Home loan refinancing has exploded in recent years due to the downturn in interest rates. People who were once paying 8%-10% in interest on home mortgages are now able to get financed at rates as low as 6%. This gives the homeowner a much lower house payment and more money in their pocket. Well, many others are also looking at second mortgage refinancing as well. Here are some tips to help you in this aspect of refinancing.
People get second mortgages on their homes for various reasons. Sometimes it is to get their hands on much needed cash to pay for expenses such as college or a new car, etc. Other times it is to used to purchase a second home. Second mortgages will generally always be much shorter in length than a first. In most cases they run 5-10 years.
Why refinance a second? Just for the same reason you would refinance your original mortgage you want to get a lower interest rate and save money on your loan. It’s a sound financial decision in most cases.
When you make the decision to refinance a second home mortgage, there are some things you should look for before signing any new contract.
– Look at several different lenders to find a good one
– Look online for more information and lending choices
– Always ask questions and if you feel you aren’t getting the right answers…scratch that lender off your list
– Know what closing costs, points and fees will apply to your second mortgage
These are only some of the major points to be aware of when looking to refinance.
You should be able to easily find a good lender if you just ask for referrals and look around. Most people you work with are happy to recommend a lender that they have had a good experience with. Just be careful, check them out, and ask questions. This will assure you that your second mortgage refinancing will go smoothly and quickly.
Usually clients are busy people who don’t want to spend their precious time searching for the best mortgage deal but still want the best deals available. They do need a qualified professional such as a mortgage broker they can trust to review the market and to look in detail at their circumstances. A mortgage broker can and provide them with full mortgage information, the most competitive and suitable loan product, especially in the atmosphere of today’s mortgage market which is becoming increasingly complex and not easy to contend with. A mortgage broker’s expertise can help clients to make substantial savings & secure the most competitive & appropriate loan product.
The majority of mortgage brokers are real experts & hardworking professionals, who help borrowers to get better mortgages and benefit.
Mortgage brokers can help clients who are looking to arrange a residential mortgage for their home, to buy and let / to finance an investment, self-employed clients or clients who have a bad credit history. They act as the intermediary between the banks and the consumers during mortgage transactions.
A good mortgage broker will be able to advise clients as to how much they can borrow, how much their mortgage could cost & also how much could be saved by the clients. The mortgage broker will provide clients with the various tools necessary to make educated, intelligent decisions.
Mortgage brokers will also help clients fill in the application form, they will deal with the lender on clients’ behalf and, should clients need to settle really quickly, the mortgage broker can use his or her best efforts to push the deal through. The mortgage broker can also prepare individual repayment plan for clients which enable them to budget better.
Unlike a lot of banking institutions, which usually ask potential clients only predetermined questions and then, depending upon clients’ answers, provide them with information about their own products ( as opposed to a competitor’s mortgage product that may better suit these clients) a mortgage broker takes a completely different approach – the mortgage broker will search the whole market and will have access to thousands of deals.
Different mortgage brokers have different working styles but many of them are time-flexible and can visit clients in the evening or on weekends. Clients can also contact mortgage brokers or visit them when it suits them best. Banks usually do not have such flexibility.
If clients have atypical circumstances, bad credit or no credit, some other credit problems, bankruptcies or foreclosures, they will be able to really benefit from the advice of an expert who has a deep understanding of the mortgage market & deals with variety of lenders, some of whom may be able to assist. Since the recent global credit crunch (which was primarily brought about by irresponsible sub-prime lending in the United States, lenders in the “bad credit” market have exited as they have not been able to generate funding for this high risk area of lending.
If on the other hand you simply do not have your tax returns in order then your mortgage broker will access “LoDoc” funding which is still available through a number of lenders. The lending ratios for LoDoc have however been reduced, with most lenders only lending to 60% of the value of the security offered.
Most people refinance their mortgage loan when it is up for renewal from its term. Mortgage loans come in a variety of terms, anywhere from six months to 10 years at a time, amortized over 25 to 50 years. Each term of a mortgage loan is its own mortgage loan – meaning that you can change the mortgage loan type you have as well as the term when your mortgage loan renews. If your mortgage loan is up for renewal, it’s a good time to see if you can get a better interest rate on your new mortgage loan by shopping around. However, there are other times when refinancing your mortgage loan makes sense.
Term renewal on mortgage loans is, obviously, the time when most mortgage loans are renewed. It is a time when you can search for a different lender for your mortgage loan or stay with the same lender. However, refinancing your mortgage loan is similar to taking out a new one to begin with, except that you’re not required to have a down payment.
Refinancing your mortgage loan means having a new mortgage loan – you can use this opportunity to change the type of mortgage loan you have, such as going from an adjustable rate mortgage loan to a fixed rate mortgage loan, or vice versa. You can also change the term of your mortgage loan, make it longer or shorter, depending upon your wants and needs.
If you’re term mortgage loan is up for renewal and the interest rates are low, it’s a good time to lock in the good interest rate for a longer period of time with a fixed rate, long term mortgage loan. However if your renewal comes up and the interest rates are high, it’s a good time to go with either a short term fixed rate or an adjustable rate mortgage loan. Adjustable rate mortgage loans’ interest rate changes at various points in the term, which means you could end up with a much lower interest rate, and therefore lower payments when the rate changes.
Need extra money?
Mortgage loan refinancing is also a good time to take out some of the equity you’ve been saving. You can refinance your mortgage loan for higher than is owed to the previous mortgage loan and get cash from your equity to spend as you see fit. The most common uses for equity cash is home improvements, consolidating high-interest debts (such as loans and credit cards), and paying for college tuition for children.
Other times it’s a good idea to refinance
There are other times throughout the term of your mortgage loan that you may want to consider refinancing. If the interest rates plummet, it’s a consideration to refinance your mortgage loan with a longer term, fixed rate mortgage loan. Locking in a low interest rate on your refinanced mortgage loan could mean that you save tens of thousands of dollars in interest payments to your lender.
A word of caution about refinancing mid- mortgage loan term – prepayment penalties come with some mortgage loans and if you have a prepayment penalty on your mortgage loan, talk with your loan officer before you begin the refinancing process.
There’s an easy way to figure out if it’s worth refinancing your mortgage loan mid term and paying the prepayment penalties – find out what your yearly interest payments will be with a new mortgage and compare them to what they are with your current mortgage. Subtract the new mortgage interest from the old mortgage interest – this is how much interest you’re saving in a year. Compare this number with the amount you’ll pay in prepayment penalties. If it is less than half (which means it would take two years to “pay” for the refinancing), then it’s not worth refinancing your mortgage loan. However if you can “pay” for the refinancing within two years on a five year term or more mortgage loan, then it may be worth paying the prepayment penalty.
You can ask your mortgage loan lender if they will waive the prepayment penalty if you refinance your mortgage loan with the same company. Prepayment penalties are in place from some lenders because they’re losing your business and thusly the thousands of dollars of interest payments you were to make to them for the remaining term on your mortgage loan. Most prepayment penalties are six months interest on 80 per cent of the total of your mortgage loan. However, some lenders may be willing to waive the prepayment penalty if you’re staying with them for the longer term mortgage you want to lock in with lower interest rates. While the interest they’re receiving is lower, it can add up to much more than the prepayment penalty amount they will receive if you refinance early.
In order to make paying a prepayment penalty worth it to refinance your mortgage loan, you shouldn’t take any longer than two years in saved money to make up the amount you pay out to the old mortgage loan company in penalties. Be sure that if you do make the payment that your new mortgage doesn’t have prepayment penalties attached to it.
Refinancing your mortgage loan is a good opportunity to seek out better interest rates and terms. Many people choose to use a mortgage broker to find a new lender to refinance their mortgage loan. The reason for this is because mortgage brokers work with several lenders and can submit the single application you fill out to many lenders at the same time. They then enter a ‘bartering stage’ with the lenders who are willing to refinance your mortgage loan. By using a mortgage broker, you can get great interest rates from lenders vying for your business.
Don’t underestimate some of the mortgage loan refinancing companies as well – because they are online and don’t have as much overhead as standard lenders, they can sometimes offer even better deals on interest rates and terms.
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A mortgage broker offers loan products of various lenders. Essentially, a mortgage broker is a loan provider who serves as a contact between borrowers and lenders.
A mortgage broker will learn the needs of the borrower and start researching the market for the best loan deal from lenders offering that particular type of mortgage loan. Mortgage brokers usually work with numerous lenders, attempting to match the right lender with each individual client – be you a first home buyer, upgrading to a new home or looking to refinance an existing home or investment loan – it is worthwhile to engage a mortgage broker.
He or she will invariable advise borrowers on ways to obtain better loan rates. Brokers answer questions and assist borrowers in understanding both the loan application process and the specific loan details, terms and conditions as well.
A mortgage broker usually works within a firm but can operate independently.
Most people use mortgage brokers to get access to a greater range of mortgage options, for better service and for the mortgage broker’s ability to negotiate with lenders. A mortgage broker offers loans from a panel of financial institutions, including banks and non-banks. Using a mortgage broker is now an essential part of scouring the market for the prefect home loan. They originate the loan while the mortgage lenders’ actually fund the credit.
Finding the right home loan can be very stressful for borrowers, this is one of the reasons why mortgage brokers are good value, as they do the research for you, deal with the banks on your behalf and provide assistance in completing some of the paper work that is involved in arranging a new mortgage.
Some of their main roles include; taking the application, performing a financial and credit evaluation, produces documents and closes the agreement.
Mortgage brokers are one of the largest distributions of different kinds of mortgage products.
The biggest benefit gained from using a mortgage broker is their access to loans. A broker can save a borrower thousands of dollars if they’re able to deliver the right home loan at the lower cost possible.
By searching for loans through a broker, a borrower receives information on cost and accessibility of credit from several lenders in a solo enquiry. Borrowers who are unfamiliar with the mortgage industry, may decrease the cost of learning about the availability of different mortgage products, terms and lenders through using a broker.
It is the liability of the mortgage broker to know as many details regarding mortgages and loans to inform their clients on what will be the right choice for them.
If you are not happy with your current loan arrangement or at any time through the life of your loan, you are able to contact your mortgage broker to determine if this is still the best loan for you. Mortgage brokers will are able to look into your current situation at any time and decide if there is a better option for you.
A mortgage broker is one of several sources that homebuyers can use to obtain a mortgage.
Mortgage brokers work with multiple lenders, also known as wholesalers, to offer loan products to homebuyers.
When you work with a mortgage broker, he does the initial steps of the loan process: completing the application, obtaining your credit report, conducting the appraisal, verifying your employment, etc.
After the broker completes these steps the lender conducts the underwriting process in which your risk as a borrower is determined.
When the loan closes, you will no longer work with the mortgage broker. Instead, you work with the lender.
These wholesale lenders quote brokers a wholesale price for the loan. The mortgage broker then decides the price to offer to you.
The price you are quoted by the mortgage broker often includes some type of markup, usually in the form of points. Each point is one percent of the total loan amount.
So if the mortgage broker charges 1 point on a $100,000 loan, he received $1,000. Keep in mind that the number of points the broker charges is in addition to interest charged by the loan provider.
There really is no systematic way for mortgage brokers to set their markups.
For the most part, you can expect the broker to set the markup as high as they feel they can get away with.
This is why it is vital for borrowers to negotiate the price of their loan as much as possible. Go into the process expecting to negotiate because often the markup a mortgage broker includes isn’t the absolute lowest he or she will accept.
The benefits to using a mortgage brokers are numerous.
You will likely get a much better deal when you work with a broker than you would going straight to the lender, even though mortgage brokers are known for marking up mortgages.
Since mortgages brokers have the luxury of working with several different lenders, they are in a position to give you the lowest mortgage offered.
You might also consider working with an upfront mortgage broker, a variation on the traditional mortgage broker.
An upfront mortgage broker conducts business in a slightly different, and perhaps more ethical manner.
At your request, this kind of mortgage broker discloses, in writing, the wholesale value of the loan as well as his or her markup included in the loan.
There are no secrets when you work with an upfront mortgage brokers – you know exactly what you are paying and how much goes to each party in the process.
Finding an upfront mortgage broker in your area can be done by visiting the Upfront Mortgage Brokers Association’s website found at http://www.upfrontmortgagebrokers.org.
Through this website you can locate and contact upfront mortgage brokers in your area.
When you use a mortgage broker to shop for your loan, it is a good idea to shop around with several other mortgage brokers to get a feel for the rates that are being offered.
This is the surest way to receive the best deal on a mortgage.