Mortgage refinancing is an option that can help borrowers' lower loan installments through reduction of interest or principal balance. This strategy involves taking out a new loan which requires borrowers to pay closing costs. Therefore, careful consideration should be given to ensure this is a smart financial move.
Borrowers also engage in mortgage refinancing to obtain cash back through accrued home equity. This can be a good option when large sums of money are required. Common reasons to engage in this strategy include paying for college tuition, home improvements, and paying off high interest loans.
Banks charge substantially lower interest rates against home loans. When borrowers require funds for major purchases it can be smarter to borrow against home equity than to use credit cards or take out unsecured loans.
Refinancing requires borrowers to qualify for a new loan. It is best to obtain current copies of credit reports from the 3 major credit reporting bureaus before submitting an application. Most lenders require borrowers to have a credit score of at least 700. Interest rates are based on FICO scores so the higher the score the lower the rate of interest.
Property owners often use their current lender when refinancing mortgages. However, it is smart to spend time comparing lender rates and requirements. The Internet is a great source for conducting research and can help borrowers obtain the best rate. One trusted source is BankRate.com.
When researching mortgage refinance loans it is crucial to read the fine print. Taking time to thoroughly understand loan terms, assessed interest, and prepayment penalties can help borrowers prevent costly mistakes. If necessary, consult with a real estate attorney, home loan specialist, or housing counselor.
Borrowers who are uncertain if mortgage refinance is in their best interest may want to obtain housing counseling through the Department of Housing and Urban Development. The HUD website provides numerous resources regarding refinancing. Visitors can download financial worksheets, compare mortgage lenders, and locate approved housing counseling agencies at HUD.gov.
Mortgagors should review their current loan contract to determine if a prepayment clause is in place. Mortgage notes include a Truth in Lending disclosure statement (TIL) which outlines prepayment penalty information. Borrowers often fail to read TIL when taking out home loans and are shocked to discover they are penalized for paying their loan off early.
In addition to prepayment penalties, borrowers should be prepared to cover the cost of settlement fees involved with taking out the new loan. Fees typically hover around 6-percent of borrowed funds and include loan application fees, title search and insurance, property inspections and appraisals, land survey, and legal fees.
Some banks offer no-cost mortgage loans, but careful consideration should be given to this type of lending. The truth is these loans do indeed have costs associated with them. The difference is fees are rolled into the loan and borrowers pay interest for the duration. If closing costs are $12,000 borrowers could end up paying upwards of $18,000 in interest for a 30 year loan.
While mortgage refinancing can reduce payments and save borrowers money in the long run, it is crucial to calculate the true costs. Borrowers should only consider this option if they can obtain an interest reduction of at least 2-percent.
Borrowers also engage in mortgage refinancing to obtain cash back through accrued home equity. This can be a good option when large sums of money are required. Common reasons to engage in this strategy include paying for college tuition, home improvements, and paying off high interest loans.
Banks charge substantially lower interest rates against home loans. When borrowers require funds for major purchases it can be smarter to borrow against home equity than to use credit cards or take out unsecured loans.
Refinancing requires borrowers to qualify for a new loan. It is best to obtain current copies of credit reports from the 3 major credit reporting bureaus before submitting an application. Most lenders require borrowers to have a credit score of at least 700. Interest rates are based on FICO scores so the higher the score the lower the rate of interest.
Property owners often use their current lender when refinancing mortgages. However, it is smart to spend time comparing lender rates and requirements. The Internet is a great source for conducting research and can help borrowers obtain the best rate. One trusted source is BankRate.com.
When researching mortgage refinance loans it is crucial to read the fine print. Taking time to thoroughly understand loan terms, assessed interest, and prepayment penalties can help borrowers prevent costly mistakes. If necessary, consult with a real estate attorney, home loan specialist, or housing counselor.
Borrowers who are uncertain if mortgage refinance is in their best interest may want to obtain housing counseling through the Department of Housing and Urban Development. The HUD website provides numerous resources regarding refinancing. Visitors can download financial worksheets, compare mortgage lenders, and locate approved housing counseling agencies at HUD.gov.
Mortgagors should review their current loan contract to determine if a prepayment clause is in place. Mortgage notes include a Truth in Lending disclosure statement (TIL) which outlines prepayment penalty information. Borrowers often fail to read TIL when taking out home loans and are shocked to discover they are penalized for paying their loan off early.
In addition to prepayment penalties, borrowers should be prepared to cover the cost of settlement fees involved with taking out the new loan. Fees typically hover around 6-percent of borrowed funds and include loan application fees, title search and insurance, property inspections and appraisals, land survey, and legal fees.
Some banks offer no-cost mortgage loans, but careful consideration should be given to this type of lending. The truth is these loans do indeed have costs associated with them. The difference is fees are rolled into the loan and borrowers pay interest for the duration. If closing costs are $12,000 borrowers could end up paying upwards of $18,000 in interest for a 30 year loan.
While mortgage refinancing can reduce payments and save borrowers money in the long run, it is crucial to calculate the true costs. Borrowers should only consider this option if they can obtain an interest reduction of at least 2-percent.