Featured Article - Refinance Your Interest
As we head toward spring of 2007, mortgage interest rates are doggedly maintaining their attractive levels. Regardless of what the economy and the housing market does, mortgage rates are staying at a very reasonable level. Prime fixed rate loans are available in the low six percent range and home equity loans can be found below eight percent.
Now these rates are first-glance teaser rates on websites, and may well not be available to many of us – or any of us, once the closing fees are factored in. Nevertheless, it’s still a good market to refinance mortgages with a very attractive array of refinance interest rates.
Given the steep hike in home values over the last five years, many people have chosen to take advantage of refinance interest rates. These homeowners have chosen to obtain new mortgages on their homes that provide “cash out” for the equity the home has developed through appreciation. For total home refinancing, the refinance interest is not the only cost that enters into the calculation of costs. Closing costs will be similar to those of the first mortgage and will amount to several thousand dollars, in all likelihood.
Home equity loans and home equity lines of credit (HELOCs) are also types of home refinancing, in the form of a second mortgage. For these loans, the refinance interest rate is going to be a couple of percentage points higher than for a primary mortgage for the same lender with the same credit rating. These “refis” are designed to extract cash from the home’s equity. The interest rate on home equity borrowing is generally fixed for home equity loans and adjustable for home equity lines of credit.
The institutions that are offering “no points” and “no closing costs” are in fact building those costs into the refinance interest rate attached to the home equity borrowing. That’s why you’ll see a substantial spread in available refinance interest rates among a list of banks and their corresponding interest offerings. It’s important to determine all that is included in your refinance interest rate.
If it’s another adjustable rate mortgage, take a close look at the cap structure and the issue of prepayment penalties. Should you decide to sell the home, prepayment charges can run to several thousand dollars. If it is a relatively long term loan, the cap structure is critical both for the annual maximum increase on an adjustable rate and for the maximum overall interest rate cap for the loan
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