Home > Refinance Information
Mortgage Refinancing - What Every Homeowner Should Know
By Louie Lato
The average homeowner in the United States refinances their home mortgage every four years. You should know that there are a number of costly mistakes to be made when refinancing, mistakes that can add up to thousands of dollars lost. Here are the basics of mortgage refinancing that can help you avoid costly mortgage mistakes.
The average homeowner’s financial picture changes every four years. This change could be in the form of higher income, better credit, or having more equity in their home. When this happens many homeowners refinance their mortgages to take advantage of their new financial situation. Before you decide to refinance your mortgage it is important to carefully consider the benefits and expenses involved.
There are a number of reasons why homeowners refinance their mortgage. These reasons include qualifying for a better interest rate, raising or lowering their monthly payment amount, and cashing out equity in their homes.
Get a Better Interest Rate
If your financial picture has changed you may qualify for a better interest rate on your mortgage. Mortgage interest rates are still at historically low levels, if you are paying a higher interest rate now you could very well save by refinancing this loan. Qualifying for a better interest rate will save you money by lowering your monthly payment and paying less to the lender over the life of the mortgage.
Switch to a Fixed Interest Rate
If you financed your home with an adjustable rate mortgage and are concerned about rising interest rates you could find yourself peace of mind by refinancing to a fixed interest rate mortgage. By refinancing your mortgage to a fixed interest rate you will not have to worry about the monthly payment going up when the lender adjusts your mortgage.
Raise or Lower Your Monthly Payment
Why on earth would anyone want to raise their monthly payment? Many homeowners refinance their 30 year mortgages to a 15 year deal. The reason for this is to build equity in the home at a faster rate; raising your monthly payment in this manner will save you money by paying less interest to the mortgage lender. Other homeowners refinance to lower the monthly payment and ease their cash flow situation. You would do this by choosing a mortgage with a longer term, choosing a loan that offers payment options, and qualifying for a lower interest rate.
Convert Equity to Cash
Many homeowners tap equity in their homes for a variety of reasons. If you consider doing this remember that while you own the equity, the money is a loan that you will have to repay. You need to carefully consider your budget and what you can afford to repay before applying for a home equity loan.
To learn more about refinancing your mortgage loan and avoiding common mortgage mistakes, email us at info@jennifermartinrealty.com
Benefits of a FHA Refinance
- It is easier to qualify for a FHA refinancing loan than it is for a traditional loan from your average lender. Since the FHA does not directly loan you the money, you have to qualify with a lender that funds FHA loans. It is easier to qualify because the FHA guarantees your loan, which means that they promise the lender that if you skip a mortgage payment, go into default, or they are forced to foreclose on the property, that the lender will get their money back. The FHA guarantees a percentage of the loan, which they pay directly to the lender in the case of foreclosure. So, the lender has nothing to lose by extending credit for a mortgage loan to a borrower who chooses an FHA loan.
- You do not have to have perfect credit to refinance with a FHA loan. The FHA requires certain standards order to offer you a loan guarantee, but the lender is still guaranteed their money in case of foreclosure, so they are more likely to fund the loan even if the borrower's credit is not ideal.
- You can have no down payment or a very low down payment, and still get a mortgage loan. Most traditional lenders require a minimum down payment, which preferably is around 20% of the purchase price of the home. FHA loans only require 3%, and this required portion can be a gift to you. Many lenders don't allow gifted funds to be used for down payments on a mortgage loan, but a FHA loan would allow you to do so. This means that you can borrow the down payment from a friend or relative, or use a down payment gift program, like AmeriDream, that will give you the money for a free down payment on your home. If you are refinancing, you would be able to take more cash out from your home, or refinance sooner, even if you have a very small amount of equity built up in your home.
- You may get a much lower interest rate on your refinance mortgage. FHA loans can offer much better loan terms than traditional mortgage loans because the loans are guaranteed by the federal government, so there is almost no risk involved. Because of the guarantee, lenders are more secure with the loan, and can offer lower long-term fixed interest rates and fewer points.
- The FHA will stand by you in case of an emergency. Most lenders help you get your mortgage loan, and then leave you on your own. Your mortgage may even be sold to other companies, and you would never deal with your original lender again. The FHA stays with you for the life of your loan, and they can help you if you get in trouble. If for any reason you get to the point of default or foreclosure on your home, you should contact the FHA immediately. The FHA has programs that can help you retain ownership of your home in times of crisis.
If you are interested in Refinancing your current mortgage please email us and we will send you a list of our preferred lenders to help you.
info@jennifermartinrealty.com
|
|
