Mortgage Refinance: Tips to Reduce Monthly House Payments
Mortgage refinance grants homeowners the chance to reduce monthly house payments or receive cash back from accrued equity.Before refinancing home mortgages is it essential to understand how the process works and shop around for the best deal.
Prior to shopping mortgage refinance loans, homeowners should take time to examine their current mortgage note. Read the fine print for a prepayment clause. Most home mortgages include a penalty for paying loans off early. Borrowers with two or more mortgages could encounter stiff penalties; negating savings obtained through refinancing.
FHA and VA loans and mortgage loans obtained through federally chartered credit unions are exempt from prepayment penalties. Borrowers should determine if they are eligible for Federal Housing Authority or Veterans Administration loans and seek out credit unions when refinancing mortgages.
Review loan documents to determine the rate of interest applied to the note. Financial experts state mortgage refinance should occur only when interest rates are reduced by 2-percent or more.
Mortgage refinancing requires homeowners to apply for a new loan to pay off original loans. Borrowers holding two or more mortgages can combine them into the new loan if they meet lending criteria.
Homeowners must undergo the standard credit approval process when refinancing mortgages. The process begins by submitting an application. Loan application fees range from to 0. When applying for mortgage refinance through your current lender, application fees might be waived.
In addition to prepayment penalties, new home mortgage loans incur closing costs. Settlement costs generally range between 3- and 6-percent of the outstanding principal and interest of the original mortgage notes. If a homeowner owes 0,000 on his existing mortgage, closing costs could range between 00 and 00.
Obtaining a lower interest rate reduces monthly payments and saves borrowers thousands of dollars over the long run. Closing cost fees can be recovered over time, but can be challenging to pay when originating a new mortgage note.
Some lenders offer no-cost mortgage refinance. This is somewhat misleading because there are costs involved. Instead of paying out-of-pocket at closing, banks include the costs in the loan. Borrowers pay interest on settlement costs for the duration of the loan. Unless absolutely necessary, borrowers should avoid no-cost loans.
Refinanced mortgages extend the term of the loan. If homeowners have 20 years remaining on their current note and refinance into a 30-year loan, they are adding an additional 10 years of interest. This can amount to several thousand dollars, so careful consideration should be given to the actual costs of refinancing.
Take time to become educated about the pros and cons of mortgage refinance. The Internet provides a wealth of information and provides the opportunity to thoroughly shop around for the best home mortgage. It is recommended to stick with government agencies to obtain accurate information and seek out financially-sound lending institutions.
The Federal Reserve Board provides a comprehensive consumer guide to mortgage refinancing at FederalReserve.gov. Visitors can download complimentary refinancing and loan comparison worksheets, locate mortgage lenders, and determine if they meet eligibility requirements.
Another credible source for mortgage refinance information is the U.S. Department of Housing and Urban Development. HUD’s website at hud.gov provides a wealth of mortgage refinance information, along with worksheets, funding resources, government programs and complimentary housing counseling.
Homeowners with FHA loans can apply for mortgage refinance through the Streamline Refinancing program. Streamline allows borrowers in good standing to bypass credit checks and income verification. This program is only intended for reducing mortgage payments and prohibits borrowers from obtaining cash from accrued equity.
Real estate investor, Simon Volkov, specializes in assisting homeowners at financial risk. His expertise includes helping borrowers facing foreclosure and those who need to sell property fast. Simon is recognized as a leader in California real estate. He offers a comprehensive article library covering mortgage refinance, personal money management, real estate investing and more at www.SimonVolkov.com.
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