When you refinance a home there are many fees that you incur that must be paid including closing costs, courier fees, and recording fees among other things. It is estimated that $3,800 is the average closing costs for a refinance loan in 2011. Even though you are refinancing the loan for your house the fees must be paid out of pocket. However, there are a few loan types that pass those costs to other people and that include the no-cost refinance. With this loan type, the bank pays the fees associated with refinancing allowing you to keep more money in your pocket to spend on other things.
However, the bank does not give this money away for free. Typically the bank will charge a higher interest rate on no cost refinancing to recoup the money they paid for the closing costs. Exactly how much higher is the interest rate on the no cost mortgage? This could be anything from .25 to .375 cost to the closing costs or .125 or .25 is factored to the interest rate to compensate for the lender paying your closing costs. Although it may seem like a small percentage point it can translate into several hundred dollars on a $200,000 or $300,000 loan.
One of the main benefits of the no cost mortgage is the fact that the money is not coming out of your pocket. This is great for people who are strapped for cash but want to take advantage of low interest rates. If you could potentially lower your interest rate at least 2%, you would still come out ahead every month when it comes time to cut the mortgage check. This type of loan is also good for people that refinance their home frequently for investment purposes. In this instance a no cost refinance makes sense because that is money you don’t have waste every 5, 10, or 15 years you decide to refinance.
Doing a no cost refinance allows you to get more money out of your home. This is particularly beneficial if you are tapping into the equity of your home so you can pay off debts with higher interest rates or remodel your home. That extra $3,800 can be used to pay off credit cards, auto loans, or to make needed repairs that increase the value of your home. Make sure you shop around and compare interest rates of different banks to ensure you are getting the best interest for your investment.
Many people in the United States have vacation or investment properties but getting “mortgage refinancing” on a second home for a lower interest rate presents a whole new set of challenges. When people begin looking for ways to save money, the first place they often look is at their monthly mortgage payments. Typically this involves looking at a possible refinance of the home loan. However, refinancing your primary residence isn’t the only way you can save money. If you have multiple properties, reducing the interest rate on your second home or investment property could lower monthly payments and increase your cash flow. This includes any vacation homes or rental properties that you own. As long as the property is not considered owner occupied, meaning it is not your primary residence, you can find a good deal on your second home refinance.
We recommend a mortgage refinance with a fixed rate so you won’t have to worry about interest rates rising. The mortgage rate for a refinance on 2nd homes is typically .25 to .50 higher than rates on primary residences. In most cases you will need more equity to qualify for refinancing and very few lenders allow cash out for 2nd home loans.
First, the home must qualify as a second home. Otherwise you will be penalized with higher interest rates when you go to refinance the home. This means the home must be located a certain distance from your primary residence; usually 50 miles is the minimum distance that should separate your second home from your first. The second home must be used by you or your family at least 14 days per year. Once you are able to establish that the house is a second home then you may qualify for interest rates that are close to the rates offered for primary residences.
Lower Monthly Payments with a Low Rate Second Home Refinance
Typically second homes which are considered owner occupied do not require large amounts of equity in order to qualify for mortgage refinancing like primary homes do. This is another reason why you will want to make sure your second home is designated as such. It will be considered an investment home if you rent the property for income which means the bank will require a greater amount of equity in the home before they will consider letting you refinance it. This can certainly put a crimp in your plans if you were trying to get in on low interest rates.
Like any other refinance, you want to look at all of the numbers to make sure your refinance makes financial sense. Shop around for the best interest rates and don’t forget about the closing costs associated with refinancing your home. Determine if you want to actually pull money out of the home (cash in equity) or if you just want to refinance the principal so that the monthly mortgage payments are lower. If you need help, a financial planner can provide you with more information about refinancing a second home.
Homeowners and first time home buyers were busy last week submitting their home mortgage and refinance loan applications into process in an effort to beat the looming deadline when the higher FHA insurance premiums are mandated. According to the Mortgage Bankers Association, borrowers rushing to beat an FHA mortgage insurance premium hike and a slight increase in mortgage refinancing applications helped increase seasonally adjusted application volumes overall by 5.3% during the week ending April 15, Overall, application for the “FHA refinance” rose 5.9% on an unadjusted basis, bolstered by a seasonally adjusted 10% increase in home purchase loan applications. This brought seasonally adjusted home buying to a high not seen since Dec. 3, 2010. Government mortgage applications spiked 17.6% during the week ending April 15. But while the four week moving average for seasonally adjusted home purchase applications was up 2.5% last week, unadjusted, purchases were still down 11.4% from the same week a year ago.
Consumers Raced to Lock in FHA Home Purchase and Refinance Loans Before Insurance Premium Increase Goes into Effect
The four week moving average for loan applications overall was down 2.9% as of the week ending April 15. For the most part, refinance loan volume has drastically decreased in 2011 as the pool for qualified borrowers has shrunk significantly. Higher FHA insurance premiums certainly haven’t helped loan origination for the FHA streamline program.
The MBA home refinance index increased 2.7% during the week ending April 15, possibly due to a decline in rates last Friday when the rate-indicative benchmark 10-year Treasury bond yield fell to levels closer to 3.4% from levels around 3.5%. On average during the week ending April 15, the contract interest rate for 30-year home loans with fixed rates fell to 4.83% from 4.98% the previous week, with points increasing to 1.07 from 0.93 of a point. For 15-year home loans with fixed rates, the average contract interest rate dropped to 4.07% from 4.17% with points falling to 1.02 from 1.22.
While mortgage refinance rate averages were up week-to-week during the week ending April 15, the four week moving average for the refinance index was down 5.7% and the market-share of mortgage refinancing activity dropped to 58.5% from 60.3%, marking the lowest share for refinance loans seen since May 7, 2010. The adjustable-rate home loan share was up slightly during the week ending April 15, at 6.5% compared to 5.9%.
Many homeowners seem perplexed as they reach out to lenders for advice on whether or not it is the best time to refinance. Since the rates crept up in January, many people have been sitting on the sidelines, waiting for mortgage rates to fall again to record levels. If you were to look at the interest rates over the last 30 years on a graph you would realize that we are at the bottom. Even though the refinance rate was slightly lower in fourth quarter of 2010, they are still extremely low. It means that homeowners, who are on the fence for a “house refinance” because the rates are not low enough, may be waiting for a very long time. It is much more likely that rates will rise than they will drop. The Federal Reserve cannot keep interest rates this low forever, because inflation fears will cause them to begin a trend of rate hikes. The FTC recommends comparing mortgage refinancing options from lenders that provide disclosures within the time-frame that the law allows.
Here are some questions to ask yourself as you contemplate if it is time to refinance.
Do you meet the 2011 lending requirements for home refinancing?
- Lenders have tightening refinance guidelines significantly in the last few years.
- In most cases, they want higher credit scores and more home equity.
Do you have enough equity in your home to qualify for a refinance that does not require mortgage insurance?
- FHA approves rate and term refinances up to 96.5% loan to value but they require monthly mortgage insurance
- Conventional loan companies will waive mortgage insurance and PMI up to 80% loan to value.
How much money will a mortgage refinance save you?
- In most cases the bottom line is how much lower would your new payment be?
- Are the monthly savings worth adding years to your home loan?
How much will a refinance loan cost you?
- On average, refinancing costs a borrower $3,000 in lending fees and closing costs
- Do you qualify for a no cost mortgage refinance?
If you need money, do you have enough equity for a cash out refinance loan?
- VA approves cash refinancing to 90%
- FHA allows cash out up to 85%
- Conventional lenders are offering cash out to 80%
It is very important that you answer these questions before committing to a new 30-year mortgage. Every loan program is different, so you need to know what refinance programs are available with your credentials. Compare the following loan types: conventional, VA, USDA, jumbo and FHA refinance loans.
People have been arguing and debating adjustable and fixed mortgage rates since the advent of American home refinancing. When considering a mortgage loan refinance, comparing fixed and adjustable rate loan options is a good idea. Recently many homeowners took out risky loans and foreclosure rates broke records. Truth be told, most of these borrowers took out an adjustable rate mortgage with the intention to refinance into a fixed mortgage prior to the adjustment period. The homeowners never dreamed that there would be a housing and lending crisis that would tighten refinance guidelines beyond belief. When these borrowers went to refinance their home they found that they no longer qualified. In most cases borrowers were not eligible because they did not have enough equity. With property values dropping, people were unable to avoid their mortgage loans adjusting.
Adjustable Rate Mortgage (ARM)
The most significant advantage with an ARM is the reduced interest rate. Of course a lower interest rate provides a lower monthly payment, so borrowers can save money. The negative aspect of an adjustable rate loan is that at some point the interest rate starts rising. So if borrowers are unable to refinance their ARM into a fixed rate, their payments could potentially rise to a level that is not affordable. Talk to our refinance lenders anytime about the importance of getting rid of an ARM while fixed interest rates are so low.
Fixed Rate Mortgages
Most Americans like fixed rate mortgage refinancing because it is safe and secure. Homeowners can sleep at night knowing that their mortgage rate is not rising. People also like that with a fixed mortgage refinance, the amortization schedule spreads their payments out evenly over the loan term. The fixed 30-year loan is the most common loan choice, but many borrowers who are closer to retirement are migrating towards the 15-year choice. The fixed rate loan ensures long term stability and borrowers seem to appreciate the security and protection against inflation. For more loan tips, ask your loan representative and remember that knowledge is power.
Refinancing Home Equity Loans Makes Sense
Homeownership comes with many components to effectively manage the experience. Not only is it wise to keep up with maintenance issues to prevent any long term damage, but adequately protecting the investment with a comprehensive insurance package is suggested. For the family still paying on the mortgage, a major concern may be how to get approved to refinance a “home equity loan”. The process of a rolling credit line into a lower rate 1st mortgage is fairly straightforward. Keeping financial affairs in order will make a huge impression on lending institutions. Working with an expert in the field will detail the steps needed to being the process of refinancing the home loan.
One of the first questions that should be asked in how to refinance a home equity loan is just how much of an impact it makes on the current monthly payment. Current interest rates for home loan refinance packages are attractive for the family that still has a long term loan package. The benefits of refinancing adjustable rate equity lines of credit into a fixed home equity loan include knowing what to expect for the monthly house payments. The ballooning effect of risking adjustable rates can severely impact a tight budget. Locking in a steady payment amount each month will help to maintain a balanced budget for the household.
Consolidating and Refinancing Debt and Loan Payments
One concern that many homeowners may have is the impact upon the total monthly obligation toward paying off the mortgage. When seeking out how to refinance a home equity loan, consider the current average interest rate. Compare that to the fixed rate and see if that helps in lowering monthly payments. Even if the current amount is not lower, a refinancing package is still an effective way in consolidating debt. Not only is the process of getting cash out of the loan package easier, but total overall costs associated with the loan can be less. An adjustable interest rate change can make a huge impact on total repayment amounts. Consider a government solution, like a FHA refinance loan that enables you to consolidate debt and refinance 1st and 2nd mortgages up to 85% loan to value.
Locking into a lower interest rate is the main reason why people consider the possibility of refinancing their home. Obtaining consultation is the best way to determine if this is the best way in how to refinance a home equity loan. These professionals can provide different scenarios that will affect the price. Cutting off years of mortgage payments by converting a 30-year into a 15-year loan may result in higher monthly obligations but lower the overall repayment amount. With the proper information at your disposal, a smart financial decision can be made.
Millions of homeowners took out home equity loans or credit lines over the last decade and many of these borrowers find themselves stuck with an adjustable rate or rate they are not comfortable with. Many borrowers have attempted to refinance equity loans to no avail. Second mortgage loan programs and underwriting guidelines have tightened considerably in the last few years. Home equity lenders are asking for borrowers to have more equity and higher credit scores. Since the housing crisis erupted, many homeowners have lost their equity thus being turned down by lenders in their efforts to refinance.
Refinance applications in the United States declined last week for the 6th consecutive week. Many economists attribute it to rising refinance rates and tighter lending requirements for refinancing. According to the Mortgage Bankers Association, refinance loan applications fell by 10% for the week ended March 25.
Clearly declining home values are hindering many borrowers for qualifying because they do not have sufficient home equity according to 2012 refinance guidelines. Foreclosures are also bringing the home values down and making the lenders more tentative in respect to loosening lending restrictions. Underwater mortgage refinancing is challenging as most borrowers do not meet the Home Affordable Refinance Program that was designed to help borrowers who have negative equity to get another chance at refinancing. The HARP refinance was recently blessed with aggressive guidelines that removed all “loan to value” restrictions. HUD’s decision to raise the insurance rates for FHA programs is only adding fuel to the fire as many borrowers are finding out that lower rates don’t always equate to lower monthly payments. Many consumers consider FHA to be a sub-prime loan, because they approve applicants with credit scores as low as 500.
Will Refinance Rates Continue to Rise?
Rising mortgage refinance rates continue to be a concern for borrowers who were unable to refinance last year when rates fell to record lows. Last week, the average 30-year fixed rate loan rose to 4.92 % from 4.80 %. Closing costs on refinance mortgages have also increased and privately this worries many loan companies fighting for market-share. The average 15-year fixed rate loan rose to 4.16 % from 4.02 %. MBA also revealed that the percentage of applicants seeking fixed mortgage refinancing dropped to 64.3 from 66.4 %.
One of the most common questions our lenders get is, “How do I refinance if I have bad credit?” With many facets of everyday life experiencing price increases, a common household occurrence is reviewing the current budget. Looking for ways to lower the monthly bills and cut out nonessential items is an effective way to maintain standards of living. For the homeowner, finding out how to refinance with bad credit is suggested to lessen interest obligations and decrease the monthly mortgage payment. There are a number lending companies that would be willing to discuss options available for “bad credit refinancing”. These experts will be happy to provide quotes and discuss guidelines that affect FHA refinancing packages.
The first step in learning how to refinance with bad credit is to review personal debt obligations. Obtain a copy of the credit report. This is what the financial institutionswill use to determine if refinancing a mortgage with less than perfect credit is a viable option. Knowing what is detailed on the report allows a proactive approach to resolving any unexpected issues. Try to clear up erroneous data and pay down obligations that may significantly impact the overall rating. Working with creditors shows the banks that you are aware of issues that may affect bad credit refinancing options. Making an effort to fix these problem areas conveys a strong message to mortgage companies.
| Consider These Loans for Less than Perfect Credit
Review your Credit Report
If the credit report contains information that does not make sense, discuss these items with the financial institution. In addition to providing the loan, many banks also have special programs geared toward how to refinance with bad credit possible. Working with an advisor can help formulate effective responses to potential issues. Refinancing a bad credit loan with less than perfect credit is a possibility regardless of how severe the rating may impact creditworthiness. What really matters is how the interested parties take measures to find a resolution to the issue.
With some suggestions in hand from the financial advisor, follow through on these items as soon as possible. While it may take some change in behavior and will power, the sooner that the application toward how to refinance with bad credit can begin. Bad credit refinancing is a win-win situation for everyone involved. Not only will the family budget be more manageable, but a FHA refinance lowers the risk of a home going into foreclosure status. Refinancing a mortgage with less than perfect credit can greatly impact the ability for a household to stay afloat during trying economic times. It will also lessen the impact on other needs within the home.
Most people are not aware that the government has nearly 97% of the marketplace with FHA, Freddie Mac and Fannie Mae. Dealing with the major home financing companies can provide some useful benefits that may not be available from smaller institutions. The number of Fannie Mae and Freddie Mac mortgage refinance packages available can help establish a more affordable budget within a household. Reviewing the current Fannie Mae and Freddie Mac mortgage terms will help to establish whether seeking a new home mortgage refinancing option makes sense for the current economic situation within the environment. Past experience with these lending sources will help to pave the way for renegotiating the terms of an existing loan. Favorable interest rates may result in long term savings that can be used to fund other objectives within the household.
Before making any move to discuss the possibility of Fannie Mae and Freddie Mac refinance packages with a lending officer, take some time to review the current family financial situation. In order to achieve home affordable refinance objectives, current credit levels and debt obligations should be effectively managed. Work on paying down existing obligations and avoid late payments on regular bills. If there are some credit issues, a few months of concerted efforts to meet fiscal responsibilities will positively impact credit scores. With the proper approach, the possibility of a mortgage refinance and the act of actually securing a new home loan is more likely.
|Government Extends Alternative Refinancing with No EquityOne thing that many homeowners may not readily understand is that there are a number of Fannie Mae and Freddie Mac mortgage refinance options that aren’t commonly discussed. Researching into the topic will reveal that plans include the ability to acquire 125% refinance with no equity|
This can be extremely useful for emergency situations. Another program that is not well-known is the DU refinance plus option. The introduction of this program was to help current home owners meet their monthly payments when interest rates unexpectedly changed. This is a useful alternative to running the risk of foreclosure due to nonpayment. Taking evasive action can prevent an unwanted situation from occurring.
Government Refinance Programs
- Home Affordable Refinance Program to 125%
- Emergency Homeowners Loan Program
- DU Refinance Plus to 105%
- FHA Short Refinance Program
There is more flexibility available with Freddie Mac and Fannie Mae mortgage opportunities than most people realize. In addition to the aggressive refinance FHA programs, both Freddie Mac and Fannie Mae have extended several loan programs to help borrowers refinance their underwater mortgage. While much of the media is focused on the major issues affecting the economy, many of the different possibilities are glossed over. If you are seeking a rate and term refinance to 105%, speaking with a representative will disclose the details needed to quality for this possibility. A proactive response to the changing economy will eliminate the need to take drastic actions at a later time. The end result will leave a home owner in better financial shape.
Welcome to the Mortgage Refinance Right Blog. We have been helping homeowners save money for almost a decade by connecting with mortgage lenders that offer the best refinance loans. Check out our blog for new, rates and helpful articles related to home refinancing.