Refinancing Mortgages [mortgagecalculator-tips.blogspot.com]
Question by : Refinancing mortgage? I am new to refinancing my mortgage. I've contacted a direct lender company who does not charge me closing costs if I decided to refinance again from the same company (i.e., second and subsequent refinancing). The person I spoke to said that I can refinance the mortgage as many times and as frequently as I want, and I don't need to pay the closing costs. The interest rate is the same as other lenders. I then though that it may be a good idea to start off with 5 to 7 year ARM with a lower rate and switch to 30 (or even 15) year fixed when the interest rate goes up. If the interest keeps going down, I just keep refinancing the ARM. Are there any potential problems in doing that, except my mortgage term being reset at each refinancing? Any advise? Thank you so much in advance!!! Best answer for Refinancing mortgage?:
Answer by Angry Bird
Careful with the company you are dealing with. Be very careful. Do not do ARMS - you need to lock into today's low rates. Interest rates could not possibly go any lower. If so, not by much at all. No closing costs - seems deceptive. Again. Step carefully. Many consider ARM mortgaes pure scams.
Answer by Something Else
Yes it signals other lenders you are having financial difficulties and maybe unable to pay your bills. You also run the risk of your mortgage being sold and that direct lender going out of business. Then the ARM increases and you are screwed. In 1987 ARMS increased to 17%. Not a wise gamble. Your circumstances could change and you don't qualify in 5 yrs.
Answer by Your Fat Mama
I wouldn't recommend an ARM at this time. It's a lot more likely that rates will increase than that they will decrease. If they do increase, you could get stuck with a high rate, and refinancing won't help, because that will also be at the new, high rate. Given how low rates are right now, your best bet is to get a fixed rate, even if it's slightly higher than the variable rate you can get right now.
Answer by Howard L
You might still need to qualify for the refi. If your credit gets damaged for any reason, sickness, unemployment, injury, you might be stuck with a high interest mortgage when it adjusts. You'll probably never see fixed rate interest this low again. Get a fixed rate now because in 5 years an ARM is likely to have a higher interest rate then the 30 year fixed rate you get today.
Answer by Financial Guru
ARMS typically h ave prepayment penalty in their terms. Something along the lines of "3% of entire loan value" penalty. Most likely your loan officer is not giving you full disclosure. I would get someone else involved with the lender. You might even want to get a written statement from them if they really are offering this unspeakable deal. Also don't forget that if interest rates spike before your ARM adjustment, you are going to come out with a potentially higher interest rate loan.
Answer by Jef
First off, check what is meant by "no closing costs." Are there prepaids involved (e.g. application fees, appraisal fees)? How about title fees? Settlement charges? When they say no closing costs, do they mean no costs, or just that the costs are covered by the new loan proceeds? This fits into the "if it sounds too good to be true, it probably is" thing. Secondly, refinancing to an adjustable mortgage right now is a really, really odd choice. The difference between a 5/1 ARM and a fixed rate 30 year mortgage is minimal now, and even smaller if you're able/willing to do a 10 or 15 year fixed rate mortgage. However, I can give you near certainty that when that 5/1 ARM adjusts for the first time, it'll be significantly higher than what you could lock on a fixed term today. And finally, as already noted, check on prepayment penalties. Getting stuck on a 5/1 or 7/1 ARM that has a 2-3% prepayment penalty would be a real bummer. Sure, you'd be fine with that 2.50% interest rate for the first five years, but come the adjustment and it goes up to 6.00%, you'll be faced with either a huge increase in your mortgage payments, or paying a hefty prepayment penalty to refinance into a fixed rate.
Answer by J S
Get more quotes. Anyone can do a no cost refinance and probably at a lower rate. Check http://wefixrates.com since they have the lowest.
There is just no predicting the future. Sometimes you think you can meet the expectations of your mortgage and pay off the entire mortgage when it is due. Perhaps you were expecting a higher source of income and you already planned on making full payment on your mortgages. However, a turn of events makes it impossible for you to carry out what you had originally planned and instead of finishing off your loan, you might have to restructure your entire financial planning and extending the term of your loan. When this happens, you would probably want to consider refinancing your mortgages to meet the payment requirements and to relieve yourself of the financial stress that suddenly comes upon you without warning.
Refinancing your mortgages need to be for the right reasons. If you are thinking of refinancing your home loans to be able to pay off your credit card debts, you need to think again. You need to understand that credit card debts are unsecured debts and by putting your home as collateral you are taking a big risk of actually losing your home if you are unable to pay your mortgage.
If you are looking to lower your interest rates so you are able to make lower monthly payments, refinancing your mortgages and home equity loans is a good feasible option. But you also have to remember that by lowering the interest rate you will also be extending your loan term. For example, in your original mortgage your loan term is 30 years and after 16 years you decide to refinance your mortgage and end up adding a few years more to your balance of 14 years. You also need to know if it is the right time for you to refinance your mortgages. If you only have a few years left on your mortgage, it is better to just stick with it and pay it off until the loan term ends. After that you will be free of debt.
Qualifying for a mortgage refinance is no different than qualifying for your first home loan. Lenders will still run credit checks to see if you have good or poor credit scores. The only difference is that your lender will appraise your house to see if the value is equivalent to the loan amount you are requesting. Depending on your loan-to-value ratio (LTV), they will determine whether they will approve your application or otherwise. So it is very important that you know the value of your house before you apply for a mortgage refinance.
Another important aspect that you need to familiarize yourself with is the costs incurred when applying for a mortgage refinance. The costs of refinancing will be different than when you were first applying for mortgages and home purchase loans. There will be several different fees you will need to be aware of such as application fee, appraisal fee, closing fee and sometimes survey fee. Be careful and wary when lenders offer you no-cost refinancing because it could probably just mean that they will distribute the cost into your monthly payments. So be sure to ask your lenders exactly what does the no-cost refinancing program entail.
It is also a good idea to talk to your current lender to see if you could get them to do the refinancing for you rather than going to a new lender. If you have very good credit scores, your current lender will be more than happy to keep your business and will probably give you better deals and options. Some might even give discounts or totally eliminate certain fees. So you will end up saving more money than you first intend to. Whatever you do, ask your lender to give the information you need in writing. If you do not understand anything you could always ask for a financial advisor or attorney’s advice.
Refinancing is a major decision that you simply cannot take lightly. Therefore it is crucial that you understand every single aspect because you do not want to take unnecessary risks and end up owing more than you originally did. More Refinancing Mortgages Issues
