Why is it Time to Refinance? Is it the best time to get a Mortgage Refinance?

Interest rates on mortgages have continuously declined to reach its lowest level in recorded history. This is a strong proof that it is already the best time for homeowners to consider refinancing in order to generate some savings.

The rate for a 30-year fixed mortgage was at an average of 4.39% during the end of the Aug 4 week. Similarly, the rate for a 15 year fixed mortgage decreased to 3.54% despite the reduction in bond yields and signs that show a weaker economic standing than what is expected said the Primary Mortgage Market Survey of Freddie Mac.

The president of Metropolitan Boston Real Estate, Nebury Street brokerage, said that this is good news because this will serve as a motivation for anyone who is considering refinancing knowing that the low rates won’t stay very long.

Here are the possible savings that homeowners can generate: for a mortgage of $250,000 with 5% interest, they could save about $160 monthly and $2,020 yearly if they refinance the loan for 4.39%. These savings provide a guaranteed cash in the bank during these present times when traditional savings account have nearly zero percent in returns and the gyrations in the stock market have exhausted the investment accounts.

Bankrate.com’s senior financial analyst Greg McBride said that anybody who decides to refinance at these very low rates are sure beneficiaries of the economic concerns and Wall Street challenges.
The three lenders listed in Bankrate.com that offers 30 year fixed loans with less than 4.39% interest are AimLoan.com at 4.19%, Loan Depot at 4.25% and American Interbanc.com at 4.35%. All three are offered with zero points.

Albano said that even if the low rates are great news for most mortgage owners who pass the requirements of credit and equity to qualify for refinancing, potential buyers will still not leave the sidelines. He thinks that people who are observing the rates and decides that they are not ready to purchase at 4.5% will change their mind when the rates fall at 4.3%.

If you are looking to refinance your mortgage, then you may want to consider doing it soon. As you may know, last Friday, Standard and Poor’s downgraded US treasuries from AAA to AA+. This is the first time in history that the U.S. has had a downgrade.

Then, on Monday, Standard and Poors also downgraded Fannie Mae and Freddie Mac. While it is unclear as to the final effects of the downgrade, many financial experts are prediciting that the cost of money will go up, effectively raising interest rates.

If this happens, it could be problematic for an already sluggish economy,a nd could further depress the already lagging housing market. Higher interest rates would effectively make home ownership more expensive.

As for those with bad credit or poor credit, these changes could put you completely out of the market. While the agencies push to regain their credit ratings, they may be forced to be even more conservative with lending practices, and that would make credit or loans for people with bad credit almost out of reach.

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Related articles

• US debt downgrade could mean rate hikes for all (seattletimes.nwsource.com)
• S&P Downgrade Could Feed Home Buyer ‘Anxiety’ (blogs.wsj.com)
• Economy sends mortgage rates down to new 2011 lows (hsh.com)

Why Refinance your Mortgage Loan?

The Fed’s upcoming announcement of ending the program led to expectations of rising borrowing costs. This is the only way of most companies to raise their funds. According to Wilbur Ross, chairman and CEO of the private equity investment group WL Ross & Co, this is the best time to refinance. He shared how he has been trying to refinance the company’s debt for the past year. This is because there is no assurance of a maximum limit to rate increases. However, the rates will not reduce for sure.

Lower loan rate is one of the best reasons to refinance. The usual rule is that refinancing can be done if the interest rates will be reduced by at least 2%. At present, lenders say that a 1% savings is not a good incentive for borrowers to refinance. Lower rates of interest increases savings, pushes up equity rates and reduces the amount of monthly payments.

Debt consolidation is another good reason to refinance. Exchanging high interest debts with low interest mortgage seem to be a good option. However, refinancing does not easily result to financial prudence. The truth is many people who have accumulated high interest debt on credit cards, cars and other bills have a higher chance to do it again once there is credit available.

When this happens, loss becomes higher, refinancing fees are wasted, equity in the house is lost and years are extended to higher interest payments on new mortgage. High interest debt when the credit cards are maxed out is also a possible consequence. All these will result to endless debt.

Refinance rates are lower than purchase mortgage rates. According to a report of the Mortgage Bankers Association, both refinance and purchase mortgage applications increased. There is a decline in volume but the refinance index increased by 2.7%.

You may or may not have bad credit, but you may also be asking yourself whether or not it makes sense to refinance… Because you may be in a position to actually do so.

Well, let’s think about it…..

You need to find out if you can save more money and lower your monthly payments by doing so… One thing that is really important to know or at least note is, that you must make sure that you are factoring the additional costs of a refinance…

Those additional costs include things like loan origination fees, and points you may need to pay to get a better interest rate.

This could be a tough call if you have a fixed rate only slightly higher than current rates or an ARM that adjusted downward in the past year. Just make sure that you’ll be able to recoup the cost of refinancing before you sell your home. Divide the amount of the estimated closing costs (usually 3% to 6% of the mortgage amount; look at your loan papers from last time) by the amount of the monthly savings you anticipate. That will tell you the number of months until you break even.

A second mortgage or a home-equity line of credit complicates things. If you simply want to refinance the first mortgage, your total housing debt shouldn’t exceed 80% of your home’s market value, or else the holders of the second lien may refuse to resubordinate (agree to stand behind the first-mortgage holder for repayment if you default).

If the holder of the second lien refuses to play ball, you could try consolidating all your housing debt into a single mortgage — so that you can use some of the loan proceeds to pay off your second lien. To get such a conforming cash-out refi, you must have at least 20% equity, and for a conforming jumbo, you need 25% to 30% equity, or 35% to 40% equity if the loan is more than $625,500. You’ll also pay a higher interest rate, and paying the higher rate may not make sense. Another strategy is to take out a new home-equity line of credit from the lender of the new first mortgage and use it to pay off the old line of credit. Consider a line of credit with an option to lock in the rate.

There are lots of other things to think about… One of the best things you can do is take the time to talk with a qualified mortgage broker or loan officer.

One thing to note, a loan officer and a mortgage broker are two different people. Mortgage brokers make additional money on selling the loan products. A loan officer may not. Make sure you talk to the broker or officer and find out if they charge an origination fee, and if there are other costs added or associated with working with them, that are not directly related to the loan itself.

Get help with your Decision About Mortgage Refinancing. It always helps to have an outside objective opinion. And remember when you refinance you will get a loan based on your income and your credit score. The better your credit score the better interest rate you will get. And remember the loan is against your income not the value of your house

Check your credit report for any errors that can drive up your interest rate. And realize with these tough economic times a great score years ago will only be a so so score today. Make sure that you contact the reporting agency for anything that looks wrong to your before applying for a loan.

You will also want to ask yourself if you want a variable loan or a fixed loan. You might only be able to qualify for a variable loan given your work income and your credit score. This is what gets some people in trouble.

The variable is attractive because it has a lower initial rate and lower monthly payment. But it will go up make certain of that. And this is where some people have gotten in trouble. They think that they will have more money when it does go up. But you cannot count on a raise every year in this economy.

Do not kid yourself in this case. If you cannot pay the payment you are looking at losing your home. No one wants that. If you are refinancing a fixed rate mortgage you have to realize that you will start all over with a new loan. If you have ten years on a thirty year fixed, you will start all over with a new loan.

You will now have another fixed term of the loan whether that is another thirty years or whatever the term of the loan is. If you are taking money out with the refinance you have to realize that you are taking out the equity of your home now and using that money today. This is what gets some people in trouble. They refinance and take out the equity of their home.

When they sell their home for whatever reason they realize that they will either have to pay the bank money because their home is worth below the amount they owe the bank because their home may have gone down in value since they refinanced. Some people believe that the value of their home will continue to go up so they will always have a growing equity amount in their home; but as the economy has shown that this is certainly not the case.

What you do with the money you take out of the refinance is up to you. But if you are thinking of refinancing it is a good idea to consult with an independent financial advisor to go over all of your options. The more you understand your choices and the results of your choices the better.

In addition to having less debt by refinancing a mortgage, also look at GIC rates to get higher fixed income returns. Mortgage rates vary from lender to lender so ask around.

Remortgages and secured loans are both forms of homeowner loans. However there are differences between these two financial products that most people are unaware of.

To be eligible for either a remortgage or a secured loan you must be a homeowner, as both have to be secured on the equity of a property which can be a first or a second home. They both can be used for numerous reasons.

Sometimes in the case of a remortgage the borrower only wants a like for like remortgage which means that he is replacing his current mortgage with a remortgage of the same value, but which incurs a lower rate of interest. He has an existing mortgage of 210,000 and takes out a remortgage with a different mortgage lender again for 210,000, but the repayment is less each month.

Mainly additional funds are requested when a homeowner remortgages, exactly as happens with the secured loan.

When a homeowner wants to carry out home improvements the best way is to arrange a remortgage or a secured loan. This applies to all sorts of home improvements, and using a secured loan or remortgage will cost a fraction of the cost than a loan taken out through a home improvement company.

You are not tied to any one company by taking out a secured loan or a remortgage for home improvements as you would be with the home improvement company.You will have the ready funds available to pay cash and as such get yourself the best deal.

Remortgages and secured loans can also be the way of paying for an exotic far flung holiday, a wedding, to buy a boat, etc. etc.

There are pros and cons with remortgages and secured loans. Remortgages normally take well over a month to even six to eight weeks to pay out and the secured loan should be paid out in less than three weeks. Therefore if speed is of the essence you may be best to go down the secured loan route, although bear in mind that a remortgage will in general have a lower interest rate than the secured loan.

The main difference between a remortgage and a secured loan is that the remortgage pays of your existing mortgage, and with the secured loan your current mortgage remains in place and the secured loan is a second mortgage secured on the equity of your property.

secured loans