More Homeowners Consider Refinancing

Because of the decrease in mortgage rates to record lows, homeowners’ demand for refinancing has increased across the nation.

According to lenders and mortgage experts, all types of homeowners are attempting to decrease their monthly payments especially with the rates for 30-year mortgages decreasing to less than 4 percent ever since October of the previous year.

Mike Fratantoni, vice president of research for National Mortgage Bankers Association in Washington, D.C., said that nationwide refinance volume is at a three-year high in the past few weeks while mortgage rates stayed at record lows. Fratantoni added that the number one cause for the increase in refinances is interest rates.

Together with months of interest rates at record lows, some of the other factors that push the refinancing boom include the competitive lending market and modifications in a few federal refinancing programs intended for distressed homeowners.

There are advantages in refinancing a mortgage and some of these include reducing the monthly payments, eliminating the uncertainty of an adjustable-rate mortgage by changing it to a fixed rate, opening home equity cash to cover home improvements or college costs, and most importantly, shortening the loan term can result to thousands of savings in terms of interest.

According to John Winters, a wealth adviser at Morgan Stanley Smith Barney, he recommended all his clients to consider refinancing their mortgages, especially those who find it hard to live with little returns on CDs and bonds that have low interest because it can free up monthly income.

When considering refinancing a mortgage, you basically look at how long you think you are going to stay in your present home and whether or not the upfront costs offset the monthly savings. Greg McBride, senior financial analyst at Bankrate.com, said that you are not going to earn back the closing costs if you’re not staying in your home for a year or two.

How to Become Eligible for No Documentation Loans

The usual problem that people encounter, especially those with poor credit, is that their application for a loan is rejected by the bank after a credit check is done. In addition, even if you were already approved for a loan, there is still a possibility that you will be charged with a high interest rate. If you are facing these kinds of problems, the best thing to do is find the right kind of loan from an equitable lender.

If you are having difficulties qualifying for a loan, consider applying for a no doc loan, which is a loan that does not require any documentation. In other words, they do not run a credit check on you or require you to present any proof of income. The most popular examples of these are payday loans and cash advance loans.

Although the process of qualifying for such a loan varies depending on your lender, it is essentially fast and leads to immediate approval. Basically, you will be asked to fill out an application form including your name, address, and contact information. Moreover, you might be asked to write down your account and routing number if the lender offers a transfer of funds straight to your bank account.

On average, you can be approved for the loan in minutes after answering the application and receive the money within the day. Thus, these loans are appropriate for those who need quick cash and who are capable of paying the loan plus interest in a short term.

It is important to note that you will more likely be charged a high interest rate and other fees so make sure to never borrow more than what you can pay for. It is also recommended to look around through various lenders to know which will offer the least interest rate and most suitable repayment terms for you.

Save Money by Shortening the Term of a Mortgage Loan

The majority of people refinance in order to save money, which typically entails jumping to a lower rate. However, you can also save lots of money by cutting down the term of your loan even at the same low interest rate.

According to Karen Mayfield from Bank of the West, nowadays, there are lots of lenders that offer the same 30-year rate on mortgages with terms ranging from 20 to 29 years. Also, the majority of lenders offer the same 15-year rate on loans with terms between 8 to 15 years.

Although you may not instantly save money in terms of your monthly payments but you could save a lot from interest over the shorter term of your new mortgage.

However, the possible negative aspect of this shorter-term mortgage is that you might have a lesser tax deduction for your mortgage interest, but it’s still an uncertain disadvantage.

In addition, mortgage interest is not a dollar-for-dollar write-off. Instead, the deduction is dependent on your income-tax bracket. Thus, if you are in the 15 percent bracket, then you will receive only 15 cents for every dollar in mortgage interest.

Furthermore, there is the question whether or not mortgage interest will stay deductible. While it’s going to be a long time from now before the Congress would remove that benefit, it will be on the table if and when the policymakers amend the tax code of the nation.

For instance, you have a 4-year-old, 30-year mortgage with interest of 6.5 percent, and monthly payment of principal and interest for a total of $1,896. If you refinance at 4 percent into a 30-year mortgage of $288,000, your monthly payment will decrease to $1,375, which means monthly savings of as much as $521. However, you’ll be paying an extra $206,984 in terms of interest over the term of the new loan.

Mayfield advises that although not everyone agrees with shortening the term of their mortgage, you might as well consider doing so if you are wealthy enough make the same payment as you do at the moment.

Bill Proposed that Would Increase Limit on Payday Loans

Supporters of payday lenders are advising the state Legislature to increase the restriction on the high-interest loans, allowing distressed borrowers to be in much deeper debt. It is not a good idea and lawmakers must not think about increasing the present restriction on lending without more meaningful consumer protections than the sponsor of the bill has suggested.

When getting a payday loan, a person can borrow as much as $300 but actually receives less than 15 percent of the face value of the loan, which is the lender’s fee. The term of payday loan is typically two weeks after the borrower’s next payday.

However, the problem with these loans, besides the excessive interest rates of over 400 percent annually, is that the short repayment period disables borrowers to distribute the cost over time. Consequently, a few borrowers take on loans one after the other, and find themselves in a debt trap.

The bill, AB 1158, which was proposed by Assemblyman Charles Calderon, would increase the restriction to $500. Supporters claim that the state’s restriction is out-of-date and that borrowers who need more cash are turning to unregulated lenders online.

The Pew State Small-Dollar Loans Research Project discovered that state limits on payday lenders don’t bring about would-be borrowers to look around for other lenders. Moreover, the increase in the state’s restriction would only cause borrowers to be in deeper debt, especially without real protections against repeat borrowing – such as a restriction of six payday loans annually and a centralized record of loans released to assist in implementing the restriction.

Calderon was asked by AARP’s California branch, Consumers Union and Western Center on Law and Poverty to discontinue the bill except if he includes a six-loan restriction, a longer repayment period and an order that lenders evaluate a borrower’s ability to repay prior to giving a loan.

Be Smart with Payday Loans

There comes a time when money is so hard to come up with and a person becomes caught in a dilemma caught in a web of bills. In these times, payday loans and instant loans become your only hope. When you need money in less than a day to help you in meeting your emergency and needs then you will not have to wait for payday, all you need to take on is a pay day loan.

These loans are easy to get however; they also charge disciplinary interest rates since they are not very secured. People who are not very good at saving will be finding themselves in turmoil of debts. You can take many steps in getting over a debt, one of which is to research and learn a lot of information about the loan you want to get. Different states have different laws and rules for moneylenders and you have to find what is most suitable for you. You have to make sure you find the most trustworthy company in order to avoid fraud and being harassed when you are not able to pay your debts on time.

If you apply for the right loan in the right company, you will be able to get the money you will need to take care of your emergency needs until you are free of your stress.These lenders will roll off your debt if you are not able to pay without adding high interests that will ruin your financial life in the future. So before you sign a contract with a lender you have to be very familiar to the terms of the contract you are getting into. Be careful of the terms that will work to your total disadvantage in the future. Once you get a loan that you need, you have to make sure you use it well because if you spend away the money in for things that you do not need you will be flailing back to the same desperate spot you were in before you got a payday loan.