One More Chance to Refinance in 2015?

January 4, 2015

IS NOW A GOOD TIME TO REFINANCE?

2015 shirtHomeowners who missed the last refinancing boom have been given another chance.

According to a weekly survey by Freddie Mac, average interest rates for 30-year fixed mortgages fell last week to their lowest level in over a year and a half last week. Interest rates are the lowest the country has seen since mid-2013, and remain close to their lowest level in 50 years.

Not many experts expect rates to stay low, however.

According to the Mortgage Bankers Association, 30-year fixed mortgage rates are likely to rise as early as 2015’s first quarter; and should end the year at 5%. The mortgage industry trade group also predicts rates at 5.4% by 2016.

With current mortgage rates low (but expected to rise), U.S. homeowners are submitting applications to refinance by the tens of thousands.

Refinancing can be a great way to save money, but there are times a homeowner should choose to say “no”. For example, because there are costs associated with refinancing, sometimes, refinancing to a lower interest rate mortgage can be more expensive than keeping your current one.

So, how should you determine whether refinancing is right for you?

First, you will want to understand how refinancing works. Then, you should consider your current financial situation and what you plan to accomplish with a refinance.

Click to get today’s interest rates.

HOW REFINANCING WORKS

The mechanics of a refinance are basic — you give a new mortgage which pays your original mortgage in full, leaving you with just the “new” mortgage(s) on your home.

The interest rate of your new loan; and the term of your new loan may be different for your original, but the property securing the loan is the same.

Many people find it simpler to refinance a home than to get the loan needed at the time of purchase. This is because refinance transactions typically require less paperwork and documentation as compared to a purchase loan.

Refinance mortgage rates may be higher or lower than rates available on a home purchase.

Click to get today’s interest rates.

FACTORS TO CONSIDER PRIOR TO REFINANCING

Low mortgage rates are an excellent reason to refinance a home; however, for today’s homeowners, there are other considerations as well.

How Much Equity Do You Have In Your Home?

In general, homeowners may find it challenging to refinance without sufficient home equity. In mortgage terms, “sufficient home equity” can be defined as have a loan-to-value on your home of 80 percent or better.

However, there are a number of refinance programs available to homeowners with less than 20% equity. Two popular programs are the VA Streamline Refinance and the FHA Streamline Refinance.

Available to homeowners with existing VA and FHA loans, respectively, these two streamlined refinance plans ignore a homeowner’s home equity percentage and allow refinancing based on recent payment history. Homeowners nearly always qualify for the VA or FHA Streamline Refinance if when they’re current with their loans and the refinance shows benefit.

For homeowners with conventional loans backed by Fannie Mae and Freddie Mac, two options exist. The first option is the Home Affordable Refinance Program (HARP) which allows for unlimited loan-to-value; and the 97% LTV program for homeowners with at least three percent equity in their homes.

The 97% mortgage program is available to all homeowners who meet the program criteria; and can be used by homeowners with existing FHA mortgages to “cancel FHA MIP”.

What Is Your Current Interest Rate?

When you can lower your current interest rate, it may be worthwhile to refinance your home.

Lower mortgage rates can mean lower payments but, for many homeowners, the deciding factor in refinancing to lower rates is going to be some variation of “how long it will take recoup your loan closing costs?” For example, if your refinance carries total closing costs of $3,000, and you save $100 monthly with the transaction, the general thinking is that you should not refinance unless you’ll be in your home for at least 30 months.

However, there are other considerations with a refinance including getting “cash out”, and the value of having access to extra money today.

Choosing a lower mortgage rate can be a good reason to refinance — it just shouldn’t be the only reason.

Click to get today’s interest rates.

What Are The Closing Costs To Refinance?

Closing costs are an important consideration when deciding whether to refinance and there are three ways to handle your costs.

The first way to handle your costs is to pay the minimum at closing, in cash or as part of your loan balance. For example, if your closing costs total $2,500, you can opt to bring $2,500 to your closing in the form of a check; or you can add $2,500 to your loan balance.

In both instances, you are paying closing costs from your own money — either as cash or in the form of home equity.

The second way to handle your costs is to elect to pay discount points, which lowers your mortgage rate below “standard” market rates, in cash or as part of your loan balance. 1 discount point costs 1% of your loan size such that a $250,000 loan with 1 point will carry an additional loan fee of $2,500.

In general, paying 1 point will lower your mortgage rate 25 basis points (0.25%). This will result in lower monthly payments and, eventually, you will save more on your payments than you paid in points at your closing. Recouping your discount points could take as few as 12 months or as many as 60.

The third way to handle your closing costs is via a zero-closing cost mortgage. With a zero-closing cost, you willingly accept a slightly higher mortgage rate from your lender in exchange for having all of your loan closing costs paid on your behalf. In general, on a $250,000 loan, a mortgage rate increase of 25 basis points (0.25%) will convert your loan into a zero-closing cost mortgage.

Zero-closing costs mortgages can be sensible for homeowners whom expect to move from their homes in the next few years; or whom expect to refinance within the next 24 months.

For homeowners planning to make their next refinance last 30 years, zero-closing cost loans can be the most expensive route. Mortgage calculators can be a helpful tool to determine which program works best.

Do You Want To “Own Your Home Sooner”

Another consideration for refinancing households is whether you want to extend or reduce the number of years until your mortgage is paid in full.

For homeowners with an existing 30-year mortgage, refinancing to a new 30-year mortgage may yield tremendous monthly savings. However, the new loan will reset your years of indebtedness to thirty. Long-term, you’ll still save money, but you’ll be paying on your loan for more years overall.

Not wanting to “start over” is one reason why the 15-year mortgage is a popular refinance choice. 15-year mortgage offer low mortgage rates and fewer years to repay in full. It should be noted that payments on a 15-year mortgage are higher as compared to 30-year loans, but over the life of the loan, today’s 15-year mortgages save homeowners 65% in mortgage interest costs.

With its huge long-term savings, the 15-year mortgage can be an excellent way to save for homeowners to plan to retirement or to save for college tuition costs.

GET TODAY’S REFINANCE MORTGAGE RATES

Deciding whether to refinance is a personal decision. Consider how long you’ll be in your home, how much you’ll save each month, and how long it will take to recoup your costs. Thankfully, with mortgage rates low, the market is ripe for homeowners to take action.

Click to get started. 

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The Road to Mortgage Ready Credit eBooklet

January 19, 2013

by Brian Short

Mortgage Ready Credit coverThe Road to Mortgage Ready Credit with Brian Short – The 22 page booklet carefully explains 1) What is good credit, 2) What is a Credit Score, 3) What improves your credit, and 4) Other Credit Issues which could keep you from qualifying for your upcoming home purchase or refinance loan.  Down load this eBooklet for your use or forward to a friend or loved one who is considering a home purchase or refinance in the coming months.


GOING UNDER: America’s Debt Dilemma

November 1, 2010

STEPS TO END IMPULSIVE BUYING

1.  Identify your problem.

2.  Build a support network. Have friends, or relatives help talk you out of unnecessary purchases and share your successes in resisting temptation.

3.  Assess current debts and income and build a workable budget for paying off debts. (Do not continue to increase debts.)

4.  Approach your creditors to negotiate payment plans you can fit into the budget you’ve built.

5.  Use your support network to help you change your buying behavior.

6.  Set up realistic financial goals and a timetable for meeting them.

7.  Keep track of your progress; share your successes. Do what you can to stop backsliding, but don’t dwell on it.

8.  Pay off all outstanding credit card debts.

9.  Set up new guidelines for responsible credit use.

10.  Begin saving money for your financial goals.

11.  Reward yourself for accomplishments (not by spending money).

12.  Check your financial status regularly and adjust any backsliding. Set new financial goals as you accomplish the old ones. And, most important — now that you know the way, help someone else who might be tangled in debt.

Source: Debtors Anonymous


 Answers to the Credit Dilemma

What students can do:

1.  Educate yourselves by reading and checking the Internet on what card companies are up to. (See accompanying Web-site information).

2.  Don’t give up just because you’re in debt. Most students can salvage their situation by addressing it early. Don’t be afraid or embarrassed. Ask for help early. Problems with long-term blemishes on credit reports occur when students feel they can’t win and give up.

3.  Get only one card, for emergency use only. Not many horror stories of debt occur when students have one major card. The danger comes when other companies continue to mail pre-approved offers — and students take the bait. Do not get cards from furniture or department stores. Nightmares about credit seem always to include those secondary cards.

What parents can do:

1.  Teach children early. MasterCard is not shy about putting a card bearing its likeness into a Barbie doll’s hand, so parents should work equally as hard to combat those approaches.

2.  Be ”nosy” about your child’s finances even if he or she is 20 or older. That may be when they need snooping most.

3.  Be a role model. Children will follow Mommy and Daddy’s lead. Will yours see you do the right things?

What companies can do:

1.  Give people accurate information about interest rates. Eliminate the fine print on the back of monthly statements. Bring that information out front, in clear language and charts. Looming legislation may help.

2.  Put the owner’s picture on every card, as Citibank does now. If the industry truly wants to lower card thefts, this would be a major step forward. The idea is simple: If the shopper doesn’t match the picture on the card, clerks should not sell them anything.

3.  Stop targeting teen-agers.

 

What universities can do:

1.  Make personal finance mandatory to graduate. Students should be required to get at least a ”C” for credit. National statistics, surveys and personal testimonies show that students need lessons in personal finance.

2.  Ban solicitors from campus, or at least limit their visits. Make them put away the candy, toys and T-shirts — free gifts designed to attract student interest.

3.  Credit is a privilege. Require people under 21 to take a test on money matters before qualifying for a card. In most states, no teen can get a driver’s license without passing a test. It should be that way with credit cards.

TIPS FOR AVOIDING DEBT

How you handle your credit and finances is as individual a choice as picking a toothbrush. But here are some general tips to help you stay out of debt, or avoid getting there.

•If you have many cards, cut up all but one. Experts say one is enough. Two is OK for theft of the other card or an emergency.

•Ignore the Joneses; keep up with yourself. Much of credit card hype involves status. Chasing fads can tempt even the most disciplined consumer to spend.

•Pay your entire balance every month. If you can’t, pay as much as possible. Some months, double or triple a payment, but make reaching zero balance a priority.

•Don’t be intimidated by card firms. NCCU sociology professor Ike Robinson likens them to bullies.  ”It’s about power,” he said. ”These are very, very powerful companies with vast resources preying on vulnerable, unstable young people. And most of these youngsters are coming from homes that are not usually affluent.”

•Be like David: Grab your slingshot and fire away at Goliath. Complain if you get hit with improper penalties, late fees or over-the-limit fees. Scrutinize your statement for phony or wrong charges. At least once, photocopy the fine print so you can enlarge it and see what it is saying.

•Network with friends and family to find ways to deal with card companies. Just as you discuss getting the best deal on a car, talk about how you can combine brain power to get the best credit deals possible.

•If you are a parent, teach your child about responsible money management, regardless of age.


Get familiar with your credit report

One of the most important tools you have to rebuild financially is your credit report.

It is the one item that will tell you what creditors are saying about how you handle money, loans, car payments — and credit cards. It also will show how often you apply for credit.

In an age when employers increasingly are asking to see credit reports, you need to arm yourself with information. Become familiar with every item on your report and get them from all three major agencies: Experian (TRW), Equifax and TransUnion.

The first step is to contact the agencies. Call to find out what information you need to send them. TRW will send a free report if you request it. Call 1-800-392-1122. Equifax charges $8. Call 1-800-685-1111. TransUnion charges $8. Call 1-800-916-8800.

Be sure to order a report from all three agencies — to compare and to have the most complete information about your credit history. One agency sometimes will have information that conflicts with figures from another agency.

Here are some common questions you may have when the reports arrive.

Q. How can I get a mistake off my record?

A. According to Equifax, you will have to document the details of the problem in writing.

Some reporting agencies will include a form to use for disputes over information you believe is wrong. The reporting agency then will check with the companies that say they gave you credit. Information that cannot be verified will be removed from your file.

Take up disputes with the company that is the source of the information in question.

Q. What if I still disagree with an item after it has been verified?

A. Send a brief statement for your credit file that will be disclosed each time your file is checked.

Q. What in my credit file could keep me from being approved for credit?

A. The answer varies. It could be directly related to items in your file. Your credit could appear to be perfect, but you could be denied because of not living at your current address long enough. Also, having too many inquiries could make stores think you constantly are applying for credit. If you have questions about why you were not approved for credit, contact the store that turned you down and ask why.

Q. How long will bad credit information stay on my report?

A. Most comes off after seven years. If you filed bankruptcy, it might stay on there for 10 years.

Q. Who can look at my credit report?

A. The law says credit bureaus can disclose any information about you to any person with a ”permissible purpose” for seeing the information.

That could include landlords, car dealerships or employers — anyone who wants to see your financial habits. Your report will show who has been requesting information about you and when they requested it.

Sources: Equifax Credit Information Services; ”Get a Financial Life,” by Beth Kobliner

 CREDIT HELP ON THE WEB

Listed below are Web sites and telephone numbers that should help anyone seeking more information on credit companies’ relationship with college students:

1.www.JumpStart.org — JumpStart is dedicated to increasing financial literacy among teen-agers and children. It is excellent for parents and children. (202) 466-8613.

2.www.ftc.gov — The Federal Trade Commission has a site loaded with information in easy-to-understand English. The publications page should be helpful. (404) 347-4836.

3.www.abiworld.org — The American Bankruptcy Institute site is a must for anyone thinking about filing bankruptcy. This a nonprofit organization that won’t push for or against filing. But it will provide a plethora of information for you to make an informed choice. (703) 739-0800.

4.www.debtorsanonymous.org — This is the site of one the first national help organizations for over spenders and debtors. (212) 642-8220.

5.www.fraud.com — This is the national fraud information center. It has vast resources on how to protect your cards and account numbers. (800) 876-7060.

6.www.powersource.com/cccs/ — This is a national site for the Consumer Credit Counseling Service. The service also has a local office that provides counselors who can help people analyze their debt and how to get it under control. The CCCS also can be contacted by calling 800.251.2227,* Books: ”Get a Financial Life,” by Beth Kobliner; ”Expressing America,” by George Ritzer.

Download this Debt Seminar: Click Here