Many retired people ex-pats in Spain are struggling financially, because the exchange rate between the British pound and the Euro is substantially down from the levels it was 2 years ago. This has put pressure on their spending power, which means they cannot go out for 2menu del dia” as often. The knock on effect of this is that the businesses, particularly bars and restaurants are suffering too.
There is a way out if you own a property of €150,000 in value, if the youngest (of a couple) is over 65.A lifteime loan, which has no mortgage repayments can be considered up to a percentage of the value of your property, usually with a “no negative equity” guarantee. Interest rolls up on the amount borrowed, but as the percentage borrowed is lower, the younger you are, the chnaces of the loan being larger than the vaue of the house, is in any case, quite remote.
The funds taken out can be used for any purpose, which means that it can either be invested to produce regular income to top up pensions, or for a special purchase.
Having a loan against property, in Spain, is also beneficial in mitigating Spanish succession tax. You can either release funds from your property, if it is mortgage free or you can use a lifetime loan to buy a property.
Full ownership is retained by the borrower, which means that they keep full control of the valuable asset.
The process to obtain this type of loan is quite straight forward, as there is no requirement to prove income. An independent lawyer is appointed to ensure that the borrowers are, firstly, capable of transacting the contract and secondly fully understand all the implications of their committment. It is advisable to discuss the proposals with other family members, such as children, in order that they understand why you are taking funds out of the property.
If the funds taken out are not needed for a specific purpose, then advice should be taken from an independent financial adviser, as to the best place to invest the funds, in order to maximise the mitigation of inheritance tax for their surviving families.
Consideration must be given, in this respect, as to whether the borrowers are resident for tax purposes in Spain or “non tax residents”. This will have a bearing on the effect of inheritance tax calculations, which tend to favour “Spanish tax residents”, as they are entitled to higher reductions in the tax payable.
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There are also ways for those under 65 to take money out of their properties, however, the proof of income requirements are quite strict, and many lenders will require a specific purpose for the borrowing to be evidenced, This is OK if you are having an extension built or buying a new car, or even a boat, but there are restrictions on re-mortgages designed for simply taking capital put of the property. For UK ex-pats, you are now required to obtain a credit reference report from companies such as Experian , if you left the UK less than 6 years ago.
David Bates Financial Adviser
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The recent global financial crisis has made it plain for all to see that personal finance is now largely dependent on credit. As well as financial borrowing, a good credit file can effect your ability to get a mobile telephone contract or join a catalog company. It is also worth considering that, the better your credit file, the lower the rate of interest you may pay on loans or credit cards is.
If your credit file makes for disappointing reading, don’t panic. There are ways and means of increasing your credit file. Firstly, request a full copy of your file from a licensed agency and check all the details are correct. By doing this, you may find some anomaly that isn’t accurate, which is preventing you from getting credit. Some companies provide credit file reports for free, while others charge up to $5 for a more thorough analysis. Simply decide what’s best for you.
When you know exactly what you’re dealing with, you can begin to repair your credit file and thus make yourself a more attractive candidate for company’s to lend to.
Firstly, check you are on the electoral roll at your current address. This is one of the first things that companies check for when searching into your credit history , so make sure you’re listed. This may seem basic, but it can sometimes mean the difference between a yes and a no.
The next step is to take out a credit card specifically for the purpose of rebuilding your credit rating. If you find it difficult to get credit, you may have to resort to using one of the high-interest cards, but if used right there won’t be a problem. Every month, use the card for a small transaction, then pay it off in full. The longer you do this, accruing no debt and acting like the model customer, the better effect it will have on your credit file. After several months of this perfect behavior, your credit card company may offer you an increased credit limit – to resist temptation, refuse it. Use this card solely for small purchases you know without a doubt you can pay off, and make sure you do. If you don’t and build up debt, you may end up in a worse situation than you started in.
You should also steer clear of joint financial products – such as current accounts – unless the other person has a good credit file. Association with other people and their borrowing can effect your own. If you are divorced or have a child with debt problems who lives with you, you can apply for a Notice of Disassociation through credit agencies. This means that your finances will be assessed on their own merit and not linked with anyone else, who may have a poor credit file.
Finally, be vigilant. Keep up to date on all of your current repayments, as one slip can undo months of good work. If you are having problems, contact your creditor and try and resolve the situation before a default is applied to your credit file . You should also try to keep applications for credit spaced apart, as every time a company searches your credit file it can damage it. Stay on top of the situation, only applying for credit when necessary, and in time your file should begin to look much more healthy.
The “two steps forward, one step back” economic news continued last week. On Friday rates went up, and nervous brokers locked in early. We had Ben Bernanke saying that there are signs that the economy is improving, or at least leveling out. And if to prove it, Existing Home Sales were up over 7% to a 2-yr high. But heck, at some price point, wouldn’t the Home Sales number look great? In this number, the median price fell 15%, aided by foreclosure numbers, government credits for first-time buyers, and relatively low rates. There is still over a 9 month supply of inventory.
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But then we had the MBAA come out with a survey showing that the percentage of residential mortgages either in foreclosure or with at least one payment past due hit 13.16% in the second quarter, the highest percentage ever recorded. What’s a mother to do? And this number doesn’t even include mortgages in the foreclosure process! According to the MBAA, in Florida (home of humidity and palmetto bugs), 22.8% of mortgages outstanding were delinquent at least one payment or in foreclosure. “Other poor performing states include Nevada, where 21.3% of mortgages were delinquent or in foreclosure, Arizona, where 16.3% were delinquent or in foreclosure, and Michigan, where 15.3% were delinquent or in foreclosure.”
We also had our usual Friday afternoon seizing of banks, this time the FDIC garnered the third largest this year: Guaranty Bank. Guaranty is estimated to cost the FDIC, and taxpayers, $3 billion. Option ARM’s made up almost a third of Guaranty’s single family mortgage portfolio, along with $1.2 billion of loans to homebuilders in California. In an interesting note, BBVA Compass, a U.S. subsidiary of Spanish bank Banco Bilbao Vizcaya Argentaria, agreed to assume all of Guaranty’s deposits and will buy $12 billion of its assets, the first time an overseas-based bank has bought a failed U.S. bank this year. Three other banks failed: CapitalSouth Bank (AL), First Coweta (GA…and I doubt if this bank was named by an Italian dairyman in the winter), and ebank (GA).
Unfortunately for rates, the Home Sales number, combined with a little rally in equities, pushed rates higher. Mortgages were worse by .5 in price, and the 10-yr Treasury worsened by over a point. This morning the 10-yr is up to 3.59% and mortgages are worse by another.250. This week the U.S. will sell $42B of two-year notes, $39B 5-yr notes and $28B of 7yr notes starting tomorrow. On top of the auction, today we have some numbers from the Chicago Fed, tomorrow the usually grim S&P/Case-Shiller Home Price Index, along with Consumer Confidence, Wednesday Durable goods, Thursday Jobless Claims and GDP, and then on Friday Personal Income.
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Fannie Mae “retired” their “HomeStyle Construction-to-Permanent (HomeStyle CtoP)” product. They’re giving lenders lots of advance notice: the final purchase date of HomeStyle CtoP loans is November 30. Fannie tells us that “after this date, construction phase servicing of HomeStyle CtoP loans will continue as prescribed in Section B5-2.3 of the Selling Guide until all construction is completed and all loans have converted to the permanent, fully amortizing phase.”
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Mortgage rates may vary depending on the type of loan and the duration of the loan. A mortgage loan is basically taken against a property. In case you own a property you can keep the house as collateral and avail a loan to help you in times of financial crisis. Though a property with a good value can guarantee you a good mortgage loan, rates of the loan are often dependent on various factors like your credit ratings, personal assurance, etc.
It is common practice to apply for a mortgage loan when buying a property; in which a lien on the property is given to the lender as collateral for the loan. Though a property with good value can guarantee you a good mortgage loan, the rate (interest rate) applied on the loan is often dependent on various other factors like your credit ratings, personal assurance, etc.
In the case of ‘fixed mortgage rates’, the monthly payments and the principal as well as the interest rate do not change throughout the entire tenure of the loan. As long as the borrower is in a fixed rate mortgage, the interest rate remains the same. The advantages of this type of mortgage rate are that a record of the exact amount of payments can be kept by the borrower; and an increase in market interest rates will not affect the borrower’s payments.
There are numerous mortgage companies which offer refinance that involves obtaining a new mortgage loan on a property that is already owned – and that is often to replace existing loans against the property. It is a good time to refinance when the mortgage rates are low.
One of the major benefits involving refinancing is the fact that it can save the monthly payment of an existing loan. Lock-in rates are another very interesting schemes these companies offer.
There are several things that affect the rates of mortgage loans. These include the current market prices, the standing interest rates, present situation of the real estate market, and the overall financial environment at that time among other things. Mortgage refinancing is when you apply for another loan to pay off a first mortgage loan that was secured on your home.
Other things that you can adjust in mortgage refinancing are the term of your mortgage loan and the adjustability of the rates. If you initially had a longer term mortgage loan, you can choose to shorten that term and in turn save more money on interest. If you also had an adjustable rate, you might want to get a fixed rate mortgage loan that remains steady and predictable despite market changes.
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Skilled mortgage brokers are frequently essential to potential homeowners, since every solitary homeowner is a real estate investor of a kind, because their expectation is that in the foreseeable future property prices will escalate. There is a great deal to be gained, from using a fully qualified mortgage adviser. Even though there is no lack of mortgage brokers it is advisable to pick astutely. Select a broker in whom you have full confidence, but also somebody with whom you can enthusiastically talk.
Check to ensure that your mortgage broker is suitably trained and experienced. There is a large assortment of mortgage types that he ought to be entirely familiar with. That is why it is vital, when selecting your mortgage broker, to obtain the advice of a family member or friend, who has previously used the establishment. Good character is not built overnight, but fortuitously mortgage negotiations are commonplace, that virtually everybody knows someone who will have had a satisfying outcome.
Bear in mind, that insofar as mortgage arrangements are concerned, your mortgage broker is your instructor. Ensure that everything is related to you in a manner that you wholly comprehend. Then you should have the chance to be pleased with a relatively stress free loan procedure.
It would be reasonable to ask which mortgage broker is properly suited to your personal intentions? There are specific criteria that you should seek answers to Each feature of the mortgage deal will need to be gone into. For a start you will have to be convinced that your negotiations are handled in a cool but helpful way.
It is vital that you are able to contact your mortgage broker if and when required. Your broker will have other patrons as well as you, but you must be sure that you can speak with him at any reasonable time. Additionally ensure that if he has agreed to telephone you at a distinct instant, he will honour the obligation; otherwise you could be very worried!
A mortgage broker, ought to be competent enough to deal with any question you bring up, in a unruffled and efficient manner. If he was to become anxious or tetchy, that might reflect on you, and the broker client connection would be jeopardized. Don’t be scared of being persistent in searching solutions to things you’re disturbed about.
Think of a mortgage as amongst the major financial undertakings you might ever be required to make. Therefore, it is essential that you deal with the formalities totally understanding your commitment. You can understand how a trustworthy, certified and experienced mortgage broker should be extremely helpful, and assist you in getting the most advantageous mortgage loan on offer.
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So, you want to get into the flipping game and earn money or presumably you had a bad experience with flipping a property and desire to discover how to flip a property and essentially make money?
Firstly, allow me to say that I do not believe in expecting a huge return on a flip if all you do is sign your name on a closing statement and expect to turn it round swiftly. It simply isn’t that straightforward. What can occur though is if you follow some of my techniques you should be expecting to earn an agreeable profit for yourself.
There are five keys to success that i want to debate in this article. They’re : ( one ) you have got to buy the property right, ( two ) you should be prepared to buy superb deals, ( 3 ) you should not be scared to get involved, ( 4 ) you have got to be fairly handy, and ( 5 ) you have to do the bulk of the work yourself. Here is where you need to either be an estate agent or work with one.
Knowing the market area is necessary to getting the right house at the right price . Are charges in this area increasing? Are others improving their homes? Is the home’s sale price consistent with the repairs needed? Does the listing make allowance for a simple out of the contract should you learn something in the home inspection stage? It is my opinion that you definitely need a home inspection because you need to know everything that’s’s false with this house before you start. You should be prepared to buy for hot deals. First thing I usually do is set a budget. It is not iron clad, but it’s’s a place to start.
You know what you purchased the home for and you know roughly how much you want to get out of it, so now work backwards. What should ideally be done and what quantity of money are you in a position to allot to it? Be methodical, make a list and attempt to adhere to it. Shop hard for sales, closeouts, and possible selections. Lots of the home improvement stores put closeouts out front early in the morning. Swing by on the way to work. Check garage sales, paper advertisements, and even the Net.
Always buy with price and quality in mind with a close eye on the budget. Over-spending is a standard problem. You mustn’t be terrified to become involved. If a home should be transformed, chances are it is pretty mucky too. Hiring a cleaning person is dear and not required. Anyone can scrub. It’s helpful exercise too. Some of the toughest work is done in the yard.
Having the proper tools is important but you don’t have to buy them, many of them can be hired.
You have to be moderately handy and you’ve got to do the majority of the work yourself just about go side-by-side.
You must consider finding another past-time if you can’t do average repairs yourself or if you do not like it.
If you get stuck and have to bring the pros in for a botched job, your profits will swiftly go down the drain. Work is awfully dear to pay somebody for and should be used parsimoniously.
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In the old days, hurricanes were named after women. Why? Because when they arrive, they’re exciting and wild, but when they go, they take your house and car. We now have Hurricane Bill in the Atlantic, which reminds the markets that it is the time of year when every major storm that comes and goes tends to move the price of oil. Fortunately for anyone who drives a car, however, the price of oil is sinking, given continued slow economic news around the world.
Aside from that, there is no economic news today, aside from whatever the equities markets might be up to. Yesterday rates worsened slightly in spite of the Fed buying their usual allotment of securities – this time mostly 5% and 5.5% securities (5.25%-6.125% mortgage rates). In spite of little news, the bond market is on a tear this morning! The price on the 10-yr is better by almost a point, and the yield is down to 3.41%; 30-yr mortgage prices are better by between .250-.375
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The Mortgage Bankers Association’s application came out, as it does every Wednesday, showing apps were up last week almost 6%. Refinancing was up almost 7%, and purchases were up almost 4%. But by most accounts things are pretty slow out there, which some attribute to rates staying where they’ve been for a while, and others attributing to folks being away on summer vacations. Per the survey, refinancing accounts for a little over 53% of applications. See where Mortgage Rates are today!
The stockholders of Pulte Homes and Centex Homes approved their merger, which completes the $1.3 billion purchase of Centex by Pulte. The expected savings amount to about $350 million per year.
ING, still a presence in the wholesale arena, has seen its stock take a dip after the company’s second-quarter profit had been almost wiped out by falling property prices and rising bad-debt charges. Last week ING said its profits dropped 96%. Ouch. ING said the value of its real estate holdings fell, it had write-downs on a portfolio of residential mortgage-backed securities in the U.S., and the banking business took provisions to cover customers who may be unable to repay their loans.
GMAC Bank (GMACB) Correspondent clients were reminded that “the revised eligibility requirements for FHA Roster Appraisers that becomes effective for case numbers assigned on or after October 1, 2009. All appraisers chosen or approved to conduct appraisals of properties that will be security for FHA-insured mortgages must be “certified” by the State in which the property to be appraised is located; or by a nationally recognized professional appraisal organization, and have demonstrated verifiable education in the appraisal requirements established by FHA. Are there enough of these appraisers to go around? Perhaps not, so GMAC tells clients that the requirement has been phased in. But no Later than October 1, 2009, all FHA Appraiser Roster appraisers in all states must be state certified in order to be eligible to conduct appraisals for FHA-insured Mortgages and remain on the FHA Appraiser Roster.
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Georgia, like many other states, has its fair share of manufactured housing. According to the Atlanta Journal-Constitution, “Federal and state regulators have put as many as one-third of Georgia’s 300 banks under intensified monitoring and recovery plans, mostly strict enforcement orders a step or two short of seizure, according to banking experts. A majority of these 90 to 100 banks, these experts say, are operating under “cease and desist” orders that require them to complete tough turnaround plans within strict deadlines.” Georgia already leads the nation in total bank failures, having had 21 in the last year. The story states that most of the enforcement actions are not publicly disclosed, so a firm number of affected banks can’t be determined: the state regulators don’t disclose their cease-and-desist orders whereas Federal regulators, who do disclose their actions.
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How is giving the money to banks working out? Many argue “not so well”. The injections have made the banks richer and less likely to become go bankrupt, but it doesn’t force them to lend money out. Heck, they may want to use the money to cover the bad loans they either already have on their books or may have in the future. Government directives go to Fannie and Freddie, who in turn offer to buy the loans. Then, of course, it is up to the investors to decide whether or not to offer the program.
Renting isn’t so bad, right? In an interesting quote from Rep. Barney Frank, chairman of the House Financial Services Committee, he said, “I’ve always said the American dream should be a home – not homeownership.” Supposedly the current administration is doing away with George W. Bush’s “ownership society’’ and instead plans to pump $4.25 billion of economic stimulus money into creating tens of thousands of federally subsidized rental units in American cities. In other words, the government will get behind the construction of low-rise rental apartment buildings and town houses, as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates. Apparently the Obama White House has acknowledged that not everyone can or should own a home.
According to a spokesman from the FDIC, BB&T has acquired all of the mortgage warehouse assets from the failed Colonial Bank, except for those associated with Taylor, Bean & Whitaker. BB&T does indeed have its own small warehouse facility, and they are currently evaluating Colonial’s warehouse business. In its statement on the Colonial acquisition, BB&T said it did not acquire any assets relating to TBW, primarily mortgage loans and are currently involved in litigation.
Sometimes companies wonder why a seasoned loan (one that has been on their books for a while, perhaps as much as a few years) would be worth less than a loan that has recently funded. After all, they wonder, hasn’t the borrower been making their payments with no issues? Well, from an investor’s point of view, two things tend to push the price of servicing down. First, if the original lender sells loans, why wasn’t the loan sold in the past? Second, and probably more importantly, how much longer is this loan going to be on the books?
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Unfortunately yesterday (for all of us liking the low rates available), as the stock market improved, the bond market worsened. (This is not always the case, by the way.) Today we’ll get the announcement of 2 year, 5 year and 7 year notes, all of which will be auctioned in the middle of next week. Jobless Claims already came out this morning: claims unexpectedly rose last week by 15,000 to a seasonally adjusted 576,000 in the week ended Aug. 15. The number of people collecting long-term unemployment benefits edged up 2,000 to 6.24 million in the week ended Aug. 8 (that’s a lot of people “on the dole”!), but the four-week moving average declined 2,500 to 6.27 million. For weekly claims, the four-week moving average for new claims climbed 4,250 to 570,000 last week.
Later today the Philly Fed Survey is released. (I think that it is only a rumor that, with Michael Vick coming to play there, Philadelphia’s new City Song is, “Don’t Let Your Dog Out! Woof, Woof”.) In other news, oil prices have moved up again, and Asian stock markets improved. Tomorrow the only news out is Existing Home Sales. With all of that in mind, the 10-yr’s current yield is 3.46%, and both the 5-yr Treasury and mortgages are roughly unchanged.
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Non-depository mortgage banks had some good news: the FDIC notified personnel that Colonial’s warehouse relationships would continue under BB&T, at least in the short term. Many of Colonial’s assets were purchased by BB&T, including the warehouse facility which appears to be operating “business as usual” and funding loans. There is some nervousness, however, given the investigation into TBW and the Colonial warehouse unit, but it is rumored that BB&T has assured lenders that they will keep the business channel open – and why not? It’s a good business with lots of demand! Just look at the Mortgage Rates.
Some interesting news came out yesterday. Barclays reported that most major credit card companies saw positive performance in July: aggregate charge-offs declined and yields increased, payment rates were higher, and delinquencies continued to improve for the third consecutive month. Do you have a credit card? Does your child? How many? US citizens hold 1.3 billion credit cards, which means that there are roughly 4 cards for every man, woman, and child. In China, where there are about 1.25 billion people, there are only 5 million credit cards. The ability spend, and in some sense capitalism in general, makes it profitable for producers to sell what consumers want to buy, but it also makes it profitable to cause consumers to buy what producers want to sell. (Think about that one! Said another way, capitalism does not just sell people what they really want, it also sells them what they think they want.) Interestingly enough, studies indicate that Americans who don’t own a credit card save more than those that do.
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Is California real estate turning around? Is there allot of business being done for Purchasing or Refinancing. SunTrust thinks that it is. Not only are they going to $2 million loan amounts, but they have updated the “SunTrust Declining Markets Index” to reflect only seven (7) Metropolitan Statistical Areas (MSA) in the State of California which remain in areas that continue show declines in property value. Those MSAs are Hanford-Corcoran, Madera-Chowchilla, Merced, Modesto, Riverside-San Bernardino-Ontario, Sacramento-Arden-Arcade-Roseville, and Salinas. All other MSAs in the State of California have been removed from the SunTrust Mortgage Declining Markets Index, which is obviously subject to change.
Today U.S. Bank Home Mortgage’s Wholesale Division will increase their fee on the VA programs, both for fixed and ARMS programs. For loan amounts greater than $417,000 clients can expect to see to a fee increase varying between .5-.625 points. In addition, U.S. Bank made some changes regarding FICO & LTV adjustments to their conventional Manufactured Housing products. All conventional Manufactured Housing products must have a FICO score greater than or equal to 640, regardless of LP/DU response, and a maximum 80% LTV/TLTV/HTLTV.
StoneWater Mortgage, “in an effort to continue to address short term market risk”, made changes to their conventional conforming fixed loan products maximum financing, effective immediately. Investment property cash out refinances are no longer permitted. 2 unit primary residence purchase or rate/term is limited to 80% LTV/CLTV/HCLTV and 75% LTV if subordinate financing exists. 2 unit investment property purchase limited to 75% LTV/CLTV/HCLTV and 70% LTV if subordinate financing exists. 2 unit primary residence cash out limited to 75% LTV/CLTV/HCLTV and 70% LTV if subordinate financing exists
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The roller coaster of economic news continues. (I guess it would be too easy if everything pointed to one outcome.) Last week rates improved, as they did again yesterday morning after Asian stocks fell significantly. Oil, gold, and other commodities were down (although sugar is at a 28 year high, which doesn’t help people who make jam at home and kids who eat Captain Crunch).
How far can rates drop? I haven’t heard too many agents complain about rates in general, as mortgage rates remain near their lows but the government’s borrowing needs are at historical highs. This limits the amount that rates will be able to fall so as to attract buyers of our debt, and most analysts believe that soon the buyers of our debt will be demanding higher yields. Last week the Fed left overnight rates unchanged. So what? If anything, what the last year or two has taught us is that mortgage rates have little or no correlation with Fed Funds, so even though CNBC and the media make a big deal out of the Fed’s decision, mortgage rates are not impacted. Granted, any changes in rates can impact the Prime Rate (currently 3.25%), but that obviously is not the same as a 30-yr mortgage rate. So how do mortgage rates change? Mortgage rates are the result of supply and demand forces, just like any other security that is bought and sold in the open market. Securities that are backed by mortgages trade in the market, just like other fixed-income debt, and just like stocks which garner the headlines, with the prices in turn determining rates.
In spite of some second-tier news from the “Empire State General Economic Index” that showed growth, the equities market followed Asia and had their worst day since early July. So if an investor thinks that we’re not out of the economic woods yet, where can they put their money? One answer is fixed income securities, which rallied. The yield on the 10-year note hit 3.46%, the lowest level in almost a month. And it didn’t hurt that a) the Fed bought Treasury notes maturing in the next four to seven years, and b) the Fed officials said they will extend TALF loans against newly issued asset-backed securities and legacy commercial mortgage-backed securities through March 31, 2010.
Although we had some potentially market-moving data out this morning, the market hasn’t moved much since yesterday afternoon.The Producer Price Index for July was -.9%, a larger drop than expected and mostly due to gasoline prices being down last month. In June the PPI was +1.8%, so we are certainly seeing some volatility month-to-month, and versus a year ago the PPI is -6.8%! (Remember when the Fed was worried about inflation?) Ex-food & energy, the PPI was -.1%, +2.6% versus a year ago. On the residential front, Housing Starts dropped 1%, below expectations, although the June numbers were revised slightly higher. Multifamily unit starts dropped over 13%, but single family home starts were up almost 2%. New Building Permits were down almost 2%, and down over 39% versus a year ago. After the news we find the 10-yr yielding 3.49% and mortgage prices roughly unchanged from Monday afternoon’s levels.
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While the typical home buyer gets a 30 year mortgage, not many homeowners wind up paying on their mortgage the full 30 years. The typical homeowner, according to the Mortgage Bankers Association, will refinance their mortgage after four years. Refinancing to get a lower interest rate, even taking into account the fees, can mean saving a large amount of money over time. But, if you don’t think long term, refinancing can be a costly mistake. Thus, you should think through the reasons you have for wanting to refinance your mortgage.
The following reasons are good guides to help you decide to upgrade your home mortgage.
Changing from Adjustable to Fixed Mortgage Rate – Mortgage companies may offer adjustable rate mortgages with an initial low fixed rate for the first few years of the loan. Low initial rates are great for people who expect their incomes to grow so they can afford the increases in mortgage payments a few years down the line.
Sometimes the initially low interest rate lasts for three years or more. However, once the “FRM period” expires, fluctuating rates may prove to be stressful and disadvantageous. If you have initially taken an adjustable rate mortgage and would like to switch to a 15-, 20- or 30-year FRM, you may pay higher interest but gain the confidence of knowing what your actual payments would be every month for the rest of your loan.
To get emergency cash – The biggest asset you typically have is your home. And any amount of equity you have built over the years is like money stored in your savings account. Through mortgage refinancing, you can tap these savings and get the cash to finance any immediate need. There are many reasons you may need this extra cash. You may need to pay college expenses, pay off high interest credit card debt or consolidate debts. You may need money for car repairs or to get another car. Or you may need to do some home improvements.
To Get a Lower Rate – When interest rates fall you will have the opportunity to get a lower rate for your new mortgage. Interest rates are determined by market forces. Changes in interest rates often reflect the confidence other nations have in the dollar. And if the Federal Reserve cuts rates, the prevailing rate at the time you bought your house may be significantly higher than what is being offered at the moment. When you see mortgage rates drop, it’s a good signal that you can confidently refinance your home. Refinancing to get a lower rate will benefit you by reducing your monthly mortgage payments..
Improving your credit score helps. The interest rates available to you are also a function of your credit rating. By being timely paying your bills and avoiding additional negative credit notations on your credit report your credit score will improve. The higher your credit score, the more trustworthy you become in the eyes of lenders. So, if you have improved your credit standing and elevated your credit score, now might be a good time to refinance.
Extending Your Loan Will Reduce Your Monthly Payments – Even if interest rates have not changed, extending the term of your loan will reduce your monthly payments. This, of course, equates to you paying a significantly higher total amount for your property, but if you are willing to stay in your home long term, this may be a good move.
Reduce the Term of Your Loan to Pay it Off Faster – By reducing the term of your loan your monthly payments will increase, but you’ll pay off your loan quicker and pay less interest overall. Refinancing a 30 year loan to a 20 year or even a 15 year loan will let you build equity in your home faster and pay off your loan earlier.
Refinancing your mortgage is a bold move. After all, your home hangs in the balance. And your financial status in a credit conscious world is at state. Make sure you have both a good reason to refinance as well as a steady income to keep up the payments before you apply for a new mortgage.
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