Do you want a lower monthly payment? Perhaps you prefer to switch your adjustable rate mortgage to a fixed rate. If this sounds familiar, refinancing your home may serve to your advantage. In the past five years, mortgage interest rates have dropped dramatically. Thus, many people who purchased homes when rates were high refinanced their homes. Refinance involves creating a new home mortgage, and homeowners must re-apply for a home loan. With this said, refinancing sounds great for individuals with good credit. However, refinance loans for bad credit are widely available.
Refinance Home Loans
Ordinarily, a person with bad credit would have a difficult time obtaining a loan. This is because a persons credit worthiness is based on information included in their credit report. Individuals with a history of paying bills late or refusing to pay their creditors are considered high risk candidates, thus lenders are unwilling to loan money to them. However, refinance loans are different. When a homeowner refinances, their house serves as the collateral. Therefore, if a person defaults on the loan, the lender may take possession of their home.
Knowing When to Refinance
The key to refinancing a home involves knowing when to refinance. Commercials and radio advertise low interest rates. Thus, many homeowners choose to take advantage of low rates and lower their monthly payments. Unfortunately, the cost of refinancing a home may sometimes outweigh the savings. Because a refinance creates a new mortgage, homeowners are responsible for fees such as closing costs, title search fees, settlement fees, prepayment penalty fees, etc. Moreover, some mistakenly refinance before a home has time to build sufficient equity. Another reason for refinancing a home includes receiving a shorter term, which may also boost a home’s equity
One benefit to refinancing a home with poor credit is that homeowners may receive a lump sum at closing. This money may be used to improve credit – pay off credit cards, consumer debt, etc. For this to happen, a property must have ample equity. Some mortgage professionals encourage homeowners to keep an original mortgage for at least two years before refinancing. This allows the property value and equity to grow.
By: Carrie Reeder
Posts Tagged ‘Adjustable Rate Mortgage’
Refinance Home Loans with Bad Credit – Knowing When to Refinance
February 15th, 2010Indiana Refinance Loans – Refinancing an Interest Only Loan
January 17th, 2010
Interest only loans can be very tempting to borrowers who are unable to afford a home with traditional means. They are also popular among those who intend to invest their savings or those who plan to make more money in the future. Unfortunately, interest only loans aren’t right for everyone. If you, like many other people in Indiana, took out one of these loans and find that they aren’t all that they are said to be, you may want to consider refinancing.
Who Should Refinance Their Interest Only Loan
Many people who take out an interest only mortgage loan expect to be making more money within a few years time. Unfortunately, expectations don’t always match up with reality. If your earnings aren’t increasing, refinancing now may be a good idea. If the interest only period of your loan will be ending soon or if you plan on staying in your house for awhile longer, refinancing will also be of benefit.
Why Refinancing Will Help You Save
Currently, interest rates on interest only loans in Indiana average 5.72 percent. While this is a fair rate, it’s not much lower than the rate you would pay on a regular adjustable rate mortgage. In fact, it may even be higher depending on the type of ARM you get. Current rates on a 5/1 ARM in Illinois average 5.56 percent, while a 3/1 ARM averages a rate of 5.42 percent. By refinancing to a regular ARM, your monthly payments will still be comparable to what you pay now. The bonus is that you will be paying on the principal and building equity at the same time. This will allow you to save money over the long haul.
By: Jane A. Hale
Refi Home Mortgage Loans – Different Types of Mortgage Refinance Loans
January 13th, 2010
With today’s lenders, you have more refinancing options than ever before. So whether you are looking to reduce your rates or lower your monthly payments, you can find financing that is right for you.
Lenders also let you compare loan quotes online without hurting your credit score. So with real numbers, you can determine which is the best lender and loan for you. You take the guesswork out of the refinancing process, knowing how much you can save.
Stability Of A Fixed Rate Mortgage
Refinancing for a fixed rate mortgage can lower your rates and give you peace of mind. By setting your mortgage rate today, you know exactly how much your interest will cost and how long your loan will last.
Fixed rate mortgages also allow you to buy down the rate, saving you thousands if you keep the mortgage for several years. You can also extend the loan period to reduce monthly payment amounts.
Betting On Lower Rates With An Adjustable Rate Mortgage
Refinancing with an adjustable rate mortgage will qualify you for some especially low rates a year or more. With these introductory offers, you can save hundreds a month.
There is the chance that rates will increase, along with your monthly payments. Depending on your caps, you may also see your mortgage lengthen due to high rates. But if you aren’t planning to keep your loan or house for too long, you may find the savings worth the risk.
Cashing Out Your Equity With A Refi
Cashing out part of your equity during a refi saves you money on application fees and higher rates with a separate home equity loan. When you pull out your equity, you can still select fixed or adjustable rates. You also have the options of extending or shortening your loan terms.
Creative Terms For Unique Situations
Interest only loans and similar creative loan terms work for those in unique situations. For instance, if you are planning to move in a year, refinancing with an interest only loan can cut your mortgage payments by hundreds of dollars. And by selling before the loan payments jump, you don’t have to worry about high payments.
By: L. Sampson