Personal Debt and Financial Management

It is to your definite advantage in this extremely aggressive home mortgage refinance loan industry to be able to find websites set up to provide you various quotes from multiple lenders. However, there are a variety of loan types, some which can be risky. Because property values are going up, there are some new types of loans that can be very risky for the consumer.

One of these is the interest only loan, which is where you pay only the interest on the loan for a shorter term, expecting a larger windfall in the near future to help with your principal. As people are beginning to find out, without a windfall, it s easy to get foreclosed, due to the inability to make larger payments latter, so a better option is the conventional interest/principal loan, with a 15-30 year term.

When choosing between a 15 or 30 year loan, I recommend the 30-year term, because it is always easier to exceed a minimum payment than it is to come with extra cash to pay a higher minimum in case of emergencies. A 30-year term for a home mortgage refinance loan will give you more options and more liquidity.

Below listed are some principles for a successful home mortgage refinance loan:

1. Do not refinance unless your new loan is at least 2% lower than your current one, so you can cover your costs of refinancing.
2. A refinance may not make sense unless you are going to stay in your house at least 5 more years, so you can break even on your additional costs.

The benefit

One benefit of a refinance could be to roll the cost of a new car in with your mortgage refinance. That way, you get a car loan at a lower rate, and spread the cost out over more years. If you drive cars until they practically fall apart, this would make the life of the loan match the life of the car more closely.

The major expenses in refinancing a home mortgage include closing costs and purchasing points off the new loan. These costs usually come to about 3-6% of the new loan. For a loan of $150,000, the fees would be about $7000. Companies that advertise no closing costs usually make that money back by charging higher interest rates. The best way to compare is to look at the bottom line.

You should probably purchase points off the refinance loan if you plan to stay in that home for 3 or more years. If you plan to move sooner, you may not recoup the money you spent buying interest points.

How can I know if I should refinance or not? Contact a lender, or there are refinance calculators online that can help you decide if you would save money with a home mortgage refinance loan.

How to Obtain Home Mortgage Refinance Loan

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