Educate Yourself

CONSIDERING REFINANCING? THEN READ ON…

Taking a mortgage is not the end in financing. With the fluctuation markets, interest rates keep changing, whether it is hiked or dipped. So, you have the option of refinancing when the opportunity is available. With refinancing you can save a lot of money as the interest gets lower and you save on lower payments monthly.

To make up your mind whether you should refinance or not:

Changing from adjustable loan to a fixed rate:

• By having a fixed loan means that your payments will remain the same as you refinance on a low interest. Converting  ARMs to a fixed rate makes sense as fixed rate is more stable.

Fix your stay:

• How long you plan to stay in the same house reflects on the kind of refinance you should opt for. As you refinance even on a lower interest, you have to keep in mind that closing costs and fees would remain the same. If you plan to stay long   term in the house, then only it makes sense to refinance as the time needed to come at par will be longer.

Compare and fix:

• Before going in for a refinance, you should do your homework effectively. Read about the rates prevailing in the market, different deals of various lenders. Knowledge about all these will help you to get the best rates at lowest interest.

FAQ: Reverse Mortgage

Reverse mortgage is a loan for older people so that they receive monthly, tax free payments without selling the house.

• What is the qualification?

You must be 62 and must have equity built in your home.

• What if the house is mortgaged?

You may qualify even then. The money received should be used to pay off the initial mortgage.

• How much money is paid to me?

It depends on factors like the home age, the valuation, your age at the time of taking the loan, and current interest rates.

• Are they monthly payments?

No. Money can be got in form of lump sum, lines of credit, and monthly payments.

Common Home Loan Types

There are various types of home loan for the property owners. Some common loans are:

• Adjustable Rate Mortgage:

The interest rate of these loans depend upon the financial index it is dependent upon and so after a fixed rate of interest for few years it starts to vary for the rest of the term.

• Fixed Rate Mortgage:

These loans have a fixed interest rate for a particular period of time. So your budget can be calculated as the monthly installments remain constant.

• Balloon Home Loan:

This type of loan is repayable in the full amount when the term gets over. Generally a loan with the term of 5 to 10 years with a low rate of interest as found in ARMs loans.

• Home Equity Loan:

These fixed rate loans are taken on the equity that your property is valued at. They provide you with liquid cash so as to invest, renovate, education purposes. They have a fixed monthly payment and are basically safe.

• Line of Credit:

A line of credit loan allows you to take cash on the mortgage. You can cash on the equity of the house. The monthly installments are of low interest. The advantage is that you can pay it back when you want.

Things To Remember Before You Refinance Your Home

Refinancing a mortgage can really be taxing. Keeping abreast of the intricacies of refinancing will be beneficial. You need to know the basic things about the deal, make a checklist before signing.

• Interest Rate

The interest rate will depend on the type of refinance mortgage you have chosen and on that basis monthly payments will be made. Taking an ARM will have an interest rate that will be fluctuating as it’s based on the market index. While a fixed rate of interest will give you security of a fixed monthly payments.

• Prepayment fines

Mortgage lenders put prepayment penalties because it is in their favor. If you will have a prepayment fine in your mortgage, you will have to give the lender the penalty for refinancing. Be aware of these clauses.

• Term of refinance

Term of the loan means the total time you have to repay the loan. Longer the term of the loan, lower monthly payments are there. With a shorter loan of 10 to 15 years gives you ownership faster, with lower interest monthly.

CASH-OUT REFINANCE TO BUY A CAR

A home and a car are two of the biggest purchases people ever make. You can use a cash-out mortgage refinance on the home loan to buy a new car.

• Mortgage turns into money machine

Cash-out refinance requires you to refinancing the first mortgage. After the refinance is closed, the mortgage lender will give you cash that you need to withdraw. Then this cash can be recycled into buying the car.

• Tax deductibility, more attractive.

Consider a second mortgage, which includes a fixed-rate home equity loan or a home equity line of credit, which is better than first mortgage with high closing costs. Recycling home equity to buy a car is a good decision, for low tax deductibility and lower monthly payments makes it better than a proper car loan.

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