Refinancing a home loan is a rather simple process. Yet it is smart to know what your options are before undertaking it. Many things have to be considered, you should compare lenders, rates, costs, interest types, etc in order to make a well informed decision.
First off, a mortgage is a method of using personal property as security for the payment of the debt. Like collateral. Only your collateral is the thing you initially had the mortgage for. When you decide to refinance a mortgage you'll be canceling a previous loan with the money amount obtained from a second loan.
Unless of course your motive is that you are not being able to meet the monthly payments you should make sure that the new loan has overall better conditions than the previous one.
Interest rates are on the way up, and that has slowed demand for the government-encouraged mortgage refinancing initiative announced not long ago.
Still, refinancing or modifying your home mortgage may make good, bottom-line sense for families that are paying too much of their monthly incomes for housing. The clock is ticking on the federal program, which could ultimately help millions of homeowners keep the roof over their heads.
The federal effort is called Making Home Affordable. It offers refinancing options to homeowners whose mortgages come from Fannie Mae or Freddie Mac. Modifications are available to those with mortgages from most other lenders.
To qualify for refinancing, a borrower from Freddie Mac or Fannie May must be "current" on payments, that is, not more than 30 days late on any payment in the past 12 months. You're likely eligible for refinancing if the amount you owe on the mortgage is about the same as or a bit more than your home is worth.
Put another way, the amount owed on your first mortgage must not be more than 105 percent of the market value of your home.
Your lender will give you what's termed a "good faith" estimate on a refinancing package. If you look at the terms and decide they're not much better than your current payment plan, refinancing may not be the right move for you.
Refinancing can put some stability into your financial picture by eliminating things such as variable rates or balloon payments.
Many borrowers from sources other than Fannie May and Freddie Mac also are having trouble making their mortgage payments. Their interest rates may have gone up, or their incomes may have decreased. For those borrowers, a Home Affordable Modification may be the answer.
To be eligible for a modification, you must:
First.Have taken out your mortgage before Jan. 1, 2009.
Next.Live in your home.
Next. Have trouble paying your mortgage.
Next. Have a mortgage payment more than 31 percent of your monthly gross income.
Not all lenders are taking part in the Making Home Affordable program, but most likely will do so. Your lender doesn't want to put you in the street, and likely feels a modified payment plan is far preferable to no payments at all.
Advantages Of Refinancing
The first thing to consider is the interest rate. You may be able to obtain a refinance with a lower interest rate because market conditions have improved or because your credit and financial situation have improved. Either way, pay special attention to other costs as you may be paying as much in extra fees as what you can save by reduced interests.
If your current mortgage interest rate is variable you may want to refinance your home loan and obtain a fixed interest rate, this will give your monthly payments certainty so you don't have to worry about sudden increases on your expenses. Fixed rates tend to be a bit higher but the peace of mind that they imply is well worth the small difference.
You can also get a cash-out refinance, you'll be refinancing for a higher amount than the amount owed so you'll end up with extra cash for home improvements, buying a car, going on vacations or any other purpose you may think of. Just make sure that you are able to meet the monthly payments. Given that your new debt will be higher, your monthly payments will probably be higher too, unless of course you get a longer repayment program too.
Requirements of Cash
Bear in mind that there are certain expenses that must be paid separately, like attorney fees, closing fees, etc. However, if you don't have the cash available, you can opt to charge this amounts to the loan principal, thus avoiding the need to find the money in order to close the deal.
How long ??
The refinance process is usually completed in a reasonable amount of time. A length ranging from ten days up to a month can be considered acceptable. If you are short on time, make sure to push for a quick closing when you talk about the loan conditions with the lenders as the time they can take is rather flexible. However, if you are not in a rush, you'll better take your time to request quotes from many lenders and compare rates and other conditions in order to get the best deal available for you.
First off, a mortgage is a method of using personal property as security for the payment of the debt. Like collateral. Only your collateral is the thing you initially had the mortgage for. When you decide to refinance a mortgage you'll be canceling a previous loan with the money amount obtained from a second loan.
Unless of course your motive is that you are not being able to meet the monthly payments you should make sure that the new loan has overall better conditions than the previous one.
Interest rates are on the way up, and that has slowed demand for the government-encouraged mortgage refinancing initiative announced not long ago.
Still, refinancing or modifying your home mortgage may make good, bottom-line sense for families that are paying too much of their monthly incomes for housing. The clock is ticking on the federal program, which could ultimately help millions of homeowners keep the roof over their heads.
The federal effort is called Making Home Affordable. It offers refinancing options to homeowners whose mortgages come from Fannie Mae or Freddie Mac. Modifications are available to those with mortgages from most other lenders.
To qualify for refinancing, a borrower from Freddie Mac or Fannie May must be "current" on payments, that is, not more than 30 days late on any payment in the past 12 months. You're likely eligible for refinancing if the amount you owe on the mortgage is about the same as or a bit more than your home is worth.
Put another way, the amount owed on your first mortgage must not be more than 105 percent of the market value of your home.
Your lender will give you what's termed a "good faith" estimate on a refinancing package. If you look at the terms and decide they're not much better than your current payment plan, refinancing may not be the right move for you.
Refinancing can put some stability into your financial picture by eliminating things such as variable rates or balloon payments.
Many borrowers from sources other than Fannie May and Freddie Mac also are having trouble making their mortgage payments. Their interest rates may have gone up, or their incomes may have decreased. For those borrowers, a Home Affordable Modification may be the answer.
To be eligible for a modification, you must:
First.Have taken out your mortgage before Jan. 1, 2009.
Next.Live in your home.
Next. Have trouble paying your mortgage.
Next. Have a mortgage payment more than 31 percent of your monthly gross income.
Not all lenders are taking part in the Making Home Affordable program, but most likely will do so. Your lender doesn't want to put you in the street, and likely feels a modified payment plan is far preferable to no payments at all.
Advantages Of Refinancing
The first thing to consider is the interest rate. You may be able to obtain a refinance with a lower interest rate because market conditions have improved or because your credit and financial situation have improved. Either way, pay special attention to other costs as you may be paying as much in extra fees as what you can save by reduced interests.
If your current mortgage interest rate is variable you may want to refinance your home loan and obtain a fixed interest rate, this will give your monthly payments certainty so you don't have to worry about sudden increases on your expenses. Fixed rates tend to be a bit higher but the peace of mind that they imply is well worth the small difference.
You can also get a cash-out refinance, you'll be refinancing for a higher amount than the amount owed so you'll end up with extra cash for home improvements, buying a car, going on vacations or any other purpose you may think of. Just make sure that you are able to meet the monthly payments. Given that your new debt will be higher, your monthly payments will probably be higher too, unless of course you get a longer repayment program too.
Requirements of Cash
Bear in mind that there are certain expenses that must be paid separately, like attorney fees, closing fees, etc. However, if you don't have the cash available, you can opt to charge this amounts to the loan principal, thus avoiding the need to find the money in order to close the deal.
How long ??
The refinance process is usually completed in a reasonable amount of time. A length ranging from ten days up to a month can be considered acceptable. If you are short on time, make sure to push for a quick closing when you talk about the loan conditions with the lenders as the time they can take is rather flexible. However, if you are not in a rush, you'll better take your time to request quotes from many lenders and compare rates and other conditions in order to get the best deal available for you.
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