Mortgage Refinancing Information

Refinancing Adjustable-Rate Mortgages in 2007

When To Refinance To A Fixed Rate Mortgage

Option Arms... The Good, The Bad, and The Ugly

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Option Arms... The Good, The Bad, and The Ugly

As long as you haven't been living under a rock, I am sure that you have seen ads from mortgage companies recently that advertise products like the following;

Refinance Today and Get a $300,000 mortgage for $700 per month!!!
or,
Use our loan programs to purchase a $500,000 house for under $1200 per month!!

Well, what we do here at FastMLA.com is give you the skinny on this and all other mortgage programs, so, here it is....

The Good:

An Option-Arm is a very new and innovative product that was created to help homeowners create better cash-flow with their existing or soon to be purchased Real Estate. It allows you to purchase a home and pay far less of a payment than you would with a traditional loan, keeping more money in your pocket. With this program, you are given 4 payment option..

Minimum Payment - Usually figured at a 1 to 2% interest rate
Interest Only Payment- Payment without principal
15 Yr. Payment - 15 Yr Amortized Payment
30 Yr. Payment- 30 Yr Amortized Payment

You may be thinking, "well, that sounds great, I can pay a much lower payment on my house than i would normally, and I can buy a much more expensive house!" ... Well, we say Buyer Beware!  

The Bad:

Unless your credit score is over 720 (sometimes higher), you can expect to always have a Pre-Payment Penalty on this loan. This means that if you pay your loan off within X amount of years, you will have to pay a hefty penalty.

Most banks will not allow you to go above 90 or 95% ltv on your property when refinancing.

Most banks also cap the LTV at less than 85% for Non-Owner-Occupied Properties. This means that most investors will not qualify for this program as the majority of them do not have 15% or more equity in their properties.

Now For....

The UGLY:

Negative Amortization - Simply put, when you are paying a 1% or 2% payment when the going interest rate for a similar loan is 7%, the difference in payment is applied directly to the Debt on your property.  What this means is that if you pay the minimum payment only, the next time you go to Refinance, or you sell your home, you will owe MORE MONEY than you did when you originally obtained the loan. This can be Devastating to many homeowners, effectively eating away their equity and possibly making the homeowner "Upside-Down" on their home loan.

Fully Adjustable Interest-Rate - unless you are lucky enough to have an honest mortgage professional put you in what is called a "Hybrid-Option Arm", then your loan will be fully adjustable from the day it is closed.  This means that not only will you not know how much your next payment will be if using the latter 3 payment options, you also won't know in advance how much debt is being added to your home when you pay the minimum payment.

Very High Interest Rates - Lenders usually view the Option-Arm as a high risk loan.  Because of this, your interest rate will usually be abnormally high compared with a similar loan without the 1% payment.  This is due to the possibility of the homeowner being upside-down on their mortgage after just a few years. What this means for you...not only will you add debt to your house when paying the minimum payment, but you will add a lot more debt than you would have by just paying an interest only payment on a standard mortgage.

Now, we aren't saying that this type of program isn't good for some homeowners/homebuyers, but its is bad for most.  If you are the type of person that keeps complete records of their finances and can have the discipline to pay the higher payments at least a few times per year. You can effectively minimize the negative effects and create cash-flow (or, extra pocket money) during those months where your income may be lacking or is needed for other things.

Your best bet is to contact one of our Mortgage Professionals and they can help you decide what would be the best fit for your situation. Also, feel free to fill out our question form on our home page if you would like to ask a more in depth question about Option-Arms or other loan programs.

Company That Specializes in Fast Mortgages Warns Homeowners to Start Refinancing Search Early

Thu Sep 20, 3:01 AM ET

Fast Mortgage Loan Approval (FastMLA) warns that with stricter lending practices, homeowners that need to refinance should start their search early. FastMLA can now help homeowners, from all 50 states, refinance their adjustable rate mortgage into a fixed rate loan.

(PRWEB) September 20, 2007 -- Two million adjustable rate loans will reset within the next year and mortgage companies are preparing for the fallout. The majority of these homeowners need to refinance their loan into a fixed rate mortgage prior to their reset date. Fast Mortgage Loan Approval (FastMLA) has always specialized in helping customers find mortgages at great rates within a short amount of time. With an influx of homeowners across the country needing to refinance, FastMLA has adapted to the changing market. Fast Mortgage Loan Approval (FastMLA) can now help homeowners, from all 50 states, refinance their adjustable rate mortgage into a fixed rate loan. But heed our warning - don't wait until the last minute to refinance.

 

Most experts agree that if homeowners wait too long to start the refinance process, they might find themselves out of options. Out of the two million loans that will reset by the end of this year, about 240,000 homeowners will qualify for an FHA backed loan. These loans help struggling homeowners qualify to refinance into a fixed rate loan. For those that do not qualify, FastMLA advises applying today to see what refinancing options are available.

With stricter lending practices, homeowners that want to refinance should think about how to prove the following to their financial institution of choice:

- Good employment history
- Enough income to make their mortgage payments and other obligations
- Good payment history for 6 months before their loans reset
- 3-6 percent equity in their home, but possibly down to 0 percent.

With recent media coverage showing an increase in foreclosure warnings across the United States, many are thinking ahead and are trying to adjust their mortgage now instead of waiting until the last minute. Others have decided to place their homes on the market, in the hopes of getting close to what they paid for their home. Homeowners that cannot sell for their purchase price are now trying to rent for close to the price of their monthly mortgage payment. In many areas, it is not only a buyers' market but also a renters' market. Starting the refinancing process early may be the best advice to those with an adjustable rate mortgage. If homeowners wait too long, they may lose their homes and damage their credit.

These issues arose after the recent US housing boom. Mortgage rates stayed too low for too long and prices skyrocketed in response. Then when prices fell, homeowners that recently purchased with an adjustable rate mortgage found themselves needing to refinance as their rate adjusted. Some refinanced but some did not. Problems arose when those homeowners owed more than their home was worth in the marketplace. Also, some homeowners purchased homes that were too expensive for their means and simply could not afford paying on a fixed rate mortgage. Foreclosures are now at record levels and may continue for the foreseeable future.

This might be the time to refinance your mortgage into a fixed rate loan at a record low rate. Proving good employment history and income to show that you are not a credit risk will help in your mortgage search. Fast Mortgage Loan Approval at FastMLA.com can now help homeowners find a mortgage in all 50 states. If you are interested in learning more about your mortgage options, visit http:///www.fastmla.com - Fast Mortgage Loan Approval.

When To Refinance To A Fixed Rate Mortgage

Mortgages come in two forms, both adjustable rate and fixed rate.  There are many reasons to choose a fixed rate when refinancing.  A mortgage broker should be a mortgage counselor.  They look at each individual case and provide borrowers with options.  The final decision is up to the homeowner.  Therefore, here are some tips to help in the decision.

 

Currently, fixed rate mortgages are low in comparison to previous years.  Choosing a fixed rate mortgage locks in a payment that will not change for the life of a loan.  Mortgage interest rates change frequently and over the last 25 years, they have reached 19% and as low as 5%.  Historically, rates are low and it is a good time to lock interest rates.

 

Fixed interest rate mortgages are ideal for homeowners that want stability over the long haul.  To refinance your mortgage to a fixed rate, apply today.

How Do I Refinance?

At FastMLA.com, we have made a "one-stop-shop" that will not only provide you with a plethora of information but mortgage seekers can apply for a mortgage fast. Simply use our pre-qualification form to begin the pre-qualification process. If you are looking to refinance an existing mortgage, we can help.

Refinancing Adjustable-Rate Mortgages in 2007

A Difficult Task That Requires A Team Working On Your Side

 

There are about $1.1 to $1.5 trillion in adjustable rate mortgages (ARM) facing a rate increase in 2007, according to the Mortgage Bankers Association.  The MBA expects homeowners to refinance up to $700 billion of those this year.  There are a lot of variables in the refinancing equation that require consideration.  First, interest rates have increased since homeowners were first issued their loan.  Second, borrowers are facing a slowdown in the housing market where prices have dropped or flattened.  Refinancing before rates adjust can be a challenge for some because of prepayment penalties and some lenders are tightening their standards.  Fast Mortgage Loan Approval is experienced in helping borrowers in all different types of situations. 

 

Homeowners are facing a slowdown in the housing market, which is creating some issues for mortgage refinances.  The reason some issues arise is because the house appraisal value might have gone down.  Sometimes, borrowers credit has declined since they took out their mortgage.  Also, homeowners that have tapped into equity trying to refinance may run into multiple issues.  Fast Mortgage Loan Approval specializes in helping people refinance no matter their individual situation.  We shop around to help homeowners get the rate and payment they deserve.

 

Many homeowners currently have 5/1, 3/1, or other type of ARM that will adjust this year.  Since interest rates have increased, payments will usually go up.  The trick is, to find a broker that will account for this as a variable to your individual refinancing equation.  Congratulations, you found us.