Frank W Ellis asked:




Refinancing is nothing more than replacing your existing mortgage loan with a new loan. If interest rates have dropped since you last financed your home, refinancing at a lower rate (even 1 percent) can save you a lot of money.

You don’t have to be a mathematician to figure out whether a refinance would save you money. You’ll need to know your total closing costs and your new monthly payment to make an estimate. Let’s assume that your mortgage payment is $1250 and you find a lender that will cut your loan payment by $200 a month. That’s $2400 a year!

But wait… The new loan comes with a price. It’s not unusual for a refinance loan’s closing costs to be in the $4000 neighborhood. That’s a lot of money. But, the next question is. How many months will it take me to recover my costs of getting the new loan? At a monthly payment savings of $200 a month it would take 20 months to get back to a break-even point in this case.

After the break-even point it all depends on how long you stay in your home. If you were to stay in your home for 60 months or (5) years after the break-even point, you would save $12.000. Not a bad deal!

Refinancing a mortgage isn’t cheap and it’s not always easy, but when you consider the possible savings, it could be worth your time and effort. Mortgage interest rates rise and fall all the time. A drop of just 1 percent in mortgage interest rates can be enough to make refinancing worthwhile for you.

Herbert

Harris Fallon asked:




A 2nd mortgage loan allows a homeowner access to the equity in his home. This is the appraised value of the property less the amount of the first mortgage. Traditionally, second mortgage loans were used to finance improvements.

Homeowners might remodel the kitchen, add a deck or finished the basement to provide a family room or home theater. The equity was used to send students to college or to provide startup capital for a small business. The second loan for most homeowners was a one-time loan meant to cover a specific purpose.

Twenty years ago only the most credit worthy individuals could qualify for a second mortgage that, when added to the first mortgage, would total more than 80% of a home’s value. When mortgage interest rates declined in the early 2000s, second mortgages became more common. A contributing factor was the housing bubble that caused home prices to rise by double digits annually in many parts of the country.

Large financial institutions began to ease the underwriting restrictions on second mortgages in the 1990′s and by 2001 a homeowner could leverage 100% of the value of his home with a second mortgage loan. The low interest rates were attractive to homeowners. It has been common for those living above their means to consolidate their debt with a second mortgage on their home by refinancing the second mortgage year after year.

In the past, a 2nd mortgage could be expected to be at a higher rate of interest than the first mortgage on a property. Variable rate second mortgage liens were offered with initial interest rates as low as 3%. Some homeowners began to use the equity in their home as a mini-bank. They would take a 10 year second mortgage to pay off credit card debt and their monthly payments on the new loan would be substantially less than the payments made on the high interest credit cards.

However, it is important to realize that when you take a second mortgage loan on your personal residence, you are in a position of increased risk. Almost all second mortgage loans have a cross default policy. That means failure to pay the second loan will cause the first mortgage to go into default and you may lose the home through foreclosure. In the current economy, the rapid decline in home values has meant thousands of homeowners now have first and second mortgages that are much higher than the market value of their home.

Equity in your home is like have emergency cash in a bank account. Homeowners who treat the cash generated by such a loan as an excuse for a shopping spree may find themselves struggling to keep their home. Used wisely, a second mortgage loan is an option available to pay for medical expenses, college tuition, or to improve your property. Used unwisely, homeowners may find themselves facing the loss of their home altogether. As such, you should weigh the extra cash that you generate with the extra risk you will take on before deciding to take on a second mortgage for your home.

Ron

Katharine Norman asked:




Mortgage refinancing can make good sense if you want to make improvements on the house, pay those college fees, or pay-down higher-interest loans. As property prices have gone up and up, homeowners often find they have more equity than they ever dreamed of when they first bought. Richard Syron, CEO and Chairman of the Federal Home Loan Mortgage Corporation — or ‘Freddie Mac’ — says “more than a dozen years of sustained growth in housing prices have turned many middle class homeowners into millionaires; put countless children through college; and made the family home the most valuable egg in the American nest”. Maybe we can’t all be millionaires but, even so, “for the typical family, home equity accounts for the bulk of their wealth,” agrees Frank Nothaft, chief economist at Freddie Mac.

It all looks good, so far. But now that you’ve started to look for that home equity loan — most likely a fixed-term second mortgage, or a line of credit — maybe you’re starting to wonder why home equity rates are generally higher than all those great first mortgage packages?
There are quite a few reasons. For a start, you’re comparing apples and oranges –they’re different breeds of loan, and the interest rates reflect the different features offered by each. But how, exactly, are those interest rates set? Frank Nothaft explains that “home equity loans are typically linked to the prime rate … many home equity loans have rates that are 1 percent or more above the prime rate” and, by comparison, “most 30-year first mortgages are typically below prime”. The interest rate for a typical home equity loan needs to take several factors into account: the risks to the lender, the duration of the loan, the flexibility offered to the borrower, and the amount of the loan in relation to the amount of equity available (referred to as the Loan to Value (LTV).

The first mortgage, of whatever kind, is just that — it’s the first lien on your property, and the first in line if you default on your loans. When you got your first mortgage you put your home up as collateral against the loan. If you can’t make the payments, the mortgage company can proceed with a collection action — in a worst-case scenario, you lose the house to pay off the loan. And, because it’s the primary loan, your first mortgage has priority in any collection action. Essentially, the mortgage company is confident that they’ll get their money back if you default. For a second mortgage, the situation’s different: whether it’s a conventional repayment mortgage or a line of credit (or any other kind of loan), it’s second in line if things go wrong. So that’s a bit more of a risk to the mortgage company, particularly if the value of your house depreciates, or you take out yet more loans.

And then there’s the time factor. The term, or duration, of a home equity loan is usually far less than that of a first mortgage. Most first mortgages are for a period of maybe 15, 20, or even 30 years. That’s because most people want to minimize their mortgage payments as much as possible, especially at the outset, and they’re in it for the long-haul. And, just think about it: while you’re making the payments, you’re paying interest, and you’re making the mortgage company money. You’re a good bet. That’s why, when it comes to first mortgages, companies compete with each other so aggressively to get your custom. And they pass that competition on to you, through lower interest rates.

A standard home equity loan is effectively a second mortgage, and can be a fixed or adjustable rate mortgage. The money is loaned in one lump sum, and payments are made over a pre-arranged duration — just like a first mortgage. But a home equity loan is typically for a short term, possibly only for a few years. Usually it’s for a specific purpose — home improvements, or paying of a debt — and the higher interest rate means most people prefer to pay it off as soon as they can, rather than mount up large amounts of interest. The mortgage company doesn’t have your custom for the long-haul, and it takes this into account when setting the interest rate.

Even so, this kind of mortgage can be far cheaper than the interest rates on credit cards or unsecured loans. As interest rates rise, pushed up by the Federal Reserve’s successive increases in the prime or ‘index’ rate, more and more borrowers are seeing the value of fixed-rate home equity options, in the 10-15 year range. Although these still have higher interest rates than first mortgages, homeowners have the best of both worlds: the comfort of knowing the rate won’t rise, and the ability to improve their quality of life by releasing the equity in their home.

With the other kind of home equity loan, the line of credit, you can draw cash whenever you want, up to your limit. When you pay money back, that credit is released again for you to use, immediately. In that sense it’s an “open account”, a bit like having a credit card, but with lower interest rates. This freedom to dip in and out of the loan can be a boon for the homeowner, who only pays interest on the amount owed, and nothing more — but it is more unpredictable, and less lucrative, for the mortgage company. So you pay that bit more for the flexibility of being able to use the loan as you wish, and that comes in the form of a higher interest rate.

But, given the ability to release your equity and use your wealth when and where you want, it can certainly pay to refinance. Don Taylor, of Bankrate.com, agrees, saying that a home equity loan, or a home equity line of credit (HELOC) can “allow you to restructure your debts or finance something that’s important to you,” and adds that both kinds of loan typically have much lower closing costs than a first mortgage.

Maurice

Loan to Loan asked:


When it is the question of a mortgage, proper care should be taken while choosing one. A little mistake on your part can make you end up paying overages that’ll increase your budget. Hence, it is advisable to opt for the services of a reputed mortgage Broker. The services from a trusted source will not only save your money but will also guarantee you a good mortgage rate with long term benefits. Moreover, dealing with authentic mortgage Brokers also keep your mortgaged property safe. Hence, if you want to bag the lowest home mortgage rates in UK, then try to take the help of a mortgage Broker. While banks and other financial institutions are there to offer you help, dealing with an experienced mortgage Broker has other benefits too. As a borrower, you can also try online financing services. There are a good number of financial service companies. You can choose their services to know about the current mortgage rate in the market.

From the borrower’s point of view, it should be your first priority to bag easily the lowest mortgage interest rates available. If you are one who is on the lookout for the lowest home mortgage rate, then you can also take clues from a mortgage broker. They are a good medium to gain access to a large number of lenders who provide better opportunities to compare mortgage rates and terms. Apart from them, you can also negotiate with banks and other financial institutions to find a mortgage rate that suits your budget.

Some lenders in UK offer capped rates for mortgages, having the maximum interest rates which the borrower is required to pay at any time within the term of the loan. In case of capped rates, there are many early repayment charges. It basically has higher interest rates than those of comparable fixed rates.

Here are some tips which might help you in the quest for a good mortgage quote comparison.

· Consider the Interest Rates

· Bigger Deposits Mean Better Options

· Evaluate Mortgage Quotes having Same Points

· Check the Mortgage Fees

· Consider the Time Duration

· Consider Mortgage Flexibility

Loan 2 Loan UK is a great option in case of Mortgage Loan, However, a great advancement has come into effect in the financial market and the fraternities have turned up with several lucrative offers for the Debt Consolidation.





Laurie

Marina H asked:


I heard that the mortgage interest rates are going down this month. I wan to refinance my house…loan amount is $453k, fico score of 640, SFR, no cash out, full documentation and reserves and my loan to value is 65% . I don’t know if I should refinance now or wait a little bit more. I would like to have more informations about 12/12/07.
Please advise,
Thank you

Jackie