Refinancing Online - Can You Really Save Time and Money?

You've decided to refinance your home mortgage loan. Interest rates are the lowest they have been in decades. But, you are wondering if you should refinance online.

Can You Really Save Time And Money Refinancing Online?
One of the largest financial aspects in people lives could not escape the Internet. Refinancing online is an integral part of the mortgage industry. This has become a paradigm shift that greatly helps benefit the consumer today. Now there is much more competition, which gives more financial power to the home owner wanting to refinance. You can now get the information you need in regards to home mortgage loans in minutes, instead of weeks.

Refinancing Online Is Much Easier Today Than In The Past
With today's online mortgage brokers; it's easy for you to get the information you need. This takes far less time, because there is little paper work involved while shopping for the best deal online. This can help you get a lower interest rate, because mortgage brokers are very competitive to earn your business. One of the biggest advantages is you don't have to run all over town pulling credit reports and talking to multiple lenders. Online mortgage lenders can give you multiple quotes from many lenders.

Refinancing Online With Easy Forms - Only Takes Minutes
With easy online forms, this takes a few minutes instead of hours without the hassle of talking to several high pressure loan brokers. There is no commitment until you are comfortable and have shopped around to find yourself the best deal for refinancing your home mortgage.

Refinancing In The Past Was A Hassle
Refinancing your home mortgage in the past (before the Internet), was a real hassle for both mortgage lenders and borrowers. The process of gathering information to compare rates, fees, points and loan programs was a time consuming task. There was not a centralized information source for mortgage programs and to go for refinance home loans, rates and financial advice for consumers. A home owner would talk to a couple of banks and just go for what seemed to be the lowest rate and fees for their situation.

Home Owners Now Have The Advantage Of Refinancing Online
Home owners can now access current financial information and news. Looking for the best rates and fees for refinancing between lenders, takes a few clicks of the mouse. Within seconds you can now have all the information you need. With mortgage calculators, loan programs and financial tools, the borrower is now empowered from the Internet.

Thousands Everyday Are Now Using The Internet For Refinancing
The Internet is now the fastest and hassle-free way for refinancing your home mortgage online today. Many borrowers use the Internet when looking for resources and doing research before refinancing. Most of the consumers now days are completing the entire process online, while saving time and money. Using the Internet for all areas of finance has made life easier. With enumerable sources of information online that the Internet provides, it has helped consumers make and save thousands of dollars and countless hours of research. Home123 at http://www.home123.com is offering Mortgage Loan Calculator to plan more securely about your finances when applying for any mortgage plan.

How much is too much for Mortgage Closing Costs?

Something that is very important for you to take into consideration when purchasing or going to refinance home loans for your home is the closing costs.

I would love to tell you that closing costs are not expensive, but believe me they are. Once you add up all the fees' involved, such as points, taxes, title insurance, county costs and various other fee's, it really begins to add up.

The first thing you need to understand is that nobody works for free so be prepared to pay at closing.

The total amount of fees' depends on quite a few things. For instance, the percentage of loan origination fees' (points) the lender is going to be charging you. Another large fee is the title search and insurance. The title fee varies by state and is determined by the amount of the home.

Closing costs on average should not exceed 5% of the total amount of the purchase price, and this does not include the down payment.

The total amount of these fees' does not all go to the lender. Generally only the loan origination fee and the application fee go to the lender.

The rest of the fee's such as the appraisal, credit report, interest for the period in between closing and your first monthly payment, home owner’s insurance, title insurance, pro rated property tax, etc., go to their appropriate institutions when applying for the home mortgage loan.

Before you go to closing, the lender is required by law to send you a Good Faith Estimate (GFE).The GFE disclose an accurate estimate of the entire fee's you will be responsible for at closing.

Make sure you go over the GFE with a fine tooth comb, and if there are any fees' you don’t understand, call your lender or broker and ask for an explanation.

As I stated earlier, you must be prepared to pay closing costs. Closing costs are not cheap, but you should not pay a penny more than what is required.

If your closing costs are somewhere between two and 5% of the amount of the mortgage, you should be in good shape.

If they are drastically higher, consider finding another lender.

Remember, do your homework. Put yourself in a position to understand all the jargon that fills up all the paperwork you will be signing.

Also, take your time and shop around, always look for the best rate at the lowest possible price. My recommendation for you people visiting this article is to visit http://www.home123.com and use Mortgage Loan Calculator for better decision when applying for a loan.

The Certified Guide on How to Avoid the Most Common Home Mortgage Mistakes (Part II)

TITLE INSURANCE

Paying too much for Title Insurance is a very common mistake. All lenders will require Title Insurance each time a mortgage loan is granted. This is because it insures that the title to the property is free from any surprise liens that occurred previously. So, in essence, it covers the timeframe prior to the mortgage closing. That is why a new one needs to be done even on a refinance. Generally speaking, law regulates title policy fees so all title companies charge the same amounts.
There are a few different things you can do to save yourself money on title insurance. If you are refinancing, you can save over 50% by providing your old title policy and get the “refinance” rate instead of the higher “basic“ rate. Even on a purchase, you can save 20 to 25% by getting the “re-issue” rate if you get the old title policy from the seller.

RATE SHOPPING
Most people will check the Internet or pick up the newspaper to look up current interest rates. What you see isn’t always what you get. Unfortunately, there are many ways to get hurt when shopping for the best rate:
Short Pricing — It is not necessary for lenders to state the “lock-in” duration when advertising a rate, so while a rate may sound good, it may not allow enough time for you to close on your loan. Most people don’t ask how long the quoted rate is guaranteed for — so make sure you do!
Low Ball Pricing — Some companies will lure you into a mortgage application with promises of a low rate, only to have the rate changes for the worse just before closing. They may tell you your rate has expired or that the program is no longer available, or they may even delay the closing to break the lock. It is not nearly as important to shop rates as it is to shop for a reputable lender.
Products — With all the different products and options available, borrowers need a good mortgage professional to help choose the right one that will best suit their needs and goals. After all, a mortgage is typically the largest financial transaction people make in their lifetime. It is far more costly to get the best rate on the wrong product that it is to get a competitive rate on the right program for you.

POINTS vs. NO POINTS
So you’re in the market for a mortgage. After hearing about all the options and products, your head is probably spinning. If that weren’t enough, after you pick your mortgage, you then have to decide whether to pay points, and how many.

What is a point, anyway? Points are prepaid interest. One point equals one percent of the mortgage amount. One point on a $200,000 mortgage is $2,000.

People are often tempted to pay points because it will reduce their interest rate. And why not? If it saves you money in the long run, then it must be good. But in the real world, it usually doesn’t work out that way.

Let’s look at an example: You take on a $200,000 mortgage with a 30-year fixed rate. Your lender offers 8 percent with no points, or 7.75 percent with one point, or 7.50 percent with two points, and so on.

Generally, one point equals a quarter of a percentage point. It’s not a hard and fast rule, but it usually works out that way.
• The 8-percent/zero-point option equates to a monthly mortgage payment of $1,467.
• The 7.75-percent/one-point option equates to a $1,433 monthly payment, but with $2,000 paid up front.
So your choice is: save $2,000 now, or save $34 each month going forward.

It’s quite natural for you to make a few quick math calculations: $2,000 divided by $34 equals roughly 59. So 59 months (nearly five years) from now, the point you paid will pay for itself.

This is probably how some mortgage bankers will explain it to you. In turn, you might respond by saying: I plan to live here more than five years, so the point makes sense. That can be a big mistake. Worse yet, it’s the kind of mistake that goes unnoticed. The simple calculation is flawed; that’s the whole problem. This is one case where simplicity isn’t good.

Here’s why. The question really boils down to how you can best use that $2,000. You can pay a point, you can invest it, you can pay down other debt, or you can put it toward a bigger down payment on your house. If you plow it into the down payment, now you have a mortgage balance of $198,000. This changes the original choice you were faced with above. Now the choice is:
• The 8-percent/zero-point option gets a monthly mortgage payment of $1,452 with the lower starting balance.
• The 7.75-percent/one-point option equates to a $1,433 monthly payment, but with $2,000 paid up front.
So now your choice is: put the $2,000 toward the down payment, or pay the point and save $19 each month going forward. Now when you do the quick math: you will divide $2,000 by $19 and come up with about 105 months, or nearly nine years. This isn’t quite the no-brainer the previous decision was.

The average family changes residences about every nine years, according to the National Association of Realtors. And first-time homebuyers move frequently. The Mortgage Bankers Association says the typical homeowner refinances once in nine years. All this brings us to the average life of a mortgage, which is less than five years. So, more often than not, borrowers will find themselves with a new mortgage before one point pays off.

The case for avoiding points is even more compelling when you refinance a mortgage. That’s because the tax treatment is less favorable. The points paid on a first mortgage when you purchase a home are fully deductible on your federal taxes that year. That’s one of the selling points of points to begin with. But on a refinance, you must amortize those points over the life of the loan. This leaves you with slim pickings, at best, on the tax benefit side of the equation. On a refinancing with $3,000 of points paid, you get to deduct just $100 per year on a 30-year loan.

Lenders love to take your point money. But you should keep it and put it toward a sure thing, like cutting your loan size.

PRE-PAYMENT PENALTIES
Watch out for pre-payment penalties. I don't like prepayment penalties under any circumstance and would do my best to avoid them. If you are getting a great deal on a loan that has a pre-payment penalty, try to keep it to a one-year period. Additionally, make sure it's a "soft" pre-payment penalty. That means there is no penalty if you sell your home, and you can reduce your principal up to 20% per year. The only time you pay the penalty with a soft pre-payment penalty is if you refinance. Still, there are so many options out there, why be stuck with a lemon like a pre-pay?

NEGATIVE AMORTIZATION
Negative amortization is when the loan balance increases rather than decreases. This is a dangerous game and is offered in exchange for a lower payment. An example might be where the borrower makes a payment based on a low 4% rate but the actual rate being charged is 8%. The difference between what is being charged and the amount paid is added to the loan balance. Just like a credit card! You pay interest on the interest as well (ouch). Your home should not be treated like a credit card. If the situation persists and home prices level off or even depreciate like they did 10 years ago, you may be unable to sell your home because you owe more than the value. You may also be unable to refinance the loan because you exceed the maximum loan to value limits. Avoid this like the plague.

PROCESSING FEES

The most damaging of all could be the additional processing fee (this may have a separate or different name). This is really “points.” What is worse is the fact that, because the lender is hiding it as a fee rather than points, they rob you of the tax deduction.

The Certified Guide on How to Avoid the Most Common Home Mortgage Mistakes (Part I)

SELLER CONTRIBUTIONS

A "seller contribution" is one of the best-kept secrets in the home-buying process. That’s when the seller of a home puts up some of the money needed toward the buyer’s closing costs. It can mean the difference between a sale of a home and no sale.

Seller contributions can be negotiated at the time of a home purchase by having the seller pay closing costs rather than or in addition to a reduction of the home sales price.

A seller contribution can seal a home purchase in some cases where the buyer does not have enough cash for both the down payment and closing costs. Many people can qualify for the payment on a home mortgage but encounter challenges in gathering the necessary cash. Often, people worthy of a mortgage don’t have a lot of ready cash sitting around at the moment they find their dream house. Don’t let the idea of a seller contribution scare you. An experienced mortgage broker or banker can help you figure out the best way to put a deal together. He or she should also be able to help you understand the details well enough to be comfortable with the purchase structure.
There are many other benefits of utilizing a seller contribution. Using the money from a seller contribution for the closing costs can free up more cash for a larger down payment. This can reduce or eliminate the need for private mortgage insurance (PMI) and can thereby save the borrower anywhere from $50 to $200 each month in PMI charges. This can also be used to achieve better price break points in the loan-to-value ratio to help the borrower get a better interest rate. Another benefit is the improved pricing or accessibility of "no income verification"
mortgages. This is where the borrower cannot verify the income needed but may still obtain the mortgage by increasing the amount of down payment. If the borrowers have consumer debt with high monthly payments, preventing them from qualifying, they can use the seller contribution to pay off some or all of those debts. This allows them to qualify or significantly reduce their overall monthly payments. Also, closing costs are virtually non-tax-deductible. However, points are still tax-deductible. If paying points, it is very smart to use a seller contribution because while the seller pays the points, they are still tax-deductible to the buyer.

A seller contribution is easy to implement. There are no negative tax consequences to the seller except for a negligible real estate transfer tax in some areas. A seller contribution must be fully disclosed. The amount of seller contribution must not exceed the actual amount of closing costs. The buyer or real estate agent should check with the lender to make sure that they are within allowable limits, normally 3 to 6 percent of the purchase price.

Refinance with a Purpose

So many homeowners rush to refinance when rates decline. They shop, looking for the lowest rates and lowest fees, but while wrapped up in all the shopping frenzy, they could be missing the big picture. A home mortgage is typically the largest financial transaction that individuals make in their lifetime. While price is important, the paramount element in securing a home loan is the strategy of the program and how it fits into your life plan.

The vast majority of homeowners will secure their mortgages based solely upon the interest rate, and then wonder how to work their financial goals around it. Since there are literally hundreds of mortgage plans to choose from, the far wiser approach would be to begin with the end in mind. First, have a long-term financial strategy in place. Then you can find a mortgage that fits into and helps achieve the goal of that plan.

Just like the lost driver who refuses to ask for directions, most families do not have a financial roadmap to reach their goal or destination. They just “hope” that things will “work out.” When your children’s college education, your financial freedom or your quality of life after retirement hangs in the balance, you can’t afford to just “hope.”

Let’s take an example:

We often see someone refinancing to save $200 per month. They decide to do this not because they are struggling to make ends meet but because it simply would be foolish to throw that money away. After figuring the after-tax effect of the $200 savings, the net for most families would result in a savings of around $140 per month. Unfortunately, there isn’t a lot you can buy with that today. Most borrowers would simply spend the additional monthly savings and not have much to show for it in the long run.

Consider that many long-term, professionally managed financial plans can achieve a long-term rate of return of 12%. This rate of return would cause a lump sum to double every six years. Okay, back to our borrowers who would save $200 ($140 net of tax benefit) per month by refinancing? Let’s assume they have a very young child and have not yet put together a college savings plan. They could, at current rates, borrow $30,000 more and still keep the same monthly payment that they currently have. If invested with a professional money manager or financial planner, that money could double in six years, bringing the total to $60,000 (assuming a 12% rate of return). Six years later, the total would double again equalling $120,000. Add another six years, and the total would be $240,000 in 18 years. Now that’s a great way to get your child off to college!

The above example, while realistic and based upon historic returns, does not provide a guarantee that the results will be as illustrated. But even if only half of the sum were achieved, the total would still be a handsome $120,000 accumulation. That’s still far better than the net $140 per month that would likely be spent without a plan.

It seems so obvious to have a solid financial plan before deciding on such a large monetary undertaking as a home mortgage. If you are not a dentist, would you attempt to perform a root canal on your spouse? (I am not asking if you want to). The obvious answer is no. Why, then, do so many homeowners go for such a long period of time without consulting a financial planning expert before making major financial decisions? That financial planning expert can sometimes be your Mortgage Loan Representative, but check first to make sure they have the expertise to help guide you along the way.

Selecting the Right Mortgage Product Requires More Than Just Information

Are you considering buying a new home or refinancing your present one? With the range of mortgage products available today, many people feel as though they need a crystal ball in order to make the right choice. It certainly would be handy to see into the future, but there are more prudent and more logical ways to navigate your way through the available options.

There are many mortgage types — pick-a-payment, hybrid adjustable, fixed-rate interest only, reverse, negative amortization, FHA, CHFA, VA, Fannie Mae, Freddie Mac. All these mortgages are referred to as MPs (mortgage products) or MOs (mortgage options).

When you start looking for a mortgage, try to keep an open mind. Be prepared to listen carefully so you can hear about all the mortgage products available to you. What might have been right for your parents, or what might be right for a friend, might not be right for you.
Here are some questions you should ask yourself before you meet with a mortgage professional:
• How long do you plan to stay in the house? You can use a range of years — for example, 2 to 5 years, 6 to 10 years, 12 to 20 years.
• Are you anticipating large expenditures in the near future? For example, you might need a new car, or you may be saving for a child’s college education.
• Is your family getting larger or smaller? Are you planning to have more children, are your children going off to school, or are your children grown and married?
• Is your income remaining steady, increasing, or subject to large variations? Is your spouse working, or is your spouse planning to stop working? Do you anticipate cutbacks in overtime or a slowdown in business?
• Is this your dream house or an interim house? Do you expect to improve it over time?
• Will the monthly payment curtail other activities, such as vacations or hobbies? If so, are you prepared to give those up for a while?
• Will the money from a refinancing improve the property’s value? Will it improve your cash flow, or will it improve your financial condition in some way?

Your mortgage professional will help you evaluate your answers to these questions, and he or she will help you find the right mortgage product for you. A good mortgage professional is like a good physician — both probe for information to help guide them toward making a recommendation that will be best for you.

When you are ready to buy or refinance, be sure to get a referral from someone you trust an attorney, accountant, financial planner, or good friend or relative who has gone through the experience. Remember, the more you know, the better off you are. Perhaps then you won’t need that crystal ball!

Getting to the Truth in Real Estate Mortgages

Have you noticed all the media attention being given to the various new types of mortgages that have become popular in the last five years or so? Many of these mortgages make it easier for people to buy homes. In some cases, people get more house than they thought they could afford, and that is good, especially when that extra bedroom is needed for a growing family, but in other instances, Some people perhaps buy more house than they need or can afford.

While it is true that our low interest rate environment has fueled the real estate market and made it possible for more people to achieve the goal of owning a home much earlier in their life than ever before, credit is also due to the introduction by banks and aggressive mortgage companies of a lot of new mortgage products, including: low start rate loans, interest-only options, deferred interest loans and a proliferation of no-money-down loans.

Stories about unqualified buyers who have been led astray by unscrupulous loan officers or real estate agents are picked up and exploited by the media, but as far as I am concerned, the whole story is often not heard. As a mortgage professional, I work with other professional men and women who take their careers and their client relationships seriously, and I am confident that most companies have a high code of ethics and have trained their loan officers to make sure that each client is making an informed decision and is entering into the purchase of a new home or refinancing of an existing home with a maximum amount of confidence and knowledge.

Of course, every decision is not the right one, and often the passing of time alone changes a person’s needs, qualifications, and circumstances. No one has control over this, and there are no crystal balls to help make personal or business decisions. Here is a typical example in my experience: It’s time to buy a house. Husband and wife are excited and anxious to make the move. They want to upgrade their living style, space and perhaps location for job or school reasons. The market is hot, houses do not stay on the market too long, they realize they need to act quickly and be prepared to pay more than they expected. The mortgage broker gives them all of their choices of loan programs; among them are the conventional 20% down fixed rate mortgage. But now they realize they will also want to fix up the house once bought, so putting less money down is an attractive idea. They are also very optimistic about their job and income future. Things are going well, and raises and promotions are in sight, so they decide to take a chance on a lower interest rate adjustable product to help keep the payment down to where they need it to be. One year later, interest rates go up, and the raise in income did not come through. You can see that this couple made their decision based on their needs and financial capabilities at that time. The mortgage broker presented them with all their options and discussed each product’s benefit and potential hazards. It is a professional’s job to do the research, present the facts and help their client evaluate the various what-if scenarios. They cannot predict the future, nor should they speculate about their clients personal lives. So is it possible that we simply have too many choices and it is in our nature as humans to select the path of least resistance? Personally, I do not think so. I believe that choices empower people and drive the marketplace into staying competitive. It is we as consumers who need to do our part and take responsibility for ourselves and our decisions. You need to find the right professionals to help you in any financial decision you make, but at the same time, we all must be prepared to live with and work out the choices we make in life. However, I do have advice for potential homebuyers and refinance candidates, and that is simply to trust the person you are doing business with and to ask as many questions as you can. A true professional will always take the time to help you understand what you do not know. The following are a few other good tips and practices.

Phone solicitation: There are groups of unethical mortgage telemarketers who call homeowners and offer a “free survey” of your “financial and debt” picture. In reality, the vast majorities of these callers are reading from a script and have little to no real experience in the mortgage field. The operators of this type of solicitation Company move from one hot industry to another year after year, leaving a wake of unsatisfied clients behind them. They were selling alarm systems last year and probably will be selling frozen beef next year. This type of mortgage marketing is an embarrassment to the real professionals in the industry, and consumers should beware.
You don’t need to receive these unwanted phone calls. Simply add your name to the national Do Not Call Registry, and the calls should stop. We provided a link to their website here: https://www.donotcall.gov/

Direct mail: Unfortunately; there is no such thing as a Do Not Mail list, and if you are like me, you receive all kinds of mortgage offers and solicitations. (Some sound so good that even I have been tempted to call!) Keep in mind that a letter in the mail with an offer that is too good to be true is usually just that — not true. Read everything carefully, even the letters that look like they are from your current mortgage holder, and do not be tempted to jump at the offer. A good direct mail piece should give you timely or practical advice about the product or service the company is offering. This is a sign of honesty and integrity on the part of the solicitor.

E-mail spam: If someone is spamming you about a mortgage, how much trust do you really have in them to deliver a worthwhile financial product? Spammers are often hiding behind a curtain of deceit, using foreign and untraceable URLs and phony names. You can be sure no one took the time to sit down and write you personally about a mortgage.

When you are ready to buy a house, or when you want to refinance your home, be sure to get a referral from someone you trust — an attorney, accountant, financial planner, or good friend or relative who has gone through the experience. Remember, the more you know, the better off you are!