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
Posts Tagged ‘Fha Mortgages’
Refinancing Home Loans – An Introduction
April 18th, 2010Fixed Rate Second Mortgages For Refinancing ARM Loans
December 13th, 2009
According to the National Association of Realtors, home depreciation is affecting homeowners across the nation. As a result, many consumers are nervous that home values may begin to drop before they refinance their adjustable rate mortgage. Millions of homeowners have mortgage loans that are scheduled to recast which will cause interest rates to rise. Borrowers will have rising monthly payments as a result.
The good news for people who are considering refinancing your ARM is that the current market is yielding low rates with affordable payments blessed with interest only monthly payment options. The fixed rate second mortgages are a whole percentage point lower than the prime rate for home equity lines of credit that are reported in the Wall Street Journal.
The bottom line you need to focus on is whether or not the home equity loan offers you monthly savings by consolidating your debt. If you have the ability to lock into a fixed rate mortgage and save a few hundred dollars a month, then it is time to call your loan officer. Ask your loan representative if you can eliminate your revolving credit cards at the same time you refinance your ARM.
How much money would you save by refinancing into fixed rate loan?
As many of borrowers already know, consumer debt is at an all-time high, and if you have credit card bills mounting each month it may be time to consider a 125% second mortgage. This 2nd mortgage requires zero equity, and the loan balances can even exceed the value of your home. FHA mortgages will allow you to subordinate your existing 2nd mortgage if you do not have enough equity to refinance both loans into one mortgage.
- Second Mortgage Loans to 125%
- Home improvement financing
- Debt consolidation for lower Payments
Fixed rate second mortgage loans can convert adjustable rate rate credit card debt into a simple interest installment loan that yields significant monthly savings and additional tax deductibility as well. Homeowners benefit from reduced their numerous credit cards balances when the compounded interest debts convert to simple interest savings. People are saving thousands of dollars each year, when they consolidate their variable interest loans into a fixed rate 2nd mortgage or FHA home loan.
By: Lynda Nelms
New Loan Limits Set For FHA Mortgages and FHA Refinance Loans
November 28th, 2009
On Monday HUD announced its new, permanent maximum loan limits for FHA Mortgages and FHA Refinance Loans that will become effective on Janurary 1st, 2009. These new maximum loan limits have been set as part of The Housing and Economic Recovery Act of 2008 and will be permanent limits.
Under the Housing and Economic Recovery Act of 2008 (HERA), which passed in July 2008, the Federal Housing Finance Agency (FHFA) was established and directed to set conforming loan limits each year. The rules governing how the loan limits are established differ from the rules set forth in the Economic Stimulus Act of 2008 (ESA), which applies to loans originated in 2008. For example, under ESA, loan limits for high-cost areas were set at 125 percent of local house price medians and the maximum high-cost limit was 175 percent of the national conforming limit ($729,750 in the continental U.S.).
Starting January 1st, the national loan limit for one-unit homes in the lower 48 states shall be pegged to a house price index chosen by the FHFA. The national loan limit for 2009 will remain at $417,000. In future years, the mortgage limit for any given area shall be set at 115 percent of the median house price in that area, as determined by HUD, except that the FHA mortgage limit in any given area cannot exceed 150 percent of the Freddie Mac national loan limit, nor be lower than 65 percent of the Freddie Mac national loan limit.
This essentially creates the “Floor” and the “Ceiling” for the maximum FHA loan amount for a given area with the lowest maximum FHA loan amount being $271,050 in any area and the highest FHA loan amount being 625,500. Alaska, Hawaii, Guam and the USVI may be adjusted to 150% of these limits to account for higher costs.
The new FHA Mortgage limits for 2009 are detailed below:
In areas where 115 percent of the median house price is less than 65 percent of the Freddie Mac limit, the FHA limits are set at the 65 percent amount, i.e., the “Floor,” as follows:
One-Unit $271,050
Two-Unit $347,000
Three-Unit $419,400
Four-Unit $521,250
Any area where the limits exceed the floor is known as a high cost area. In areas where 115 percent of the median house price exceeds the 150 percent figure, the mortgage limits are set at the 150 percent amount, i.e., the “Ceiling,” as follows:
One-Unit $625,500
Two-Unit $800,775
Three-Unit $967,950
Four-Unit $1,202,925
For all other areas, i.e., those where 115 percent of the median home price for the area is in between the floor and the ceiling, the limit shall be at 115 percent of the median home price.
These new FHA mortgage limits could mean that the time might be right for you to consider an FHA refinance loan or an FHA mortgage for your new home purchase. If you would like more information on FHA mortgage loans or an FHA refinance loan, please visit fha-101.com.
By: Spencer Llewellyn