Refinancing can be a great money saving tool for homeowners, or it can be the wrong thing at the wrong time. Last year, according the Mortgage Bankers Association, Americans refinanced to the tune of $1.17 trillion dollars. The rising cost of fixed rate mortgages drove that to a mere $938 million this year. That’s still a huge number of people who choose to refinance their homes or commercial mortgages. Here are some guidelines to help you decide if this is the right time for you to refinance.

What to Know Before You Refinance

You need to be able to answer some basic questions about your home or real estate investment before you can make a wise decision about the best time to refinance. For instance, what is your current interest rate? Is it fixed or variable? Is your home’s value increasing? Can you afford the closing costs associated with refinancing? What are your plans for your home or real estate?

This background knowledge will help in several ways. If you plan to move within the next three years, or if the difference in interest rates in less that 1.5%, then refinancing might not pay off right now. Remember, once you refinance you need time to recoup the closing costs you have invested. However, if you have a variable rate that is climbing, or a significantly higher fixed rate, refinancing may offer you some appealing options.

Why People Refinance

People refinance for different reasons. In many cases, the decision to refinance can help to reduce your monthly payments and interest, or reduce the life of your loan and the principle owed. Others obtain a cash-out closing to make home improvements or pay off consumer and credit card debt. This method usually doesn’t lower your payments.

Before You Decide to Refinance

But before you jump into a decision to refinance, be aware that there are costs involved. Closing costs and points will affect how much money you must pay up front to refinance. A point is equal to 1% of the total amount of your loan. You should expect to pay 2-3% in points when you refinance. Just like when you purchased your home or real estate investment, the more money you put down, the lower your interest rate is likely to be. There are instances where you can get a no-cost closeout, and these are ideal, but not always available.

A word of caution; if you find yourself refinancing yearly to pay off debt, you’re not doing yourself any favors. In this situation you are probably increasing both the life and principle balance of your loan amount. This is a short-term fix that can have long-term consequences.
What Can Help

To help get the lowest interest rate when you refinance you can do one of two things. Put as much money as you can down upfront, or use that money to pay off consumer credit card debt. Since your interest rate and the amount you can borrow are tied to your credit score, it can save you money to improve your rating before you refinance.

And don’t forget to shop around. You will find a lot of lenders willing to work with you, and mortgage rate calculators are available on many real estate websites. A little homework now will save you a lot of money later.

Source: Buzzle

Borrowers in California have a wide range of mortgage options. There are many loans created to help people purchase, refinance, and consolidate their debts.

Summary of Basic Loans

Here is a basic summary of some of the loans available to California borrowers:

Payment Option Loans

Full documentation
Stated documentation
No ratios
Up to $3 million
Ignore consumer payment lates up to 90% loan to value ratio
Interest Only Loans

These loans offer the borrower the chance to make a lower payment than a regular loan
Interest only options are available for different loan terms, including 5, 10 or even more years
30 Year Fixed Loans

This is the standard mortgage loan
Options now include a 10 year interest only option
Some lenders even offer an interest only options for all thirty years
40 Year Loans

This is a newer loan term that allows borrowers to have a lower monthly payment
50 Year Loans

This is a newer loan term that allows borrowers to have a lower monthly payment
They are often only fixed to 30 years
90 Days No Payment Loans

These loans allow people to not pay their mortgage for 90 days
They often feature minimum payment loan options
No Documentation Loans

Mortgage lates OK
Verbal verification of employment
Cash Out Loans

Very low documentation to 80% of the value of the property
Nearly all other loans allow for cash out

Source: Buzzle

Refinancing twice can be beneficial. Many homeowners are under the mistaken impression that if they have already refinanced their home, that is it, they can not do it again. Wrong. Many people can, and do, refinance their homes a second time, sometimes more.

Many homeowners are under the mistaken impression that if they have already refinanced their home, that is it, they can not do it again. Wrong. Many people can, and do, refinance their homes a second time, sometimes more.

There is a definite increase in the trend of refinancing more than once among homeowners today. It only makes sense that if something saved you money once and can save you money again, you should take advantage of it; and homeowners across the nation seem to be catching on.

More and more people find themselves refinancing a second time. Some homeowners are even refinancing within a few short months of their first refinance process.

When should you refinance a second time? It’s a personal choice and depends on a number of factors, but a safe rule of thumb to follow is to refinance when you can save one to two percent, or more off your current mortgage rate by doing so.

It’s also important to note that when you refinance a second time, you will be able to deduct the points of the entire current loan off of your taxes. When you’re paying the loan off monthly over a period of years, the deductions for points must be taken gradually as well.

By refinancing a second time, you get to deduct the points all at once. The best way to make refinancing a second time affordable to you is to seek out no-cost refinancing options. By doing this, the only costs you will usually incur up front are the appraisal costs, and if you can use the appraisal from the first refinancing, you will save even more money. The tax savings may even be enough to pay for the costs involved with the refinance.

Of course you should consult with a tax advisor to determine exactly how these rules can benefit you.

So when does refinancing a second time not make sense? When there is a prepayment penalty, especially if you have already paid a prepayment penalty with the first refinance. Before refinancing, it is very important for homeowners to check if there is a prepayment penalty policy with their existing mortgage.

In today’s economy it is so important for consumers to save money and tighten the belt in any way they can, and if that means refinancing a second time, they should go for it.

Source: Buzzle