Home mortgage refinance loans are loans that are obtained by exchanging the existing loan for another. This is ideal when the interest rates on current mortgages are lower. Home mortgage refinance loans are an effective way to decrease the debt on existing home mortgages. They are ideal if the rate on the previous mortgage is higher than the rate on the refinanced mortgage. Refinancing when the interest rates are lower would help to decrease any kind of debt burden, whether it is a credit card debt or a debt on the same house. It is the best way to convert from a high-interest loan to a low-interest loan. With increasing real estate prices, home mortgage loans and home refinance mortgage loans are being increasingly considered by professionals as well as people who have been planning to buy a house.There are several advantages from refinancing: it can lower monthly payments; it can convert an adjustable-rate mortgage into a fixed-rate mortgage or a long-term mortgage in to a short-term mortgage; it can help to consolidate the debt; and it can generate some extra cash, which can be used for home improvement that can increase the value of the home.There are certain aspects to be considered about refinancing home mortgages: the price of the home may actually come down, instead of going up, thus making repayment difficult; there could be additional costs of refinancing; you may have to move out of the house sooner than expected, etc. Refinance costs include application costs, appraisal costs and legal fees. But with increasing competition, most lenders are offering low-cost and no-cost refinance options for home mortgages. However, the waiver of these costs may mean accepting a slightly higher rate.The best source for knowing about home mortgage refinance is the Internet. Most mortgage loan companies provide information through their websites, also. These sites are updated daily with the latest mortgage rates. Their sites also have easy-to-use home refinance mortgage calculators that give all information, including payments to be made each month and the tax advantages, with the single click of a button. Most of them also have financial advisors who would provide advice online, or over the phone.
With refinance home mortgage rates super low right now, you are probably thinking you should take advantage of it. You already researched everything you could research on your own. So you know that your home’s value is enough to cover the whole loan in a refinancing transaction. Your credit score is over 700, which is excellent. And your income to debt ratio is very good. You make more than enough for even several house payments. Ok, so maybe that’s not the case, but that does not mean you will not quality. Working with a good loan officer, you will be able to find a solution that will let you lock in an excellent interest rate. So, as you are going through the paperwork, the topic of discount points comes up. Should you take the discount point?The answer all depends on what you are planning on doing in the future. Are you planning on selling within 5 years? Or are you planning to stay for the long term?If you are going to sell, you have to consider the real estate market. Will you be able to realistically sell and make enough money to have made it worthwhile? Right now, it is unlikely that a house will appreciate enough to make it worthwhile. You have to consider that you will be paying the realtors’ commissions which will amount to 6%. Then you may have to pay taxes and insurance so that you will have a buyer. This all adds up and if your house has not appreciated by at least 10%, then you would be losing money and thousands at that. But if you are confident that you will be able to sell, then it would be wiser to not take a discount point as it will only add to your cost. If anything, you might want to take a slightly higher rate just so you get the rebate upfront. If do some calculations, you can figure if the upfront savings will be more than what you would pay on the interest and when the break-even point is. This will let you know the deadline by which you would need to sell before you starting losing money.If you are not going to sell your property, then of course, taking the discount point is the wisest course. You will be locking in at one of the terrific refinance home mortgage rates available right now. In the long term, you will end up saving a lot in interest payments. It really is amazing how much you really do end up paying.
The cost of your home mortgage refinance package is typically made up of a number of components and the decisions made regarding these factors will affect the cost of the loan both at closing time and during the lifetime of the loan. The final cost of any loan is driven by the home mortgage rates, either fixed or adjusted over the course of time, by the closing costs as well as loan fees applied to the loan and by the length of time before the loan is paid off in full. Each of these factors can have a significant impact on the amount you pay for the use of the money to purchase your home.Fixed or Adjustable?A fixed rate for your home mortgage refinance means that the interest rate is set at the time of the loan closing and doesn’t vary due to rising or falling market conditions, economic aspects or other factors which are out of your control. An adjustable rate mortgage (ARM) on the other hand can change, particularly in instances where the interest rates are rising steadily or even drastically during a relatively short period of time. However, the ARM does have the advantage of costing less during the initial payment periods which can range from six months to two years.Closing costsClosing costs accrued during a home mortgage refinance can be displayed in a higher or lower interest rate and can be added to the principal to be repaid on the loan or can be required to be paid in cash at closing. Typical costs that are associated with closing are prepaid interest points, loan document fees, loan origination fees, title search, property inspection and property appraisals. Whether these are paid directly, or are rolled into the cost of the loan, they must be paid and must be considered as a cost of money.Option ARMAn option ARM is a fairly new type of refinancing on the market and is more common with new home loans than with refinances. Choosing this type of mortgage loan, means that you are beginning the loan with payments that are less than the necessary cost to cover the home mortgage rates interest and principal costs. The difference between the payment amount and the total cost of the monthly payment is simply added to the principal balance and interest is charged against the revised amount. For a person with a flexible income this can be a great choice, but it requires self discipline to make additional payments when the income level is higher.Loan termAnother component that is important in determining the final cost for the home mortgage refinance is that of the loan term. This is effectively the length of time before the mortgage is complete paid off. Obviously, the longer it takes to pay off the principal, the more interest will be charged and vice versa. At the same time, a longer loan term means that the payments on a monthly basis will be lower because a smaller proportion is going toward the principal.
Home mortgage rates are still at record lows this year, according to Freddie Mac or the Federal Home Loan Mortgage Corporation. For a 30-year mortgage this year, the rate is 4.5% which is down from last year’s 5.2%. This year’s rate is even lower from that of two years ago, which was at 6.5%. What these all mean is that home refinance rates are at an all time low too, this year. If you’re thinking of refinancing your home mortgage, there’s no better time than now and take advantage of this year’s rates, but only if you have the right reason why you want to refinance your mortgage.One of the reasons, and the usual reason, why homeowners refinance their home mortgage is to take advantage of the low rates. You can lower your monthly amortization with a lower interest rate, of course. You can save up to $7,560 over ten years if you reduce your interest rate from 6% to 5.5% of a $200,000 30-year fixed rate loan. You can also change from an adjustable-rate mortgage to a fixed rate if you think the home refinance rates will rise in the future. Conversely, you can change from a fixed rate to an adjustable-mortgage rate if you think the rates will continue to decrease.The other reasons why some homeowner resort to home refinancing, aside from the low home refinance rates, was to adjust the length of the mortgage. You can either shorten or lengthen the term of your mortgage. If you want to finish paying your mortgage faster, or to build your home equity faster, you may want to shorten the length of your mortgage. Shorter term refinancing usually have lower rates also, so although you will have a higher monthly payment because of the shorter term, in the long run, you will save money because you’re paying less rate.If you have been paying your home mortgage for a long time now, it may not be a good idea to refinance your mortgage even though there is a much lower home refinance rates. This is because the longer you’re paying your mortgage, your payments are going towards paying the principal loan. If you resort to refinancing, you will restart the process again and you’ll be again paying for the interests. There are some mortgage loans that will charge you a large fee if you pay your loan early, known as pre-payment penalty. It may also cover refinancing, so it is best to ask your lender first.Aside from the pre-payment penalty, you should also remember the whenever you refinance, you will be paying fees that can add up to thousands of dollars. You may have to pay refinancing fees that totals up to 3% to 6% of your outstanding principal. Refinancing fees differ from States to States and lenders also have their own fees that differ from that of other lenders. Even if the home refinance rates are low and you’re tempted to refinance your home mortgage, it is best to consider these costs and compare it with the amount of money you will be able to save.