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A successful mortgage |
Securing a home mortgage is one of the largest financial transactions most consumers will ever make. But it doesn't have to be the most expensive. By following a few suggestions, you can make sure that your mortgage fits your budget.
A mortgage loan shopping primer
1. Shop around for lower prices. Variety is the spice of life. It can also save you money. The marketplace overflows with mortgage lenders- credit unions, bankers, mortgage brokers, and mortgage companies are all in the fray. Ask for referrals from trusted friends. Then do some legwork. Get quotes from four or five different lenders to find a trustworthy lender with a competitive price.
2. Keep score with your credit report. Nothing can jack up the interest rate on your loan like a low credit score. Order a copy of your credit report, and scrutinize it to make sure that all your credit information is accurate before shopping around.
3. Paying points may pay off. A point is equal to 1 percent of your total loan amount. Mortgage lenders will let you pay points to "buy down" or lower your interest rate. This upfront money-which you can roll into your loan-can save you money in long-term interest.
4. Adjust the loan option to meet your budget. If you want to keep things affordable, consider a mortgage option other than a 30 or 15-year fixed rate loan. Adjustable-rate mortgages offer low"teaser" rates for a limited time (generally 3-7 years), and adjust upward after the intro period has ended. It might be a good choice if the interest rate on a fixed-rate product makes the monthly payment out of reach. You can always refinance to a 15- or 30-year loan when rates get lower.
These simple tactics can help you find a home mortgage that fits your budget. If your credit report is in good shape, it can make the entire process even easier. By following the above steps, you may save some big money, and the process can be smooth as the peanut butter you spread on your bread. |
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Reasons to refinance
There are many reasons why homeowners decide to refinance their homes and there are many ways they can benefit from refinancing existing mortgages. Because there are often misunderstandings about refinancing, it is important to first explain that refinancing is actually closing out a mortgage and financing your home with a new loan. With this being said, keep in mind that refinancing a home can be a lot of work and could also involve the same cost as when you first took out your mortgage. On the other hand, refinancing can result in significant savings depending on the circumstances and reasons involved. Your decision to refinance or not will ultimately depend on your particular circumstances.
The following are some of the most common reasons why people choose to refinance their homes.
1. Lower Payments. When interest rates fall below your current mortgage interest rates you may want to consider refinancing to lower your payments. Although there are costs involved, if you plan to stay in the home for a long time then the reduced monthly payments will likely offset the costs associated with the refinancing.
2. Reducing the Term of your Loan. Some people decide to refinance their home at a shorter term in order to reduce the overall costs of the loan. For example, if their current loan is for 30 years at a fixed rate of 8.00% and they refinance for 15 years at a 7.00% interest rate the savings could be thousands of dollars over the life of the loan even though the monthly payment amount may not change that much.
3. Converting Equity into Cash. Another reason why some decide to refinance their homes is to convert equity into cash. This cash is often used to do home improvements which will increase the value of the home.
4. To Consolidate debt. A common reason for refinancing is to finance a higher loan balance and use the cash difference to pay off credit cards, auto loans, and other debts.
5. To Convert an Adjustable Rate Mortgage to a Fixed Rate mortgage. When interest rates are low, it might be a good time to convert an adjustable rate mortgage to a more stable fixed rate loan which will likely save the borrower money over time.
Deciding on whether to refinance your current mortgage will depend on many factors including the current interest rates, your reasons for refinancing, how long you plan to stay in the home, your current loan features, and your goals for mortgage refinancing.
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