Should I Refinance With My Current Lender?

by Craig Romero

With so many homeowners refinancing lately, there are hundreds of refinancing questions being asked. One of the most common is "Should I refinance with my current lender?" The answer is both yes and no.

Your current lender should be the last lender that you obtain a quote from, but you should definitely contact them when you are thinking of refinancing. Get together quotes from other lenders, and then approach your current lender and ask them to meet, or even better, beat those quotes.

You can also ask them to waive certain settlement costs and other fees involved since you are already an established customer and your lender may have customer retention programs, but you will need leverage before you do this. That leverage should come in the form of quotes from your lender's competitors.

In fact, your lender may opt to just decrease the interest rate you are currently paying, thereby allowing you to avoid settlement costs= altogether.

However, there are drawbacks to using your current lender. Your lender already has your business, once you pay the lock-in fee, they have your money too. Since they already have your mortgage, they have no incentive to close the deal in a timely manner. There are also times when lenders will not quote you the best rate they have, but will quote you a rate that is lower than your current rate.

For instance, if you're at an eight-percent interest rate currently, your lender may offer you 6.5 percent because it's significantly lower than your current rate. Normally, that would be great, but if rates are at 5.5 percent, your lender isn't doing you any favors. That is why it is so important to be prepared with quotes from other lenders. It lets you know what rates are available to you, and lets your lender know that you're not going into the situation blind.

A wise decision is to treat your current lender as you would any other lender (see examples= at: http://debt-solution.biz ). If they do not come in with the lowest rate or best service, take your business elsewhere. While it is nice to do business with a familiar face, you are not obligated to refinance with them, and if you can save money by going elsewhere, you should do so.

About the Author

Written by Craig Romero/Mortgage Analyst

Discover how to quickly build a minimum of $40,000 worth of home equity and pay your mortgage off in 10 years or less without making biweekly mortgage payments. Visit:
http://debt-solution.biz

 

Should you refinance?

Michael VanDeMar

There are several reasons that might make someone consider refinancing their existing mortgage. One would be to get a lower interest rate than what they currently have, thereby reducing monthly payments and lowering the overall cost of the mortgage. Another is to shorten the length of the loan, which can save quite a bit in interest payments. Thirdly, someone may have other debts that they wish to pay off, and refinancing may provide them a means of consolidating that debt into one overall lower payment.
A lower interest rate isn't the only thing that should be taken into account when thinking about refinancing. There are costs and fees associated with refinancing your mortgage. The bank will charge fees, there will be costs for a new inspection and a new appraisal, title search, and so on. The process that is gone through is very much like the process that one goes through on getting a first mortgage. It requires a new application with a new credit= check, survey, and appraisal. As it is with a first mortgage, this can be a long and costly process.
In general, it makes sense to refinance if the interest rate on the new loan is at least two percentage points lower than that of the current loan, although this is not always the case. Some things that need to be taken into consideration are the total cost of the refinancing, the total monthly savings, and how long you plan to stay in your house after you refinance. You can calculate how long it will take you to break even on refinancing costs by dividing the total cost of the refinance by the monthly amount you will be saving. For example, if the cost is $2,500, and you reduce your monthly payments by $100, then it will take 25 months to start seeing the savings from the reduced mortgage rate. If you plan on staying in your house longer than this, then it may just make sense for you.
Another reason that someone might consider refinancing is if they are trying to consolidate= debt. In such cases, there is also the tax impact that one should look at. Many loan types are not tax deductible, whereas mortgage loans are. Therefore for that reason alone it may be a good idea to consolidate outstanding credit card debt, student loans, car loans, as well as others.
Some people may not have a choice about refinancing, it is a must for them. This happens in cases where they have a loan with a balloon payment coming up and no conversion option. In instances like this the best bet is to refinance the mortgage a few months before the balloon payment is due.
If you do decide that the costs associated with doing a refinance outweigh the benefits, you should ask your bank or financial institution if you can get some of the terms that you want by agreeing to a modification of your current loan. However you choose to go, remember that it always makes sense to consult with a mortgage professional before making your move. This can end up saving you both time and= money. You should also do research before making a decision. Spend some time on the web familiarizing yourself with what you are getting yourself into. Take the time to read up on and understand what your options are.
More on Mortgage Refinancing.

About the Author

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Six Ways Under Your Nose To Finance Your Home Business

George A. Parker

There are lots of ways to get additional capital to expand a home-based business. But before you look outside for financing, leaving the decision about your company's progress and merits to someone else, consider these six ways under your nose to finance your home-based business:

Personal Savings

Savings are easy to tap and involve no paperwork.

The negatives: if you use the money in your business, it eats into your safety reserve and is no longer there for emergencies. It diverts funds from a very low risk investment to a high one.

Whole-Life Insurance

Whole life policies accumulate tax-deferred cash value that you can tap for your business. But the only way you can tap this cash without paying taxes is to borrow against your policy. As long as you keep your policy intact and pay premiums when due, loans remain tax-free.

The negatives: you will be converting a low risk investment into a high one; if you decide to terminate your policy or if you default on repaying your loan, taxes will be due on all cash value accumulated under the policy; if you die before your loan is repaid, any distributions to your beneficiaries will be reduced by the amount of your outstanding loan.

A Loan from Your 401-K Plan

You can borrow up to $ 50,000 of the money you have saved under many 401-K plans. There are no credit checks. Interest is usually a percentage point or two above the prime rate and the interest that you pay back to the plan will be tax-deferred to the plan. Most loans are repayable out of salary deductions over five years.

The negatives: you will have less money invested toward retirement; the dollars used to repay the loan will be after-tax dollars withheld from your paycheck; if you fail to repay the loan, the IRS considers your failure a premature distribution -- you will be charged taxes on the borrowed amount plus you may be assessed a 10% early-withdrawal penalty.

A Home-Equity Loan

These loans do require that you apply and be reasonably credit worthy. You generally can borrow up to 80% or 90% of the equity value of your home. Interest on these loans is generally tax-deductible.

The negatives: you will reduce the equity value of your home by the loan amount; you will be diverting funds from a relatively safe investment to a high risk one; if you default, you put your house at risk of foreclosure. Think very carefully before using this form of financing.

Personal Credit Lines and Credit Cards

They are convenient, versatile forms of financing. You can borrow and re-borrow up to the line limit as needed.

The negatives: you will pay relatively high interest rates-- rates range from 12% to over 18%; the minimum monthly payment on many of these arrangements will repay the outstanding balance within 42 months; it is easy to dig yourself deep into debt using credit lines and credit card debt; high outstanding balances against your line can negatively impact your personal credit rating.

A Margin Loan

You can use margin loans for purposes other than buying additional securities.

Any margin loan will be secured by your equity shares. Rates are often below prime, applying is relatively easy, and these loans have very flexible repayment terms.

Loans are initially limited to 50% of the purchase price of your equity securities. Loan repayments are triggered when the value of your stock falls below the margin limit.

The negatives: Because borrowings are predicated on volatile stock values, a margin loan can be a risky proposition; if you default in repaying, the brokerage firm can sell your securities to satisfy the loan; an untimely sell-off can have a devastating effect on your portfolio and negative tax consequences.

The only safe way to consider a margin loan to finance your home-based business is to limit advances to a relative low ratio of your stock portfolio value – say, 25% or less.

Most of these financing methods are under your control and don't require business plans or company financials to qualify. Although each of these methods has risks and disadvantages, so do most external methods of financing. Before proceeding with one of these financing methods, carefully consider the potential benefits, risks and consequences. Whatever you decide, it helps to know the options right under your nose.

About The Author George Parker is a Director and Executive Vice President of Leasing Technologies International, Inc. ("LTI"). He is responsible for overseeing the company's marketing and financing efforts. One of the co-founders of LTI, Mr. Parker has been involved in secured lending and equipment financing for over twenty years. Mr. Parker is an industry leader, frequent panelist and author of several articles pertaining to equipment financing. Headquartered in Wilton, CT, LTI is a leasing firm specializing nationally in direct equipment financing and vendor leasing programs for emerging growth and later-stage, venture capital backed companies. More information about LTI is available at http://www.ltileasing.com. gpmail129-groups@yahoo.com