IF you have a mortgaged property in Florida, you might be wondering if you should go for a refinance. Florida offers as many mortgage refinance options as first mortgage, but how would you know if refinance would be good for you and, if yes, which type of refinance it should be. This article attempts to briefly but comprehensively answer these questions.
Mortgage Broker in Florida
One normally opts for mortgage refinance if it results in lower monthly payments, gives you a certain lump sum of cash, or enables you to consolidate your higher cost debt. You can lower your monthly payments if interest rates are lower than they were when you took the original mortgage loan (also called purchase mortgage loan) and/or if you are willing to prolong the duration of your loan. You can also cash out or consolidate your high cost loan if the market value of your home has increased considerably since you purchased it, or if your mortgage loan balance has decreased considerably due to several monthly repayments. It is you who has to decide what you want out of your mortgage refinance.
If you aren't sure how refinance can help you, you should avail of professional help from mortgage lenders or brokers in Florida, whom you can contact through mortgage websites such as www.mortgageloan.com, www.erate.com, www.bankrate.com among others. You may also want to use the online calculators available on these websites to get a preliminary idea of what could be in store for you in the refinance market. And remember you don't have to pay anything to anyone for consultation. You pay the broker's fee only if you and when you have formally accepted an offer through him or her (the fee could range from 1% to 10% of the loan amount: better your credit rating, lower the fee). As a caution, don't depend on advice from only one source: take advice from at least three sources -- online and offline-- and compare what they have to say and offer.
What type of refinance is better
This article assumes that you are aware of the main types of mortgage loans available in Florida. To recap, the most common types of loan are the fixed-interest mortgage (FRM) and adjustable rate mortgage (ARM) loans. The same types apply to mortgage refinance too, since mortgage refinance is also a mortgage loan.
- When FRM is better : If you think interest rates will increase in the future, it is best to take an FRM refinance loan. This is because in FRMs, the rate will stay constant throughout the life of the loan; so you will continue paying the present low rate even when rates have increased in the market in the future.
- When ARM is better : If you think interest rates will fall in the future, it's best to take an ARM refinance loan. This is because these loans come with a low interest rate in a specified number of initial years followed by changing rates every year thereafter -- the changes being decided by the rates prevailing at the time.
ARM / FRM conversion
Refinancing to switch over from an ARM to an FRM is usually inadvisable if you are planning to sell off your home within a few years. This is because the advantage of a low interest ARM may not be enough to offset the closing costs you have to pay upfront for your refinance loan. However, if your current mortgage is an FRM, and you wish to sell off your home within a few years, it may make sense to go for an ARM, so that you pay a low interest rate for a few years and sell off your property before the rate adjustments start.
There is no thumb rule to determine whether mortgage refinance would do you good or not, or which kind of refinance would be best for you. A lot depends on your own financial situation at a given time, your credit profile, and other variables as described in this article. Professional advice without obligation is amply available in Florida, both online and terrestrial. But the important thing to remember whenever your prospective lender or broker talks about interest rate, you should insist on knowing the 'APR' or annual percentage rate. This is because APR is a better indicator of the cost of your refinance loan since it takes into account other upfront costs you have to pay for refinance.