04
May
By support
Home Mortgage Tips

When is Refinancing Not a Good Idea?

When is Refinancing Not a Good Idea?Refinancing your home can be a great way to reduce monthly mortgage payments or interest rates – or even pay off your debt faster. And while it is a useful tool in budgeting for millions of homeowners, a home refinance may not necessarily be useful in every situation – in fact, there are some situations where refinancing can cost you a great deal of money.

So when should you skip the refinance and simply keep with the original plan? Here’s what you need to know.

If You’ve Already Paid Off Much Of Your Mortgage

When you first start paying a mortgage, most of your monthly payment goes toward the loan’s interest rather than its principal amount. But as you start paying down your mortgage, more and more of your payments are applied directly to the principal. And if you only have 10 years left on your mortgage, the vast majority of your payments are being applied to the principal.

Refinancing a mortgage essentially restarts the loan over from scratch – so if your mortgage is mostly paid off, a refinance will put you back where you started and cause you to owe much more money in interest payments.

If You’re Not Prepared To Pay More Closing Fees

Refinancing can be a great way to lower your interest rate, extend your loan, or get better terms, but it also comes at a cost. Since refinancing essentially starts a new home loan, you’ll need to pay all of the closing costs associated with a new mortgage – and on average, closing costs can total up to 5% of your home’s value. If you don’t have enough cash on hand to pay for your closing costs for a second time, refinancing your mortgage will harm you more than it will help you.

If You’re Giving Up An FRM For An ARM

If you have a fixed-rate mortgage, you have a great guarantee that your mortgage rate will stay the same. And if you already have a low interest rate, trying to get a lower interest rate will make it difficult for you to break even on your closing costs – unless you go with an adjustable-rate mortgage, which typically has lower closing costs.

But opting for an adjustable-rate mortgage is a poor idea right now. Today’s interest rates are at historical lows, which means they have nowhere to go but up. If you refinance with an adjustable-rate mortgage, you’ll end up paying more money than if you simply kept your existing fixed-rate mortgage.

Refinancing is often a useful tool, but it’s not always helpful in every situation. A qualified mortgage advisor can tell you whether refinancing is right for you. Contact your trusted local mortgage professional to learn more.

03
May
By support
Home Mortgage Tips

How to Lower Your Mortgage Interest Rate

How to Lower Your Mortgage Interest RateMortgage interest rates are at historical lows right now, but they’re expected to start rising soon. That’s why savvy buyers are taking steps to ensure they get the best possible interest rates on the market and then lock those rates in for the long term. But even if interest rates are already low, that doesn’t mean you can’t reduce them further.

So how can you save even more money on your monthly interest payments? Here’s what you need to know.

Buy Down Your Rate With Interest Points

Interest points are a form of pre-paid interest that can help you to greatly reduce your interest rate. When you buy down your rate using interest points, you’re essentially paying interest up-front in order to reduce your monthly payments. Each point that you purchase could reduce your monthly rate by up to 0.25%, which makes interest points a worthwhile investment when considering you’ll be paying interest for the entire life of the loan.

Refinance At A Lower Rate

Refinancing is a great way to benefit from historically low interest rates if you originally bought your home during a time when interest rates were high. With a mortgage refinance, you essentially pay off your first mortgage with a second mortgage, which you can negotiate as a completely new loan. This is a great option if you originally had poor credit when you first bought your home but have since improved your credit score.

Set Up Automatic Monthly Mortgage Payments

If you want to reduce your monthly interest rate, you’ll need to offer your lender something in return. One great way to get a lower interest rate is to set up automatic bank withdrawals that pay your mortgage for you every month. In exchange for this guaranteed monthly payment, your bank will be more flexible regarding your rate.

Opt For A Mortgage With A Shorter Term

If your income is about to see a large increase, choosing a shorter-term mortgage is a great way to significantly reduce the amount of interest you’ll pay. Shorter mortgages like a 15-year fixed mortgage typically have lower interest rates than longer mortgages, and you can save thousands of dollars over the life of the loan by choosing a shorter mortgage term.

Mortgage interest rates are the scourge of many a home buyer, but with smart buyer strategies and the guidance of a qualified mortgage advisor, you can reduce your interest rate and save thousands of dollars on your home purchase. Want to learn more about how you can reduce your interest rate? Contact your local mortgage professional for more information.

28
Apr
By support
Home Mortgage Tips

The HARP Refinance Program Has Been Extended into 2016: Here’s How You Can Take Advantage

The HARP Refinance Program Has Been Extended into 2016: Here's How You Can Take AdvantageWith the Home Affordable Refinancing Program recently being extended until the last day of December, 2016, many homeowners who have found their assets in a challenging situation have been given a second chance to apply and receive an affordable mortgage.

By taking advantage of the HARP program, eligible borrowers can refinance to the current mortgage rates on their homes while avoiding paying for private mortgage insurance or putting down the principal.

A Quick Primer On The HARP Refinancing Program

With the economy in a strong downturn in 2008, the value of millions of American homes plunged and the owners found themselves owning property with negative equity.

The Home Affordable Refinancing Program was created by the government to assist people whose home values were lower than the outstanding balance on their mortgages. Previously it would have been impossible to refinance for a better interest rate on the current value of the home, so HARP was designed to help any of these borrowers stay above water.

Who Is Eligible For HARP Refinancing?

There is a certain set of criteria that needs to be met in order to qualify for the HARP refinancing program, but two major points stand out: The mortgage must have been granted earlier than May 31, 2009 and it must have been granted by either Fannie Mae or Freddie Mac.

It is important to point out that many banks do not back their own mortgages and work as a servicer, a middle-man to collect the mortgage that is actually backed by Fannie Mae or Freddie Mac. Many borrowers believe they do not qualify without double checking with their lender to see if the mortgage was granted by Fannie Mae or Freddie Mac, so it is imperative to contact the lender or check online to see who granted the mortgage.

There are also several disqualifiers that should be known. With certain exceptions, many borrowers who have previously refinanced their home under the HARP program are ineligible. The other major factor is that homes must have a loan-to-value ratio of 80% or higher.

What Is The Next Step For Eligible Borrowers?

The next step for anybody eligible for the HARP refinancing program is to check the current rates and see if refinancing would be beneficial. Your local mortgage professional will have experience with the HARP application process and will be able to confirm today’s rates to see if applying is the right move.