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Mortgage Refinancing Explained
29/08/10
Lots of homeowners are now deciding to go for a mortgage refinancing to get a lower mortgage rate; shorten their mortgage term; or get extra cash.
When mortgage refinancing you should always shop around and speak to more than one lender. One way to get a better deal which will allow you to pay less each month is to tell the loans officer that you are shopping around for the lowest rate or best deal because you want to reduce your monthly payment. This openness at the start will let them know they need to give you their best offer to get your custom. This should result in you getting a great deal and slash you monthly costs.
Mortgage refinancing does cost money in the short term. It may cost as much as a few thousand dollars. Borrowers should expect to have to pay closing costs. Mortgage refinancing has the result of the existing loan being closed and a new loan being opened. Closing costs are therefore inevitable. Additionally, mortgage refinancing requires the same procure to be followed as was followed when the mortgage was taken out. Borrowers will need to have a good credit score to be able to get a good deal when mortgage refinancing. Therefore, only those who have an accurate idea of their monetary situation and who can afford to spend the necessary amount should consider mortgage refinancing.
A better credit score will mean you are more likely to get a better deal when mortgage refinancing. The key to credit scoring is verification. If information cannot be verified it should be deleted from the file. The great news is, if you do clean up your credit score, you are more likely to get a lower interest rate when you mortgage refinancing, applying for home equity loans or equity credit lines.
Mortgage refinancing loans can be fixed rate or variable rate and can be used for different purposes. Remember if you are just looking to cut your monthly bills then mortgage refinancing is not the only way of doing it; there are other ways.
Homeowners with bad credit may decide not to apply for a mortgage refinance. The majority of people assume that their application for a loan will be turned down due to a bad credit rating. However, many homeowners have succeeded in refinancing their mortgage despite having a low credit rating. In many cases refinancing your mortgage may improve your bad credit rate. The fact that a loan has been accepted is good for your credit score and if you use the loan to pay off debts such as unsecured loans and credit cards then you may recover from bad credit. Refinancing tips and advice can be obtained online.
Watch the video related to mortgage refinancing
www.mortgage–refinance.biz – Mortgage Refinancing Tips – If you’re thinking about getting your mortgage refinanced, here are some quick tips on what you should know before calling the bank.
Help answer the question about mortgage refinancing
Has anybody applied for a mortgage refinancing to consolidate credit cards?And if you had, did the mortgage people had to issue themselves the checks to the credit cards or you did? Thanks.
About Author
Shelley Green -
About the Author:
Shelley Green is the owner of http://www.mortgages-click.com, a site that specializes in Mortgages. Shelley Green is also the owner of Loans Click and Refinance Click.
11 Comments »
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Depends on whether you are trying to help them save money , or wanting to dupe them into bankruptcy.
You would find out from them what they are paying for Interest and show them what benefit a lower interest rate would do for them. I'm talking a fixed interest Rate with no surprises. Plan and simple. no fine print .
Comment by Anonymous — August 29, 2010 @ 5:53 am
thanks mr refiadvisor
Comment by WPMixer — August 29, 2010 @ 6:23 am
so basically they are helping people..
Comment by Wordpress — August 29, 2010 @ 6:30 am
Let me clarify what a "point" is, and what an "orignation fee" is. Both equal 1% of the loan amount. However, "points" are used to buy down the interest rate and are in fact pre-paid interest, which is tax deductible. An "origination fee" is what you are actually referring to in your question. This fee is profit to the lender.
When the lender receives their fee upfront from the consumer, it is an "origination fee". What you refer to as "out the back", is a "yield spread premium" and is paid from the investor to the lender. A higher "yield spread premium" (YSP) to the lender can result in a higher rate to the consumer, but now always.
Here is an example: Say you're shopping for a 30 yr fixed rate mortgage. The broker will shop the loan with several different lenders. If the best priced lender has a rate of 6.00% at par (meaning no YSP and no points), then the broker will charge an origination fee in order to make their profit. But say you want a lower rate of 5.75%, then the broker must see what the lender is charging for that rate. Let's say it costs the lender 1.5% to buy the rate of 5.75%; that 1.5% would be charged to you as "points", and may charge another 1.5% in "origination fee" to make his profit.
But what if you don't want to pay any points or origination fees? That's when the broker will quote you a rate that gives him his desired YSP like maybe 6.5%. (the above examples are for demonstration purposes only – actual rates will vary)
As the previous poster mentioned, the lender's profit is then split between the Loan Officer and the Broker.
Ask your lender to give you various quotes and compare the monthly costs and closing costs to see which scenario makes sense for your individual needs.
Comment by Jes — August 29, 2010 @ 6:38 am
It's never a bad idea to refinance, especially if you're rate is adjusting. But there are hundreds of reasons to refi and thousands of programs.
With a 560 credit score, it might not hurt her to tap some of the equity and payoff old debt or consolidate current debt to improve the credit score. Also, that credit score isn't going to get a much better rate than she's at now, but she can fix it again for another 2 years while she works on the credit.
Don't get in to closing costs too much. Very few fees are hidden. Most people consider "pre paids" as "hidden fees." These aren't hidden fees, they are things that must be paid, such as per diem interest, any escrow reserve, and taxes, if due. The best thing to do is ask the L.O. for a Good Faith Estimate, keep it, then prior to your closing, ask for the HUD Settlement Statment. If it is more than what is disclosed on the GFE, make your loan officer explain why. A good L.O. will never have the HUD be more than GFE. And if it's going to be, a good L.O. will redisclose (revise) the GFE and forward you a copy with explanation.
Lastly, make sure your sister concentrates on improving her credit. You need an L.O. that is good at what they do and can reconcile her credit and recommend steps to take to clean it up.
Good luck and happy hunting!!
Comment by poecilia.r.lvr — August 29, 2010 @ 10:58 am
The "unpaid deferred interest" accumulated as part of your 3 yr ARM. There must've been some provision where the interest was charged but not required to be paid off right away, making your monthly payment more affordable. Now, as you're closing out that loan, the interest needs to be paid off. Guess, if your house had appreciated enough, it would've covered the amount in a refi. But that's not the case here.
So there are three things you could do:
1) Pay the entire amount of interest. That amount paid will then be found on your Form 1098 at the end of the year as paid mortgage interest, which you can deduct from your federal income taxes. I highly doubt you have almost $17k lying around that you can use to pay off the interest now. If you do, though, then it would be best to apply it now.
2) Roll the entire interest owed amount into your new mortgage. That will increase your principal, meaning you'll be paying it down over the life of the loan, but at least you don't have to pay it right now.
3) Pay part of that interest now, and roll over the remaining amount into the principal of the loan. It's a little of 1) and 2). And you'll have to figure out what amount you can afford to pay right now w/o finding yourself in a cashflow bind later on.
Good luck.
Comment by rufbam@sbcglobal.net — August 30, 2010 @ 12:07 pm
You borrow 80k and get a lower rate because rates in general are lower and the amount is lower (80k vs. 100k).
By cashing out, you would increase the size of your loan. for example, from 80k to 150k, and use that 70k like cash.
Comment by marcus s — August 30, 2010 @ 5:15 pm
Comment by Tina Z — August 31, 2010 @ 4:07 am
She should make damn sure someone runs her through the Fannie Mae and Freddie Mac underwriting systems.
With that low of a loan to value, and if she doesn't take any cash out with the refinance, unless she's been late on her mortgage recently, she should be able to get a 30 year fixed rate conventional loan. She can wrap the closing costs into the deal, shouldn't cost more than $3000-3500. If she doesn't get an A rate, she should get an A minus rate, so she could get anywhere from 6.00 to maybe 7.25%, no prepayment penalty, no adjustable rate.
Problem is, most loan officers don't think anyone with a 560 can get a normal approval, when sometimes they can.
Comment by poecilia.r.lvr — August 31, 2010 @ 12:46 pm
Chances are very high that your HELOC has a grace period, so your late payment isn't even a late payment, it just wasn't as early as the rest of your payments.
If there is no grace period, then it will go on your credit as a late payment, it doesn't matter why it was late, and explaining yourself to a teller at the bank won't do any good, but here are 2 pieces of good news.
1. It usually takes weeks or months for things to show up on your credit report. So if you are already in the final stages of refinancing, your new loan will be finalized long before this shows on your credit report.
2. One late payment doesn't really hurt you much. It will hurt a bit, but not much.
Remember, its very likely your HELOC has a grace period so this will never show up as a late payment. Call the bank that holds the HELOC to find out if this is the case.
Comment by Mark — September 1, 2010 @ 7:01 am
The short answer is that a broker searches wholesale lenders to find the best loan program and/or rates for you. A banker and a lender are the same thing, except when you're talking about an actual bank like Bank of America, Wells Fargo, etc. A lender/banker usually has better rates but may have fewer programs. The rates are better, because although they have the same wholesalers, their relationships are different. Lenders have a correspondent relationship, which means they underwrite the loans and sell them on a warehouse line of credit. A typical borrower doesn't know this and usually doesn't care, except that the interest rate is usually lower with a lender. However, you may have slightly higher closing costs because the lender will have to pay interest on the line of credit. Usually the lower interest rate more than cancels out the higher costs. If you want an experienced banker/lender, contact Julie at http://primelendingonline.com
Woof.
Comment by bayleigh789 — September 1, 2010 @ 5:48 pm