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Archive for Refinance

The Three Primary Benefits of a Mortgage Refinance

You’ve heard that a mortgage refinance can be a beneficial step to take.  Maybe you’re considering such a step.  But what are the true benefits of a refinance?  Let’s go over the three primary ways that a mortgage refinance can improve your financial situation.

1.  Decrease your monthly payment. The amount of your monthly payment varies depending on your loan term length, the interest rate of the loan, the total loan amount, and other factors such as private mortgage insurance and expenses that have been rolled into the total loan amount.  A refinance allows you to adjust many of these variables.  If your interest rate is higher than the market’s current mortgage rates, you can refinance into a lower rate and decrease your monthly payment.  This is one of the most common motivating factors behind a refinance.

2.  Access home equity as cash. If you’ve built up equity in your home through consistent payments or through increased property values, a refinance allows you to withdraw some or all of this equity in the form of spendable cash.  The amount you withdraw will affect the total loan balance remaining, but if you need access to money to pay for medical bills, college tuition, or other expenses, a refinance is a far better option than a standard bank loan or consumer credit.

3.  Change the length of your loan term. Your original mortgage length may have been fifteen years, thirty years, or more.  Either way, a refinance allows you to alter this length, and this can have a significant impact on your financial situation.  Refinancing into a shorter term will increase your monthly payment amount but will save you money in the long run.  Refinancing into a longer term, which is much more common, will have the opposite effect.

These are the three primary benefits of a mortgage refinance.  Analyze your own financial needs and goals to determine the value that a refinance can offer you.


Thinking About Refinancing? Now May Be The Time.

Interest rates are trending better, and it could be the time for you to take advantage.

Yesterday, mortgage bonds were trading at prices that were tipping towards the resistance level of the 200 day moving average.  Then today….wow!  The trading day is not over yet, but if bonds close at current levels, they will have decidely crushed through the important 200 day moving average, and this is very positive for the trend on interest rates going forward.

As you are aware (if you read this blog regularly), mortgage rates are determined by the bond market and they fluctuate daily with the market.  This is the reason that we have “rate locks” so that you can take advantage of a good day in the market to lock in your mortgage rate before closing.  This means that the rat you have been waiting to see before refinancing may be close.  If you think it may be time to refinance, give me a call, and I can tell you fairly quickly whether it is in your best interest or not.

You can also check out the latest rates at

Reduce your Mortgage Burden

A mortgage is necessary for almost every person buying a home or other piece of property. If you thought that finding a good mortgage lender and finalizing interest rates and other details to your satisfaction was an ordeal, wait until you experience what comes later – the toughest part of the whole mortgage, the repayment.

Making payments each month, on time every time, sometimes the stress of debt gets to you. Wouldn’t life be so much easier if we were free of debts? Well, there are ways to meet this monster head on and see it off as soon as possible. Read on to see how you can pay off your debt sooner and clear your debt long before you are required to.

Take advantage of the Principal Prepayment Technique (PPT): You don’t have to wait for the entire mortgage period to come to an end for you to be debt free. If your loan does not come with a prepayment penalty, paying an extra amount every month towards your principal will ensure that you repay your debt much earlier than you’re supposed to. Since you pay a higher interest amount the longer you take to pay off your loan, the money you save in terms of interest when you repay early is an added cherry that adds appeal to the cake of being debt free. Follow this link for more on the principal prepayment technique.  On a 30 year loan, adding one extra payment per year reduces the term on your loan by about 6.5 years.  This means that if you had a $1000 mortgage payment and you added an extra $83 to the principal every month, you will reduce the term of your loan by almost 25%.

Refinance your mortgage at lower rates: If your home has risen in value over the years, use the equity on it to refinance your mortgage at a lower interest rate. A new mortgage with different rates is a godsend for those who are struggling to make each monthly payment

Work on your credit ratings: Your mortgage amount and your interest rates are based on your credit ratings; improving them improves your chances of asking for a reduction in your interest rates when you refinance, leading to an overall reduction in the total amount you have to pay.

Put your cash back credit card to good use: Cash back credit cards are much better than those that earn you points. First, the benefits are easier to calculate in terms of value, and secondly, well, you can use the cash for anything rather than the select gifts that points award you. Use the cash you get back from using your credit cards towards your mortgage payments. But make sure that you don’t go overboard by spending rashly using your credit card and exceeding your credit limit or spending on unnecessary things. Remember, the purpose of the whole exercise is to reduce your debt burden, and you certainly don’t want to be jumping from the frying pan into the fire, or from the horrors of one debt to another.

This article is contributed by Sarah Scrafford, who regularly writes on the topic of luxury real estate in Canada. She invites your questions, comments and freelancing job inquiries at her email address:

Foreclosure Filings Continue To Soar

Foreclosure filings for last month were up 48% over the same period last year.

According to a recent article on MSNBC, 261,255 homes received some sort of foreclosure filing in the month of May.  This is an increase of 48% over May 2007, and a 7% increase from April.  Additionally, a report by Credit Suisse has predicted that as many as 6.5 million mortgages will fall into foreclosure over the next five years totaling 8% of the entire housing market.

Estimates are that between 50 and 60% of home owners in foreclosure will lose their homes.  The rest will be able to either sell or refinance.  Many of those sales will end up being “Short Sales”, meaning that they will sell for less than what is owed on the property in order to avoid foreclosure.

Friday May 16, 2008

The Bond Market Rallies Leading The Way For Mortgages Rates To Plunge.

Bond Market Rallies

Strength in today’s mortgage bond market could lead to a great opportunity for home owners looking to refinance.

As usual, what is good for the economy is good for stocks and bad for bonds and vice versa. And, what is good for bonds is also good for mortgage rates. This morning, the bond market was lumbering along without much going on…and then the University of Michigan’s Consumer Sentiment report came out with the worst reported numbers in 26 years. This triggered a buying frenzy in the bond market, and mortgage bonds are currently trading at 70 basis points higher than the open.

On the surface there was good news in the housing market with Housing Starts for April up to 1.038 million, up from March’s 932,000 and significantly higher than the projected 940,000. I say on the surface because even though housing starts and building permits are up, it is yet to be seen how oil prices hitting record highs on a daily basis will affect the costs to build later. (Oil hit a new high again this morning at $127.43 per barrel).

Goldman Sach’s (one of the world’s leading securities firms) said today that they expect oil to hit $141 per barrel by the end of the year, and as much as $149 in 2009. If this is true, you better dust off the solar panels and check the air in the bicycle tires because this may be a bumpy ride.

As far as mortgages go, the bond has soared past resistance levels at the 25, 50 and 100 day moving averages. With strength like that, we may see push in the refinance market soon. If you are even considering refinancing, get your ducks in a row as movement like this will correct itself quickly, and the window of opportunity will be short.

What Do You Do If You Have An Adjustable Rate Mortgage Coming Due?

Hundreds of thousands of adjustable rate 3/1 ARMs were originated in 2005, and will be resetting this year. So what do you do if you are faced with this?

Adjustable rate mortgage ARM

Millions of home owners nationwide are concerned about the economy, the real estate market, and the rising energy costs. As if that weren’t enough, many of them have a ticking clock on their mortgage rate that will be adjusting soon. Like sands through the hourglass, that day will eventually come and you can bury your head in the sand and hope that it goes away, or you can be proactive.

So, what are your options if your ARM is coming due?

  1. You can allow the rate to adjust if the difference in the new payment is negligible and you can still afford the payment after the adjustment. this will depend largely on the index that your loan is based on. If you have a treasury index loan, it is likely that you will have a larger adjustment than if you had a LIBOR index loan. This of course was just the luck of the draw at the time you got your loan as to which one had the better rate at the time. But, the LIBOR loan is more likely if you were in a non conforming type underwriting scenario such as “stated income” or “interest only” or both. If this is not a problem, you can sleep better at night knowing that your payment adjustment will not be the end of the world.
  2. If you can not afford the new payment, you may need to refinance into a fixed rate loan. Fixed rate loans are still very competitive right now, and as I write this, the national average is 6.05% for a conventional 30 year fixed rate mortgage (there is a lot of fine print with that quote that includes primary residence, 20% equity, no cash out at closing, etc.). If you have an adjustable rate, and you have equity in your home that will allow you to refinance, it may very well be worth it even if you take a higher rate than you have currently. For example, if your current rate is 5.5% and it will adjust this year with a maximum adjustment cap of 1%, you may consider refinancing at 6% for the long term security of knowing that the rate will never adjust again, rather than wait for the adjustable rate to move to 6.5%.
  3. If your overall financial situation has changed, and you can no longer afford the payment regardless whether you refinance or not, you have to sell. The government is not going to step in and save you, and neither will your mortgage company. All of the consumer protection discussions going on have nothing to do with changes in lifestyle, they directly address mortgage practices that took place at the time your loan was originated. So be aware, you have to be proactive, particularly if you are past due on your payment already.
  4. If you have no equity in your home, and you can no longer afford the payment, you have 2 choices: 1) Foreclosure, or 2) a Short Sale. A short sale is no easy task, and not everyone qualifies, but it is worth the hassle to not have a foreclosure on your record. A short sale, simply put, is getting a buyer to pay less than what you owe on the property, and convincing the lender to accept that as payment in full. This is not a new program, but it has exploded in popularity in the last year. This option will affect your credit in about the same way that a credit card account would where they agreed to settle for less than the amount owed. it is not a glowing recommendation on your credit, but it is significantly better than a foreclosure.

There are obviously more details involved in your situation than what I have covered here, but hopefully this helps to put your options out on the table.