The Essentials of Home Loan Refinance
Home loan refinance has been one of the most reliable means that you can use to lighten up your financial burden. The promise of lowered interest and decrease in monthly payment is a very attractive idea. More and more people are also drawn to the concept of getting some extra money through home loan refinance to pay for renovation, education or to pay off other debts.
No matter how attracting refinancing sounds, it is not a strategy that will make sense to everyone in all financial circumstances. You need to do your own homework to make sure that you are making a financially sound decision. In addition, remember that refinancing is a way for you to get out of debt. Never make the mistake of refinancing in order to make another consumer purchase that is not really necessary, such as a new car or a dream vacation. You might end up in more debt than you have ever been.
The old rule of thumb in home loan refinance is that it only makes sense if you can lower your rate by at least 2%. However, what actually matters with refinancing is not just the rate but how long it will take for you to reach your break even point and whether you intend to stay in your home for a long time to be worth the long term payment. A home loan refinance will be a wise idea if you are sure that the monthly payments you need to make for a couple of years is worth it.
The good thing about refinancing is that there are various options for you to choose from. Practically, there are important factors you need to consider before taking on a home mortgage refinance. You have to know the interest rate, the term of the mortgage, the variability of the interest rate (whether it is fixed or variable), and the points that you are willing to pay up to close the deal. Mortgages now come in all forms and sizes; lenders are literally everywhere waiting to offer you their affordable terms. With the tight competition, many people usually get great deals which relieve most of their financial dilemmas.
Your goal is to come up with mortgage terms that will get you a better deal than you have with your existing loan. This may not be easy to do, most especially if your credit standing is not all that good. You must have a good understanding of what is going on with your finances; plan how to solve your problems, and set-up financial goals. Based on where you are, you can look for a home loan refinance program that is in line with your requirements.
It will take some effort and a good amount of research on your part. If you deal with the right lender and get a home loan refinance at the right time, you can be pretty sure that you will save thousands of dollars with refinancing. All the effort and time will surely be worth it.
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Help answer the question about loan refinance program
Is there a new refinance program that forgives negative equity and refinances the house at current value?I heard about some new government loan where if your home has dropped in value, the government will absorb the depreciation and refinance your house at its current market value. I just bought my first house in August of 2008 for $275,000 which was a foreclosure and the other foreclosed homes surrounding me are now being offered in the $240,000 range. So in 4 months I've already lost around $35,000 in value.
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August 6th, 2009 at 1:27 pm
Typically lenders won't do a refinance for any amount less than $7,500, it's just too costly for them to make sense.
Contact the current lender to see if the offer any type of rate reduction program. Some lenders offer a discount if you allow them to auto deduct the payment from your checking account, also if you have a good payment history you may get a discount for that.
August 6th, 2009 at 3:03 pm
August 6th, 2009 at 3:41 pm
If you could provide a little additional information, that would help. What kinds of student loans do you have? Have they been consolidated? Are you a teacher?
If the loan is private, there isn't much that you can do to lower your rate — most private loan rates are variable meaning that they change with the market and, sometimes, with your credit.
If your loans are federal I have to ask: Are you sure the rate is 8.5%?? Federal Stafford loan interest rates have been capped at 8.25% for years. And the only way your rate would be FIXED that high there would be if you had consolidated when rates were at an all-time high (the last time rates were that high was in 1999).
If you haven't consolidated yet, consider doing it right away — it's the easiest and safest way to (1) lower your monthly payments and (2) lock in a low interest rate while still maintaining the protection of the Federal student loan programs (just make sure you apply for a *Federal* Consolidation Loan). When you consolidate, any eligible, Federal student loans that you have will be lumped into one new loan, your rate will be fixed at today's rate (5.3% if you're consolidating only Stafford loans) and your repayment term will be extended out beyond the standard 10-year repayment term (for a loan of $46,000, you will probably receive 25 years to repay). Extending your repayment term will mean that your monthly payment will be lowered (often significantly).
If you have consolidated, the only way that you can re-consolidate is if you…
(1) borrow a *new* Federal student loan (probably not a wise decision, financially, as it wouldn't change your overall rate much)
(2) if you "have been unable to obtain a Federal Consolidation Loan with income-sensitive repayment terms acceptable to [you]," you can obtain a Direct Consolidation Loan, which is the other type of student loan consolidation that the federal government offers.
This might be your best option. Just make sure that your current loan is a Federal Consolidation Loan (if it's already a Direct Consolidation Loan, you're out of luck). If it is, check the Dept. of Ed's website to see if you are eligible: http://loanconsolidation.ed.gov/borrower/beligible.shtml . There's no credit check on these loans, so it can't hurt to try!
There are private companies out there that claim to be able to "reconsolidate" any federal consolidation loan. These companies are SO disreputable that I hesitate to even mention them. DON'T DO IT. They're in business only to make money off of you. Many of them don't even deal in Federal Consolidation Loans, so you could end up with a "reconsolidated" private loan with horrible terms and none of the benefits and security of the Federal student loan that you started with.
Finally, about student loan forgiveness: loan forgiveness is almost always not an option for someone who has consolidated, so you will need to make the choice between Loan Consolidation and Loan Forgiveness. Before deciding, keep in mind two things:
(1) interest rates are on the RISE and scheduled to rise to 6.8% in July, so if you want to consolidate, you should do it before July 1
(2) Forgiveness (a.k.a. "cancellation") of Stafford loans is rare unless you are a teacher in a low-income area. To see if you qualify for teacher forgiveness, read this site carefully:
http://studentaid.ed.gov/PORTALSWebApp/students/english/teachercancel.jsp?tab=repaying
By all means, if you qualify, go for it!
August 7th, 2009 at 2:57 am
Unfortunately then you will join the ranks of those that have or are losing their homes. No credit, no income and no equity means pay for what you signed for. Sorry but not my fault you overextended yourself, buying way more than you could afford. Do not think my tax dollars should bail you out because of your foolish dreams, and not living in reality.
August 7th, 2009 at 10:07 pm
August 7th, 2009 at 10:27 pm
buddy….there are many refinance program online sources where you can get full of information and also get the refinance loan at lower mortgage interest rates and reduce your negative equity…i have the source where the option of existing loan modification and low interest rates : http://www.refinancing101.net
August 8th, 2009 at 1:51 pm
Of course you can, as long as you have equity in the house. Contact a mortgage broker and have him/her start shopping around for better rates., Or do it yourself through bankrate or lending tree.
August 8th, 2009 at 3:45 pm
You should be looking at an FHA loan