MORTGAGE and mortgage refinance loans are governed by the same set of rules and regulations in all the states of the United States with some exceptions, of which one is Alaska. Before we look at the difference in Alaska, let's first recap a few basics of mortgage refinance.
Understanding mortgage refinance
Mortgage refinance means that an existing mortgager takes a new mortgage loan to pay back the balance of an existing mortgage loan and then pays back the new loan in monthly installments. The house used as the lender's security for the refinance loan is the same as that for the original mortgage loan.
Reasons for mortgage refinance
There are many reasons for opting for a mortgage refinance. Different people have different reasons for it. The commonest reasons pertain to reducing the debt burden on the mortgager. The debt burden can be reduced on a monthly basis by reducing the monthly payment and increasing the duration of the loan.
Alternatively, if the mortgager is in a better financial position now than before, he might want to pay back the mortgage loan quicker than he or she had originally planned, even if that means higher monthly payments. In many cases, mortgagers feel they would be better off with a different type of mortgage loan -- say, an adjustable rate loan instead of a fixed rate loan.
There are cases where people opt for mortgage refinance to restructure their loan in such a way that get a lump sum of cash, which they need for an immediate purpose.
Yet others may just want to move over to an interest-only loan, i.e., they would only pay the interest on a monthly basis on the agreement that the lender would recover the principal at the time of the loan's expiry by way of liquidation of financial securities, or pension, life insurance, and the like.
Many people want none of the above, yet opt for mortgage refinance simply to take advantage of lower interest rates. Thus there are different reasons that persuade existing mortgagers to opt for mortgage refinance.
How to go about it in Alaska
The first thing to be done is to use online calculators available on the websites of mortgage loan lenders or brokers, such as www.erate.com, www.bankrate.com, and www.mortgageloan.com. These calculators give a fairly reliable idea of what kind of refinance you can get, depending on specific information about you and your property that you feed into the calculator.
Once you get an inkling of what is in store for you in the mortgage refinance market, you should get in touch with one or more real-world lenders or brokers registered in the state of Alaska. These are the people who can guide you to successful conclusion of your refinance application.
Note that you should know all the costs involved in the refinance loan and not just the interest rate. Ask the lender or broker what your APR (annual percentage rate) will be because that is more important than the interest rate alone.
Difference in Alaska
Without getting into technicalities, let us simply acknowledge that the broad mortgage loan type that is best and most popular in the United States, including Alaska, is the 'conforming loan'. Conforming mortgage loans are those loans whose amount is equal to or less than specified amounts for different types of homes. These limits for most states as in 2008 are:
- One-family loans: $417,000
- Two-family loans: $533,850
- Three-family loans: $645,300
- Four-family loans: $801,950
Now, for the state of Alaska, the conforming loan limits are 50% higher than the above limits. In other words, there is every reason to opt for conforming loans only in Alaska. They come at one-fourth to one-half per cent lower than the other broad type of mortgage loans, which are called jumbo loans.
In Alaska, conforming loan limits for one-to-four family homes are 50% higher than in most other states of the United States. Conforming loans come at a quarter to a half per cent lower rate than the other type of loan, i.e., the jumbo loan. Therefore, if you are in Alaska, and seeking mortgage refinance, jumbo loans are the last thing you should think of.