Refinancing Mortgage Loan - Get The Lowest Interest Rate You Can When Refinancing Refinancing can be a very simple process. You fill out a few applications, take the best offer and you're done. You already own your home, so, depending on your broker, the whole process can be fairly simple. Just be careful and make sure you do your ... Refi Home Mortgage Loans – Different Types Of Mortgage Refinance Loans With today's lenders, you have more refinancing options than ever before. So whether you are looking to reduce your rates or lower your monthly payments, you can find financing that is right for you. Lenders also let you compare loan quotes online ... Should you choose to refinance? Refinancing has become a valid option for many individuals with high interest rates on their mortgage. Refinancing is essentially a replacement loan, with a different lender and (hopefully) a lower interest rate. So why would you choose to ...
Which Is Better? Fixed-Rate Or Adjustable-Rate Mortgages
The answer depends on several factors including your financial situation. Lets take a look at the main differences between the two types of mortgages.
Fixed Rate Mortgage
Two major components that are needed to compare fixed rate mortgages are the interest rate and the points. Points are fees paid to the lender at the beginning of the mortgage period. They are based on a percentage of the loan. So, one point equals one percent of the loan amount. Therefore, a $100,000 mortgage with 1.5 points would cost $1,500.
One lender may offer a lower interest rate than another but the points may be higher resulting in a less attractive loan. The important consideration here is the length of time you plan to hold the mortgage. The longer you plan to keep the mortgage, a higher point with a lower interest rate makes more sense. And, the less time you plan to remain in a home you may be more likely to benefit from low or no points with a higher interest rate.
In addition, be sure to ask your lender the total of all fees involved. Lenders can tack on various fees that can add up in a hurry.
Some common fees are: * application fee * credit report * property appraisal * title insurance * escrow fees
Request an itemized list of all fees in writing so you can compare mortgages fairly.
Adjustable Rate Mortgage
Selecting the best adjustable rate mortgage (ARM) is basically impossible because there are some unknowns. However, you can look at a few of the loan factors and depending on your situation make a decision you can live with.
The interest rate that an adjustable rate mortgage starts off with is called the start rate. This rate is the least important consideration when looking at ARM's because it will change. The start rate is often used as a teaser rate to make you think that the loan has good terms.
The more important factors to consider when deciding on an ARM is a formula of index and margin equals the interest rate. The index is what the lender uses to calculate your specific interest rate. Indexes can differ in how quickly they respond to interest rate fluctuations. Some common indexes used are Treasury bills (T-bills) and Certificates of Deposit (CD). The margin is a fixed figure which is added to the index to get the interest rate. Margins are typically about 2.5 percent.
Another important consideration is the frequency in which the mortgage rate is recalculated. Some ARMs adjust monthly, while others only adjust every 6 or 12 months.
Also, rate caps are used to limit the amount the rate can change within an adjustment period. An adjustable rate mortgage that adjusts every 12 months may be limited to a 1-2 percent change up or down. There should also be a lifetime rate cap to limit the rate change over the life of the loan which is usually around 5-6 percent higher than the start rate.
Before accepting an ARM you should figure out the payment at the highest rate allowed to see if you can handle the worst case payment.
Lastly, other lender fees should be considered with a request for a written total fees statement.
Fixed vs. ARM Payments
A fixed rate mortgage is just that, a fixed interest rate for the life of the loan. The payment will always stay the same without fluctuation, however, the risk is that if rates drop significantly you may be stuck with a higher rate.
ARM interest rates can fluctuate many times over the life of the loan, thereby, changing your monthly payment amount. ARMs offer potential interest savings because the start rate is typically lower than a fixed rate. Also, if rates drop or stay the same there will be a continued savings compared to a fixed loan. But, if rates rise an ARM will cost more than the fixed rate loan.
Choosing a Fixed-Rate vs. an Adjustable-Rate Mortgage
First, consider the risk you can take with the monthly payment amount changing. Do you have savings? Or are you budgeted to the max without any emergency savings? If you can't afford to pay your ARM at the highest payment amount you should steer clear of this type of loan.
Also, consider how long you plan to have the mortgage. Generally, ARMs are better for a mortgage of 5-7 years. If you plan to keep your mortgage for the long-term a fixed-rate mortgage may be the better, less stressful choice.
Lastly, if the thought of having an adjustable rate mortgage stresses you out...don't do it! The stress is never worth the potential savings. And, if rates drop significantly you may have the option to refinance to a lower rate anyway.
Mortgage Refinance News
Freddie Mac report: 30-year mortgage rates are in free-fall - Toledo Blade WASHINGTON - Rates on 30-year mortgages fell to a record level for a fourth straight week, dropping to the lowest mark since Freddie Mac started tracking nearly 38 years ago. Rates have been falling since late November, when the Federal Reserve ...
More hoops to jump through for enticing mortgages - Reuters NEW YORK (Reuters) - Consumers rushing to refinance a home loan or get a new one to take advantage of the lowest U.S. mortgage rates in nearly four decades are in for a surprise: the new rates aren't for everyone. The process takes longer and is ...
Banks May Reluctantly Back Bankruptcy Bill - Street.Com The banking industry is skeptical of lawmakers' efforts to allow bankruptcy courts to modify terms of residential mortgages, but some companies may join Citigroup ( C Quote - Cramer on C - Stock Picks ) in supporting a bill in an effort to help shape ...
REFILE-Mortgage lending jobs thrive as other sectors dive - Reuters NEW YORK, Jan 9 (Reuters) - It's so 2005. Even as the rest of the U.S. job market plumbs new depths, hiring by mortgage lenders is surging now that home loan rates have hit multi-decade lows. Employers have ruthlessly slashed jobs and unemployment is ...
Freddie Mac report: 30-year mortgage rates are in free-fall - Toledo Blade WASHINGTON - Rates on 30-year mortgages fell to a record level for a fourth straight week, dropping to the lowest mark since Freddie Mac started tracking nearly 38 years ago. Rates have been falling since late November, when the Federal Reserve ...
Don't miss the refinance window - HometownAnnapolis.com CHICAGO - Lured by low mortgage rates, many homeowners have been rushing to refinance. Interest is gaining for good reason: Eligible borrowers can lock in rates that haven't been this attractive in decades. "With interest rates hovering around 5 ...
Borrowers seeking to refinance may face challenges - Frederick News-Post With mortgage rates dropping to the lowest point in 37 years, homeowners are heading to lenders to refinance their loans. Jeri Benner of Mason Dixon Funding said her firm did 400 mortgages in December; about three-fourths of those were refinancing ...
The rush to refinance - Boston Globe The mortgage interest rates have gone down again. Does that mean that refinancing is the best thing you can do? It’s a dirty little secret that most of the homeowners who are under water got there through refinancing, not by borrowing for their ...
Homeowners Rush to Refinance - KAAL-TV (ABC 6 NEWS) -- Resolve to save money in 2009. Now, you can. Just this week mortgage giant Freddie Mac says the cost of borrowing has slid more than 1 percent from this summer, averaging 5 percent. That's the lowest recorded rate since the survey ...
Refinance rush - Baltimore Sun T he economic turmoil of 2008 has left few bright spots, but here's one: Mortgage rates have plummeted. Rates on 30-year, fixed loans are hovering around 5 percent - the lowest level since Freddie Mac began tracking rates in 1971. Some economists ...
