Mortgage Acceleration Tools

The ABC’s Of Mortgage Refinancing

Just like obtaining a mortgage for the initial purchase of a home is a labor intensive process that requires good consumer skills, securing a refinance home loan product for your existing mortgage product also requires care, knowledge, and patience. Begin your quest for a new loan with a search for consumer education in the latest refinancing trends and also crunch the numbers to ensure that your idea of refinancing your property is well thought out and ultimately advantageous for you.

Learning the ABCs of mortgage refinancing does not have to be complicated, but it does need to be thorough enough to ensure that you not only understand the various loan products but also the process itself and the long term effects your refinance decision will have.

Probably the first decision you need to make with respect to a refinance option is the length of the new loan you wish to find. While a 15 year mortgage costs less in interest over the life of the loan, it does have higher monthly payments. Conversely, a 30 year loan will cost you more in interest, but your monthly payment is less. Decide what your primary focus with the refinance is and then look over your budget to ascertain what you can afford with respect to a mortgage payment.

The next aspect of your refinance loan that plays a big roll in the decision process is the interest rate. This rate determines how much the loan itself will cost you over the length of time that it is in effect. The higher the interest rate, the more the loan costs. The lower the interest, the less money you are spending on the privilege of having the loan. If you refinance your home solely for the advantageous interest rate, you need to realize that you may not actually see the profit of your actions unless you stay in the home secured by the loan for a long period of time. In some cases, the break even point at which the cost of the refinance and the savings associated with the lower interest rate coincide may be years in the future!

Often overlooked, the fees associated with the refinance of a home loan can wreak havoc with any savings you are hoping to realize. Some lenders charge a lot of ancillary fees that literally nickel and dime you to the point of breaking even years later. Other lenders commit to charging a much lower flat fee and in so doing you would reach the breaking even point a lot sooner. The fees are always disclosed ahead of time and carefully reading through the list can save you a lot of money before you even begin the refinance process!

Shop around for the lowest refinance rates and fees that are currently offered. Spend a bit of extra time to compare and contrast the various loan products that are available to you, and then choose wisely with respect to the loan type and the fees and interest rate you are willing to accept.

By: Lender411

Article Directory: http://www.articledashboard.com

Krista Scruggs is an article contributor to Lender 411 . Whether you are looking for fixed mortgage rates, variable adjustable mortgage rates (ARM), jumbo loans,interest only or even specialized mortgages such as bad credit mortgage or reverse mortgages, we will match you with up to 4 qualified lenders with 4 mortgage quotes.

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Current Information Regarding Mortgage Refinance
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Read This Before Refinancing Your Mortgage Online
Once you know exactly what you are dealing with and what the bottom line figures are, you can make an educated choice with respect to your mortgage refinance. You can shop for the best mortgage refinance rates on our site.

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Interest Only Mortgage: Pros And Cons of Interest Only Home Loans

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What is an Interest Only Mortgage?
An Interest Only Mortgage is one of several financing options available to people seeking home loans. In this type of Mortgage Loan, as the label denotes, rather than paying both the Principal and the Interest on the loan every month, you can make monthly payments on only the interest. The initial monthly payments are low for the first five or ten years of the loan term, and then later, as the Premium will get amortized, the loan payments are significantly higher.

Pros of an Interest Only Mortgage
Going for an Interest Only Mortgage loan seems like an appealing financial option to many home buyers, especially if you are buying a house for the first time. Since the initial payments are low, it is easier to get approved for a home loan for one thing and for another, it makes it possible to go for a property that would otherwise seem unaffordable.

Another favorable factor is that by paying only the Interest in the initial period, you are able to invest the Premium in businesses, savings, stocks, etc. If you invest wisely, it is possible that you will receive healthy dividends and, when the five or ten initial years of paying only Interest are over, you can either pay off the remaining home loan in a lump sum or you can go for a refinancing option.

Many people use the Premium amount to fund retirement plans, college education plans, business ventures, pay off credit card bills and so on. You may also use the Premium amount to pay off another, more pressing debt. This way you can ease your financial situation and free up your money to make only the higher payments on your home loan later.

If your home loan amount does not exceed the tax limitation for mortgage interest, you can be eligible for tax deduction. This is another plus factor.

An Interest Only Mortgage loan is also a good financing option for investors who are in the business of buying properties in order to renovate and resell. This can work out well and bring you high profit margins only if you manage to sell the house for a higher amount than you bought it for.

Cons of an Interest Only Mortgage
Interest Only Mortgages were very popular during the nineteen twenties. A large number of people went for this type of home loan. They were confident of meeting the higher payments later - they could always refinance and, the way the economy was booming, they expected to receive higher wages and expected the value of their property to appreciate in the coming years. In actuality, the exact opposite happened. With the Great Depression, markets crashed, property values dipped and people lost their jobs. It is important to take a lesson from this.

Before going for an Interest Only Mortgage, you should thoroughly evaluate your future ability to pay the higher payments at the end of the Interest Only period.

While it is great to look on the optimistic side, it is wise to think out beforehand all the pitfalls that might crop up as well. What will you do if your income does not increase as expected? Or if you lose your job? What if for some reason you have to sell your home before you’ve paid off the loan? That could mean financial loss for you. What if the property value depreciates instead of appreciating? Real Estate prices are notoriously unstable. What seems like a great investment right now could lose its value drastically a few years down the line due to rapid land development, type of neighborhood, natural disaster, and so on.

If your Interest Only Mortgage is an Adjustable Rate Mortgage, it can prove problematic for you if the market rate goes up after the Interest Only period is over. You could find yourself paying much higher monthly payments than you expected.

Many people are just not good at investing or rather lackadaisical about it. Unless you are willing to thoroughly educate yourself on all Investment and Savings related matters before you go for an Interest Only Mortgage, you might be better off going for some other financial plan for your home loan. An Interest Only Mortgage loan is really best suited to financial experts with sound investment abilities and large assets.

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How to Lower Your Interest Rate with a Biweekly Mortgage Payment

Even slightly higher interest rates cost you tens of thousand of dollars more over the life of your mortgage loan. But there’s a qucik and easy way to lower your interest rate without refinancing, changing lenders, or paying hundreds in closing costs.

If you’ve ever looked for a mortgage loan then you’re well aware that the loan interest rate can make an emormous difference in your monthly mortgage payments. But did you know what an enormous difference even a tiny difference in that rate can make regarding the total interest you’ll be paying over the life of the loan?

For instance, if you take out a 30 year loan for $100,000 at 6.5% (fixed) you’ll have paid a total of $127,544.49 in interest by the time you’ve paid off your loan. But if %your interest rate had been 6.25% the amount would be $121,658.19. That’s a savings of $5,886.30 for a rate difference of only 1/4%!

Now what if you could cut that interest rate even more? Taking the same 30 year loan for $100,000 at 6.5%, here’s how much you could save %by further cuts in the interest rate%.

Rate = 6.0% …. Point Reduction = 1/2% …Savings = $11,706.3

Rate = 5.75% … Point Reduction = 3/4% …Savings = $17,458.26

Rate = 5.5% …. Point Reduction = 1% …..Savings = $28,751.16

So by lowering the rate by a full point, you would get to keep a whopping $28,751.16! But the question is HOW can you bring about dropping the interest rate on your home loan?

Well, you could refinance your loan to get a lower rate. But doing that has its drawbacks.

to begin with, to get a lower rate you would be compelled to refinance %at a time when the current interest rates% are lower than the rate you pay now. But if current interest rates are the same or higher, then you would need to delay until rates go lower … and that could be a long wait!

Also, if you refinance you’ll have to pay hundreds of dollars in closing costs. Plus it’s likely you’ll have to change lenders and you’ll have to deal with complicated forms and a stack of documents you must put your signature on.

But what if there were a way to lower your interest rate by one full point and not increase your monthly payment … WITHOUT the disadvantages of having to refinance?

By changing to a "biweekly mortgage payment" you can cut your "effective interest rate" without the expense or hassle of refinancing.

Let me explain why.

The "effective interest rate" can be understood as the ACTUAL interest you’re paying on your loan. I’m sure you’re wondering, "How can the actual interest rate be lower than the interest rate I’m supposedly being charged?" To illustrate let’s return to our first example, the $100,000 loan at 6.5% over a 30 year term.

The loan papers you signed when you took out the loan state "6.5%" is the interest rate you would pay. And if you pay once a month like most people, you’ll pay a 6.5% rate. Now if you switch to a biweekly mortgage payment you will be reducing your actual rate.

At 6.5% your monthly payments would be $ 632.07 (not including escrow for insurance and taxes). Now let’s take that $632.07 payment, and instead of paying it once every month, we’ll pay HALF that amount ($316.03) once every two weeks. The result? Hang on, because this will floor you!

Your mortgage will be paid off in just over 24 years (not 30) and the total interest you’ll have paid will be $99,549.65 … that’s $27,994.84 LESS than you would otherwise have paid. And because you paid less interest it makes your ACTUAL interest rate just 5.22% … more than a full percentage point less. Let’s state it differently. The total of your interest paid is the same as if you had taken out a $100,000 loan for 30 years at only 5.22% interest, and made regular payments every month.

Now what if your loan had been for more (or less) than $100,000? The "Effective Interest Rate" of 5.22% would not have changed. But the larger your own had been, the less interest you would have had to pay by going to a biweekly mortgage payment.

What if your loan had been for $200,000? You’d have saved $55,989.68. How about $500,000? You would have pocketed a whopping $139,974.20.

Now what if you’ve already been paying on your current loan for a number of years?

Taking our previous example ($100,000, 30 years, 6.5%) let’s say you been making payments for 10 years, then you switch to a biweekly mortgage payment. You could still bank an extra $10,342.04. So while let’s not as much as $27,994.84 it would still make it more than worth your while to switch to a biweekly mortgage payment.

There are additional advantages to change to a biweekly mortgage payment plan.

* All payments fall on the same day of the week. So if you get paid on a Thursday, you can make every biweekly mortgage payment fall on "payday."

* You can structure it so that your payments are automatic, so you’ll never have to make a manual payment nor remember when to pay.

* You’ll pay your loan quicker and be debt free sooner.

* You’ll be making your mortgage into an investment program

* You’ll be building equity in your home up to 3 times faster!

So when you make your next mortgage payment, stop and think over how much money you could be keeping by switching to a biweekly mortgage payment … money you could save and spend on YOUR family, and not someone else’s!

About the Author:
Jim Eastman is support contact for www.Build-Home-Equity.com. How much can a biweekly mortgage payment plan save YOU? Find out NOW at http://www.build-home-equity.com.

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How To Save Thousands by Paying Off Your Mortgage Early

Learn How to Save Thousands using a new strategy that simply applies common banking resources available to everyone to reduce your mortgage by 1/2 to 1/2 without refinancing or converting to a biweekly or taking more money out of your every day budget.

FACT: Unlike about any other debt or "loan", the typical mortgage (probably yours) is front ended load to apply most of your payment to the interest for at least 1/3rd of the loan life. On a typical 30 year mortgage, 90% or so of your payments go to interest for the first 7 years!

FACT: The "6%" or quoted mortgage interest rate only becomes effective at that rate after you complete the full contracted (15 or 30 year) period!

FACT: On your 30 year conventional mortgage, not even half of your payment goes to reduce principal until after the 7th year!

FACT: Over 70% of Americans move or refinance before the end of a seven year occupancy and paying.

FACT: On that move or refinance; most Americans take some equity out and start their clock all over again!

FACT: If you had money available to make extra principal payments, you could accelerate the time where your money starts to go toward principal and you could effectively knock years of "the back end" of the mortgage.

FACT: IF you had the money, you could accelerate the mortgage pay down and save substantially.

FACT: Most Americans don’t have the extra money to make substantial additional payments.

FACT: Under The Standard System You Can’t Win

How then do you accelerate the payoff of your mortgage?

Under the standard system, we said you can make additional payments to principal.. but most people don’t have enough to do that on a regular basis. You can refinance possibly to a lower interest rate, but when you examine this option, you’ll often find that the costs associated with refinancing won’t be recovered for 3, 4, or even 5 years. And lastly, you could go to a bi weekly payment plan which is essence is a forced way to make one extra payment a year, and on average will accelerate the pay down of a 30 year mortgage by seven years.

Even with that, it’s not a win-win situation because you make two payments a month on average, but the bank sits on your first payment until the end of the 28th day, using your money, but not paying you any interest on it and only crediting you with the payment at the end of the month.

Is there an answer to the problem? Surprisingly, there is! But it takes a little knowledge (or the use of a tool that has "knowledge" built into it and can do some complex calculations. Why complex calculations? Because we’re going to follow some advice that’s been around for a very long time in successful financial transactions! What is the secret?

Use other people’s money !

In this case, the "other people" is the bank! You see, that very same bank has a tool….. well, maybe your exact bank doesn’t have one… but if not, this tool is available to most people at some bank, and it’s an open ended loan account, generally referred to as a Home Equity Line of Credit.

You need to do some independent reading because the suggested length of an article like this does not allow for a full discussion of that financial instrument, but suffice it to say, in this type of a loan interest is treated much differently. Your interest is calculated only on the average daily balance, and that balance can be changed nearly daily. In other words, if you make a payment to your principal on the 5th, you get credit for the payment on the 5th.. not at the end of the month.

We want to keep the balance on this account as low as possible, and we can do that by putting money into it that is otherwise sitting around in zero or very low interest bearing accounts. But we need to know when to put money in and take it out. Your Heloc will act like a conventional checking and banking account in nearly all respects, except it can never have a positive balance in it. If you have obtained a credit line of $10,000 you can withdraw up to $10,000 from it, but you never can put money in that would make it "store" money.

So let’s say you tap this account to make a substantial principal only payment on your primary mortgage. You’ve used "other peoples" money. For example purposes, you made a payment of 5000. Now you also have some household living expenses that equal 4000 and you wrote this out of the Heloc. Now you are "in hoc" to your heloc by 9000. You and your significant other (if you have one) or you alone… it doesn’t matter… have a monthly income (at least this month) of $6000. So you put your paycheck into your Heloc, and at the end of the month, you really only have a balance of $3000.. and that’s what you pay interest on. But you’ve killed the interest on your first of $5000. Because the first is front end loaded, depending on the year, that was really having an effective interest rate maybe of 50%.

Next month you wrote out your living expenses of $4000 from the Heloc, and as you had a negative balance in it of 3000, you owe your Heloc $y 7000. Payday again! Same $$6000, so you put it in. Balance becomes just $$1000. Month 3… same schedule for the old budget. Monthly expenses were the same $4000, and add that to the bal of $1000 you owed starting.. so you have a 5000 balance you owe the bank. Payday coming up and you know the vital fact we just stated: You can’t have a positive balance in your Heloc! If you tried to put that full $6000 paycheck in, it would not take it.

So at some time before payday, you need to transfer some funds out of the Heloc to pay down some more principal. Ah Ha.. the magic questions: When, and how much. Take a guess and pay too much from your Heloc and your "spread" of interest advantage disappears. Why not make a massive payment of $8000.. after all , you have a credit line of $10,000. And when to make it.

The answer is that if you pay too much relative to your repayment schedule, the interest of that Heloc will cancel any advantages. Ditto on the timing. While your regular mortgage payment has to be made by a certain date, or you get late charges, remember that you are not credited with payments until the end of the amortized schedule.. usually monthly. So you don’t want to put money in too soon and let the bank sit on it until they decide to credit you!

IF you had the time and patience, you could figure this all out to the penny and to the date and hour. The facts of life are that most of us don’t have these skills or the discipline, so we need some one, or some things, to give us that guidance. This is just math, not magic. Applied "numbers crunching" and what does that better than a computer! The good news: There are commercial software programs in the market today that will do this for you. Some are better than others, but we suggest you become familiar with what is available and begin to use it as soon as possible.

Will this work for everyone? No. The software will, but you need an open ended loan account, and the most common IS your Alternate Home Equity Line of Credit. Looks like a second mortgage, but is not in that it is truly open ended. By definition, to get one, you must have some equity in your home, or a home if not your principal residence. You need to have an income where your income exceeds your monthly expenses. Doesn’t nave to be by much.. as little as $$50,000 qualifies most people. And you should have a respectable credit score or rating.

In late fall of 2007 we all read about the mess the mortgage lenders are in, and in an effort to cleans themselves up, they have tightened loan standards. Even if you meet the existing criteria above, you own bank may not offer this tool to you. so shop around.

You may be able to substitute a personal line of credit. Again, shop around. As to the commercial software.. ask if it is dynamic. Does it adjust for your changing expenses and possibly income if you are self employed or paid on commission, so that each day and month, your calculations are adjusted to optimize your prompts for payment. Is it totally confidential and not move your money, but gives you full and complete control. If you change residences, can you transfer the account to a new home or mortgage? How about tech support.. is it available e 24/7? For your lifetime? From someone in the USA that you can understand? Is there a written guarantee of satisfaction? Will it reside on your PC or on a mainframe? How often is it backed up? Do you have 24/7 access? Will it provide ancillary financial advice on decisions such as true costs of major purchases?

This is only an entry level article, but it demonstrates a proven concept, in use for many years in places like Australia and the Far east; It demonstrates how you can take advantage of the spreads between when interest is applied and calculated and when principal is applied, and how with the right tools and calculations, you can truly use other peoples money to accelerate your mortgage. Typical results cut 1/3 to 1/2 off a standard mortgage.. and you don’t have to refinance or make any alterations.

We wish you well and much financial success. !

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