Basic Things About Home Mortgage Refinancing

Home mortgage refinancing—such a technical sounding word for a newbie in the real-estate market scene. Having the right set of information about it guarantees anyone to make the right decisions when it comes to paying for a home property. Here are some basic things one should learn about home mortgage refinancing. A house can be bought at 0% down payment. It may be overwhelming to believe this fact but there may even be government agencies, particularly the Department of Housing and Urban Development (DHUD), which will assist closing home costs. Although such options are not available to just anyone, first-time homeowners and homebuyers of inadequate resources are advised to carry out some research. For those who do not fit to any of the categories listed in DHUD’s website, it would be worthwhile to inquire a mortgage broker or lender about the loans that they offer. For example, an “80-20” loan means that the borrower is allowed to take out a first mortgage for 80% of the contract price and a home equity loan for the remaining 20%.

Mortgage brokers can be very useful for many people. A good mortgage broker can render advice about the types of mortgages that would best suit you. With their knowledge and experience about home mortgage refinancing, they can probe through loan products of many lenders and effectively please find the optimal rate and deal. But similar to many professions, conflicts of interest can plague the mortgage broker industry. One way to avoid being afflicted with such issue is to research on topics about, as well as actually seek out for, ethical mortgage brokers. If you personally know one such as a mortgage broker friend, use the acquaintance and trust to your advantage.

Nevertheless, not everyone needs the assistance of a mortgage broker. The best use for a mortgage broker’s service is when you are loaded with financial issues, such as a poor credit history. In the absence of such financial concerns, a mortgage broker is not at all required. For someone who has a clean credit slate and plans to put at least 20% down payment on a new home, a call to a few banks to ask for the best rates suffice.

One can also find even more attractive home mortgage refinancing rates from a local credit union or from the Internet. If you are not a member of a credit union, joining is possible through a family member, workplace or an association to which you belong. The Internet is a great arena to search in as well.

There are some websites, equipped with mortgage payment calculators that will crunch many interesting numbers for you. Through some sample calculations, one can learn exactly how much of each mortgage payment will move towards the principal of the loan against the interest. For example, only about $200 of a $1,200 monthly mortgage payment goes toward the principal in the first year (the remaining $1,000 being the interest), compared with about $800 in the 25th year.

There are also several home mortgage refinancing options that one can avail. The most popular of these, especially in hot real estate markets today, is the variable-rate mortgage, which comes in several varieties. In a nutshell, a variable-rate mortgage is characterized by an interest rate that fluctuates every year. However, for somebody who is pretty certain of not leaving the home for just a few years, a scheme such as a “5-1” variable-rate mortgage, which offers a fixed introductory rate for the first five years, then readjusts each year after that, can be availed. While 30-year fixed-rate mortgages can offer as low as around 6.2%, “5-1” variable-rate mortgages offer in the 5.8% range. This translates to a saving of $100 every month or equivalently, $1,200 every year. There are also other schemes like “7-1” and “10-1” variable-rate mortgages.

Because of the fluctuating nature associated with the term “variable-rate”, first-time renters may interpret a variable-rate mortgage scheme as being very risky as interest rates can skyrocket over one or two years. In reality however, variable-rate mortgages are generally restricted in how rates can increase each year.

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