When planning to refinance or purchase a home you need to be sure you are getting payment that fits into your budget comfortably. A mortgage calculator is a great tool to help you out with that. A mortgage calculator can calculate mortgage payments and an amortization schedule for your records. Let's look at how easy the process is.
Mortgage Balance
The first factor used is the mortgage principal, also called the amount financed. This is either the amount of money you owe on your current mortgage or the amount of money you'll be borrowing to purchase a home. Remember if you are financing any interest points or broker fees, these will need to be included. If you are unsure, add 3-5% to the purchase or refinance amount for safe measure.
Rate of Interest
One of the critical factors in determining monthly payments is the interest rate. This can cost you tens to hundreds of thousands of dollars over the course of the loan. Origination fees are fees added to the principal balance of the loan in exchange for a lower interest rate. This is generally not a good idea because this fee can never be recovered regardless of when you pay off the loan.
Length of Loan
The length of the loan is the number of months you have the loan financed for. For example, a 20 year loan is equivalent to 240 months.
Taxes, Insurance, and PMI
Mortgage calculators can calculate what escrow payments will be based on real estate taxes, home insurance, and private mortgage insurance (PMI). PMI is required on a home loan where there is less than 20% equity in the home. Payments can be calculated with or without this info.
Output
The results of the calculator can be viewed on screen. An amortization schedule can be printed for you to keep for your records. This information is helpful in that you can see what your payments are and how much interest you will pay over the life of the loan.
How do I qualify for refinance mortgage? It is now more challenging to become eligible for one as lenders have made guidelines stringent for evaluating loan applications. Let us look at what lenders look for while going through refinance applications
1. Debt to Income ratio:
Lenders consider your monthly earnings and debt payments by way of a debt-to-income (DTI) ratio. Lenders usually look for a debt to income ratio that does no exceed 38 percent. However, there are some programs that allow more flexibility and make way for a larger debt to income ratio.
To calculate debt-to-income ratio for a refinance application, you should consider your income, housing costs and debts. These are the factors that lenders often look to find out if you are eligible for mortgage refinance. If you have a high debt-to-income ratio, you may focus on clearing some of your debts before refinancing.
Also bear in mind that that most lenders will need that you have proof of income in the form of the latest paycheck stubs, w-2 forums or federal income tax returns.
2. Loan to Value Ratio:
Another factor that comes into play to find out if you can qualify for mortgage refinance is finding the loan to value ratio. To calculate this, divide the amount that you want to borrow by the present value of your home. For instance, if the value of your home is $200,000 and you want to borrow $160,000, your LTV is 80 percent. In fact, most lenders look for loan to value ratio that is lesser than 80 percent for refinance mortgage. However, there are some lenders that offer flexible terms
A good example to illustrate better Loan to Value Ratio is the Making Home Affordable Program, which makes for refinancing up to 105 percent LTV. This program is for borrowers who have a good track record of making mortgage payments on time and whose loan is backed or owned by Fannie Mae or Freddie Mac.
3. Your credit score:
The credit score also has a bearing on your ability to be eligible for refinance mortgage. While, there is no particular minimum credit score needed for refinancing, it goes without saying that if the credit is not good, the interest rate and terms offered may not make refinance viable enough. So, pay your bill on time, get a good credit score, and the qualification for refinance mortgage also increases.
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If you are thinking about refinancing your mortgage then the easiest and first place you would go to is the same place you are currently using. This is because you have dealt with them before and they know you too. Sometimes it is better to deal with someone you have dealt with before because you know how they work. In other cases the reason you would look towards them is because they may have contacted you to offer you some deal that looks like it could be of some benefit to you.
In a number of my other articles I stressed the importance of getting your current mortgage contract looked at. This was so that you could find out of you could get out of it and also what the costs involved would be. This may or may not apply if you are thinking of refinancing with the same financial institution that you are using now. You will still need to find out if the fees for exiting from the current mortgage still apply. Sometimes they will make an offer look great but they have just hidden all the fees in the new refinanced mortgage. Be careful of this because you may end up paying more than you would have and the bank makes another win from a poor soul.
In any case, you should be made to feel comfortable and not being played the fool. Know your rights and be prepared for them. If you have done your research and know that other banks or financial institutions are offering the same or a better deal than you can work out something with your current place. They want to keep your business so they will work harder to keep you if they know you want to leave them. This is why they put the large exit fees into their contracts. Not so that you can pay them but so that you stay with them.
In summary, getting your mortgage refinanced by using your current bank may be no better than if went and refinanced anywhere else. However, if you were to go to an appointment with them with a lot of prepared information and show you are not prepared to play the fool then they may be convinced to give you a better interest rate.
Being late on the mortgage is something that many home owners never experience. But for those who have had past due payments they know how stressful it can make life. You have probably asked yourself, can i refinance with late payments? Well rest assured because the answer is yes! Read on to find out what programs will allow you to refinance when you have delinquent mortgage payments.
Late Mortgage Refinance Programs
How long ago your late payments occurred will dictate what programs you can use to refinance your home loan. If they were over twelve months ago you can use FHA programs to not only get a low rate but also a stable fixed rate mortgage as well. To qualify for this type of loan you will need to have debt to income ratios below 45% and your property taxes must be current.
Your other option would be a sub prime loan. Sub prime mortgages are available for borrowers that have late payments up to ninety days late and credit scores down to 500. The only drawback to these loans is they have high interest rates that often are over 10% and they also do not allow you to borrow much more then 80% of your homes value. Many sub prime loans are adjustable mortgages and if you cannot get your credit up to a higher level when the ARM begins to adjust you could be in for a major problems. While these loans have gotten alot of bad press lately they can help you get straightened out but only if used correctly. If you are taking out this type of loan make sure that you opt for the fixed rate option.
When you start to miss mortgage payments and realize you need some sort of help it can seem overwhelming. But take a deep breath and talk to a seasoned mortgage broker who can help get you into the right loan program to keep your home from foreclosure and your credit rating in tact.
When you refinance your mortgage you pay off your existing loan and replace it with a new loan. Homeowners do this for many different reasons: to consolidate a debt, to obtain a lower interest rate, to shorten the term of their mortgage, to convert an adjustable-rate mortgage to a fixed-rate mortgage, or to use their home's equity to finance a large purchase. Whatever the reason may be, the homeowner should examine the benefits and possible drawbacks since a lot of factors are involved in refinancing a mortgage. Some reasons for refinancing can be financially sound but it can present a slippery slope of never-ending debt.
Some homeowners make use of the equity of their homes to cover big expenses, such as home improvements or college. Home improvements and remodeling can add to the home's value. Another possible benefit is that the mortgage interest may be tax deductible.
Many homeowners refinance so they can consolidate their financial debt. On the outside, a high-interest replaced by a low-interest one in the form of a mortgage appears like a good idea. But when you look at the reality behind it, refinancing does not bring financial wisdom. If you are in the habit of using credit cards to buy things you do not have the income for, you are likely to do it again after the refinance. The new mortgage will give you greater access to the unsecured credit that you refinanced into your mortgage in the first place. This creates a larger problem than the one you started out with because you now face wasted refinancing fees, the loss of equity in your house, and more years of payments with interest on the new mortgage.
Should you refinance? The answer here is simple. Refinancing is a good financial idea if it will reduce your payment on your mortgage, help you build equity quickly, and shorten your loan term. It becomes a matter of more careful consideration if only one or two of those criteria are met.
One other very important question to ask is: "How long do I plan to live in this house?" Generally, refinancing costs between 3 and 6% of the principal amount of your loan. It will take you several years to recoup that cost with the savings you will generate from having a lower interest rate or a shorter term. So if it seems likely that you will move soon, it does not make financial sense to refinance.
If you use refinancing carefully, it can be a very valuable tool in getting your present debt under your control. A prudent homeowner is looking for ways to reduce debt, build equity, save money, and eventually eliminate the mortgage payment. Deciding to take cash out of the equity of your home for unnecessary expenses through a refinance will not, in any way, help you in achieving your goals.
A mortgage is actually a liability that is deducted from your assets in determining your household's actual net worth in the market. Too many homeowners fall into the trap of thinking that lowering their monthly payments through refinancing is the only consideration, and they often end up not realizing how refinancing can affect their net worth. It is wise to think things through, ask the experts, and do a lot of research so you do not end up in a financial mess.
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You can use a mortgage refinance calculator to find out your savings if you switch to a new mortgage. The new calculator will help you determine whether the new plan that you are considering is suitable or not.
Advantages
You may wonder: what is the use of a mortgage calculator? The mortgage calculator will help you project the amount you will be paying over the loan term. This will help you decide if you should take a new mortgage or not. If your current mortgage has high interest rates, and you wish to take a second mortgage with lower interest, a calculator will help you find how much you can save.
Prerequisites
The calculator will ask you for information regarding the current loan amount, loan term and interest rates. You also need to provide information regarding how long you have had this mortgage, and the remaining loan term. You also need to provide information about your new loan, such as loan term, interest rate etc. What you need to do is provide all the information to the calculator, and it will do the hard work for you.
Finding A Calculator
Thankfully, the mortgage refinance calculator is just a mouse click away. You can make a search for it online. Once you find a website that hosts a calculator, you can fill in the information and wait for it to come up with the results.
Pay attention to the break even date. This is the time when cost of the new mortgage is recovered through the savings on it. You do not want to go in for a scheme where you cannot recover the cost through savings - it would be a loss-making proposition for you.
If your break even date falls after the loan term expires, it might not be a good idea to take the loan. If the opposite is true, then the loan can help you. If you think the loan figures do not add up to your liking, you can do the math again by putting in different figures. This will help you arrive at interest rates and loan terms that will help you.
A mortgage refinance calculator will help you find the best rates. It will give you an estimate of how long it will take for you to clear your debts. It will also help you plan your finances according to the loan term. This invaluable tool is easy to access, easy to use, and is free. What else can you ask for!
Mortgage refinancing is a great option for homeowners who want to lower their monthly payments, save money, avoid foreclosure, or get cash back from a home equity. However, refinancing a mortgage can be much easier if some simple steps are taken ahead of time. Here are some tips for homeowners that will make a refinance easier and more beneficial.
While many people apply for a mortgage refinancing, many people do not get one. The biggest factor is being prepared and having the correct paperwork ahead of time. While it sounds simple, there are many documents and verifications that must be met when refinancing a home loan. Especially these days, income, assets, bank records, and tax returns are all required and must be verifiable to get a mortgage refinancing. Here are some things you can do ahead of time to prepare yourself and get a head start on the process.
-Obtain a copy of your credit report and carefully check it for errors or mistakes. Many times a homeowner finds out too late that there is an error on their credit history and it ends up costing them money or getting them denied a mortgage refinance. Do not let this happen to you and have your own copy which you have triple checked for accuracy.
-Gather all the necessary income documents and bank statements ahead of time. This includes pay stubs, tax returns, and all related information. Make sure that you are able to provide these documents to the mortgage lender or bank hen they request them. This will make the process faster and show that you are committed to the process.
-Make sure that your income is verifiable or it will not count. This means that if you get paid in cash and can provide no tax returns or pay stubs to verify your income, you may have problems. Many mortgage lenders and banks require that income is verifiable and if it is not you can and most likely will be denied a mortgage refinancing.
While it seems easy and simple, many homeowners can not provide the needed information to get approved for a mortgage refinancing. Also, when papers are given to you and they need to be returned make sure to do it quickly. While it is always smart to take time to read and understand any documents you sign, it is also important to return them as quickly as possible. This seems obvious but many people lose their potential refinancing deal due to not returning or having the correct paperwork.
The more prepared you are the more likely you will be to get a mortgage refinancing deal that is beneficial to you and your situation. Take a little time out before you start the process and get everything that will be needed together and in order. This will make any mortgage refinancing process easier and better for you.
This article intends to be a guide for people who are in the middle of refinancing their mortgage or about to start refinancing. It is not difficult to become confused by all the different terms, types of mortgages and whatnot.
As refinancing one's mortgage loan is a very important decision, it is highly recommended for the lender to become familiar with each and every single step of the process, aside from being completely knowledgeable of the specific vocabulary associated with the process. Once the initial informational phase is over, the lender should decide whether it is wise to refinance or not. Being completely aware of the different types of refinance available is key.
All About Mortgage Loan Types
Let's start from the beginning. Before dealing with mortgage refinance, we will review the most common types of mortgage loans.
Adjustable Rate Mortgage (ARM): this type of mortgage is usually called variable rate mortgage. It normally lasts 30 years and, as the name very well implies, the interest rate varies according to a preselected index rate. The initial interest rate is lower than that of a fixed rate mortgage, but as the loan matures, the interest rate fluctuates according to an economic index. This is clearly an advantage if rates stay low, but if they increase, the payments will increase too.
Fixed Rate Mortgage: this type of loan also lasts usually 30 years, but the difference with the ARM loan resides in the interest rate which applies. In this mortgage loan, the interest rate stays steady all through the life of the loan.
There are also two types of fixed rate mortgage loans which are worth mentioning.
Balloon Mortgage: this type of loan carries a usually lower interest rate. It becomes due after five or seven years and you will have to pay it off or refinance by the time it matures.
Biweekly Mortgage: payments associated with this type of home loan are biweekly, the lender makes the equivalent to 13 months of payments a year. Advantages associated with this mortgage loan are considerably lower interest costs.
All About Refinance Mortgage Types
Knowing your options is fundamental. It will determine whether you will be saving money and how much you will be saving and whether it is actually advisable to refinance or not. In some cases, one comes to realize that the potential savings associated with refinancing are not high enough to refinance at all.
No-Closing Cost Refinance: few upfront fees are related to this type of refinance. If the rate on your current mortgage loan is at least 1.5% higher than that in the market, it will be a good idea to refinance as you will be benefited financially.
