MORTGAGE refinance is defined as a new mortgage loan that pays back in full an existing mortgage loan, and continues to exist as a current mortgage loan using the same property as collateral that was used for the purpose of the original mortgage.
Mortgage refinance in the US is a convenience offered by the financial market to enable people to adjust the terms of their mortgage to suit their changed requirements and/or changed interest rates. In this article, we look at the mortgage refinance scene in the state of North Carolina.
Most popular loan type
In North Carolina, the adjustable rate mortgage (ARM) is the most popular. ARM loans are loans that come with a fixed low interest rate for a specified number of initial years followed by a revision every year thereafter through the life of the loan. ARM is the opposite of fixed rate mortgage (FRM) loans, which come with a fixed interest rate applicable to the entire life of the loan account.
People who have taken fixed rate mortgage (FRM) loans in the past may find it attractive (though not necessarily) to opt for refinance using an ARM loan. This is because interest rates in February 2008 have been cut by the Fed in response to apparent recessionary conditions in the US economy. Though mortgage rates are not as low as they were in 2004, they are still low enough to merit serious consideration of refinance.
Even if you happen to read this article well after February 2008, this argument may still remain valid since signs are that upward revision of interest rates is not going to happen soon. In any case, regardless of the lapse of time between the writing of this article (February 2008) and your reading it, do check out on the mortgage rates at the time. You can get these rates from one of many websites, which you can located by typing “mortgage rates” as keywords in a good search engine, such as www.google.co, or www.yahoo.com.
Lest the above create the impression that low interest rate alone is enough to opt for mortgage refinance, let us hasten to clarify that it is not necessarily so. Low interest rate is one strong reason, but it may not suit all people.
You should remember that interest is only one of the cost heads in mortgage refinance, the other important ones being upfront fees, charges and commissions to be paid for the refinance loan. You also have to pay a penalty for premature termination of your original mortgage loan. Taking all this into account, the actual cost of the new loan works out higher than suggested by interest rates alone.
It is therefore important that you get to know the ‘APR’ of your mortgage refinance loan. APR is abbreviation for annual percentage rate. Sooner or later, you will know the APR of the loan, but it is better if you are in the know from the first stage of the refinance-seeking process.
Another important precaution you must take is to cross-check advice and offers you get from lenders and/or brokers. To facilitate this precaution, it would be wise to first use online calculators available on the websites of lenders and brokers (e.g., www.mortgageloan.om, www.bankrate.com, www.erate.com).
These calculators are easy to use: simply key in the details asked, and you get a fairly reliable picture of what you can expect. The details required to be entered into the online calculators include: your credit profile, the interest you are paying on your existing mortgage, the type and location of your property, the number of years you wish to retain ownership over it, the balance of the existing loan remaining to be paid, the amount and type of loan you need, and so on.
Use calculators on three or four websites and compare their results; discard any result that varies widely from the others. Once you thus get an approximate idea from the online calculators, get in touch with three or four lenders and brokers and get their quotes. You can contact lenders or brokers in your city in North Carolina through the same websites named earlier.
Compare the quotes, ask questions on wide variations, and also reference them with your online calculator results. Go for the one that suits you best, or forget refinance if it makes no or negligible difference to you.
ARM loans are the most popular mortgage refinance in North Carolina because they come with the built-in facility of interest rate adjustments every year after a specified number of initial years. Low interest rates are a good reason to go for mortgage refinance, though it is not necessarily always so.
The best way, and the safest way to ensure that you get the best deal for you, is to first obtain an initial idea of your eligibilities from online calculators and follow-up with face-to-face negotiations with lenders or brokers in your city. Finally, remember that refinance need not necessarily be good in all cases.