Adjustable Rate Mortgage Refinancing Simplified

If you are refinancing your home loan and are considering an Adjustable Rate Mortgage there are a number of things that can go wrong. Doing your homework before refinancing will help you recognize and avoid these pitfalls. Here are several tips to help you avoid paying too much when refinancing with an Adjustable Rate Mortgage loan.

Adjustable Rate Mortgages (also known as ARM loans) became popular in early 80s. These loans featured lower interest rates than traditional mortgages and easier qualification. The problem with adjustable Rate Mortgages is that many homeowners use these loans to purchase homes they cannot afford with traditional fixed rate mortgage loans.

As the name implies, the interest rate changes over time; your lender adjusts the loan at regular intervals to the index your loan is tied plus their margin. Margin is the markup your lender adds to cover their "expenses." The index your loan is tied to varies from one lender to the next and there is no one "ideal" index. Your loan may be tied to the Treasury Bill Index or even the London Inter-Bank Offered Rate or LIBOR index. The LIBOR index is popular with mortgage lenders that sell their loans to European investors.

Adjustable Rate Mortgage Safety Features

There are safety features available to homeowners that choose this riskier variety of mortgage loan. These features are known as "caps" and limit how much the lender can raise your interest rate or payment amount during any adjustment period. It is important to structure the caps on your loan properly; homeowners who neglect choosing both periodic and payment caps can experience negative amortization with their loans. Mortgage loans that are negatively amortized actually grow over time.

Adjustable Rate Mortgage Benefits

Depending on the economy and the going interest rate, the introductory offer of your Adjustable Rate Mortgage could save you a lot of money. This introductory rate, often called a "teaser rate" is usually much lower than fixed rate loans. It is important to understand that this introductory rate is not your contract rate; at the end of the introductory period the lender will adjust the loan and your payment will go up.

You can learn more about the risks of mortgage refinancing with an adjustable rate loan by registering for a free mortgage tutorial.

Lenders of Problem Remortgages

There are a growing number of lenders who will consider applications for problem remortgages. This is an indication of the growth in the problem remortgage market over the past few years, which has been largely consumer driven.

Problem remortgages are also known as the non-standard, credit-impaired, or sub-prime mortgages, and the lenders are known as specialist lenders.

Many specialist lenders are subsidiaries of mainstream lenders and are established under different names. This means that although applicants will apply for problem remortgages through a sub-prime lender, the reality is that their remortgage may be underwritten by a subsidiary of a high-street lender.

Specialist lenders will assess the facts of each problem remortgage case and, if the application is successful, offer a remortgage with fees and charges appropriate to the level of risk involved.

The level of risk will usually be deemed higher than standard remortgages and, as a result, interest rates and other charges will also be higher. Due to the competitiveness of problem remortgages these days, applicants with only a light adverse credit history will probably be offered terms and conditions that are almost the same as those attached to prime mortgage products.

Specialist products are competitive and loan-to-value ratios have been rising to reflect the strength of the property market, meaning that a smaller deposit is required. No deposit will be required for problem remortgages anyway because the borrower will already own the property.

Non-standard lenders will usually take the view that problem remortgages are only used by the borrower for several years while they repair their credit history. After it has been fixed, the borrower should be in a better position to apply for a standard remortgage product with a more competitive interest rate.

It usually takes between three to five years of consistent loan payments before a credit file is repaired and an applicant can apply for a standard remortgage product.

When You Compare Mortgage Quote, Pay Special Attention To These Four Documents

Disclosures


By law, mortgage companies are required to disclose certain things upon your application for a mortgage. Administered by the U.S. Department of Housing and Urban Development's Federal Housing Administration, the government has instituted several protections for consumers. One such program is called the Real Estate Settlement Procedures Act, or RESPA. Under RESPA, consumers are notified of "key service costs" in advance to ensure "fair settlement services." Consumers are also protected from illegal practices, including the payment of kickbacks and other illegal fees that would inflate the costs of these settlement services. RESPA provides consumers information to help them to choose the real estate settlement services most suited to their needs.

Good Faith Estimate (GFE)


A GFE is a breakdown of the fees and costs you may incur by taking out a mortgage loan. There are a lot of things you can ascertain by carefully examining a GFE.

Reg Z Truth-In-Lending (TIL)


The TIL breaks down five important aspects of your loan: Your interest rate, your APR, your total of payments, your estimated interest.

Annual Percentage Rate (APR)


The APR is an "effective" interest rate. It is a rate that reflects the total costs of the loan. It is NOT an indication of the actual interest rate you are paying. If you use a financial calculator to figure out your interest rate based on your loan amount, payment, and term, you will find that the rate is lower than the APR. The APR is a good indicator of how much in fees you are paying. The bigger the difference between the actual rate and the APR, the more fees you are being charged. The fees calculated in the APR are derived from those listed in the GFE.

The APR is a good tool for comparing similar loan offers. In other words, it can be used to make comparisons between fixed-rate loans from several lenders. You cannot, however, compare an adjustable-rate loan with a fixed-rate loan by looking at the APR because there are several other factors that go into calculating APR's for ARMs. If you look closely at a TIL statement for an ARM, you will notice the letter "e" next to some of the figures. This is an indication that the number contained there is an estimate of what it might be over the life of the loan. It is an estimate because there is no way to tell how the interest rate will fluctuate through the life of the loan.

CAUTION: Don't be surprised if the APR for a 15-year loan is slightly higher than a 30-year loan. This is because the points are amortized over the shorter 15-year term.

Affiliated Business Disclosure


This is a document that discloses the other businesses that have some sort of affiliated relationship with the lender. Usually, this includes a title company and an appraisal company. This does not mean that you MUST do business with these businesses. In most cases, you may select your own title and appraisal company.

All About Secured Loans

A secured loan is a loan understanding in which the borrower pledges property as surety for the loan; hence they are also known as homeowner loans. If the borrower continually defaults on loan repayments, the lender may take action to repossess the debt including merchandising the property.

Advantages and disadvantages

With something as valuable as your property at stake; lenders cognize that you are likely to lodge to the agreement. Add in the extra financial security provided by your property and it’s easy to see why lenders see you as low risk. As a consequence you can anticipate interest rates 1 or two points lower than with an unsecured loan, you can borrow greater amounts; anything up to 125% of the equity in your property, and you can distribute the loan over a longer term.

The chief disadvantage of a secured loan is the attendant hazard of losing your property. You need to be absolutely certain that you understand the terms and statuses of the understanding and that you can ran into loan repayments. If you happen yourself in financial problem most lenders will be sympathetic and make everything that they can to assist reschedule repayments. After all, the last thing they desire is to confront a drawn-out tribunal lawsuit incurring brawny legal fees. However, it’s of import to understand that your property is at risk.

Should Iodine take out a secured loan?

Before you take out a secured loan, believe carefully about what you need it for. Secured loans can do sharp financial sense in the right circumstances, for example: if you desire to consolidate a number of smaller expensive debts, such as as credit cards, into a single monthly payment. However, if you mean to utilize the loan for purchase, such as as a new car or holiday, it would be wiser to begin saving.

There is a convincing statement for arranging a secured loan to pay for home improvements; as this volition add value to your property. However, any pay-back will be in the long-term and depends on the perkiness of the property market.

Finding the best deals

Everybody cognizes that there are great loan deals available on the Internet; the trouble lies in determination them. Unfortunately there are no existent short cuts and the cardinal is to do as much homework as possible first.

Start by getting in touching with a number of brokers (make certain they are FISA registered) and see what they can offer you. Larger brokerages can be motivated by hitting sales targets and you may happen that they seek to force a peculiar lender.

FISA ordinances qualify that lenders may not originate contact for seven years after sending the initial loan agreement. This ‘cooling off’ time period is to allow possible borrowers to see their options. Use it carefully to compare brokers. Remember that you are under no duty until you have got signed the loan agreement.

Don’t be fooled by unrealistic loan offers made over the phone. Unscrupulous lenders often assure unrealistic rates in the hope of getting their custody on your wage slips. Once they have got your documentation; loan statuses are often then revised. If this haps to you; travel elsewhere.

If you are still having trouble determination a suitable loan; see approaching and Mugwump Financial Advisor.

Knowing Where Your Mortgage Leads Come From

Loan officers and mortgage brokers that are on the market for mortgage leads should make it a point to find out exactly where the mortgage lead company acquires their mortgage leads. It can make all the difference when it comes to the return on your investment.

Before you invest with a mortgage lead company, take the time to research them. Not only should you read their entire web site, most importantly the terms and conditions, but you should also pick up the phone and speak with someone in customer service or the sales department.

Find out exactly how they acquire their mortgage leads.

This is what you will want to hear if you want to receive fresh quality mortgage leads.

You will want to hear that the mortgage lead company that you are considering acquires their leads through web sites that they own and operate. This type of mortgage lead company can pretty much guarantee the delivery of fresh quality leads.

If you find the mortgage lead company that you are considering acquires their mortgage leads through third party vendors than move on. These mortgage lead companies are recycling mortgage leads at a profit and who knows how many times that third party vendor has sold the leads.

I am sure that you are familiar with the pain of having a customer tell you that they have received dozens of calls or that they closed on their loan weeks ago.

Also, stay away from the mortgage lead company's that bribe their customers to apply on line for a mortgage by offering free gifts such as gift cards to home stores.

You will quickly find out that these customers are more interested in the gift card than they are the mortgage and you will see your money go down the drain.

Customer service is another thing that you should take into consideration. When you call the mortgage lead company for information on the leads, how are you treated? As a potential customer or as a statistic?

If you are treated badly, than it should be safe for you to assume that their product will be bad as well. Or, consider the treatment you will receive should you have to ask for a refund.

To sum it all up, where the mortgage lead comes from can play a major roll in the number of applications you will get and the amount of loans you will close.