The 2 Percent Refinance Rule - Fact or Fiction?

Here's a look at when the 2 percent refinance rule is fact, and when it's fiction.

The long-held belief that you should never refinance unless your rate will drop by 2 percent has been passed down by generations of homeowners. Unfortunately, it amounts to the financial equivalent of an old wives' tale. Between the times when the rule was created and now, there have been millions of dollars foolishly squandered on interest payments by people who may have benefited by a mortgage refinancing.

Sound logic, faulty application

The intent of the 2 percent rule is good. Basically, the original advice was that you shouldn't refinance unless you can recoup your closing costs, including the appraisal costs, title insurance, and the rest of the laundry list of fees that accompany a mortgage refinance. The 2 percent rule assumes that it takes two years to do so.

However, this reasoning doesn't apply to people who plan on staying in a house longer than two years. Remember, the idea behind the rule is that you want to recoup your closing costs. Let's say the differential between current rates and your loan rate is less than 2 percent. It might still make sense to refinance if it takes four years, for example, to recoup your closing costs. The key is that you stay in your home at least four years, if not longer.

Apply the intent, not the law

Ultimately, when you consider a home refinancing, you should factor in the length of time you plan on staying in the house. If it takes 15 years to recoup your closing costs, you may want to hold off on the loan, considering that most people move approximately every five years.

You should also consider whether or not you might need to tap your equity for upcoming expenses. For example, if you're going to send your kids to college in the next three or four years and have little or no savings to pay for it, refinancing right now might not make sense. You may want to wait and see if you'll need to tap into your equity for a higher education. At that point, you could pick another type of loan (an adjustable-rate mortgage with a low teaser rate, for example), to get a palatable interest rate.

If you're considering a mortgage refinance, use the 2 percent rule as a guide, not as a hard and fast rule. Take into consideration the length of time you plan to be in your home. Be realistic and use common sense when determining when, and if, you should refinance.

Start here to compare refinance rates from top lenders in our network.

http://www.mortgageloan.com/2-percent-refinance-rule

Refinance Basics

here are some things to look out for when you consider refinancing

Refinancing Involves Writing a New Mortgage

This means a couple of things. The most important thing to realize is that the lender will not just fork over a new, lower interest rate. You will be asked to bring in income documentation, and your credit score will be checked, just like with your original mortgage. This means, of course, that there will be fees involved. You will have to pay closing costs on this mortgage just as you did initially.

The other important point about writing a new mortgage is the fact that, if your financial situation has changed, you may not qualify for a mortgage, or you may not get a lower interest rate. For example, if at the time of the initial mortgage, you and your spouse both worked full time, and now, one of you has decided to stay home, it does not matter if you are paying the mortgage on time every month, the lender will notice the change in income.

If you are concerned that, due to lower income, you may not qualify for a refinance, you should hop online or talk to a lender in person. If you have lived in your home for a while, you may have paid a good bit down on the principal. Remember, you are refinancing the amount left on the loan, not the original purchase price.

Refinance for Less Monthly Payments or Shorter Term

When you refinance, you are, of course, taking advantage of a lower interest rate to save money. There is, however, more than one way to save money. You can keep the length of the mortgage the same as it currently is and lower your monthly payment amount, or you can keep your payment the same, and shorten the length of your loan. If your financial situation has improved since the original purchase of your home, you may even consider increasing your monthly payment in order to dramatically shorten the term of your loan, saving money in the long run on interest payments.

Whether you choose refinance to lower your monthly payments or refinance to shorten the term of the loan has many determining factors. If you can handle the amount of the monthly payment, shortening the term saves money paid on interest and may allow you to pay off your mortgage in full by a point when the extra money would be valuable, such as retirement, or children going to college.

If your current monthly payments are causing problems, such as limiting the amount you can save toward retirement, or preventing you from replacing a car that is in need of work, you may choose to lower your monthly payments, freeing up some cash for things that you need right now.

• Refinance your Adjustable Rate Mortgage
• Costs of Refinancing your Mortgage

Start here to compare refinance rates from top lenders in our network.

http://www.mortgageloan.com/refinance-basics

Refinancing Your Mortgage? Tips for Cutting Costs

Is it time for a mortgage makeover? Time to visit the bank or mortgage broker of your choice and get a new deal? If that's the case, follow these simple cost-cutting tactics to save money over the short and long term, and make a good deal even better.

Low Refinance Rate, Save Great

The majority of your mortgage payment goes toward paying interest. To save an astounding amount of money over the long term, choose a mortgage loan with a lower rate and a shorter payback term. A 15-year mortgage may be just what the financial planner ordered. This type of loan carries a larger monthly payment; but if your budget can withstand the jolt, you can save big bucks over the long haul.

Credit Cards: Know When to Fold 'em

Lenders like pristine credit reports. If you have a bunch of open credit card accounts that you never use (and who doesn't?), consider closing them. It will boost your credit score and make you a much more attractive borrower to a lender. Then, a month after you've closed your accounts, go over your credit report with a fine-tooth comb. It should read that the accounts were closed at your request. (You don't want lenders to think someone cut you off and that you're a bad credit risk.)

Pay Points, Prevent PMI

You can also save money on your mortgage refinancing by paying "points." This is a fee that effectively lowers the interest rate of your loan. If you plan on staying in your home for a long time, this long-term strategy can be an excellent way to save thousands of dollars.

Another way to cut costs is to avoid Private Mortgage Insurance, or PMI as it's commonly called. PMI is insurance that lenders require you to carry if you are borrowing more than 80 percent of a home's value. This can cost you hundreds of dollars annually. If possible, don't rush out and buy that new bedroom set before your loan closes. Instead, put more money down on a home and avoid PMI.

Check and Double-Check those Refinancing Fees

Before you refinance a loan, make sure that you carefully analyze any fees that your lender is including on the loan. The Department of Housing and Urban Development can provide you with a list of standard fees. Use it to make sure that your lender isn't tacking on anything extravagant. And by all means, compare their fees with other lenders in the market.

Sounds simple, doesn't it? You'll be amazed at how much money just a few tactics like these can save you. Follow them diligently, and you'll find the payback well worth the effort. You'll have money for a lot more than just a bedroom set-perhaps a whole new bedroom as well.

Start here to compare refinance rates from top lenders in our network.

http://www.mortgageloan.com/tips-for-cutting-mortgage-refinancing-costs

Cash-out Refinancing to Pay For College

You've got a bright kid. She worked hard for her grades, aced her SATs, and now she's been accepted to Trinity and Sarah Lawrence. While she's busy evaluating which dorms have the best amenities, you need to figure out how to pay for everything. The answer may be closer than you think.

Finding funds

Begin by taking advantage of all the scholarships and federal loans that are available to you. Nothing beats the generous terms and low interest rates on Perkins and Stafford loans. But they go only so far.

The next step is to review your home mortgage loan. It may be time to refinance into one with lower rates or better terms. This could give you the opportunity to secure funds for your star student, as well.

A cash-out refinancing = home equity back in cash

A cash-out refinancing gives you some of your home equity back in cash, which can be especially tasty if home values have skyrocketed in your area. But there are a few issues to consider if you're going down this avenue.

One of the best perks of a mortgage refinancing is the ability to deduct some, or all, of the interest from your income taxes. If you're in the 28 percent tax bracket, the deductions can effectively knock a quarter point of interest off a 7 percent loan. In other words, it will cost you as much as a 6.75 percent loan with no tax advantages. There are limits to how much you can deduct, however.

What to remember with a home refinancing

To take the greatest advantage of the tax code, the cash-out sum should generally stay below $100,000. If the school that you choose isn't quite that expensive, you can use the equity for any of your other needs, as well. Home improvement costs always have fully deductible interest, so this could be a good time to remodel the kitchen or replace those old carpets You should park any excess funds in a liquid account until you need them.

The cash you receive from your mortgage refinance will come as one lump sum, but college is a multi-year project. So, make sure the money is placed in a safe investment that can, at least, keep up with inflation. Short-term CDs (up to three years) can be effective options, and treasury bills represent the ultimate in safe investments. The idea is to keep your money safe until it's needed, and maybe grow it a little bit in the meantime.

Finally, if you don't need all the money you can get out of your refinancing, don't borrow it at all. A dollar not borrowed is a dollar not racking up interest and raising your monthly bill. And if your home pays for college, your child will have a whole new appreciation for that old house she grew up in.

http://www.mortgageloan.com/cashout-refinancing-to-pay-for-college-560

Online Refinance

A refinance is a refinance, and if you are thinking about one you should read on to educate yourself to find out whether refinancing is right for you.

Benefits of Refinancing - On/Off Line

A refinance is an entirely new loan with new terms that pays out your existing loan and takes over. Because refinancing, an "online refinance" or not, is a new loan it comes with all the costs that accompany the set up any new loan. Well, if you have a loan already then why would you shell out another couple grand for something you already have? You wouldn't, unless by investing a few thousand in a new loan you could save a few thousand every year for years to come.

Now it is more complicated than that because people refinance for all different types of reasons given their specific circumstances. One thing is for sure, if your particular circumstances are agreeable for a refinance loan, then by not moving forward in the right direction you are costing yourself hundreds, probably thousands, of dollars per year in unnecessary interest costs.

• Lower your interest rate, lower your monthly payments
• Reduce or increase the length of your mortgage
• Get cash out
• Consolidate a first and second mortgage
• Get out of your ARM and fix a rate while they're still low

If you are not financially inclined, you don't follow the markets, your eyes glaze over when folks on the news start talking about short term interest rates, etc. let's get you up to speed.

From 2003-2005 mortgage rates hit 40-year lows, most websites that speak about an online refinance will tell you rates still are at 40-year lows, but they are fibbing; however rates are still historically very low. Thirty-year fixed-rate averages are hovering around 6.34 percent, up from sub-six levels that were cause for all the rage in the mortgage industry from 2003-2005, but remain below the twenty year average of eight percent. There is a huge different between 6.5 percent and eight percent; let's examine a typical mortgage situation.

A Refinancing Example

For example, if you have a $250,000 mortgage at a rate of nine percent your mortgage payment is $2,011 per month; if your mortgage balance remains the same but you have a rate of seven percent your mortgage payment is $1,663 per month - a $350 dollar difference per month! The factors used to calculate what rate you can get - short-term rates, your credit rating, house value, etc. - are constantly in flux, and competition for new customers like you is fiercer than ever as the refinance boom winds down. Take you first step towards online refinancing at Mortgageloan.com by comparing rates for free!

Concerns and Options

When you refinance it is a totally new loan hence you will again be paying mostly interest instead of principle and depending on how far you are into your current loan that can be a concern. Really take a look at your motivation for refinancing and make sure it is a refinance that you do in fact need. If you are simply going for a lower interest rate and you can get it, by all means, go ahead. Or, if you are in an adjustable-rate mortgage and need out before your readjustment occurs, again, by all means, do so. When in those situations a refinance is most likely going to be best, but be sure to do a little pen and paper work to see how long it will take to recoup the cost of the refinance in monthly savings; for instance, if you pay $5,000 for a refinance to save $200 a month you will have to own that property for another two years to see any real financial gain.

Mortgageloan.com can help you a bit with your refinancing online through our free online refinance comparison quote service. We have been putting loan experts in touch with people like you since 1995.

Start here to compare refinance rates from top lenders in our network.

http://www.mortgageloan.com/online-refinance

Mortgage Refinancing - How Many Points Should I Add?

Should you use points to lower your mortgage interest rate? The answer is a resounding "maybe." A few important factors need to be considered first.

Mortgage Refinance Points Up Front?

Determine how much extra cost you can handle for the closing of your refinanced mortgage loan. Every extra point equals one percent of the loan amount; adding points can be expensive when you're about to sign on the dotted line.

One option is to borrow extra funds to cover the cost of your points. If you go down this road, you'll pay interest on the points that were rolled into the loan balance. It's a bit counterproductive, so you may not save much over the option in which you don't take extra points.

How Long Will You Stay?

Examine how much lower your monthly payments will be when you add points. The longer you plan to keep your new loan, the more it makes sense to add points to lower the interest rate.

Let's say you take four points for a cost of $4,000 in prepaid interest points on your $100,000 mortgage refinance, and this lowers the loan rate from 7.5 percent to 7 percent. The lower interest will save you $60.50 a month. It will take 66 months, or 5½ years, for those savings to make up for the original cost of the points.

If you're planning to stay in your house for only five years-or thinking about refinancing again in that time-four points would be too much for you. On the other hand, if you expect to keep this loan for six years or more, the points will save you money in the long run.

Tax Effects, Points, Refinancing

Some points are not tax deductible because they represent payment for lender services. However, the "prepaid interest" points that lower your interest rate can be deducted. When you add points to an original mortgage, the entire cost of the points can be deducted in one year.

Refinancing points work a bit differently.

Tax Effects, Points, Cash-Out Refinancing

If you take cash out with your refinancing, and then use some or all of those funds for home improvement, you can deduct a proportional part of your points in that tax year. If your old loan has a balance of $80,000, and you refinance into a $100,000 loan, and then use the entire $20,000 of extra cash to build a new patio, you can deduct 20 percent of your prepaid interest immediately.

Taxes don't change your closing costs or monthly payments; but they do have an effect on your tax return. Therefore, they're worth keeping in mind.

Mortgage points aren't right for everyone. However, if you're ready to settle down for the long haul, they can save you a lot of money.

That's a point well taken.

http://www.mortgageloan.com/mortgage-refinancing-points

Refinancing after a Bankruptcy

For a person who has declared bankruptcy and wants to refinance his mortgage loan, there's good news and bad news. The good news is that in as little as two years after filing for bankruptcy, you can refinance your mortgage. The bad news is that two years seems like an eternity in our fast-paced world. But if you don't mind a little perseverance, discipline, and a two-year wait, here's how you can make it happen.

Rebuild Before You Refinance

The first thing you need to do is rebuild your credit history. For the most part, your credit report is the key indicator for a lender. Unfortunately, you're going to have that bankruptcy blight on yours for years to come. A Chapter 13 bankruptcy will be on your report for seven years, while a Chapter 7 will stay with you for ten.

But don't despair. There are concrete steps that you can take to get your credit back on solid footing. At the top of the list is avoiding the type of habits that are generally associated with a bankruptcy. Translation: Pay your bills on time. A credit report also reflects your assets, so you should morph your spending habits into saving habits. Employ time-honored tactics like using automatic deposit from your paycheck into a savings vehicle of your choice.

You should also scrutinize your credit report. Make sure it's accurate, and if you find any mistakes, work with your creditors to clear up any discrepancies.

Find a Lender Right for You

The financial world is crawling with lenders, but there are only certain ones who will handle a mortgage refinance after a bankruptcy. Most of these are subprime lenders, who will charge you a higher interest rate and tack on fees to handle your loan. Don't fall for any scare tactics from pushy lenders. While the pool isn't deep, there are enough of them out there to allow you to shop around. Scrutinize rates and especially fees, which certain unscrupulous mortgage brokers will be happy to pump up at your expense.

Eventually, you'll find a lender and a loan that you can live with. At that point, you'll want to return to rebuilding mode. Stay clean with your credit, and continue to build up your assets. In another two years, you'll be surprised at how lenders will regard your turnaround. At that point, the bad news will be nothing more than a bad memory. The good news is that your financial situation will have done a 360-degree turn, and you'll have a great mortgage to prove it.

http://www.mortgageloan.com/refinancing-after-a-bankruptcy-550

Should I refinance my home mortgage?

Essentially, you have to determine: Are the fees and time it takes to refinance going to be worth it for the amount of money I will save? One thing is for sure, if you have the right situation you can greatly benefit from refinancing your home mortgage loan. The best way to figure out whether you, in particular, are in that situation is by talking to professionals and comparing mortgage rates-both of which you can do here at Mortgageloan.com.

Benefits of Refinancing

Everyday thousands of people refinance their home mortgage because there are many attractive reasons to do so. Given you have the right situation refinancing your home mortgage can be the smartest financial decision you make this year. Every factor used to determine your refinance loan is in constant flux: interest rates, your house value, credit rating, current equity and debt standing, which make any possible point in time grounds for a new favorable refinance loan.

1. Take advantage of a lower interest rate

2. Shorten or lengthen the duration of your loan

3. Lower your monthly payments

4. Get cash out

5. Lock in a fixed rate while they are still low

Concerns about Refinancing

Just as with the creation of any other new loan there are fees associated with refinancing your home mortgage. Depending upon how long you have been paying on your current loan, the interest vs. principle pay down will be a consideration. With a refinance, which means taking on a new loan, the bulk of your payment will once again go towards interest.

You also have to consider how much longer you will remain in your home. If you are going to save $1,400 a year by refinancing, but you have to spend $4,200 to get it done, then you will have to own that home for more than three years to realize any savings on that level.

Regardless of any of these concerns, if your situation is correct, you can save a ton of money by refinancing your current home mortgage loan. Do the research and do in now by comparing mortgage rates with us, time is of the essence and it may not be in your favor, but why?

Mortgage Rates: Up, Up, and Away

Recently, the new Federal Reserve Head, Ben Bernanke, picked up where Alan Greenspan left off and raised short-term interest rates, which affect both fixed rates and those with adjustable-rate mortgages. Rates went north for the 15th straight time since they bottomed out at forty year lows in 2004. What this means to you: money costs more to borrow-mortgage rates rise in tandem. Rates will only be going higher in the foreseeable future is what can be assumed from Federal Reserve rhetoric.

• More on Mortgage Refinancing
• More on Mortgage Refinance Rates
• More on Home Mortgage Loans

Begin your search to refinance your home mortgage today by comparing mortgage rates now. Get in contact with multiple lenders, do your homework, and find a loan that is right for you. Start on one of the tracks above.

http://www.mortgageloan.com/refinance-home-mortgage

Time to Refinance Your Adjustable Rate Mortgage?

For the past few years, refinance fever has been fueled by a desire to get the lowest possible rate in a declining interest rate environment. And because the end of cheap rates was not in sight, many homeowners chose an adjustable rate mortgage, so that they could continue to enjoy lower rates into the future.

But now the situation has changed, and many people who chose adjustable rates are ready to shift gears in order to avoid paying higher interest if rates spike upward. Because interest rates are still near their historical lows, it still may be an excellent time to lock in a fixed rate.

Refinancing Your Mortgage

Your lender can assist you in doing the math to get an "apples to oranges" comparison of your existing loan with current loan options. For those who like an adjustable rate, but want to lock in a low rate for the next few years, a hybrid mortgage may be an appropriate choice because of the flexibility it offers. If you plan to live in your house only for three or four more years, the hybrid may be even better than a fixed rate, because the first years of a hybrid loan are generally charged at a lower rate than traditional fixed-rate loans. After a few years, however, the hybrid converts to an adjustable rate mortgage, and by then, rates may be too high for your liking.

Getting the Fix on a Fixed-Rate Mortgage

If you want to ensure yourself the predictability and security of paying the same interest rate for the life of the loan, a fixed-rate mortgage is a great choice. You'll be able to enjoy the current low rates for as long as you make payments on your house, no matter how high interest rates go.

Historically, interest rates have hovered near 10 percent, so it's not unreasonable to expect them to return to that double-digit territory as the economy cycles through a downturn. If you don't want to participate in that kind of inflation, there's no time like the present to opt out of an adjustable rate loan and settle into one that's not going to offer any unwelcome surprises.

http://www.mortgageloan.com/refinance-your-ARM

Bad Credit, an opportunity...

So´ your credit record looks more like a rap sheet, and that's ok. Whatever has happened up to this point is insignificant. From this point forward you have the opportunity to manage your credit in such a way that credit transgressions of the past will have less and less bearing on the future until they become forgotten altogether.

Who needs a bad credit refinance loan?

Anybody who is a homeowner and has several high interest debts to service ought to think about a bad credit refinance loan; high interest credit cards, car loans, or other forms of installment debt are all eligible. Wait, isn't the interest rate on my bad credit refinance loan going to be much higher than for someone with good credit? Yes, the interest on a bad credit refinance loan is typically two to six percent higher than that of a refinance loan for someone with excellent credit. That being said, a bad credit refinance loan of 12 percent is much better than paying 21 percent on credit card debt that never seems to lessen. Because the bad credit refinance loan is most likely spread out over 30 years your monthly payments are going to be lower than if you were to service all those debt individually. With consolidating those other high interest debts into your mortgage loan you are now getting a tax break due to the fact that they are rolled into your mortgage payment. Those high interest debts are now stretched over a longer period of time so in effect, you will be paying on them longer, but it is a trade of for paying lower interest and tax breaks provided by the consolidation.

But can I get a lower rate?

Okay, we have established that, of course, the interest rate on a bad credit refinance loan is going to be greater than that of a refinance loan for someone possessing excellent credit. Similarly, the cost of setting up a bad credit refinance loan may be more expensive compared to a regular refinance not under credit restraints - talk to several lenders about this, there are plenty of sub-prime lenders in the market now willing to make deals. Depending on how well you have been keeping up with your mortgage payments over the past 24 months, you might be able to get a better rate even with the consolidation of outside high interest debt. If you make payments on time for two solid years you should be able to refinance at a substantially lower rate.

The total financial impact of a bad credit refinance loan can be more complex than figuring out the impact of a traditional loan not including outside debt to be consolidated because there are more variables. You have to consider whether you can even service your current debt obligations without lengthening the debt repayment period and lowering the interest rate, essentially what a bad credit refinance loan does; you also need to understand which way interest rates set by the Federal Reserve are moving. That will help you answer the question: If I do make all my payments for the next 24 months, will I be able to refinance my debt at a rate to where the amount of money I save each month will be worth going through the process and incurring refinance fees all over again. When you get to this point you need to start considering all of the questions that surround any refinance situation.

Other Options

Do know that refinancing your primary loan to get cash out or consolidate debt is not the only option, home equity loans and lines of credit are also viable options. Depending on your credit, interest rate and debt servicing or cash needs refinancing your primary loan might not be the best option. The most efficient way to wade through all your different options and learn what you need to learn to make an informed decision is to speak with loan professionals who deal with bad credit refinance situations like yours everyday. Read all you like, but when it comes down to it, talking to multiple experts is the best way to get the information you need. Take advantage of Mortgageloan.com's free comparison quote service. Talk with the professionals, see what they have to say, and then decide for yourself.

http://www.mortgageloan.com/bad-credit-refinance

Home Mortgage Refinance

Why Refinance?

At the most basic level, a home mortgage refinance is simply a new loan with new terms used to pay off an existing loan. Like any mortgage loan, various fees accompany the service of a home mortgage refinance whether the new loan is carried out by the existing lender or not. So then, if you already have a mortgage, why would you go through the hassle and pay a whole new set of fees to enter into a new loan?

You can get a lower interest rate that will reduce you monthly payment and often the overall cost of your loan. Similarly, if you have an adjustable rate mortgage (ARM) that is set to readjust in the future, now might be a good time to lock in what are - still historically - very low rates.

You can combine a first and second mortgage into one new refinance loan.

You can reduce or increase the term of you loan depending on your current financial situation. Also, if you are short on cash you can draw upon the equity in your home to take cash out.

Financial Impact and Considerations

This is a business decision that will impact you for decades to come hence you and your lender need to answer some critical questions surrounding your home mortgage refinance.

• How much lower will your monthly payments be?
• What is the sum of the fees associated with the new refinance loan?
• How many years remain on your current mortgage?
• How long do you plan to remain in the house?
• How much of your current monthly payment is interest vs. principle?

The best way to figure out answers to these questions is to speak with multiple loan professionals. Ask the same question to a few different people, this will allow you recognize who is giving legitimate answers and who has your best interests in mind. Begin your research today by comparing mortgage rates at Mortgageloan.com, we want you to do the necessary due diligence in order find the correct loan.

You are in Power

You should treat a possible home mortgage refinance as if you are making a sale. You own the product, your home, and lenders want to buy the right to lend money on your home. Sell the right to lend money on your home to the highest bidder, which means, the lender who can give you lowest interest rate and best loan program for you. The more lenders you compare the better deal you will find on your home mortgage refinance; take advantage our free mortgage quotes and get to researching who can offer you the best home mortgage

http://www.mortgageloan.com/home-mortgage-refinance