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 Refinancing
Your Home Refinancing your home, there is so much talk about low interest rates it's really hard not to think about refinancing your mortgage. Mormonchic is here to walk you through the process, and to give you the resources and answers you need to determine if refinancing is right for you. This month our article is written by John ("Jack") Hales, a member of the Norman Oklahoma Stake. There are two major reasons for refinancing your mortgage, for lowering monthly mortgage payments or shortening the payoff period. The tragic events of the past couple of months has sent the national economy into a recession. Not only has short term interest rates dropped precipitously to 30 year lows but the longer term-mortgage rates have also dropped significantly, but proportionally not as much as short term rates. Expert commentary on the future of mortgage rates suggest that at least through the end of the year (2001), little rise will occur. Therefore for many refinancing their existing home mortgage is a potential money saving proposition. When making the decision to refinance the issue boils down to monthly savings vs up-front costs. If it costs you $3000 to refinance and you save $50 a month, it will take you 60 months to recoup the up-front costs. Many people refinance to pull equity out of their houses-called a cash-out refinance. These people aren’t refinancing to save money, but rather are borrowing against the house to have money immediately. Tapping into equity, therefore, usually means higher loans and higher payments. If you refinance and can save for example $100 a month in interest, you should use the money to prepay your mortgage-making sure that the loan comes with no prepayment penalty. Thus by getting a lower interest rate you can accelerate the repayment of the loan and in doing so save possible thousands of dollars in interest over the short life of the mortgage. And by doing so, you are actually saving for a rainy day (by having more equity in your house)-if the value of house increases over time, of course-to buy another house. There are a variety of mortgage types to fit differing situations and an individuals aversion to risk. The standard 30 year fixed is most common and least risky as you are assured of your interest rate for the entire 30 years. The time of payback can be shortened to 20, 15 or even 10 years. The result is much less interest paid out during the life of the loan, but larger monthly mortgage payments. Additionally there are adjustable and balloon types of mortgages. An adjustable has a lower rate early in the mortgage anywhere from 1 to 7 years. After that period of time the rates are adjusted based on some interest measure such as Treasury bill rates or discount rates. Balloon mortgages may be for the same short period of time, such as a 7 year balloon. While the loan is amortized over 30 years, after the 7 year period is up the loan is due and payable. At that time the mortgage owner either has to refinance again or pay off the loan. On the average people in the U.S. move every 5-7 years or so, thus they would sell prior to having to payoff a balloon mortgage. Therefore a reasonable estimate as to how long the mortgage will be needed will enable an individual to choose the type of mortgage he wants to get. There are a myriad of sources of mortgage money available, banks, mortgage companies, etc. Also most sources of mortgage money can be found on the Internet. Here are a few that can be checked out for current rates and type of mortgages;
Current interest rate trends can be found at:
A good way to find mortgages is to use a search engine such as www.google.com use search words such as mortgage, rates and commentary,to find out the latest expert think |