To refi or not to refi... that is the question. .With interest rates at an all-time low, homeowners in California are flocking to their nearest mortgage banker Mortgage Banker A company, individual or institution that originates, sells and services mortgage loans. Notes: Don't confuse a mortgage banker with a mortgage broker. to get in on the refinancing Refinancing An extension and/or increase in amount of existing debt. frenzy Frenzy Beatlemania term referring to the Beatles’ (rock musicians) immense popularity; manifested by screaming fans in the 1960s. [Pop. Culture: Miller, 172–181] Big Bull Market . But is this a good idea for everyone? The answer is...not necessarily. However, for many homeowners, refinancing can be very worthwhile. There are several factors to consider before taking action. The first and most obvious issue borrowers should take into account is interest rates. A drop in interest rates of just a half to three-quarters of a percentage point can significantly lower monthly payments and reduce the amount of interest you have to pay on the term of your mortgage. Another factor to consider is how long the borrower plans to stay in their home. If you only plan to be there a few years, you might want to consider refinancing to an adjustable rate mortgage This article is about the US mortgage type. For an international perspective, see Variable rate mortgage. An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. (ARM). That way, you won't have to pay the higher interest on a 30 or 15-year fixed mortgage for the short time you're living in the home. An ARM is also a good idea for those planning a principle reduction. If you envision yourself in the home longer than a few years, then it makes more sense to convert to a 30 or 15-year fixed-rate loan Fixed-rate loan A loan whose rate is fixed for the life of the loan. . Finally, if you're close to retirement, a 15-year fixed-rate loan provides the ability to pay your mortgage loan off at an accelerated rate--saving a lot of money in mortgage interest (compared to a loan amortized over 30 years). Moreover, refinancing may be beneficial for a borrower who would like to "cash out" on equity they've built up on their home to purchase a car, pay for a child's education, or to pay off credit cards or other debts. Interest rates on credit cards are compound, while the interest on a mortgage is simple. Therefore, it makes a great deal of sense to finance major purchases with the equity in your home,. allowing you to save money on interest payments. Additionally, the interest on a mortgage is tax deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). (in most cases). An important fact borrowers need to remember is that refinancing is not an improvement on their existing loan, but rather an entirely new loan, which may carry costs. To avoid having to pay these costs out-of-pocket, a borrower can have their lender use a higher interest rate to pay the closing costs Closing Costs The numerous expenses (over and above the price of the property) that buyers and sellers normally incur to complete a real estate transaction. Costs incurred include loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, , or utilize the equity in their home to pay them. The mortgage process can be confusing con·fuse v. con·fused, con·fus·ing, con·fus·es v.tr. 1. a. To cause to be unable to think with clarity or act with intelligence or understanding; throw off. b. , but there is help available to borrowers who are unsure of which direction makes the most financial sense. This article was provided by United Pacific Mortgage. For more information on refinancing, call Daryl Wizelman at 1-800-400-7166. |
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