Refinancing Mortgages
There is just no predicting the future. Sometimes you think you can meet the expectations of your mortgage and pay off the entire mortgage when it is due. Perhaps you were expecting a higher source of income and you already planned on making full payment on your mortgages. However, a turn of events makes it impossible for you to carry out what you had originally planned and instead of finishing off your loan, you might have to restructure your entire financial planning and extending the term of your loan. When this happens, you would probably want to consider refinancing your mortgages to meet the payment requirements and to relieve yourself of the financial stress that suddenly comes upon you without warning.
Refinancing your mortgages need to be for the right reasons. If you are thinking of refinancing your home loans to be able to pay off your credit card debts, you need to think again. You need to understand that credit card debts are unsecured debts and by putting your home as collateral you are taking a big risk of actually losing your home if you are unable to pay your mortgage.
If you are looking to lower your interest rates so you are able to make lower monthly payments, refinancing your mortgages and home equity loans is a good feasible option. But you also have to remember that by lowering the interest rate you will also be extending your loan term. For example, in your original mortgage your loan term is 30 years and after 16 years you decide to refinance your mortgage and end up adding a few years more to your balance of 14 years. You also need to know if it is the right time for you to refinance your mortgages. If you only have a few years left on your mortgage, it is better to just stick with it and pay it off until the loan term ends. After that you will be free of debt.
Qualifying for a mortgage refinance is no different than qualifying for your first home loan. Lenders will still run credit checks to see if you have good or poor credit scores. The only difference is that your lender will appraise your house to see if the value is equivalent to the loan amount you are requesting. Depending on your loan-to-value ratio (LTV), they will determine whether they will approve your application or otherwise. So it is very important that you know the value of your house before you apply for a mortgage refinance.
Another important aspect that you need to familiarize yourself with is the costs incurred when applying for a mortgage refinance. The costs of refinancing will be different than when you were first applying for mortgages and home purchase loans. There will be several different fees you will need to be aware of such as application fee, appraisal fee, closing fee and sometimes survey fee. Be careful and wary when lenders offer you no-cost refinancing because it could probably just mean that they will distribute the cost into your monthly payments. So be sure to ask your lenders exactly what does the no-cost refinancing program entail.
It is also a good idea to talk to your current lender to see if you could get them to do the refinancing for you rather than going to a new lender. If you have very good credit scores, your current lender will be more than happy to keep your business and will probably give you better deals and options. Some might even give discounts or totally eliminate certain fees. So you will end up saving more money than you first intend to. Whatever you do, ask your lender to give the information you need in writing. If you do not understand anything you could always ask for a financial advisor or attorneys advice.
Refinancing is a major decision that you simply cannot take lightly. Therefore it is crucial that you understand every single aspect because you do not want to take unnecessary risks and end up owing more than you originally did.
by: Ask Bill
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