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Do Your Homework before Refinancing

Posted on July 10, 2013 | Leave a comment

With ultralow mortgage rates now starting to creep up, some homeowners might be thinking that it’s finally time to refinance.

Despite six weeks of steady increases, fixed rates eased this week and are still below 4 percent. That means borrowers who have higher mortgage rates may still be able to take advantage of savings.

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Refinancing originations nationwide totaled $1.5 trillion last year but are expected to fall this year to $1.1 trillion due to rising mortgage rates, said a projection from mortgage giant Freddie Mac this week.

Figuring out whether to refinance a loan can sometimes be difficult. Several factors should be considered, from length of the existing mortgage to the borrower’s financial goals.

“Make sure you’re not refinancing just because your neighbor is refinancing,” said Todd Pianin, president and founder of Samuel Scott Financial Group, a boutique mortgage company in San Diego.

How do you know if refinancing is the right choice? Here are six questions to ask yourself:

Q:Where am I with my existing loan?

A:Homeowners who refinance can get a new mortgage with longer, shorter or the same terms. Those who have a 30-year fixed mortgage can refinance into a 15-year fixed loan, or vice versa.

Extending the term could result in a lower monthly payment but may result in paying more over time because the payments are stretched out, said Gabe del Rio, chief business officer of Community HousingWorks. The San Diego nonprofit group provides housing counseling.

Shortening the term could result in higher payments each month but it would shave off interest over time.

Also, consumers should figure out how long they’ve been paying their existing mortgage to see how much principal and interest has already been paid, said Pianin, the mortgage broker. A borrower who’s in year 20 of a 30-year fixed loan generally shouldn’t refinance because most of the payments are going toward principal.

Obama Unveils Aid for Mortgage Holders – FHA and VA Too!

Posted on March 7, 2012 | Leave a comment

WASHINGTON — President Barack Obama on Tuesday unveiled two new housing initiatives intended to assist members of the military and Americans with government-insured loans.

In his first major news conference of 2012, Obama announced a new plan to cut refinancing fees for any loan insured by the Federal Housing Administration. The president also outlined a new agreement with banks to review foreclosures for members of the military that have taken place since 2006 and provide compensation to anyone who wrongfully lost a home.

Neither proposal requires congressional approval. But they are also more modest than an earlier proposal for a $10 billion refinancing plan that Obama asked lawmakers to pass in his State of the Union address.

Here’s how the FHA plan would work: Currently, the federal government offers a program to allow borrowers with loans backed by the Federal Housing Administration to refinance their loans at lower cost. But the fees for refinancing have kept many borrowers from taking up the government on its offer. The administration estimates that an additional 2 million to 3 million homeowners could end up refinancing under its program.

Under the old program, an FHA borrower who owes $175,000 on his or her mortgage could refinance into a 4 percent loan and whittle the monthly payments down to about $1,010 per month. Under the new program, with the lower fees, that same borrower could reduce his or her mortgage payments further, down to $915 per month.

Meanwhile, the administration has also struck an agreement with various banks and lenders to conduct a review of foreclosure practices for military members. Any service member or veteran whose home has been wrongly foreclosed on since 2006 will receive compensation equal to a minimum of $116,785 plus any home equity lost since the foreclosure. This compensation will come from the mortgage servicers who conducted the foreclosures. In addition, any service member wrongly denied the opportunity to refinance will receive a refund of money lost.

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Tag Archives: refinancing

Do Your Homework before Refinancing

Obama Unveils Aid for Mortgage Holders – FHA and VA Too!

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