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Refinance Home Mortgage Loan

Refinance home mortgage loan has always been popular among homeowners in periods of low interest rates. Home loan refinancing allows homeowners to replace the existing high interest rate home loan with a low mortgage refinance rate which would reduce monthly mortgage payments and/or shorten mortgage period considerably.

Refinance mortgage could provide low interest rate and flexible repayment options. If previous loan has been paid timely, homeowner’s credit score would improve. This will help to get better refinance mortgage terms. Since new loan offers better rate, mortgage could be paid off faster. A person with good credit score can easily take advantage of mortgage refinance loan. Those who have bad credit can also get a mortgage refinance. However they will have to pay slightly higher interest rate. Probably the best advice for people with bad credit would be to see if they could improve their credit score first.

Recently, more mortgage refinancing applications have been turned in for approval than ever before. This is due to a struggling economy, low home interest rates, and new stimulus programs that make approval of mortgage refinancing easier. In addition, the lenders and banks do not want to deal with more home foreclosures or defaults. Many new refinancing mortgage options now exist for nearly any homeowner. Eased requirements and restrictions allow more people than ever to get refinance approval.

Things To Do To Reduce Costs and Fees Before Applying for Refinancing

Saving money through a home mortgage loan refinance is more than just finding the lowest interest rates. You can further cut fees and costs through the structure of your loan, avoiding PMI and buying lower interest rates. Here are the things you could do to reduce refinance costs;

1. Get prepared.

Many homeowners’ refinancing applications are being denied or returned as incomplete due to simple, easily avoidable mistakes that could cost the non refundable application fee. Do your homework; contact one or two mortgage lenders and banks to ask what their requirements are for a home loan refinance. This way, you can prepare for those requirements in the meantime.

2. Close credit card accounts.

Close inactive credit card accounts to improve your credit score, making you eligible for lower interest rate loans. You will need to notify the credit card companies in writing that you wish the accounts closed on your request.

Next, check your credit report after 30 days to be sure closed accounts include the comment “Closed at Customer’s Request.” You want future lenders to know it was your request and not bad credit that closed your accounts. Also, take the time to check for any mistakes in your credit report that could negatively impact your credit score.

3. Avoid the hidden cost of PMI.

When refinancing a mortgage, many homeowners cash out part or all of their home’s equity to invest in home improvements or pay off credit cards. But, if you are borrowing more than 80% of your home’s value, you will be hit with private mortgage insurance, costing you hundreds a year.

4. Pay points now.

If you are planning to stay in your home for several years, then you can save money by paying points for lower interest rates. You pay up front fees to ensure you have lower interest payments over the course of your loan. Remember, this only works if you keep your mortgage for several years.

5. Choose a short-term home mortgage loan.

Short-term mortgages offer lower interest rates than long-term mortgages. You save money by the lower interest rates and shorter payment period. The trade off is a larger monthly payment, but this option can save you thousands. Some homeowners get a better interest rate, but also have their home loan lengthened, which may negate savings through a better interest rate. If you have to lower your monthly outgoings due to your current financial position, then you would need to look at extending your payment period, obviously.  Homeowners should be aware of what the reality of refinancing a mortgage means to their finances, both good and bad, both long and short term. Set out the objectives you would like to achieve with refinance and pursue those objectives.

How to Find the Best Mortgage Refinance Rates

1. Internet is a good place to start searching, gathering information about mortgage refinance rates, quotes and lenders. There are numerous refinancing companies available online.  They may be able to provide home mortgage refinance loan at a slightly lower interest rates. Because the cost of providing service is lower, if the application is made online and they may save broker commissions. You can still enjoy outstanding customer service and fast approval.

2. Use a broker to help you find the best Mortgage Refinance Rates if the information is becoming too complicated for you. There are numerous mortgage refinance companies that are available in the market and they are providing diverse offers. Therefore, finding out the perfect one could be a tough task for most people. Don’t struggle alone; use a mortgage advisor who is thoroughly acquainted with the ins and outs of this market. A experienced refinance mortgage broker can give you some valuable advice.

3. Another option is just to drop into your bank to ask their terms to start with. Since you have a history with them, it is not a bad idea as long as you remember to check other lenders before deciding. You may easily get too comfortable with your bank, don’t. Your existing lender may modify your mortgage terms instead of losing you. Check with them, too.

What To Do And Look Out For During The Decision Process

Here are a few things to pay attention to when you refinance your mortgage loan, to make sure that you don’t overlook anything that you might regret, or that can cause you problems later.

1. Apply for a pre-approval to many different lenders

to make sure you are getting the lowest refinance rate possible. When you do this, make sure that with the initial pre-approval application, the lender is not pulling your credit history. You will want to reserve your credit pull for the lender that you are most likely to work with. You can decide that after you have gone through the preliminary pre-approval process with a few lenders. Each time your credit is pulled, it docks your credit score just a little. If you have too many inquiries, it could keep you from refinancing your mortgage loan with the lowest rate possible. When you pre-apply for home mortgage loans online, most lenders or mortgage service companies will not initially pull your credit. Check for information about this on their website. They will usually tell you whether or not they are going to pull your credit. Also, if on the application you do not give them your social security number, they cannot pull your credit. If, on the application, they ask you to describe your credit, they are probably not pulling your credit report.

2. Make sure that your original mortgage does not have a pre-payment penalty

or early payoff penalty of any kind. Sometimes people will get into their mortgage with the mortgage having a pre-payment penalty and they will not even know about it. Pre-payment penalties periods usually range from 6 months to 3 years with a penalty for an early payoff. The penalty is usually about the amount of 6 months worth of your home mortgage loan interest, but this varies. You would have to be able to have some significant payment and interest savings on your refinance loan to justify refinancing a mortgage loan with a pre-payment penalty.

3. Pay closest attention to the interest rates

they are offering & the closing costs when evaluating different lender offers, in the mortgage loan pre-approval process. These are the two biggest factors that will help you figure out which lender is right for you. If one of these two factors is too high, it could offset the benefit of refinancing for you.

Comparing lenders would certainly help you find the best deal on refinancing, but those numbers can get pretty confusing, especially when you are to investigate rates, fees, and points. Remember though that just because a mortgage company has the lowest rates, it doesn’t necessarily mean that it offers the best deal for you.

Many refinance companies will post their rates online. Lower interest on an ARM or fixed-rate mortgage can be tempting, but have a look at the fine print. What points or fees are usually required for the rate? Mortgage lenders lure consumers with low initial numbers, only to have high closing costs. A better number to look at is the APR.

The federal law requires the annual percentage rate, or the APR, to be disclosed to consumers before signing any contract. The APR would include the interest rate of the mortgage and closing costs and this will give you an accurate idea of the total cost of the refinance mortgage loan.

Just as your original mortgage had closing costs, so will your refinance mortgage. Standard fees include origination fees, appraisal costs, and closing fees, while points may also be required to secure a low rate. By looking at the APR, you can determine which lenders are offering the best fees in relation to their rates.

4. Get your interest rate and closing costs in writing

as soon as you decide on a lender to work with. Get your lender to give you a commitment in advance of all of the costs that will be involved with your loan. Find out if the refinance loan you are getting has a pre-payment penalty as well. Sometimes lenders will leave out important information like this, if they think it might scare you away from refinancing with them.

5. Before refinancing, decide on how long you plan to keep the mortgage.

Then, compare the costs of mortgages for how long you will have them, even if you take out a 30 year mortgage that you plan to have for only a couple of years. Mortgage calculators can always help with the math. The initial lowest rate refinance mortgage loan may not always be the best deal and it will clearly depend on your situation. For example, paying points for low rates will not save you money if you plan to move in a couple of years later.

6. Remember you are in the driving seat.

No matter what financial problem you may have, if any, you are always in control. There is no single mortgage lender or bank you must use, and there is no one who can tell you what type of mortgage refinancing you need. You are in complete control of almost every aspect of a home loan refinance. The only things that are up to the mortgage lenders or banks are whether or not you get approved, what the interest rates are, and what other costs, fees, and insurance are needed. Many of these things can be negotiated, but it is ultimately up to the lender you choose to refinance.

While refinancing a mortgage is a great idea for some people, for others it just does not make sense. Each situation is different, and needs to be dealt with in its own way. These are some general tips that will help any homeowner avoid a lot of the hassles of refinancing home mortgage loan, and help them find the best mortgage refinance for their situation. Article by JS Lee

Factors Determining Your Refinance Home Mortgage Loan Application

Knowing what the lenders are looking for to determine your refinance loan application helps you to prepare for it well in advance. The information the lenders require may increase time to time. Nevertheless, it will not be less than what I listed below. You could say that these are the minimum information required. These factors are valid for home purchase loan applications and even for car loans or credit card applications for that matter.

Your Income Level:

This is usually called household income and includes your partners income as well if you are buying (or owning) your home jointly (your friend’s income if you are buying with a friend). Refinance home mortgage loan lenders have a metric called income multiplier. For example if the metric is 3 times of the income, it means that you can only borrow 3 times of your earnings (or joint earnings). These metric changes as the lenders get optimistic/aggressive or pessimistic/cautious. Of course the lender will go through the details of your job as far as verifying it. They will at least ask your last three months wage slips. They may want to confirm with your boss. They do this in different manners, though generally by a letter. You will be asked to confirm in your application that it is OK for them to do so. The longer you were in your current job is the better, otherwise you will need to provide information about your previous jobs as well. Self employed people need to provide accounts and probably confirmation from their accountant. Your income is the very starting point of the process. There and than the lenders should be able to tell you how much maximum refinance home mortgage loan they can offer you.

Down Payment:

You will need to put down certain amount of the property value. The higher the down payment, the easier the process becomes. Your application gets accepted easier, you are offered better rates and your payments become more affordable. Unless you have a steady, verifiable jobs and best of credit score you are looking at minimum of 15–20% down payment (in refinance cases, that would be the equity left in your home after the loan). They used to do a 25% down payment and no questions asked mortgages, but the lenders wised up the hard way not to ask anything. There is the issue of Private Mortgage Insurance (PMI) that the lenders would make sure you pay if they are lending more than 80% of the value of the property. So you save on that if you can put at least 20% (or refinance up to 80%).

Your Credit Score:

It is wise to say that you should not start the process of refinance home mortgage loan application without checking your credit score. There are many free credit score providers available, but I would suggest that you get a copy of your credit report and go through it. This would at least give you an insight to how it works. There may be something that should not have been there and it may be corrected by just calling your credit card company or bank. Your credit score identifies you to the lender as a number. It really is that simple. John Smith becomes 708 to the mortgage underwriter. Looking after your credit score is a long, continuous process. However, if you failed on that do not despair, you can repair your credit in time. No not with the credit repair agents, just yourself. Starting from today, if you put your house in order, start making your payments in time and sorting out your financial affairs you can prepare yourself for a mortgage with good credit score 6–12 months down the line. If you have time, this would be much better option for you than trying to get a refinance home mortgage loan with bad credit.

Your Income and Expenditure Statement:

Most refinance home mortgage loan applications will have a section to put your household income and expenditure or there will be an additional form. You will need to put all the sources of income in here with all the expenditures including credit card payments, car loan payments, children’ school fees as well as the usual monthly utility bills, grocery and clothing spending.  This will allow the lender to assess your ability to afford the mortgage payments. They will ask you about six months bank statements to verify these spending, so there is no hiding unless you are making some cash and making payment in cash. Clearly high spending household will reduce the limit of refinance home loan amount they can get.

Your Residence Verification:

Refinance mortgage loan lenders would want to verify your residence for at least 3 years. If you are in the voters’ registrar or some government data readily available to the lenders, you just need to put your addresses for 3 years. Otherwise, prepare the utility bills for these addresses, you will be asked.

All being well you should get an offer in the post.

External Factors:

These are the factors that you can not affect. I am just going to list some of them, so that you know. General condition of the economy has direct effect on mortgages and loans. When the economy is good, everyone including lenders are optimistic and this effects their decision. They look at the applications negatively or positively. Rising or falling house prices have a positive or negative effect on your application, too. Obviously, if the house prices are rising, the security underlying the refinance loan is increasing and vice versa. I know you can not do much about it; however, it is the case. Should you not have time pressures, you may choose the best time to refinance or buy a house according to lenders sentiment. It helps. Article by JS Lee

Should You Choose Fixed Rate or Flexible Rate Refinance Home Mortgage Loan?

This article may seem to conflict with my other blogs where I talk about keeping your options open and not getting into high redemption penalty situation, but you will see that it does not. Let us look at the terminology.

Fixed rate home mortgage loan or refinance loan means that you fix your loan interest for a long period of time. Once you get a fixed rate mortgage, you will have a peace of mind of knowing how much you are going to pay each month in that duration. In return to giving you a fixed rate, lenders would want you to be committed to that loan. They will make sure with the redemption penalties that you will not refinance it anytime soon. I think it is only fair for them to do this, because to cover your fixed rate they will have to go out and find fixed source of capital. So your flexibility will be much lower but you will have a peace of mind just in case the mortgage rates shoot again.

Flexible home mortgages keep your mortgage rate flexible, meaning your loan interest will go up or down with the determined criteria (usually the base rate). Here you will have a very small (or no) redemption penalty, giving you flexibility to refinance again or pay your loan back say when you sell your home. However, you do not know where the rates are going to be in two years time. It may shoot up as well as hit the rock bottom.

One thing to note here is that some fixed mortgage lenders may allow you to move your mortgage if you decide to move, although usually selling your home and buying a new one must be done in the same time. In general the real fixed rate mortgages would be slightly higher interest; however there are so many different mortgages to generalize. Some mortgages may only be fixed to start with and then it may become flexible and higher interest after the short initial fixed period. These are little tricks the banks play on the customers to show them how low their monthly payments. Somehow consumers are focused on the near term and starting monthly payments plays an important part in their decision. What we are discussing here is a real deal fixed mortgage of considerable duration, not an introductory fixed period.

Now the decision of which of the rates to get depends entirely in your beliefs and circumstances. For example, a) you believe that the home mortgage loan rates hit the rock bottom and can not go much lower anymore, b) you have found your ideal home and you will not move for a job or other reasons for a long time, c) your credit score is very good just now to qualify you for the best rates, d) you are worried the rates will go up quite much and you want a peace of mind. Then, you should look to fix your mortgage interest as long as you can. In the completely opposite scenario, you should remain flexible. I hope it is all clear. Article by JS Lee

Differences Of Refinance And Home Equity Loan

Refinancing your home mortgage loan is different from getting a home equity loan. While both allow you to cash out equity in your home, these two types of home financing serves different purposes.

Refinancing Your Home Mortgage Loan is basically replacing one mortgage loan with another. Typically, refinancing lowers mortgage payments through lower interest rates or longer loan terms. You can also cash out part of your home’s equity while refinancing. The real reason behind it is simply you have been offered a better interest and you will save money on the long run. You may in fact choose to shorten your mortgage by paying a bit more or the same (you pay less interest more capital repayment). Refinancing requires paying closing fees. To recoup these costs, you usually need to stay in your home for a few years. However, you will save money with better terms than if you choose a home equity loan (second mortgage).

Second mortgages have slightly higher rates than mortgages, but you have less or no closing costs. In the case of second mortgages, you keep your existing mortgage and borrow more on top of it. So your new interest rate only applies to the additional amount you borrowed while first mortgage remains the same. If you want to tap into your equity to make some home improvements but plan to sell soon, then a second mortgage would be better than refinancing your mortgage. Second mortgages also are a better choice when your current mortgage interest rate is lower than those being offered by refinancing lenders.

When deciding which financing option to choose, consider the purpose of the loan. If you want to reduce monthly payments, then refinance. If you simply want to tap into your home’s equity for a small amount, then apply for a second mortgage. As these two mortgages are separate, you will be able to pay your second mortgage earlier than your main mortgage.

Also, consider how long you want to stay in your home. You can lose money refinancing your mortgage if you don’t stay in your home long enough to recoup the closing costs with the savings you made from refinancing. Only you know which loan fits your financial needs best. Article by JS Lee

Choosing the right mortgage

By Julie Bawden-Davis | Money Rates Columnist

When it comes to mortgages, the length of the agreement and the sum of money involved make it vital that you do your homework. More so than almost any other financial transaction, it pays to get the details right on your mortgage. Your home may be the biggest purchase of your life, and the type of mortgage you choose significantly influences how long and how much you pay for it.

There are many factors to consider when shopping for a mortgage, but mortgage rates fall into one of two categories: fixed rate and adjustable rate. Knowing the difference between the two is key, as which you choose can make a big difference to your bottom line.

Fixed-rate mortgages

Fixed-rate mortgages are the most common type of mortgage loan. They use a static interest rate that locks in an unchanging monthly payment for the life of the mortgage. Fixed-rate loans most often come in 15-, 20- or 30-year terms.

Adjustable-rate mortgages (ARMs)

Adjustable-rate mortgages feature interest rates that fluctuate according to market conditions throughout the life of the loan. You may start with a lower monthly interest rate than the prevailing fixed interest rate, but you will likely end up with a higher rate after the initial loan adjustment period, which can last from 6 months to 10 years.

Fees and closing costs

Other factors to consider when choosing a mortgage are the fees and closing costs. These can vary between lenders, so it pays to examine how these charges will affect your mortgage’s overall price.

Typical fees include appraisal and application fees, origination/underwriting fees, broker fees and settlement/closing costs. The variety of fees can seem dizzying (and costly) to borrowers, but they are often negotiable. No-cost loans also exist, but they usually feature higher interest rates.

Buying a home can be a complex and tiring process. But by thoroughly examining your options, you can better your chances of finding the home loan that best suits your long-term needs.

Credit Restoration Free Consultation

Getting a good interest rate on a new mortgage or refinance loan is always based on your credit score/credit history. The better your middle credit score, the more money you will save on your mortgage and most of your bills. Get a free credit consultation, with no risk or obligation by a Senior Credit Consultant. 

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