How to Best Refinance a Mortgage

December 22, 2011 By

Refinancing a mortgage can be a good idea if you get a lower interest rate, and this is sure to get the attention of many homeowners. The first question to ask yourself is whether you should refinance your mortgage, looking at your income level and priorities. Where income is concerned, mortgage payments should not take more than thirty percent of your gross monthly income. If your mortgage payments take over one third of it, it may be a good idea to refinance. Second, you may be repaying an adjustable-rate loan, with an interest rate which has increased, or your total income might have dropped. Then you may consider this option.

So, how to best refinance a mortgage? One option is to modify the terms and conditions of your current mortgage rather than refinance. Discuss this with your lender, and they may agree to lower your interest rate in exchange for a lump sum that you pay them, say, a couple of hundreds of dollars. This can be a good solution if rates have dropped, and borrowers already refinance. It won’t hurt to ask whether modification is possible. If you prefer not to work with your existing lender or another institution offers better interest rates, you may consider their offer. At the same time, it is important to check the terms. They may have a different schedule of fees, with a copy of a reference document costing $20 or so. Or you may have to deal with bank representatives only by phone, the bank being halfway around Canada, instead of talking to an employee at your local branch. Of course, even if you choose to refinance your mortgage with the original lender, you will have to re-qualify, meaning that the lender will review and verify your financial situation.

Remember that with refinancing, you will be required to cover the closing costs. The amount may be higher than the savings you get with the lower interest rate. The point in which the borrower’s savings offset the new loan’s closing costs is called break-even period. You should normally receive an estimate of the loan’s closing costs from the new lender once they receive your application. This is helpful in spotting any hidden costs which can be avoided. If you do not receive an estimate, ask them to provide one. If they refuse to do so, you may want to look for another lender.

Finally, if you are offered no-cost refinancing, be sure to ask what it means. Different lenders define this differently, and there are two main ways to go about avoiding upfront fees. Under the first arrangement, it is the lending institution that will cover the loan’s closing costs, with borrowers being charged a higher rate of interest. This interest rate will apply over the term of the loan. With the second option, the refinancing fees are rolled into or included in the loan, being incorporated in the principal amount. Then you will not have to pay cash upfront, paying interest and fees over the term of the loan.

Filed Under: Loans, Mortgages, Real Estate

Get Your First Mortgage Quick and Easily with a Cosigner

November 24, 2011 By

When you apply for your first mortgage, there is a set of criteria that you have to meet if you want to qualify. The criteria include income level, job stability, credit history, and others, depending on the financial institution you go with. If the lender determines that your income level is too low, you do not have a stable job, or you have poor credit and a low credit score, you are likely to be seen as too great a risk and turned down. This is where a cosigner comes in. A cosigner can be anybody, but most people ask their relatives or friends for help. Young people typically ask their parents or older siblings. The cosigner assumes great responsibility, so you have to get someone who trusts you completely. The cosigner guarantees that you will pay the loan back in full. If you fail to make payments on time (or at all), the cosigner assumes your debt.

As a specific amount of money is being secured by the cosigner, you are increasing the sum that a lender could be willing to give you. This is one of the conveniences of having a cosigner, among others. The lender takes into account the cosigner’s creditworthiness when determining the loan amount they can offer and looks at his or her credit history, job stability, income, and other aspects of the profile as well. Then again, you cannot be absolutely sure you will be lent the money with a mortgage cosigner. You still may be turned down. You are the actual recipient, so your credit score, job, income, and profile in general are of greater importance. If your parameters are poor, while the cosigner’s are good, you probably will not get the loan. The problem with poor credit scores is that to lenders, they signal that you are unable to pay your bills, which include loan payments, card payments, utilities, credit cards, etc. This can mean one of two things – you can’t handle credit or you are in trouble due to some family crisis. If you can make a case for the latter, be honest and make sure the lender knows this.

According to some, it is important to make the distinction between a cosigner and a loan guarantor. From the other person’s perspective, it is better to be a cosigner than a guarantor because a cosigner is basically a co-owner of the property. He holds equal responsibility for payments, while the guarantor guarantees payments will be made, but is not on title. The guarantor is in a bad situation because he has to make payments, on one hand, but has no right to the property on the other. When do you need a cosigner, then, and when do you need a guarantor? Lenders require a co-signer to support income, to bridge the income gap if the applicant’s income is deemed insufficient. A guarantor is usually needed if the applicant’s income is sufficient, but he or she does not have ideal credit (or any).

 

Filed Under: Debt, Loans, Mortgages

Don’t Buy Until You Compare Mortgage Deals

October 11, 2011 By

A lot of people make the mistake of throwing themselves at the first mortgage offer they see without looking at it in depth or reading the fine print. You should compare mortgage offers before you settle on one. It is very easy to do this. But how do you do it exactly? Mortgages are available [...]

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Filed Under: Banking, Loans, Mortgages, Real Estate

Top Facts about Debt Consolidation Loans

August 18, 2011 By

If you wonder whether to consolidate your loans and if this is the right option for you, you may want to read some important facts about debt consolidation. First, debt consolidation can lump together two or more unsecured loans into a single unsecured loan. More often, however, it involves consolidating loans into a secured loan [...]

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Filed Under: Bankruptcy, Credit Cards, Debt, Debt Consolidation, Loans, Mortgages, Real Estate

Nine Different Ways to Avoid Bankruptcy

June 5, 2011 By

There are ways to avoid bankruptcy, and then there are reasons. Reasons are more important because many people (mistakenly) see filing for bankruptcy as the easy way out of their financial problems. All they know is that doing this means they will not have to make good on their debts, making it a very enticing [...]

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Filed Under: Bankruptcy, Credit Cards, Debt, Loans, Mortgages, Real Estate

Why I decided to Refinance My Mortgage

January 8, 2011 By

There are plenty of reasons to refinance your mortgage, the most common being to lower the interest expenses. Why you or I have decided to refinance depends on the interest rates and the type of mortgage to be paid off over the mortgage loan term. Mortgages can come with fixed or adjustable interest rates. The [...]

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Filed Under: Debt, Loans, Mortgages, Real Estate