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Mortgage Refinancing, A Big Decision Requires Proper Planning

Buying a home is very important to many people the world over. Because houses are such a big-ticket item for most people, the most costly item they will ever purchase in their lifetimes the biggest hurdle they must jump over is getting a mortgage loan just to buy a house.

Once a loan is obtained however, it does not automatically mean the homeowner has stopped getting loans. Most homeowners refinance their mortgages from time to time, at least every 10 years if not much more frequently.

To refinance a mortgage is to replace it with a brand new loan, usually but not always from a different lending company. In so doing, the applicant (current homeowner) must go through a mortgage application process similar to the process of obtaining the original mortgage loan. Refinancing can be a very sound financial choice, if done for appropriate reasons.

There are good reasons and times to refinance, and there are also bad ones. Good reasons for home mortgage refinancing may include: reducing monthly payments by taking advantage of lower interest rates or extending the repayment period; reducing the interest rate by switching from an adjustable-rate to a fixed-rate loan or from a balloon mortgage to a fixed-rate loan; reducing the interest cost over the life of the mortgage by taking advantage of lower rates or shortening the term of the loan, and paying off the mortgage faster (accelerating the build-up of equity) by shortening the term of the loan.

It may be a good time to refinance a mortgage when it is possible to get a better rate or a better loan product to fit your needs, and when there is no current prepayment penalty that would eat up equity by paying off the original loan. A bad time to refinance a mortgage would be when rates are currently higher than the loan is already fixed at, and when paying off the current loan would mean incurring a prepayment penalty to the lender.

While it is possible, and many homeowners do it all the time, to use home equity to buy luxury items and finance vacations, it is not necessarily smart. The house is an appreciating asset, so its equity should only be used to buy other appreciating assets (such as other properties, or businesses) rather than items that are known to only lose value. It is not the best use of refinancing to get cash out to pay off credit cards that will only be spent up again due to out-of-control spending habits. It would be much smarter, for example, to use cash from a home to fix up the home and therefore increase its value, than to buy a luxury car that will depreciate as soon as it’s driven off the dealership lot.

Gaining equity in a home is a wonderful thing; a solid investment. However, mortgage refinancing should not be viewed in terms of using a house as an ATM, because of the risk of dwindling equity — a secure nest egg for the future — for short-term inability to curb the desire for immediate gratification.

 Kathy Hildebrand is a professional writer who is easily bored with her “day job” assignments. So, she researches anything and everything of interest and starts writing. Writing about an extremely wide variety of subjects keeps her skills sharp, and gives her food for thought on future paid writing assignments.

More of her research and articles can be found at www.lasertargeted.com/mortgage and other sites around the internet.

Mortgage Refinancing, A Big Decision Requires Proper Planning / Author: Kathy

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Mortgage Refinancing - The Facts

Mortgage refinancing is when a homeowner gets a new home loan to pay off their existing one. The benefits of doing this are that they may be able to save money by getting lower interest rates or special deals. Refinancing is not the best option for everyone, though. For a person who is facing financial problems refinancing could spell trouble.

It is common for a person to want to save money on their home loan. A home is most likely the biggest purchase a person will ever make, but that does not mean they have to stick with one lender and pay the same high interest rates forever. Home owners have the option of refinancing to cut their home buying costs. Refinancing involves shopping around for a better deal then the one they currently have.

When shopping around it is advisable to approach a few good mortgage brokers that work with a large panel of lenders, not just one or two. This way they can search the market place to find the right deal for you. This is even more advisable if you have a bad credit history. A good broker will have access to a number of specialist adverse or sub prime lenders who will be able to offer you competitive rates. The same is true if you are self employed and have trouble proving your income.

Many times when a person is facing financial problems they see using their home as a way to clear their debts. While that is an option, refinancing to get out of financial problems is not a good idea. One reason is that should the person be unable to make the new loan payment, then their house is now in jeopardy.

Unless a person is truly sure that refinancing their home to get money to pay off debts is something they can afford and will truly solve their problems, then it is not a wise decision.

Some people refinance to change from a variable interest rate to a fixed interest rate. This can be very beneficial. Fixed rates mean that the mortgage payment never changes and is the same form month to month.

With a variable rate the amount of the mortgage can change drastically form month to month as the interest rates fluctuate. However, with a fixed rate a person has to be careful not to lock in on too high of a rate. They would then lose out when interest rates go down, unless they go through mortgage refinance again.

There are also many lenders out there who are not what they say to be. Mortgage refinance scams are common and can really be damaging. To avoid scams a person should always deal with a trusted lender and read every piece of paperwork completely. If a deal does not seem right then it is best to back out before ever signing anything.

Mortgage refinance can be a very good thing if done carefully. There are also many ways in which it can go wrong. Homeowners need to be aware of everything involved in mortgage refinance so they can get the best possible deal that will save them the most money.

They should also always be aware that they are risking their home should they not carrying through with their mortgage obligations. It is important to make sure everything is in place and understood before ever signing the papers.

 James Copper has been in the financial services industry for many years. He is currently a Cheap Remortgage Expert for Remortgage-Here, who specialise finding in the Best Remortgage deals available.

Mortgage Refinancing - The Facts / Author: Christopher

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Mortgage Refinancing - Important Factors to Consider

Nowadays, refinancing one’s mortgage is an extremely attractive option for homeowners with big loans to pay off. Simply put, mortgage refinancing means you’ll take out a new loan to pay off your current mortgage, and this new loan actually has lower interest rates than your previous one, which therefore results in lower monthly payments. This fact alone is already a major selling point for many people.

Mortgage refinancing is also one way to shorten your mortgage’s term, since you’ll be able to make payments more quickly. It also allows you to cash in on your home equity, which should give a significant amount of money in your pocket and allow you to use it for other personal expenses such as home improvement projects.

But before you decide on refinancing, consider the following factors first.

?¤ Check your credit score. The higher your credit rating, the better your chances of getting a lower interest rate on your loan payment. You should also watch how market interest rates are doing before jumping into mortgage refinancing.

?¤ Will your potential refinancing lender allow you to pay off a significant amount of your mortgage? There are lenders who would only assist you with around 85% of your original loan.

?¤ Figure out how many ‘points’ you’re supposed to pay upfront, if any. One point, or your premium, is equivalent to 1% of your total loan amount.

?¤ Consider the benefits of a fixed refinancing rate instead of going with an adjustable rate mortgage (ARM). ARMs are good only when current interest rates are down, but will give you a headache once rates skyrocket once again.

?¤ Be warned: if you’re only looking to refinance to avail of lower interest rates or to save more money, you should take a look at any fees and closing costs that come with taking out your new loan. Sometimes, the add-on charges will actually amount to more money than you’ll be saving if you take out the loan. Even if this isn’t the case with your lender, unless you can afford the fees, you’d better think twice about mortgage refinancing, or make sure you have enough money saved up to cover the costs.

If your lender does have a no-cost refinancing option available, which means that you won’t be charged for any fees, don’t lunge at the opportunity right away. No-cost refinancing means that your interest rates will be jacked up, so take a look at your current payments first as well as the amount you’ll pay and save when you avail of a mortgage refinancing loan that comes with fees to see which set-up would greatly benefit you.

Refinancing your original home mortgage loan is a great way for you to slash your monthly bills, but it could only work if it really will save you more money in the long run. Even if you’ll pay lower interest rates or bills for your loan every month, you should consider how the total amount of cash you’ll be paying for mortgage refinancing will affect you.

Mortgage tips made easy - Refinancing Your Mortgage

Mortgage Refinancing - Important Factors to Consider / Author: James Ack

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Mortgage Refinance or Home Equity Loan - What’s the Difference?

Many people use the terms mortgage refinance and home equity loan interchangeably, but the two are not the same thing. Before you consider one or the other, be sure you know what your lender is referring to.

The reason the two terms are often confused has to do with the fact that you’ll typically be refinancing your existing mortgage when you have some equity established in your home. Equity is simply the difference between the market value of your home and the amount you owe against it. To put it into dollars, a person who owns a home that has a market value of $100,000 and a mortgage on that home of $60,000 has $40,000 in equity.

That’s not to say that all lenders are willing to loan you an additional $40,000. In fact, many lenders have caps on the amount they’ll loan. It might be that a particular lender will only loan up to 90 percent of the market value of the home. In that case, the loan value of the home would only be $90,000. Though the amount of equity technically remains the same, the amount of loan available depends on the lender’s guidelines.

If you have $40,000 in equity in your home, you may want to cash in on at least some of that money. But how do you go about getting it? The two main options are to take out a mortgage refinance loan or a home equity loan. A mortgage refinance is exactly what the name implies - your original mortgage will be figured into a new loan, giving you a mortgage refinance loan. But a home equity loan leaves the existing loan as it stands. You’ll have a second payment on top of the original mortgage.
So which is better? It actually depends on several factors. Did you get great terms and rates when you financed the original loan? If so, you may want to consider a home equity loan so that you keep those great rates and terms on your original mortgage.

Can you afford to make the “double” payments required? Remember, if you take out a home equity loan you’ll still be making the original mortgage payments and your home equity loan will be tacked on top of that. Some people find that the budget simply won’t stretch to make those necessary payments.

There’s plenty to consider before you decide whether it’s time for a mortgage refinance or you should take out a home equity loan.

Dave is the owner of http://refinance-home-loan.info and http://california-home-loan-refinancing.info websites that provide information on mortgage refinancing.

Author: ted belfour

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Mortgage Refinance – What Are All Those Closing Costs?

Some people who decide it’s time for a mortgage refinance aren’t prepared for the closing costs associated with the loan. They think that they’ve already paid closing costs and all the other fees associated with the purchase of the house, so they’re surprised to find that many of these same costs pop up again when it’s time for a mortgage refinance. What are these costs? And which can you expect to pay again?

The amount of time that’s passed since you took out your original loan will have some impact on the cost of your mortgage refinance, but time isn’t the only factor that can make a difference. Take a look at the typical home appraisal. As a rule, a lender wants this document so that he can prove to his superiors that the property is worth at least as much as he’s agreed to loan you. Remember that banks aren’t typically in the real estate business. If you should default on the loan, the lender wants to know that he can recover at least the majority of the loan by selling off that property.

That’s why a current appraisal is often required for a mortgage refinance. Property values fluctuate and other changes impact the final dollar value an appraiser will attach to your property. You may even have made some changes that will affect the value. Have you added floor space by building on a room or even boxing in attic space for a bedroom? That can increase the value of your home. If you’ve done major renovations or even added a pool, you may have raised the value of your property and the appraisal will reflect those changes.

Remember that you’re likely going to be limited to some percentage of the value of your home probably 80 or 90 percent. If the appraisal shows that your property is now worth more than when you bought it, you may be eligible for a larger loan or better terms.

You’ll also likely pay closing costs for taking out a mortgage refinance. The lender is charging you for rewriting the loan, going through the steps and creating the paperwork.

The lender may also run an updated credit check. This could also help you if your credit has improved over the course of your loan. You may now qualify for better rates and terms than when you took out the original loan. Some people even use that status change as a reason to seek a mortgage refinance.

Dave is the owner of http://mortgage-quotes-online.info and http://home-loan-mortgage-refinance-loan.info websites that provide information on mortgage refinancing.

Author: ted belfour

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