08
Jul
By First Rate Financial Group
Mortgage

Refinancing A Mortgage: Is It Too Soon?

Refinancing A Mortgage: Is It Too Soon?Due to the fact that mortgage rates are still hovering near record lows, many homeowners are considering refinancing to a lower interest rate. This is a great way for homeowners to shorten the term of the loan, reduce the size of their monthly payments, and access cash for a home improvement project. On the other hand, there are some situations where it might be too soon to refinance an existing mortgage. What are a few factors to consider?

Conventional Home Loans Might Require A Certain Amount Of Equity

Homeowners with a conventional loan should reach out to their lender to see what the requirements are on the home loan before refinancing. Some lenders require homeowners to have a certain amount of equity built up in the home before they allow lenders to refinance, particularly for a cash-out refinance (when homeowners refinance and tap into home equity as a source of cash). Other lenders might simply require homeowners to wait six months after taking out the initial home loan before going through the refinance process. This all depends on the type of home loan.

FHA Loans Have Several Refinancing Options

An FHA loan is a loan backed by the government. There are several refinancing options available. First, homeowners seeking a cash-out refinance must have lived in the home as the main residence for 12 months and must have had a mortgage for six months. A simple rate adjustment refinance requires seven months of waiting after taking out the initial loan. Finally, anyone going through the FHA streamline process must have made six months payments in order to go through this process.

VA Loans Have A Simple Waiting Period

Anyone with a VA loan must wait 210 days or make six mortgage payments before they are allowed to refinance. Homeowners with questions should reach out to the lender to learn more.

It Might Be Time To Refinance

Because interest rates are still low, this could be a great time for homeowners to refinance their current home loans; however, it might be too soon for some homeowners. Keep in mind that there will also be closing costs associated with refinancing a home loan. Homeowners should work with a professional to see if refinancing is worth it for them.

17
Jun
By First Rate Financial Group
Mortgage

Is an ARM Loan Right for You?

Is an ARM right for youIn today’s competitive housing industry, it’s important to find the loan that’s right for you. With the low-interest-rate environment, many buyers wonder if an ARM loan is the best choice. Here’s everything you should consider before choosing an ARM loan.

Understanding how an ARM Loan Works

An ARM loan offers an introductory rate. The rate remains fixed for the first few years. After the fixed period, the rate adjusts annually based on the index (such as LIBOR) and the chosen margin set by the lender.

Many buyers prefer the ARM because the initial payment is much lower so they can afford a larger loan. With the potential of increasing rates in the near future, many buyers are looking at the ARM for its lower cost. 

A fixed-rate loan, on the other hand, starts at one rate and remains the same. Your payment never changes unless you escrow your taxes and insurance, and those rates change throughout the time you own the home. 

Pros and Cons of the ARM Loan

 Pros:

  • Lower payment for the first few years
  • You may be able to pay more principal each month with the lower payment
  • Rates may decrease in the future

Cons:

  • Rates can increase significantly
  • Your monthly payment will change annually after the fixed period
  • It’s hard to predict your financial situation 5 to 10 years from now

Choosing Between an ARM Loan and Fixed Rate Loan

Because you don’t know where you’ll be 5 to 10 years from now, it’s hard to decide if an ARM loan or fixed-rate loan is right. Here’s what you should consider.

Will you Move Soon?

Think about your plans. Will you move in the next few years? If so, an ARM may make sense, especially if you can get one with a rate that will adjust after you sell the house.

Do you Think you’ll Refinance? 

Some people like refinancing whether to get the lowest rates or to tap into their home’s equity. If you’ve structured your loan so that you put money into the home now but will tap into it later, an ARM may save you money for a few years. If you refinance before the rate adjusts, you eliminate the risk of increasing rates. 

Do you not Like Risks?

No matter what your future plans may be, if you don’t like risks and uncertainty, a fixed-rate loan is a better choice. You’ll get more predictability and know exactly what your payment is each month. You’ll also know when you can afford to pay more principal and pay your loan down faster.

Choose the Right Loan Term for You

Look at your situation and choose the loan term that suits your finances now and in the future. Even if everyone around you is taking an ARM loan doesn’t mean it’s right for you. Know the terms, how much the rate can change, and what you are comfortable affording.

Talk with your loan officer and look at all scenarios, paying close attention to the loan’s total cost over the life of the loan before deciding.

16
Jun
By First Rate Financial Group
Mortgage

Deciding Whether To Move or Refinance: Which Is The Better Option?

Deciding Whether To Move or Refinance: Which Is The Better Option?There are a lot of people who are wondering if now is the right time to move or refinance their current home loan. With interest rates still favorable, a lot of homeowners have the potential to save a lot of money if they are able to secure a home loan with a lower interest rate. There are two ways homeowners can secure a home loan with a lower interest rate. The first is to refinance. The second is to move. Which option is better? There are a few key points to keep in mind.

Taking A Closer Look At Refinancing

There are a lot of homeowners who have an abundance of equity currently built up in their homes, making this a great time to refinance. With a refinance, there are multiple options available. Some homeowners might refinance to access the equity in their homes, allowing them to complete a project. Some homeowners might refinance in an effort to pay off their home loan sooner. If homeowners are trying to access more equity, or are trying to shorten the term of the loan, then refinancing might be the smart move.

Looking At The Option Of Moving

The other option is to get a new home loan entirely by moving. This is an attractive option for homeowners who might have a dream house they would like to move to. In particular, any homeowner who currently has a home loan with a high interest rate should consider moving into their dream home now. Because mortgage rates are low right now, this is a chance for homeowners to move into a larger house while keeping their mortgage payments the same or less by obtaining a lower interest rate.

Every Situation Is Different

In the end, every situation is different. Because interest rates right now are so low, now could be the time for homeowners to consider moving or refinancing. Switching to a home loan with a lower interest rate could save tens of thousands of dollars over the life of the loan. Anyone with questions or concerns should reach out to a professional for help.