When it comes to a home refinance, things aren't always as easy as they may initially appear; learn how to protect yourself and get a great rate with this easy to use home refinance advice
Home Refinance Advice
- Work with a solid lender. With the recent banking crisis it can be difficult to know which company is solid and which isn't. Take time to verify the credentials of the refinance lender and follow-up by making copies of all paperwork, communication and other transactions. In the event of a problem, you will have the information required to prove your position.
- Don't fall for scams. Always verify the credentials of any home refinance provider prior to relating sensitive information including social security number, banking or credit scores. It's a good idea to check with the Better Business Bureau or other consumer regulatory agency in your state to confirm the agency is in good standing and eligible to write loans. Never do business with a company that requires large up-front fees to gain information or anyone that makes promises that sound too good to be true. Know what typical closing costs and other refinance fees will be before you sign.
- Speak to a credit counselor. If you are interested in home refinance as a way to reduce monthly debt, it may be advisable to speak with a credit counselor first. Sometimes it is possible to restructure or modify current loans or debts to make them more affordable without having to refinance. Depending upon your specific situation, loan modifications, extended payment plans or other payment options may be less costly in the long run and provide the same relief for a fraction of the cost. Remember, the time to act is before you are in serious financial trouble. Plan ahead in order to keep all your options open and then make the best decision for your situation.
- Get it in writing. Refinancing is a complex transaction where time is of the essence; everything from rate locks to points paid are subject to change so always be sure to get everything in writing. Never rely upon verbal approval only. In the event of a problem you will not have sufficient proof to substantiate your position.
- Make copies of everything. You have probably heard the saying to err is human. Well, it certainly holds true when dealing with any type of paperwork. During the course of a mortgage or home refinance you will be required to submit many types of forms and documentation. Take a few extra minutes to make a copy of everything just in case it is needed later. Not only is it a great way to stay organized but it may help prevent the late submission of paperwork required to get the best rate.
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For many people, the ability to refinance your home may reduce monthly expenses and actually improve credit all at once. Contrary to what you might think, refinancing is still a viable option for many homeowners. Determine if it's a good idea to refinance your home with this quick quiz:
Should You Consider Mortgage Home Refinance?
- Are the current mortgage interest rates at least 1 point less than your existing mortgage interest? If so, refinancing your home mortgage might make sense. If interest rates are lower now by 2 points or more than when you bought your home, you should definitely look into refinancing.
- Do you currently have an adjustable rate mortgage, negative amortization or interest only loan that is due to reset or which isn't building equity? If so, today's historically low mortgage interest rates make it a great time to refinance a home loan and lock in low rates on a standard mortgage refinance loan with a fixed interest rate.
- Do you have at least 20 percent or more equity in your home? If so, you might benefit from refinancing by reducing or eliminating the Private Mortgage Insurance (PMI) that you are paying each month. PMI is a type of insurance that is required in many loans where the buyer didn't make a down payment. of 20% or more. In exchange for less money down, PMI provides additional insurance to lenders in the event of a default. But if you now owe 80% or less on your mortgage, you may be able to drop the PMI and that can reduce monthly payments by $70 to $150 or more.
- Is your debt to income ratio nearing the maximum? If you refinance your home, you may actually improve your credit score by freeing up additional income and lowering the minimum monthly payment amounts of your basic bills. By keeping a solid credit score and low debt to income ratio, you will often qualify for lower interest rates on everything from credit cards to insurance… making this a strong strategic move toward lowering all of your bills at one time.
- Do you need to pay for a large one-time out of pocket expense like major medical bills or college tuition? If so, it is often more affordable to take out money when you refinance your home rather than securing additional loans. Just keep in mind, you could be refinancing for up to 30 years so the total cost may be substantially more in the long run. Take time to calculate the cost versus savings for yourself before making a final decision.If you answered "yes" to any of the above questions then you might benefit from speaking to a mortgage broker or lender to refinance your home. It could easily save hundreds of dollars per month. Be sure to consider the refinance closing costs and any other refinance fees in your decision. If refinance costs are nearly equal to what you would save by refinancing, then it may not be worth the trouble.
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The mortgage relief act that has been passed in the state of California is giving a lot of families that have lost their jobs and their homes due to the economic crisis, something to be happy about. Before this act was implemented, if an individual owed a debt to someone and they had this debt canceled or forgiven, the amount of debt that was canceled could be considered taxable income.
By forgiven, this means let's say that a creditor or lender decided to let you settle a past due debt for five hundred dollars less than what you owed. The amount of money that you did not pay, would be considered taxable income, thus meaning you would responsible for paying taxes on that amount of money.
The mortgage relief act was first introduced to the public in 2007. California, which has seen an immense amount of poverty since the outbreak of the economic recession has decided to extend the time frame for this act.
This means, that the act will remain in play until the year 2012. According to this act, up to two million dollars of debts around the world will be forgiven for families, one million will be forgiven if you are married filing separately.
Before this act was implemented, residents that resided in California were forced to pay taxes on any deficit account that was acquired during the processing of a foreclosure, loan modifications or a short sale. Individuals were required to report their canceled amounts on their tax forms and they had to render payment for the forgiven amounts thereafter.
The state of California is allowing anywhere between $250,000 to $500,000 to be eliminated. This means, individuals will not be responsible to file these amounts as earned income, therefore their tax amounts when filing after a home has been foreclosed on and some of the debts have been forgiven are not going to burden them in the least.
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Adjustable Rate Mortgage
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