I wish I would have never taken out this adjustable loan. What do I do now?
For the past several years so many people have taken out adjustable loans only to later realize that at some point, when the loan adjusts, that their monthly payment might be higher than they can really afford. Furthermore, many of these adjustable loans included a prepayment penalty. Such a penalty forces the borrower to pay a large fee to close out a loan, whether you refinance or sell.
Therefore the first step in deciding whether to refinance is to find out exactly what type of loan you have. Call your lender at the number provided on the mortgage statement and find out if your loan is in fact fixed or adjustable. If they tell you it is fixed be sure to ask, “for how long is it fixed?” If they say 5 years or less, you really have an adjustable loan. Most adjustable loans were packaged in 2, 3 or 5 year increments. Only if they tell you that your loan is the same rate for 15 years, 20 or 30 years do you have a true fixed rate loan.
The next step is to then find out if you have a prepayment penalty and just how much extra it will cost to actually refinance out of your present loan program. Some prepayment penalties will be equal to 6 months of mortgage payments. Others are for a percentage of the outstanding loan amount, (i.e. 1% or 2% etc).
Finally you need to find out when your prepayment penalty is going to expire. For example many adjustable mortgages have a fixed rate for 2 years and then will adjust. After 2 years your prepayment penalty should also expire. Hopefully this is the case so you can move forward and take advantage of the great refinance rates that are presently available.
However, if your loan is to adjust after 2 years but your prepay penalty won’t expire for 3 years then you are in an unfortunate position because odds are your monthly payment is going higher and in the mean time you will be stuck paying a prepayment penalty if you choose to refinance and if you do not refinance because of the penalty, than you are stuck with one more year of higher monthly payments.
Fortunately most reputable lenders and loan officers set up their client’s adjustable loans to adjust after 2 or 3 years. If your loan was fixed for 2 years the penalty would end after 2 years, and if your loan was to adjust after 3 years the penalty would end after 3 years.
So be proactive and find out exactly what type of loan you have and you will be well on your way to knowing whether it is a good time to refinance or not.
Good Luck and Happy Hunting.
By: Allen Sayble
Posts Tagged ‘Adjustable Mortgages’
When Should I Refinance My Adjustable Loan?
April 18th, 2010Refinancing Home Loans and Home Equity Loans Can Save You Money
February 17th, 2010
Texas mortgage brokers can offer you the best advice about refinancing your home loan and what offers are available for low-interest Texas home equity loans. Interest rates are in decline right now, and this makes it a good time to think about a refinance, as well as picking up a home equity loan.
Texas home loans can be available in both fixed-rate and adjustable-rate loan instruments. Fixed-rate Texas home loans make for a regular payment amount due each month, making it easier to budget for the payment. Adjustable mortgages, or ARMs, offer the benefit of a small interest payment for the grace period of the loan, after which it adjusts according the current interest rate. For a short-term loan for a home that you plan on selling in five years or less, this could be a good option for you.
You might decide to look into Texas home equity loans if you need money for a special project or to pay off larger bills. This is a type of loan that is also called a second mortgage. You can take a loan out on the amount of equity you have built up in the home, and this is the basis of Texas home equity loans. The money can be used for any purpose.
Because interest rates are currently quite low, many home owners are refinancing their Texas home loans. What happens is that if the interest rate has dropped since the time you first took out your mortgage, you can save money by refinancing your loan to take advantage of the lower interest rate. At the time of refinancing, many Texas mortgage brokers can recommend a home equity loan that would work for you, and by performing both transactions at the same time, you will often save money in finance charges and fees.
Texas mortgage brokers can provide you with a wide variety of loans so that you can examine each one in detail. The brokers can answer all of your questions, and even, based on your credit score and financing, offer recommendations as to which loans may work best for your financial situation and long-term financial goals and needs. Texas mortgage brokers can give you different term lengths of loans, and can do the amortization and math so that you can compare each offer side-by-side and determine the one most suitable for you and your family’s future.
By: Anne Harvester
Bad Credit Mortgage Refinancing Home Loan
December 24th, 2009
Bad credit mortgage refinancing loans help borrowers with credit problems refinance an existing mortgage to either payoff debt or get cash out. If your credit is poor because of excessive credit card debt then bad credit refinancing is one of the best ways to improve your credit score.
Bad credit refinancing is typically for home owners who have credit scores under 620 and have late mortgage payment’s in the last 12 months. Sub prime lenders are the main source for these types of loans and many will lend to bad credit borrowers with a 30, 60 and even a 90 day late payment on record. Although the amount of equity you can borrow will be greatly reduced with the amount of late payments you have. Qualifying Credit scores for sub prime loans begin at 500 and go all the way up to 700, at a 500 credit score expect to be able to borrow 70-80% of your home appraised value. The higher your credit score the higher the Loan To Value you can borrow.
Many sub prime lenders offer 2 or 3 year Adjustable Rate Mortgages to bad credit borrowers, short term Adjustable mortgages are not a good idea for the bad credit borrower. The biggest drawback to an ARM is that if you should fail to improve you credit score and be unable to refinance, your payments will begin to rise when your adjustment period begins. The rise in payments can often be hundreds of dollars a month making your mortgage difficult to pay. When applying for a bad credit home loan It is best to stick with a fixed rate subprime mortgage, if you need a lower payment ask your mortgage broker about 40 year fixed rate subprime loans.
With the availability of subprime home loans bad credit refinancing can be a great way to improve your credit score, however when the wrong programs are chosen it can do just the opposite. Use a good reputable mortgage broker and always use common sense when shopping for your subprime home loan.
Learn More About Bad Credit Home loans
By: Darin Sewell