 |
|
Mortgage Brokers - Articles & Advice
|
Browse mortgage loans, check rates, and quickly compare payments.
Get great deals and fast, friendly service
at E-Loan, the #1 online lender.
Pick your best loan deal, then get approved in five minutes!
Click here to
Check Current Rates (opens
in new window) |
Is Refinancing a Good Idea Right Now
Barrett Niehus
By Barrett Niehus
http://www.freetrainer.com
Rates on mortgages are lower than they have been in forty years. This provides a huge opportunity for new and existing home owners, but also carries risks that can have a substantial impact your ability to pay in the future. Mortgage lenders are inundated with work, and it was recently reported on national news that “if you can breath, you can get a mortgage.” This phrase should at the very least frighten the average mortgage customer. It indicates that not only are the mortgage companies finding new ways to make money off of their huge list of clients, but they are also circumventing the risk analysis that avoids putting high risk customers into immediate credit trouble.
The opportunity is immense. For many home owners, monthly mortgage payments can be reduced by ten to fifteen percent through a refinance. For new home owners, they can afford to pay ten to fifteen percent more because of resulting low monthly payments. The benefits are substantial and if addressed properly, the risks can be avoided.
The risk of course is choosing a form of financing with inherent uncertainties and putting your long term financial situation at risk. One of the most popular mortgage products available today are variable (floating) rate mortgages. The mortgage rate varies with the current Treasury rate until it is locked in at a set amount above the future treasury rate three to five years after the date of origination. Many mortgage customers are fond of this type of funding because it allows them to enjoy a very low rate for the next three or five years. Unfortunately, the risk involved with this type of loan is huge, and can have substantial impact on the customer’s ability to pay.
Given that rates are at a forty year low, it is very probable that interest rates will climb substantially within the next three years. Although most of these variable rate mortgages have interest rate caps where the lock in rate will not exceed twelve percent, the impact of a rate increase during a lock-in period can be substantial. To provide an example, suppose you have a $200,000 variable rate mortgage with a 5.5% interest rate. When you first originate the loan, your monthly payment will be $1,135. If interest rates increase to 12% by the time of your lock in period, your payments will increase to $2055 per month; where they will remain for the life of the mortgage. For many home owners this type of increase will quickly lead to default, eviction, and bankruptcy.
Keep in mind that mortgage lenders are sales people, and mortgage brokers are essentially selling you a product. They make money when they sell you a mortgage. With the current emphasis on low finance rates, they are inundated with business, and are more focused with getting the loan closed than with evaluating your future ability to pay. As sales people, they have been given a number of products to sell, and because of the current frenzy, have been given substantial leeway from the banks. Therefore, they can forgo many of the risk analyses that were necessary during leaner banking times and sell whatever mortgage product is available.
With mortgage brokers trying to fund all of the business that they are given, and with mortgage products that carry high uncertainties, the risk associated with purchasing or refinancing is higher than ever. If refinancing or funding a new mortgage is the best financial decision for your specific situation, be aware of the risks, quantify the benefits, and realize that your mortgage lender has a vested interest in closing the deal.
------------------------------------------------------------
ABOUT IP WARE
http://www.freetrainer.com
With IP Ware Real Estate Investment Software, you can evaluate rental properties in seconds. Weed out unfavorable properties in minutes, and save weeks of research with a quick and concise analysis. Begin using this amazing tool TODAY! http://www.freetrainer.com
Related Pages
Mortgage
Brokers - Shop these top lenders for comparison quotes.
Selecting
The Right Mortgage - How to choose the right mortgage based on your
lifestyle - Advice on the best mortgages for different phases of life, future
income changes, and risk levels.
Down Payment
Leverage - Avoid PMI with a two-loan strategy. How to grow your equity faster.
Online
Lenders - Tips on evaluating online lenders and their offerings.
Refinance-
Tips on when refinancing is the right decision - How to avoid paying points and
other lender fees.
Home Loan Online
- Discover the best ways to get the lowest rates - Links for checking current rates.
Real
Estate Settlement Procedures - Your rights under the Real Estate
Settlement Procedures Act - What protections you are entitled to and what needs
to be disclosed to you.
Private Mortgage
Loans - When to use private mortgage loans as an alternative funding
resource - Qualifying for a private mortgage loan is based on the property
value, not your personal credit.
Loan Directory - Complete home loans directory for thousands of loan products, mortgage
companies, brokers, and lenders. Search our loan directory by keyword or by
category for complete listings of all things related to mortgages, home equity
loans, refinance, and more.
In The News
|
|
|
|
