Blog

Refinance Home Mortgage Loan

Refinance Home Mortgage Loan

A refinance home mortgage loan is a loan taken out by the borrower of an original home loan, where the original home mortgage loan is paid off and replaced, typically, with a loan that has a lower interest rate.

We’ve compiled a list of the top reasons why most people choose to refinance their home mortgage loan.

Would you like to have your monthly mortgage payment lowered? Sure. We all would. If you plan on staying in your home over three years, it might make good sense to lower your interest rate and refinance your home mortgage loan. The big catch on your mortgage loan is to make sure the savings in interest are greater than the refinance closing cost you will incur.

Do you need to get out of an adjustable rate mortgage? Adjustable rate home mortgage loans are another reason many people choose to refinance their home loan. They can seem extremely attractive up front with a lower interest rate, but you’re risking fluctuations. If you don’t want to own your home for more than three years (a general rule of thumb), then this maybe a great option. However, switching to a fixed rate home loan is often a great idea when choosing to refinance.

Are you trapped in a balloon payment program? If you are, now may be a great time to refinance your home mortgage loan. Getting close to the end of your balloon term can be scary. Take the appropriate time to choose the right lender for your new refinance home mortgage loan.

Understanding Closing Cost of Your Refinance Home Mortgage Loan

Mortgage Brokers and lenders are in the business of making money. Pure and simple. For your refinance home mortgage loan, understanding their closing cost can be a great advantage in negotiation. Ask your loan officer for a GFE (good-faith-estimate) of your refinance home mortgage loan’s closing cost. These letters, or GFE’s, are not guarantees, but any mortgage company who wants your refinance home mortgage loan will stand by their offer in good faith. Below are the typical fees associated with your refinance home mortgage loan:

• Loan Origination Fee
• Loan Discount Point Fee
• Processing Fee
• Application Fee
• Administration Fee
• Home Inspection Fee
• Document Preparation Fee
• Home Appraisal Fee
• Credit Report Fee
• Title Policy Fee
• Escrow Fee
• Reconveyance Fee
• Beneficiary Demand Fee
• Loan Tie-in Fee
• Notary Fee
• Delivery and Counter Fee
• Email Document Fee
• Tax Service Fee
• Recording Fee

Summarizing Your Refinance Home Mortgage Loan

Refinance Home Mortgage Loan Advantages

• Lowering your monthly payment:  If you’re gonna stay in your home long enough to recoup your break even cost and then some, a refinance home loan is a great option.  You can add up your savings and put do many things with the extra money!
• Shorten Your Amortization Period:  If you can afford a higher payment after you reviewed your refinance home loan quotes, consider shortening the loan term.  You’ll pay off the loan in less time, but make sure you can’t invest the difference somewhere else for a better return with your money.
• Cash:  Like my accountant told me in April, cash is king.  A refinance home loan can put cash in your hands to pay off high interest credit card debt, buy a new car, or take a much needed vacation.  You could even put it in the bank and make money off the cash you’ll take out your home’s equity.

Refinance Home Mortgage Loan Disadvantages

• Refinance Home Mortgage Loan Costs:  The closing costs associated with the loan need to be less than your savings.  Sound simple?  It is.  Simply add up all your fees and calculate the difference between your old home loan payment with your new refinance home loan payments.  Divide the difference into the loan fees and this number will tell you the number of months you must pay to break even on your loan (the break-even period).
• Refinance Home Mortgage Loan Longer Amortization Periods:  Amortization is the equal monthly payments of principal and interest over a specified period of time will completely payoff an amortized loan.   If you have the option of shortening your amortization period, you may not be able to qualify for the higher payment or you may not want pay more each month to pay off the loan faster.  The most common use is to extend the term of the loan.  I you refinance your home loan with 15 years remaining on a new 20 year loan, you just turned your 20 year loan into a 25 year loan.
• A Larger Mortgage Home Loan:  If you choose to roll the costs of the refinance home loan into the loan itself (like most of us), you’re taking out a larger mortgage.  More of a mortgage eats into your equity.  Additionally, if you take a cash-out refinance home loan, you’re increasing the balance of your mortgage.

That’s about all the info you’ll need before you begin to refinance your mortgage / home loan.  When speaking with a loan officer or mortgage broker, ask questions related to their closing cost and be prepared to negotiate.  They want you to be a happy customer and save money on your refinance home mortgage loan.  Best of luck!

Why Choose A Refinance Home Loan?

A refinance home loan is a big way to reduce monthly payments, get a better interest rate, and gain additional time for repayment, but it should not be decided in a hurry. Refinancing your home loan at the wrong time can result in having to pay a higher payment.

Some simple suggestions to help you decide:

•    How do you refinance your home loan?
In order to refinance a home loan, the bank or other lender that you take out the refinance loan through will handle all of the transfers and payment of the mortgage, though there may be some instances where you have to handle it yourself depending upon the specific lender that you use.

•    When should you refinance?
The best time to refinance a mortgage is after a significant portion of the mortgage has been repaid and sufficient equity has built up. It’s important to have enough equity to cover the loan amount as it will secure the refinance loan.

Care should be taken that you apply for your refinance home loan at a time when interest rates are lower. To end up paying less interest will depend upon the term that you agree on for the refinance loan.

HOW DO LENDER’S DECIDE? Downside

The fact that maximum expense ratios may vary with other characteristics of the mortgage transaction, it may pose as a downside to the borrower. To illustrate: the maximum ratios are often lower and more restrictive for any of a long list of program modifications: if the property is co-op, a condominium, a second home or that it was developed for investment purposes and not residential, the borrower is self-employed, the loan is cash-out refinance home loan or a combination of any of these.

How Does Employment and Credit Affect Your Refinance Home Loan

Every part of your life is entwined with the other part. Same goes for the refinance. Looking at your past employments gives the lender an idea about of stability and increasing income. It shows that you are a good customer, less risk of foreclosures.

Seeing the credit history gives a picture of your borrowings, lending and repayments. If it steady you naturally have a high credit score. This is seen to check the ability of repayment of the refinance home loan. You are protected by law against discrimination on the basis of color, origin and income. Even with a poor employment history and bad credit you are eligible for a number of loans.

How To Choose The Right Refinance Home Loan Lender

To be able to finalize a good lender/bank for a refinance home loan can be an important decision, so emphasize on:

•    The need to refinance
Getting a refinance on the mortgage can make some profit for you, if the present mortgage is 1% higher than the ongoing rates. Moving from an adjustable rate mortgage (ARM) to a fixed rate mortgage can save money.

•    Be knowledgeable about the different types of refinance lenders and refinance products available
Banks, credit unions, mortgage companies, or online lenders are few of the options. There are also brokers who will find different kinds of lenders for you and also help choose best suited refinance package. Knowledge of the mortgage financing vocabulary is important.

•    Different lenders to refinance your home loan
The market for refinance home loans has become so competitive that it is easy to find several lenders to compare.

•    Negotiate the mortgage refinance home loan that suits personal needs
Usually, the money that a lender earns on refinancing a mortgage depends on the terms of the mortgage, so it is up to one’s own judgment to make sure that the loan received is the most cost effective. Compare the features of each loan like type of loan, interest rate, points, prepayment penalties, and closing costs.

Next Page »