American homeowners have turned a deaf ear to discussions regarding mortgage refinancing with an adjustable rate. Clearly fixed rate mortgages have surged in popularity in recent years, but they are time when an ARM makes sense. Adjustable rate mortgages (ARM) are a very attractive option for homeowners looking to invest in a home. The interest rate offered on these types of loans are generally significantly less than what you would get on a 30 year fixed rate mortgage. However, the tradeoff is that the interest rate usually changes every year on the anniversary of your loan. This can be quite risky as you won’t know for certain if the interest rate will be higher or lower than your current rate. Even a change of as little as 1% can add hundreds of dollars to your monthly mortgage. Is the monthly savings worth the risk?
Is a 5/1 or 7/1 ARM Too Risky?
It depends on what your long term goals are. Although there are a number of ARMs available, many people consider 5/1 or 7/1 type of ARMs. A 5/1 ARM is fixed for five years and then the rate adjusts every year afterwards until the loan is paid off. The 7/1 ARM is fixed for seven years and then an adjustable rate for the other 23 years. For those that are considering refinancing a home loan, these may be viable options if you are anticipating interest rates will drop by the time the five or seven years have passed. The reality is that there are multiple choices for a fixed rate mortgage refinance with hybrid loans that blend fixed and adjustable rates over the term.
ARM Refinancing May Save You Thousands of Dollars a Year
They are also a good option if you plan on moving or selling your home prior to the mortgage rate becoming adjustable. For example, if you are planning on retiring in a few years and moving to another state, then refinancing at a fixed rate for 5 or 7 years can save you a significant amount of money in interest. As long as you sell your home before the fixed rate term is up, then refinancing your home loan may be worth the time and effort.
How much lower is the 5/1 rate than a 30-year fixed rate? It can be 2% or more less than a fixed rate mortgage which would result in several hundred dollars in savings every month. That is money you can use to pay off more expensive debt, such as credit card, or to put towards your retirement savings. Be aware, though, that refinancing to a 5/1 or a 7/1 does carry some risk. Namely, if you do not sell your home in time, you could get stuck paying a higher interest rate when your fixed rate term ends. Evaluate all of the elements involved in the refinance – interest rate, fees, terms – to ensure you are getting the best deal available. There are more choices today for the fixed 5 and 7 year loans with conventional, jumbo and a FHA mortgage refinance program. This makes selecting a hybrid refinance that much easier.
When to Refinance
Posted by: | CommentsKnowing when to refinance your home is difficult if you are trying to time the market. Most homeowners try and play the interest rate game like the stock market when it comes to refinancing. They usually think that if they wait a little longer that the mortgage refinance rates will fall.
Unfortunately like the stock market, predicting the trend for interest rates is difficult and if you wait too long it can come back to haunt you. Millions of homeowners waited a day, week or month too long and never saw mortgage refinancing rate decline to the level they had hoped for.
If you are wondering when to refinance a mortgage, take a picture of your financial situation and compare your interest rate with the current refinance rates.
- Will refinancing save you money without adding years to your mortgage?
- What will mortgage refinancing cost you?
- Do you qualify?
- Can you document your income with W2’s and paystubs?
- What is your credit score?
- Do you have enough equity to meet the loan to value requirements for home refinancing?
Many people choose to refinance when they can lower their interest rate by a percentage point. If you have a jumbo mortgage, lowering your rate a quarter of a percentage point could save you thousands of dollars. So use a mortgage calculator online and do the math so you can make a sound decision on a mortgage refinance loan. You need to have a good idea about how much money you would save by refinancing. We also recommend looking at the big picture when shopping for the best loan. Remember that a FHA refinance will have a monthly insurance payment in addition to the mortgage payment, so make sure that you are looking at the big picture. Consider the costs and benefits of mortgage refinancing, before paying for a new appraisal and committing yourself to one lender.
Mortgage Refinance Loan Alternatives
Posted by: | CommentsThe financial meltdown and continued tough economic conditions have lead many people to consider mortgage refinance alternatives. With the ongoing threat of foreclosures due to adjustable interest rate refinancing packages, seeking out a way to lower monthly payments is a smart financial move. Escaping from the uncertainty of changing monthly bills, considering the different options can help individuals plan their personal budgets. One option is to investigate FHA refinancing programs. A number of viable mortgage relief options exist for those looking to gain better control over their costs associated with owning a home. This can provide a sense of security in an unstable market.
Utilize Mortgage Relief Resources at Your Disposal
Before embarking on looking into mortgage refinance loan alternatives, perform a thorough audit of the current financial obligations within the household. Understanding the impact of debt levels on mortgage refinance programs will help to determine the best route to consider. For individuals that may have large credit card debts or have experienced late payments on important bills, bad credit refinancing packages may need to be contemplated. While the overall credit rating can have an impression on the types of interests rates offered to those interested in home refinancing, it doesn’t have to prevent the overall process. Knowing the available choices can help find the right course of action.
Not only will fixed rate mortgage refinance alternatives impact the monthly payment obligation associated with the property, but they can significantly impact the overall total cost of the loan. Speaking with professionals that understand various mortgage relief programs can provide insight on previously overlooked possibilities. An outside consultation can suggest a loan modification package that may not have been discovered from self-research. Understanding all the possible avenues that one can take significantly increase the possibility of finding a workable solution to the problem. With the right approach, a seemingly difficult situation can be easily overcome.
Because of the demand, the marketplace has created a number of different mortgage refinance alternatives. The increasing number of loan relief choices can be difficult to navigate without expert help. Seeking the advice of someone that is an expert in the field can define complex terms and provide a sense of clarity. Counselors can lay out the different possibilities and explain the benefits of one program over another. A loan officer will even help to expand the number of options that are available for the homeowner seeking mortgage refinancing suggestions. Using the resources available will allow the different plans at your disposal a real possibility to find a new mortgage.
Mortgage Refinancing and Debt Consolidation
Posted by: | CommentsMost financial analysts would agree that mortgage refinancing to consolidate adjustable rate debt is a good move for consumers financially. Trading debt with adjustable interest rates for a fixed simple interest loan that is tax deductible is simply smart financing. Whether you choose a second mortgage or refinance loan may depend on your equity, credit score and preference. A few years ago, no equity mortgage refinancing was easy to find, but today most 100% refinance options do not allow cash out or debt consolidation. For example, the popular streamline refinance program that is insured by FHA or VA does not require an appraisal, but they again, no cash out is allowed. The FHA streamline refinance even requires borrowers to pay for closing costs out of their pocket.
Freddie Mac reported that in the fourth quarter 46% of homeowners who refinanced their home loan reduced their principal balance by paying in additional money at the closing table. This is the highest “cash-in” share since Freddie Mac began keeping records on home refinancing patterns in 1985. Freddie Mac also said in its 4th quarter refinance analysis that “cash-out” borrowers, those who increased their loan balance by at least 5%, represented 16% of all home refinance loans, the lowest cash-out share since the analysis began in 1985. The average cash-out share over the past 25 years has been 62%.
Cash-out refinance activity in recent years has been harder due to tighter loan guidelines and tougher underwriting standards. When you factor in the declining in property values, it’s easy to see that cash out refinance loans are very difficult to get approved in today’s mortgage climate. Among the refinanced loans in Freddie Mac’s analysis, the median appreciation of the collateral property was a negative percent over the median prior loan life of 4.1 years.
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