Is Mortgage Refinancing a Good Idea? by toriola1


									                                               Presented by Daniel Toriola

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                                            Is Refinancing a Good Idea Right Now?
                                                       By Barrett Niehus

    Is Refinancing a Good Idea Right Now? by Barrett Niehus

Is Refinancing a Good Idea Right Now?

By Barrett Niehus

Rates on mortgages are lower than they have been in forty years. This provides a huge opportunity for
new and existing home owners, but also carries risks that can have a substantial impact your ability to
pay in the future. Mortgage lenders are inundated with work, and it was recently reported on national
news that “if you can breath, you can get a mortgage.” This phrase should at the very least frighten the
average mortgage customer. It indicates that not only are the mortgage companies finding new ways to
make money off of their huge list of clients, but they are also circumventing the risk analysis that avoids
putting high risk customers into immediate credit trouble.

The opportunity is immense. For many home owners, monthly mortgage payments can be reduced by
ten to fifteen percent through a refinance. For new home owners, they can afford to pay ten to fifteen
percent more because of resulting low monthly payments. The benefits are substantial and if
addressed properly, the risks can be avoided.

The risk of course is choosing a form of financing with inherent uncertainties and putting your long term
financial situation at risk. One of the most popular mortgage products available today are variable
(floating) rate mortgages. The mortgage rate varies with the current Treasury rate until it is locked in at
a set amount above the future treasury rate three to five years after the date of origination. Many
mortgage customers are fond of this type of funding because it allows them to enjoy a very low rate for
the next three or five years. Unfortunately, the risk involved with this type of loan is huge, and can have
substantial impact on the customer’s ability to pay.

Given that rates are at a forty year low, it is very probable that interest rates will climb substantially
within the next three years. Although most of these variable rate mortgages have interest rate caps
where the lock in rate will not exceed twelve percent, the impact of a rate increase during a lock-in
period can be substantial. To provide an example, suppose you have a $200,000 variable rate

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                                              Presented by Daniel Toriola

mortgage with a 5.5% interest rate. When you first originate the loan, your monthly payment will be
$1,135. If interest rates increase to 12% by the time of your lock in period, your payments will increase
to $2055 per month; where they will remain for the life of the mortgage. For many home owners this
type of increase will quickly lead to default, eviction, and bankruptcy.

Keep in mind that mortgage lenders are sales people, and mortgage brokers are essentially selling you
a product. They make money when they sell you a mortgage. With the current emphasis on low
finance rates, they are inundated with business, and are more focused with getting the loan closed
than with evaluating your future ability to pay. As sales people, they have been given a number of
products to sell, and because of the current frenzy, have been given substantial leeway from the
banks. Therefore, they can forgo many of the risk analyses that were necessary during leaner banking
times and sell whatever mortgage product is available.

With mortgage brokers trying to fund all of the business that they are given, and with mortgage
products that carry high uncertainties, the risk associated with purchasing or refinancing is higher than
ever. If refinancing or funding a new mortgage is the best financial decision for your specific situation,
be aware of the risks, quantify the benefits, and realize that your mortgage lender has a vested interest
in closing the deal.


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                                  Faqs On Getting A New Home Mortgage (Refinancing)
                                                                  By Alan Lim

 Here are some of the most commonly asked questions about getting a new home mortgage. Read
through each of them to better understand the concept of home refinancing.

What is refinancing and what types are there?

Refinancing is simply the process of getting a new home mortgage to replace your existing one. There
are various loan terms available for you to choose from. The most common ones are the 5, 10, 15, 20,
25, 30 or even way up to 40 to 50 years.

Is it financially safe to get a new home mortgage?

Refinancing can most likely lower your current interested rate to an adjustable or fixed mortgage. That
said, refinancing may well be the solution to your financial problems. Refinancing also allows you the
chance to change from your current adjustable rate to a fixed rate and vice versa. It can also allow you
to take some cash out from your equity, lower your interest rates and your overall monthly mortgage
payment. These benefits can be enjoyed only with refinancing, but at the expense usually of longer,
renewed mortgage terms.

How much do I pay for refinancing?

Getting a new home mortgage may cost you some fees and charges which may include application
fees, appraisal and legal fees, closing and other related charges. There are lenders who offer low cost,
or even "no cost" refinancing at the cost of higher interest rates, or deductible from the lump sum
mortgage to be issued. It is not really "free" per se, but you do not pay up front for the mortgage.

Is it a good idea for me to refinance?

It may or may not be a good idea to refinance. The answer to this depends on individual circumstances
and your financial goals. Refinancing may be a good idea if you want to lessen your monthly payment
or reduce your interest rates. However, you should consider other factors as well such as your length
of stay in your home, the points you are willing to pay, your home equity, and so on.

Is it necessary that I pay points to get lower interest rates?

The choice of whether to buy points is also entirely up to you, depending on what you want to achieve.
Points are usually tax deductible in small increments. You can use this to your advantage as well.

How long will it take me to get a new home mortgage?

Refinancing usually takes about two weeks to a month depending on a few factors. If you had a fairly
recent home appraisal, or if you can get appraisal service easily, you can refinance as soon as just a
little over a week. During refinancing peak seasons, it might be difficult to get an appraisal, and you will
experience delays in refinancing.

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How do I shop for a great new home mortgage deal?

Try to get in touch with at least three lenders and check on each of their loan terms, programs and
rates. You can do your canvassing online or through phone.

Can I still refinance even if my credit rating is not so good?

Yes, by all means, do so. The loan terms you will be given may not be as attractive as when you have
a good rating, but it relatively can match it well.

Want to know more about mortgage refinancing and other ways to solve your financial burden? Check
out or and let our experts provide you some sound
advice on handling your finances better.

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