Refinance Rates & Information
There are different reasons to refinance, including several ways to save money, but consider
how long you may keep your home, because the
amount of savings from your refinance
can vary
depending on the mortgage program and
costs.
A good way to
save money if you plan to stay in your home for a short time, is
to use a
zero point refinance, or a zero cost refinance home loan, because if you move
or refinance your home later, you won't waste
money having to pay fees again.
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Another potential money-saving loan option is a 3 year ARM or a 5 year ARM refinance,
which provides a lower
fixed rate for the first 3 years or 5 years of the loan.
For refinancing
with a high loan to value, or lower credit
scores, also
see FHA loans.
Other short term refinance loans include a 6 month, or 1
year ARM. To attract borrowers, lenders provide adjustable
refinance rates that start lower than fixed refinance rates. Every 6 months or 1 year, the rate is adjusted based on the index
plus the margin, subject to periodic and lifetime rate
caps. The index can be based on the 1 year T-Bill,
Cost of Funds, Treasury Average, or LIBOR. The margin is a fixed
number set by the lender, which can range from 2.25 to 3.00.
If you want a cash out refinance, but you currently have a
low interest rate, you may consider using a home
equity loan or a second
mortgage. If you are looking for lower payments, refinance
on a 30 year fixed rate home loan,
however, if your goal is to keep your house until it is free
and clear, you may want to consider a 15 year fixed mortgage.
When you compare
mortgage rates, the monthly payments will be higher, but the principal
reduction is accelerated, so you can drastically
reduce the amount of interest paid for a
mortgage.
For example, the monthly payment for a $200,000
refinance home loan, for a 15
year term would be almost $500 per month
more than a 30 year term, but it would also save about $128,000
in interest payments. Technically, you could achieve similar
results on a 30 year mortgage by sending an
additional amount each month to be applied to the
principal balance, if you have the discipline.
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