13 May 2008
By using a refinancing loan to get better terms on your mortgage, you may be able to increase the length of your mortgage or increase your ability to repay... read full story
3 April 2008
A refinancing loan is for the times where your financial situation changes for the better, but due to your previous financial difficulties, you've been stuck with whatever home loan you could get... read full story
If you're tired of paying higher interest rates, then you may consider the option of taking out another mortgage. Refinancing can help improve your financial situation in more ways than you can imagine. It can help you pay lower interest for your old mortgage loan and also use home equity as source of funds. However, a refinancing loan isn't for everybody, which means that you need to first have a clear assessment of your current status. Do you have a stable income source? Is your business losing money? Or perhaps, you need immediate funds for home renovation or the college education of your kids? These questions will help determine if the savings on interest will compensate for the price you have to pay for refinancing. You likewise have to consider how long you're willing to wait for the break-even.
Refinancing a loan may be beneficial for some homeowners. To know if this will be best for you, might as well take a look at the advantages it may provide.
Market rates will help you decide when is the best time to refinance a loan. A drop in current interest rate could mean that you're paying more than you should. However, this doesn't mean that you should consider refinancing as the best financial move. Think about the refinancing cost and home equity first. And, how about pre-payment penalties and the duration of your stay? Most often, refinancing is a good option if you intend to stay in your house over a longer period of time to reap off the following benefits:
*Getting lower interest rates
With lower interest rates through a refinance loan, you may also cut the cost of your monthly charge. This will help you pay off other debts and develop a better savings plan.
*Changing the mortgage terms
You may extend the loan term to few more years if you want reduced monthly payments. This will help carry over the cost of interest more lightly on your budget. But if you think you're paying more for interest because of the extended period, you may also choose to have shortened mortgage terms. The monthly charge may be higher but at least, you get to fulfill your financial obligation in less time, helping you save more from piling interests.
*Enjoying more flexible alternatives
Refinancing can provide more convenient options for you. If you think an interest-only payment term will help you manage your budget more wisely, then you can take out this type of loan so you can use your money for other meaningful expenditures.
*Having extra cash
Through home equity, you can use the money for other plans such as home improvement, vacations, or college education. You can also use the fund to pay off other debts. Just make sure that refinancing a loan can give you more favorable results in the future. Talk to a financial counselor or a loan specialist to discuss its full-term benefits.
When applying for a refinancing loan, the last thing you should do is to disappoint the loan officer. Make sure that you keep this list of do's and don't's in mind to improve your chances for easier loan approval:
1. DO keep your job. Change of employment may affect your qualification. Being laid off from work will undermine your ability to provide for loan payment. With a new job, the salary you receive during the probation period may not be considered yet as a proof of income.
2. DO maintain a good credit score. As much as possible, don't make late attempts to repair your credit. Develop a better plan for paying your loans, monthly bills, and other expenses so you won't have a hard time explaining your situation to the loan officer.
3. DON'T buy anything new prior to application. Buying a new car or expensive furniture may affect your debt-to-income ratio. This may increase the amount of your total debt and decrease the loan amount you may get.
4. DON'T make sudden bank account transfers. Avoid sudden changes in your account for these may complicate the process of approval. The lender still has to study new accounts and verify each of them.
5. DON'T consolidate unless you're asked to. You may ask your financial counselor or the loan officer if this will be a good alternative for you.
