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Chapter 7 – Final Tips & Warnings
When Should You Refinance Your Mortgage?
You can consider refinancing your mortgage after you build up 10% or more equity in your home. (The requirement for refinancing Fannie Mae mortgages is 5% equity.) In some instances, you may be allowed to refinance with even less than 5% equity, but a payment may be required before doing so to even out the difference in equity.
When in doubt, follow the 2% Rule. According to the 2% Rule, a good time to refinance your mortgage is when the refinance interest rate is 2% lower than the interest rate of your present mortgage loan. Your interest savings will assist you in regaining the cost of the new loan. Although it is tempting to go for no-cost or low-cost refinance mortgages, such loans often come with high interest rates and may be difficult to obtain during a down-swing in the credit market. Prior to applying for mortgage refinancing, be sure to comparison shop among lenders for the best possible refinancing interest rates.
Avoid making late payments. The majority of lenders request that you have no late monthly payments during the 12 months preceding any application for refinancing your mortgage loan.
Review your credit report and remove any inaccuracies or negative information before applying for refinancing. Failure to do this may prevent you from obtaining a refinancing loan at a competitive rate.
When Should You Refrain from Refinancing Your Loan?
If the value of your property has decreased, it may not be a good time to refinance your mortgage loan. If you should refinance up to 80% of your home’s appraisal value while your property value is down, the amount of your first mortgage loan may be greater than the amount you now borrow. In this case, you will not be able to pay down the initial mortgage with your newly acquired loan.
If you are in the last stages of paying off a 30-year fixed rate mortgage loan, refinancing will not be helpful. The amount of your equity loss will far exceed the remaining amount of your loan.
Refinancing is not a recommended option if the amount of your equity is substantially diminished due to a second mortgage or home equity loan. And remember, it is very unusual to locate a refinance loan equal to 100% of the original mortgage.
Refinancing is also not recommended if you have just a few years remaining on your present loan. Obtaining an additional loan at this point will only serve to increase your debt once again. And, whenever you are making a decision about refinancing a loan, you must determine whether it’s to your current advantage to choose a simple interest rate adjustment refinance option or a refinance plan that will provide you with extra available funds.
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Conclusion
Through the concerted efforts of many dedicated organizations, agencies, designated interest support groups, medical and healthcare facilities and staff, government legislation and funding agencies, communities, industries, social and charitable groups and strongly motivated individuals, the number of home owners with disabilities is gradually increasing each year in the U.S.
With the ongoing support and guidance of such dedicated groups and individuals, along with new and innovative avenues and opportunities for obtaining acceptance for the latest advances in home owner mortgages, home equity loans, and other financial products and tools, the nation as a whole will gain knowledge and awareness of the specialized needs and concerns of the disabled population. At the same time, the disabled will continue to gain new levels of independence, self-reliance and personal esteem by becoming enthusiastic and successful home owners and vital, supportive, contributing community members and leaders.
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