7 Tips to Refinance a Mortgage Loan to Make It Affordable
By Jessica N. Bennet

The mortgage rates are quite low in present times. It is about 4.8% on a 30-year FRM (in March 2011). So, this is the ideal time to refinance your existing home loan if you’re making monthly payments on a comparatively higher interest rate. However, you should consider certain factors while refinancing your existing mortgage loan with a new one.

Tips to follow while refinancing mortgage

Here are some tips that you can follow while refinancing your existing home loan in 2011. These tips may help you save hundreds or even thousands of dollars on the refinance loan you obtain.

1. Decide whether or not to refinance – Before starting to shop for the best rates, it is quite important to decide whether or not refinancing is right for you. To do this, ask yourself why you want to refinance. It may be due to the fact that your credit score has improved over time and you want to reduce your interest rate by taking advantage of the current low market rate. You can lock-in the current low interest rate by converting your ARM (Adjustable Rate Mortgage) to an FRM (Fixed Rate Mortgage).

2. Shop around for best rates – While shopping for mortgage loans, make sure you consider the whole package. One lender may offer you a low rate but he may require a balloon payment after every 6 months or 1 year. Another lender may charge a closing cost that’s quite high. So, you should understand the entire package to decide which loan is right for you.

3. Get pre-approved by several lenders – It is advisable that you get pre-approved by several lenders while shopping for home mortgage refinance loans. However, be careful that the lenders don’t pull your credit reports as otherwise it may hurt your credit record thus reducing your score to some extent. Only authorize those companies/lenders to pull your credit reports who offer the best mortgage refinance rates.

4. Consider interest rates and closing costs – The closing costs that you have to pay should be an important deciding factor along with considering the interest rates offered on the refinance loans. It may happen that a company is offering you a refinance loan at a comparatively lower interest rate but charging hefty fees for it. One of the best ways to decide is finding out whether or not your savings through refinance can offset the closing costs within the time period you plan to reside in the property.

5. Check pre-payment penalties on existing mortgage – You should check whether or not there are pre-payment penalties on your existing mortgage loan. If there’s such a penalty, then you should have enough funds to cover it. Usually, lenders charge a pre-payment penalty that’s equivalent to about 6 months’ interest payment on your existing mortgage loan.

6. Read the fine print carefully – Often borrowers make a mistake by not reading the fine print carefully before taking out a refinance loan. It is needless to mention that you should get everything (each and every refinancing terms and conditions) in writing. It includes interest rates, closing costs, pre-payment and other types of penalties associated with the refinance loan.

7. Take out an affordable loan – Do not take out a loan that you cannot afford. It is advisable to not go for cash-out refinancing if you haven’t yet decided how to spend the amount or you don’t have a solid reason to tap your home equity.

One last tip – you should check your credit score before shopping for mortgage loans and if required, raise it to get favorable terms and conditions on your home mortgage refinance loans. In the present scenario, lenders may offer you the best rate on a conventional mortgage loan if your credit score is 700 or more.

Jessica Bennet with her vast experience in the mortgage industry has been associated with the MortgageFit Community as a Mentor. Not only does she participate in the community forums to give her suggestions, but also makes her contributions through different articles on mortgage.

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When you are looking for a bank to work with you on a mortgage, don’t forget to look online. When looking online for a bank, you have more options available to you. There are many things you need to consider when looking for a bank. You will want to find a bank that is willing to work with you.

If you have talked to the banks in your area and do not like what you have found out, try looking on the Internet. When looking online, you may find a bank that has exactly what you are looking for. Just because the bank is not in your town does not mean you can’t work with them. This gives you more options when you are looking for a bank because you are not limited to the banks in your area.

When you are looking online for a mortgage company, you will need to fill out an application just like at a local bank. The difference is that online applications usually get submitted to more than one company. This allows you to compare banks with only one application.

Online banks may also have more options available to you. Sometimes these banks can offer you different kinds of loans than you can find at your local bank. Some banks can offer you interest only payments. Online banks may also be willing to loan you more money. No down payments, or low down payments, or no closing costs may be something else that is available to you.

The time it takes to get the information to each other is cut down since you can use the Internet. This usually helps cut down on the time it takes to get approved and close on your house. Who wouldn’t want to move into their new found house as soon as possible?

Online banks may also be able to give you a better interest rate too. Make sure you know what kind of interest rate you will be getting though. Working with online banks that offer you more options makes some people leery of their interest rates. They wonder how a bank can offer you all these great things without a higher interest rate. Just make sure you know what kind of rate you will be getting.

Another thing that makes some people leery about working with online banks is the sharing of information. When working with online banks you have to give all your information to the bank on the Internet, which makes some people nervous.

When looking for a bank make sure you check out all your options. You may find the perfect loan for you if you look online.

Gregg Hall
http://www.articlesbase.com/mortgage-articles/dont-neglect-shopping-online-for-a-mortgage-it-could-save-you-tons-57663.html

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I want to know how banks set the interest rates for mortgages. All I know is that they move up and down with the fed funds rate and discount rate (Correct me if I am wrong). Does anyone know all factors that play into the rates that lenders come with? Is there a way to calculate or give more or less weight to any one of them? Thank you.

That is not to say that when the fed lowers rates the mortgage rates don’t tend to fall slightly but not in unison.

The question i think you want to know is why the rate quotes differ so much does. The fact is all mortgage professionals are finding rates from the same pond so to speak.
lenders and brokers have rate sheets it shows the rates that would be available to you what most people don’t know….simply put it shows the rate with the borrower paying no points to get a lower rate and then the other which is it shows the lender or broker your rate that would pay him a yield spread! 1/2% of loan amount to as much as 3% of your loan amount

And in some cases the borrower has no idea of this! Or it is explained away when you see a high APR by saying the reason is because of the closing costs. Closing costs do move the apr higher but considering the apr is factored over the life of the loan 30 years or whatever your term is.

The term is yield spread or back end money. most brokers and lenders even banks split the amount they want to make between the lender fee and yield spread so if a lender wants to make 3% then they show half in the front of 1 1/2 % lender fee.
Borrowers should always focus on the rate. It is unfortunate that so many brokers use the raising of rates to make more money and that doing this can cost the borrowers tens if not hundreds of thousands of dollars in added interest.

The simple fact is you need to use a loan comparison calculator to show the differences in loan offers. 1/2 % higher rate on a 30 yr fixed with a 250k home loan is 48,750 in additional interest!
Remember that the majority of the first 10 years of mortgage payments go toward the interest you owe!

HERE IS A CALCULATOR TO SEETHE BIG PICTURE

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I am not a rich person but I need a home for my wife and two girls. The price range is between 100,000 and 120,000 if that is needed. I have zero money to put down, but I might be able to dig up about a thousand dollars or so. Any help would me much appriciated. Thanks Alot!
By the way my approx. credit score is 710

if you have a 620 you can look at mycommunity….it’s zero down….otherwise you can use the FHA with 2.25% down payment.

make sure to get the seller to pay for the closing costs!!!

*710 is good but it will not change your rate on the government programs

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http://realestatemarketingthisweek.com/real-estate/the-old-rules-of-real-estate-financing-no-longer-apply-and-suze-ormond-should-know-that/ – The old rules no longer apply and Suze Ormond should know that. –

Part 7 – We have Dan Havey the author of Real Estates Future in the studio today.

Michael, I was just curious, back when I got into the industry many, many years ago there used to be a rule of thumb that if you were going to refinance you had to lower your interest rate by at least two percent and I know as time went along and products changed that really became unnecessary, but I am just curious in todays mortgage market its a lot different than we were dealing with even two years ago. Is that still true that there is a 2% rule? Whats going on now?

I happened to catch Suze Orman on television and she was talking about mortgages, the caller who called in to the program, the question became I believe similar to what Dan just asked, her comment was that basically if you’re in 6% interest rate or above now is the time to re-fi. That is what she said, a blanket recommendation. I know a lot of people put a lot of credence into what she says, maybe you could speak to that, the lowest interest rates you’ve seen in your career, you have been doing this for a while.

I have, and they are. You know there was a lot of speak the last couple weeks about the Fed, the Fed funds rate by the way is the lowest it’s ever been in history. As of this week the discount rate is to the point that banks are lending money to each other at nothing, the Fed funds rate for intrabank lending is at zero, the problem is the banks don’t have any money.

To be serious about the refinancing, because its a serious topic, I think people are starting to see their mail boxes filled with lots of advertising crap about refinance. I believe that doing the refinance is no different from doing a loan modification or buying a house, you need to sit down with the human being that’s local, that you can know is a legitimate source. You’re going to give all this personal information about you, your family, your kids, your Social Security number, you want to make sure you have somebody there that you know whos legit.

In regard to the old rule of thumb 2%, nothing could be further from the truth, and I will expand, but to the point of Ms Ormond that if youre at 6% or higher, that is a blanket statement and blanket statements never work. We just did a refinance for a guy who was at 5 1/2%, and it makes sense. Every situation is different, as far as how much do I have to lower my interest rate to make it work? It depends on the type of mortgage that you get.

The only type of loan to get today in December of 2008 is a 30 year fixed. I know that one of the things that was really interesting to me, and that you and I have referred clients to one another for several years, so we share a number of clients, were familiar with those families and those households, and this is Wednesday, on Monday and Tuesday of this week I’ve had seven phone calls from clients who you’ve already done loans for, refinances for, asking if this is the time to refinance a loan that is only a couple years old.

And I know in several of those cases the answer is yes you’re actually helping families right now with that process. I am and we do. To answer the question, you need to determine what the payback term is, in other words when your refinance is done it’s a new loan, there’s the title insurance, appraisals, lots of different things may need to be done, not in every case, but in most cases there are costs associated with that. The cost has to be offset by the amount of savings. Its a breakeven analysis

Absolutely it is, the shorter the breakeven the better the loan. I am working on a case right now which is going to be done in the next couple of days where the guy lowered his interest rate by an1/8 of a percent and it made sense for him. It’s not for everybody, 2 percent or lower, 2% is significant, now you’re talking about really significant savings in terms of cash flow… http://realestatemarketingthisweek.com

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We own 10 investments properties and have 10 mortgages (with Bank of America) on each one. The bank is saying that they can do only 10 mortgages per person. How or where can we go over that limit, with reasonable rates and closing cost.
Thanks for looking.

You can still find a few conforming lenders willing to exceed the 10 property max. It’s only going to be lenders willing to hold onto the mortgages as opposed to sell them to Fannie Mae so they’re few and far between. You have really 3 options.
1. Look into purchasing in the name of an LLC or escorp or some such. Obviously this would be a commercial deal and they’d start looking at things like DCSR of the property so it may not be the way to go.
2. Look around and find a reputable mortgage broker who does this type of business. Ask them upfront if they have lenders that deal with more than 10 mortgages and compare a few offers.
3. Look into restructuring the mortgages. Depending on your equity situation you may be able to use some of the properties to pay off some of the other mortgage in full. This is typically the most expensive option as every mortgage you refinance to juggle equity has closing costs.
It can be done, for this type of loan I’d suggest looking at brokers as they tend to have more programs than any single bank. Even a big bank like BOA only offers a fraction of mortgage products available.

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Click here for Part 2: http://www.youtube.com/watch?v=jTXPzr_2BxQ

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-Application Process
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-Closing costs

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