Should I Choose Adjustable Refinance Mortgage Rates?

Mortgage refinance rates are rising and if you’re in the market for a new home loan the temptation for many loan officers is to push home loans with adjustable interest rates. Can you limit your risk and still save money refinancing with an adjustable rate mortgage? Here are several tips to help you make an informed decision on your next home loan despite rising mortgage refinance rates.

Mortgage Refinance Rates Are Rising Fast

Have you been procrastinating refinancing your home because you didn’t want to pay the closing costs? Over the past several weeks mortgage refinance rates have jumped nearly one percent across the board. Bank of America is currently showing 30-year fixed mortgage refinance rates at 4.625%, up from just under 4% two weeks ago.

This is a pretty dramatic increase considering two months ago you could have locked in three percent for 30-year fixed mortgage refinance rates.

Interest rates on 15-year fixed rate mortgages are also up, most lenders are quoting mid three percent, where a month ago you could lock 2.5%. The bond market is tanking which is bad news for mortgage refinance rates.

Things aren’t much better for adjustable mortgage refinance rates. Bank of America is quoting 3.375% for their 5/1 ARM, a popular choice compared to 4.625% for 30-year fixed.

What Are You Getting With A 5/1 ARM?

What does that 5/1 Adjustable Rate Mortgage mean? The first number designate the fixed rate period. If you locked Bank of America’s 3.375% today your mortgage payment would be fixed for the first five years.

The second number is the frequency that the interest rate and your payment amount resets after the fixed rate period. With the 5/1 ARM your payment resets every calendar year after the five year fixed period.

Many loan officers are pushing 5/1 ARMS right now because they’re not closing much with fixed rate mortgage loans at 4.675%.

Rising Mortgage Rates Means Higher Payments

If you lock a 5/1 ARM today you might be happy with the 3.357% interest rate for the first five years, but when your ARM starts resetting you could be in for payment shock.

The point here is the mortgage payment you could have gotten two months ago is significantly lower compared to the fixed mortgage refinance rates you’re locking today. This higher payment makes it much more difficult to break even recouping your closing costs to the point where mortgage refinancing may not make sense.

The Mortgage Refinance Rule of Thumb

Should I refinance my mortgage? Will your payment go down enough to recoup your out-of-pocket expenses? The refinance rule of thumb used to state that you shouldn’t refinance unless mortgage refinance rates were 2% lower than what you’re currently paying. This rule is too broad and leaves a lot of cash on the table.

You can use a simple mortgage calculator like this one to approximate your breakeven point. Enter the mortgage refinance rates you’re being quoted and your desired term-length to calculate your new payment amount. The difference between your old payment and the new one is your monthly savings.

Simple Mortgage Calculator

Loan Amount: Years: Interest Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

Divide the amount you’re paying at closing by the amount you’re saving each month and you’ve got the number of months it’s going to take you to recoup your out-of-pocket expenses. If you break even in a reasonable amount of time, (reasonable is subjective for everyone) then paying for a new home loan probably makes sense.

If you do any amount of mortgage refinance rate shopping you’re going to find that lenders have quietly switched to quoting 5/1 or 7/1 ARMs. Why are they doing this? These rates seem more attractive than 30-year fixed mortgage refinance rates meaning they close more home loans.

Who wants to refinance at 5%? Unless there’s no other choice mortgage refinance rates on 5/1 ARMs are an attractive alternative.

How to Shop Smartly for Your Next Home Loan

If you’re considering refinancing with a 5/1 or 7/1 ARM over current 30-year mortgage refinance rates, you should consider the risk of payment shock five or seven years down the road. Most financial analysts are predicting mortgage rates will continue to rise over the next ten years which could leave you with payment shock and no way of lowering your payment.

While locking in 30-year fixed mortgage refinance rates doesn’t sound as good as it did two months ago, knowing that your payment won’t skyrocket in five short years could give you a lot of peace of mind.

Is your loan officer quoting you a 5/1 or 7/1 ARM because the rates are better? If so you might want to question their motivation. Do they have your best interest at heart or are simply looking for a commission at a time when many loan officers aren’t closing refinance loans.

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You can learn more about paying less closing on your next home loan from today’s best mortgage lenders by checking out my Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
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Here’s a quick sample to help you get the lowest home refinance rates without overpaying lender fees…

Get The Lowest Refinance Rates By Improving Your Credit Score

Are you frustrated shopping for a new home loan because the refinance rates you’re being quoted are higher than what lenders are advertising? If so, the likely culprit is your credit score. Did you know that advertised refinance rates are usually based on having a credit score of 720 or higher? Here are several tips before you refi to improve your credit score and make sure you’re getting the lowest refinance rates.

Refinancing rates crept up slightly with the New Year; however, according to the Mortgage Bankers Association demand will remain strong throughout the year. This means there will be a lot of opportunities for you to take advantage of low refinance rates, even if you have credit challenges.

How To Get The Lowest Refinance Rates Possible

If you want the best possible deal on the lowest refinance rates the first step is to get your finances in order starting with your credit reports.

Your credit report is a record of your past finances including car loans, credit card payment history including any collection activity or liens. Credit reports typically go back for seven years. Your credit score is derived from the contents of your three credit reports.

The better (higher) your credit score, the closer your refinance rates will be to what you see lenders advertising. That’s why it’s worth investing a little bit of your team cleaning up the contents of those credit reports.

Just why is that mortgage rate so low?

In this article I’m talking about getting the lowest rates you see lenders advertising. There is a catch when shopping from today’s best mortgage lenders. There’s always a catch right?

When you’re shopping for refinance rates you’ll find that the lowest mortgage rates include discount points. That means you’re paying a fee to get your interest rate that low. One discount point is typically one percent of your mortgage amount and lowers the interest rate by .25%.

If the mortgage rate you’re being quoted requires 1.5 points on a $200,000 home loan you will be required to pay $3,000 at closing just to get the refinance rates you’ve been quoted. Should you pay discount points to lower your interest rate?

Most homeowners want to avoid paying discount points when refinancing. Mortgage rates are still near historically low levels and the amount of time it takes to recoup the fee you’re paying generally makes paying points a bad idea.

When shopping for the lowest refinance rates ask your loan officer for zero point quotes. If you’d like to see how paying this fee affects your payments there is a table on page three of your Good Faith Estimate.

If you haven’t already done so you should head over to the government mandated website AnnualCreditReport.com. The Fair Credit Reporting Act requires the three credit bureaus (Equifax, TransUnion and Experian) to provide you a free copy of your credit report every year. This credit report does not include a credit score; however, if you’re a member of a credit union most offer low-cost monitoring services that include access to your credit score.

When you apply for mortgage refinancing the lender runs your credit and reviews your middle credit score. Suppose your three credit scores are 640, 660, and 720. The lender will base your refinance rates on the 660 credit score. Mortgage lenders use the “middle” score and do not average the three.

How To Improve Your Credit Scores

The most important thing you can do to improve your credit score is to pay all of your bills on time. In the short term you can boost your credit score by paying down the balances on your credit cards below 30% of your credit limit.

While you’re reviewing your credit reports if you find mistakes or inaccurate information each credit agency accepts online disputes you can use to have the information removed. Removing inaccurate negative information from your credit reports can significantly improve your score.

Shop Smartly For Refinance Rates

Many homeowners refuse to provide lenders with their Social Security number when shopping for the lowest refinance rates for fear of damaging their credit score when that lender runs their credit.

It is true that having a mortgage lender run your credit will lower your credit score; however, this is the only way to get an accurate quote based on your finances. If you don’t provide your Social Security number when requesting refinance quotes you’re going to wind up with someone’s guess of what your interest rate should be.

If your credit isn’t where you’d like it to be you risk losing your quoted rates when the lender does run your credit score.

The best strategy for minimizing the impact to your credit score is to limit all of your refinance rate quotes to a two week period. If you do this you’ll only get dinged for one credit inquiry. Always provide your Social Security number when securing mortgage quotes to make sure the quotes you’re getting are accurate.

Click Here For More Details…

You can learn more about getting the best deal on your next home loan by avoiding junk fees and unnecessary points by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
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Here’s a quick sample to help you make the smart choice from today’s best mortgage companies…

Who Will Refinance My Mortgage?

Are you struggling finding a lender to answer the question “Who will refinance my mortgage?” There are millions of homeowners unable to take advantage of historically low interest rates for one reason or another. Here are several tips to help you find a program and a lender to get your application for mortgage refinancing approved and save thousands in the process.

How Do I Refinance My Mortgage?

The most common reason people have been unable to refinance since the housing market meltdown is a lack of equity. If you’re underwater in your home loan and have not looked into the Home Affordable Refinance Program (HARP) you’re missing a great opportunity. The only catch with this government refinance program is that your home loan must be backed by Fannie Mae or Freddie Mac prior to June 1st, 2009.

Most underwater homeowners that are not HARP eligible do not qualify for this reason. HARP 3.0 is rumored to remove this requirement but has not happened yet.

Should I Refinance My Mortgage?

The first thing you need to do is answer the question “Should I Refinance My Mortgage?” Most homeowners do this by figuring out how long it’s going to take breaking even on closing costs. The way you break even recouping your out-of-pocket expenses when refinancing is by lowering your monthly payment.

You can approximate the amount of time it’s going to take you to break even by adding up all of your closing costs and dividing by the amount your payment is going down. This will tell you the number of months it’s going to take to break even. If you sell or refinance again before breaking even you’re losing money no matter how low your interest rate.

Who’s Going To Refinance My Mortgage?

Shopping for a mortgage lender can be a confusing and frustrating process, especially if you’re shopping for a lender’s approval. Many homeowners throw fees and rates out the window only focusing on getting the first approval available. Others focus on getting the lowest refinance rates at the expense of fees. Either approach results in overpaying thousands of dollars, something that can be avoided.

Are you shopping for mortgage approval? Consider focusing your efforts on government refinance programs from the VA, FHA, or HARP 3.0 when available.

You still need to focus on fees and rates but in this case enlisting the help of a mortgage broker can help balance finding an approval with paying less in closing costs.

How Do I Pay Less To Refinance My Mortgage?

Once you’ve decided if refinancing is worthwhile for you the next step is to choose a program. If you need an FHA home loan with a 30-year fixed interest rate then all of your quotes should be for that program. Don’t let a fast-talking loan officer confuse you by quoting refinance rates across different programs.

Comparing mortgage offers across different lenders from identical programs is the only way to make an apples to apples comparison of refinance rates and fees.

Your next step in getting the best deal for your home mortgage is to focus on the fees you can control. Page two of your Good Faith Estimate details the loan origination fee, yield spread premium and any discount points. For most people paying discount points is a waste of money so requesting zero point quotes is a good starting point.

Page three has a comparison table you can refer to if you’d like to see how points affect your monthly payment.

The next largest fee that you control is the loan origination fee. This is paid to the person or company arranging your home loan. Most brokers will tell you that one percent is standard; however, I’ve reviewed community based credit unions that charge as little as $400 for loan origination.

You might find that some loan officers are unwilling to negotiate settlement charges because if they do the lender takes the difference out of their commission. If this is the case simply move on to the next lender. The less you pay closing on your new home loan the more you’ll benefit from today’s low refinance rates.

Click Here For More Details…

You can learn more about getting the best deal from today’s best mortgage lenders by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
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Here’s a quick sample to help you make the best choice for your next home loan…

4 Steps To Getting The Lowest Refinance Rates

Are you shopping for refinance rates from today’s best mortgage lenders and are frustrated to find your quotes are higher than what’s being advertised? There’s more to getting the best deal on your next home loan than just refinance rates; fees make or break the deal you’re getting. Here are several of my best tips to help you get the lowest refinance rates without paying unnecessary fees or discount points.

Refinance Rates Fluctuate Daily, Hourly

Mortgage refinance rates are a function of the market. On the plus side they can’t be manipulated, the downside is that timing the markets is next to impossible. There are however steps you can take to make sure you’re getting the lowest refinance rates and lender available.

4 steps to the lowest refinance rates

  1. Boost Your Credit Score
  2. If you haven’t checked your credit reports in a while your first stop before refinancing needs to be the government mandated website AnnualCreditReport.com. Carefully review all three of your credit reports for mistakes. If you find errors use the online dispute found on the Equifax, Experian and TransUnion websites.

    Once you’re certain that your credit files are correct you can give your score a shot in the arm by paying down the balances on your credit cards below 30% of your limit. Avoid applying for ANY kind of credit while shopping for refinance rates.

  3. Shop For The Best Mortgage Lenders
  4. Some homeowners would rather have a root canal than shop for mortgage refinance rates. Some choose to refinance with their bank just as a matter of convenience. Shopping around will not only help you nab the lowest refinance rates but allows you to pay less at closing.

  5. Compare Refinance Rates & Fees
  6. Don’t rely on the Annual Percentage rate when choosing a mortgage lender. APR is manipulated and the home loan with the lowest APR usually comes with the highest out-of-pocket fees. Use section 800 from your Good Faith Estimate to compare things like loan origination fees across different lenders.

    Don’t be afraid to question any of the fees your lender charges and keep an eye out for junk fees. Lenders cook up all kinds of clever names for many of their fees just to confuse you; keep an eye out for anything resembling administrative, processing, rate lock, or courier fees. These are unnecessary fees that you can negotiate to pay less or not at all.

    Before you do any refinance rate shopping you need to choose a mortgage program and stick with it. Do you need a low payment that never changes? If so, 30-year fixed refinance rates are for you. Think you’ll be moving within five years or so and want the lowest possible payment? Consider a 5/1 Adjustable Rate Mortgage. The point is you need to decide which mortgage program is right for you before doing anything else.

    One of the most common mortgage mistakes is comparing loan offers from different programs. Don’t let a fast talking broker confuse you by quoting refinance rates on a 5/1 ARM when you’ve decided 30-year fixed is right for you.

  7. Lock Your Refinance Rates Smartly
  8. Your mortgage rate lock is the lender’s promise to give you a specific refinance rate for a length of time needed to close. Keep in mind that many lenders are taking 60+ days to close and plan accordingly. If your rate lock expires don’t expect your lender to honor you refinance rates. (there are a few out there that will)

    The duration of your rate lock also affects your refinance rates. The longer your rate lock the higher the impact on your refinance rates.

    How to win the mortgage rate lock game

    Winning with your refinance rate lock isn’t hard. What you need to know is that rate locks come in 15 day increments. Your choices range from 15 days, 30 days, 45 days, 60 days, and onwards and upwards.

    Remember the longer your lock period the higher your refinance rates and payments will be. You need to have a conversation with your loan originator about the time it’s taking to close when refinancing and factor that into your decision when choosing from today’s best mortgage lenders.

    Choosing the lender with the shortest closing time could win you as much as ¼ point on your refinance rates. Locking smartly could save you $20 a month on a $200,000 home loan.

Click Here For More Details…

You can learn more about getting the best deal on your next home loan without overpaying by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
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Here’s a quick sample to help you get the best refinance rates without paying too much at closing…

5 Mortgage Mistakes Even Smart People Make

If you’re thinking about refinancing your home you’re probably already shopping for the best mortgage lenders. Shopping for refinance rates can be confusing and choosing poorly could cost you. Common mortgage mistakes like comparing quotes from different programs are currently costing your neighbors thousands of dollars. Here are a few tips to help you avoid the hazards when shopping for the lowest refinance rates from today’s best mortgage lenders.

Common Mortgage Mistakes You Want to Avoid

  1. Fixating on the lowest refinance rates
  2. Getting the lowest refinance rates doesn’t automatically mean you’re getting a good deal. Especially if the offer is loaded with discount points and junk fees. Do you think choosing a mortgage based on the Annual Percentage Rate is a smart move? Mortgage lenders like to brag about their low APR refinance offers; however, the mortgage with the lowest Annual Percentage Rate usually comes with the highest closing costs and junk fees.

    Sure, you can buy down your refinance rates but if you’re not able to recoup your closing costs you’re losing money no matter how great your interest rate.

  3. Comparing refinance rates & fees across different programs
  4. Pick a mortgage program and stick with it. Don’t let a fast talking mortgage broker muddy the waters quoting refinance rates on a 5/1 ARM when you want 30-year fixed. It’s impossible to make an apples-to-apples comparison of lender fees unless you’re comparing offers from the same program. If you want a 15-year fixed mortgage then you should only be comparing fees from section 800 of the Good Faith Estimate from quotes on 15-year fixed rate mortgages.

  5. Not comparing closing costs correctly
  6. Do you know which of your closing costs are negotiable? Can you spot a junk fee at a 100 yards?

    You already know not to compare fees across different mortgage programs but did you know there are fees you can negotiate to pay less? When comparing refinance offers from today’s best mortgage lenders pay close attention to section 800 of your Good Faith Estimate.

    First, make sure you’re comparing zero point quotes for your mortgage program. Next, separate the fees paid to third parties like attorneys or the title company. These fees should be pretty much the same across different lenders and generally cannot be negotiated. Next, look for junk fees like processing, rate lock, administrative and courier fees. These you can call out and question to avoid paying as a condition of your business. Finally, look at the loan origination fee.

    The mortgage origination fee is paid to the broker or lender arranging your home loan. One percent is common; however, I’ve reviewed credit unions that charge as little as $400 for loan origination. Remember, the less you pay closing on your next home loan the more benefit you’ll get from lower refinance rates.

  7. Choose a mortgage lender based on Annual Percentage Rate
  8. Annual Percentage Rate is the most manipulated marketing tool in your lender’s arsenal. Spend any amount of time shopping refinance offers from today’s best mortgage lenders and you’ll find they quote based on the lowest APR first.

    This is because the lowest APR home loans come with the highest closing costs. The reason this happens is mortgage lenders manipulate their APRs with discount points to make them appear to be the best deal. If you choose the loan with the lowest APR you will have the highest closing costs.

    Always compare refinance rates and fees with zero point offers from the same program across different mortgage lenders. Mortgage refinance rates are still at historically low levers so the only thing paying points does is separate you from your cash.

  9. Neglecting to shop around from the best mortgage lenders
  10. Many of your neighbors simply refinance with their current lender or bank because it’s convenient. Your home loan is the largest financial commitment most people ever make, isn’t it worth spending a few hours to get a better deal?

    Refinance rate shopping isn’t hard and if you follow the tips outlined in this article you’re on track to get a better deal than most of your neighbors. Some of the best deals I’ve found have come from small, community-based credit unions so don’t assume the Wells Fargos and Bank of Americas of the world have the best deals. Pay attention to section 800 and never choose a mortgage based on the Annual Percentage Rate.

Click Here For More Details…

You can learn more about getting the best deal on your next home loan without paying junk fees by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
  • Get My Underground Mortgage Videos
Here’s a quick sample to help you get the best refinance rates without paying lender junk fees or discount points…