Home Refinance – Start Saving Money Today!

Home Refinance, also known as Mortgage Refinancing is exchanging your mortgage with a new one, an act meant to save the loaner money in the long run. This is a good thing to consider  when the interest rate in the mortgage market is significantly lower than the one in the active mortgage – thus we take a new loan with better rates and terms.

Home refinance has it’s costs, this means that we should consider refinancing very carefully, since we do not want these costs to exceed our earning from the new mortgage.

Our association - refin.org - will provide you with different data concerning home refinance:
When is it worth considering? What are the different mortgages and instruments? What are the costs? and more…

Home refinance is not always worth it, let’s examine when do we need home refinance and when can it be benefital for us.

  • Reducing the interest we are paying will help reduce our monthly payments and as a result our overall ineterst payed.
  • Reducing the mortgage period will help “get rid” of the mortgage faster. while extending the mortgage will help us reduce the monthly payments and maybe the overall interest payed.
  • Debt consolidating: through home refinance we can join different debts and even join home-equity loans with our mortgage, thus enjoying better interst rates.

An extensive part of our website will examine the term “closing costs”. This is the money the new mortgage will costs us. The costs are very improtant because if we manage to save an oveall of 20,000$ between our new mortgage and the old one, but entering the home refinance costs you 25,000$ – than you have actually lost money!! so, calculating your mortgage closing costs is the first thing you should do. In average, every 100,000$ you refinance – will result in 1,500$ + TAX closing costs (this data is from early 2009).

Don’t forget tp search for acctuall market rates before entering the home refinance process:

  • Do you know what is your current loan rate ? does your loan has a Prepaying Panelty ? This is also a costs in old loans that needs to be consideres.
  • Have you checked rates? does different brokers offer lower closing costs? this is improtant.
  • What is your credit score ? this will be a relevant factor for the interest you will get. If you had mishaps that effected your score recently – you may not be able to get top interest rates, and thus the home refinance or mortgage refinance process will be irrelevant.
  • Use this website and other sources for home refinance calculators. That way, you will be able to find out exatcly whether refinancing is the best thing to do.

Here’s a small example:

you mortgage is on a prinicpal of  300,000$ and for another 8 years. closing costs for the new mortgage are aprox. 5,500 $. If we can save considerably more than 58$ per month for the next 8 years – than we probobly should get to it.

We must also consider our break even point. To “break even” is to cover the closing costs and all other costs. This should be done after 2 years + , or at list as long as we are planning to stay in the property.

That’s the genaral info regarding home refinancing. every issue can be discussed on and on and this is exactly what you can find on our pages.

It is advisable to remember that every mortgage is different from loaner and loaner and every lender issues different terms, so we should consider our mortgage on its own and accept these pages as guidlines to help us through the process.

Good luck!

May 30, 2010 · admin · No Comments
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Home refinance with HARP or with HAMP: what are the differences?

Home Refinance is replacing your existing mortgage or loan, with a new one – that has better terms and rates, thus enabling you to pay less for your mortgage each month. Loaners with bad credit or bad credit history have already found out that such home refinance act is practically impossible, since they pose too much risk and will be denied a new loan from their or any lender.

While having bad credit, some loaners may still apply for home refinance, others – that have mortgage balances exceeding their property value – can soon forget about their homes… right?

Wrong! Lately, the US Government has posed a new plan named “Making Home Affordable Program”. This article will examine two ways in which lenders can use this program to perform their home refinance and enjoy the opportunity to save their house.

HARP Explained

The federal Home Affordable Refinance Program, or HARP, allows qualified borrowers to refinance a home loan with many restrictions, and therefore will not be suitable for everyone.

To begin with, this is a program designed to loaners whose home loan or mortgage is owned or guaranteed by Fannie Mae or Freddie Mac. If this is the case, make sure that you meet the other criterions: your home is a one to four unit home that is currently your primary residence, and your loan balance may not exceed 125% of a property’s value.
Furthermore, this program is not suitable for really “under the water” loans as the loaner is required to be “current” on his mortgage payments and have not been more than 30 days late making a payment within the past 12 months, plus the loaner has sufficient income to support the new mortgage payments in such a way that he will not miss payments.
At last, you will be granted aide from HARP only if proven that the home refinancing will actually improve the long-term affordability or stability of the loan.

HAMP Explained

HAMP, or the Home Affordable Modification Program is for loaners that have “an unclean” payment history & they are on the verge of losing their property. Qualifying, will have you proving financial hardship that may end up with the genuine lose of  your property

Needless to say, that your mortgage or home loan must be owned or by firms that have signed up with the U.S. Treasury to qualify for HAMP. These firms will get incentives of up to $1,500 for each loaner that  will meet the criteria and be eligible to home refinance or more accurately – home loan modification.

To qualify for HAMP, the loaner must own a 1-4 unit home that is his primary residence. The mortgage is one that was received prior to January 1, 2009;
As to the hardship, the loaner must pay for his mortgage (including taxes, insurance, and homeowners association dues) a sum that us  more than 31% of his gross (pre-tax) monthly income.

The Lender will be able to lower the interest rate to as low as 2%, as well as extend the term up to 40 years, or forbear payments on your principal. The Lender is also entitled to forbear some of the principal in radical cases, but all of these modifications will be done under the following trial period: homeowners who will qualify will be forced to complete a trial period of three to four months, In this period they must demonstrate the ability to pay the reduced monthly payments without being late or missing a payment.

You can check eligibility at http://makinghomeaffordable.gov/eligibility.html

Good luck!

August 22, 2010 · admin · No Comments
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Making Home Affordable program explained

We’ve been hearing more and more lately about HAMP or the Home Affordable Modification Program, the talked about governmental mortgage bailout program. In this short article we will understand what this program is, and will try to sort out its implications on your home refinance.

First, let’s look at some figures: the current administration have put aside $75 billion for this stimulus plan called “Making Home Affordable”. This plan is directed towards the mortgage lenders, making it very awarding to give loaners that try to perform home refinance, very low interest rates, regardless of their credit score.

How will it work?
First of all, the lenders, banks and other financial institutes are promised cash incentives from the government for allowing struggling homeowners – those that are actually in debt – to get beneficial refinancing terms for their home loans.
So even if the loaner has super bad credit score, it will be beneficiary for the lender to make him eligible to low rates and to approved him for home refinancing. This will be mostly done through “no cost home refinance”, which means that all the costs of the new mortgage is basically being sponsored by these government funds.

How do they do it?
This program will be limited to first home mortgages with outstanding principal balances that don’t exceed $729,750, for single-family homes only. This is done to ensure that the loan modification program does not aid loaners who bought property for investments purposes, land-lords or renters.
Each of the eligible loaners will make it possible for the lender to get $3,500 from the government, this is more than enough to subsidies your average home refinance costs, meaning that thanks to the government – these loaners will enjoy no costs refinancing.
In addition – the government will also be matching a portion of the lenders’ costs, so that actually the lenders get the mortgage and have much less overall costs for it. Everybody wins…

Note – loaners themselves will have to sign affidavits attesting to their financial hardships – meaning that the credit score checkup will not be enough.

In conclusion, makinghomeaffordable.gov gives us tips to avoid scams and frauds

  • Beware of anyone who asks you to pay a fee in exchange for a counseling service or modification of a loan. The program does not utilize such external advisors. All assistance from a HUD (U.S. Department of Housing and Urban Development)-approved housing counselor is FREE
  • Do not be lured by scam artists that will try to buy out your home and debt, just because you are struggling.
  • Beware of agents who pressure you to sign papers immediately, or that they can salvage your home if you sign or transfer over the deed to your house.
  • Do not make a mortgage payment to anyone other than your mortgage company!

Good luck!

August 15, 2010 · admin · No Comments
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Documents Needed to Home Refinance

Up until now we have not yet mentioned the technicality of the Home Refinance Process. Here we consolidated all the required documents for the home refinance process. These will vary from lender to lender and with different loan programs.

Proof of Income

Home refinance requires you to provide proof of your income either by showing your workplace paycheck from the past few months or by supplying contact information of your employers from the last 1-2 years.
Self employed loaners and Independent business owners, freelances or any other form of self employment, will have to provide their year-to-date profit and loss statements or balance sheets.
Showing your pension plans, social security, rental property income or any other payments that may indicate your income level may help. This can be done by showing legal statements and checking account balances.

Taxes

You will need to provide W-2 forms from the previous year.
Self-employed as mentioned above will have to show signed tax returns from the previous two years.

Insurance

Make sure you provide a copy of your current property insurance policy. The insurance also shows the legal description of the home and land and saves you the need to get proof of ownership.

Additional Asset Information

  1. Verification and documentation regarding other assets you may own, may also be needed – especially if you rely upon these for better credit score. This may include bank statements for checking accounts, retirement plans statements, and 401Ks forms.
  2. Statements for mutual funds, bonds and other securities, may also upgrade your financial ranking and credit score.
  3. Savings and checking accounts may also be a requirement to show the lender that you have sufficient cash for closing costs (for non “no-cost” mortgages).

Other Documents

  • Copy of your ID and proof of your social security number .
  • An approved copy of the deed to the property (unless the Home insurance is enough for the lender).
  • Credentials such as academic degrees, especially if you get preferred students rates.
  • A copy of title insurance which will be used by your lender verify the taxes, names on the title and legal description of the property.

The more information you have ready to provide your new lender may improve your credit score, credibility, and shorten the time it will take to get approved and to close your loan.

July 3, 2010 · admin · One Comment
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Reasons for Home Refinance when rates are not lower

The main reason to conduct home refinancing is when we can find the interest rate lower than in our original mortgage. The well known rule-of-thumb speaks about a 2%+ rates difference, which makes refinance worthwhile. However, it is a well known fact that Americans perform this process every couple of years for various reasons. This article will explore all the reasons to conduct home refinance even when the interest rate is not significantly lower.


Reason # 1 – we anticipate an increase in the market’s interest rates

Well, low interest rate can get us far enough, but usually is not here to stay. If we know we must perform home refinance, since we need to consolidate debt or we have an ARM (Adjustable Rate Mortgage), we might not reach the lowest interest rate before we have to perform the refinance.
Thus, if we expect rates to get up, and we anticipate our payment climbing since we have an ARM – then, performing the Home Refinance before this will take place – may be a good judgment call.


Reason # 2 – lowering our monthly payments

Even if rates are the same as when you obtained your running mortgage or maybe they are even higher – sometimes the extent of our debt is so straining, that we may need to refinance in order to extend the term of our loan.
This is hardly advisable, since it will get us more years into debt and more interest to pay overall, but sometimes we simply have no choice, and the monthly reduction can easily turn into a breather.
Refinancing a running mortgage to a longer period of time may also be the solution, especially if we have past the loan mid-term. Thus we have been “biting of” more of our principal and not interest, and may have a smaller debt to roll on.


Reason # 3 – your financial status has improved from when you initially took the mortgage

Even if rates are not lower, maybe your rates will be lower!
Think, has your credit rating improved? Maybe you have better income or smaller debts than when you first applied for your mortgage. Maybe old mishaps in payments have already been reset…Your credit score was a big factor when the lender determined the interest rate on your original mortgage. If things are brighter today – maybe you can get a better rate after you apply for home refinance.

If your financial status has indeed improved and you have a higher income, you may want to remember that home refinancing isn’t always about lowering your monthly payment – sometimes it is wise to elevate it. If you can put extra income towards paying off your mortgage you needn’t wait until you accumulate a certain percentage of the principal in order to pay it off. Try Converting to a shorter term amortization table and thus you will pay more each month, pay less overall interest and save many dollars in the long run.


Reason # 4 – Cancel different fees, such as PMI

In most mortgages or home loans, where you need to put less than 20% down-payment, the loaner is required to pay for PMI – Private Mortgage Insurance. This is a fee that can be canceled by the lender, upon request, if you have enough equity so that the mortgage is less than 80% of the property value.
However, if you can’t persuade the lender to drop the mortgage insurance, you might want to consider home refinance. If the new mortgage is for at less than 80% of your home’s new appraised value, you’ll avoid paying PMI by performing the refinance.

There are more reasons to perform home refinance. Cashing out from your equity, or even consolidating different debts are private cases that can be considered also when interest rate have not dropped. In conclusion, we must determine if the refinance is right: is it worth the closing costs and can we break even soon enough? These are private questions to private matters and should not be considered light headed before going on with the home refinance process.

June 27, 2010 · admin · No Comments
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When should I consider Home Refinancing?

Deciding upon home refinance can be, but is not always, the financial right decision. While refinancing can reduce the overall debt and lower our monthly payment – it is not always the case. By assessing the costs for the new mortgage or home loan, AKA closing costs or settlement costs, and taking under consideration our running mortgage costs along with the break-even period, we may discover whether the refinancing will save us a buck or not.

This article will not talk about assessing and comparing costs, but on the overall conditions and goals that shouldn’t be overlooked before going into the small details of the home refinance process.

What is our goal?

Before going into a refinancing process, we must examine our goals as loaners. Are we refinancing just “for the sake of it” or do we have actual targets, financial ones, we want to achieve through the home refinance process.

Reducing the interest rate and thus the monthly payment is the most common goal of home. But some loaners also appreciate the ability to extend the loan into additional 30 years, thus reducing the monthly payment even when the interest rate is not dramatically lower than when they originally took the loan.

Debt consolidation is another goal of home refinancing. If you have both a first mortgage and a home loan, combining the two into one fixed-rate mortgage can reduce the stress and payments from multiple debts.

Switching between different mortgages types is also a reason to perform home refinance. Wjether you have an ARM (Adjustable Rate Mortgage), a Fixed rate or an Hybrid, changing the course of payment can be suiting to what you try to achieve. The ARM rates are normally lower, but can fluctuate.
Read more about different mortgage types.

According to the Commonwealth of Massachusetts Refinancing is worthwhile on the following conditions:

  • In order to lower the interest rate on the running mortgage, thus reducing your monthly payments and overall cost;
  • To reduce the length of the running loan, thus saving money on overall interest payments.
  • To perform debt consolidating.

Refinancing is just like taking a new mortgage. It requires an application, credit score checkup, new survey and title search, plus paying appraisal and inspection fees.

Asking yourself a few questions may help you determine if you can save money:

  • How much can I lower my monthly payment through home refinance?
  • How long do I plan to stay in the property after I refinance?
  • What are the refinancing costs?

The state also offers us their Mortgage Refinancing Worksheet as a guide to help the loaner through this process. PDF Refinancing worksheet.

June 26, 2010 · admin · No Comments
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