Is it Time to Consider Refinancing Your Home Mortgage Loan?

Sheryl Landrum
LoanBiz Columnist

Article Rating , 5 out of 5 based on 3 votes

In the last few years, many borrowers chose alternative mortgage loans to purchase and refinance their homes. Unfortunately, many of these seemingly "dream come true" home loans are now becoming a nightmare to homeowners.

The Best Loan Now and Later

Here are three things to consider when evaluating your current home mortgage loan:
  • If you currently have an optional payment or negative amortization home loan you should consider refinancing NOW! These loans have a minimum monthly payment that usually does not cover the monthly interest payment due. This means that the unpaid interest amount gets added to the mortgage loan balance and raises the loan amount. Currently, interest on these loans is running between 7% and 8% making the difference between the minimum mortgage payment and the needed payment even higher.
  • Have you checked your adjustable rate mortgage lately? Borrowers whose mortgages had a six month, one year, or three year adjustable interest rate should evaluate their loans with their loan advisor. These loans have the potential for a big increase in interest rates (between 2-6%) and monthly mortgage payments. Talk to your loan officer before the ARM period adjusts.
  • Get rid of your high interest rate second mortgage! In the last few years, lenders helped borrowers achieve home ownership by doing "combo" loans such as a first mortgage loan with a higher interest second mortgage or home equity line/loan of credit behind it. Hopefully your home equity has risen as fast as the interest on your home equity line. You need to evaluate your current mortgages to see if you can combine both loans into one loan with a lower overall mortgage payment.
Mortgage interest rates are currently very low, so call your mortgage advisor for a consultation and make sure you have the right home loan for you. Remember, the money you save will be your own.

About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage in San Diego and Prudential Realty in Bonsall, California.

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