Mortgage Refinancing Loan Terms – Are 10 or 15 Year Terms Better?

10 Year Vs. 15 Year MortgagesThere is a lot of decision making involved in refinancing a mortgage loan. Before applying for a mortgage, you should figure out what your budget is, so you will know how much you can spend on fees, down payment, and the mortgage itself. Also, it is very important to come to a conclusion regarding what your future plans are, like how long you want to live in the home that you are buying. All these factors will help you better determine what kind of term you are looking for in a mortgage.

Why You Should Opt for Shorter Terms

Paying off a mortgage in 30 years is very common, and will probably work for you as well. Even if your interest rate will be slightly higher, your monthly mortgage payments will be lower, so you will have an easier time paying it off. That sounds great, but taking pretty much half your life to pay off a mortgage sounds a bit daunting. A good alternative is to get a 15, or even 10, year mortgage loan, which will have a lower interest rate but larger monthly payment. However, even though comparing a 15-year mortgage to a 10-year mortgage seems much easier than comparing a 15 and a 30-year, there are some things that you need to keep in mind before deciding on either one (Read: Home Refinancing Objectives: The Basics).

Differences between a 10-Year and a 15-Year Mortgage

Usually, paying off a mortgage loan in less years means that you will pay less in interest. The difference in interest may seem very small, less than 1 percent, for example, but that means thousands of dollars over time (even tens of thousands of dollars) depending on how large your mortgage loan is. The difference in interest between a 15-year mortgage and a 10-year mortgage will probably be even less than .50 percent, but it will still be a huge difference in the interest that you will be paying during the loan repayment period.

The downside is that, the shorter the loan term, the larger your monthly mortgage payments will be. Depending on your budget and plans, this might only be a small disadvantage. If you can afford the monthly payments and plan on paying off your mortgage as soon as possible, getting a mortgage with a lower term is the way to go.

If you are unable to make a larger mortgage payment each month, paying off your loan in 15 years instead of 10 is a good alternative. Your monthly payments will be lower, but your interest rate will be higher, so you will spend more overall than if you paid off your mortgage in 10 years. However, you have the option of making additional principal payments which will result in paying off the debt in the same amount of time as a 10-year mortgage, and also give you the option of skipping a principal payment if money is tight in any particular month.

The amount of years that you need to pay off a mortgage loan can make a large difference in how much you spend on your mortgage. Longer terms mean that you pay more overall, but you can do it much easier, shorter terms mean that you pay less overall, but at the cost of having to come up with more money each month. Ultimately, deciding between refinancing into a 10-year or a 15-year mortgage depends on how much you are willing to spend on your mortgage each month and your future plans.

Mortgage Refinancing: The Overlooked Mistakes You Want to Avoid!

Mortgage Refinancing-The Overlooked Mistakes You Want to Avoid- 150x150Mortgage refinancing can be a true life saver when done correctly and at the right time. Making your monthly mortgage payment smaller will free up cash that can be used for other monthly expenses or be put in savings. But before you are lured by the smaller mortgage payments and interest rates, you must be sure that you understand how refinancing works. Understanding this process is the only way in which you can make sure that you avoid making mistakes that will cost you time and money.

Refinancing is expensive and it comes with considerable risk, especially for those who are first time home owners and for those that are refinancing for the first time. The most important thing when refinancing is finding out if the new loan is truly saving you money. Taking refinancing costs into consideration is very important when comparing your current loan to the new loan. Another important thing to consider is how long you plan on living in your home. In order to cover the cost of refinancing, you will have to live in your home for two or more years.

Making a mistake when refinancing is very easy and you will end up regretting making the decision to refinance. But do everything by the book and refinancing will prove to be exactly what you needed to make your life easier. Here is a list of the mistakes that you want to avoid making when refinancing.

Mistake #1: Refinancing Multiple Times

In rare cases, refinancing multiple times makes sense, especially if it is done over the course of a few years. But most of the time, if done very often, refinancing multiple times will result in losing money instead of saving it. Low interest rates are attractive for everyone, and most home owners will give refinancing a thought when interest rates are near record lows. Home owners who have recently refinanced might get the idea that they will save even more money if they refinance again, because the rates are so low.

Unfortunately, refinancing is expensive, costing up to 6 percent of the loan amount. Saving enough in interest for the closing costs to be covered is unlikely if you recently did another refinance. This means that your loan balance will increase, negating the savings that refinancing should bring, making you lose money. It is recommended that you don’t refinance before recuperating the closing costs from your last refinance.

Mistake #2: Not Shopping Around for a Lender

Lenders are always competing with each other, so shopping around for a refinance is a smart thing to do. Even if the first loan that you are offered has a low interest rate, good terms, and seems like exactly what you’re looking for, you still have the option of contacting other lenders. By comparing mortgage lenders and what they are offering, you could save thousands of dollars.

If you have a good relationship with your current mortgage lender, he might offer you a good deal on refinancing. Even if that is the case, it doesn’t hurt to take a look at what other lenders are offering.

Mistake #3: Ignoring Some of the Costs of Refinancing

If you are planning on refinancing your mortgage, you need to find out if the savings outweigh the cost of refinancing. Refinancing closing costs involve several fees, some high and some low. Not taking into consideration some of these fees, like the origination fee, which can be a few thousand dollars, can make refinancing more appealing, but there is no way of avoiding this fee. You might think that you are saving money by refinancing when in fact the closing costs will be much higher than the savings you are making by taking out a loan with a lower interest rate.

Mistake #4: Not Locking In Your Interest Rate

Not locking in your interest rate is like gambling. You hope that the interest rates will go lower before closing, and you end up with a more advantageous rate, but you are aware that there’s a risk that the interest rate will increase, making your payments higher than you anticipated.

Not locking in your interest rate is especially dangerous with refinancing, because you have to make sure that refinancing will actually help you save money. If you come to the conclusion that you are, indeed, saving money with the interest rate that your lender is offering, but don’t lock in and the interest rate increases, the whole refinance could become just a waste of time and money (Read: Mortgage Refinancing Guidelines).

Mistake #5: Extending Your Mortgage Loan’s Term

When refinancing, you are basically resetting the term on your mortgage loan. Your monthly payments will be lower, but you will be paying more in interest, especially because most of the payments go towards the interest when taking out a new mortgage loan.

Extending your mortgage loan’s term would be a mistake, and you should aim towards taking out a loan with a term close to what has remained on your current mortgage, or even shorter.

Taking precautions before refinancing will help you find out if refinancing is the right step for you, and make sure that the whole process goes smoothly. Your goal is to save money on your mortgage, so avoiding these mistakes should be your top priority when refinancing your mortgage.

How to Take the Headache Out of Cash-In Refinancing

How to Take the Headache Out of Cash-In Refinancing-150x150You have probably heard of cash-out refinancing, which allows the borrower to leave the closing with a little extra money. This type of refinancing was very popular a few years ago, before the housing market crashed. The United States Housing market is currently still recovering, so cash-out refinancing is not so popular anymore.

A type of refinancing that is pretty much the opposite of cash-out refinancing is cash-in refinancing. With a cash-in refinancing, the borrower makes cash payment when refinancing, instead of receiving a cash payment. This type of refinancing is used by more and more borrowers because it helps them meet the lender’s requirements. The borrower makes a payment towards his or her mortgage balance, and then takes out a new loan for a much smaller amount. Most people who choose to do a cash-in refinance have money sitting in savings accounts that yield low returns, and would like to put that money to better use.

Is Cash-In Refinancing a Good Idea?

Paying off your mortgage easier or earlier is a great feeling, but you might be asking yourself if that money would be put to better use if you invested it in something else. You could be investing the thousands of dollars that you are using in a cash-in refinance elsewhere, but this type of refinance can also be considered a good investment. Reducing your mortgage debt will get you a lower interest rate, which would bring you some large savings and possibly be more than the return that some investments would generate.

Cash-in refinancing is a great opportunity for home owners whose homes have declined in value. If the home is appraised for a low amount, the equity in it might not be enough to meet the lender’s minimum lending requirements, so making a large payment will certainly help you qualify for a refinance much easier. Making that payment required in a cash-in refinancing will also help you avoid having to pay for Private Mortgage Insurance.

You might want to reduce your mortgage term, from 30 years to 15 years for example, but you wouldn’t be able to afford the much larger monthly payment. By doing a cash-in refinance, you lower the mortgage balance, making it much easier for you to reduce the term of your mortgage loan and afford the new monthly payment.

Of course, like with any type of refinancing, there will be a couple of years or more until the amount of money that you used to pay the closing costs with will be recovered by the savings from refinancing (Read: Refinance Loan Types and Closing Costs).

Another downside is that you have to come up with a large amount of money for the required cash payment, which may cause you some trouble if you are taking it from a 401k, for example. Taking money from a 401k will attract some penalties, such as recovery or repayment costs. Obtaining the money by selling stocks could result in having to pay a capital gains tax.

The thought of saving thousands of dollars by doing a cash-in refinancing is very appealing, but, like with any type of refinancing, you must consider all the risks as well. Your financial situation and future plans should be the most important factors affecting the decision to refinance. If you come to the conclusion that doing a cash-in refinance will save you money and make your life easier, then you shouldn’t encounter any problems as long as you have done your homework and understand what it involves.

Here’s What You Can Do When Turned Down for Refinancing

Here's What You Can Do When Turned Down for Refinancing- 150x150Refinancing is a great way of saving money on your mortgage when interest rates are low. Refinancing has strict guidelines, and making your mortgage payments on time may not be enough to convince your lender to allow you to refinance. Mortgage refinancing requires a home appraisal, a significant number of documents that show your income and assets, and a good credit score. Not meeting one of the lender’s requirements may result in a denial. Fortunately, being turned down for refinancing is not the end of the world and you should know that you still have options. Here are a few reasons why you may be denied and what you can do to make refinancing possible.

Little or No Equity in Your Home

The number one reason why home owners are being refused when trying to refinance is the lack of home equity. Your problems don’t even have to go as far as being underwater on your mortgage, or owing a larger amount than your home is worth. Simply having low or no equity in your home can trigger a denial from your lender, because they prefer a borrower who has a nice amount of cash tied up in his or her home. The simplest way out of this situation is to come up with more cash, but, if you take into account the high refinancing closing costs, you might realize that a few extra thousands will be hard to find.

An alternative would be the Home Affordable Refinance Program (HARP), designed by the government to help home owners with little or no equity in their homes. Recently, this program has undergone some changes, which should help you get approved easier than before. The program is designed for home owners who have less than 20 percent equity in their homes, but some lenders might use their own guidelines when deciding if you qualify for HARP.

Another alternative would be refinancing into a Federal Housing Administration (FHA) mortgage. FHA mortgages require a low down payment and equity, but you may be required to pay additional insurance on this type of government insured mortgage loan.

Low Credit Score

Your credit score has a large impact on not only your interest rates and the loan value, but also on whether you will be allowed to refinance or not. If your credit score is bad, your only chance of refinancing is by improving it. It might take a year or two, but if your credit score wasn’t affected by anything major, you should get it into a more favorable range with little effort. Paying your bills on time is the first and most important step when trying to increase your credit score. If, however, you have a large blemish on your credit report, such as a bankruptcy, then increasing your credit score will prove to be more difficult and can take up to 10 years.

Low Income

Lenders usually require your debt to not exceed 43 percent of your monthly income, while monthly mortgage payments, property taxes and insurance are limited to 30 percent. Reducing your debt can help tremendously when trying to look better in the eyes of a lender. You could quickly pay off some or all of your debt if you have access to savings or other investments. Some of these solutions might not be the best, and it all depends on your situation, and how much you want or need to refinance.

Of course, the simplest thing you can do when being turned down for refinancing is talking to another lender. Lenders are in competition and sometimes have significantly different offers for their customers, so shopping around is always a great idea, even if you are approved by one lender. You might find a more attractive offer with a lower interest rate or closing costs somewhere else. Don’t be discouraged if your refinancing is declined because there are ways in which you can drastically improve your chances in a very short amount of time.

Refinancing Your Home: The Complete Process

Refinancing Your Home-The Complete Process- 150x150Refinancing your home at the right time can bring you great financial benefits, but the process can be a little intimidating for those who are refinancing for the first time, and even for those who have done it before in the past. Changing your mortgage loan to a different loan with different terms can get a bit confusing, and you might be afraid not to make any mistakes and end up doing the exact opposite of saving money.

There are consultants who can guide you through the refinancing process, and it’s not a bad idea to use them, but it’s important that you understand how refinancing works, from deciding to refinance to actually taking out the new mortgage loan. Understanding the refinancing process will help you avoid making simple, but expensive, mistakes, which can end up ruining your plans.

Deciding to Refinance

Home owners generally refinance when the interest rates are lower than they were when they took out their mortgage loan, but interest rates should not be the only deciding factors when you consider refinancing. First of all, the advertised interest rates are usually reserved for those who meet some very strict requirements, like having a perfect credit score. Anything less than a perfect credit score and you will find that the interest rate that you’ll be required to pay on your new loan is not that attractive anymore. Secondly, you should not be blinded by the low interest rates that lenders are willing to give you. The closing costs of refinancing can be very high, and might make the overall value of your new mortgage loan even greater than the value of your current loan.

Getting Prepared to Refinance

If you have decided that refinancing is the right step for you, and you will be saving money by doing it, then it is time to get prepared. Like most mortgage loans, refinancing will require a good credit score and a significant number of documents. Before talking to a lender, you should check your credit score, and make sure it’s in good shape, without any inaccuracies. You are entitled to one free credit report check per year, and you should report any erroneous information to the credit bureau. Also, having some of the paperwork ready before applying for a refinance will save you a lot of running around, and it will make the whole process go faster and smoother.

Choosing the Right Refinance Loan

There’s no perfect mortgage loan that will benefit everyone. Depending on your financial situation and many other factors, you should closely look at all loans that will be made available to you and decide once you find one that meets all your requirements. For example, you may want a lower monthly payment, in which case you should look at 30-year fixed-rate loans. Alternatively, you may want to pay off your mortgage sooner, in which case you should look at 15-year mortgages.

Applying for the New Mortgage Loan

Like we’ve mentioned earlier, preparing certain documents, such as personal tax returns, bank statements, pay stubs, and others, will make the refinance application process go by very quickly and, in some cases, you can even apply over the phone. The quicker you submit the required information, the faster will your new mortgage loan be approved.

Appraisal and Approval

After submitting your application, you will normally have to get your home appraised by a home appraiser. These appraisals usually cost a few hundred dollars and are paid by the borrower. The home appraisal is required in order for the lender to find out how much your home is worth and if you have enough equity in your home to support the new mortgage loan. All your paperwork, including the appraisal, will then be reviewed by the lender. If the lender comes to the conclusion that you are able to repay the new loan, your refinancing loan will be approved.

Locking in the Interest Rate

Once your new mortgage loan is approved, you will have the choice of locking in the interest rate or letting it float until closing. By locking in your interest rate, you are protected from an increase in interest rates before you close on the loan. If you don’t lock the interest rate, there is a chance that the rate on your new loan might increase, but there’s also a chance that it might decrease by closing time.

Signing the Loan Documents and Closing

At closing, you will be required to sign all of the loan documents. You should carefully review each document before signing, making sure they contain everything that was agreed upon. When closing, you will also be required to pay various closing fees, which can be pretty costly. However, some of these closing costs can be reduced at your request, or even waived, if you have a good relationship with your lender.

Refinancing is a pretty straight-forward process once you understand it, but you should still pay attention to the details. Refinancing can turn into a costly nightmare if you don’t carefully take all of the aspects into consideration. Doing your homework before refinancing will ensure that the whole process goes by smoothly and making your mortgage payments will be much easier.

Top 10 Refinance Lenders for Borrowers with Bad Credit

Top 10 Refinance Lenders for Borrowers with Bad Credit-150x150Getting a mortgage loan with bad credit is difficult, but doable. Lenders typically regard people with bad credit as a high default risk, but they are willing to help every borrower as much as their lending requirements permit them. The same applies to refinancing, where borrowers might want to take out a new loan and possibly receive a better interest rate. Unfortunately, getting a smaller interest rate than your current mortgage loan is not very common if you have bad credit.

Refinancing is an expensive process and, even if you are able to get a loan with a lower interest rate, it might not be worth it, due to the higher overall cost of the new mortgage. Everyone’s financial situation is different, and you might very well be able to refinance with bad credit, get a lower interest rate and end up saving money. The only way in which you can find out if refinancing with bad credit is a good choice is by talking to several lenders about your situation, carefully look at what they’re offering, and decide if refinancing is to your advantage. Here is a list of the top refinance lenders for bad credit:

Top Refinance Lenders for Bad Credit Borrowers

  1. Wells Fargo. One of the largest financial services providers in the U.S., Wells Fargo, started its business in 1852. Since then, it has expanded in more than 35 countries, and currently has more than 270,000 team members. Wells Fargo specializes in mortgage, business banking, consumer and commercial finance, as well as wholesale banking.
  2.  JP Morgan Chase. The acquisitions and mergers of more than 1200 banking institution helped JP Morgan Chase become one of the largest banking institutions in the country and in the world. Some of the most important mergers were with J.P. Morgan, Chase Manhattan, First Chicago and Chemical. Chase serves millions of clients in the U.S., and offers services such as consumer banking, loans, private banking, asset management and mortgages.
  3. Flagstar Bank. Headquartered in Troy, MI, and founded in 1987, Flagstar Bank is one of the country’s top mortgage originators. They deliver award-winning services such as residential lending, retail banking and government banking.
  4. Fifth Third Bank. As of this year, Fifth Third Bank has assets of $318 billion, and is one of the largest banking institutions in the Midwest. Fifth Third Bank offers its customers four main services: consumer lending, branch banking, commercial banking and investment advising.
  5. SunTrust Bank. The Atlanta-based bank has more than 1,500 branches throughout the states of Georgia, Florida, South Carolina, North Carolina, Tennessee, Maryland, West Virginia, Virginia and the DC.  SunTrust Inc. and its subsidiaries offer a wide range of services to its retail and business clients, including banking, mortgage, asset management and securities brokerage.
  6. Nationwide Direct Mortgage. Nationwide Direct Mortgage was founded in 2009 and is one of the best-know online direct lenders in the country. This means that customers can borrow funds directly from Nationwide Direct Mortgage, without dealing with a broker or a third party agent. Nationwide Direct Mortgage provides customers an online mortgage application process, which can be tracked by applicants, who will obtain an approval or decision in less than a week.
  7. CapWest Mortgage. Founded in 1971, CapWest Mortgage is a division of Farmers Bank and Trust, a family owned bank since 1907. CapWest is approved by Freddie Mac and Fannie Mae, and is a Costco Preferred Lender. CapWest can originate loans in all 50 states, and also offers saving accounts, Certificates of Deposit and home equity lines of credit.
  8. Cole Taylor Bank. Named the sixth largest bank in Chicago by Crain’s Chicago Business, Cole Taylor Bank has assets of $5.8 billion, and can originate mortgages in 33 states. The bank was founded more than 80 years ago, and can offer a wide range of financial services, including residential mortgage lending and personal banking.
  9. First Financial Services, Inc. FFSI specializes in residential home financing and commercial lending. The company, known for their excellent rates, was founded in 1991 in North Carolina, and is also licensed in South Carolina, DC, Maryland, Virginia, Texas, Florida and Georgia.
  10. Amerisave Mortgage. Amerisave is one of the nation’s largest mortgage lenders, and offers clients all mortgage products, such as refinance loans, FHA, VA mortgages or reverse mortgages. Amerisave operates in all US states, and has more than 1,500 employees. The company guarantees an on-time closing, and they have excellent prices and offer great service.

Refinancing could be a great option for you and may save money for you in the long run, but it’s important to weigh in on the pros and cons before you make a decision to proceed. There is a high chance, especially for those borrowers with bad credit, for refinancing to cost more upfront then it will save you eventually, making it pointless for you to refinance. However, with this list of the top 10 lenders, you have the best chance of getting a better interest rate and saving money.

What is the True Cost of Refinancing? The Truth is Revealed Here!

What is the True Cost of Refinancing- The Truth is Revealed Here- 150x150Refinancing your home involves getting a new mortgage loan, and it’s a practice that can be very beneficial and save you a nice amount of money, or it can prove to be very expensive and cost you a lot of money. The main goal of refinancing is to save money on your mortgage by replacing your original mortgage loan with one that features a lower interest rate (Read: Major Motivations to Refinance a Mortgage).

Usually, refinancing costs the average home owner between 3 and 6 percent of the home loan’s value. For example, if you are refinancing a $200,000 home, refinancing will cost you between $6,000 and $12,000. Paying such a high price for refinancing should make you wonder if you should do it and get a new loan with a lower interest rate, or keep your old loan with the higher interest rate. The only way to find out if refinancing is worth the hassle and cost is by putting everything on paper and calculating if the lower interest rate of the new loan will bring greater savings than you will be spending on closing costs.

Closing Costs

All the fees associated with refinancing should be included in the Good Faith Estimate. This document will reveal how much your lender is charging you for each item. If you do your homework, you will be able to tell which fees are necessary and which ones are unnecessary and can be lowered or even waived by your lender.

Costs such as the origination fee or the lender fee are paid directly to the lender and can be easily negotiated, and sometimes even waived. The lending officer normally works on commission, and will prefer to lower these fees, than to lose a customer and get no commission at all.

When doing mortgage refinancing, you can purchase “points”, which will lower the interest rate on your mortgage. They are essentially a form of prepaid interest and each point is worth 1 percent of the loan amount. You should take into consideration the amount of time that you will be spending in the home and how long it takes you to break even on the cost when purchasing points.

Determining the True Cost of Refinancing

Lowering your interest is very attractive and the main reason why people refinance, but it’s not the only factor you should look at when deciding whether to refinance or not. The new lower interest rate should play a big part in your decision, but what you should really be looking at is whether the savings that you get from refinancing your mortgage are bigger than the cost of refinancing. Many times, borrowers will be blinded by the lower interest rates, and refinance without realizing that the high cost of refinancing will actually cause them to lose money.

In order to find out how long it will take you to start saving money after refinancing your mortgage, you should subtract your new monthly payment from your old monthly payment, and divide the cost of refinancing by the monthly savings. The number that will result from this will be the number of months it will take to break even. Refinancing if you plan on living in a home for longer than it will take you to break even is a great choice. Here are a few tips to help you understand how much will refinancing cost you and decide if it will save you money:

  • Find out what your new interest rate will be. Many times, lenders will only advertise the lowest interest rate that they can give, but that doesn’t mean you will qualify for it. Depending on your credit score and how many points you purchase, you can end up paying a much higher interest rate, which will make refinancing look less appealing than it did when it first crossed your mind to refinance.
  • Find out how much refinancing will cost you. You will, most likely, have to pay several good thousands in closing costs when refinancing, so finding out exactly how much this will cost you is a great way of determining if refinancing is a good choice. Mortgage application, origination, document preparation, appraisal, title and many other fees can add up and cost you an arm and a leg.
  • Decide if refinancing is worth the hassle. Besides the high closing cost, refinancing is also a time consuming process. Before talking to a lender, you should consult an online mortgage refinancing calculator. Online calculators won’t be 100 percent precise, but you should make sure that you provide the most accurate information when calculating your costs and savings.

Refinancing is a costly process, but you shouldn’t let that scare you. You should also not let the low interest rates advertised by

Do You Make These Mistakes? Don’t Kill Your Mortgage Refinance!

Do You Make These Mistakes- Don't Kill Your Mortgage Refinance-150x150Making lower payments on your mortgage is a great way to save money and make your life easier. The most common way in which you can reduce your monthly mortgage payment is by refinancing. This can also be the most beneficial way, which can save you a significant amount of money. But going from saving money to losing money is really easy when it comes to refinancing.

Refinancing might seem like a great idea at first glance, but it is not for everyone. There are several factors that have an influence on whether refinancing is good or bad for your situation. When refinancing, many home owners often make mistakes that, even if they won’t create problems in the beginning, will end up costing them in the long run. Refinancing is more complicated than it was years ago- the requirements are stricter, more paperwork is needed- so it’s easy for a borrower to make a mistake.

Here are the most common mistakes that borrowers make when refinancing, to help you avoid making them when you decide to refinance.

Convincing Yourself That Your Home is Worth More Than It Is

Being unrealistic about the value of your home is a sure way of ruining a refinance. Many areas have seen a decline in home prices, so your home’s price has probably fallen too. Most refinances today are denied because the home is appraised too low, so the lender won’t give out loans that are larger than the appraised value.

Not Shopping Around

You might have a great relationship with your current lender, and he might give you a special deal on your refinance, but it never hurts to shop around for an even better rate. Lenders can also reduce or even waive certain closing costs, which will also influence how much you will be spending on refinancing. Even a small difference in interest rate can mean a lot of money over time, so it’s important to look around, see which lender can offer you the best deal.

Not Taking Closing Costs into Consideration

One of the biggest reasons many home owners choose not to refinance are the high closing costs. The closing costs are one of the main factors that should be taken into account when deciding whether to refinance or not. Interest rates offered by most lenders will probably look very attractive, but you can end up losing money if you don’t take closing fees into account.

Letting Your Credit Score Decrease

Even if you find a very attractive refinancing rate and a lender who is willing to waive some of the closing costs, refinancing with a low credit score will most likely result in a waste of time. Not having a good credit score will attract high interest rate, or even the lender’s refusal to give you a new loan.

Creating New Debt During the Refinance

New credit cards or loans can seriously hurt your chances of being able to refinance. Additionally, you’ll have to provide even more documentation to justify the new debt. It’s best to hold off acquiring new debt until the refinancing process is over and your new loan is granted. It’s always best to keep new debt low, even after refinancing, and talk to your lender about what the implications are.

Refinancing Multiple Times

Refinancing repeatedly in a short period of time will not save you money. Each time you refinance, not only do you have to pay some hefty closing costs, but you are also resetting your mortgage, meaning that over time you will pay significantly more in interest. You can also end up having to still make mortgage payments during your retirement years.

Your decision to refinance should not be affected only by the low interest rates. Always take into consideration the closing costs when trying to figure out if refinancing is the right step for you. Not paying attention to all of the details can become very expensive with refinancing. All mistakes can be avoided by doing a little research, making refinancing an easier process, which will truly save you some money.

Can You Get a Lower Mortgage Rate without Refinancing? The Answer May Surprise You

Can You Get a Lower Mortgage Rate without Refinancing- The Answer May Surprise You-150x150Over the past few years, interest rates have kept falling, reaching record lows. More than likely, you know people who have refinanced and now have much lower interest rates than you do on your mortgage. Refinancing is one way of lowering it, and it can be beneficial in most cases, especially when rates are this low. But you did your homework and came to the conclusion that refinancing will lower your monthly payment, but not enough to make up for the high closing costs. Another reason why you are not refinancing can be that you simply can’t afford it. Fortunately, there is another way in which you can lower your mortgage, without paying thousands in closing costs.

Most people are refinancing as soon as the rates fall, without taking the high closing cost and the fact that they are basically resetting their mortgage into consideration. For some, lowering their mortgage interest rate is the only way they can get some peace of mind, so current mortgage rates today seem very attractive. If you are someone who reached the conclusion that refinancing doesn’t make sense for you, but would still like to lower your mortgage rate, then you should know that there are alternatives.

Lowering Your Mortgage Rate without Refinancing

If you can’t afford to refinance because of the high closing costs, or you simply don’t want to refinance but can afford to make a larger monthly payment, then you can talk to your lender about lowering your interest rate by prepaying the mortgage principal. By making additional payments towards your principal each month, you can even save as much as you would by refinancing.

Restarting a mortgage through refinancing is time consuming and expensive, but if your monthly budget allows you to spend a little extra on your mortgage each month, then this is a great alternatives. Of course, this alternative will increase your monthly mortgage payments, but prepaying your mortgage will save you money in the long run.

Another way in which you could make paying your mortgage easier is by convincing your lender to give you a better rate. You can start by contacting your lender and explaining that you would like a better interest rate, but can’t afford to refinance, or simply choose not to because it wouldn’t make sense financially. If you have a good relationship with your lender, they might agree without giving you too much trouble.

Talk to your lender about your financial trouble, so that they can make sure that you deserve to have your loan modified. The lender could modify the loan, or he could help you go through the government’s Home Affordable Modification Program, which is designed to help home owners who are facing financial difficulties keep their homes.

In many cases, refinancing is the best choice when looking to reduce your mortgage payments. Unfortunately, being an expensive process with plenty of drawbacks, it is not for everyone. So, if you do the proper research and find out that refinancing is not an option for you, then you are better off trying to get a lower mortgage rate without refinancing, through one of the alternatives described in this article.

Addicted to Refinancing Your Home Multiple Times? You’re Not Alone

Addicted to Refinancing Your Home Multiple Times- You're Not Alone- 150x150A few years ago, when the housing market was booming, many home owners started to take advantage of the lower interest rates by refinancing their mortgages. For many borrowers refinancing is a great opportunity to save money on their mortgage, but there are other factors besides the interest rates that should be considered when determining if refinancing is a good choice.

Refinancing a mortgage multiple times has become a trend among borrowers, with more than 2.2 million refinances recorded since 2009. Because interest rates are still near record lows, there really aren’t any reasons for home owners to stop refinancing. Normally, refinancing a mortgage is an expensive process, so the high cost doesn’t always financial sense for home owners to go through with it, even if the interest rate on the new loan is significantly lower.

But lenders are coming up with ways of attracting refinances by lowering the closing costs or waiving certain fees, making refinancing much more accessible. Closing costs are not the only factor of what home owners should consider before refinancing. Many mortgage loans also include a prepayment clause, which force the borrower to pay a steep penalty if they wish to pay off their mortgage earlier. Some lenders are even willing to waive the prepayment penalty. Don’t be fooled, though. Lenders usually recover the waived and lowered fees by charging a higher interest rate.

Should You Refinance Multiple Times?

Through history, as interest rates went down, the number of home owners who refinanced went up. Right now, with interest rates on the rise, but still near record lows, and the job market recovering, people are in a rush to refinance their mortgages. Refinancing more than once makes sense, but only if you do your homework, and come to the conclusion that it will actually save you money. Many borrowers refinance thinking that a lower interest rate will save them money, while the cost of refinancing may actually cause them to end up with a more expensive loan, which will result in losing money.

Refinancing and getting a lower interest rate will not only reduce your monthly mortgage payment, but will also reduce the principal on your mortgage. Having a lower mortgage payment will free up money that can be used to make other purchases or even pay off other debt, which will increase your credit score, making future loans more accessible.

The downside to mortgage refinancing is that, with each refinance, you are basically resetting your mortgage term to a longer term, such as a 30-year term. This means it will take you a longer time to pay off your debt. Refinancing also requires a lot of running around, gathering several documents and more scrutiny on your credit score. The biggest downside of all is that refinancing is normally an expensive process, which can actually cause you to lose money.

Refinancing isn’t really a viable option for borrowers with low credit scores. Even if the lender is willing to waive some of the closing fees, applying for refinancing with a low credit score will either get you rejected, or you may find that there is no way to receive a loan with a lower interest rate.

Refinancing multiple times pays off for many home owners, especially if they manage to secure a lower interest rate and the lender is willing to waive some of the closing costs. When trying to determine if refinancing again is a good idea, make sure that you take all of the costs into consideration, or you might end up paying more than on your previous mortgage loan. Saving money by refinancing is more than just getting a lower interest rate from your lender. If you do the research and come to the conclusion that refinancing again is worth it, then doing it multiple times is a wise choice.