Mortgage Home Refinancing Tips and Guide on Home Refinancing

If you are refinancing your home loan and are considering an Adjustable Rate Mortgage there are a number of things that can go wrong. Doing your homework before refinancing will help you recognize and avoid these pitfalls. Here are several tips to help you avoid paying too much when refinancing with an Adjustable Rate Mortgage loan.

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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With mortgage interest rates rapidly rising, now may be the time to refinance your variable interest rate home equity line of credit (HELOC) or adjustable rate mortgage (ARM) home equity loan into a fixed interest rate second mortgage. Otherwise, your payments could become more than you can afford, which could be dangerous because your HELOC is secured by the equity in your house.

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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I had a recent conversation with one of my clients, Mr. Jackson, who is a finance savvy homeowner from Virginia Beach, VA. He asked me an interesting question that I wanted to share with you, because it seems to be a common dilemma for homeowners in many states.

What the best solution for refinancing my first & second mortgages? Mr. Jackson elaborated, “I have an 6% 1st mortgage with a balance of $255,000, and a second mortgage at 14% with a balance of $52,500. We did a 125% second mortgage to pay off some credit cards. If I add the loans together, we exceeded our homes equity, as the property was appraised at $280,000. We are satisfied with the 1st mortgage rate, but we wanted to lower the rate on the second mortgage. A few years have passed since we took out the 2nd loan back in 2002, and importantly our home’s value has increased to about $325,000.” He continued, “Should I refinance the second by itself and try and get a lower rate, or should I refinance the 1st and 2nd mortgage together for one mortgage payment?”

Wow, what a good question. I praised my client for consolidating his credit card debts with a fixed rate loan. He was very satisfied with his monthly savings with the 125% loan and because it exceeded his property value, he did not consider refinancing that loan until neighbor hood housing costs went up significantly. Now that his house has increased its value it appears that his combined loan to value was under 100%. His refinancing options become much greater with the increased equity from the home appreciation.

I asked Mr. Jackson a few questions so I could help him find the best solution. How is your credit? Do you know your credit score? Is there a pre-payment penalty on your second mortgage?

Does your first mortgage have a fixed interest rate?

Jackson answered quickly: 689 credit score no pre-payment penalty after 3 years, and his 1st mortgage is at 6% with a 30 year fixed rate.

Combining first and second mortgages into one loan can be challenging, but sometimes it makes sense financially as well as being practical. In Jackson’s case, the best option was to leave his first mortgage alone, and simply refinance the 125% home equity loan with a 95- 100% second mortgage to lower his monthly payments. So Mr. Jackson was approved for a fixed rate 2nd mortgage. He had inquired about a home equity line of credit, but I reminded him that they have adjustable rates that have been increasing rapidly in the last few years. Since he was paying off long term debt, a fixed rate loan with simple interest was the only way to go. I was excited for Mr. Jackson, because we were able to get him approved for a loan with no pre-payment penalty and we were able to reduce the closing costs, because of his credit score.

Depending on the home equity program, 2nd mortgages may cost you a few thousand dollars in closing costs. Most closing costs are tax deductible and getting the lowest possible rate pays off in the long run. For example, With a 15 year term, you would recover the cost of the second mortgage within a few years, so if you can get 1% or more better paying some closing costs, it would be better than a home equity loan with no points. The lending reality is that most no point no fee 2nd mortgages require credit scores over 700, and the combined loan to value will most likely need to be under 90%.

If you are able to get the second mortgage with no penalty for early payoff, then get that feature with your loan, because if your home’s value continues to increase, then in a year or two, you may find yourself ready to refinance because you are back at the golden 80% combined loan to value. If 1st mortgage rates happen to drop again, then you may find yourself in a great position to finally combine both loans together. If the 1st mortgage rates dropped to the 6% zone, and you still plan to live in your home for many years to come then make the move to refinance. It all comes down to what the rate are doing, when the time comes.

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www.GuideStepByStep.com — Refinance Your Mortgage To Save That Extra Money Why is it good to refinance at that time? You take a fresh loan for paying off all your existing mortgages. If you pay your mortgage dues in time, your credit scores will increase for very valid reasons. This will…

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A mortgage net branch is an arrangement in which an existing mortgage company gives a franchise to another mortgage company in order to carry out its business in a particular area. The company that gives the franchise is called the mortgage originator, while the company that takes the franchise is called the mortgage net branch. This arrangement is done by some companies who wish to expand their business into newer areas. Mortgage net branches may be small companies in their own right, or they may be mortgage brokers.

There are certain prerequisites to become a mortgage net branch. The mortgage professionals wishing to become a net branch must be licensed. Licensing requirements vary from state to state and are controlled by the Housing and Urban Development (HUD) code. Most mortgage originators want their net branches to have at least three years of prior experience in the field of originating, processing, undertaking and risk analysis of all types of mortgages.

Some huge mortgage companies conduct written examinations for candidates wishing to become their net branches. Apart from these, other factors like having premises, goodwill in the market and superior communication skills are also desired. There is some kind of payment to be done to the originator by the net branch. The process is totally formal and documented, as the prospective net branch has to fill application forms.

Net branching is a viable option for small amateur mortgage companies to get nationwide exposure. This is possible, as the originators are big companies that are already functional on a countrywide basis. On the other hand, the originator is able to expand its business by enlisting the services of a net branching franchisee. Hence, mortgage net branching is a mutually benefiting symbiotic relation between the originator and the net branch.

But mortgage net branching has its downsides, too. Parties opting to become net branches are more often than not obliged to give up their original identities and take up new ones as desired by the originators. This makes the net branch lose its individuality. Also, the net branch does not have total liberty to undertake its tasks, as it has to work under orders issued by the originator. Hence, brokers and companies with several years of experience behind them do not accept the idea of becoming net branches that easily. Net branching is considered by new entrants in the field wishing to cash in on the goodwill of the originating company.

The business of mortgage net branching is expanding rapidly day by day. Clients are only too happy to deal with branches of esteemed companies in their vicinities. In fact, it is mortgage net branching that has made the buying of mortgages such an immensely popular phenomenon.

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Amidst the Real Estate & Mortgage Meltdown; Foreclosure Fraud & Scams; Real Estates Future is Great. First Time Home Buyers, FHA Loans & Seller Paid Closing Costs. Go To RealEstateMarketingThisWeek.com Part 5 (Excerpt) CDOs and the disgraceful actions of the Bond Rating Agencies We just talked about the process regarding your mortgage lender and having standing, which is a legal term, which was a little complicated Dan. I’m not going to lie to you. That is why all the information is on the website, http And you can also go to VelocityFinancial.com. There is a link there to Dan’s website. Dan is talking about breaking these mortgages down and eventually selling them off to Bangladesh in different tranches. Some of the servicers are actually in India, of all places. If you have a mortgage that you’re having trouble with and you need to call somebody to get help, you are actually calling India to talk to somebody about your mortgage here in Phoenix. I dont really know why, but none the less, Brett, you wanted to address this from a financial advisor standpoint Yes, I am pretty immersed in this because what Dan was describing in these collateralized debt obligations, CDOs, CMOs etcetera, does get a little complex. I think I can clarify it a bit as you may feel that this doesnt apply to me, is this something I should consider in my own strategy. It works like this, this is true for most people who took out a mortgage in the last couple of years, you start your mortgage and get …

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Throw out the idea of applying for a home loan. One of the first things that will pop into people’s minds is their credit score. After all, you need a great credit score to get financing, right? Umm, not really.

Welcome To The World of B Paper Mortgage Financing

The biggest fear of most potential home buyers is the mortgage application. It is like walking down into that scary cellar in a horror movie. You are not sure what is down there, but you have a pretty solid feeling it is not going to be good. In this lexicon of home financing, we are talking about credit scores.

Credit scores are simply an algorithm applied to your credit reports. The big three credit reporting agencies are Equifax, Experian and TransUnion. As strange as it sounds, the reports each of them maintain for you will be different. This is because creditors often only report to one or two of the agencies. Strange, but true!

Regardless, you lender is going to want to size up the risk of lending you a large quantity of money. To make sense of your credit, the lender will get a FICO score for you. FICO is short for Fair Isaacs, the company that created the calculation. If you get approved, you will love this company. If you get rejected, the feeling will be the opposite.

In the world of home financing, your FICO score is not referred to as a FICO score behind closed lender doors. It is referred to as “paper”. Specifically, your score will fall within a certain range that is similar to the high school grading system. If you have an excellent score, you are considered “A” paper. If you have a few problems, you are “B” paper and so on down the line. As the score gets worse, most people think the rate of application approval also goes down. This is not necessarily true.

Most lenders you see in the paper or on television are interested in A paper borrowers. If you show up with C paper, you are going to be rejected. Sorry, but that is the hard, cold truth. So, should you give up on your dream of owning a home? NO!

You might be surprised to learn that there are plenty of lenders that do not want A paper borrowers. These lenders specialize in people with less than perfect credit. Yes, they want those of you that have B, C and D paper, to wit, bad credit scores. These institutions are known as sub-prime lenders. If you have bad credit, this is who you should be applying with. Why would they want to give you money for a home? Well, they are going to make more money. In exchange for giving you the cash despite your credit, these lenders will charge you a higher interest rate and incidental costs. It may be half a percentage higher or more. The answer lies in your situation and just how bad your credit is.

So, should you rush out and look for sub-prime lenders? Probably not. The rates offered by these lenders can differ dramatically. If you select the wrong one, you can end up paying tens or hundreds of thousands of dollars more than you should have over the life of the loan. A better approach is to contact a mortgage broker. They are independent professionals that can show you the various packages being offered by the different lenders. This lets you find the most favorable rates and save a boatload of money.

At the end of the day, perfect credit is much like the idea of me dating Angelia Jolie. It is a nice idea, but probably isn’t going to happen. If you credit is blemished or a disaster, contact a mortgage broker to see if there is sub-prime lender out there that will finance you. You will probably be shocked to learn there is.

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You’ve heard all the mortgage stories and liked some. Now you want to know what it is going to cost you when you take out a refinance mortgage. The best and accurate source of information is the online mortgage calculator. But do you like what’s it’s telling you? Whatever it is, take heed.

Fact vs. Fiction

The sky is not falling and so are interest rates. But you can still find a comfortable rate that’s up your alley. Just take a long, hard look at the mortgage calculator after you’ve punched in your numbers.

You can use the online mortgage calculator to work out your monthly payments towards a refinance. The result will be based on the following:

1. selling price of your home.

2. the desired loan amount.

3. the preferred loan term.

4. percentage of down payment.

5. interest rate of the loan.

6. percentage of Private Mortgage Insurance to be put up.

7. local property taxes.

The sum total will show the monthly fee you’ll be paying up for a period of x years. This amount will be stable for the duration of the loan term if you’re eying a fixed rate mortgage.

Before you can believe all the stories you hear, sort out the fact from fiction by relying on a mortgage calculator to give you the specifics.

User-friendly and Accurate

The online mortgage calculator won’t frighten techno-phobics. You can immediately see the results for yourself and the explanation for the figures that will show up. For a thirty-year term for a $150,000 house with a 10% down payment and an interest rate of 7%, you’ll be coughing up $898.16 monthly towards the principal and the interest only.

An explanation will clearly tell you that you have to pay an additional fee for the Private Mortgage Insurance (PMI) because you’ve paid only 10%, instead of the 20% required for the downpayment. If you’ll be paying the amortized PMI, this means an additional $74.25, bringing the total monthly fee to $972.41.

The calculator is convenient to use and eliminates the need for an accountant to do the figures. The instant results will help you make up your mind if you are comfortable or not with the prospective loan amount, interest rate, and the loan term. You can check out other possibilities if you choose to go for a pricier or a more affordable house. You can get all the information on different loan terms, interest rates, and down payment until you’ve arrived at something you prefer and think you can afford without having to pay through the nose.

Well Informed Is Well Armed

You already have the advantage of knowing what you’re getting into when you take out a mortgage. When you shop for a lending company, shop for comparative rates. You might find something even better. However, don’t take up the notion that the results shown by the mortgage calculator are all that you have to spend. If this is your first ever mortgage, inquire about the fees they’ll charge from the start to the closing of the loan. Add these all up and that is the money you’ll need before any amount can be released to you.

Study the basic types of mortgage and how well each suits your financial circumstances, present and future. The mortgage calculator has shown you what to expect, and whether you like the results or not, the choice is still yours.

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A hybrid tool that is generally used to avoid foreclosure is a called a short finance. This term refers to both refinancing and modifying a loan, while discharging the value of debt, which makes a homeowner upside down. This tool allows homeowners to refinance their loans, but with some of the debt forgiven. Essentially, if a mortgage on a home exceeds the fair market value of that home, homeowners can now though their attorney negotiate with the lien holder to forgive the debt in excess of what a home could reasonably sell for in todays market.

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President Obama and his administration have recently announced details of their home affordability stimulus plan, which should help as many as 1 out of every 9 homeowners avoid foreclosure or more easily refinance even if the amount owed on the mortgage is more than the home is worth.

This housing stimulus announcement came just 2 weeks after President Obama stated that $75 billion dollars would be spent on housing and mortgage problems out of a $787 billion dollar economic and financial-bailout stimulus plan.

This housing affordability stimulus plan from Obama had to be carefully laid out and implemented due to the Obama administration not wanting to look as if though they are rewarding homeowners who were greedy or reckless during the housing boom times. Therefore the first step of this plan is to help homeowners who have remained current on their mortgage payments for at least 12 months. Although, regardless of payment history, there is other refinancing options available.

The administrations outlined estimates say that this stimulus plan will benefit as many as 9 million current mortgage holders, and has 2 main components to it.

First, mortgage lenders, banks, and other financial services offering mortgage refinancing will be offered incentives and other subsidies from the government to loosen up the refinancing requirements for homeowners who are having financial difficulties that are so bad that losing their home is a serious risk. These borrowers will have to sign financial hardship affidavits to this effect detailing their hardships. For doing this, homeowners can see their current interest rates drop to as little as 2%, their mortgage lengthened, or other methods to bring down the monthly mortgage payment to 31% of the homeowners gross monthly income. This stimulus plan will be limited though to first lien mortgages only with mortgage amounts that do not exceed $729,000 for a single family home.

Mortgage lenders, banks, and other home loan providers will also get up to $3500 from the government to participate in this program as well as matching portions of the mortgage lenders or banks costs dollar for dollar in some circumstances. Homeowners are also eligible to get up to $5,000 in federal money to help reduce or pay off other outstanding balances as a way to ensure they do not lose their home later down the road. Also noted by Obama administration officials was the fact that people who purchased homes as investments and not primary residences are not eligible.

Second, this plan calls for government backed mortgage lenders Freddie Mac and Fannie Mae, to allow home refinancing for literally millions of current homeowners who owe more on their existing mortgage than their home is actually worth, even if they are not having problems making monthly mortgage payments. There is no limit to the amount these mortgages can be for either. However, the mortgage must be backed by Freddie Mac or Fannie Mae and can the borrower can not owe more than 105% of the total value of their home.

Refinancing a home mortgage now with the help of President Obamas “Home Affordability Plan” will save millions of homeowners hundreds of dollars every month. Get in touch with your mortgage lender or a potential lender today and see what kind of assistance you can get through this housing stimulus plan.

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