Mortgage refinance rates have edged up recently but are still low enough for many people to apply for a loan. If you’ve been paying on a home loan for several years, refinancing to get a 15-year mortgage can help you pay off your home quicker. But should you do it?

Lower Mortgage Rates

Mortgage loans with a 15-year term have lower mortgage rates than 30-year loans. That means you end up paying less interest over the life of a loan. For instance, 30-year fixed  mortgage rates are averaging 5.14%, while 15-year fixed loans are averaging 4.54%, according to Freddie Mac.

High Monthly Payments

But refinancing into a 15-year loan from a 30-year mortgage usually means your monthly payment is going to rise. For example, a 30-year mortgage  for $200,000 with a 5.14% rate would have monthly payments of $1,090.82, while the same amount for 15 years at 4.54% would have monthly payments of $1,534.08. Use a mortgage payment calculator to run different scenarios for interest rates and terms.

More Homeowners Refinance for 15 Years

Despite the higher payments, 15-year mortgages are popular these days. About one in five mortgage refinancings in November were for 15-year mortgage loans, according to the Mortgage Bankers Association. “My general advice is homeowners who have 30-year mortgages — and they’ve been in them for 3 or 4 years — it’s prudent not to go back into a 30-year mortgage,” Amir Syed of American Street Mortgage told CBS2.

Mortgage Principal and Interest Payments

Most of your mortgage payments go toward interest in the early years of amortization. So if you already have a 30-year home loan and refinance for another 30 years, you end up starting over again with most of your payments going toward interest.

It’s important to discuss all the numbers with your mortgage lender to determine if it really makes sense to refinance. Use the refinance savings calculator to determine if you can save money by refinancing and how long it is going to take to recoup the cost of refinancing.

Financial Freedom

For many people paying off their home represents true financial freedom. A 15-year mortgage is one way to reach this goal quicker, although you may have to make some sacrifices in your monthly budget to afford higher mortgage payments.

You can get free, no obligation mortgage refinance quotes here to determine if a 15-year loan can help you.

Some lenders have offered existing mortgage loan customers the chance to refinance with low closing costs. Does that mean you should jump at the chance to do a mortgage refinance if your bank offers such a deal?

Saving Thousands in Mortgage Closing Costs

Depending upon your mortgage loan and the interest rate being offered, there could be the potential to save a lot of money upfront when refinancing. For example, Valley National Bank, based in New Jersey, has been advertising for months a mortgage refinance for a flat fee of $499. Refinancing doesn’t require an appraisal or various other fees common to mortgage closings. The bank says you can save up to $2,000 in fees by refinancing.

Consider Other Factors Before Refinancing

If you’re thinking of refinancing through a similar mortgage program, it’s important to look beyond the closing costs, however. You should factor in how long you have to pay off your current mortgage. Most of the monthly payments go toward interest during the early years of a mortgage. If you’ve been paying on a mortgage loan for many years, it’s important to look at how much money gets put toward interest on a refinanced loan.

Are You Planning to Move?

It may not make sense to refinance if you plan to move soon. Sure the housing market isn’t doing so hot right now, but that doesn’t mean you won’t be able to sell your property in a couple years. It won’t take as long to break even on lower closing costs for a refinance, but getting a new mortgage loan seem like a wise move at this point?

Lower Your Mortgage Payments

Talk to several mortgage lenders to compare deals, even if they involve higher closing costs. Begin searching for mortgage refinance quotes here.

In some cases, refinancings that involve low closing costs may have higher mortgage rates than loans that involve more fees. But if you can significantly lower your monthly payments and are happy with other terms of a mortgage refinance deal, why not go for it? Refinancing into a fixed-rate loan also can give you more financial stability.

Low Mortgage Rates 

Current mortgage rates are very competitive overall. Refinancing could be one way to cut your monthly expenses and save more money in this tough economy. Just make sure you consider a mortgage refinance from all possible angles to avoid any problems later.

Many homeowners who have trouble making mortgage payments turn to savings and investment accounts for funds. But some financial experts recommend that homeowners seek help from mortgage loan modification or refinance programs before depleting their savings or ending up in foreclosure, according to a Consumer Reports article. 

Keeping money in a savings account can allow you to have access to cash in the event of an emergency. Here are some things to remember about getting help with your home loan.

Mortgage Loan Modifications

The government’s Making Home Affordable program has helped about 650,000 homeowners modify mortgages since February. That’s about 20% of the people who are eligible for help through the program.

If you are struggling to stay current with mortgage payments or are already behind on payments, you could qualify for a home loan modification. You also must:

• Have a first lien that originated on or before Jan. 1, 2009
• Have monthly mortgage payments (including taxes and insurance) greater than 31% of of your monthly gross income
• Be able to document that you are having trouble making mortgage payments because of a financial hardship

Even if you don’t have a mortgage loan guaranteed by Fannie Mae or Freddie Mac, you could qualify for assistance. Contact your mortgage loan service to find out if you qualify for help. Mortgage modifications last for a three-month trial period, but are supposed to be extended for five years if you make the payments on time.

Refinance to Lower Mortgage Rate

Mortgage rates are very competitive right now if you want to refinance. Even if you’re home has lost some value during the housing crunch, a mortgage refinance isn’t impossible.  You may qualify for a refinance if:

• Your home loan is owned or guaranteed by Fannie Mae or Freddie Mac
• You are current on your mortgage payments
• The amount you owe on your first lien doesn’t exceed 125% of the current market value of your property
• You have income to make payments after mortgage refinancing

Lowering Monthly Payments

Even if there is a second lien on your home, you could qualify for a refinance. If you currently have a high mortgage rate, refinancing should lower your monthly payments. However, if you currently have an interest-only loan and refinance into a fixed-rate mortgage, your monthly payments may not decrease. But refinancing should result in an overall savings over the life of the mortgage loan.

When seeking help with a mortgage loan it’s always best to contact your loan servicer directly. Avoid using companies that offer to modify your mortgage for a fee that is paid upfront.

If you’ve gotten behind on mortgage loan payments and are facing foreclosure, there may be help from a Fannie Mae program. The housing agency is allowing some homeowners to voluntarily transfer their properties back to their mortgage lenders and stay in the homes as a renters. Here are some details of the Deed-for-Lease Program.

Mortgage Refinance or Modification

You may have tried unsuccessfully to do a mortgage refinance or loan modification. Fannie Mae’s program allows you to complete a deed-in-lieu of foreclosure and lease back your house at the current market rate for up to 12 months. Your mortgage must be owned or guaranteed by Fannie Mae. The idea is that even though you are struggling to keep up with mortgage payments, you might be able afford a lower rent.

“This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities,” said Jay Ryan, vice president of Fannie Mae, in a statement.

Who Can Qualify?

 To participate in the Deed for Lease program you must:

• Live in the home as your primary residence
• Be released from subordinate liens on the property, such as a second mortgage
• Be able to document that the market rental rate is less than 31% of your gross income
• Submit to a credit check
• If the property you live in has tenants, they also may be eligible to rent through the program
• Get renters insurance if you have a pet
• Pass a property inspection
• Not have an illegal activity on the premises

Advantages to Rental Program

So why is Fannie Mae letting people rent back their properties instead of foreclosing? One reason is that it is better to keep people in a property rather than let it sit abandoned. Foreclosed homes that sit abandoned often fall into disrepair or attract vandals and and other criminal activity.

Mortage Lenders as Landlords

Some lenders, however, are reluctant to get into the landord business even if homeowners are struggling with mortgages. “We’re in the lending business. We’re not really equipped to be landlords,” Tom Kelly, a spokesman for JPMorgan Chase, told Time magazine.

Contact your mortgage loan servicer to discuss participating in this program if you’ve exhausted other options such as a trying to refinance, sell your house, or get a loan modification.

So you’re ready to get a home loan or refinance and want to know how large of a mortgage you can get. That depends on several factors, including the home appraisal. The following guide shows how an appraisal affects the amount of your mortgage loan.

What Is an Appraisal?

An appraisal gives an estimate of what a home is worth. When you apply for a home loan the mortgage lender usually orders up an appraisal and chooses the company to do it. The cost of the appraisal is included in your closing costs, and you are entitled to a copy of the appraisal.

If you already have a mortgage and are thinking of refinancing, you can get your own appraisal to get an idea of what your home is worth. But your mortgage lender is under no obligation to use that report.

Declining Home Values

Because so many people have seen their home values plummet during this recession, it can be tough for them to get a large enough appraisal to qualify for a mortgage refinance or new home loan. In many cases homeowners are “upside down” on their loans, or owe more on a mortgage than their house is currently worth. If that happens, you may be denied a mortgage loan.

If the house appraises for less than you expected, you may be asked to make a larger down payment. If you’re buying a home the mortgage lender may even ask you to go back to the seller to renegotiate the sale price. 

Reasons Appraisal May Be Low

There are various reasons an appraisal may come in lower than your expected, including:

•  Your neighborhood may have a lot of foreclosures, which could affect your home value
• The underwriter could have evaluated the home incorrectly
• The seller may have overpriced the house
• The appraiser may not have much experience

You can always appeal an appraisal, but there is no guarantee of it getting changed. If your mortgage lender won’t budge, you may be unable to refinance or obtain the mortgage loan you need to buy a home.

Current mortgage rates have fallen near record lows, but should you move to do a mortgage refinance? Here are 10 things to consider if you’re thinking about refinancing.

1. Consider a 15-year mortgage if you have a low balance. Fifteen-year mortgage rates averaged 4.36% last week, the lowest rate since Freddie Mac began tracking the rates.
2. Consider paying points to get a lower mortgage rate. Generally, you can lower your mortgage rate by about 0.25% for each point you pay.  Each point will equal 1% of the total amount of your mortgage.
3. Use a loan calculator to figure out what your monthly payments will be after refinancing. A loan calculator also can show the break-even point for recouping fees paid to refinance.
4. Check out home values in your area before applying to refinance a mortgage. This will keep you from being surprised by a low appraisal during the refinance process. Keep in mind that if you live in an area hit by a lot of foreclosures, it may be difficult to get a high enough appraisal to refinance if you don’t have a lot of home equity.
5. Don’t apply for a mortgage refinance until after you’ve reviewed your credit report. Make sure all information on your report is accurate. If you have a poor credit history, you may be turned down for refinancing.
6. Don’t apply for other types of credit before getting approved for a mortgage refinance. Too many credit inquiries or newly opened lines of credit are red flags to mortgage lenders.
7. Ask mortgage lenders to provide a Truth-in Lending Disclosure and Good Faith Estimate before paying an application fee or a rate lock-in fee. Some lenders may balk at doing this, but anyone who wants your business should be able to give you this information.
8. Make sure you continue making payments on your current mortgage. You are still responsible for the payments until you close on the refinance.
9. Comply with the mortgage lender’s request for documentation of income, income taxes, financial statements, etc. Dragging your feet on getting these documents together can delay closing on your home loan.
10. Just because mortgage rates are low doesn’t mean you should refinance. Talk with an experienced mortgage counselor if you need help deciding whether or not refinancing will help you.

Countdown to Your Mortgage Closing

If you do refinance your mortgage, be patient. Mortgage lenders have been overwhelmed by requests for loan modifications and refinancings so it make take a little longer than you want to get to closing.

This blog isn’t really supposed to be about tips, and hints. But, a couple of days ago, the New York Times gave such a good piece mortgage advice that I just have to pass it on. Read the rest of this entry »

It may only have confirmed what most people already suspected, but the biggest financial news of the week was the official announcement that the United States was already in a recession.

Two very different consequences of the slumping economy could be seen in other news of the week:

• Unemployment figures reached levels last seen in December of 1982 — when the economy was just starting to recover from a one-two punch of two recessions in three years
• Mortgage rates plummeted, approaching their all-time lows

While the prospect of unemployment may be enough to give anybody pause, those low mortgage rates should be a green light for many borrowers.

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Current events give a good demonstration of what really drives market interest rates:

• The Federal Reserve decided to leave short-term rates unchanged, at 2.0%
• And yet, thirty-year mortgage rates have eased off their recent highs over the past two weeks

The reason for the drop in mortgage rates can be traced to a third significant development:

• The price of oil slid to around the $120 a barrel mark, some 18% below its peak of $147

All of which suggests that potential homebuyers — or mortgage refinancers — would do well to keep their eyes on the price of oil in the weeks ahead. 

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Mortgage news was dominated by two items this week:

• President George W. Bush signed the mortgage relief bill, designed to help troubled home owners stave off foreclosure
• A prominent home price index reported a 15.8% decline for the year ending May 31, 2008, the biggest year-over-year decline so far

On the surface, the first would seem to be a highlight, and the second a lowlight, of the week’s mortgage and housing news. Reading between the lines, though, reveals that the first item may not be as good as it’s been reported, but the second item may not be as bad.

Read the rest of this entry »