Refinancing loan » Variable Rates

Refinance Home Loan – Dos and Don’ts

admin — Tue, 13 Apr 2010 20:50:30 +0000

Lending companies need your business. If you are taking out a refinance home loan, check out what your current mortgage company can offer. Do not get a new loan from them unless they can offer you lower interest rates. On top of this notice, observe cautionary tips to get yourself a better deal on your new loan.

Getting A Refinance Home Loan

It is not always profitable to get a new loan with the same company if they cannot offer lower interest rates and they charge you more fees for the second loan.

Before getting a contract with a new lending company, know the following:

1. Is the service transferable?

2. Will you be going through the set up process anew?

3. Will you be paying another fee?

4. When will the current company forward the additional payments toward your refinance home loan?

5. Can you expect savings after the fees and costs involved in the new loan?

Traps to Avoid With a Refinance Home Loan

1. Do not get a new loan from your current company if they cannot offer lower interest rates like the other company. They may offer you a mortgage equivalent to your old loan in addition to your new loan contract.

2. Never drop a low interest rate loan for a higher interest loan. Look at the Annual Percentage Rate of the new loan. This should be lower than the rates stipulated in the previous loan. Consider also the insurance costs, closing cost, and other fees charged upfront. A lower monthly payment should not be enough enticement to get a refinance.

3. Avoid the offers of very low interest rates as these will balloon later to rates you cannot afford. Steer clear of variable rates that may sound attractive for the low interest rates charged during the early part of the loan.

4. Don’t fall for tax advantages offered for debt consolidation purposes. Review your personal tax position and analyze how this will be affected. Unless you diligently itemize your deductions, the tax write-off for your mortgage interest is useless.

5. Avoid spurious lending companies. You will know them by the suspiciously low rates they offer.

6. Don’t forget that you have three days to cancel your loan. This offers you the chance to get out of a loan that is disadvantageous to you. It is your house that is on the block, so be vigilant. Inform the lender that you have changed your mind before the deadline.

Payments to Prioritize If You Have A Refinance Home Loan

Be smart. Even if you have a refinance home loan to pay monthly, prioritize important payments to get yourself out of trouble.

Always be up to date with your Council Tax payments or you might end up in prison for this neglect. For your home and office, pay gas and electricity bills on time – suppliers can disconnect your lines anytime. If you are paying business rent and rates and insurance, give these your attention. When the tax month comes, pay your taxes diligently. Put your savings from your lower refinance home loan monthly payments towards your taxes without having to dig deeper into your funds.

Armed with these dos and don’ts you can check out the offers of the different lending companies.

By: Rony Walker

Importance Of Interest Rate On Refinance Loans

admin — Tue, 09 Mar 2010 07:06:52 +0000

To simplify comparisons you should (on the many rates that may be thrown to you) concentrate on the APR. The Annual Percentage Rate will provide you with the best figure to know which loan is best for you. This figure takes into account not only the interest payable over the term of the loan but also any other related charges or fees. As such it’s the best measure for comparing the cost of borrowing from one lender to another.

Risk and Rate

Since refinance loans are secured loans, they carry rather low interest rates. However, your credit score will still modify the interest rate you’ll be charged for your loan. Thus, a good credit score applicant will get significantly lower interest rates than a bad one. Risk and rate are directly related and whenever you represent a higher risk, this is unavoidably translated into higher interest rates.

There are also other loan terms that modify the risk implied in the financial transaction and thus modify the interest rate you’ll have to pay for the refinance loan. Insurance, loan length, interest rate type, etc. are some examples of these terms. You can always discuss with the lender these subjects so as to get a competitive rate by modifying loan terms.

Different Loans, Different Rates

Different kinds of loans carry different rates. The interest rate charged for a 10 years home loan will be lower than the rate charged for a 20 years or 30 years home loan. Also, the interest rate charged for home loans with fixed rates tends to be higher than that of variable rate. However, variable rates can rise to new heights changing the original ratio.

Cash out refinance loans tend to carry higher rates than plain refinance loans. This is because the costs of cash out refinance loans include additional charges, more insurance, etc. It all adds up to the fact that the loan terms will determine the interest rate and that little variation on the loan terms can result in raises or reductions on the interest rate.

Huge Savings

Thus, the key to refinancing is to agree with the lender the loan terms in order to obtain a lower interest rate. This can be boosted by requesting a refinance home loan with a shorter loan length. The main benefit of refinancing is that by obtaining a lower interest rate you can get huge savings over the whole life of the loan.

For example: If you have an outstanding mortgage of $50,000 with 10 years more of repayment at an 8% APR, You’ll end up paying $40,000 on interests by the end of the loan term. If you refinance at a 7% APR, you’ll end up paying $35,000 on interests which represents savings of $5,000.

By: Kate Ross

Different Types of Mortgage Refinancing Loans

admin — Wed, 30 Dec 2009 03:14:42 +0000

There are several types of mortgage refinancing loans available in the market today. With these different types of getting your mortgage refinanced, you can make the choices based on your circumstances and your needs. These are mostly taken out to make some renovations, pay off debts or use the proceeds for your child’s college education. Regardless of where you will use the proceeds of the refinancing loan, it would be smart to know the different types in order to make an informed decision.

The different types are; fixed rate, variable rate, interest only, balloon type, home equity, and fully amortizing mortgage refinance loan.

Fixed rate type is one where the interest rate is locked to a fix amount and will stay for the duration of the loan. In other words, it would simply mean that you are going pay at a constant rate of interest for the whole life of whatever balance you have.

Variable rates are where the interest rates fluctuate or changes with certain predetermine index. This is not for the faintest of heart as this can change anytime as the market changes its directions. This type of refinancing normally gives the borrower and introductory low rate which is usually between 3 to 5 years then the real variable rate starts to kick in.

Interest only type is self explanatory in the sense that you are being ask to pay only the interest mostly for a period of time. After the specified time has lapse, you will start paying the principal.

Fully amortization is one where your monthly payments are a combination of all the interest charges and additional payments towards the balance. This is very good option as it will reduce your balance every time you make your payments, thus paying off the mortgage loan will be faster.

The home equity type of refinance is where you borrow against your equity on the house and use it as a collateral or security for your borrowings. You then be able to get the money in the form of a revolving credit line or cash.

So now that you know and understand the different types of mortgage refinancing loans, you are not going blindly into applying to refinance your mortgage loan. Learning, understanding and knowing what the types are can really help you make an informed decision when the time comes to refinance your mortgage loan.

By: Julie Viola