Home Mortgage Refinance
Eliminating Debt With A Home Mortgage Refinance Loan
An interesting and little known fact about loans – they hurt your credit. More appropriately, having a lot of loans hurts your ability to get more, but financial institutions like it when you use a loan you already have, such as a home mortgage refinance, to pay off your outstanding loans.
Although not every mortgage broker can make your home mortgage refinance include your other loans, it would serve you well to find one that can. The benefits strongly outweigh any kind of negative impact on a mortgage refinance. Even though you may have been looking forward to a lower payment by doing refinancing your home mortgage , you will enjoy overall lowered expenses across the board.
How it Works
It really depends on which lender you end up with as to whether they can consolidate your debt into your mortgage refinance. However, even if a lender can take care of this for you, they may have certain limitations as to what they can include in a mortgage refinance. Ask your broker up front whether they have a lender that can consolidate your particular kind of debt into the mortgage refinance.
Once you have found a broker who can put together the kind of mortgage refinance you want, just be sure to bring all the paperwork. All of your outstanding credit card balance information, auto loans, student loans, and anything else you might have hanging around. Once the mortgage refinance is complete, you will end up with one loan and one payment.
In essence, all that you are doing is paying off all those balances with your mortgage refinance, and continuing to pay on those loans at a lower rate. The most beneficial kind of debt to include in your mortgage refinance are credit cards. These should be a top priority for including in your mortgage refinance because revolving credit, as credit cards are, hurt your credit the most.
Keep in mind, it doesn’t matter if these accounts are closed or delinquent in order for you to include them in your mortgage refinance. However, some lenders also have a limit as to how much you can borrow over your home’s value. So if you’re really in over your head, you may only be able to get a portion of those loans included in the mortgage refinance.
Home Mortgage Refinance – Choosing a Good Broker
Home Mortgage Refinance – Choosing a Good Broker
To put it quite bluntly – you absolutely, categorically, and without a doubt, can not trust the person taking care of your mortgage refinance. It does not matter if they are employed by some multi-national company or even someone you think of as a friend. Mortgage refinance professionals have far too much power, and it is all too easy for these people to casually decide that ripping you off is a good idea – and not only get away with it, but get thanked for it too.
Why? Well, just like every other salesperson of “blind” products who gets paid a commission (i.e. cars, mattresses, appliances, and other complex big ticket items), that person processing your mortgage refinance is getting paid based on the difference between the rate he can give you on a mortgage refinance according to the lender, and the rate he can sell to you. Yes, that means your broker picks your rate.
Look for a Character
Fortunately, there are a few financial professionals who actually want to help your situation with a mortgage refinance. Since this type is very rare, they will be easy to spot. The great big sign you’re looking for when shopping for your mortgage refinance is someone who treats you differently.
Although brokers typically despise people who shop for the best rate on a mortgage refinance, how they treat you may not bely that fact. Depending on how the mortgage refinance market is doing, you might get a whole bunch of rude people, or quite the opposite may be the majority.
You will be able to tell in the first five minutes of a conversation whether a broker is a keeper for your mortgage refinance, just by keeping your eyes and ears peeled for the one that goes against the grain.
What Not to do With Your Home Mortgage Refinance
What Not to do With Your Home Mortgage Refinance
Consumers often mistake their mortgage refinance as a means to get out of the hole or keep their head above the financial water. That would be a big mistake. If you find yourself thinking those are the best reasons to get a mortgage refinance, then you are only setting yourself up for failure. A mortgage refinance should help you to get ahead, not stay on top of things.
Getting a mortgage refinance should not become a priority when you get behind on bills or making the payments. Although a mortgage refinance is certainly a wonderful tool for saving money, you should not see it as a way to lower your overall expenses. Beside the fact you should be living well below your means to begin with, you should not be spending more than a fraction of your income on frivolous things.
Taking Away From Your Future
The quickest way to lose money and lengthen the time it will take you to save up for a comfortable retirement, is to take money out of investments and drop it into a bottomless pit. A lot of homeowners, when they realize how much they will save with a mortgage refinance, think first of the vacation they can take or a new big screen television instead of meeting their retirement goals.
You should instead see a mortgage refinance as an opportunity to catch up on all the money you should have been investing in your retirement all along. Rarely is there a consumer who started saving early enough, so it is a pretty safe assumption that you do not have enough to retire just yet.
Although, if you still have revolving debts (such as credit cards or student loans) you could instead opt to keep your payments much the same and consolidate those debts in with your mortgage refinance. Either way you will be that much closer to meeting your retirement goals. Just whatever you do, do not consider the lowered payments on your loan from the mortgage refinance as an opportunity to spend it on something which does not return to you financially.
Rule of 72 and Your Home Mortgage Refinance
Rule of 72 and Your Home Mortgage Refinance
The great thing about money is you can calculate how much you will have, and how much you have lost, with a simple formula and extreme accuracy. One such formula, the Rule of 72, helps determine how many years it takes for money to double – or debt to double, as the case may be in your mortgage refinance.
Using the Rule of 72 when shopping for your mortgage refinance can be very handy, especially if you do not intend on keeping the house for the rest of your life. By plugging your new rate from the mortgage refinance into the formula, you can quickly, easily, and accurately figure out exactly when you would want to sell the house or do another mortgage refinance.
How it Works
All that you have to do is divide 72 by the rate of your mortgage refinance. For instance, let’s say your new rate would be 6% – just as an example – your debt would double every 12 years. However, there is a special rate you should run from if you are paying it with your mortgage refinance, but fall all over yourself if you have a chance to earn it.
When the rate on your mortgage refinance doubles, your debt doubles twice as quickly. Or at least, that is the typical way of things. For instance, a 4% rate on your mortgage refinance would cause your debt to double in 18 years, whereas 8% would double your debt in 9 years.
Logically then, 12% would work the same, and double every 6 years. However, if you were to chart it out for your mortgage refinance, you would quickly see that by doubling your debt every 6 years, the amount you owe increases much faster than any other rate. Three times as fast, to be precise.
Knowing this about your mortgage refinance and how quickly your debt would double, you are now better prepared to pick the best rate for you. However, it should be noted the Rule of 72 only works for scheduled (also known as “rip off”) loans.
Setting Goals for Your Mortgage Refinance
Setting Goals for Your Mortgage Refinance
You probably thought doing a mortgage refinance was an end unto itself, didn’t you? Well, the unplanned act leads to unplanned problems. It is vital you think about what you want a mortgage refinance to do for you, and seriously consider how a mortgage refinance fits into your financial goals.
Take a Step Back
First you need to look away from the whole ordeal of a mortgage refinance and think about what you want to accomplish financially. Do you need to retire in twenty years? Then it might not be such a great idea to have a mortgage refinance with high payments during that time, especially if you do not have all that you need saved up already.
It is alright to put off the final payment of your mortgage refinance until the more imperative goals have been met. After all, if you opt for a longer term, lower payment mortgage refinance, you could always sell your home later on and purchase something a little better suited to your needs later on in life – in other words, smaller and less expensive.
Be Realistic
You can not know exactly what the future holds, much less what will happen in the term of your new mortgage refinance. Your family may not be as large in the next decade, or maybe you will need to move a great distance and buy another house.
Knowing your mortgage refinance exit strategy will help you to avoid the most common financial pitfalls of your average consumer. In other words, figure out exactly what the point is to getting a mortgage refinance in the first place, and use that plan to pick the best mortgage refinance for your future goals and needs.
Prepare for the worst and hope for the best, but most importantly, make sure you do all you can to ensure that the most imperative goals are met with your mortgage refinance. The short term payment savings from a mortgage refinance are less important than long term boost to investments you can have if you use those savings intelligently.
The Right Home Mortgage Refinance Strategy
The Right Home Mortgage Refinance Strategy
A mortgage refinance is not an end unto itself. You need to ask yourself what you hope to accomplish financially in order to get the most of anything you do, most especially a mortgage refinance. In fact, why you perform a mortgage refinance and what you do with the new financial landscape after the refinance is probably one of the most critical financial decisions you will ever make for your family.
Assess Your Financial Goals
First ask yourself what you hope to accomplish in the next ten years after the mortgage refinance. Do you intend on selling the house any time soon? Do you want to just get the mortgage paid off and be done with it? Or do you have some debt sitting around that you would like the mortgage refinance to include? Is this the home you intend to pass on to your children?
How you answer these may greatly change what you aim to do in a mortgage refinance. Take for instance, whenever you think you would like to sell the house will determine the kind of loan you may wish to get. If that selling date is, let us say, five years from now, you might want to consider a balloon loan as part of your mortgage refinance strategy so you can minimize your payments and let the sale of the house pay for most of your loan.
However, if debt consolidation or long term ownership is in your plan, then the kind of mortgage refinance that would be best for you might be more along the lines of a balanced approach. Instead of worrying about the money later, you would be better off making sure your mortgage refinance fits in your budget to pay everything off as soon as possible.
Either way, do your best to live well below your means. Remember that you still have to save up for retirement – and if you haven’t managed to save a good sum for that yet, your mortgage refinance might be the best opportunity. You could get cash out of your mortgage refinance in order to invest in your retirement, or take the savings and invest it.
When to do a Home Mortgage Refinance
When to do a Home Mortgage Refinance
Pay no attention to all the gimmicks you see on television. The proper timing to do your mortgage refinance is entirely dependent upon you and your current financial situation, nothing more, and nothing less.
The truth is, all those financial professionals telling you “now is the time to refinance” and “there has never been a better time to do your mortgage refinance” are flat out lying. Nothing could matter less than the interest rate or current state of the market. Although those will factor into your mortgage refinance, it will be negligible at best – and any professional who tells you otherwise is just trying to pressure you into getting a mortgage refinance here and now.
What is the right time for a home mortgage refinance deal
So when is it the prime time to take care of your mortgage refinance? Well, pretty much whenever you can, but most especially when it would benefit you the most. A mortgage refinance is useful for so many more things than just shortening the term on your home loan or freeing up money from your mortgage to put into other things.
Take for instance, your mortgage refinance could enable you to get out of debt and retire faster. You could also include other revolving debt, such as credit cards or students loans, into the mortgage refinance. Although this would not lower your payments, in the long run, this will save a great deal of money for you.
It should be noted however, a mortgage refinance is not very effective as a means to keep your head above water – unless you are speaking in terms of retirement. If you find yourself needing a mortgage refinance just so you can make the payments on your loan, then it is time to get out of the loan, not do a mortgage refinance.
In a nutshell, the timing of your mortgage refinance is entirely dependent upon whether it would benefit you the most at that point. If you know of a debt you will be incurring in the near future or of more difficult times ahead – such as a new baby – then you might want to consider holding off on doing a mortgage refinance until after that point.
