Is Mortgage Refinancing Market Good or Bad Right Now?

Sunday, July 26th, 2009 at 1:53 AM

With all of the home foreclosures taking place across the country, many people may feel that it is not a good time to refinance. This is actually not true. Lenders want to keep people in their homes because of the expenses they incur when they try to sell a foreclosed home. Most times, they will actually take a bit of a loss. If you are considering refinancing for a better rate or to clean up any outstanding debts, there are many reasons why this is a good time to refinance your mortgage.

Mortgage refinancing is when you take a second mortgage to pay off the first mortgage and possibly consolidate debt under one loan. Like the first mortgage, it is secured against your home. Today, because of the current market conditions, lenders are offering interest rates at record lows. A record low rate could reduce your monthly mortgage payments by hundreds of dollars. As well, a fixed interest rate will not be affected by any down turns in the economy.

Another benefit of refinancing your mortgage is President Obama’s mortgage refinance stimulus plan. His plan has allowed millions of mortgage owners the opportunity to refinance their mortgage at a low fixed rate in order to get out of financial hardship caused by the housing crisis and a decline in the economy. If you are having trouble paying your current mortgage or you are seeking to refinance for a better rate, President Obama’s plan may be the solution for you.

Highlights of the Homeowner eligibility requirements as outlined in the President’s Home Affordability Plan include:

The house that will be refinanced must be the principal residence.
The amount remaining on the mortgage must be for less than $729,500
Income must be verified through tax returns or pay stubs.
Homeowners must provide a handwritten and signed letter of Financial Hardship
The mortgage loan must be through Fannie Mae or Freddie Mac
If monthly debts exceed 55 of the homeowner’s gross monthly income, the homeowner must get credit counseling

There have been special incentives that President Obama s government has provided all lenders for performing loan modifications on existing home loans. Banks and mortgage lenders can now offer the following highlighted benefits as outlined in President Obama’s Home Affordability Plan:

The bank or mortgage lender can lower monthly mortgage payment to 31 of one’s gross monthly income.
Home interest rates can go as low as 2 in order to meet the Obama plan guidelines. The 2 and 4.5 mortgage interest rates are adjustable after a 5 year period
Home loan modification fees will be paid by the Government as part of the Home Affordability Plan.
Incentive plans are available to reduce the homeowner’s principal over 5 years, up to a maximum of $5,000.

Mortgage refinancing has always been a popular method of getting better rates and consolidating debt. According to the Mortgage Bankers Association, the average interest rate on a 30 year mortgage in April was 4.76 per cent. Because of President Obama’s new mortgage refinance stimulus plan, as well as lenders offering record low interest rates, this is a great time for you to refinance. It could save you hundreds of dollars a month.

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Debt Consolidation Loan or Mortgage?

Thursday, June 25th, 2009 at 11:11 AM

Comments (2)

For many people with debts, debt consolidation can be a good way to bring them under control or stop them getting out of control in the first place.

Quite simply, consolidation involves taking out a new loan or mortgage and using it to pay off multiple smaller debts.

By bringing their various debts together, consolidation makes them much easier to manage: it stands to reason that one payment is simpler than multiple payments to remember (and budget for). It s an important point, given that making a payment late or even forgetting to make it altogether can lead to fines and damage the borrower s credit rating.

At the same time, consolidating debts gives the borrower a chance to reassess their finances and arrange repayment terms which are right for their financial situation as it stands today, rather than the way it was when they took on their other debts in the first place. So it s an opportunity to arrange a longer repayment term if they need to which will decrease the amount they need to pay per month.

However, there is a downside to longer repayment terms. Repaying any debt more slowly may well end up increasing the overall cost of that debt, as it ll spend longer accruing interest. Having said that, a debt consolidation loan is likely to come with a lower interest rate than other forms of credit, especially credit cards and store cards and other high interest credit.

So does it make sense to take out a debt consolidation loan, or a debt consolidation mortgage? There are pros and cons to either approach.

A debt consolidation mortgage, for example, is likely to come with a lower interest rate than a debt consolidation loan even if that loan is secured against property.

However, any form of remortgage is only available to homeowners. Today, in the credit crunch , they re only available to people who have enough equity in their property (i.e. homeowners whose property is worth substantially more than any loan and/or mortgage they have secured against it).

The interest rate on a debt consolidation loan may be higher than that on a remortgage, but it s still likely to be lower than some or all of the debts the borrower is using it to repay. And they may be able to find a loan with a particularly low rate if they own enough equity in their home and they re willing to secure the loan against their property.

Securing any debt against a property can be dangerous, though. If the borrower fails to keep up with repayments to a mortgage or secured loan, there s a chance their lender may try to force them to sell their property so they can repay the money they owe.

The same thing can happen with an unsecured loan (one which isn’t secured against property), but it would take longer and be more complicated from the lender s point of view, as they would have to apply for a Charging Order to have the debt secured against the property in the first place.

Finally, as with any debt, no one should ever take out a consolidation loan or mortgage unless they re sure that they can afford the repayments and that they re not expecting any major changes in the foreseeable future which could change that.

BIO: For more information on debt consolidation including debt management, visit http://www.thinkmoney.com

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