A look back on historical milestones on this day. John F. Kennedy, Sir Edmund Hillary and Mayor Tom Bradley. Mortgage rates then and now.
What does JFK, Mount Everest and Los Angeles have in common?. A look back at events that happened today and what mortgage rates were then and a snapshot of today’s rates.
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In certain circumstances, homeowners may decide that they want to take out a new loan on their home, in order to reorganize their finances. While it can be a bit of a project to apply for a brand new mortgage loan, mortgage refinancing can be worth it. If done at the right time, it can save hundreds of dollars a month in mortgage payments, and thousands of dollars down the line. There are, however, certain risks involved, which are important to take into account.
Why Consider Refinancing?
Mortgage refinancing essentially provides homeowners with a new loan that will pay off the remainder of the previous home loan. While this might sound like it makes little sense, since at the end of the day homeowners are still left with a large loan, refinancing can lower monthly payments in terms of both principal and interest. Moreover, if the amount of the new home loan is a bit more than what is needed to pay off the previous loan, refinancing can help homeowners consolidate other debt as well.
When Should You Refinance?
Those who are considering mortgage refinancing should pay close attention to the market’s interest rates. The best time to refinance a home is when interest rates are low, since this will be key to guaranteeing that the refinance will actually save money. It’s also advisable for someone to refinance only if his or her credit score has increased since the initial loan application, since a lower score may also result in higher interest rates or monthly payments. The key here is to reduce cost and risk, not to increase it.
Risks and Caveats
It is important to remember that there are a number of costs and fees attached to any refinancing. The process is similar to applying for a first mortgage, so closing costs, legal fees, home inspection charges, and credit checks will still apply. In light of the added fees, it’s even more essential to carefully calculate how much money will be saved in the long run—ask yourself, is there a risk that you will end up paying more in the end? Monthly payments might be lower, but if the loan term itself stretches out for a long time, it may not be worth your while to opt for mortgage refinancing.
Qualifications for Refinance
In order to qualify for loan refinancing, applicants will need to demonstrate a solid financial history. New loans will not be granted to those who are behind on their original loan payments. Mortgage refinancing is not meant to be a “last ditch” effort for those in dire financial straits, but rather a savvy and carefully calculated move to further improve financial standings. Borrowers will also need to provide much of the same information as they did during their initial application, to prove that they will be able to cover all of the mortgage payments.
If done at the right time and with the right interest rates, mortgage refinancing can be an incredibly smart move. To ensure that you get the most out of refinancing, make sure to keep your debt to income ratio low, opt for a shorter loan term, and apply for the minimum amount that is needed.
Bacon Shortens Mortgage Term
Applying extra dollars or “bacon” toward mortgage payments is an economical method to rid of one’s mortgage early. When closing on a home loan, most mortgage borrowers go into shock when they discover the total amount they will be paying to finance their home. There are several ways to shorten the mortgage term to save thousands.
Borrowers can use simply make use of the 52 weeks in a year to add an extra payment to the principal. A Bi-Weekly program has 26 opportunities to make payments to the bank using what adds up to a payment annually. The extra “bacon” applied annually as a payment will reduce a mortgage term by a little over six (6) years.
Homeowners can inquire with their lender about a bi-weekly payment program to save on their payments over the long run. The Bi-Weekly program is excellent for borrowers who want an easy to manage payment option. Continue reading
If you have revolving debt often credit cards or student loans, consolidating them into your mortgage can save you lots of money. Considered a “cash-out” refinance, the purpose of the new mortgage can be a great way to get your finances in order.
Many websites offer free online quotes. The key advantage is time savings in getting quotes to shop for your needs, whether for a home purchase or a refinance. Most sites will have fixed rate mortgages, adjustable rate mortgage, jumbo, VA and FHA programs.
Fixed Products
A home loan in which the interest rate will remain the same through the life of the loan, most often 15 years or 30 years. More recently, the 10, 20 and 40 year fixed mortgages are being offered on the market. Rates for shorter term fixed mortgage are lower, but payments will be higher. Borrowers that do not want to chance their payments changing over the life of the loan prefer the fixed rate mortgage.
Adjustable Products (Adjustable Rate Mortgages, ARMs)
Home loans with periodic changing interest rates based on a standard financial index are called Adjustable Rate Mortgages or ARMs. Most ARMs have caps on how much an interest rate may increase. ARMs have optional initial fixed rate periods in 1, 3, 5 or 7 years. ARMs, most often, have cap limits on the total rate on the life of the loan, as well as, how much a rate can increase over a period. Borrowers with shorter views on keeping their property choose ARMs. Continue reading
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