Why would you refinance your home?

If you would read this a few years ago, chances are that you might not even know what refinancing meant. People would purchase a house, get a mortgage for paying and then keep on making payments every month until they were debt free.

Things are worked out differently nowadays. Most people refinance their loans eventually. Most often, people exchange their loan for some other may be better loan. However, this makes the loan extend for more number of years.

There are several reasons as to why you or anybody would want to refinance their homes and they are valid too. Following are some of the reasons that might make you refinance your home.

Getting a fixed rate of interest

A few years ago, the market saw historic dropping of interest rates. They were lower than ever. As a result, several homeowners decided to go for loans with adjustable rates. These offered them the benefit of lower rates of interest rather than being stuck with a fixed rate. This way they could pay less and be able to purchase more ownership. However, with the current trend of increasing rates, homeowners are finding fixed rate loans much more secure. This is one of the reasons that people might want to convert to fixed rate mortgages.

Looking for a lower rate of interest

This will be the reason when interest rates are dropping like ripe apples. Often people will exchange any high interest loans for the new low interest ones. It is the sensible thing to do anyway. Lower interest also means lower payments every month.

Looking for a longer term

Sometimes, people fail to do the planning. As a result, while a 12-year loan might seem better than a 20-year one because you become debt free in less number of years, you will have to pay bigger instalments every month. This might not be affordable. However, you realise that after you have taken the loan. Therefore, you might then think about refinancing to a longer-term loan so that you can have lower monthly payments.

Looking to borrow money

The previous five years have seen “cash out” refinancing becoming more and more popular. When the homeowners are satisfied that they have enough equity in their house, they look to cash it out in order to get some money to remodel, pay out other debts and for many more reasons.

All these reasons seem quite reasonable and logical to refinance to any homeowner. However, they should realise one thing that with refinancing comes the closing costs and these can be in thousands. If you are considering to refinance your mortgage, you should first think about the amount of time you are thinking of staying in that home. You should not do it unless you are going to stay more than five or six years.

Continue Reading

The basics of forward mortgage

The prices of houses are shooting up high. This is good news for the homeowners and bad news for any future homeowner or a homebuyer. Things have become more and more difficult for them owing to the huge payments that are to be made as down payment as well as the closing costs involved. It is hard to imagine the state we would be in if no mortgage was available.

The traditional mortgage or forward mortgage causes you to be under debt as per the amount that you borrow from the lender. It will also affect the per cent of your ownership or the equity that you have in that house that you have bought.

Any cash advances made in order for your benefit will also be included in the debt. Now, home equity is the value of the house minus the amount in debt that you owe to the lender. For example, if the value of your house is $125,000 and if you owe a mortgage of $25,000 then the equity for your house would be $100,000. Now, this will be falling debt and rising equity.

When you first bought your house, you made a certain down payment. The rest of the value of your house was paid through the mortgage that you took. You have to keep making specific payments every month for a specific number of years in order to repay that mortgage.

As a result, with the passing years, your debt due to mortgage will keep on decreasing while the equity on your home keeps on increasing.

You can use your income to repay your debt using forward mortgage. With time, this is increasing your equity or share of ownership for your home. In order to obtain such a forward mortgage, you will first need to be eligible and pass their qualification standards.

You might have to show the proof of your income, any requirement of assets to show that you can afford these payments every month. The amount that you can secure for a mortgage also depends upon your age. The younger you are, the more you can mortgage.

Forward mortgage is all about paying for your house step by step, one monthly instalment at a time. Within the specified years, you will become debt free and the house will become all yours.

Therefore, as time passes, while your debt will be decreasing, you will be coming closer and closer to owning your house fully. Thus, rising equity, falling debt is the name of the game in forward mortgage.

Continue Reading

Refinancing your mortgage

When it comes to refinancing your mortgage, it is more than simply considering the interest rates. It is not all about seeking out the lowest rate of interest. In fact, many times, the mortgage terms are reason enough to seek mortgage refinance.

While there are several reasons that might lead you to refinance your mortgage, changing from an adjustable rate to a fixed-rate loan is the most common of all. There is a single difference between these two loans.

An adjustable or variable interest loan is just what the name says. Every month you will have a different payment to make. The amount is designated or decided by certain lenders depending upon the current prime rate of interest. There are some obvious negative aspects of this kind of a loan.

The most inconvenient of all is that the borrower will never know how much exactly they will be paying this month. While payments do not fluctuate a lot, there is always a little variation.

If you happen to miss any payment for whatever reason, you will end up paying ridiculously high interest for the missed payment or late fees. This is true even if you missed it because of an oversight owing to the fact that you were not aware of how much you had actually to pay.

Therefore, stability is one of the prime reasons that people seek to refinance their mortgage.

Now you would say that if people want stability then why go for adjustable or variable interest loans in the first place. The reason is that some years back, the market saw great fluctuations in interest rates.

While rates are quite steady at present, it is always possible that they will go up at any time. That is a reason for seeking mortgage refinance. Even if the rates of interest shoot up, you are at least secure in the knowledge that your loan is secure in a certain specified rate.

On the other hand, if the rates were to drop significantly, you would be stuck paying a high interest when others were paying a lower one. Therefore, it is all up to you to decide if you want to take the risk.

At times, the situation of the borrower does not allow them to go for a fixed-rate loan. However, you can better your position by regularly paying for your present loan. This might allow you to qualify for a loan that offers better terms.

In fact, if you have been “good” and made your payments in time and the lender is convinced that you are completely willing to satisfy the terms and conditions of the better loan then they might offer you that. in this case, mortgage refinance might be a better option.

Continue Reading

More about second mortgages

If you are a homeowner then your house is probably the biggest asset that you have. You realise this no better than when you go out looking to find someone who will offer you a loan.

That is the reason the recent few years have seen people use their homes as a means to get some extra cash at times of dire need. A great way to get your hands on some cash through your house is by getting a second mortgage.

Now, there is nothing difficult or un-understandable about second mortgages. They are what the name says they are. It is a loan that you take in addition to the existing mortgage. The amount of the loan will depend upon your share or equity in your house.

People take second mortgages for a number of reasons. They do it to refurbish their homes, do some home improvement, pay off debts, pay for education and many others. Because this is your second mortgage, it is a given that you have done this before.

However, things are much simpler the second time comparatively. Besides that, the costs of transactions are also significantly lower. However, the rates of interest will be higher on this second one.

A second mortgage will usually lend you a certain fixed amount of money depending upon the home equity you own and you will have to repay the amount over a certain period. If you are taking your mortgage from the same lender as your first then they will combine both your mortgages.

While it sounds quite simple, you do need to remember some things. First, if you do not own a significant share of your house yet, then it is not the right move to take a second mortgage on your house. You should have made payments for the first mortgage for quite some time before you can think about getting a second one.

While you might be able to get yourself second mortgage, you will be charged enormous rates of interest if you do not hold much equity. Besides that, your loan amount will be quite low. In all, it will be more of a waste or loss of money and time. It is better and more worth waiting before you get a second mortgage.

Therefore, you should always keep looking for other options in case you cannot get a decent amount at good enough interest rates against your home equity. Alternatively, you can look at options such as home equity loans as well as home equity lines of credit. Both of these are options where you can borrow against the home equity.

You can decide which one to choose.

Continue Reading

Buying a house for the first time? Look out for cash grants

How often we dream of somebody coming and offering us thousands in cash for free! Well, that is a dream that never converts into reality for most people. Nevertheless, if you are a first time buyer for a house, then things might be different for you. In fact, there are some genuine sources who actually want to give free money in thousands to you.

These genuinely kind people are the federal and state agencies and they offer you a lot of free money in the form of cash grants that will help you purchase your very first home. One of the biggest hindrances or obstacles that first time buyers such as yourself face, is paying the down payments as well as the closing costs. Yes, you can save for it, but that is again a whole other battle that you have to conquer.

Several find this battle to be an impossible one and if you consider the facts, it is true. After you get over with paying your rent, food, utility bills, insurance, gas, car payments, phone bills, clothing and the list goes on, you are left with little to nothing to put aside as a saving.

Now, the state as well as the federal governments are kind enough to recognise and consider this situation. Therefore, they have come up with special programs that have a single purpose of giving money to people who are in need when buying their first house. You might think that no sooner the agencies receive these funds than they give them away completely within a matter of days or even hours. After all, who would not line up for such a free giveaway? Nevertheless, this is not the scenario at all.

Every year, most of the state agencies are not able to exhaust their entire funding. Now, this is great news for any first-time buyer that there is money and it is available to you now.

These programs do not get a lot of advertisement and hence, not many people know about them. That is the reason that the agencies do not fall short of funding. You can learn more about these grants by purchasing this information, contacting your respective state representative or by going online, as you are doing now.

Take action today because thousands of dollars are awaiting you in cash grants. After all, you can use all the help you can for buying your first house.

Continue Reading

How to select the right mortgage lender?

Enter mortgage into any search engine and you will find scores of sites offering you mortgage. On the other hand, enter any bank or financial institution and say that you want a mortgage then you will most likely be hurried into some private office for a meeting with the mortgage advisor or be showered with several leaflets.

However, the point is not finding somebody who will give you a mortgage but it is about finding the right one. Mortgages mean big business. Hence, every financial institution has several different loans for buying any property on offer.  Therefore, you need to shop around before deciding, check out a number of lenders and then make your decision. Comparing can save you quite some money.

The best place to start with is your bank. If you have been with the same bank for quite a while besides having a good record financially then they will be much more confident to loan you more amount of money as mortgage.

The competition amidst lenders is quite fierce these days with the interest rates dropping. Therefore, it is possible that you might find a better deal somewhere else also. Hence, you do not have to feel compelled to use your bank to get your mortgage.

You can make things easier for yourself by using several websites online that help you out with several comparative tables of mortgage offers. Simply type ‘mortgage’ in the search box and you will see several results. One such site is moneysupermarket.com/mortgages. It is good for comparing.

Then there are several comparison sites online. You can use any of them to your benefit. Another good place to look is the finance section of your newspaper. They carry many advertisements besides any news on the recent offers. However, do not get lured by any adverts that simply promise lower rates while not revealing any other information.

Mortgage is not all about rates. Most often, banks advertise displaying the lowest rate that they offer. However, before you can avail that rate you will have to pass several qualifying criteria. Besides that, you should look out for any hidden charges, or clauses.

Always remember to read the fine print, the terms and conditions before you sign up for any deal. People usually get scammed because they do not pay enough attention. Therefore, be careful when you decide.

Then some of the borrowers can also consider ethical investment. For example, Muslim banks are not allowed to charge or pay interest.

Continue Reading

Do you really want to remortgage?

Remortgaging or refinancing your house is not so uncommon these days and most often, the reasons for doing it also seem to be quite viable too. Refinancing or remortgaging means changing your present mortgage to another one may be even a different provider in order to avail the benefits of better options.

You might want to change your mortgage for a number of reasons, some of them being change of your circumstances, availability of other lower interest loans or better options. All of these and many other reasons seem enough to make a decision to remortgage. However, before you do it, take a look at the following considerations that you need to make.

Consider any charges

Most often, lenders include prepayment penalties in their loan conditions. Therefore, you should first check your loan documents to see if there are such penalties or charges attached to your loan. If they are then you might have to calculate your penalties and the difference in the interest between the two loans. This will help you decide if paying the penalties is a better option.

Consider any fees

Taking out a new mortgage will include fees. You have to do that calculation also. Include the fees of a surveyor for valuation, solicitors’ fees as well as any other extra fees that you might have to pay. Some deals also offer cash so that you can cover any costs or even fee-free deals. You should calculate and decide based upon the difference.

Consider the features

Sometimes, people change loans also because they are more comfortable with the new loan terms compared to their previous one. They might want more flexibility or less flexibility, basically different terms that suit their needs. Therefore, consider all the features along with any extra charges or fees.

Consider the equity of your home

If your house has become more valuable or more expensive over the past years then you might want to remortgage for the simple reason of releasing the equity of your house as cash. Now, there will be some limits as to the amount that you will be able to borrow. That will mainly depend on the property value as well as your income.

If you are retired then there are schemes for equity release for you. You can access cash or get an income regularly based upon the value of your home. In other words, your sell your house to them and yet they give you the right to stay in your house until you live.

Continue Reading