Best Refinance Mortgage Interest Rate
The best refinance mortgage interest rate online programs are best defined by their purpose, which is to obtain a new loan to repay an existing loan. The best will always be better than the original loan rates unless the current interest rate index has dramatically increased or the homeowner's credit has severely fallen or there is no equity at all in the home. The reason that homeowners can find the best refinance mortgage interest rates is the ease with which to compare companies nationwide through the Internet. As long as the brokerage is certified and licensed to sell in the customer's home state, it can be included as a potential contender for receiving the home owner's business.
Some offers come from companies who want to take over the interest payments that are now being paid to the primary loan holder. In order to receive the best refinance mortgage interest rates, they must offer lower rates and a lower monthly payment than the homeowner is currently using. Whenever there is a decline in federal interest rates, many property owners will seek out the services of a refinance brokerage. If rates continue to decline over a period of years, homeowners will refinance their mortgages multiple times. In fact, in the year 1997, refinancing accounted for over 40 percent of all loan origination in the United States. The benefits of refinancing differ for each borrower. Of course, the best refinance mortgage interest rate online is the most popular consideration.
Other benefits include the costs of negotiating the new loan (new closing costs and discount points), the effect of tax laws on the borrower, and possible new lender requirements such as an adjustable rate instead of a fixed rate loan. There are no definitive standards for refinancing and costs can vary substantially between lenders. The first place to search for a loan with the best refinance mortgage interest rates is with the existing loan holder. If interest rates are down, more often than not a mortgage company will offer the best deals to keep their clients. They know that the homeowner will probably get another loan somewhere else and they must be competitive in this market.
Many times a website will allow a homeowner to search multiple lenders to achieve the best refinance mortgage interest rate online that is offered. A guideline for refinancing is that the rate reduction should be 2 percent or more. However, rate reduction alone will not save money if the costs (closing and points) exceed the savings. A more practical approach is to add the costs of refinancing, and then compare that with the savings to see how many months it will take to recover the costs. For example: A property financed at 10% on a 30 year fixed rate loan is compared with an 8% fixed rate loan. At 10%, $120,000, 30 years = monthly payment of $1053.10. At 8%, $120,000, 30 years = $880.55. That is a total savings of $172.55 per month. If the costs paid for the best refinance mortgage interest rate online are $6300, then that cost is divided by $172.55 which equals 36.51 months just to break even. The savings do not begin until after the 36.5 months.
There are many mortgage brokerages offering a flat and low refinancing fee to make the process of refinancing much easier for homeowners. The biggest moneymaker in the mortgage refinancing business is the commission the brokerage receives, not the official fees associated with the origination of a new loan. Many times a mortgage brokerage commission fee is equal to 1%-2% of the loan amount. For the above example, the mortgage broker's fee would have been $1200-$2400 of the closing costs. Up front commissions and fees can vary by lender and an easy comparison should be made before signing a new loan agreement with one. Comparison shopping is always wise when dealing with companies that claim they have the best refinance mortgage interest rates.
Tax laws treat refinancing differently from a new loan in terms of deductibility of a discount. Even though a discount may be paid in cash for refinancing, the IRS ruled that a discount must be amortized over the life of the loan. This differs from a discount paid by the buyer at the time of purchase on the house, which may be deducted in the year paid, the same as interest. Another tax question that should be considered when searching for the best refinance mortgage interest rates concerns the value of deducting interest on a home loan. The benefit differs with the taxpayer's tax bracket. Thus, a taxpayer in a higher bracket would have greater possible deductions and would need a lower refinance rate to achieve the same benefit as a person in a lower bracket. Using wisdom and understanding in the decisions made concerning the best refinance mortgage interest rate online is the key. "Through wisdom a house is builded; and by understanding it is established" (Proverbs 24:3). The first person to consult when considering financial decisions is God and His Word.
Home Equity Loan Interest RatesHome equity loan interest rates are primarily based on the amount of equity one has in their home and the score reflected on the primary income earners credit report. The charges accrued throughout the life of a loan, using a piece of property or land as collateral, can vary widely depending on the organization that lends the funds and the brokerage firm that represents the lender. With the Internet so readily available to the population, researching many different brokerages and lenders can be done efficiently and quickly. Comparison shopping should be done before settling on the first contacted lender. Competition between lenders and mortgage brokerages is determined through the closing costs that are charged to the borrower and the home equity interest rates offered. There are also banks that will offer this type of collateral based financing in-house. In order to stay competitive, they should offer lower fees because the entire process can be done in-house without the necessary contributions of a mortgage brokerage.
It is important for borrowers to remember that a collateral backed source of financing puts their collateral at risk should default during repayment occur. When a house is used to secure financing for unsecured debt that has been created or to pay for medical or educational expenses, wisdom suggests being completely sure that there are funds available to make the minimum monthly payments. If default does occur, the lender has every right to sell the property in order to pay off the debt. If a borrower is seen by the lender as 'at-risk' then the home equity loan interest rates will be higher. It is important for the borrower to factor in the cost of the higher fees charged before deciding to make application for the financing. Home equity interest rates, when high, can increase monthly payments by as much as 100%, with payment of these fees going to the lender before a reduction in the principle balance is applied. Any type of borrowed money should be paid off as quickly as possible. As a general rule of thumb, if longer than 15 years is needed to pay off debt, reconsidering the amount to borrow should be done. "When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou has vowed" (Ecclesiastes 5:4-5).
In order to get the lowest fees a lender offers. A borrower should investigate their credit report score before making application for any type of financing. Once the report is obtained, checking for any mistakes or misinformation should be a priority. There have been cases of individuals who have had credit reports mixed up with others of the same name and by the time they found out, had already begun paying higher than normal home equity loan interest rates to a lender. Once the promissory note is signed, only a court order issued by a magistrate can re-open the lending and repayment terms for change. If the credit report is accurate and the score is lower than desired; a great way to quickly improve the number is to pay down balances on revolving credit accounts to 25% or lower than the limits given to each account. By widening the cushion between a credit balance and limit, creditors feel more comfortable lending money with less risk of payment default. This in turn allows the borrower to receive lower home equity interest rates which directly creates a lower monthly payment and/or repayment term length. The goal to achieve payoff status within a 15 year time frame is possible with the help of lower lending fees.
In addition to obtaining a personal credit report and attempting to improve the score before making application to a lender; a borrower should have their house appraised. Ideally a borrower will want to have more equity in the house that they are requesting in borrowed funds. For example: if a couple owns a house and has a mortgage balance of $100,000 left to pay, and the house appraises for $150,000, they should request secured financing for an amount not greater than $35,000. This leaves a $15,000 cushion between what is owed on the house and what is paid off. The bigger the cushion, the lower the home equity interest rates offered by the lender will be. If a borrower is aware of their appraisal and mortgage balance, as well as their credit reporting score, they can contact multiple brokerages and lenders directly to receive accurate quotes on home equity loan interest rates.
It is suggested that a borrower, interested in this type of secured financing, compare at least 5 lenders or brokerages representing lenders before deciding on a specific organization to process the financing through. First, a prospective borrower should check with the holder of the original mortgage. The first mortgage holder may offer the lowest fees simply because they want to keep all of the lending business for a property they already have an interest in. Next, the Better Business Bureau should also be contacted for a review of a company's reputation directly compiled from previous customers. A company with a record of satisfied clients and complaints that have been resolved should be sought after. Finally, a thorough researching attempt should include a list of referrals from friends and family that have been satisfied with their experience with mortgage lenders. Another's experience with a particular lender can be an adequate predictor of the kind of service a new borrower will receive.