Have interest rates dropped since you first bought your house? Are you in a considerably better place financially and credit wise than you were when you first got your mortgage? Are you looking for a way to lower your monthly mortgage or loan payments? If any of the above are true, then it may be time to take a closer look at a refinance mortgage.

A refinance mortgage, or ‘refi’ as it is popularly referred to, is a loan taken out specifically to pay off an existing loan for the purpose of lowering your current monthly payments – or reducing the total amount of interest that you’ll pay.
Refi loans become more popular when interest rates drop significantly, though there may be good reasons for you to consider a refinance mortgage loan even if the general interest rates have remained the same or increased. How does refinancing your current mortgage lower monthly payments and when should you consider a refinance mortgage loan?

Suppose that you bought your house with a mortgage loan from a local lender. Because of your lack of credit history and your decision to put down a small down payment, you ended up with an interest rate that was slightly higher than average. Five years later, the standard interest rates have dropped by nearly a full percentage point – which puts them nearly 3 percentage points below the interest rate on your current mortgage. You’ve been with your current employer for seven years, lived in the same house for five and have built a solid history of on-time payments on your mortgage and credit cards. You’re in the ideal situation to seek a refinance mortgage because:

1. Your credit rating nearly guarantees the lowest interest rate available on new loans.

2. A drop of 3 percentage points on your mortgage is significant. Most experts recommend considering refinancing if the new interest rate is at least 1 full percentage point lower than your current interest rate. In fact, drops of as little as half a percentage point in the APR can significantly lower your monthly costs.

3. Your original mortgage carries a higher interest rate than market rate because of financial circumstances that no longer exist.

One other reason you might take out a refinance loan is to shorten the term of your mortgage. If you originally took out a 30 year mortgage at 5.25% APR, refinancing the loan for 20 years, even at the same APR, will lower your overall cost considerably though your monthly payments will be higher. Still, if you’re in significantly better financial circumstances than you were when you took out the original mortgage, the overall savings could make it worth your while to refinance.

There are several factors to consider when deciding whether or not to refinance your existing mortgage. Most mortgages carry an early repayment penalty, for instance. There are also fees and closing costs associated with the new loan to add into the mix. You’ll need to consider all the costs of taking out a new loan against the possible savings of a lowered interest rate before you decide if it makes sense to refinance your mortgage.

Found here.

Reverse Mortgages are becoming popular in America. The U.S. Department of Housing and Urban Development (HUD) created one of the first. HUD’s Reverse Mortgage is a federally-insured private loan, and it’s a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements, and more. You can receive free information about reverse mortgages by calling AARP at: 1-800-209-8085, toll-free. Since your home is probably your largest single investment, it’s smart to know more about reverse mortgages, and decide if one is right for you!

1. What is a reverse mortgage?
A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD’s reverse mortgage provides these benefits, and it is federally-insured as well.
2. Can I qualify for a HUD reverse mortgage?
To be eligible for a HUD reverse mortgage, HUD’s Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.

3. Can I apply if I didn’t buy my present house with FHA mortgage insurance?
Yes. While your property must meet HUD minimum property standards, it doesn’t matter if you didn’t buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.

4. What types of homes are eligible?
Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for condominiums to qualify under the Spot Loan program. The home must be in reasonable condition, and must meet HUD minimum property standards. In some cases, home repairs can be made after the closing of a reverse mortgage.

5. What’s the difference between a reverse mortgage and a bank home equity loan?
With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, other loan fees, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don’t make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.”

6. Can the lender take my home away if I outlive the loan?
No! Nor is the loan due. You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home’s value.

7. Will I still have an estate that I can leave to my heirs?
When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD’s reverse mortgage loan. This debt will never be passed along to the estate or heirs.

8. How much money can I get from my home?
The amount you can borrow depends on your age, the current interest rate, other loan fees and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

9. Should I use an estate planning service to find a reverse mortgage?
I’ve been contacted by a firm that will give me the name of a lender for a “small percentage” of the loan? HUD does NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender! HUD provides this information without cost, and HUD-approved housing counseling agencies are available for free, or at minimal cost, to provide information, counseling, and free referral to a list of HUD-approved lenders. Before you agree to pay a fee for a simple referral, call 1-800-569-4287, toll-free, for the name and location of a HUD-approved housing counseling agency near you.

10. How do I receive my payments?
You have five options:
• Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
• Term – equal monthly payments for a fixed period of months selected.
• Line of Credit – unscheduled payments or in installments, at times and in amounts of borrower’s choosing until the line of credit is exhausted.
• Modified Tenure – combination of line of credit with monthly payments for as long as the borrower remains in the home.
• Modified Term – combination of line of credit with monthly payments for a fixed period of months selected by the borrower.

Found here.

You’ve been advised to refinance your home mortgage, you finally made up your mind but you are not sure how to be prepared for this process. Learn all you need to know before applying for a refinance mortgage loan and how to successfully apply and get what you want out of your refinance mortgage loan.

If your idea is to save money by refinancing, to lower your monthly payments by getting a longer term or get extra cash for other purposes by requesting a cash out refinance loan, there are different facts that you should know and different variables that you should watch closely.

Saving money by refinancing

If you want to save thousands of dollars of interests with a refinance home loan, you need to make sure that the new mortgage comes with a lower interest rate. You’ll also have to check that there are no extra fees or costs that you’ll be charged like closing costs or administrative fees that may turn your new loan more onerous. Moreover, make sure that the previous loan doesn’t have a prepayment penalty fee and if it does, you need to ponder this too when calculating if your new loan will save you money or not.

There are basically three reasons why you could get a lower interest rate: An improvement on your credit score since the last home loan application, a reduction on average interest rates on home loans due to an improvement in market conditions and a shorter repayment term on the new loan. Thus, these three factors need to be taken into account in order to see whether you’ll be able to save money or not by refinancing.

If you have or can improve your credit score you’ll be able to get a lower rate and save money. Waiting for proper market conditions to refinance is also a smart thing to do. And finally, shortening your repayment program as long as you can pay the monthly installments is another way of saving money.

Reducing your monthly payments

Reducing your monthly payments can be achieved by refinancing for a lower interest mortgage loan. However, chances are that if you need to reduce your monthly payments, you won’t be able to get a lower interest rate. Moreover, one of the most effective ways of reducing the interest rate (shortening the loan term), would backfire because it would increase your monthly payments. Thus, you’ll have to do exactly the opposite thing. In order to get lower monthly payments you’ll have to get a mortgage loan with a longer repayment program. This won’t save you money, but will definitely reduce the amount of money you’ll need to pay on each mortgage installment.

Getting extra cash from your refinance mortgage loan

Getting extra money from your refinance home loan can be easily achieved by requesting a cash-out refinance home loan. However, in order to get the amount of money you need and want, you have to possess enough equity on your home. Equity is the difference between your home’s value and the outstanding debt secured by it. Thus, if your property is worth $50.000 and your outstanding mortgage debt is $45.000 you will only be able to get $5.000 if there are no other additional costs. That being said, for this kind of refinance loan, what you need to watch closely is not only your credit score and the loan terms but also your home equity before deciding whether to apply or not.

Found here.

Once an expensive last resort for elderly homeowners struggling for financial survival, reverse mortgages are now being sold as retirement planning tools for affluent people.

Despite a softening housing market, mortgage brokers say homeowners are using them to tap into their equity to invest in stocks, upgrade their living quarters or simply pay expenses in lieu of dipping into their retirement accounts too heavily.

Federally insured reverse mortgages grew a stunning 77 percent in the fiscal year ended Sept. 30 compared with the year-earlier period, according to the National Reverse Mortgage Lenders Association. That’s 76,351 home equity conversion mortgages, which are available to homeowners 62 and older.

But this may be one of those parties where it pays to arrive fashionably late. Industry growth and soaring home values have spawned several new players–particularly in the private jumbo-loan market–and as new products hit the market, the deals are expected to get better, experts said.

As the name implies, a reverse mortgage is a loan that allows homeowners to use their equity to create a lump sum of cash, a stream of monthly payments, a line of credit, or some combination of all three.

All but about 5 percent of conventional reverse mortgages (or those less than $419,000) are insured by the Federal Housing Administration through the Home Equity Conversion Mortgage program, though they are serviced by private lenders. Reverse loans for more than $419,000 are called jumbo reverse mortgages and are privately insured.

While the FHA guarantees that HECM lenders will meet their obligations, it is the private lenders who stand behind the proprietary loans.

“Over the next year we’re going to see better pricing on federally insured and private loans, so if you can wait, do it,” said Ken Scholen, a reverse mortgage expert with AARP.

Changing marketplace

Reverse mortgages can be an expensive way to tap equity, but some of the newer products allow more flexibility in payment streams and higher loan amounts.

“It’s really a changing marketplace. A year from now, the industry will be very different,” said Peter Bell, president of the reverse mortgage lenders association.

Change is already happening on the West Coast. Reverse Mortgage of America, a unit of Seattle Mortgage Co., last month rolled out a new jumbo reverse mortgage called the Independence Plan in Washington, Oregon and California. Officials expect it will be available nationwide in the first quarter of 2007.

The private jumbo products offer higher loan-to-value ratios and have some flexibility in fee structures compared with the limits in place for reverse mortgages insured by the Federal Housing Administration. For example, a private lender might waive closing costs in exchange for the homeowner drawing down a large portion of the equity–say 75 percent–all at once.

Financial Freedom Senior Funding Corp., an Indymac Bank subsidiary, boosted its loan limits in July, ahead of the Reverse Mortgage launch, and competing jumbo products for loans over $416,000 are expected later in the year from other big players, including Bank of America and Countrywide Home Loans Inc.

“Another four to five major players will hit the market” in 2007, said John Nixon, executive vice president for Reverse Mortgage.

“Competition is going to be terrific for this business,” said Tom Kelly, author of “The New Reverse Mortgage Formula: How to Convert Home Equity into Tax-Free Income.”

As with all reverse mortgages, remember to study the contract details before jumping in, experts said, because there may be lower-cost and better options for tapping cash.

As a starting point, check out how much your home equity might be worth at Financial Freedom’s calculator, www.financialfreedom.com/ReverseMortgage Calculator.

And don’t forget to run any potential reverse mortgage product by a financial adviser familiar with both the federally insured and uninsured products. Mortgage counseling must be provided to all reverse-mortgage shoppers in the federal programs, and counselors in the coming year will be equipped to evaluate how new private loan offers measure up to the federal program, AARP’s Scholen said.

Found here.

With today’s lenders, you have more refinancing options than ever before. So whether you are looking to reduce your rates or lower your monthly payments, you can find financing that is right for you.

Lenders also let you compare loan quotes online without hurting your credit score. So with real numbers, you can determine which is the best lender and loan for you. You take the guesswork out of the refinancing process, knowing how much you can save.

Stability Of A Fixed Rate Mortgage

Refinancing for a fixed rate mortgage can lower your rates and give you peace of mind. By setting your mortgage rate today, you know exactly how much your interest will cost and how long your loan will last.

Fixed rate mortgages also allow you to buy down the rate, saving you thousands if you keep the mortgage for several years. You can also extend the loan period to reduce monthly payment amounts.

Betting On Lower Rates With An Adjustable Rate Mortgage

Refinancing with an adjustable rate mortgage will qualify you for some especially low rates a year or more. With these introductory offers, you can save hundreds a month.

There is the chance that rates will increase, along with your monthly payments. Depending on your caps, you may also see your mortgage lengthen due to high rates. But if you aren’t planning to keep your loan or house for too long, you may find the savings worth the risk.

Cashing Out Your Equity With A Refi

Cashing out part of your equity during a refi saves you money on application fees and higher rates with a separate home equity loan. When you pull out your equity, you can still select fixed or adjustable rates. You also have the options of extending or shortening your loan terms.

Creative Terms For Unique Situations

Interest only loans and similar creative loan terms work for those in unique situations. For instance, if you are planning to move in a year, refinancing with an interest only loan can cut your mortgage payments by hundreds of dollars. And by selling before the loan payments jump, you don’t have to worry about high payments.

Found here.

You’ve made the decision that you need some extra assistance in meeting your monthly financial obligations. One of the best options for those over sixty-two years of age who own their own home is a reverse mortgage. Instead of you paying the bank each month, the bank will actually pay you. The loan can be taken out as a lump sum, a fixed monthly payment or as a line of credit.

You do not have to pay back the loan until you sell your home or move out permanently. There are many reverse mortgage lenders such as banks and credit unions that you can contact to obtain details about these loans. Rates may vary so you will want to check around with various banks before deciding. There are several types of reverse mortgage loans and they include the following:

Home Equity Conversion Mortgage – HECMs are the oldest types of reverse mortgage loans and the most popular. They are insured by the federal government through the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development.

The amount of money you can take out as a reverse mortgage loan depends upon your age, the appraised value of your home, current interest rates and the location of your home. The older you are and the higher the equity (what it would sell for less what you still owe), the higher the loan amount can be. For 2006, the loan limit for a home in a rural area is $200,160 while the limit for high cost areas is $362,790.

Another reverse home mortgage product that you can obtain from a lender is the Fannie Mae Home Keeper. Fannie Mae is the largest investor of home mortgages in the country and a major investor in reverse mortgages. Fannie Mae developed its own reverse mortgage product as an alternative to the HECM to address the needs of customers who had a higher property value on their home. Home Keeper loans can be larger than HECMs because their mortgage limit is higher. Another Fannie Mae reverse mortgage product is the Home Keeper for Home Purchase program. This is for seniors who wish to use the reverse mortgage loan to buy a new home. For example, let’s say someone sold his home for a $60,000 profit and wants to buy a new house for $100,000. He could get a reverse mortgage using money from a Home Keeper loan so he would not have to use his savings to purchase the more expensive home.

The opportunities are endless for borrowing against the equity in your home from reverse mortgage lenders you can depend upon.

Found here.