Posts Tagged ‘Adjustable Rate Mortgage’

Refinancing Home Loans – An Introduction

April 18th, 2010



Homeowners today don’t give a second thought before refinancing their home loan every time interest rates fall. People while trying to refinance don’t wait to consider if it’s a good or a bad idea. Moreover they always fail to look at the bigger picture. Refinancing home loans is a common practice today and you need to look into each and every detail before you take out another mortgage loan. Before we go any further let us understand what refinancing means:

What is Refinancing?

The original loan secured by a buyer to buy a home is called a purchase-money loan while a refinance loan is taken by a borrower to pay off the amount of the original loan. In case of an individual who continuously refinances his loans every time there is a drop in the interest rates (also called as a Serial Refinancer), the new loan pays off the last loan amount.

Serial Refinancers often go about refinancing their mortgages again and again without realising the fact that every time they refinance, they not only keep on adding more principle toward the end of the loan but also extend the term of the loan.

Kinds of Refinancing

With proper study and research, refinancing home loans can become an easy task. It’s possible to take out a different kind of loan at the time you refinance but is very necessary to understand all that is involved (terms and conditions) in the new loan procedure before you apply for a change. Some common loan types are mentioned below:

Interest Only Mortgage.

Option ARM Mortgage.

Adjustable Rate Mortgage.

FHA Loans.

Reverse Mortgages

Drawbacks of Refinancing

Here are a few:

Costs

Are you paying a certain fees in order to obtain a new loan? Well, fee means money, money which you might not be able to recover through a low interest rate for around a couple of years. Relevant calculations are beyond the scope of this write-up. Go online to refer to specific details.

Longer Amortisation Period

Remember that if you refinance a 20 year long loan with 15 years remaining, with another 20 year loan, then you’ve just turned an original 20 year plan to a 25 year plan. You need to take care of such things!

Benefits of Refinancing

Here are a few:

Lower Monthly Payments

If you are someone who is not into planning too much into the future, refinancing may be a good option as it will insure lower monthly payments, i.e. greater monthly cash inflow.

Cash In Hand

Many people obtain cash so as to invest it for a higher rate than the current interest rate. Hop online to read detailed documents on the procedure of refinancing and make better decisions while getting home loans.

By: Michel Disusa

Low Cost Refinancing Through Convertible Loans

March 10th, 2010



Most homebuyers-whether a first time purchaser or a veteran trading up for a more suitable home-have one goal in mind: Get the house. To that end, they’ll often take a mortgage loan offer that’s less than ideal. While it’s best to get the loan you want initially, one type of mortgage loan makes getting the loan you need now and readjusting in the future easier. It’s called a convertible loan.

Convertible loans are just what the name suggests: a loan that can be converted from one type of loan to the other. More specifically, convertible loans can be change from an adjustable rate mortgage (ARM) loan to a fixed rate loan. The loan, because of its convertibility, is highly appealing to those who are on a tight budget and are willing to take the risk of an ARM to secure a low interest mortgage loan. The borrower can use the initial period of the loan to get their finances better organized. Then, when a fixed loan offer with a manageable interest rate becomes available, the borrower can switch to a fixed rate loan.

Convertible loans are a fairly new loan product, especially when compared to traditional refinance loans. Though classic refinance loans will always have a place and purpose in the real estate industry, convertible loans do have one main advantage over refinance loan that’s helping them to gain popularity: The cost to switch a convertible loan from an ARM to a fixed rate loan is significantly less than going through a traditional refinance to accomplish the same goal. Consult a mortgage professional to see which type of mortgage loan is best for you.

By: Mauricio Navarro

Home Mortgage Refinance Loans

March 1st, 2010



A mortgage is a loan that is taken for buying a house or a property by using the same property as collateral. Home mortgages are very common in many countries, and are generally used for buying a house. Taking a mortgage allows the borrower to defer the payment of the house for a few years. The borrower has to pay a part of the principal and some amount as interest every month to the lender. Home mortgage refinancing is an option where the borrower exchanges one loan for another. He can sell off the loan, or a part of the loan, and take another loan at a lower rate of interest. This is an effective way to reduce the burden from existing loans.

Home mortgage refinancing is ideal when the current interest rates are lower than the rate of interest on the existing loan. With increasing real estate prices and more options for mortgage loans at lower prices, refinancing is increasingly being considered as an option by many borrowers. There are several advantages to home mortgage refinance loans apart from the lower interest rates: lower monthly payments, conversion of an adjustable rate mortgage into a fixed rate mortgage or a long-term mortgage into a short-term mortgage, consolidation of debt and generation of additional cash that can be used for home improvement, which would increase the value of the house. With refinancing, the borrower can save hundreds of dollars every month.

Refinancing can be ideally considered when the current interest rates are at least 2% less than the rates on the loan. However, even a 1% difference can mean significant savings. There are certain aspects to be contemplated while considering home mortgage refinancing: the value of the house may actually come down, instead of going up, thus making repayment difficult; there could be additional costs of refinancing; or you may have to move out of the house sooner than expected. Home mortgage refinance costs include application costs, appraisal costs, and legal fees. Nevertheless, with increasing competition, most lenders are offering low-cost and no-cost refinance options for home mortgages. However, waiver of these costs may mean accepting a slightly higher interest rate.

Home mortgage refinance loan rates are different in different states and range between 5.875% and 6.375% or higher, depending on the kind of loan.

By: Marcus Peterson