refinance home loan

Refinance Home Loan

A refinance home loan is a loan taken out by the borrower to pay off the original home loan, typically when the current interest rates are lower than the interest rate on the said home loan.

Why Refinance?

Below are five of the most common reasons to refinance your home loan:

1.  Lower Your Monthly Payment

• Do you plan on staying in your home for three years or more?  If you do, it might make sense to decrease your interest rate and monthly mortgage payment.  Over the term of the loan, you will have, generally, easily paid off the cost of the refinance home loan.  However, if you’re not planning on staying in the home for awhile (under a few years), refinance may not be the best option.  You need to figure out  your break even point (add up the closing costs against your savings) and see if it’s right for you.   Click here for a refinance home loan quote.

2. Refinance from an Adjustable Rate to a Fixed Rate Mortgage

• Adjustable Rate Mortgages (ARMs) have an appeal of lower monthly mortgage payments for home owners who are willing to risk interest rate fluctuations.  For those who don’t plan on owning a property for a number of years, this is generally a great option.  On the other hand, if you plan on making your home a long-term investment, choosing a fixed rate mortgage (15, 20 or 30 year) is generally the best option.  You can have confidence in your loan payment never rising with a fixed rate home loan.   Click here for a refinance home loan quote.

3.  Get Out Of Ballon Payment Programs

• Ballon payment programs appeal, like adjustable rate mortgages, are generally because of the initial lower monthly mortgage payments.  If you’re still own the property at the end of your 5 to 7 year fixed rate term, the entire mortgage balance is due to the lender.  If you’re getting close to the end of your balloon payment term and can’t afford to pay the lender your balance (like most of us), you can easily refinance your home loan into an ARM or Fixed-Rate mortgage.  Click here for a refinance home loan quote.

4.  Get Rid of Private Mortgage Insurance (PMI)

• Low down payments (Zero down is pretty much a thing of the past), allow home owners to purchase homes with little down payment up front (generally 3 to 5% and under 20%).  The bad side is the required private mortgage insurance (PMI), which protects the lender from you defaulting on the loan.  When the value of your home increases and the balance on your home loan decreases, it’s possible to remove the PMI with a refinance home loan.  Click here for a refinance home loan quote.

5. Refinance Home Loan:  Your Home’s Equity

• A home equity loan is a type of tax-deductable refinance loan where you can get cash from your home.  When your home increases in value, you have the ability to take some of that equity out and put it into your pocket as cash.  Generally people use this to pay off their high-interest credit card balances, buy a new car (which interest rate is higher:  auto or home?), or make home improvements (extra benefit:  you’re generally increasing your home’s value with improvements).  With a cash-out refinance home loan, it’s simple to do all the above and more (need a vacation?).  Click here for a refinance home loan quote.

Refinance Home Loan Closing Costs:

All lenders are in the business of making money.  There’s a cost associated with getting you in the door or on the phone.  While there are still lenders who offer no closing costs on your refinance home loan, these costs are typically rolled into your higher interest rate (albeit, lower than your original home loan interest rate).  How do you sift through the fine print and make sure you’re getting the best deal?  Demand a Good-Faith Estimate (say “GFE” to your loan officer).  These costs are not guaranteed, but a lender who wants your refinance home loan will stand by their offer in good faith.  Below are some of the costs your may be expected to pay with your refinance home 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

Garbage Fees on your Refinance Home Loan:

Some lenders will charge your what’s commonly known in the business as “garbage fees.”  These are the fees that you can be negotiate with your refinance home loan.  Ask your loan officer to waive certain fees (administration, processing, application, etc).  Remember they want your refinance home loan, but they also need to make money.

A Summary; Refinance Home Loan Advantages and Disadvantages

Refinance Home 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 Loan Disadvantages

• Refinance Home 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 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:  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 information you’ll need to know before you refinance your home loan.  When you talk with a loan officer ask questions related to their closing cost and negotiate.  They want you to be a happy customer and save money on your refinance.  Best of luck!

Click here for a refinance home loan quote.

refinance home loan

A Little Info On A Refinance Home Loan…

A refinance home loan is generally done to lessen the payment and / or free the equity on your house. Arguments in favor of refinancing are:

1.  Lessen your installment
With  a refinance home loan, you are able to pay less monthly installment. Even extending the term of your loan will lower the installment payment.

2.  Get a fast access to equity
Getting cash out refinance home loan allows an instant access to the equity built in your home. With the cash you can get a remodeling done, travel worldwide, consolidate debt.

3.  ARM to Fixed rate of interest
ARM (adjustable rate mortgage) is good for those who plan to stay in the mortgaged home for a short span because the rate of interest changes every year according to market index fluctuations.  While in a fixed rate of interest the rate is constant for the whole term of the loan.

3.  Balloon Payments
Balloon payments have a lump sum amount that needs to be paid after small monthly installments. You may not be able to pay the lump sum, so refinance to a fixed rate loan is generally the best option.

refinance home loan

A Little Info On Home Equity Loans…

Many people call the home equity loan as “the second mortgage” This is distinguished from a refinance home loan because it allows property owners, for example in Colorado, to borrow money by leveraging the home equity. The primary reason for the home equity loan is for certain tax changes to be accommodated or circumvented. The reason is, when a borrower from Washington acquired the new loan amount, and then he could use the interest rates of the new loan to subtract costs for his or her tax returns.

Types

There are two basic types of home equity loans or what was previously referred to as second mortgages. These are the fixed-rate mortgage loans and the LOC or the line of credit. We are reminded that the fixed-rate loans are the major source of refinancing cases particularly in New York and Virginia. The line of credit on the other hand will be discussed later.

LOC

When a bank, or a financial lender, and a mortgage borrower reached an agreement regarding a clear drawn ceiling on the maximum amount that the borrower can avail for his loan is what is referred to as the line of credit. The concept roughly resembles that of refinancing but one of the distinct benefits of the line of credit if you are a resident of Pennsylvania is that the borrower need not pay the interest for the LOCs that are not utilized.

Home Equity LOC

If the mortgage borrower in his or her transaction with a Virginia local lending institution had his property of home used as a collateral for the extension of a line of credit, then it is called as the Home Equity Line of Credit or more popularly know around New Jersey as the HELOC. In the event that the previously explained ceiling is reached then the borrower can decide how much credit he is willing to avail.

refinance home loan

Why Should You Decide To Take Out A Refinance Home Loan?

Equity means the amount that a property is valued over the money owed on it.  The main benefit with a refinance home loan is to use the equity built on the house for different uses like remodeling, extensions, education, and travel.  By refinancing you take a mortgage on the amassed equity of the home.

Why take this loan?

• Debt consolidation
• Lower payments
• Cash in hand
• Renovations and extensions better options
• Shorter term of loan
• Equity utilized in different forms

Looking at the variability of this loan, it’s no doubt that the popularity is high. Refinancing to this loan helps to lower the interest rate and shortens the term also. You can utilize your equity on the house by taking this refinance.

refinance home loan

Common Sense Refinance Home Loan

The excitement of owning a new house camouflages the high interest rates sometimes, but once they realize their mistake that the home is costing more than the thought of monthly payment.  Sometimes, the home has to be foreclosed, leading to a bad credit rating. To help out such mistakes, there is always a ref.

This loan is a help to people who do not want to continue with high rate of repayment. A refinance home loan will help you take a mortgage with, possibly, a lower interest rate and put your finances back on track.  If you have the current home loan for a long time then you can take a Cash-Out refinance home loan on the amount of money left on the current mortgage. This gives you cash in hand for other things like renovations, remodeling and extensions.

Another refinance is Home Equity Refinance. The owner of the house will be able to cash on the equity of the house and payment of monthly installment is on a lower rate, so he gets to use the cash for different things. It can save you a lot of money by lowering your rate of interest.

If you are unable to continue paying installments at a high rate, then refinancing is the best. Talk to your lender or financial advisor about the best deal for you and your mortgage

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