Refinance Home Mortgage – What You Must know
Posted on May 9, 2009 in the Mortgages category
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Today’s recession that many Americans are suffering through, has several homeowners pondering whether they need to refinance the mortgages they currently have. A large number of homeowners now hold adjustable or variable rate mortgage loans, that at one time were quite affordable to them, and did not require them to make a substantial down payment if any at all. But over time the interest rates received enough adjustments to make them quite high now, this has homeowners flocking to get their mortgages refinanced.
The problem arises when the homeowner no longer has good credit and is trying to refinance to lower their debt, many lenders today won’t work with them. This is actually part of our problem now is that too many people got loans that could not really afford them. Too large a number of lenders at one time, did grant loans to many individuals who could not at that time afford the payments.
On the other hand, mortgage rates have never been lower. That is indeed good news for individuals with good credit who are seeking to refinance mortgage loans. It is actually a golden opportunity to refinance student loans, to refinance debt consolidation loans, to refinance business loans, to refinance any kind of loan.
But getting back to the subject of mortgage loans, it is important for the homeowner to decide how long they plan on remaining in their current home before going ahead with a refinancing. Although many factors play into the decision, the rule of thumb states that if you plan on staying in your home for less than 10 years then it probably isn’t worth refinancing your mortgage.
This is due to the fact that the fees from the attorney and the appraisal will negate much of your financial benefits of you having the interest rate lowered. But if you are going to be in your house for more than 10 years then it is an excellent idea to do a refinance of your mortgage.
There are two basic types of these mortgage loans, one is the fixed rate loan and one is the adjustable rate loan, which can be also known as the variable rate loan. The adjustable rate loans causes the interest rate to be raised periodically. These are a bargain in their early years but can blow up in one’s face as the years go by, and the interest rates get too much to handle.
Now with the fixed rate loans, this is where the interest rate stays the same for the duration of the loan. They are also made for either a 15 year period of time or a 30 year period, and the rates are locked for those years. The fixed rates are not as risky as the adjustable rates are, due to not being negatively impacted on due to the various market conditions.
The homeowners can always choose to lock the rate in of an adjustable and turn it into a fixed rate. The opposite can also be done, but is not the most common choice. It is not advisable usually to take a fixed rate and change to an adjustable rate unless you have an old high rate on your fixed rate.
It is strongly suggested that for anyone that is considering refinancing their mortgage that they get a hold of one of the refinance mortgage calculators that are readily available on Internet. A refinance mortgage calculator allows the homeowner to punch in various payment scenarios derived from the length of the mortgage and interest rates charged to see if it makes sense financially to refinance their loan.
Mortgage experts are not in short supply, and they are anxious to answer whatever queries you may have about refinancing. But be very careful not to let them talk you into something too quickly, they do work on commission, so they may try to push you in one direction or another. You probably do understand that refinancing your mortgage can have a long time affect on your financial well-being, so be sure to make the correct decision.
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