Is it Always Worth it to Refinance a Home Loan?

by: admin - November 20th, 2011   Filed under: Mortgage Tips

You may have been advised to refinance your home loan. Refinancing is a process wherein you would be able to settle or pay off your current home loan through a new loan, which should feature a much lower interest rate and better terms. It is like renewing your mortgage using another one.

Refinancing home loans is gaining popularity as years go by. This is not surprising. Many home loan borrowers have applied for and obtained refinancing especially during the onset of the recent global financial crisis. Are you having a hard time repaying your current home loan? You may avoid hefty penalties and possible default through taking the option to refinance your mortgage.

It is always worth it to refinance a home loan. Numerous home loan borrowers could attest to this. It is actually a strategy to make the home loan more affordable so you would not have to face budget constraints whenever you need to make your monthly amortisations.

Lower interest rates

What most borrowers rave about home loan refinance products is the much lower interest rates. Yes, you could now cancel your current mortgage with astronomical rates. You could always find much more attractive rates. If you succeed in doing so, you could effectively lower your mortgage and of course your monthly repayment.
Such an activity may not be possible if you would stick with your current mortgage. Lenders hardly agree and allow re-adjustments of interest rates. Thus, you would end up paying expensive rates if current interest rates prevailing over the market fall.

Longer terms

Because you are getting a new loan, it is like renewing your mortgage to take another term. However, as mentioned, the overall cost would be lessened because of the lower interest rates applied. You may opt to extend the loan for two, three, or four years (even longer). The longer the term, the lower the monthly amortisation gets.
It would not be ideal if you intend to de debt free soon. But it is for you if you are on the verge of default because you could hardly afford the interest rates and monthly amortisations.

Using the loan for other purposes

Some home loan borrowers intend to use the mortgage refinance plans for other purposes, whether for investments or businesses. This could be possible if your remaining balance on your old mortgage is already minimal. Thus, you do not have to make other costly or secured loans. Your home loan refinance would do.
What’s more? Such products are never hard to find. Those are even easier to obtain. You could opt to take any refinancing product from your current creditor or lender. Doing so would spare you from all the rudiments and tediousness of the loan application process. Or you could opt to get the refinance loan from another lender, which offers much better rates and overall terms. Either way, you could be sure you would be standing to benefit from applying for and obtaining a home loan refinance.
About the Author:  Andrew has been writing about refinance solutions for the last 2 years. Andrew is also a regular writer at Australian Lending Centre

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How To Get The Best Mortgage Loan Rate With Bad Credit

by: admin - July 6th, 2010   Filed under: Mortgage Tips

For most people, applying for a mortgage loan to buy a house is one of the biggest and the toughest lifetime financial exercise. It gets even more difficult for those who have had a bad credit history. Even though people with bad credit are at a disadvantage, lenders do recognize their financial problems and needs and offer them mortgage deals that might not be the best but which at least provide them with an opportunity to own a home.

In order to get the best possible mortgage options, a borrower has to impress upon a lender that in spite of a bad past, he is financially responsible. To convince the lender of your credibility, the foremost thing to do before applying for a mortgage loan is to start clearing the red flags that mark your credit report. Begin by reducing your credit card debts as much as possible. Similarly pay off other debts like car loans or auto debts, particularly if they have more than 9 monthly installments left, since auto debts with less than 9 payments are generally excluded from debt calculations.

The next best thing to do is start saving big for a good size down payment on your home. Since you fall in the bad risk category for a lender, the bigger the down payment, the more it assures the lender of being able to recover his cash in the event of a future default. Do remember to include closing costs when saving for your down payment as they can add as much as 3% to the purchase price. Overall, saving more than 20% of the total purchase price should improve your credibility.

The borrower should target and reduce his monthly liabilities to less than 50% of his total income in order to give confidence to the lender about his ability to repay his mortgage loan without any defaults. It is never to late to get into better financial habits, like reducing the use of credit cards and postponing large purchases. At this point of time, it is wise to hold on to your present job and not make any unnecessary jumps. A steady employment of over two years adds to your image as a consistent and stable person.

Lenders will go through your bank statements to figure out your expenses and incomes. Any unusual entry may raise question marks. If a friend or family member gifts you money to help you purchase your house, make sure the lender know it is a gift and not another loan. Reveal all your liquid and cash reserves that you own since lenders judge your paying capacity from them and generally prefer that they have at least two month’s reserve of the monthly mortgage payments.

Last but not the least, even factors like prompt payment of house rents, phone bills, insurance premiums and other financial bills add to your credit worthiness. Finally, even after you have spruced up your credit image, make sure to approach more than one lender and compare their lending terms and conditions in order to get the best mortgage loan.

About the Author:  Pat Witt
Find tips about bee traps and drone bee at the Bee Problem website.
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