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A mortgage refinance is just that a move to pay-off your mortgage by taking out a new loan on your home. Refinancing a mortgage therefore simply means replacing an old mortgage with a new one.

Should You or Shouldnt You?

Theres no simple yes or no answer to this question. It would be better to leave it at it depends on your situation, priorities and preferences. Generally, however, you should refinance if you can save money by so doing. This can come about in two ways.

Lower interest costs: First, if you are refinancing to a loan with a lower interest rate than your current mortgage, then you can conceivably save on interest rate payments and therefore be able to make more payments towards the principal, increase your equity at a faster rate and pay your loan much earlier than you expected to do so.

For example, if the current annual rate of interest of your mortgage is 8.25%, your monthly interest rate is around 0.6781%. If your current mortgage balance is 80,000 and you have an interest-only mortgage, then youre expected to make an interest payment of around 542.48 monthly.

You will save money on interest payments if you manage to refinance to a lower rate. If you manage to obtain a mortgage refinance loan with an interest rate of only 6%, for example, your monthly interest charge will become only 394.52. This is a savings of around 147.96 every month on an interest-only payment scheme.

Lower future interest costs: Second, if you have a mortgage with an increasing variable rate of interest, then you can gain savings on future interest rate payments through refinancing your mortgage with a fixed-rate loan program. By doing this, youll be able to keep your mortgage interest rate and thereby your interest costs at a constant level.

For example, if you have a mortgage whose interest rate is currently 6.5% and a balance of 80,000 (as in the previous example), monthly interest payments would be around 427.40. However, if your loans index rate (the rate on which your actual interest rate is based) increases by one point and becomes 7.5% the next year, then your monthly interest charges on the same balance would be 493.15. If the year after that, your interest rate increases by another point, your interest rate will become 8.5%. Assuming that you still havent made any payments towards your principal, your monthly payments will become 558.90.

In three years, therefore, your interest rate payments will change from 427.40 to 493.15 then to 558.90. Assuming that each particular interest rate sticks around for a year, your interest rate payments in three years will amount to 17,753.42.

On the other hand, if you changed to a fixed rate of interest now, you can save yourself money on future interest payments. For instance, you can replace your 6% adjustable rate mortgage with a 7% fixed-rate mortgage refinance. This will actually make your current interest rate payments greater at 460.27 but this will lead to savings of around 32.88 next year and 98.63 the following year. In this fixed-rate loan, your interest payments in three years amount to only 16,569.86 yielding a total savings of 1,183.56 in interest rate payments.

Of course, current and future savings arent the only considerations when deciding to refinance. You should also weigh your savings with the costs of refinancing. When you refinance, you will also pay various loan processing fees as well as the origination fee. Compute the costs of a mortgage refinance and compare it with your projected savings. Refinance only if your savings will be greater than the costs.

One of the most common things that borrowers ask lenders is what their rates will be. The rates a lender has is very volatile, it is not always the same. So the lender will always have to wait via fax, E-mail or a secure website for the rate sheet that comes from their company. Because it is volatile the rates could even change 5 times in one day. As a borrower you have no right to see the rate sheet, this is basically the advantage or a way for the lenders to do the business. The rate sheet will always show the interest rates and the cost expressed in points. A point is equal to one percent of the loan.

The cost of the rate usually vary depending on the interest rates, higher rates are cheaper compared to lower rates. This is done because it helps the lender to earn more over the interest for the period of the loan, so lenders charge less cost. When customers want a lower interest rate, they are charged with higher cost because lenders will earn fewer in the longer period of the loan.

The point system would usually work in this way: Zero points mean par value or pricing. The numbers in parenthesis means premium or rebate. Premium or rebate means that the money is paid back to the loan officer or where the loan originated at a rate instead of having a cost.

The loan officers are paid by commission. The earnings of the loan officer and the branch are split between them. The fees that are not subject to the points are not split up and instead directly go to the branch.

Before giving you his quotation price, the lender will add on the profit he and his branch would like to make. Dont worry however as there limits are set by the company as how high or much he or she can add to his cost. For the lender, he or she should not worry about the limitations because between the minimum and maximum there is a great deal of flexibility.

An example of this situation is when the loan officer wants to earn 1 point. When he gives you the quotation, it will already include the one point to the cost of the loan. So if the lender has 7.125% of interest rate, the lender will earn 1 point and have some left over money. The left over money is then used to pay the processing fees and the documents.

More informations are available at http:www.debt-credit-00.infomortgage-refinance

Your FICO score will be a determining factor in the setting of the interest rate on your mortgage. Put simply, your FICO score is a risk rating on you, the borrower. Data related to your financial responsibility is aggregated by institutions that you do business with, and it is this data that comprises your FICO score or credit score. So what exactly makes up your FICO score and how will it affect your mortgage interest rate and your monthly payments?

There are five basic components with respective percentages that make up your FICO score. They are payment history 35%, amounts owed 30%, length of credit history 15%, new credit 10%, and types of credit used 10%. As indicated by the aforementioned percentages, payment history carries the most weight in the composition of the score. Mortgage lenders need borrowers with exceptional payment histories so they can forecast future profit. To secure future profits, a lender needs to know that borrowers will be able to pay well into the future. The servicing of past debts is an excellent predictor of the servicing of future debts; consequently, if you have been on time with the vast majority of your debt payments in the past, you will be a profitable consumer into the future, and therefore an acceptable mortgage risk.

Payment history does not just include the payment history on prior mortgages. It includes a long list of financial data; everything from the most obvious-credit cards- to the not so obvious, such as how completely you fulfilled your promises of repayment on a past due shopping credit line. Data that is an extension of direct financial transactions will also be included in the payment history component of your credit score. Examples of this data are liens, garnishments, judgments, and bankruptcies. Understanding how to build a complete profile of yourself, by yourself, is crucial to your financial success in the 21st century. If you entered a financial transaction with credit or an account held by computer data bases, any and all of this information will be used by lenders to asses you as a risk to profitability.

Amounts owed comprises 30% of your credit score, and even if lenders dont directly use the variables that constitute the amounts owed on a FICO score they will definitely be using some measure of your current debt and servicing of that debt to determine if they will be paid in full and on time. Before taking out a mortgage, paying off as many debts as possible is a great idea. Being less of a risk is quite desirable and will allow you to shop around for the most competitive rates. Your credit score is a good indicator of you as a risk to a lender, and accordingly institutions will use it as a way to set your mortgage interest rate, and consequently your monthly loan amount. A common analysis, used to illustrate the vast difference in rate and payments terms, on a loan, is to analyze a 300,000 loan and what a good credit score and a bad credit score would have to pay.

On a 300,000 loan, a 760-850 credit score can expect to pay about 5.5% and a 1,700 monthly payment. A credit score of around 500 can expect to pay approximately 10% and 2,600 per month-quite a difference in monthly payments

If you have ever gone looking for quotes on a mortgage in order to find out just what a mortgage might cost you, you have probably had the term points thrown at you. So what are points?

Each point is a fee and it is based on one percent of the total amount of the loan. There are a couple of different points, there are discount points and then there are origination points and lenders do not all charge the same amount of these points. Some lenders will charge you one point while others may charge you three.

Discount points are the points that are like prepaid interest on your loan that you are getting for your new home. Every point that you purchase will lower your interest rate to some extent. Most borrowers will be able to choose just how many points they want to purchase. There is a limit of course, usually around four points. The number of points that you choose to buy will depend on how much you want to lower you interest rate. One especially good point of these points is the fact that they are tax deductible.

Origination fees are different. These fees are used in order to pay for the costs of giving you the loan in the first place. You don’t get anything out of these points so most borrowers don’t like them as they are not even tax deductible. If you can try to get a loan that does not require you to get these types of points. Discount points on the other hand can be useful to you.

The choices that you make concerning the points to get will be affected by a couple of different things. For example, how long are you going to be living in this house? And how much of a down payment are you going to be putting down? If you are thinking of settling into this house for the long haul then perhaps discount points are a good way for you to go. Lowering your interest rate for years to come is always a good thing. Before making your decision take stock of your situation and see what suits your needs best.

New home search in California is made much easier with a mortgage loan pre-approval that lets you know the maximum amount obtainable.

With a California home loan pre-approval letter, real estate agents are more inclined to work with you, and show properties in the specific price range of the maximum mortgage. Sellers and listing agents also take an offer more seriously if the home mortgage loan is already pre-approved.

Many first time home buyers confuse being “pre-qualified” with “pre-approved.” Pre-qualification is a casual process, where the potential buyer how much may be borrowed based on income, existing debt, and cash down payment.

A pre-qualification may be a form letter or personalized, but will contain disclaimers to protect the lender in case the borrower fails to qualify. Some real estate agents feel that pre-qualification letters say little more than you have contacted a California mortgage company. Before a lender will make the loan, a formal loan application will be required.

In contrast, pre-approval letters have far more validity and indicate to the seller that the borrower has passed the credit check and have preliminary loan approval. To obtain pre-approval letter a formal loan application is submitted with all the relevant documentation. Everything is verified and credit is checked, then the California mortgage lender agrees in writing to make the loan. The loan will be subject to a satisfactory property appraisal and title search.

A formal loan application process is an eventuality, so we recommend obtaining a loan pre-approval in advance. By doing so, you avoid any disappointment of making offers outside of your price range, and get far more cooperation from agents and sellers because they will feel that their time is not being wasted.

For more information on obtaining a pre-approval for a California home mortgage loan please call Goldmedalmortgage at 866 398 4664 or go to:
http:www.goldmedalmortgage.com