If you are in the process of refinancing your mortgage it is important to understand how loan-to-value affects your mortgage application. Here is what you need to know about your loan-to-value ratio.
The value of your home is an important aspect of your mortgage application. The loan-to-value ratio lenders use is based on the appraised value of your home and the amount you are requesting to borrow. To determine your loan-to-value ratio, divide the total amount of your loan by the value of your home from a recent appraisal.
For example, if your home is worth $150,000 and you are asking for $120,000 from your new mortgage lender, your loan-to-value ratio is .80 or 80%. Mortgage lenders have guidelines for approving mortgage loans and traditional lenders typically do not approve mortgage applications with loan-to-value ratios greater than 80 percent; if the lender is willing to approve a mortgage above 80% loan-to-value, that lender may require Private Mortgage Insurance in order to qualify.
Mortgage lenders consider homeowners with high loan-to-value ratios to be more of a risk for lending. Homeowners that own more equity in their homes are less likely to default on their mortgages than those that have little or no equity. In addition to requiring borrowers with high loan-to-value ratios to take out Private Mortgage Insurance, mortgage lenders charge these borrowers higher interest rates because of this increased risk. If you are a homeowner with a high loan-to-value ratio the lender may require you to pay for a new appraisal before approving your mortgage. To learn more about refinancing your mortgage and avoiding common mortgage mistakes, register for a free mortgage guidebook using the links below.
By: Louie Latour
Posts Tagged ‘Mortgage Lenders’
Mortgage Refinancing: Loan-to-Value Ratio Basics
March 27th, 2010Refinance Home Loan: 3 Home Loan Refinancing Pitfalls to Avoid
February 22nd, 2010
If you are in the process of refinancing your home loan, there are a number of common mistakes you need to be aware of. Here are three home loan refinancing pitfalls you need to keep an eye out for when refinancing your mortgage.
Watch Out For Prepayment Penalties
A prepayment penalty is a clause in your loan contract that requires you to pay a penalty if you refinance or sell your home before the penalty expires. Prepayment penalties can be expensive, mortgage lenders often charge up to six months worth of interest on 85% of the original loan balance. Predatory mortgage lenders include excessive fees in their loan contracts to discourage you from refinancing the loan. If you have good credit there is no reason to accept a home loan with this penalty.
Never Agree to Arbitration
Predatory mortgage lenders often ask you to agree to arbitration as a condition of having your loan approved. If you agree to arbitration you are forfeiting many of the rights and protection you receive under the law. Agreeing to arbitration means that you agree to a third party arbitrator resolving any legal disputes you have with the lender. Never agree to arbitration with any mortgage lender.
Watch Out for High Interest Rates and Fees
Predatory mortgage lenders often try and sell subprime mortgages to homeowners with good credit. This means you are taking out a bad credit mortgage regardless of your credit rating and will pay higher interest rates, lender fees, and points. The only way to know for sure that what you’re paying is fair is to shop from a variety of mortgage lenders and compare all aspects of the loans. You can learn more about comparison shopping for the best mortgage by registering for a free mortgage guidebook.
By: Louie Latour
Online Home Mortgage Refinancing Loans
February 20th, 2010
Online Home Mortgage Refinancing Loans There are many places on the Internet where you can find home mortgage refinancing loans and lenders. Back in the old days, home loan borrowers had no choice but to work with lenders that were not always willing to bargain. Now, by searching online you can find many lenders and banks that are willing to compete for your business.
Home mortgage refinancing online, is fast becoming the way to get a low cost home loan when you need it. In a recent article, Henry Gardner, vice president with emortgages says, he thinks that online mortgages will be the mainstream in the next two to three years.
Finding the best refinancing rate is possible when you apply for a mortgage loan online. You don’t have to settle for terms you don’t like. By filling out one online loan application you can get competitive quotes from National and local mortgage lenders.
There are many great reasons for wanting a refinancing mortgage loan. Consolidating debt is one of those great reasons. While mortgage interest rates are still low is a good time to pay off those high interest credit cards. You can put mortgage refinancing to work now by reducing your high interest debt.
Reducing your monthly payments is another great reason to refinance. By getting several refinancing loan quotes you can compare the different offers before deciding on the loan payment that’s right for you. With a lower interest rate you may be able to lower your monthly mortgage payment.
Whether you have good credit or bad credit, you can find some of the lowest refinance mortgage interest rates online. Looking to the internet is a great way to find the best mortgage deals. First rate lenders are waiting to assist you with the lowest cost home refinancing loans.
By: Frank W Ellis