Many homeowners find themselves in the position that may call for a home mortgage refinance loan. This prospect may be a little overwhelming for anyone who remembers the initial process they had to endure when applying for their first mortgage. However, being well prepared in this endeavor will make the application process run very smoothly.
Pre-Approval
Applying for pre-approval with a number of different home mortgage refinance lenders is a great way to ensure that you can get approval without taking too much time in the process. This also offers the other great benefit of having more than one option.
Shopping around for the right refinancing loan is always a good idea. Different companies will have different requirements and programs. You may find that you have access to a few outstanding packages if you take time to shop around. Having pre-approval is a fantastic way to weigh your options.
One word of caution is necessary. If you choose to apply for pre-approval, it is necessary to make sure that these companies are not pulling your credit history from a credit bureau. Each time someone pulls your credit report, your score drops slightly.
Even though the drop in score is minimal, it can have a profound impact on your ability to get a great rate. This is especially true if you are applying to a number of different agencies that each accesses this information. These numbers can add up very quickly.
The only companies that should pull your credit history are ones that have made you a fantastic offer including the best home mortgage refinance rate. In essence, only one or two requests for your credit score should be made. This increases your chances of getting a great deal.
Pre-Pay Penalties
This may be hard to believe but some companies charge you for paying off your loan too quickly. Make certain that your current mortgage lender does not charge pre-pay penalties. Some of the penalties can cost as much as six month’s worth of interest. If you still want to opt for a home refinance loan, you will need to have these funds available.
Interest Rates and Closing Costs
Other considerations include interest rates and closing costs. You may find that a home refinance loan could turn out to be very expensive if these figures are not calculated in the process. The monthly payment may be appealing. However, high closing costs and interest rates can ruin the deal
There are many things to consider in a home refinance loan. Knowing the basics is a great first step in the endeavor.
Some home buyers find that they fall short when it comes to getting a property loan that they can afford. If you have your heart set on a particular home but you are not able to meet the requirements with a traditional mortgage with a fixed rate, you may want to consider interest-only loans.
Home mortgage rates come into play in this type of loan, of course. Homebuyers that can’t afford a traditional loan may find that they can afford an interest-only program instead. This type of advance typically requires a lower monthly installment which is ideal for some people.
There are some things to think about before delving right into this type of loan. When home mortgage rates are the primary factor in the monthly payment, the principal seems to fall to the wayside. This can make paying off the loan in full very difficult.
Principal versus Interest
The principal is the actual amount of the loan without taxes, insurance and interest figured into the mix. If you purchase a home for 220,000 dollars and make a down payment of 20,000 then the loan’s principal would be the difference or 200,000 dollars.
Interest is the additional money that the bank earns over the course of the loan. The total interest paid on the loan depends on the home mortgage rates at the time that you sign the agreement. The interest is figured into your monthly payment as an integral part of the loan.
Interest-Only Mortgages
When you adopt an interest-only mortgage, you do not have to pay on the principal for the first five years of the loan. Some lenders even allow clients to go ten years without paying anything on the principal. The result is a significantly lower monthly payment.
This type of loan is ideal for someone who wants their dream home but does not want hefty monthly payments that go along with it. The interest-only option is also great for people who expect a significant pay increase in the next few years. They already have their mortgage and they can make additional payments to address the principal.
This type of loan is definitely not for everyone. It is important to remember that you will not be building any equity during the time that you are making the interest payments. This means that you will still owe every penny on the principal loan even after making payments for five or ten years. You might as well rent.
Home mortgage rates are valuable tools that can help consumers decide if the interest-only loan is right for them. This type of loan is only for individuals who have the drive and fortitude to make larger monthly payments when they can to reduce the principal.
This website uses cookies that are necessary to its functioning and required to achieve the purposes illustrated in the privacy policy. By accepting this OR scrolling this page OR continuing to browse, you agree to our Privacy Policy