How To Get A Refinance Even With There Is No Equity
The Federal Reserve has pledged to keep rates low for an extended period but market
volatility might cause a spike in rates at any time so to make the most of this unique opportunity is to lock at the lowest mortgage rate by refinancing. Refinance basically means to replace your current mortgage with a new loan that has a more favourable interest rate and terms that you can afford to manage. This new loan is secured on the same property as your current loan. The new loan funds are used to pay down the current mortgage while any remaining money can be used to your best advantage. Refinance doesn't pay off the debt; it just restructures it.
But is refinancing of your mortgage an option for you? To make refinancing worthwhile see if the current interest rate is lower than what you are paying for your home currently. It is a best practice that the difference in the rate of interest is of at least 1 to 2 percent in order to refinance. You must also check the cost towards refinancing and see if it is profitable in the long run. Check what type of mortgage you have. Is it an adjustable rate mortgage (ARM) or fixed rate mortgage (FRM)? If you have an adjustable rate loan, you may want to refinance to switch to a fixed-interest loan but understand the terms that you are bound by and how much you stand to gain by doing so.
If you actually owe more on your home than it is currently worth, you may find it very difficult to find a lender willing to refinance your current loan because of the loss of equity. Yet I will recommend not considering foreclosure and bankruptcy protection immediately but persevere to find a good lender to refinance. You may question who will help me with my refinance in such situation but it just a matter of locating a reliable lender.
In the mean time it is of utmost importance that you stay up to date with your payments. The better your payment history the more likely you will be to obtain a favourable rate. Lesser the equity you have in the home, the more a lender will want to see a favourable payment history and credit line because when you pay off your debts, it will have a positive impact on your credit. Not only this, your credit score will shine and boost your FICO score. Another way to attract lenders to refinance your home is by showing a good debt to Income ratio. This ratio looks at your monthly debt obligations (payments of interest and principal) as a percentage of your monthly income. If you have a significant amount of debt, your debt service burden may be too high for a lender to comfortably give you a loan. The bank wants you to have no more than about 38% of your income as debt. An example will clarify this better. If you have $4000/month in income and $1520/month of this is available for total debt ($4000 x 38%). Of that $1520/month you already have $1000/month in debt, leaving only $520/month for mortgage payments. In such a situation you need to either increase your income, or cut your debts.
Some homeowners can qualify for assistance under President Obama's "Home Affordable modification" plan. It allows homeowners to refinance even if they owe 125 percent of their home's value on their mortgage loan. It also has a loan-modification program to help reduce payments. You can ask your lender if it is participating in any federal programs.
Look out for refinance my home plans from reliable lenders and evaluate the options provided and see if you can find how refinance would work best for you. As you do your research it is equally important to take this critical decision with right people who will help you to understand better and save more.
by: Ask Bill
Planning A Celebration On A Budget Dr Reviews - Using Them To Find The Right Physician How To Vacuum Achieving Financial Prosperity Through Proper Thinking Processes Money Saving Check: Discount Ideas, Wary Advice Breast Actives Review Earn Money Through Custom Printed Apparel Money Resources for News and Information Save Money – Reduce Expenses – Live Better Require to Make Money on the World wide web - Call for Caution! Best Encouragement-Callaway X-22 Irons Review Easybiz Tools Review Preparing For Financial Disasters