AZ Refi: Guide to Arizona Refinance
Az Refi - Guide to refinance that everyone needs
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Your Resource For Arizona refinance Information. A Step By Step Guide to Reducing and saving money on your mortgage payments. We Aim To Provide Relevant Az Refi Information.
All circumstances from reducing monthly repayments, finding the lowest rates, calculating if its worth it, choosing fixed or adjustable: You Can Educate Yourself Here.
Refinance Tool Kit:
Do you have a mortgage but want to pay less each month, today's low mortgage rates are giving many home owners the opportunity to trade in their current mortgage for a brand new mortgage, one that takes advantage of low interest rates and lower monthly payments.
To help you determine if this is the right time to refinance, here are some answers that will help you decide:
What does it mean to refinance and how does it work?
Refinancing simply means that you are swapping out of one loan, removing everything else that went with it, the rate, the loan features, maybe even the lender and replacing it with an entirely new mortgage loan.
In fact you are paying back the entire amount of money from your current mortgage loan by raising money from your new mortgage loan. Due to the fact that you are obtaining a new loan you will need to work the lender to ensure you qualify for the new loan, which means a new application and a new closing process.
Now I know what you're thinking: 'I've been paying my current mortgage on time, why do I need to requalify'?
Well first congratulations on keeping your mortgage current, that's good for keeping your credit score high and will help the refinancing process.
But because this is a brand new loan the lender needs to make sure that you qualify for the following:
The new monthly payment
The new loan amount versus your current home value
Your income
Your credit history
and other factors.
Keep in mind lenders now have stronger requirements, but that's a good thing, it protects the lender, the economy and most importantly it protects you. Responsible lenders want to place you with a loan you can afford to pay back.
Does it make sense to refinance right now?
It depends on your situation, here are some examples:
The most common reason to refinance is to lower your interest rate because that in turn lowers your payments. The general rule of thumb is to only consider a refinance if the new rate is at least 1% below your current rate.
How much of a difference can lower interest rates make?
Well, for example on a 30 year $200,000 loan moving from 6.5% to 5.5% equals a monthly saving of about $130 on your mortgage payment. So you will need to compare your current rate with other rates offered in the marketplace. A good source for that would be weekly mortgage rate e-mailer's offered by many lenders. With some lenders you can specify your target rate and they will notify you when rates hit or fall below that level.
The rate is not the only thing to think about when considering refinancing. As there were with your current mortgage there will be closing costs such as loan origination fees, title search, insurance fees, local real estate transaction fees and taxes.
All in all you can expect your closing fees to range from 1-3% of the loan amount.
So how do you figure out if refinancing is worth it for you in your current situation?
Generally the bottom line in refinancing is that it's worth it if you're still in your home by the time the monthly savings you accumulated equals the refinance costs.
For example say your refinance costs total $3000 and you're saving $150 per month because of your lower payments, then you will break even in 20 months after refinancing.
Formula: Refinancing costs divided by monthly savings = Number of months to break even.
Another good reason to refinance is to change the type of mortgage deal that you have. Lots of homeowners have adjustable rate mortgages or arms and their current rate may be lower than other rates available on other 30 years fixed rate mortgages. However, those adjustable rates will likely reset in the future and they could go much higher. Refinancing now with today's low fixed rates, even though the repayment costs could go up slightly, will end the uncertainty of what arm rates could do in the future.
For an arm loan a break even analysis does not apply, or at least not as conveniently because you don't know what's within the future. So the thing to consider here is how much is it worth to you to eliminate the risk of future payment increases.
The last thing to share with you about refinancing is that it's important to get it right. Your home is probably your biggest investment and the recent problems in the housing market are largely due to poor financing decisions, so work with a trusted lender and make sure you understand your loan options before you sign any mortgage document.
Refinancing in Arizona
Arizona had become victim of the Az Refi Clan over the last couple years. I use the term Clan because that's what the Arizona mortgage and refinance industry had become, one close knit community banded together, keeping a tight lid on the Government Green back that's been poured over their greedy parched faces.
Well, whilst big Az Refi banking argues that this government band aid has kept them from burning up in the wake of the financial meltdown, this reluctance to lend has also prevented both the working man and local business from looking to the future.
Az is desperately in need of some sun screen, third degree burns are immanently facing a huge proportion of Home owners in the sunset state and the Az Refi Clan certainly need their hands forced. That is exactly what Obama is now attempting to do.
Obama's new refinance initiatives were instituted on March 26, 2010. This means the Banks are now being encouraged to offer mortgage refi deals to troubled Az home owners.
Now that competition is heating up amongst the refinance companies and banks, homeowners in Az can take heart in knowing that at least some refi deals and loans are spilling on to the market.
Lets hope that this will spur the banks to open their vaults to business in Arizona too!
Pointers on How to Refinance
Is the drop in interest rate worth refinancing your loan or mortgage?
Take into consideration the costs associated with refinance, as well as interest rates
A lower interest rate means less tax to deduct off your income tax figures. Fully evaluate the total cost saved from taking out your refinance product. Ask yourself if the increase in tax and total fees for refinancing are worth it?
Cost of refinancing: The total cost can run between three and six percent of the total amount you borrow. So, for instance, you borrowed $100,000 on a refinance mortgage loan. For this amount, the lender may charge you between $3,000 and $6,000.
Most important tip
Get as many quotes as possible.
Make sure when asking for quotes that they are not going to run a credit check on you before giving you an estimate. If they answer 'Yes', TERMINATE YOUR ESTIMATE. This is the number one way to ruin your credit score. Companies do not need to run a credit check on you before giving you an estimate.
Mortgage strategyJust because someone says that you qualify for a $250,000 mortgage, doesn't mean you should go out with it.
Purchase within your means. You will also want to make sure you can save, you should have some reserves set aside in the event the unexpected occurs, either an unforeseen expense or an interruption to your income.
Consider a fixed-rate mortgage. There are adjustable rate mortgages in the market now, however it is a gamble and you don't know what the future is going to hold. The difference between an adjustable rate mortgage and a fixed rate mortgage is just not worth the risk in my opinion.
If you commit to a 30 year fixed-rate mortgage, you can always pay extra principle and that will allow you to pay the mortgage quickly. This gives you the same benefits of the 15 year mortgage, without being locked in to higher 15 year mortgage payments.
What if I already own a home, when is a good time to refinance?
There are a few things you want to think about:
How long do you want to be in a home where you have the mortgage?
Is it an investment property?
How much are my costs to refinance?
How much can I improve my rate?
The general rule of thumb is if you can save 1% or more in the interest rate and you are going to own the property for three years or more, you can cover your costs to finance in a reasonable amount of time. Generally in three years.
Potential problems with your credit history:
The first thing you must not assume is that you can't apply for a mortgage because of your credit history. Talk to your loan officer and review your credit history in person. Professionals review your credit history and know how your credit history affects credit score. They also know how to improve your credit score.