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Posts Tagged ‘mortgage refinance’

If you are thinking of mortgage refinancing then there is one thing you might want to know and that is – you should stay away from ARMs ( adjustable rate mortgages ) …

And if you are wondering why anybody would want to do that, especially since ARMs promise such low interest rates, well here’s why …

Adjustable rate mortgages are a great idea when the interest rates are all set to go down for the next several years …

And interest rates go down only when the Government wants to increase consumer spending. Interest rates go down when the Government is looking at ways to stimulate the economy, boost consumer spending …

But you might want to ponder whether this is the case now …

Consumer spending is extremely good and real estate prices are increasing at record growth rates that may not have been seen before. In fact, in some areas the rates are so high that some experts are actually wondering if anyone but the really rich can actually own property there.

And if the real estate prices keep increasing at the same or even higher rates for a long time, then possibly only the rich will actually be able to buy any houses in many areas …

And if that happens, the housing markets might actually see steep fall in prices because most of the people cannot afford houses … and due to this, lots and lots of houses might remain unsold.

Would that be a healthy trend then ? If you think it’s not, well … that might be something even the Government might not want that to happen …

And what do they do to prevent very high inflation … like what is discussed above ?

The answer : They increase the interest rates …

And when interest rates increase, adjustable rate mortgages increase too … and if the interest rates increase significantly, the adjustable rates increase significantly too …

That’s possibly why you might want to stay away from adjustable rate mortgages.

And what do you choose instead ? Well, you might want to consider fixed rate mortgages … since the possibility of fixed rate mortgages increasing is relatively low.

And here is one other thing you may want to do before you consider refinancing, and that is …
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Maybe you need a little extra cash for a home remodel or college tuition, or perhaps you simply want to save some money. Whatever your reason, refinancing your home loan can be a smart move as long as you get a low rate. Here are some simple tips that can ensure you get the lowest rate possible on your Home Refinance Loan:

Clean up your credit

Lenders use your credit score as one tool for determining your interest rate. In general, the better your score, the lower your rate. Before applying to refinance your mortgage, check your credit report and look for any errors. If you find a mistake that’s negatively affecting your score–such as a payment marked as “late” when you sent it on time, or a line of credit that doesn’t belong to you–be sure to correct those errors.

Shop around

You might not necessarily get the best deal from the same finance company that holds your mortgage loan. Make sure you check out offers from other lenders. You can do this by submitting your application to multiple lending companies, or by hiring a mortgage broker that will check out numerous lenders for you. To get the largest variety of offers, try different types of companies, such as banks, credit unions, online mortgage lenders and local mortgage brokers.
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Refinancing both your first and second mortgage will lower your monthly mortgage payment and qualify you for overall lower rates. It will also save you money on closing costs and application fees. And while you are looking at rates and terms, you can reevaluate your loan’s payment schedule to better fit your budget needs.

Why One Mortgage Is Better Than Two

Lending companies prefer financing one total mortgage rather than two separate loans. So second mortgage rates are at least a point higher than first mortgage rates.

Refinancing your two mortgages into one will qualify your for a lower rate mortgage. Since lenders charge flat application fees, you will save money by going through the process only once. Closing costs can also be cheaper.

Readjusting Terms

In all likelihood, your mortgages have different terms. Refinancing is a good time to reevaluate those terms and decide what would best meet your budget concerns.

If lower payments are your concern, then choose a longer term. While this will increase your total interest costs, it will ease your immediate budget concerns. Then when your financial situation improves, you can make principal payments to offset the interest costs.

When concerned about interest costs, it’s best to opt for a shorter term with its lower rate. You can also pay points to further lower your rates. But this is only wise if you plan to keep the loan for several years in order to recoup the costs.
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Do 1.25% interest rates really exist? Neg am mortgages calculate several mortgagerates. One is called the payment rate the other is the actual interest rate. Fortunately, the payment rate is capped at 7.5% of the previous payment. The true interest rate is calculated as simply the index plus the margin without periodic caps. When the interest rate resets to a higher rate with a negative amortization Adjustable Rate Mortgage (ARM), the mortgage payment doesn’t change. Instead, the additional interest expense is added to the loan balance.

Homeowners are given a choice of which rate to pay, which is why negative amortization loans are also referred to as “payment option” loans and option ARMs. Cost of Funds Index (COFI), Cost of Savings Index (COSI), and Monthly Treasury Average (MTA or MAT) are all examples of Alt-A negative amortization loans. The Mortgage Bankers Association of America (MBA) says alt-A loans’ share rose from 8% to 11%. Why? Because of the flexibility these loans offer, not to mention affordability for a home purchase loan or if you want to cash out on your home equity with a mortgage refinance.

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