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Here are some frequently asked questions about refinancing.
Click on the question to get the answer:
- What are the advantages of refinancing a home?
- What are points?
- Can I obtain a home equity loan without paying
points/or closing costs?
- Why do most lenders charge up-front fees just
to apply?
- What is the difference between a fixed rate
loan and an adjustable rate loan?
- Which is better - an adjustable rate mortgage or
fixed rate mortgage?
- What
are the benefits of consolidating debt by refinancing my mortgage?
1.
What are the advantages of refinancing a home?
The advantages of refinancing your home mortgage
include the following:
- Stability - Converting an
adjustable rate mortgage to a fixed rate means your monthly payments will
always be the same amount - no surprise increases.
- Savings
- Reduce your monthly mortgage payments by refinancing a higher interest
rate when rates are low to save money each month.
- Tax Deduction - Get a tax
deduction on the amount you refinance, even if you take cash out to use for
other purposes. Consult your tax advisor to determine how much of a
refinanced payment may be tax deductible.
- Increased Value - Use additional
cash from a refinance to improve your home and increase its value.
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2. What are points?
Points are a method of reducing the interest rate you would pay on a loan. One
point is equivalent to 1% of the loan amount. For example, 2 points on a loan
amount of $200,000 would be $4,000. In general, a loan requiring 2 points has a
lower interest rate than one with 1 point or 0 points, but you would pay the
higher amount of fees from the increased points in your closing costs. Paying
points may be a more attractive option for those planning to stay in their new
home for longer periods of time, usually at least three years or more.
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3.
Can I obtain a home equity loan without paying points and/or closing costs?
Yes, depending on which lender we find fits your needs. SecureYourDebt.com is here to find you out what kind of loan program you want
and then see how close you come to qualifying to that ideal.
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4. Why do most lenders
charge up-front fees just to apply?
Many lenders will charge $300 - $500 up-front, when you apply for a mortgage not
only so that they earn additional money, but so that you will be less inclined
to consider other lenders once you have applied - even if you later become
dissatisfied with their rates, fees or service.
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5. What is the difference
between a fixed rate loan and an adjustable rate loan?
A fixed rate loan is one where the interest rate remains constant throughout the
entire term. An adjustable rate mortgage will generally start off at a lower
rate, but then will adjust at fixed periods throughout the life of the loan. It
can go as high as the "cap" or margin amount you agree to on the loan.
This means your monthly payments will be periodically recalculated based on the
prevailing market conditions at the time.
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6. Which is better - an
adjustable rate mortgage or fixed rate mortgage?
In most cases, a fixed rate mortgage is better when rates are low. That way
you can plan for the monthly payment amount and it will not change. An
adjustable rate mortgage may be more attractive for those who do not intend to
stay in a house long-term, as the payment amount can go up dramatically in an
increasing rate environment. In addition, in some cases, an adjustable rate
mortgage may have negative amortization - where the amount you owe on your loan
actually goes up over time, rather than getting paid down.
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7.
What are the benefits of consolidating debt by
refinancing my mortgage?
There can be many benefits to refinancing, including:
- Saving money by reducing your current monthly mortgage payments.
- Increasing your tax deductions by financing other needs with a mortgage
[consult your tax advisor].
- Eliminating monthly bill payments, by consolidating all your debt onto one
monthly mortgage payment.
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