Home Mortgage Refinance Explained

By Bill McKenna

Refinancing is often considered one of the most beneficial ways to save money on your home mortgage. Refinancing is when you renegotiate the terms of a loan, essentially the refunding or restructuring of debt with new debt, equity, or a combination of both. Refinancing is basically taking a new mortgage to replace an old one. Refinancing is often the best way to save money, get a lower interest rate and a lower monthly payment, or keep the monthly payment the same and have a shorter loan term. Refinancing is used in most cases to improve overall cash flow.

There are many things that play a role in whether or not refinancing is a good move. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance. Sometimes, refinancing is an appropriate way to resolve financial problems. Refinancing is not advisable if you plan to move in next few years, because the price that you pay for the refinance will just reduce or negate the savings that you get from the interest rate or lower monthly payment. Another obstacle to refinancing is the current slump in the housing market where values of many homes have decreased to below their purchase price. If cash flow is an issue and refinancing isn't available, try to work out a plan with your lender to modify your current loan that would allow you to make either a smaller payment, or to miss a payment until you have the funds.

In the context of personal finance, refinancing a mortgage can be used to pay off high-interest debt such as credit card debt. Debts can be paid and revolving accounts satisfied so that the homeowners credit is not ruined. If the borrowers have wisely used their time and opportunities to establish a positive credit history, this should be a benefit to them. You may be able to secure a lower interest rate because of changes in the market conditions or because your credit score has improved. If your credit points have been decreasing in recent years, lenders may not endorse the refinance.

Refinancing may be undertaken to reduce interest rates, to extend the repayment time, to pay off other debt, to reduce or alter risk (such as by refinancing from a variable-rate to a fixed-rate loan), or to raise cash for investment. As part of the mortgage refinancing process, various information that was required for your first mortgage will again be needed (such as your financial records and credit reports for you new loan report.) You should know how much you will pay in all (interest and principle together) as well the term over which you will be making payments. Interest rates and number of credit points determine the total cost for a second mortgage refinancing. Most refinancing lenders offer a variety of combinations of points and interest rates. Paying more points typically allows one to get a lower interest rate than one would be capable of getting if one paid fewer or no points. A general role of thumb is that refinancing becomes worthwhile if the current interest rate on your mortgage is at least 2 percentage points higher than the prevailing market rate. The average cost of refinancing is usually in the range of three- to six percent of the value of the loan, plus any prepayment penalties and charges associated with paying off any second mortgages that may exist.

Though banks have been directed to tighten their credit purse strings by stiffening their loan qualification criteria somewhat, as long as homeowners have done their part by paying their mortgages on time, it's likely that they'll have very little trouble finding a lender to accommodate their wishes. If you decide that refinancing is not worth the costs, ask your lender whether you may be able to obtain all or some of the new terms you want by agreeing to a modification of your existing loan instead of a refinancing. Whether refinancing is right for you depends upon your own personal situation with regard to your financial objectives and goals.

Obama's Stimulus Package For Mortgage Refinancing and Loan Modifications Incentive Programs

By Brian R Stephens

The US government under Obama's leadership have produced a stimulus package for mortgage refinancing programs designed to assist people who are facing foreclosure on their homes. The loan modifications incentive is primarily geared towards people who are struggling with mortgages on their homes and is not really intended to help out people who have houses sitting empty.

There are 2 options available, providing the criteria for qualifying for the packages are met.

Mortgage Refinancing

This is where an existing mortgage that is owned or guaranteed by one of the two large lending agencies Fannie Mae (Federal National Mortgage Association or Freddie Mac (Federal Home Mortgage Corporation)can be refinanced to take advantage of lower rates of interest. The qualifying criteria: -

• The loan is not more than 105% of the house valuation
• You are up to date with your repayments
• Your circumstances have not changed to the extent you will not be able to afford the lower payments e.g. you still have an income that is enough to meet the payments

Loan Modifications

This is where you change the terms of your current loan (mortgage) through your existing mortgage company providing that they are participating in the program and that you meet the qualifying criteria: -

• Your total payment that includes interest, taxes and insurance is more than 31% of your gross income.
• The mortgage must be on your principal family home where you are currently living
• Your mortgage balance is not greater than $729,750
• You got your mortgage before the beginning of 2009 i.e. not on or after the 1st January 2009.
• You will also be required to make the modified payments over a trial period of 3 months to prove you can finance the new deal

Mortgage Broker Bond - All About Countrywide Finance Corporation

By Robert A. Dallas

There comes a point in time when a situation would present itself that you would need to get additional financial aid through the form of a mortgage bond. Getting a mortgage bond with a reputable company is extremely important since it you guarantee you that you would not only be able to get the financial assistance you need. A highly reputable financial institution would provide you flexible mortgage programs which you can choose from based on your needs and ability to pay back the amount you have taken out in the form of a mortgage.

Countrywide Finance Corporation

This is the largest home mortgage creditor in the United States. About 20% of the total home mortgages in the country, which account for about 3.5% of the Gross Domestic Product of the United States, have been attributed to this firm. In July 2008, Nationwide Finance Corporation was acquired by the Bank of America.

As a finance and investment firm, it offers a number of different products and services. Some of these include Mortgage Banking services, loans, mortgage bond acquisition and mortgage processing. Apart from the United States, they also serve clients in the United Kingdom and Japan.

About Nationwide Home Mortgage Bonds

Countrywide Finance Corporation trades in the capital markets, which are institutions that provide long-term funding and financing. As such, the source of the funds of this group comes in the form of equity and bonds. State Home Mortgage Bonds which are offered by the company is responsible in order for home loans and mortgages for commercial purposes are properly managed and funded. Currently, Home Mortgage Bonds account for 60% of the total revenues earned by Nationwide Finance Corporation.

This Home Mortgage Bonds are, as of the moment, only traded with other financial institutions such as banks, insurance firms, hedge funds, investment companies and the like. It does offer a number of different commercial mortgage bonds to individual and private investors, many of which are owners of commercial properties.

Countrywide Asset Management Corporation

Home loan processing as well as other types of loans, are handled by its subsidiary company, Nationwide Asset Management Corp. Many of the loans that are handled by Asset Management Corp. are delinquent home loans which they intend to start up their home loan services. These delinquent loans were passed on to Countrywide Finance Corp through the passing of various rulings done by the Federal Housing Administration and the Veterans Administration.

Securitized Loans

One of the products offered by this group is securitized loans. Securitized loan, in reality, are delinquent loans which have been issued under the rulings of certain government agencies such as the Federal Housing Authority and the Veterans Administration. These loans are often securitized by converting these loans into mortgage bonds. In the case of Countrywide Finance Corporation, its subsidiary, Nationwide Asset Management Corp intends to securitize the delinquent loans it intends to use to start up their home loan services by converting them into Home Mortgage Bonds. Once this happens, the delinquent loans can now be traded in the secondary sector of the capital markets