MORTGAE refinance is a busy market in the state of Mississippi. And why not? Mortgage interest rates are low, as of February 2008, and brokers and lenders will leave no stone unturned to convince you that you should go for refinance. They do have a point.
Refinance makes sense when interest rates are low as it enables you to manage your mortgage obligations more easily. You could reduce your monthly payments, or reduce or increase the term of your loan, get a lump sum of cash, or just save some money by paying at the new, low interest rates than the rate at which your took your original mortgage loan.
Yes, the brokers and lenders are right, but it wouldn't be right on your part to take them at face value. Mortgage market operators are professionals, but -- as in every state -- there may be a few unprincipled guys in Mississippi too, who are waiting to earn at your expense.
So, whenever you think refinance in Mississippi, you should be aware of some fundamentals of mortgage refinance to ensure that you get the best deal for you.
If you are not aware of certain basics of mortgage refinance, you will be entirely at the mercy of the broker or lender to get a refinance loan. It is in your interest that they know you are not ignorant, and they will know this if you know the following:
Interest rate not enough : Interest rate by itself does not suffice to give you an idea of what the cost of your refinance loan will be.
You must take into account certain other costs, which you will have to pay upfront at the closure of the refinance loan. These costs include broker's commission, real estate agent's commission, valuation fees, points (1 point = 1% of the loan amount) you are willing to pay to effectively reduce your interest rate, and of course prepayment penalty for premature closing of your original mortgage loan.
Therefore, it is not enough for you to know the interest rate. What you should know is the annual percentage rate (APR) and you should ask your broker / lender about this quite early in your negotiation.
Know what you are eligible for : This is a very important precaution you should take before you sit across the table with a broker or lender. You may not be able to have accurate information on what you are eligible for, but you can get a reasonable idea from the online mortgage loan calculators that are available on the websites of many mortgage lenders and brokers (e.g., www.bankrate.com, www.erate.com, www.mortgageloan.com).
Use these calculators, by entering the data asked for, and -- at the click of a button -- you will have approximations on the terms of loan, under different types of loans, that you can get.
The variables that collectively decide your eligibility include: your credit profile, the amount of loan you want, the type of loan (see next para), the location of your property in Mississippi, the number of years you want to retain your property, and so on.
Now, a word on the types of loan available. These include: fixed interest mortgage (FRM), adjustable rate mortgage (ARM), interest-only loan, and jumbo loan. An FRM loan, as the name suggests, is a loan with an interest rate that remains constant throughout its duration.
An ARM loan is one with a fixed low interest for a specified period of time followed by changing rates every year thereafter. Interest-only loan is one in which you only pay the interest, while the principal will be taken by the lender at the end of the loan's duration (through your savings, investments, insurance, etc).
A jumbo loan is one of an amount exceeding the limits specified by government-sponsored enterprises such as Fannie Mae and Freddie Mac. These limits for first mortgage loan are: $417,000 for one-family house, $533,850 for two-family house, $645,300 for three-family house, and $801,950 for four-family house. The limit for second mortgage loan is $208,500.
Brokerage commission: You pay the broker only if and when you formally accept an offer he or she brought to you. This payment is made at the closure of the loan. The commission usually paid varies from 1% to 10% depending on your credit profile. Better the credit profile, less is the commission.
Mortgage refinance loans are easily available in Mississippi, but your should be aware of basic facts and principles of refinance. This is to ensure that you get the best deal you are eligible for, and not the deal that your broker or lender offers you in their own interest.
Of course, most brokers in Mississippi are principled professionals, yet there could be some exceptions, as in every state and every industry. Online calculators available on the websites of lenders and brokers are of great help in giving you approximations of what you can expect.
Use more than one of them, compare results, and get a sound idea. On the basis of this idea, you should negotiate with brokers or lenders. Remember, just as you used more than one online calculator, you should also talk to more than one brokers and lenders, and compare their offers before accepting one.