Archive for Refinancing Tips
Which Makes More Sense a Refinance Loan with No Lender Costs or Refinancing with Points to Get a Better Interest Rate?
When you choose to refinance, you have the choice of getting a loan with no closing costs or paying for “points” to secure a lower interest rate. Before you make the decision, it’s critical to define the terms involved and do the math!
What Is A “No Cost” Or “Zero Cost” Mortgage Refinance?
“Zero cost” loans are loans you can get without paying any closing costs. The closing costs that you might have to pay vary widely and are not dictated by loan amount. Generally, closing fees will cost at least $2,000, and frequently run to $3,000.
No Cost Quotes from Multiple Mortgage Lenders Now
What Is the Difference Between a No Fee Refinance and a “No Points” Loan?
A zero cost mortgage excuses you from closing costs such as:
— Home appraisal
— Credit report fees for the borrower
— Processing and underwriting fees
— Attorney fees
— Title fees
— Additional miscellaneous costs
In order to get a zero cost loan, you will probably have to settle for a higher interest rate.
A Brief Introduction to Paying Points
A “point” is one percent of the total mortgage balance. When refinancing, you can choose to “buy” points to reduce your interest rate. Whether to use points is up to you – and whether it is wise depends on your loan. If your loan amount is $50,000, a “point” would be $500. Paying down five “points” of your mortgage might be equivalent to your closing costs if they are in the usual range of about $2,500.
In terms of reducing your interest rate, a point is usually worth about an eighth of a percentage point. Paying points always lowers your interest rate by some amount, while negotiating to finance closing costs virtually always increases your rates. Paying points can save you money by reducing your monthly mortgage payments. However, they can be a waste, as paying for enough points to significantly alter your loan may be very expensive.
Under today’s market conditions, most people do not pay any points. The majority of buyers find it easier to negotiate for reduced closing costs, avoiding “up front” payments so they can be on a firm financial footing as they work out the costs associated with home ownership.
If you paid eight points on a $60,000 loan, you would pay a total of $4,800. This would cut your interest rate about 1%, but would leave you with more than $7,000 in cash costs by the end of the transaction. Even over 30 years, few savings would materialize.
The Importance of Negotiating Closing Costs and Interest Rate
Most buyers in the United States consider the immediate benefits of cash in the bank to be far superior to what they can save with points. Unless you have significant savings, points don’t always add up. Even if you don’t plan to buy any points, it’s still important to negotiate the lowest closing cost and interest rate that you can get. Some financing, such as FHA loans for bad credit, help you secure low rates and can even cover closing costs. Looking to these first can be a smart strategic move.
There are plenty of reasons to check out different loan refinancing options for your home. Whether you need lower payments, want to do some updates, or are just looking for a better loan, you can refinance your home without much effort if you know what you are getting into. In the past, it was a lot easier to refinance but there are still options out there to choose from. Consider how low the mortgage refinance rate has fallen to. Refinance programs come in all shapes and sizes, including loans specifically for bad credit, which is something that you don’t see every day. You will need to explore the options and find options like the no-cost mortgage that help maximize your monthly savings while underscoring the benefits for mortgage refinancing.
People who need more flexibility than a conventional refinance can check out FHA refinance loans, offered by the U.S. Department of Housing and Urban Development. These loans have better terms and more flexible lending solutions for people who might not be able to get approval somewhere else. The options that you have completely depend on what type of refi you are shopping for. You can find rate and term refinance loans, streamline refinance loans, and cash out refinance loans to help you get back on top and get the solution that you need.
When you are choosing between refinance home loans, it helps if you can talk with a lender to learn about the different options and figure out what is going to be best for your situation. A lender will be able to explain the different types of loans that are available and help you determine which refinance will be right, no matter what you are dealing with. They can advise you about the options and what you can do to improve each of them, as well as which might be ideal or which loans you need to be cautious about.
Refinancing your home can be done for a variety of reasons and there are plenty of loan programs out there for you to choose from. By taking the time to learn about refinancing, you will be better prepared. Just remember that the market isn’t as flexible or willing as it used to be, and don’t get discouraged if it seems difficult to get the right loan. It is out there, but it might take a little more effort to find. Whatever you do, make sure that you get the best loan for your needs and educate yourself instead of just taking the first loan that comes along.
Over the last few years many people have been rejected for getting lower and more affordable mortgage refinance rates because they owe more on their mortgage than their home is worth. Unfortunately millions of Americans saw their property values plummet between 2007 and 2011 and if your mortgage is greater than the value of their house and most lenders will not approve home refinancing to borrowers with underwater mortgages — at least until now. Government mortgage finance companies, Fannie Mae and Freddie Mac got together to create the Home Affordable Refinance Program.
The good news is that the “Home Affordable Refinance” was extended until June 2012. The government had initially set the expiration date for next month, but Congress voted to extend the HARP mortgage relief initiative for another year. For example, if you purchased your home before the housing bubble burst. Most borrowers who bought their house in 2006 or 2007 have an interest rate at about 6% if they got a 30-year fixed rate. If the borrower got an option ARM or a 3/1 ARM then their rate has converted to an adjustable rate that has likely risen to 8%. Either way, taking advantage of a “refinance” makes sense because fixed rates are well below 5% for people with fair or good credit scores.
No equity refinancing has almost vanished in recent years as lenders have been pressured by banks and the government to tighten lending guidelines in an effort to minimize home foreclosures. Greg McBride with Bankrate.com says Home Affordable Refinance Program is the only real solution left to help distressed homeowners who have been rejected to refinance their home due to a lack of equity. McBride said “To be eligible, you have to be current on your payments. The other important issue for qualifying is that you have a Fannie Mae or Freddie Mac mortgage that they guarantee. McBride continued, “Your mortgage balance cannot exceed 125% of the present appraised value of your home. So find out if meet the criteria for the HARP refinance program and compare rates with participating lenders like Quicken, Nationwide, or Loan Depot.
| No Equity Home Refinancing to 125%
How Do I Know Who is Servicing My Mortgage?
Fannie Mae has an online tool, for homeowners who need help determining whether Fannie Mae is the investor on their home mortgage. Check out the “Loan Lookup” is available at FannieMae.com. The tool will uncover whether Fannie Mae is the investor on a home at a specific address, but it will not determine if the borrower qualifies for 125% refinancing under the HARP program. You will need to discuss eligibility with a lender that is approved for the Home Affordable Refinance Program. Make sure that you are shopping refinance loans with a HARP lender or you will be wasting your time. In addition, the Desktop Underwriter will determines if the borrowers and property address on a refinance transaction are associated with an existing mortgage serviced by Fannie Mae, and applies the DU Refinance Plus expanded eligibility guidelines, when applicable. Homeowners can also contact Fannie Mae by phone at (1-800-732-6643).
If you do not meet the HARP requirements for refinancing because of poor credit scores, late mortgage payments or subordinate financing like a 2nd mortgage then consider a loan modification. The Home Affordable Modification program is intended for borrowers who do not have the ability to make their mortgage payments, even with a refinance. To be eligible for Home Affordable Modification, the borrower is required to “document a financial hardship and represent that s/he does not have sufficient liquid assets to make the monthly mortgage payments.
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.
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.