A mortgage refinance can save you a substantial amount of money. Some mortgage refinance options including no closing costs or equity withdrawal can temporarily add to your principal balance due to the added costs that get lumped into the new loan but taking advantage of the best home refinance rates around can usually save enough on your principal payment to overcome the slightly larger principal balance your new mortgage can carry.
Of course not always will refinancing a home mortgage or home equity line of credit lead to lower monthly payments and not always will you save money in the long run refinancing a mortgage. There are specific situations when your mortgage refinancing options are limited and sometimes unwarranted. The trick is knowing when it is in your best interest to seek a new mortgage for your home and how to structure the new loan so that it both saves you money in the short term as well as in the long term.
Refinancing Your Home Mortgage â When It's Right
Above all the most basic way to determine if it's right for you to refinance your home mortgage is to compare what interest rate you are currently paying on your first or second mortgage and compare that rate to the going rate on the market today. Sites like Bankrate.com are excellent for the comparison of home mortgage refinance rates, home equity line of credit rates, as well as other types of credit rates such as revolving credit and auto loans. Each type of credit tends to carry it's own rate which is based on the collateral of the loan and the risk of that type of credit.
Prior to 2010 mortgage rates were typically much higher than after 2010 as a rule of thumb and mortgages made before 2007 are generally even higher. If you have a mortgage that was created before 2008 then the chances are that your mortgage could probably be refinanced to a lower rate assuming you meet the lenders guidelines of credit worthiness, income documentation, and debt ratios. Each lender will be slightly different so finding out the particulars will be a matter of consulting with many different mortgage consultants or a couple very knowledgeable mortgage brokers.
Refinancing For People With Bad Credit
One of the obvious difficulties of the post Great Recession era is that many people have been left with bad credit due to issues beyond their control. Many people lost jobs in the recession causing troubles with debts and bills. Many of these problems are beyond the control of the average person and although credit standards and guidelines of banks and mortgage lenders require credit worthy borrowers depending on the type of loan you have and whether it is insured by the government you may have some wiggle room.
A major part of the post mortgage meltdown response at the federal level has been in propping up as much as possible the ailing mortgage market and keeping homeowners in their homes. For those people with bad credit do to the economy or for those people wising to get a mortgage refinance on a home that has no equity some government programs and outside consultants may be available to aid in your goals. There are no sure bets but the chances are greater than zero.
For home owners looking to refinance their underwater home loan which is held by a portfolio lender the underwriting guidelines may be against you however the lender and servicer being one in the same may have an interest in making sure you stay current on your loan even as your equity has fallen. After all they still hold all the risk of your loan.
If this is the case you may be able to negotiate a home mortgage refinancing package outside of guidelines if it betters your chances at staying current on your loan and not defaulting. From the mortgage lenders perspective if they own and service your current loan they will want you to remain current and sometimes a refinance outside of guidelines is their only option to ensure that happens.
You can never place bets on refinancing an underwater home. Getting negative equity home refinancing with your current lender can never be counted upon but if you can show that your are current and in good standing but struggling it may be possible to get relief through an interest rate reduction. Just don't jeopardize your credit by not making your payments as this may not help you out at all.
2nd Mortgage Rates & Refinancing HELOCs
If you are fortunate enough to have maintained good credit over the years and still maintain home equity high enough to refinance your home loan through standard means you may want to consider taking out a HELOC due to the extremely low rates this mortgage environment has brought. Home equity lines of credit are based on short term rates and indexes which are at historic lows. Unlike 30 year fixed rate mortgages or jumbo mortgage rates, mortgage credit lines track short term rates which remain much lower than the already low long term rate spectrum.
The rate spread and difference is great enough that it may not even be worth it to convert current home equity credit lines to fixed rates or to even refinance existing equity lines because the HELOC refinance may actually give you a higher long term rate. This is obviously not always the case but it is something you should be aware of. Always ask for clarification of your terms and look for little things like this that may make a refinancing look bad or good.
Again, mortgage professionals including mortgage consultants, realtors, and local experienced mortgage brokers can help greatly in assessing your current situation and seeing what benefits you can gain from seeking a mortgage refinance during this extreme time in our economic history. Remember, mortgage refinance, no closing costs, interest rate reduction, and other buzz words don't help you at all unless you act upon them. You may not be able to get a mortgage refinance but you can't hurt your situation by trying.