Do you remember a bank called, "Providian?" Some might, depending on where they are located in the United States, as it was not a nation-wide bank. For those who do not remember, Providian was one of the leading credit-card-issuing companies in the country, until it was bought out by Washington Mutual in 2005.
In following, Washington Mutual was bought out by JP Morgan Chase in September, 2008.
Both companies were known for their high approval-rate-percentages regarding credit cards. Washington Mutual was also known for its high approval rate in home mortgages.
As a former employee of Washington Mutual, I am now known as previously working for "one of the largest banking failures in history;" a quote regularly seen in the media. Washington Mutual was not the only bank that was seized by a larger, more powerful financial corporation in the fall of 2008. Wachovia was bought out, and caught in the middle of a messy battle for ownership rights by Wells Fargo and Citibank. Wells Fargo came out on top.
These banking disasters are partial contributors to some of the economic instabilitythat is prevalent in our society at the moment. More importantly, the failure of so many home mortgages has made potential home-buyers rather uneasy about investing their money in property.
The excessive rate of home-mortgage approvals in conjunction with Washington Mutual led to the failure of WAMU LLC and of people's ability to continue making payments on a loan they could never afford in the first place. Therefore, the sudden eruption of 'mortgage crisis's' that hit the media is the leading contributor to the surging panic people experience when debating on whether or not to invest their money in a home.
People are supposed to trust their banks. Washington Mutual could no longer be trusted as a helpful or honest lending source. Homebuyers must realize not all companies operate this way. If you are in the market for financing or refinancing your home, there are places that are dependable and will be responsible for getting our economy back on track.
Texas is a state that did not experience as devastating of a blow as some areas in the U.S. Property values in Texas are in their prime, making right now an opportune time to invest, as the values will skyrocket over the next few years.
Don't Panic - Refinancing Your Home is Easy
Mortgage Refinancing: Five Excellent Reasons to Get a New Mortgage
If you are on the fence about mortgage refinancing, there are a number of great reasons to refinance your mortgage regardless of what interest rates are doing. With mortgage refinancing you can reduce your monthly payment, lower your interest rate, and even cash out equity in your home for any reasons. Here is a list of five excellent reasons to help you decide if mortgage refinancingis right for you.
I. Mortgage Refinancing to Reduce Your Monthly Mortgage Payment
The most common reason homeowners have for mortgage refinancing is to lower their monthly mortgage payments. There are several different ways to accomplish this. If you plan on staying in your home for a long time, consider paying a point or two in order to buy down your mortgage interest rate. If your financial situation has improved since purchasing your home, you may qualify for a better interest rate without points. If you are unable to qualify for a lower rate, you can still lower your monthly mortgage payment by extending the term length of your mortgage loan. Mortgage loans typically come with a term length of thirty years; however, there are now forty and even fifty year mortgages to choose from.
II. Mortgage Refinancing to Switch Your Adjustable Rate Mortgage (ARM)
If you purchased your home with a risky Adjustable Rate Mortgage and concerned with the risk of rising interest rates, refinancing to a fixed interest rate loan could give you the financial peace of mind you need. Fixed interest rate loans typically come with higher rates than adjustable rate mortgages; however, you can lower your payment amount with the new interest rate by extending the term length. A lower payment with a fixed interest rate mortgage will allow you to plan your monthly budget around the mortgage payment.
III. Mortgage Refinancing to Avoid Balloon Payments
Balloon mortgages are popular because they come with very low monthly payments; however, once the balloon payment is due you could be facing a financial hardship if you’re unable to pay. Refinancing to a fixed or adjustable rate with a long term length could match your current payment amount.
IV. Mortgage Refinancing to Stop Paying Private Mortgage Insurance
Many homeowners that purchase their homes with less than 20% down or borrow above a certain level of home equity are required to purchase Private Mortgage Insurance. Private Mortgage Insurance is expensive; the premiums can add hundreds of dollars to your monthly payment amount and does nothing else for you. Private Mortgage Insurance only protects the lender from losses if you default on the mortgage. Even if you have not build up sufficient equity in your home there are a number of mortgage refinancing programs to help you drop this costly insurance.
V. Mortgage Refinancing to Borrow Against Your Home’s Equity
Another popular reason for mortgage refinancing is to cash out equity in your home. This cash can be used for any reason: you can pay off credit cards, make repairs to your home, pay for college, even purchase a new car or take a vacation. With cash-back mortgage refinancing this is fast and easy. You even gain a tax deduction for the interest you pay when borrowing against your home equity.
To learn more abut your mortgage refinancing options, including costly mistakes to avoid, register for a free mortgage tutorial.
Mortgage Refinancing - Choosing the Best Mortgage Loan Option
If you are in the process of mortgage refinancing, you might feel overwhelmed by all of the mortgage loan options available to you. There are different types of mortgage refinancing loans for every situation; however, choosing the wrong type of loan when mortgage refinancing could be a costly mistake. Here are several tips to help you choose the right mortgage for your individualsituation.
Which Type of Lender Should You Choose When Mortgage Refinancing?
There are many options available when choosing a lender for mortgage refinancing. Banks, mortgage brokers, online portals, and local mortgage companies all offer mortgage refinancing loans. Choosing the wrong type of mortgage lender is a costly mortgage mistake you need to avoid. Banks and broker-banks should be avoided when mortgage refinancing. Banks are exempt from disclosure laws in the United States that protect borrowers from predatory lending practices. If you take out a mortgage from your bank they could overcharge for the loan and you’d never know. Mortgage companies and brokers are retail outlets for mortgage loans and can help you find competitive offers for your new loan. There are still risks when dealing with a broker or your local mortgage company. These companies regularly mark up the interest rates they receive from wholesale lenders to receive an additional bonus from that lender. If you learn how to recognize retail markup on your interest rate, you can avoid paying it.
What Type of Loan Should You Choose When Mortgage Refinancing?
There are a number of loan options when mortgage refinancing. You have the choice of taking out a loan with a fixed interest rate, an adjustable interest rate, or a hybrid loan with both types of interest rates. When interest rates are rising, mortgage refinancing with a fixed interest rate loan has the advantage of a predictable payment amount you can plan your budget around. Fixed interest rate mortgage refinancing typically comes with higher rates than a comparable loan with an adjustable interest rate, at least initially. Adjustable Rate Mortgages save money in the beginning because these mortgages come with an introductory interest rate that is significantly lower than the actual rate. Once the introductory period expires the lender will adjust the monthly payment amount to include the actual interest rate. When this adjustment occurs the payment amount will go up significantly.
Cash-out Mortgage Refinancing
When refinancing your mortgage you have the option of taking cash back from the equity you own in your home. Cash-out mortgage refinancing has a number of advantages over home equity loan options. The main advantage over other home equity loan types is that you will only have one monthly payment to make. Because you will only be carrying one mortgage on your home you will also qualify for a lower interest rate. You can learn more about your mortgage refinancing options, including common mistakes to avoid by registering for a free mortgage refinancing guidebook.
Mortgage Refinancing – What You Need to Know Before Refinancing With a Broker
If you are in the process of refinancing your home loan you might consider using a mortgage refinancing broker to help you find the best loan offer. Mortgage brokers are an excellent resource for locating competitive mortgage refinancing offers as long as you understand how retail mortgage loans work. Brokers often significantly mark up the interest rates on loan offers; if you are able to recognize this markup you can easily avoid paying it. Here are several tips to save you money when mortgage refinancing witha broker.
The Mortgage Refinancing Market
The retail mortgage market is made up of mortgage companies and brokers that refer borrowers to wholesale lenders for a commission. There are also banks and broker- banks that write their own mortgages; however, due to loopholes in mortgage refinancing disclosure laws that protect homeowners in the United States, you should never refinance your mortgage with a bank or broker-bank. For the purpose of this discussion we will focus on mortgage refinancing with mortgage brokers which act as third party vendors for wholesale mortgage lenders.
Mortgage Refinancing With a Broker
Mortgage brokers that do not close on home loans in their own names are excellent time-saving resources for mortgage refinancing. This is especially true for special needs borrowers, like homeowners with poor credit. The first question you should ask every broker you consider is “Do you close on the loan in your own name?” If the answer to this question is “Yes” or the mortgage refinancing broker refuses to answer, you know that you are dealing with a broker-bank and should scratch this person off your list. Never refinance your mortgage with a bank or a bank pretending to be a mortgage broker.
What to Tell Your Broker When Mortgage Refinancing
When you have found a broker that you are certain is not a bank masquerading as a mortgage broker, tell the broker you will pay mortgage refinancing origination fees and closing costs, but will not pay Yield Spread Premium (YSP) of any kind. YSP is the markup mortgage brokers tack onto the interest rate your wholesale mortgage refinancing lender qualified you for. Mortgage brokers do this to receive an additional bonus for overcharging you.
Additional Resources for Mortgage Refinancing Information
You can learn more about mortgage refinancing with a broker, including common mistakes to avoid by registering for a free mortgage refinancing guidebook.
Mortgage Refinancing With a Broker: Costly Mistakes to Avoid When Refinancing With a Mortgage Broker
If you are considering mortgage refinancing with a mortgage broker, there are a number of things you need to know before signing an agreement. Mortgage brokers can be an excellent resource for finding competitive mortgage refinancing offers; however, you need to be careful to avoid overpaying for the mortgage broker’s services. Here are several tips to help you avoid costly mortgage refinancing mistakes when working with a mortgagebroker.
Mortgage Refinancing: What Are Mortgage Brokers?
Mortgage brokers are a third party retail outlet for securing mortgage refinancing loans. When mortgage refinancing it is important to understand the how the retail mortgage market works. With the exception of banks and broker-banks (which you should avoid altogether) the retail mortgage market is made up of mortgage companies, online web portals, and mortgage brokers. These retail outlets all work basically the same; mortgage brokers sell mortgages for wholesale mortgage lenders for a commission.
Mortgage Refinancing: How Do Mortgage Brokers Operate?
When you apply for a mortgage loan from a mortgage broker the wholesale lender qualifies you for a certain interest rate and provides the mortgage broker with a written guarantee of that interest rate. The mortgage broker will turn around and reissue the mortgage refinancing interest rate guarantee in their company’s name. Do you think the guarantee you receive is the same as the one that came from the wholesale lender? If you said “No!” give yourself a gold star. Mortgage brokers always mark up the interest rate the wholesale lender qualified you for. The wholesale mortgage refinancing lender may have qualified you for a 6.0% loan; however, the mortgage broker marked it up to 6.75% on your interest rate guarantee.
Mortgage Refinancing: What is Mortgage Broker Yield Spread Premium?
The markup your mortgage broker slips into your interest rate when mortgage refinancing is called Yield Spread Premium. Mortgage brokers are compensated with the origination points or fees you pay for mortgage refinancing. Yield Spread Premium is the icing on the cake for many retail mortgage outlets like mortgage brokers. By overcharging you for the interest rate, the mortgage broker receives an additional point for each .25% they mark up on the loan as a bonus from the wholesale lender. In the case above where the wholesale lender qualified you for a 6% loan and your mortgage broker marked up the interest rate to 6.75%, that broker will receive three additional points as a bonus for ripping you off.
Suppose your mortgage refinancing loan was for $200,000, the mortgage broker would receive a $6,000 bonus for overcharging you. The overwhelming majority of homeowners never know they’ve been ripped off in this manner by the mortgage broker. How can you avoid paying this mortgage broker markup when mortgage refinancing? Homeowners that learn to recognize Yield Spread Premium can avoid paying the markup. To learn how you can avoid paying mortgage broker markup when refinancing your mortgage, register for a free mortgage refinancing guidebook.
Mortgage Refinancing – Reasons To Avail Refinancing Facilities
A mortgage is a type of loan, primarily used to purchase property, in which a lender or mortgagee provides credit facilities or finance to a borrower or the mortgagor, after obtaining a legal protection in the form of an official commitment, according to which the lender holds a legal right to sell or carry out transactions or
activities to recover the loan amount, in the event the borrower becomes delinquent and is not able to repay or redeem the borrowed capital. In simple language, a mortgage is a loan undertaken to buy property in which the borrower gives official powers to the lender to sell his or her property if it is not possible to repay the borrowed amount. Majority of the banks and building societies offer mortgages and mortgage facilities, as well as mortgage companies.
Refinance
Refinancing means the process or activity in which the existing debts or financial obligations incurred due to a loan or financial borrowing is replaced with a new loan or credit facility having different terms and conditions, lowered interest rates, and a restructured loan or debt repayment plan that is based upon the borrower’s monthly income and cash inflow. Refinancing of existing loans is carried out to reduce the interest rate or interest costs by rearranging the loan terms to repay the entire outstanding loan amount at a reduced interest rate, and extending the debt repayment time. The basic objective is to reduce one's periodic payment obligations by increasing the loan term or tenure, and re-avail the credit facilities at affordable rates. People undertake refinancing activities to raise cash for investment purposes, consumption, or the payment of a dividend or a preexisting loan.
Mortgage refinancing
Mortgage refinancing means paying off your existing real estate mortgage loan with finance availed from another mortgage loan, which is specially structured to help you save money by reducing the net payable mortgage interest rates as well as extending the tenure with lowered monthly repayment schedule. There are many reasons why individuals opt for refinancing options and avail mortgage refinance facilities. The interest rate imposed upon a mortgage is directly tied to its associated monthly mortgage repayments. Lower interest rates usually mean lower monthly payments. It is recommended you avail refinancing facilities when your credit score has improved, or when the market offers an attractive repayment rate. A lowered down interest rate also helps in rebuilding the equity for your home.
Reasons for refinancing
Individuals prefer mortgage refinancing programs because of following reasons:
1. Reduced monthly payments
One of the major reasons to go in for mortgage refinance is to avail reduced or lowered monthly dues. When you pay less it becomes possible to save some money. It is difficult to save money when you have fixed overheads, and you are paying high monthly installments. By decreasing the overall payment and interest rate, it is possible to avail a difference in your net payable monthly amount. This amount can be saved by depositing your money in a savings account, where you get a dual benefit of maintaining your savings as well as availing interest on it.
2. Avoid Balloon Payments
A balloon payment is the final payment, which results into the termination of the debt, and the amount paid is substantially more as compared to previous installments. Balloon payments are a good way to lower your initial monthly payments and rates. At the end of the fixed rate term, which is usually around 5 or 7 years, if borrowers still possess their property in their individual names, the entire mortgage balance would mature out for a final payment. Balloon program provide a facility through which the borrowers can easily switch over into a new fixed rate or adjustable rate mortgage.
3. Avoid private mortgage insurance (PMI)
The PMI is undertaken primarily to protect the lenders when debtors have unacceptable credit ratings or who are likely to become delinquent while repaying their debts. When the outstanding loan amount decreases over a period as the debtor pays off the monthly dues, the degree of encumbrances reduces on the home offered as a security, and it becomes possible for the debtors to avail certain benefits. However, to avail the benefits right from the start at the inception of the loan, mortgage refinancing turns out to be a good option since you do not have to pay the PMI. The inherent risk is covered by the credit facility itself, and the lender does not need to ask for special protection. It is possible to avoid PMI through mortgage refinance programs.
4. Generate home equity
Generally, as time passes, most homes will increase in value, and are therefore excellent choices for investments. Increase in the net resale value also increases the potential to avail loans of greater amounts. However, when a mortgage is carried out, the lien sets in and prevents the potential from being used by the debtor. Mortgage refinance makes it possible to avail the advantage of an increase in the home resale value. Through refinancing, it becomes possible to generate some liquidity or hard cash, which can be utilized for some fruitful purpose such as renovating your home or paying off a credit card debt.
