Is Refinancing a Good Idea Right Now?

Is Refinancing a Good Idea Right Now?

By Barrett Niehus
http://www.freetrainer.com

Rates on mortgages are lower than they have been in forty years. This provides a huge opportunity for new and existing home owners, but also carries risks that can have a substantial impact your ability to pay in the future. Mortgage lenders are inundated with work, and it was recently reported on national news that if you can breath, you can get a mortgage. This phrase should at the very least frighten the average mortgage customer. It indicates that not only are the mortgage companies finding new ways to make money off of their huge list of clients, but they are also circumventing the risk analysis that avoids putting high risk customers into immediate credit trouble.

The opportunity is immense. For many home owners, monthly mortgage payments can be reduced by ten to fifteen percent through a refinance. For new home owners, they can afford to pay ten to fifteen percent more because of resulting low monthly payments. The benefits are substantial and if addressed properly, the risks can be avoided.

The risk of course is choosing a form of financing with inherent uncertainties and putting your long term financial situation at risk. One of the most popular mortgage products available today are variable (floating) rate mortgages. The mortgage rate varies with the current Treasury rate until it is locked in at a set amount above the future treasury rate three to five years after the date of origination. Many mortgage customers are fond of this type of funding because it allows them to enjoy a very low rate for the next three or five years. Unfortunately, the risk involved with this type of loan is huge, and can have substantial impact on the customers ability to pay.

Given that rates are at a forty year low, it is very probable that interest rates will climb substantially within the next three years. Although most of these variable rate mortgages have interest rate caps where the lock in rate will not exceed twelve percent, the impact of a rate increase during a lock-in period can be substantial. To provide an example, suppose you have a $200,000 variable rate mortgage with a 5.5% interest rate. When you first originate the loan, your monthly payment will be $1,135. If interest rates increase to 12% by the time of your lock in period, your payments will increase to $2055 per month; where they will remain for the life of the mortgage. For many home owners this type of increase will quickly lead to default, eviction, and bankruptcy.

Keep in mind that mortgage lenders are sales people, and mortgage brokers are essentially selling you a product. They make money when they sell you a mortgage. With the current emphasis on low finance rates, they are inundated with business, and are more focused with getting the loan closed than with evaluating your future ability to pay. As sales people, they have been given a number of products to sell, and because of the current frenzy, have been given substantial leeway from the banks. Therefore, they can forgo many of the risk analyses that were necessary during leaner banking times and sell whatever mortgage product is available.

With mortgage brokers trying to fund all of the business that they are given, and with mortgage products that carry high uncertainties, the risk associated with purchasing or refinancing is higher than ever. If refinancing or funding a new mortgage is the best financial decision for your specific situation, be aware of the risks, quantify the benefits, and realize that your mortgage lender has a vested interest in closing the deal.

Refinance Your Second Mortgage

A 2nd mortgage is a secured loan on your property, with your home serving as collateral. Depending on the particular terms of your second mortgage, you could be able to refinance if you wish to reduce your monthly payments or are in need of extra cash. Refinancing a 2nd mortgage can be an option for those who want to pay off their mortgage (excluding any home equity lines of credit), reduce the interest rate they currently pay on their second mortgage, or simply want reduce their monthly payments. Refinancing a 2nd mortgage can also be an option if the homeowner wants to pay off the mortgage, including home equity lines of credit, and receive cash.

You can refinance your second mortgage even if your credit is less than perfect. Second mortgages are an excellent means of reducing monthly payments and getting extra cash for bills, remodeling needs, or any reason the homeowner sees fit. If your interest rate on your 2nd mortgage is substantially above the current interest rates being offered by most lenders, you may be able to refinance your second mortgage. Sub-prime loans are available for second mortgage refinances and even with adverse credit, you may be able to lower the amount of interest you pay on your second mortgage. A poor credit rating is no reason not to explore the possibility of refinancing your 2nd mortgage.

Lenders are standing by to give you a no-obligation quote on refinancing your second mortgage. You can get quotes from several different lenders with one simple application, reducing the number of inquiries on your credit report. Often you can submit your application with no initial credit inquiry at all. Now is the perfect time to think about refinancing your second mortgage. You could be approved in less than twenty-four hours and begin saving money each and every month.

Refinancing your second mortgage is a fast, easy process and with the availability of multiple quotes from one simple application you will be assured you are receiving the lowest rate and best terms possible for your individual situation. If you have poor credit, you may still be able to refinance your 2nd mortgage. Mortgage lenders work with any credit situation and may be able to save you money by refinancing at a much lower interest rate that you currently pay. Get multiple quotes on refinancing your second mortgage from one fast, simple online application. The potential decrease in your interest rate could save you money on your payments each and every month.

Refinancing Your Home Mortgage Loan With Bad Credit

There are numerous reasons a person has bad credit. Late or partial payments, missing payments, and too many outstanding debts could all be factors that have left you with a poor credit rating. If you want to refinance your current mortgage but are afraid a poor credit rating will disqualify you, be aware that there are mortgage lenders that can help you qualify for a loan. Refinancing your home with bad credit is not impossible. Mortgage lenders can help you be approved for a home refinancing loan and will offer you advice on how to improve your credit rating.

Bad credit can result from many other factors besides missing or making late payments. Illness, unexpected expenses, and unemployment can affect your credit rating adversely as well. When you refinance your existing mortgage you may even be able to get cash back to help you pay off your debts and restore your credit rating. Regardless of your credit history, you can be approved for a home refinance loan. You could lower your monthly mortgage payments and have the extra cash you need to pay off high interest debts. Refinancing with bad credit is not only possible; you could be approved quickly when you apply for a refinancing loan online. Online lenders can offer you free quotes and great terms, even with bad credit.

If you have bad credit, contact a lender who specializes in sub prime refinancing loans. The application is fast and easy. You could be approved for a home refinancing loan in just hours and the low rates you'll receive will save you money each month, allowing you to pay off your debts and begin rebuilding your credit. Mortgage lenders can help you with refinancing your home even if your credit history is less than perfect. A mortgage loan is secured by your home, so the risks for the lender are much less than with a non-secured loan. Bad credit will not prevent you from refinancing your mortgage and may even put you on the path to freedom from debt entirely.

Apply to refinance your mortgage today and you could be saving money on your monthly mortgage payments in a very short time. No matter what your credit history, lenders are anxious to approve your loan today. Complete an application now to see the great interest rates and low monthly payments that are available to you.

2nd Mortgage - Better Than Refinancing

You have probably received refinancing offers in the mail or advertised online touting your ability to pull out your home's equity. But a 2nd mortgage, also called an equity loan, may be a better financing option than refinancing your mortgage. 2nd mortgages are ideal when you just want to tap into your equity, plan to move soon, or are unsure about the amount you want to borrow.

Tapping Your Equity

Tapping into your home's equity is best done through a 2nd mortgage if you already have a low interest loan. Typically, applying for a 2nd mortgage requires fewer fees than refinancing a mortgage. 2nd mortgages are also paid back sooner, so your interest payments are less.

Short-Term Loan

With the costs involved in refinancing, you typically need to keep the loan for about two years to break even. However, with a 2nd mortgage you don't have those fees to worry about recovering. 2nd mortgages do have minimum balance and early pay off fees, but they are significantly less than refinancing fees.

Flexible Loan Amount

A 2nd mortgage allows you to take out your home's equity over the course of several years. The money can be accessed with a check, ATM card, or direct deposit, depending on how you set up your account with the lender. Additionally, you only pay interest on the money that you have withdrawn.

Higher Approval

Lenders tend to be more lenient with approving 2nd mortgages. Since the amount usually is less than a traditional loan, lenders remain confident that they will receive payment. If you have had a few credit glitches in the past two years, think about going with a 2nd mortgage.

2nd Mortgage Mistakes

2nd mortgages aren't for everyone. You should weigh the cost of PMI and payments when choosing your financing options. Borrowing more than 80% of your home's value will subject you to private mortgage insurance.

Your monthly payments should also be a factor in your decision. By taking out equity when refinancing your home, you will have a lower payment than if you had both a mortgage and 2nd mortgage payment. Also, if you refinance in the future, you will have to pay off your 2nd mortgage.