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:: HOME :: CREDIT CARDS :: LONG DISTANCE :: INTERNET SERVICE :: LOANS · Main Page · Auto Loans · Home Equity Loans · New Mortgage Loans · Refinance Loans · Student Loans  Loan Consolidation New Student Loans Tips and Advice Calculators· Lines of Credit · Debt Consolidation · Credit Report & Score · Tips & Advice - New! · Calculators - New! · Loan Glossary · Loan FAQ · Info & Resources :: CELL PHONES :: INSURANCE :: ONLINE BANKING :: KNOWLEDGE :: MORE |
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Loan Tips and Advice Center Topic: Refinance Mortgage Loans See the subtopics menu for tips and advice about refinancing mortgage loans. For additional information about loans, see the topic list directly below.
 Refinance Mortgage LoansWhat is a mortgage refinance loan? Lenders offer a wide variety of refinance loans for homeowners. Refinancing a home loan involves paying off the current mortgage loan with a new mortgage loan that usually has a lower interest rate and/or a substantially different repayment plan. Equity is the amount of money a home is worth minus the amount of money the borrower owes on any outstanding loans attached to the house. Homeowners often turn to the equity in their homes when they have a large expense or require funds to pay for a home improvement project. A refinance that results in money being distributed to the homeowners is called a cash-out refinance. Borrowers can often get the best cash-out refinance interest loan rates if ther have an abundance of equity in their home, have excellent credit, and choose the shortest amortization available (for example, a term of 15 years instead of 30 years). ^ Back to top When to RefinanceWhen does it make sense financially to refinance a home mortgage loan? Mortgage loan refinancing can be a good idea in a variety of instances. One of the most common reasons for refinancing a mortgage loan is to lower the interest rate, and this can certainly be a great reason to refinance your mortgage loan. How do you know when it's worth it to take the time to go through a mortgage refinance? The general rule of thumb regarding mortgage refinancing is that you should lower your loan interest rate by at least one percentage point. In other words, if you currently have an interest rate of 7% and you can refinance into a mortgage loan of 6% or lower, it will be worth your effort. Remember that you will probably need to pay closing costs with your refinance, so you want to make sure that you only refinance when it is truly financially beneficial. A small drop in interest rates does not merit a rush to refinance your mortgage loan, especially if you have recently refinanced. If you fall into a pattern of refinancing every single time mortgage rates drop you will wind up paying so much in various fees and closing costs that it will take years before the lower interest rate ever saves you some money. See our refinance interest savings calculator to determine how much refinancing might save you overall and whether or not it is right for you. ^ Back to top The Refinancing ProcessWhat does a mortgage refinance process entail? A mortgage refinance is rarely as complicated as an initial mortgage, but you should be aware that the process of refinancing still involves plenty of paperwork and time. You will have to fill out a full application for a refinance, and many times the refinance application is just as lengthy as an application for a new mortgage loan. Amd keep in mind that there are usually closing costs associated with a refinance. You may or may not need to have an appraisal and inspection done on your home before the refinance can be fully approved, although this varies from lender to lender. Some mortgage refinancing companies will bypass appraisals and instead accept a market value analysis on a home. This is often the preferable option since there are generally fewer fees involved. Refinances do not necessarily have much quicker processing times than initial mortgage loan applications, and refinances go through a legal closing process much like new mortgage loans. ^ Back to top Mortgage Refinance RatesHow can I get the lowest mortgage refinance rates? Mortgage refinance rates depend on several factors, some of which you have control over and some of which you don't. One of the most influential factors is your credit score. When you apply for a refinance loan the lender immediately pulls a copy of your credit report and examines your history along with your score. If you have a high credit score then you will typically be eligible for lower interest rates than someone with a lower credit score. Lenders also scrutinize the amount of equity you have available in your home. A good portion of lenders are not willing to refinance a home that does not have substantial equity, although applicants who fall into special categories (such as loans guaranteed by the Veteran's Administration) may be able to refinance without substantial equity. When you apply for a mortgage refinance you are securing an entirely new loan, so some lenders do look at the entire application when considering what interest rate to offer upon approval. This means that factors such as your debt-to-income ratio and your assets may sway the lender as to what interest rate to offer. Some lenders offer one flat interest rate on refinances regardless of other factors, and these lenders do not offer varying interest rates based on creditworthiness, income, or the equity in the home. The very best refinance interest rates are generally reserved for homeowners with good credit, abundant equity, and an appealing credit application. ^ Back to top Mortgage Refinancing LendersHow can I find the best mortgage refinance lender? If you are in the market to refinance your existing home mortgage loan you're probably looking for the lender who will give you the most attractive interest rate. The first place you look is your current lender with which you already have your mortgage loan. Check out the interest rates that your current lender is currently offering for refinancing and chat with a mortgage consultant to find out what kind of rate you might be able to get. Occasionally, lenders will offer lower interest rates to existing customers. You should also find out if your lender offers any type of rate modification program. Not every mortgage lender offers this option, but if you are merely looking to lower your interest rate and not take any cash out of the loan then a rate modification is a less expensive alternative since it usually does not feature pricey closing costs. If your current lender does not have what you are looking for then it's time to start looking around for an appealing interest rate. You can find nearly endless options for mortgage refinancing online, but don't haphazardly fill out a mortgage refinance application online for a lender you're not familiar with. Take the time to make sure that the lender is reputable before you give them all your personal financial information. ^ Back to top Obtaining EquityHow much equity do I need to get a mortgage refinance? Home mortgage refinancing is available to homeowners who have sufficient equity and relatively good credit scores, but the amount of equity needed in order to refinance varies from lender to lender. Equity is the market value of your home minus any outstanding loans. The industry standard among prime mortgage lenders used to be at least twenty percent of equity available in the home before a refinance loan would incur extra fees and higher interest rates, but this is not always the case. The current trend leans toward more stringent standards. This is a result of the mortgage lending frenzy a few years back that consequently allowed many homeowners to refinance their homes at elevated market values. As market values began to decline many people found themselves actually owing more on the home than it was worth. Combine this with the large amount of homeowners who indulged in rock-bottom adjustable rate mortgages for refinances, which inevitably led to much larger payments than they could afford, and the end result is an entire mortgage lending industry that has become much more cautious about lending standards. For this reason you may not be able to find an abundance of lenders who are willing to offer a refinance of a mortgage loan for homes which you do not hold substantial equity. Lenders who offer cash-out refinancing in amount exceeding the market value of your home still exist, but the interest rates and fees associated with this type of loan can be extrememly high. ^ Back to top Bad Credit Mortgage RefinancingCan homeowners with bad credit get approved for refinancing? Bad credit mortgage refinancing is big business. Although there are plenty of mortgage lenders who are willing to do business with homeowners in this position the lenders are also wary of the high probability of defaults and foreclosures among people with bad credit. But there are options for people with less-than-perfect credit. In fact, in some instances credit history is not nearly as important as a hefty amount of available equity. If you don't have good credit and you also have a small amount of equity then be very cautious, as your loan will be considered subprime. Lenders that specialize in subprime loans can sometimes require excessive fees and high interest rates along with prepayment penalties and other unexpected costs. If possible, before you apply for a refinance of your mortgage you should take some time to try to get your credit score elevated. Even a slightly increased credit score can make a huge difference when the time comes to apply for your refinance. However, if you are in a position where you simply can't wait then you should do as much research as possible in order to find a lender who will refinance your loan for the lowest rate possible. Start with your current lender and then search online to find the best rate for people with bad credit. ^ Back to top
Should you refinance your existing mortgage? This calculator can help you that find out. Enter the specifics about your current mortgage, along with your current appraised value, new loan term, new rate and closing costs. Together, this can determine how much refinancing might save you overall. · Calculate how much you could save in interest
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