Refinancing can save you money, but the downside is that you have to restart amortization. Once again you are paying mostly interest at the beginning of your loan. But there are ways you can get around this, keeping your original pay off period and saving on interest charges.
Short-Term Refinance Loans
Lenders offer a variety of terms – 30, 25, 20, or 15 years. By refinancing for a shorter term you can closely match your original pay off date. Unfortunately, lenders don’t fraction year terms – such as 22 years and 4 months.
However, by choosing a shorter term, you may qualify for even lower rates. You can also pay off your loan sooner, further increasing your interest savings.
Self Increasing Your Payment On Refinance Loans
Another option is to refinance your mortgage for 30 years. Then make an additional principal payment each month to pay off your loan at the original date. You can use a mortgage calculator to determine this amount. You can also make one extra payment a year to reach the same results.
With this approach, you have control over your payments. For some this can be seen as a negative, since there isn’t the required payment. You can also pay off your loan earlier by increasing your principal payment even more.
Pre-pay “Cash Out” Refinance
The third option is to take out the original loan amount. Then prepay the principal amount to what you currently were at with your original loan. That way you will pay off your loan on your original terms.
This option gives you more control over the pay off date. But, you may be charged a higher rate for cashing out part of your equity.
Selecting the Right Refinance Option
Each approach has its own advantages and disadvantages. Mostly it comes down to a matter of preference and what works for your budget. However, do ask for rate quotes to see the difference in interest costs. Not only will you have a better understanding of the numbers involved, but you will also find the best APR.
By: Carrie Reeder
Posts Tagged ‘Refinance Mortgage’
Iowa Refinance Loans – Choosing a Lender
January 28th, 2010
Thinking about getting an Iowa refinance loan? You’re not alone. Many homeowners in the state have recently chosen to refinance their Iowa mortgage to secure a lower interest rate, change the loan term, lower monthly payments, or borrow from equity. If you want to do the same and make sure your refinance loan truly pays off, you’ll need to choose a good lender.
Finding Lenders
When getting an Iowa refinance loan, a good place to start is with your current lender. While you may not get the best deal, you will have something to compare other offers to. Your next step should involve getting a referral for two to three other lenders. Referrals can be obtained from friends, family, and co-workers. You may also want to try searching the web. There are many online services that can offer you solid lending referrals and advice.
Comparing Loan Offers
Once you have located several lenders, you will want to begin making a few comparisons. Look at rates, points, terms, closing costs, and lending fees. Do your best to make apple to apple comparisons. For example, compare fixed rate loans to fixed rate loans and adjustable rate loans to adjustable rate loans.
Protecting Yourself from Predatory Lending
Though the state of Iowa is working to enforce stricter anti-predatory lending laws, there aren’t many regulations that are currently in place to protect borrowers. This is why it is so important for you to take time to make comparisons and find a lender who is reputable. You are the only one who can protect yourself and your finances. If you have any questions about a particular lender, or if you need advice on obtaining an Iowa refinance loan, you can contact the Iowa Division of Banking.
By: Jane A. Hale
Home Equity Refinancing – VA Loan Refinancing
January 25th, 2010
Opting to go with a VA loan to refinance your home mortgage can be great for your budget. It is possible to get cash when you need it. If you need to consolidate your high interest debt or pay for a child’s tuition a VA loan can be beneficial.
VA refinancing loans can be great. If you need you can find cash in little to no time at all. It can be a great tool to utilize.
What a VA loan transaction requires is repayment of the estate debt. The loan must be for the same property and also the same borrower. What this is called is “Cash Out Refinance.” This “Cash Out Refinance” is considered the principle residence of the homeowner.
In general the rule for the owner is that their homes can be refinanced for up to 90% of its appraised value. However, this option is not available in every state so check whether you are in a state that offers this option. The closing cost must be at par with the ratio of the homes value.
It does not matter how long the home have been owned, it is not a requirement for this loan. However, the minimum requirement is that the homeowners pay the loan on time on a consistent basis.
Most often people are not aware whether their rates are adjustable. This is a big concern because most people budget their income to accommodate the payment that they currently have. Fixed VA loans are great because it allows the borrower to know exactly how much they need allow for their payments every month.
This however is up to the lender to decide. The other option would be the VA loan that with an adjustable rate. On average the interest on the loan is adjusted by 1% every year. The duration of this is usually around five years and would typically reach 5%.
The only person that knows what is best for you is yourself; never take the first offer that is given to you. It is a common mistake people make, jumping on the very first offer because they are worried or not exactly sure of what to do or what they can do.
Do some research and find a plan that best fits you and your situation. It is recommended to speak with a consultant and look at their calculations. Look at how differently you make have to make the payments, depending on whether you choose to go with an adjustable VA loan or a VA loan that has a fixed rate. Make sure you are absolutely comfortable with the plan that is offered.
Once you have the numbers, think whether you would be able and comfortable with your monthly payments and go from there.
By: Michael Petrone