Adverse Mortgage – Also referred to as Bad or poor credit mortgages. For those with a poor credit history, CCJ’s, defaults on loan payments etc.

Agent – Agent The person who is acting on behalf of the principal or client.

Amortization – The reduction of a debt by regular, usually monthly, installments of principal and interest.

Application – The method by which a mortgage is applied for. The initial statement of personal and financial information which is required to approve your loan

Application Fee – A Fee that is paid upon mortgage application.

Appraisal – A fee charged by an appraiser to render an opinion of market value as of a specific date.

Appraised Value – An estimate of the market value of the home and property that the borrower pledges as security for the mortgage.

Assets – The things of value that you own, such as your home, car or summer home.

Borrower – A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

Broker – The person who brings both borrower and Lender parties together and assists in negotiating contracts between them.

Cap – The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage.

Credit Report – A report outlining an individuals credit history, public records and credit worthiness. A history of an individuals ability to pay their bills on time as well as any other relevant public records.

Default – The failure of a borrower to comply with the terms of a mortgage.

Deposit – A sum of cash that must be paid to the vendor by the purchaser.

Equity – The difference between the fair market value (appraised value) of your home and your outstanding mortgage balance.

Fixed Rate Mortgage – A mortgage loan with an interest rate that does not change during the entire loan term.

Foreclosure – The legal process by which property that is mortgaged as security for a loan may be sold to pay a defaulting borrower’s loan.

Interest Rate – A charge for a loan usually a percentage of the amount loaned.

Lender – An individual or company that offers to lend money for an agreed period of time.

Loan – Money borrowed that is usually repaid with interest.

Loan To Value (LTV) – A ratio determined by dividing the sales price or appraised value into the loan amount, expressed as a percentage.

Mortgage – A legal document that pledges property to a lender as security for the repayment of the loan.

Principal – The amount of the loan on which interest is calculated.

Rate (interest) – The annual percentage amount charged in return for borrowing funds.

Refinance or Refinancing – When an existing mortgage is replaced by a new mortgage.

Repayment Mortgage – You pay interest and part of the capital each month to pay off your mortgage completely at the end of the mortgage term.

Security – Property, or assets, offered as backing for a loan.

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Adjustable Rate Mortgages (also known as ARM loans) became popular in early 80s. These loans featured lower interest rates than traditional mortgages and easier qualification. The problem with adjustable Rate Mortgages is that many homeowners use these loans to purchase homes they cannot afford with traditional fixed rate mortgage loans.

As the name implies, the interest rate changes over time; your lender adjusts the loan at regular intervals to the index your loan is tied plus their margin. Margin is the markup your lender adds to cover their “expenses.” The index your loan is tied to varies from one lender to the next and there is no one “ideal” index. Your loan may be tied to the Treasury Bill Index or even the London Inter-Bank Offered Rate or LIBOR index. The LIBOR index is popular with mortgage lenders that sell their loans to European investors.

Adjustable Rate Mortgage Safety Features

There are safety features available to homeowners that choose this riskier variety of mortgage loan. These features are known as “caps” and limit how much the lender can raise your interest rate or payment amount during any adjustment period. It is important to structure the caps on your loan properly; homeowners who neglect choosing both periodic and payment caps can experience negative amortization with their loans. Mortgage loans that are negatively amortized actually grow over time.

Adjustable Rate Mortgage Benefits

Depending on the economy and the going interest rate, the introductory offer of your Adjustable Rate Mortgage could save you a lot of money. This introductory rate, often called a “teaser rate” is usually much lower than fixed rate loans. It is important to understand that this introductory rate is not your contract rate; at the end of the introductory period the lender will adjust the loan and your payment will go up.

You can learn more about the risks of mortgage refinancing with an adjustable rate loan by registering for a free mortgage tutorial.

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By refinancing your existing home equity loan or line of credit you could save a lot of money in the long run. There are many places you can find a fixed interest rate second mortgage loan. These tips can help you keep your costs down and help you avoid unpleasant surprises at closing.

· First, order your credit report from all three credit reporting agencies and check it for errors. An inaccuracy you aren’t aware of could cost you thousands of dollars in extra interest or even cause a denial of credit.

· Find out what current mortgage rates are and whether they are going up or down. Knowing the current mortgage rates will give you bargaining power when you shop for your new loan.

· Talk with your existing lender about mortgage refinancing of your home equity line or variable interest rate 2nd mortgage. At the same time, contact at least one bank, one credit union and one direct mortgage lender. Their 2nd mortgage loans probably cost less than ones from finance companies and mortgage brokers, and one of them could possibly give you a better deal than your existing lender.

· Most lenders will loan you up to 85% of the value of your home based on the total of both the first and second mortgages. Steer clear of the 125% Loan To Value (LTV) second mortgages or any other loan that allow you to borrow beyond the value of your home. Mortgaging your home for more than it is worth is an easy way to lose it.

The other problem with 125% LTV loans is that you may not be able to claim all of the interest you pay on the loan. According to the Internal Revenue Service (IRS), there is a limit on the amount of debt that can be treated as home equity debt. The total home equity debt on your primary residence and second home is limited to the smaller of:

- $100,000 ($50,000 if married filing separately),

- The total of each home’s fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt.

Interest on amounts over the home equity debt limit generally is treated as personal interest and is not deductible, so you could lose the tax deduction benefit if you mortgage your house for more than it is worth.

· Find out what will you have to pay in points and fees. Remember, 1 point equals 1 percent of the loan amount (1 point on a $10,000 loan is $100). Reputable lenders normally charge between 1 and 3 percent of the loan amount in points and fees. If points and fees are more than 5 percent of the loan amount, you should probably shop for a different lender.

· Find out if the new loan carries a default penalty in case you are late or miss a payment. Default penalties could cause the interest rate to increase dramatically.

· Before you apply, pay close attention to the terms of a loan including the type of 2nd mortgage, the presence of prepayment penalties, balloon payments, low or high down payment, mortgage insurance requirements, payment schedule, lock-in period and other loan features. Are the terms better than yours? If not, keep shopping.

· Know your legal rights. The Federal Reserve Board states that if you’re using your home as security for any type of home equity loan, including a second mortgage, federal law gives you three business days after signing the loan papers to cancel the deal–for any reason–without penalty. You must cancel in writing within the three-business-day window of time, and the lender must return any money you have paid to date.

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There are numerous of benefits that can be associated with re-financing a home. Whereas there are some situations where re-financing is not the proper call, there are a bunch of benefits that can be gained from re-financing given the right conditions. And when you consider that we currently have the lowest mortgage refinance rate in many years, homeowners can use this to their advantage. Some of these advantages include: lower monthly payments, debt consolidation and the power to utilize the prevailing value within the home. Owners who are considering re-financing ought to contemplate each one of these choices regarding their current money scenario to see whether they would like to re-finance their home.

Lower Monthly Payments

For most owners the likelihood of lower monthly payments may be a very attractive benefit of re-financing. Numerous owners live paycheck to paycheck and for these people, finding an opportunity to increase their savings can be a monumental feat. Owners who are in a position to negotiate these lower interest rates can surely see substantial benefits in the way of lower monthly mortgage payments resulting from the decision to re-finance.

Each month homeowners send in a mortgage payment. This payment is sometimes used to repay some of the interest as well as some of the principle on the loan. Owners who are capable of refinancing their loan at a lower interest rate will see a decrease in the amount they are paying in both interest and principle. This will be because of the lower interest rate as well as the lower remaining balance. When a house is re-financed, a second mortgage is taken out to repay the primary mortgage. If the current mortgage was already several years old, it is because the homeowner already had some equity and had paid off some of the previous balance. This permits the homeowner to take out a smaller mortgage once they re-finance their home since they are repaying a smaller debt than the initial purchase of the home.

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Pros – Protection From Higher Rates

Fixed rate mortgages provide the security of always knowing what your monthly payment will be. If the Federal Reserve decides to hike rates up 10 points, you don’t have to worry.

Today’s mortgage rates are near historic lows. So it’s unlikely that you’d save yourself that much money by refinancing with an unpredictable ARM.

Pros – Able To Buy Down Rates

Buying down rates with points can guarantee yourself savings of thousands of dollars on your fixed-rate refi. For example, buying down a 7%, $200,000 loan to 6.75% would save you $58,750.53 over the life of the mortgage.

Cons – May Miss Out On A Rate Drop

Fixed rate mortgages lock you into a rate. So you miss out on any reduction in mortgage rate changes. Even a drop as little a quarter of a point can cost you thousands.

Keep in mind, that if your credit score improves in the future, you could become eligible for lower rates, even if market rates haven’t changed. Some subprime ARMs have this refinance option as part of their contract.

Cons – Fixed Rates Higher Than ARM

Fixed rate home loans will always have higher rates than ARM – at least in the beginning. And you will find that you have a higher monthly payment refinancing with a fixed rate mortgage. Fees can also be higher with a fixed rate mortgage.

Choosing to refinance with a fixed mortgage is a gamble. If you have good credit now and feel that mortgage rates are low, then opt for a fixed rate. But if you want low monthly payments now or think that you can qualify for lower rates in the future, then consider refinancing with an adjustable rate mortgage.

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Determinants of Interest Rates

As with everything in the market, your mortgage interest rates are determined by the interaction of supply and demand. When borrowing is up and the economy is strong, interest rates increase. When borrowing is down and the economy is soft, interest rates decrease.

But it’s not only the market forces that are setting the stage. There is also the Federal Reserve. Whatever the Feds do and wherever they set the fed funds play a crucial role.

The Federal Funds Rate

Now what is a federal funds rate? Also called the fed funds rate, this is the interest rate that is charged whenever banks lend funds to other banks. The rate’s maturity lasts for only two years or less, which makes it the short-term type. The behavior of the federal funds rate affects short-term interest mortgage rates.

As simple economic laws would have it, when short-term rates decrease, borrowing and spending are likely to increase. The result is inflation and the Federal Reserve tries to avoid this.

As for long-term interest rates, these are rates that last for ten years or more in terms of maturity. Short-term rates influence them indirectly. They typically rise when attempts to assuage inflation come into play. When inflation is increasing to undesirable heights, the Fed tries to remedy the situation by increasing short-term mortgage interest rates. People whose finances are gravely affected by market movements of interest rates are forced to consider alternatives.

Heed Your Lender’s Advice and Grab that Refinancing Mortgage

Your lender may be right after all. Maybe you do need that refinancing mortgage. All these talks about mortgage rates are Greek to you and the last thing you need is to have to watch over them if only to keep up with your refinancing mortgage payments. Maybe that adjustable mortgage rate you’re in right now is just not cut for you.

The Difference Between an Adjustable Interest Mortgage Rate and a Fixed Interest Mortgage Rate

By the way, do you already know what an adjustable interest rate is? How does it differ from a fixed interest mortgage rate? An adjustable rate is the type of interest rate that is subject to the changes in the market. This means that you may suddenly find yourself dealing with an unexpectedly high interest rate because of changes in the economy.

A fixed interest rate, on the other hand, is the type that is unchanged by the market trend. It remains the same no matter what shifts occur in the economy. It is more stable and more predictable.

Go on ahead and heed your lender’s advice. Grab that refinancing mortgage while the offer’s still up.

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* Freeing up equity in your home

* Refinancing to get a better interest rate

* Reducing how much you pay each month

You can also use refinancing to free up money in your home to spend on doing your home up. This is one of the most popular uses of refinance as it actually adds value to your home.

Home equity loans are used to provide guarantees to the lender, which should make it possible for them to offer you much better loan terms. Equity is simply the difference between the value of the house, and the amount of money you owe on the property. You’ve no doubt heard of negative equity, this is when you owe more than your house is worth. Fortunately this is not very common at the moment.

As the house is hopefully worth more than you owe there is more money that can be released from the property. By guaranteeing the loan against the home it reduces the risk for the lender.

Home equity loans can offer loan terms that are almost as good as other home loans. You can often get cheaper interest rate loans using home equity loans, you can also borrow larger amounts of money, and lower monthly payments.

Home equity loans can do all of this because the loan is secured against the property, therefore there is minimal risk for the lender.

Refinancing a home loan works by taking out a new mortgage loan, and using the money to repay the existing mortgage. These loans are actually known as a cash out home loan, this simply means that you are borrowing more money than you currently owe. The remainder of the money that is not used to pay off your existing debts is given to you as a lump payment. This is very beneficial for whatever you need to do, including home improvements.

If the money intends to be used for home improvements, then most lenders will offer special discount interest rates and other special terms. This is because spending money doing your home up should actually increase the value of your home, so meaning there is more equity in your home.

Make sure you mention you intend to use the money for home improvements when applying for you loan, as you want to benefit from any discounts you can possibly get. If you look hard enough you will be able to find a lender that can offer special offers that may suit your needs.

Many lenders nowadays are designing loan programs that are aimed at people who are doing their houses up.

The most important thing when taking out a refinance loan is not to go with the first one you find, you must compare options. Choosing the first option may not be the best choice, by getting a number of quotes, you may be able to negotiate.

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The streamline refinance is working off of the original qualification process you went through to get your original loan. If your current mortgage is financed by the VA, that is the first qualification checked off. This loan does not require an appraisal. Income documentation and job verification is not required and neither is credit qualifying. The only credit requirement is that you be current on your mortgage and have had no more than one mortgage payment past thirty days due in the last 12 months. What could be easier than that?

According to the VA Home Loan Company, another great feature is that the “VA streamline refinance loan is that you can get it with no closing costs.” The only cost to the loan is a 0.5% funding fee. And that can be wrapped up in the mortgage. Now, you cannot cash-out on your mortgage with this particular loan. (If you would like to do that, you need to speak with a mortgage professional about cash-out with VA refinance loans.) However, if you have some energy improvements you would like to make to your house, you may be able get up to $6000 added to the VA mortgage loan to cover these costs.

With credit tightening and underwriting becoming more difficult, the VA streamline refinance option by-passes this for veterans. However, it is in the best interests of any veteran to know what a VA lender should be saying. If a lender tries to say they are the only one qualified to make VA IRRRL loans, they are wrong. Any VA lender can. If they say that there are certain lender costs that must be added, be wary. The only cost associated is the 0.5% funding fee. And be cautious if you are going to refinance your home for more than it is worth. You may get into a situation where you would find it difficult to sell your home and cover the mortgage. See a VA mortgage professional for guidance before making any financial decisions.

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It is very important to consider the type of loan you need to meet your current financial situation and consider your future needs.

Fixed Rate Mortgage

This is your parent’s financing. Prior to the internet, when most people stayed at the same job until retirement and families weren’t as mobile as today; this loan was the epitome of stability. With fixed rates, the interest rates and payments stay the same for the term of the loan.

Balloon Mortgages

Balloon financing always seem attractive in the beginning. These loans generally offer a fixed rate for several years. At the end of the fixed rate portion of the loan, payment is due in full. If at the end of the term you are unable to pay you have few options. You can refinance but you will be subject to current interest rates or you may find yourself in default.

The 5/5 & 5/1 Adjustable Rate Mortgage

This offers a stable payment and interest rate for the first five years. In the sixth year the interest rates, and therefore the payments, are adjusted every five years for the 5/5 arm and every year for the 5/1 arm.

Refinancing in Texas

In some instances, refinancing your current mortgage loan can help you lower your monthly payment. Borrowers can borrow against the equity built up in their home at a lower cost than they can from other sources. Like most mortgage interest, another benefit to refinancing is that if you pay off credit cards, the interest you pay will now be tax deductible.

The rates and points on each loan will vary. As with any major consideration, it is imperative to consider all of your options and utilize all of the resources available to make an educated financial decision. Talk to a reputable mortgage lender and ask them to explain some important points in finding the right loan for you.

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Factors The Will Determine Your Interest Rate

Credit Score-Your credit score by far is the the most important factor in getting the best deal on your next home loan refinance. Credit scores of 680 and above will give you the best chance of getting the best deal. If your score is less then this you may need to do some credit repair or look into FHA financing

Equity Borrowed-In order to get the mortgage refinance lowest interest rates you need to keep the amount of your homes value that you borrow around 90%. After this level there will be increases in the rates that you pay because the risk to the lender increases.

If You Escrow-With any home loan refinance the choice of escrowing your taxes or not will have a direct affect on your final interest rate. If you decide not to escrow your property taxes your rate will be about .25% higher then if you do escrow your taxes.

Cash Out Or Rate Term- If you are taking cash out when you refinance you will have a higher interest rate then if you just refied to get a lower rate. Many mortgage companies will advertise their low rates for non cash out loans to get borrowers excited. So if you you need cash out and think you will get the mortgage refinance lowest interest rates you hear on the radio think again because these are for rate term only and not cash out!

While there are some other minor factors that will determine your final interest rate the above list covers the most important ones. So use it to analyze your situation before you apply.

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