Should I refinance?

It really depends on your financial situation whether you should refinance or not. Refinancing your mortgage will only be of benefit to you if you will be able to lower your interest rate by at least two percent. Also, it depends on how long you plan to stay in your home. If you do not plan to keep your home, it may not make sense to refinance. However if you plan to stay in your home for a long time, allowing you to break even or get back the money it took to refinance, then refinancing your home loan would make sense. On the other hand, if you plan to sell your home within a few months, you should probably hold off on refinancing until you talk to a refinance expert and fully understand all the pertinent details.

Are All Mortgages Created Equal?

All mortgages are not created equal, so when shopping around make sure you compare apples to apples and not apples to oranges. Choosing a mortgage based solely on the annual percentage rate (APR), or on the amount you have to pay each month is a dangerous way to make a decision. There are a few more important variables to consider, such as:

• Type of interest rate – Fixed vs. adjustable interest rates. A fixed rate will remain the same throughout the life of the loan, whereas an adjustable or variable rate will change after a predetermined amount of time has passed, such as three years or five years.
• Origination fees – Origination fees, discount fees, or points are fees that you pay to a lender or broker at closing. Determine if the fees are worth it.
• The term of the mortgage – This will tell you how long it will take you to pay off the loan’s principal and interest.

Will It Really Help To Refinance Your Home Loan?

In order to make a knowledgeable decision you will need to shop around until you are completely satisfied with your deal. The decision to refinance should only be made if you will benefit in the long run.

Repaying your home as fast as possible doesn’t always make the best financial sense. Often cash flow, capital growth and freedom from debt are more important in maintaining stability and security for your family, than owning your home outright right now. Therefore, consider the top five reasons people refinance their homes, and how you can use mortgage refinancing to set your family up with the modern version of security through property.

1 Debt consolidation

The reality is that most of us have a credit card or two with an outstanding balance we just can’t shift. One of the greatest barriers to getting rid of any sort of personal debt – credit cards, personal loan, store cards or student loans – is the interest rate, and the compounding interest which just keeps being added to your balance and increasing your repayments.

As a result, consolidating debts into your home loan is a popular reason for refinancing because home loans are the form of borrowing with one of the lowest interest rates. To refinance your loan to consolidate debts you will need to be able to show your lender capital growth, and an accumulation of equity which you can borrow against. Your principal loan amount can then be refinanced, subject to approval as your borrowing capacity will be reassessed, to include your existing home loan amount, plus the amount of equity you need to access to repay your other personal debts.

Debt consolidation is only a good reason to refinance if you keep your consolidated debts and your original home loan amount split, so you can still focus on repaying your personal debts sooner; if you don’t you will end up paying more interest on your personal debts because you are paying them off over a much longer term.

2 Lower repayments

Lower mortgage repayments can ease the pressure on your cash flow situation and free up funds for other investments, lifestyle changes such as a holiday or a private school for your child, or to direct more funds to your 401K for your retirement.

If your refinance your home loan to one with a lower interest rate, even a discount of half or three quarters of a percentage point can lower your monthly commitments. However, for this to be of a true benefit, you need to make sure you plan to stay in your home and keep your new loan for long enough that you break even – that is, the costs of refinancing are outweighed by the savings you have made.

If you can’t find a better interest rate deal you can choose to lower your repayments by refinancing your loan to a longer term. If you have a loan with a 15 or 20 year term, refinancing to a loan which spreads your repayments over 30 years can reduce your monthly commitment. Just make sure that in 30 years you will still be able to cover your repayments, and that you’re not heading for retirement and a reduced income.

You can also make lower repayments by making interest only repayments on your loan. This type of refinancing can also be one of the most affordable as you can often change your repayment structure with your existing lender. Therefore, instead of paying the interest and a portion of your principal each month, you are paying just the interest which has accumulated. Keep in mind this doesn’t reduce your loan amount and your repayments may go up at the end of an interest only period – usually up to 10 or 15 years – to keep your principal repayment on track within the term of your loan.

3 Refinance for a different type of interest rate

Choosing a fixed interest rate to see you through the term of your loan can be restrictive, especially if interest rate have dropped, or you’re able to pay more off your loan but can’t with a fixed rate product. Therefore, you may consider switching to a fixed-period adjustable rate mortgage (ARM) which is also known as a hybrid ARM. These loans will give you both a fixed and an adjustable rate on your mortgage, where a 3/1 ARM for example would have a three year fixed rate and would adjust once a year after that. Plus, the fixed interest rate for the initial period is lower than the fixed rate on a 15 or 30 year fixed mortgage so you are saving money from the beginning.

4 Cash out refinancing

While you can access the equity in your home to repay personal debts, you can also use cash out refinancing for whatever you choose. The equity in your home is the difference between the value of the home and the amount remaining on your loan. You can apply to refinance and access that equity in a lump sum payment for a new car or a family holiday.

Alternatively you can refinance to a home equity line of credit and have your loan amount approved up to your available equity amount, and draw down on those preapproved funds when you choose, for a home renovation, a party or to pay unexpected bills. With a line of credit you don’t have to make repayments until you have reached the limit of available credit, and you are only accumulating interest on the amount of the credit you have used.

5 New loan features

When you took out your loan, the features of the product may have been perfect for you. However, lenders are always making changes to the features offered and the loan structures used, that there may be a better way to structure your loan.

For example, if you took advantage of a balloon program when you applied for your home loan, you would have received lower interest rates and lower initial repayments. However, if you are still living in your home at the end of the fixed rate term – which you may have chosen from 5-7 years – your entire mortgage amount is now payable. Luckily, you can easily refinance to a new adjustable rate mortgage, or a new fixed rate mortgage.

Or, if you didn’t provide a deposit when you applied for your loan you will have been able to secure your dream home without using funds of your own, but you would have paid private mortgage insurance (PMI) because you purchased your home with less than 20% down. The PMI you are paying protects your lender if you default on your loan but if you have been repaying your mortgage for some time, the value of your home has increased and your loan amount has decreased, so by refinancing you may be eligible to remove the PMI costs from your loan as you can provide that equity as security.

However refinancing is not for everyone. If you only gave a few years left on your mortgage payments or the value of your home have depreciated, refinancing may not be your best option. And a general rule, if you have a large number of years left on your mortgage, then getting a new loan with its benefit will be ok. When seeking to refinance your mortgage, applicants should:

1. Be specific about the loan size:

Being sure of your loan size reduces the time spent with your mortgage broker.This will depend on several factors such as when you plan to sell the house, length of the debt and repayment amounts.

2. Do not rely on advertised rate:

Banks will always advertise the best rate possible for their refinancing. This rate is however reserved from that top 10% who meet all their stipulated requirements. Refinancing rates are established on an individual basis based on your credit score, loan size and whether the loan is closed or floating.

3. Start with your current mortgager:

If you have a good record with your current mortgager, it is best to seek you refinancing from them. They will be more accommodative in order to keep your business. They may also be willing to extend some courtesies such as reduced processing fees due to your loyalty.

4. Be careful when shopping around:

Shopping around is not a bad idea. However, before your give out any information such as your social security number ormake any paymentsensure that the business is legitimate. This can be done by calling the state’s division of banking to investigate the lender’s track record.

5. Avoid “No Cost” refinancing:

No cost refinancing is a trick used by many institutions to syphon money from your pockets. Under no cost refinancing, the fess associated with let us say a 30-year mortgage could be doubled, as these fees are bundled into the overall mortgage. As a result, mortgagers will also be paying interest on these fees.

6. Opt for he reissue rate on you title:

If you are staying with your original mortgager, individuals can ask to be given a reissue rate for their title. This cost is usually 70% less that the cost of issue of a new title. Of course, if you are using a new refinancer, you would not have this option.

7. Recheck your new Title:

Ensure that your new title has all the correct information before it is sent to the courthouse for recording. It is within your rights to request this of your mortgager.

8. Avoid escrowing taxes and Insurance:

Unless you foresee financial difficulties or you are an undisciplined individual, when refinancing never escrow to cover your home insurance or property taxes. This will attract a fee of 1% of the loan amount in states that allow it.

9. Revise closing cost estimates:

If you lock your interest rate, the lender should furnish you with a god faith estimate of your closing cost within three days. Peruse these numbers carefully and compare them with those on your final settlement statement. This gives a good idea of the final closing cost.

10. Allow some time for Closing:

Giving yourself enough time to complete your entire financial requirements can save you a lot of money. A closing time of 30 to 45 days is usually enough to ensure all your contractual obligations are met.

Would you like to refinance your second mortgage? The decision to refinance your second mortgage should work to your advantage. For some homeowners, refinancing is a good idea and a good financial move, but for others that may not be the case. Here are some things you need to know in order to help you make your decision.

Advantages of Refinance a Second Mortgage

Refinancing your second mortgage can be a good idea if the interest rates are better than what you currently have, otherwise you may end up paying a higher monthly payment in addition to the cost of refinancing. Below are a few advantages of refinancing your second mortgage:

• To consolidate the first mortgage and the second mortgage into one mortgage loan and one monthly payment
• To get rid of adjustable rates for a fixed interest rate
• To get a lower interest rate
• To change terms and conditions to fit your current financial situation
• To lower your monthly payments

Selecting a Second Mortgage Refinance Package

There are two ways available to you if you decide to refinance your second mortgage. One way is to get a second mortgage for the full equity built up in your house, which is a home equity loan. The other way is a home equity line of credit which is less costly, but you will have cash available which you do not have to pay interest on until you use it. There may be a third option available which is to refinance everything. Talk to your second mortgage refinance lender to see what your options are.

Steps to a Smooth Refinancing

Step one – Before you refinance, make sure that your credit report is intact. Get a copy of your credit report and go over it thoroughly for any mistakes and get them corrected immediately. Any negative report on your credit can lower your credit score.

Step two – Open a savings account or if you already have an existing account, add some money to it. This is to show the lender that you have a reserved fund to cover closing costs or other costs associated with refinancing your second mortgage.

Step three – Shop around for lenders who can advice you on how to refinance a second mortgage, get as much information as possible from each lender to help in selecting the best lender that offers you the best terms and fees to suit your needs. Keep shopping around until you are completely satisfied with the offer.

Step four - Take the time to look over the terms and conditions of your refinance before signing the paperwork, because once the paperwork is completed and you sign on the dotted line, there may be no going back.

As with any mortgage, make sure you keep the time frame short. A longer time frame means that you will end up paying more in interest. Again, the final decision lies with you and your individual financial situation and needs. Before you jump head-on into a second mortgage refinancing agreement, you should do your homework and determine whether or not refinancing your second mortgage is in your best interest financially. ]]> http://blog.badcreditwhiz.com/refinancing-second-mortgage/feed/ 2 http://blog.badcreditwhiz.com/bad-credit-homeloan-ref/ http://blog.badcreditwhiz.com/bad-credit-homeloan-ref/#comments Wed, 09 Sep 2009 06:45:29 +0000 William M. Davis http://blog.badcreditwhiz.com/?p=1010

There are lots of benefits to a bad credit home loan refinance. When you stay in your home for an extended period, you develop a decent amount of home equity. If your property is in an area where there has been a considerable increase in the property prices, there is a chance of increase in equity, which you can use for home improvement or debt consolidation loans.

Get to Know the Loan Package

As a borrower, it is your responsibility to familiarize yourself with the loan package before signing an agreement. You must know well in advance what you are going to get from the loan package. A bad credit home loan refinance is quite similar to a first mortgage loan. Before accepting any loan offer, you need to take into consideration the interest rates. Lenders will check your financial condition first. If your financial condition is not good, you may face rejection.

To get a better idea of your loan package, make sure that you interact with the lender. This can come in handy if you are not happy with the terms and conditions of the loan package. To get bad credit home loan refinance, you need to tell the lender what your motive is in taking out the loan. The majority of people get this loan for debt consolidation.

How to Qualify for Bad Credit Home Loan Refinance

To qualify for a bad credit home loan refinance, you need to devote plenty of time in research. As few lenders deal with bad credit home loan refinance, you need to find a lender that provides loan to people with bad credit. Once you do that, you need to fill out a loan application form. If there are any mistakes on your loan application, your application will be rejected by the lender.

Finding a Lender to Refinance Home Loan with Bad Credit

To find a lender for bad credit home loan refinance, you need to shop around in the market. Any friends or family members who have taken out a bad credit home loan refinance in the past can help you in finding a lender. The internet is the best place to find a lender for bad credit home loan refinance. Before going with any lender, make sure to check the profile of the lender first. Stay away from lenders that are not members of the Better Business Bureau. You should go with a lender that provides top quality customer service to their clients.

The best bad credit home loan refinance lenders give their clients plenty of flexibility in terms of repayment schedule. These lenders set monthly installment on the basis of financial condition of the borrower. Often, they also provide a grace period to their customers.

Analyzing your Credit Situation

You need ask yourself several questions before proceeding to refinance your liabilities. As a first step you should read through your credit account. If the credit report is not appealing, you should first work for improving the credit situation. With no effort your refinance application will be rejected for sure. Hence to avoid a bad foot print on your credit report, you should improve and ensure your refinance application will succeed in fetching you a loan. Refinancing as an option can help or hinder the bad credit situation depending on the precaution you take.

Calculating Cost

Jot down every possible cost to be incurred for a refinance option. The best feature of refinance is that you get lower interest rates and shorter repayment periods. You should clearly note every charge which is made on the option, starting with insurance cost, carrying cost, closing cost, service fees, and a never ending list. Hence, remember cost is not just the interest cost; it is the total of all the charges made till the date the loan is repaid. Do not forget to make note of the additional taxes charged in the transaction.

Cost Benefit Analysis in Bad Credit Situation

You should do cost benefit analysis of the cost incurred and the resulting benefit you get. Say, if it is a bad credit home mortgage refinance, you benefit if you stay for a long time. Otherwise, it will not be a wise decision to refinance your home mortgage. ]]> http://blog.badcreditwhiz.com/refinance-bad-credit/feed/ 1 http://blog.badcreditwhiz.com/mortgage-refinance-faqs/ http://blog.badcreditwhiz.com/mortgage-refinance-faqs/#comments Mon, 09 Mar 2009 12:10:03 +0000 William M. Davis http://blog.badcreditwhiz.com/?p=449

Mortgage Refinancing is practical option if done at the correct time. It can help you clear your other debts as well. The money saved through refinancing can be used for expenditures like house renovation or higher education. Below are Top 20 most asked question on Mortgage Refinancing.

1. Can I refinance with bad credit report or should I file bankruptcy?

   Refinancing will only result in high cost borrowing, considering the risk factor involved in financing a bad credit holder, which eventually one will not be in a position to repay, hence it is a good idea to file bankruptcy under chapter 13 where a repayment plan will be developed requiring monthly installments to be paid. This will in turn help you improve your credit score, as against no payment under refinancing.

2. Will I have to pay a PMI?

   Fannie Mae requires borrowers to pay a PMI for conforming loans where the loan to value exceeds 80

3. Can I refinance where there is a lien on the property?

   It depends, the normal procedure is that you clear the lien and then go for refinancing, but again you can also file a petition to eliminate any kind of title related issues.

4. Is refinancing essential for consolidating credit card debt?

   It is purely optional and depends on your ability to payoff the loan liability. It is not a good advice to risk your house property, for in case of failure, your house is lost.

5. Is refinancing allowed when I am in bankruptcy?

   Yes, it is allowed with courts approval. You are required to submit the bankruptcy papers to the lender, fulfilling the requirement of atleast 2 years repayment under chapter 13, together with the amount of equity built during the plan is taken under consideration.

6. What is meant by the term “Seasoning”?

   Seasoning is a norm where the lenders insist that you to make payments on a current mortgage for a period of 12 months before permitting refinance.

7. Am I allowed to refinance if my property value is less than what I purchased?

   You are certainly allowed to refinance even if the value of your property is lower than the purchase cost, but ensure it is not less than what you owe. With an excellent credit report and income you certainly qualify.

8. I have refinanced the first loan, is it required that I should subordinate the second one?

   Subordinating the second loan is essential, otherwise it will be treated as the first lien on your property and refinance loan will become the secondary lien.

9. Is refinancing option allowed after bankruptcy?

   A refinance option is allowed even after bankruptcy. But yes, you are required to apply for it 2 years later to a chapter 13 bankruptcy and 4 years later to a chapter 7 bankruptcies. Any early application may not fetch optimal rates.

10. Will I be permitted to refinance if I quitclaim home?

    It is obvious that you will not be permitted for a refinance loan, as the property is no more yours. The new owner will be allowed to refinance the loan.

11. Is the extra cash from refinancing taxed?

    It is the cash out of home equity and you are the borrower, so you will be taxed for the amount of cash on refinancing.

12. Is it possible to force ex-spouse to refinance after divorce?

    Yes it is possible provided he/ she submits required documents such as income documentation and divorce decree etc.

13. Which one to choose refinancing or reverse mortgage?

    Well, the choice is yours. It is the cost factors which makes the choice visible between these two. Reverse Loans come with greater closing costs when compared to reverse mortgage.

14. There is a delay in getting appraisal report prior to refinance, what can be done?

    It is your right to ask the lender for an appraisal report. A complaint can be lodged with the State Department of Banking and Finance when there is no response.

15. Is it possible to combine 80-20 loan with FHA loan?

    Yes, it is very much possible to apply for a combined refinance FHA Mortgage Loan. Those lenders who are qualified by FHA offer loans upto 98% of the property value.

16. Is a reverse mortgage refinanced for clearing a bill?

    It is actually possible to refinance the reverse mortgage loan with any other loan provided the property value has increased; otherwise the processing costs incurred for raising a loan will eat up the benefits of refinancing.

17. Suggest me a refinance option, where I have late payments on Adjusted Rate Mortgage?

    FHA secure loan program is the best option; provided you do not have any late payments and you satisfy any other additional details required.

18. Is it possible to refinance 80% first mortgage leaving out the 20% second?

    Yes it is, provided you get the subordination agreement for the remaining 20% second loan.

19. Can a lender foreclose the loan even after signing a refinance agreement?

    Where your payments are late for close to 120 days, the lender has the option to foreclose the agreement inspite of the refinance option. Kindly opt for an expert guidance on how to appeal.

20. Which is the best refinance option interest-only or a reverse mortgage?

    You can opt for a reverse mortgage provided you look for cash flow in following 10 to 20 years. In any other case go for a fixed rate loan, interest only loans are never a good option.