Refinance Home Loan Questions And Answers
Is Now A Good Time To Refinance?
A. When interest rates drop homeowner should definitely consider refinancing. but he or she should evaluate their entire financial situation and goals before making any final decision to refinance. Is your goal to lower your monthly payment? Consolidate debts? Get cash out for large purchases, to invest and expand your portfolio, grow your business or free up funds to acquire an investment property? Do you wish to change your interest deduction expense for tax purposes? Once your answered these questions your better able to answer the questions "Is now the time to refinance?" Your next task is to determine the product and term length of the refinance program needed.Here are a few of the more popular refinance products to choose from:
15 year fixed rates
30 year fixed rates
7 year ARM
5 year ARM
No cost refinancing
Home Equity Refinancing
Replace with The Top Lenders List
Q. When should I refinance my current mortgage loan?
A.
It is often said that you should refinance when mortgage rates are 2% lower
than the rate you currently have on your loan. Refinancing may be a viable
option even if the interest rate difference is less than 2%. A modest
reduction in the loan rate can still trim your monthly payment. For example,
the monthly payment (excluding taxes & insurance) would be about $770 on
a $100,000 loan at 8.5%. If the rate were lowered to 7.5%, the monthly
payment would be about $700, a savings of $70. The significance of such
savings in any scenario will depend on your income, budget, loan amount and
the change in interest rate. Your trusted lender can help calculate the
different scenarios. The Home Loan Page
Q. Should I refinance if I
plan on moving soon?
A. Most lenders will charge fees to refinance a loan. If you plan to stay in the property for less than a couple of years, your monthly savings may not get a chance to accumulate and recoup these costs. Let's say a lender charged $1,000 to refinance your loan, but it resulted in a monthly savings of $50. It would take 20 months (1,000 divided 50) to recoup the initial costs before you start to realize some savings. Some lenders will charge a slightly higher than average interest rate on refinance loans, but waive all costs associated with the loan. The attractiveness of these loans will depend on the interest rate you are being charged on your current loan. Learn about the useful money saving tools provided by Replace with The Top Lenders List
Q. What are points?
A. Points are costs that need to be paid to a lender in order to receive mortgage financing under specified terms. A point is a percentage of the loan amount (one point = one percent of the loan). One point on a $100,000 loan would be $1,000. Discount points are fees that are used to lower the interest rate on a mortgage loan (you are discounting the interest rate by paying some of this interest up-front). Lenders may express other loan-related fees in terms of points. Some lenders may express their costs in terms of basis points (hundredths of a percent). 100 basis points = 1 point (or 1 percent of the loan amount).
Q. Should I try to pay as many discount points as possible to lower my loan's interest rate?
A.
If you plan on staying in the property for at least a few years,
paying discount points to lower the loan's interest rate can be a good way
to lower your required monthly loan payment (and possibly increase the loan
amount that you can afford to borrow). If you only plan to stay in the
property for a year or two, your monthly savings may not be enough to recoup
the cost of the discount points that you paid up-front. Ask your lender how
long it would take for your monthly savings to recoup the costs of the
discount points.
Q. What does it mean to lock
the interest rate on a mortgage loan? A.
Due to the nature of interest rate movements, mortgage rates can
change dramatically from the day you apply for a mortgage loan to the day
you close the transaction. If interest rates rise sharply during the
application process, it could make a borrower's mortgage payment larger than
he/she previously thought. To protect against this uncertainty, a lender can
allow the borrower to 'lock-in' the loan's interest rate, guaranteeing the
borrower the prevailing loan rate for a specified period of time (often
30-60 days). A lender may or may not charge a fee for this service. A
simpler process would be to have several lenders contact you.
Q. Should I lock-in my
loan rate when I apply for home refinancing? A.
No one knows for sure how interest rates will move at any given time,
but your lender may be able to give you an estimate of where it thinks
mortgage rates are headed. If interest rates are expected to be volatile in
the near future, you may want to consider locking your interest rate if
rising rates will no longer allow you to qualify for the loan. If your
budget can handle a higher loan payment or if the lenders lock fee seems
excessive for your means, you might want to consider allowing the interest
rate to 'float' until the loan closing.
Looking for low rates? Replace with The Top Lenders List
Q.
I've had credit problems in the past. How does this impact my chances of
getting home loan refinancing? A.
Q. How can I tell
who has the best deal on refinancing? A.
Q. Should I choose the
lender with the lowest interest rate and costs? A.
Mortgage Loan Search Financial Network
is a
division of
Financial Marketing Network, Inc.
926 Cator Ave
Baltimore MD 21218
© 2006, 2007, 2008
Financial Marketing Network, Inc. All rights reserved.
Refinance
Loans
Home Purchase
Home Equity Loans
Consolidate Debt
Business Loans
Student Loans
RE Investor Loans
Commercial Loans
