Archive for the ‘Refinance’ Category

Guide to Refinancing Home Loans

Monday, May 12th, 2014

Houses are big investments that often require home loans to help with the purchase. However, you may find you need home refinance loans. A refinance loan is commonly taken to pay off the first mortgage with a reduced interest rate. Some homeowners use a second mortgage to consolidate. Consolidation will allow you to pay off multiple loans with a single payment. Deciding the best time to seek refinancing can be difficult regardless of the reasons you want to refinance. Here is some information to help you learn more about refinancing, when you should get it, and other factors to consider.

A primary factor in deciding to refinance is the current economic conditions. The government may raise interest rates to even out inflation and manage consumer spending. When consumers spend beyond their means, prices will increase. This means interest will also rise, followed by a decrease in spending. A slow economy will mean lower interest rates, so it is the ideal time for home purchase loans or to refinance. If you have an adjustable interest rate, it may be the best time to get a fixed interest rate. Adjustable interest rates can increase your payments in a bad economy. Another good time to refinance is when market value rises. It is an ideal situation, especially if you want to consolidate debt or use equity.

There are some things to consider when refinancing. Most lenders have a seasoning clause in the contract, which states you cannot refinance until you have lived in the home for at least two years. Lenders will allow two years, but they commonly prefer waiting at least four years before refinancing to prevent early refinancing. Lenders could also include early pay off penalties. These charges must be paid during closing of the loan. You may have to pay these penalties before you get a second loan. Be careful not to take out a loan with early repayment penalties. Credit still matters to the lender, even with a second loan. The interest rate you get will depend on your credit score. You are advised to review a copy of your credit report before applying. You can request a free copy once a year from each of the three major credit bureaus. Any errors can prevent you from being approved.

Getting a refinance home loan should carefully be considered. Make certain the interest of the new loan is 2% less than your current interest rate. It is essential to be certain you get the best deal on refinancing. HARP refinance is a government program that offers second mortgages at affordable rates. Consumers have saved up to $200 a month on payments with HARP. If you are current with your mortgage, you can take advantage of lower interest rates through this program.