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Refinance
Refinancing is a great option for homeowners who:
- Have a high interest loan
- Have an adjustable rate mortgage
- Would like to invest in home improvement
- Need to pay for college tuition
- Are in need of debt consolidation
- Want to make a major purchase but do not have the funds
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Imperfect Credit
An adjustable rate mortgage is often chosen by borrowers with damaged credit
because of the following benefits:
- Lenient qualifying standards
- Low introductory rates
- Varied options for adjustment periods, allowing your rate to remain the
same for anywhere from one year to five years.
- Rate ceilings to keep your interest rate from rising to high
- Lower initial payments generally prompt lenders to approve larger loans
- When interest rate indexes fall, an adjustable rate falls as well, unlike
a fixed rate, which does not allow the borrower to benefit from dropping rates
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Home Construction Loans
Borrowers should be careful to ensure that the repayment period does not begin until after construction has finished, and also that the loan agreement covers the entire cost of materials, labor and land.
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Rates
There are generally two types of loans. A fixed loan or an adjustable loan. A fixed rate loan gives you the security a constant rate throughout the life of the loan. Since your rate will not change, your monthly payments will often remain the same during your repayment period. An adjustable rate mortgage rises in falls along with the fluctuate of certain rate indexes. As your loan repayment period goes on, your monthly payment will change as you interest rate changes. Generally an adjustable rate will change every one to five years. Because it is susceptible to change, an adjustable rate loan caries more risk and is usually used by borrowers with less than perfect credit and those planning to move between five and seven years. However, adjustable rate loans come with low introductory rates and rate caps. Depending on the activity of current interest rates, a person with an adjustable rate could actually save money.
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Mortgage Calc
Using a mortgage calc can also help you ensure that your loan terms will not cause negative amortization. Amortization is the schedule of repayment of your mortgage through monthly payments of principal and interest . Negative amortization occurs when the monthly payments set by the lender are not high enough to cover interest and principal. This causes the outstanding balance of the mortgage to increase instead of decrease as the repayment period goes on. Negative amortization can cause a homeowner to default on the loan, and though uncommon, all borrowers should be certain that set monthly payments are high enough to cover both the interest and principal of the loan.
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Mortgage Refiancing
Mortgage refinancing is the repayment of a current mortgage using a new mortgage. This new mortgage should have an interest rate at least 2% lower than the original rate or else it may not be worthwhile for the homeowner. By obtaining a loan with a lower interest rate, you should be able to save hundreds, if not thousands the time your loan is paid off.
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Refinancing Your Home
However, if your original loan has a high rate or an unappealing term, refinancing
can be the perfect opportunity to save money and reduce monthly payments. If
you are a homeowner who:
- Plans to remain at his or her home for the next three years
- Would like to change an adjustable rate mortgage or establish a lower rate
cap
- Has not damaged your credit since your original loan
- Wants to take advantage of lower interest rates
- Needs money for home repairs or improvement
- Needs money for college tuition or other large purchases
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