Your Questions About Mortgage Refinancing Rates

John asks…

Will refinancing a home lower the mortgage and interest rate?

John answers:

It’s almost impossible to answer this question without more information.

Generally, refinancing can lower your interest rate and payment if your mortgage interest rate is higher than the rates at the time when you refinance. It’s that simple. For example, if you are paying 7% and current rates are 6%, then you will have a lower interest rate when you refinance! And usually, a lower interest rate correlates into a lower payment.

That said, keep in mind several factors that may affect whether or not refinancing will save you money.

How much are the closing costs? How long do you plan on staying in your mortgage? Do you want an adjustable-rate mortgage or a fixed-rate? All of these can affect your refinance.

Think of it this way. If refinancing saves you $150 a month, but costs you $2000 in closing costs, you’ll need to stay in your mortgage at least 14 months just to break even (14 x 150 = 2100).

And regarding whether to pick an adjustable or fixed rate mortgage, that again would depend on current rates and how long you plan to stay in your house. If you know you want to move within 3, 5 or 7 years, you can usually get a lower rate with an adjustable mortgage.

This is a long answer to your short question, but my point is that there are so many factors to consider that there is no one easy answer.

You’ll have to talk with a trusted mortgage professional to get a truly accurate idea if refinancing will lower your rate and save you money.

I hope this information was what you were looking for.

Lisa asks…

Mortgage Rates determined?

I have a 5 year ARM 5.25% about to reset this May. I have not refinanced thinking that I would get a better rate considering the Fed slashing rates. However I’ve also heard that lower Fed rates doesn’t mean my mortgage rates will be going down.

Am I headed for a problem? Should I refi ASAP?

John answers:

Because the fed has or has not changed their interest rate might not have any relation to your rate as your adjustable rate is probability not associated with the fed rate.

There are several rates in which your rate could be tied to. These rates are listed in your mortgage loan docs you signed at the close of your purchase transaction.

Your rate could be tied to the prime rate, northern district cost of funds or libor just a couple of rates that come to mind, there are others that might apply to your mortgage loan, that would determine if your mortgage payment would adjust up or down.

If you are concerned about your current mortgage rate it might be to your best interest to contact your current mortgage lender about a stream lined refinance or another lender about a refinance and make an application for a new mortgage loan, called a refinance.

Since your mortgage loan is due to adjust in May there would be little to any prepayment penalty.

You may also refinance your mortgage loan through FHA, thus the criteria is not as stringent as that of a conventional lender.

I hope this has been of some benefit to you, good luck.

“FIGHT ON”

Nancy asks…

Should you refinance an adjustable rate mortgage?

John answers:

Many people are afraid of ARM’s because a friend of a friend who is in the mortgage business who they know said so, many people just assume these types of loans are dangerous because of the keyword “adjustable”.

This is not true in most cases. ARM’s can be very beneficial to people in the right circumstances.
People who are buying a home who may have bad credit or just had a bankruptcy. They are going to rebuild their credit over the next few years, so why go into a long-term 30-year fixed loan if you will probably refinance in 2-5 years when your credit has been rebuilt? Why not go for a 5-year adjustable? Not all adjustable loans start off as ARM’s, for example the 5 year adjustable is actually fixed for 5 years at a much lower rate than a 30 year fixed. The 5-year is amortized over 30 years as well and begins to adjust only after the 5-year period is over, you can refinance before the adjustment hits.

It’s also beneficial to people who may sell their home in the next few years.
Or people who need to pay off a large debt.
Interest Only loans are also a great alternative, where you only pay the interest on the loan.
For Self-Employed people that have fluctuating income periods. For example people who may not make as much during the spring and summer but make significantly more money in the winter. There are MTA loans that are adjustables where you pick your payment from month to month. One month you make an interest only payment, another month you make a basic minimum payment, another month you can make a fully amortized payment and on and on. The rates start off very low, some as low as 1.25%. MTA loans are not for the average person though. They adjust on either a monthly basis, or 3 and 6 months.

There are many other benefits and downsides as well. Make sure to ask your mortgage consultant to explain them to you until you understand it as well as he/she does. If they try to confuse you with unfamiliar terms then go elsewhere. You need to feel as good about the deal as they do.

Steven asks…

mortgages and refinancing?

if you are going to refinance to a lower interest rate. how much lower should the rate be for it to be worth your while.currently 6.5

John answers:

You didn’t list enough information to answer your question properly. It all depends on what you can afford monthly. Some of my clients have refinanced & have only reduced their payment $100.00 a month. Others have refinanced to make their adjustable rate a fixed rate. What is your loan amount now? Why are you refinancing? When you refinance you’ll be paying closing costs all over again. You have a great rate right now. Ask your Mortgage Broker to give you figures on what is the best rate he can get for you.

Good luck!

Charles asks…

MORTGAGE ADJUSTABLE RATE QUESTION?

We bought a house in december 2006 with adjustable rate, we plan to refinance between march and april because we are planning to use our tax return to pay our credit card debits so that our FICO score can be increase so that we can take advantage of the current mortgage interest rate. But today we receive a mail that stated that our monthly payment has been increased from 7.7% to 10%, which make our monthly payment from $1500 to $1800, that is $300 increment need advice on what to do, how to communicate with the bank so that the new increase will be freeze for the next 3 month. please help and no information is too much. Thanks

John answers:

Call your current mortgage company to see if they will do a mortgage modification that can lock you into a low fixed rate mortgage. If not refi with another company. I don’t know what your credit scores are but if the primary borrower is over 720 you need not wait. I don’t know the appraised value then and now or how much you put down on the home, so I cannot say if these options are viable.

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