Refinance Home Mortgage Guide

As a homeowner there are many reasons you might consider to refinance your mortgage. These reasons include: lowering your monthly payment, cashing out equity to pay off other bills, save money in interest payments, pay off your mortgage quicker, and consolidating 1st and 2nd mortgages.

The Internet makes refinancing your mortgage easy. You can research lenders, compare mortgage offers, and apply quickly online. By investing a little time you can easily locate a mortgage with the best interest rate and terms for your situation. As a homeowner it is important to do your homework prior to shopping around so you will be able to recognize the best deal when you find it. Our free guide “Five Things You Need to Know Before Refinancing Your Mortgage” will help educate you.

A mortgage broker can help you find the best mortgage by doing some of the legwork for you. It is important to contact more than one broker when shopping for a loan so you can compare broker fees along with interest rates, terms, and conditions.

When shopping for a mortgage try to minimize the number of times your credit is accessed by lenders and brokers. If you can narrow it down to 4-5 brokers or companies that can give you multiple mortgage offers there will be fewer requests logged to your credit history.

If you are a homeowner wanting to take out a 2nd mortgage or a home equity loan, you may want to brush up on mortgage basics. Here is a brief overview of mortgage loan terminology.

Amortization This is the single most scary word in the mortgage world. Amortization refers to the amount of interest paid over the term of the loan versus the principal balance repaid. Mortgage loans are front loaded with interest meaning that you will pay more interest than principal at the beginning of your loan. An Amortization table shows you how much you are paying to interest and principal during the life of your mortgage.

Interest Rate The interest rate is the amount you are paying the lender to provide you the loan. Interest rates come in two varieties: fixed interest rates and adjustable interest rates. Fixed interest rates do not change for the entire duration of your loan. Adjustable interest rates change to whatever the current market rate is at the time of adjustment plus the premium amount your lender is charging you. The adjustment period varies from loan to loan; for example if you have a 5:1 adjustable mortgage your interest rate will not change for the first five years; after the 5 year period your interest rate will be recomputed every 1 year. (Hence 5:1)

Principal Balance The principal balance of your mortgage loan is the mount you borrow from your lender. If you apply for a $160,000 mortgage loan the principal balance is $160,000.

Term The term of your mortgage is the duration your lender has given you to pay back the loan. If you take out a 30 year fixed interest rate mortgage you have 30 years or 360 months to pay the loan back. Terms vary depending on the type of mortgage. Common mortgage terms are 1 year, 5 year, 15 year and 30 year mortgages.

Every homeowner loves saving money. You can save a substantial sum of money over the life of our mortgage by refinancing to a lower interest rate. If you have been unsure about refinancing because you might move within the next five years, there are still options to save you money.

Your Credit Score

A solid credit rating is your key to improving your mortgage and finding the lowest interest rate. Lenders view homeowners with good credit as less of a risk; as a result you will receive a lower interest rate for your mortgage loan.

Improve Your Credit Score

Improving your credit is easier than you might think. Start by paying down the balances on your credit cards. If you have cards that you rarely use, close the accounts. If you reduce your debt and pay your creditors on time, your credit score will improve in a short amount of time.

Be Aware of Your Lender’s Lock Period

Once you have selected a lender and a mortgage, make sure you are able to close in the time allowed before the lock period expires. The lock period is the amount of time your lender guarantees your interest rate. If you are unable to close before the lock expires your lender could raise the interest rate.

Pay Points If You Can

Points are prepaid interest. The more you pay up front, the lower your interest rate will be. This will save you much more money over the course of your loan.

Do Your Homework And Shop For The Best Deal

You won’t be able to recognize a good deal until you’ve done your homework. Our free guide to mortgages and mortgage refinancing will teach you the lingo, the industry, and how to spot a good deal.

As a homeowner you may be interested in lowering your monthly mortgage payment or cashing out equity in your home. If you currently have an adjustable interest rate mortgage and are worried about your monthly payments going up, now is the time to refinance to a fixed interest rate loan.

Lower Your Monthly Mortgage Payments - Even If You Have Poor Credit

If you have less than perfect credit, (even downright bad credit) you can still refinance your home and lower your payments. You may have to use a subprime mortgage lender and pay a higher interest rate, but you can still find good deals from these lenders.

To find the best deal for your mortgage you need to shop around from a variety of lenders. Online mortgage lenders and brokers are excellent resources to help you do this. Utilizing the internet and a good search engine you can quickly compare a variety of lenders and mortgage products.

Another way to lower your monthly payment is to select a mortgage with a longer term. The term of a mortgage is the length of time your mortgage lender allows you to pay off the loan. Mortgages traditionally had terms of 30 years; however, 40 year mortgage loans are becoming available in today’s marketplace.

Cashing Out Equity to Pay Debt

If you have equity in your home and are considering cashing out to pay off debts now is a good time to do it. Home equity loans and 2nd mortgages are in strong demand in today’s marketplace. When you pay off excessive debt you will improve your credit rating and make your monthly budget more manageable.

When it comes to financing your home, the biggest mistake you can make is skimping when it comes to doing your homework and shopping around. The more you know in the mortgage industry, the more you will save. To learn more about saving money on your mortgage sign up for our free guide to mortgages and mortgage refinancing.