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By admin On February 5, 2010No Comments
With almost everyone looking for ways to lower their monthly bills, many people are refinancing their mortgage. When done properly, refinancing a mortgage can have both immediate and long term benefits. But, is it a good financial move to refinance your home? And, how can you be sure that it’s the best option for you?
There’s a lot of advantages in refinancing a mortgage. It’s a great way to save money on interest and have lower monthly payments. It’s also an excellent way to obtain extra money if you’re planning on doing some home improvements. But, it isn’t always the best option for everyone, it depends upon your specific circumstances.
One of the main factors you need to consider before refinancing your home is whether or not you plan to stay in the home. Even when you can get a much lower interest rate, if you plan to sell your home in a few years the closing costs may out weigh the savings you’ll see on the interest charges.
Even when you do plan to stay in your present home, there are still other factors that you need to consider.Closing costs and fees average several thousand dollars. And, if your monthly savings over the term of your current mortgage doesn’t equal more than the costs, you might be better off with your current mortgage agreement.
While most experts agree that a lower interest rate of just one or two percentages indicates a good reason to refinance, it depends on how much you owe on your home. If the balance on your mortgage is substantial, a one percent interest reduction can be a huge savings. But, if you have a lower balance, refinancing might not make much sense.
If you have an adjustable rate mortgage, refinancing for a fixed rate mortgage can be a good financial move. At a time when interest rates are rising, a fixed rate can guarantee your set monthly payment. You won’t need to worry about your payment raising with the market and you will be better able to budget your monthly income.
You should also consider refinancing if your credit rating has improved since you first bought your home. Your credit score has a big impact on the interest rate you receive. A low credit score means a high rate and if your rating has increased you will be able to refinance at a much lower rate of interest.
Whether or not you should refinance your mortgage is all about the bottom line. As a general rule if you can recover the costs of refinancing your home within two or three years, you probably should refinance. And, if you want to consolidate your debts or just need a large sum of money, refinancing might be the only way you can get the money you need.
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By admin On January 23, 2010
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It has been proved through a lot of statistical evidence in the form of government based agencies that student debt is on the rise. It is growing at a shocking rate of 25 to 27 percent every year. One of the reasons to blame for this is the economic decline that the world is going through. Banks have tightened their grip and are now cautious about giving loans and are prompt about recovering them. That leaves student with little choice as they go through depression because they are at dark about how they could possibly pay back the lenders.
Parents, who have high expectations from their kids, are to be blamed for going over-the-top with loans. They take obscene amount of money as loan to fund for their children’s college education and when the time comes to pay the money, they are not able to pay back and expect their kids to pay the money. Students, who also do not realize the gravity of the situation, when the money is being borrowed, find themselves trapped during the recovery process. There has been news about how students have resorted to prostitution, drug trafficking, dropped out of college, stolen money and due to their inability to pay back their school loans.
Students mostly look for part time jobs and sacrifice valuable learning years and productive years of their lives to service the debt. The government seems to have finally woken up and is keeping a close watch on loan agencies who offer high loans with exorbitant interest rates. If you want to postpone paying your student loan for a certain period of time, you can do so with ‘deferment’-an agreement between the borrower and the lender where you call upon the lender to postpone the due date to a certain period.
You can choose deferment of loan over forbearance. Deferment means the interest rate on the loan is frozen and you will not have a bigger debt after the grace period is over. In forbearance, you have to pay the debt with the interest rate that has increased over time. However, deferment of student loans is not given to anyone. If you can prove that you have no job, the lenders will not pressurize you for payments and you can defer the payment. If you are still in college, you are not liable to pay the loan and you can defer the period. If you can show with proof that you are earning less money as of now but your income will rise after you are absorbed in the company or some such condition, you can defer the loan. If you are in constant contact with the lender or the bank and let them know of your situation, they will give the matter its due sensitivity. If you give a strong reason for loan deferment they will comply with your request. However, please understand that such a situation should not arise in the first place; parents should never take high student loans for their children based on high expectations.
By admin On November 7, 2009
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Refinance rates started the month on an upward trend as the stock market has again topped the 10,000 point barrier. Fixed interest rates have steadily moved up from the beginning of October when they briefly flirted with the potential to drop below five percent for thirty year loan terms. Since early October, long term interest rates have been on a slow but steady ascent higher. The upward move with mortgage rates can be traced to a number of areas.
The first item that contributed to pushing long term rates higher was the rapid rise in oil prices. The month of October saw oil rise above $80 per barrel for the first time this year. This sharp increase in pricing helped renew fears over the potential long term effects higher energy prices could have on inflation. Inflation is one of the key components to moving interest rates, a perception of low level risk associated with inflation helps to keep long term rates lower, as investors are more content with their investments. Fears of higher inflation lead investors to seek higher rates, pushing up bond yields and interest rates for loans such as mortgages along the way.
The second factor that pushed up long term rates over the past thirty days has been the perception that the economy is getting healthier. The third quarter report on gross domestic product (GDP) was a shocker for the entire economy. The report highlighted positive economic growth for the first time in the past year, a signal that the economic recession is coming to a quick end and brighter days are certainly on the horizon. This report also was a key ingredient in helping to drive the stock market back above the 10,000 point level. The rise in the stock market tends to dilute the interest in the bond market, which inevitably leads to higher interest rates. The bond market moves like any normally commodity based on supply versus demand and investors pulling capital out of bonds in favor of equities leads to higher interest rates.
The last component that is driving up refinance rates is the FOMC. The Federal Reserve met again this past week and announced their would be no changes to the current monetary policy, leaving rates unchanged for the Fed Discount and Fed Funds rates. This move had no impact on interest rates, as it was all but certain the Fed would not be changing interest rates. The area of the Fed that has the impact to influence long term rates has to do with the Feds commitment in subsidizing the secondary mortgage marketplace by purchasing mortgage securities from Fannie Mae and Freddie Mac. The Fed has reiterated its position that it would like to transition this role over to a private secondary investment market. The process of the Fed pulling out of its role in helping to keep liquidity in place for mortgage bonds is certainly going to add fear into this market, which will have an immediate impact of pushing rates higher. Long term refinance rates remain very attractive as they have remained well under five and a half percent for the entire year (excluding the first two weeks of June) and have provided a great opportunity for eligible home owners to lock in financial savings and reduced interest expenses on their home loans.
By admin On October 19, 2009
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California has become the latest state to target companies taking advantage of struggling home owners searching for help to save their homes. The state is the most recent to join a growing list of governments that have banned companies from charging a fee upfront for a promise to help home owners modify their mortgage. Loan modifications have become one of the most highly marketed financial services over the last two years. Homeowners who are struggling with their finances and face the potential of losing their homes have become a target for shady companies and scam artists.
The purpose of a loan modification is for a home owner to rework their mortgage commitment with their existing mortgage lender to offer more favorable payment terms. The modification may include the forgiveness of payments and interest, reduction to the interest rate or lowering of the principal balance of the note. Borrowers typically explore a loan modification when they are unable to refinance their existing mortgage loan, because they do not qualify or their value is not sufficient to meet the lenders guidelines.
The government has been instrumental in pushing more lenders and loan servicer’s to offer loan modifications through their Making Home Affordable program. This program was put in place earlier this year with a goal of helping five millions homeowners keep their homes and avoid foreclosure over the next two years. The push to help struggling homeowners comes at a time when job losses are mounting and consumers are struggling to pay their bills. To date, the program has been met with mixed reviews and ample criticism for poor customer service from many of the countries largest lenders and loan service providers.
The move by the State of California to ban upfront payments for loan modifications is an action taken to curb private companies from trying to take advantage of homeowners. The traditional marketing pitch is that a separate company will represent the borrower to handle to the loan modification on their behalf, working directly with the lender to negotiate a better settlement. These companies often charged $1000 to $5000 upfront for their services, with no guarantee the lender will modify the borrower’s loan. The changes to the law still allow for individuals to be represented by third party companies, but eliminate the ability of the company to charge the borrower a fee upfront for this service.
By admin On October 6, 2009
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Home owners across the country have been provided with a great opportunity here in October. The national average for a fixed rate home loan has dropped to its lowest level since early January, providing another chance to lock in a historically low home loan rate. Interest rates on average, according to Freddie Mac, one of the nations largest agency lenders have dropped to 5.125%, with .6pts according to recently released figures. These mark the lowest interest rates have been at in quite some time and is great news for homeowners who have yet to take advantage of a refinance mortgage this year.
The month of October is also going to be a pivotal month for home buyers who have less than sixty days to lock to close on a home purchase and take advantage of up to $8,000 in tax credits from the government. The low rates and expiring tax credits are certain to entice buyers who have been on the fence hoping for better deals to move forward with their purchases in the upcoming weeks. The drop with interest rates since June, allows a homeowner to save well over $100 per month on their mortgage if they are in a home with a loan balance over $200,000. This savings is certainly welcome news to potential buyers and current home owners at a time when the economy has yet to pull out of the downward recession.
Mortgage rates have been trending down in the month, primarily as a result of investors aggressively moving out of the stock market. The stock market has shed almost five hundred points, until a recent rally in which the market has recovered some of its losses. The mortgage industry, to date has proven to be quite resilient against upward movement in the stock market, which does not go historic tendencies. In years past when the stock market rises, fixed mortgage rates have always risen in lockstep. This year has proven to be the exception to the rule, as fixed rate loans are greatly benefitting from a decision by the federal reserve to continue to support the mortgage back securities market through purchasing these assets. The Fed’s decision to initially begin purchasing mortgage backed securities in December and again in March helped push fixed rate loans to their historic lows. During the most recent FOMC meeting, the Fed appears committed to continue with this policy of helping to invest in mortgage backed securities. The Fed would like to begin pulling out of this market, but realizes they will provide a necessary bridge between the private markets and the state of the current marketplace to help ensure that the real estate industry has its full support.
The prospect of long term rates moving into the six percent range or higher for the balance of 2009 appears quite low. There remains little to no inflationary pressure in the market today (with the exception of oil). The commitment by the FOMC to continue supporting the secondary market will certainly help keep rates attractive during the transition to marketplace that is more investor driven.
By admin On September 29, 2009
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Homeowners could have another opportunity to lock in record low mortgage rates this fall. Refinance interest rates have dropped to their lowest levels in the past six months, thanks in part to increased demands for long term bonds and further commitments from the Federal Reserve to continue to support the mortgage industry. Home loan rates may have peaked for the year in June, when they rose to the six percent range for a short period of time, fueled by concerns that the U.S. debt levels would scare away global investors. This fear quickly passed, allow rates to slowly move lower over the course of the summer months.
The market remains in a state of confusion. Historically interest rates have tended to move up in conjunction with the stock market. The basis for this movement was simply following the money; investors would take money out of bonds and place them into stocks. The removal of money in the system would force yields to move higher in an effort to continue to attract investors seeking higher rates of returns to offset their potentially investment opportunities in alternative investment programs.
Over the course of the past sixty days, the yield on the ten year Treasury bond has dropped from 3.5% down to 3.3%. This drop correlates to a move in fixed interest mortgage rates of .375%. Long term thirty year loan rates are now available for both refinance and purchase home loans, at or below five percent with numerous mortgage lenders. This drop in rates has positioned long term rates near 2009 low levels and is a great opportunity for homeowners who have yet to refinance their homes.
Mortgage rates have been greatly influenced this year by the Federal Reserve, in years past, FOMC announcements tended to have minimal impact on long term rates. This trend will probably hold true in the future, the big change is that the FOMC has committed billions of dollars to support the secondary mortgage market. Their commitment to purchase mortgage backed loan securities this year immediately dropped rates to historic low levels. The Fed has followed up on this commitment with their recent policy meeting, indicating they would continue to support this process, although they want to begin looking for an exit strategy. This commitment is one of the key reasons rates have dropped to their current levels, offering great opportunities for homeowners to refinance their mortgages and lock in long term rates that allow them to save thousands of dollars worth of interest over the life of their home loans.
For example, homeowners who refinance a $200,000 home loan and drop their interest rate down to 5%, from 6% stand to save $126 per month, $1512 per year and a staggering $45,360 over the life of their mortgage loan. This savings could help fund a retirement program or education savings program.