Just in case you're considering a Mortgage Refinance, here is a tale of how one couple accomplished the task. Our couple's names are Mary and Mark Henderson. They live in Pleasantville, USA and you may find that they're just like you.
Assessing the Situation
Mark still has the job he held for the past 20 years. Mary on the other hand had worked only for the past 4 years because she was taking care of the kids. Refinancing at a lower interest rate would mean lower mortgage payments and less interest paid out over the life of the loan. It would represent tens of thousands of dollars in savings for the couple. Mortgage refinancing would also mean they could keep their home.
The Role of Credit Rating
With another kid on the way, Mark knew that soon he would not be able to keep the mortgage current and then their credit rating would be adversely affected. Once that happened, it would be harder – if not impossible – to get a mortgage refinance loan at a low rate. Mark pulled both of their credit reports and found that their credit score was 790 and there were no errors on his report. Having excellent credit score meant that he and Mary were in a good position to apply at MortgageRefinance.com. It also meant he had a good shot at getting approved for a mortgage refinance loan since they have good credit and interest rates are at historic lows.
Fortunately, Mary and Mark had a good relationship with their local bank, the holder of their current mortgage. Mark researched on the Internet and discovered that having more options is always better. After reading up on current events, Mark learned that mortgage rates were still at historic lows. It seemed to be a great time to get a Mortgage Refinance. He went to MortgageRefinance.com and the same day had a chance to speak with mortgage brokers and lenders that gave him a loan quote and locked in the interest rate for the next 30 days. He also stopped by his local bank and asked the current interest rate and fees for a mortgage refinance. Mark researched the "Big Banks" online to see their current offerings and rates.
Mary and Mark then used free online mortgage calculators to determine their monthly savings under several different interest rates. They found that at the MortgageRefinance.com loan quote interest rate was much lower than their local bank and they could save more than $500 per month if they refinanced their home. Luckily Mark locked in their low mortgage rate for the next 30 days and even if the rates increased they could still get their locked-in mortgage rate. This was more than enough savings for Mark and Mary to handle the loan payment with the new baby on the way. After 15 days Mary and Mark decided to refinance at the locked-in mortgage rate which added savings as interest rates were climbing since they last spoke with their mortgage broker.
The Mortgage Refinance Application
Mary and Mark found that applying for a mortgage refinance loan is very similar to applying for a new loan. They had to present proof of their ability to repay the loan; the bank pulled their credit report; and they had to provide a list of creditors and open accounts. A certified appraisal of the home was required as well. The banker discussed all the available options with the couple. Mark and Mary considered such things as FHA-backed loans, zero point options, no closing cost mortgage refinance and more.
Since money was in short supply in the Henderson household, Mary and Mark opted for a no closing cost mortgage refinance and they asked the lender if he could waive fees such as lawyer's fees, appraisal and title insurance (they did not get everything they asked for, but it certainly did not hurt to ask.)
Refinancing meant that Mary and Mark could save $566.25 on their monthly mortgage payment. In a year, that was a savings of approximately $6,795.00. The total loan amount is $200,000.00 and it is a 30-year fixed loan. Here is a comparison of the same loan at a 9% interest rate and at a 4.750% interest rate.
Mortgage Refinance Tips
Take time to find the right mortgage product for you. Lending fees and interest rates vary from lender to lender, so it pays to comparison shop. Just one point difference can save you thousands of dollars. Sometimes a mortgage refinance is a good idea and at other times, it is not. A few good reasons to seek a mortgage refinance are: going from a 30-year to a 15-year loan to pay down the mortgage more quickly, switching from an ARM to a fixed rate mortgage and locking in a lower interest rate. If you plan to pay off higher interest rate loans or add value to the home with a remodel, it may be a good choice.
If you plan to splurge on a vacation and a luxury boat, refinancing to cash out equity may not be a good choice. If your home is in an area with a large number of foreclosures, prices may decline still further, leaving you with negative equity. Carefully consider your options before committing to any new loans. You may want to consult a financial adviser. Feel free to contact any of our mortgage brokers and lenders for a Free Consultation.
Mary and Mark's story related above had a happy ending. They found they could save more than $500 monthly refinancing at a lower rate. This savings meant the couple could keep the home even with a reduced income. However, every mortgage refinance story does not have a happy ending. Just ask the millions who refinanced at the height of the housing bubble, and then watched as their home's value fell below what they owed. This is called negative equity. Many people bought more home than they could afford, or cashed out equity to enjoy a high lifestyle for a while. Many of those same people are among the record foreclosures sweeping the United States today. Create your own happy ending by carefully considering your circumstances and options. Be careful to read the fine print, perform due diligence as to area home values, and as mentioned previously, shop around for the best deals and lowest interest rates.