In determining how large of a mortgage you can afford, first consider your income. Deduct your exisiting debts, monthly bills, and down payment, resulting in a debt to income ratio. This will help you evaluate what purchase price and monthly payment best fits your budget.
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Interest rates are always changing. If you’re stuck paying a high interest rate on your loan, you should check your options. You could save a lot every month.
You can put as little as 3.5 % down. It doesn’t even have to be your own money – the down payment can be a gift or loan.
If you need to finance more than 80 percent of your home’s purchase price or appraised value, an FHA loan might be right for you.
If you’re an eligible veteran and need to finance more than 80 percent of your home’s purchase price or appraised value, a VA loan may be a good option for you.
What is refinancing?
Refinance is essentially, a tool which allows the home loan customers to smartly tackle the fluctuating circumstances to their own benefit. Refinance tool can help the home loan investors substantially reduce the cost of their home loan, if done with proper research and thought process.
To put it simply, Re-financing is a process of taking another home loan to pay off the financing of the existing Home Loan. One of the most common reasons to refinance a mortgage/home loan is to take the advantage of the lower interest rate on the refinanced loan
The process of refinancing the existing home loan is pretty simple and work as below-
- Once the home loan investor identifies the opportunity with a lender who offers better rates, terms, and conditions, they initiate the process of refinancing the existing home loan
- Home loan investor reaches out to the new lender with details, which in turn, settle all the dues with the existing lender and take over the outstanding loan amount
- After the completion of all the refinance formalities, the investor start paying EMIs to the new lender
of people believe buying a home is the best long-term investment a person can make.
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Factors to consider while opting for home loan refinance
Considering the big ticket size of the property investments, the decision of refinancing a home loan should be taken after due consideration. It is essential to consider all the relevant factors before going for the refinance. Some of the essential factors to consider are discussed below-
Take into account all the associated costs
First and foremost thing to remember is the fact that refinancing the home loan involves various costs. The final decision of refinancing should be taken after doing a thorough cost-benefit analysis and accounting for the actual net savings you are going to make in long run by the time you repay the loan in entirety. Some of the costs associated with the home loan refinance include-
- Legal fees, if any
- Prepayment charges with the existing lender
- Processing fees of the new loan
- Incidental charges with the new lender (in case of a fixed rate home loan) .
Other non-financial factors
The decision of refinancing the home loan shouldn’t be entirely based on the lower interest rates. The other factors non-financial factor to consider include-
- Terms and conditions of the new lender
- Reliability of the service aspect
- Reputation of the new lender etc
Benefits of a Refinance:
This is one of the main benefits of a Refinance. By refinancing the mortgage /home loan to a term that is longer than the existing mortgage, the homeowner can reduce their monthly payments.
Low-interest rates on a new loan is a major factor that attracts a lot of home loan investors to consider the refinance option. The lower interest rate on the refinanced loan eventually reduces the net interest paid by the time entire loan is repaid.
As the interest rates drop with changed market conditions, home loan investors often get an opportunity to refinance an existing loan with a new lender that, without much change in the monthly payment, offer a significantly shorter term.
For example, Suppose Clara got a 20-year mortgage five years ago, and she is looking to refinance. In such a case, she doesn’t have to start over with a 20-year repayment period all over again. She can ask to repay it in the shorter time period maybe 10 or 15 years.
Considering your outstanding loan amount is less than 80% of the appraised value, you may be able to refinance into a loan without mortgage insurance.
This does not apply to someone who has a mortgage insured by the Federal Housing Administration (FHA loan). With the modern-day FHA loans, one can’t cancel the mortgage insurance even when the loan-to-value ratio falls below 80%. The only way to rid of FHA mortgage insurance payments is to refinance the home loan.
of homebuyers stated that price is most
important when considering a mortgage