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How does refinancing the current mortgage help?

When one should refinance home mortgage? Does it help to bring the number of period of payments down? If so how?

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4 Responses to "How does refinancing the current mortgage help?"

  1. mateomortgage.com says:
    There are many reasons people consider refinancing. It just depends on your financial situation and what you would like to accomplish. If you want to pay your mortgage loan off sooner then doing a 15 or 10 year loan will help. If you want to lower your monthly payment you can see if you can get a lower interest rate, or go to a different loan type.
  2. valstpatrick says:
    There are a few general rules on when refinancing your existing mortgage provides a BENEFIT to the borrower.
    1. If you are in an ARM and you switch to a fixed rate
    2. You get a lower rate
    3. You shorten the term
    4. You consolidate other debt and reduce your monthly payments
    5. You obtain cash out for other reasons, (college) etc.

    If you pay your mortgage every two (2) weeks instead on ONCE per month, you can reduce the term of the mortgage by 7-9 years. You pay half the mortgage every two weeks = 13 months of payments per year instead of 12.

    You can always pay more principal with your mortgage and this will also shorten the repayment term.

  3. Robert N says:
    There is usually the unfortunate outcome that the clock starts over again, but you won’t keep your property for the life of the loan, unless you follow Val’s advice and pay it off sooner.

    There is another option…truly the last loan you will need…

    It’s called the “Home Ownership Accelerator”, and it is a time proven loan that was first used in Australia, then the UK…and has finally come to the U.S.

    In a nutshell, it’s a 1st Home Equity Loan (no 2nd Home Equity Loan Required), is serviced by a new checking account by GMAC, which has tremendous benefits if you qualify…and while many people don’t due to the requirements, if you do qualify and it fits your objectives, it can’t be beat.

    How does it work?

    Instead of depositing your paychecks or business income into a low interest bank account, they are deposited directly into your new line of credit, immediately reducing your principle balance on the loan. You always have access to these funds just like your normal checking account for paying your monthly expenses and your daily needs via ATM Card or check, and of course online bill pay. The beauty of it is that you don’t have to change your spending habits to gain the following benefits:

    1. Save thousands in interest every year.

    Because your income flows directly into the loan account, your principle balance is reduced IMMEDIATELY until the funds are needed for expenes. As a result, your daily principle balance is less, which can save thousands in interest. With every dollar deposited, instead of “earning” 1% in a low interest bank account, you are saving about 6% in mortgage interest!

    2. Builds equity faster.

    Because less of your money is consumed in interest, more can go towards paying down the principal each month. If you have a pretty typical income with good cash flow every month you will pay off an average loan in 1/2 the time of a traditional loan, WITHOUT CHANGING YOUR SPENDING HABITS!

    3. Access to equity.

    You always have full access to the funds available in your loan account up to your credit limit for any purpose, such as buying a car, paying taxes, tuition, or if you’re like me..for investments. Meanwhile, until you need the money, those funds are working for you every day to save interest, leaving more income available to pay down principal.

    This loan is not for everybody but works well for people with decent income or small to midsize business owners who want to free up cash for conventional investment or for people who want to begin investing in real estate, and this is a good time to find opportunities. The loan is best for people who have positive cash flow every month (savers). If you can qualify for a 30 year fixed mortgage, you will likely qualify for this loan.

    If you are already a person who can effectively handle your monthly finances and have money left over at the end of the month and know how to manage a home equity line, you will do great with this loan, and I believe this is the last loan I will ever need on my principal residence and my second home.

    Drop me an e-mail and I will send you a video link which explains it well.

    Regards,
    Robert Noakes
    Real Estate Investment Consultant
    Sr. Mortgage Planner
    415.652.8112
    robert_noakes@yahoo.com

  4. Quicken Loans says:
    Great question! Unfortunately, there is no “right answer” here as it is dependent on your individual situation and what your financial goals are. Some questions that you need to answer (to yourself or a mortgage broker or lender) are:

    How long do you expect to be in your home?
    If you’re only going to be in your home for a few more years, it may make sense not to refinance out of your ARM. If you’re going to be in your home longer than seven years, it might be a smart move to refinance to a fixed-rate mortgage.

    How much equity do you have in your home?
    Using the equity in your home to pay off other bills can be a smart thing. Consider taking some money out to pay off high-interest credit cards bills, auto loans, and any other debts you have that have non-tax-deductible interest.

    Are you willing to pay points to get a lower rate?
    Paying points may or may not be your best option, depending on what you’re doing. Points paid on a loan you’ve refinanced can be deducted from your taxes only in small increments—1/30th a year for a 30-year mortgage, for example. This means it could be several years before your lower rate makes up for the points you pay. However, if you’re buying a home, points paid are a tax-deductible expense for that year.

    Will having lower payments more than make up for the closing costs, fees and points if any?
    Sometimes the money saved with lower payments is less than closing costs and other fees associated with refinancing.

    What type of mortgage are you currently in – fixed or adjustable?
    Again, you need to consider how long you plan on being in your home. Many people move within nine years so it may not make sense to pay a higher interest rate for a 30-year fixed-rate mortgage when you’re not going to be in the home that long. Doing so may be costing you money. Consider refinancing to an ARM instead — you’ll get a lower rate and lower your monthly mortgage payment.

    Do you have high-interest credit card debt?
    Unlike your mortgage, the interest you pay on a credit card is not tax-deductible and you normally pay a higher rate than you would on your mortgage.

    As always, I recommend you speak with your tax advisor as well as your mortgage lender or banker. If you have any questions, feel free to contact me through my profile. Good luck

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