IF you are a homeowner in the state of Oregon and are making monthly payments against your purchase mortgage loan, you might be looking at the mortgage refinance option. Not a bad idea if you want to manage your mortgage repayments on more convenient terms or if you are looking at having an amount of cash deposited in your account for use the way you want to use it.
At a time like now (late March 2008) when interest rates are dipping as a result of recessionary sentiments prevailing in the United States, a mortgage refinance can be an attractive proposition subject, of course, to certain criteria specific to you as a person and to your property. But even if rates are not low -- in fact, even if the rates are high -- mortgage refinance can make sense depending on what you want the refinance to do for you.
What refinance can do
There is a host of benefits that mortgage refinance brings, but all such benefits don't apply to everyone. Different people have different needs to fulfill which they choose different refinance options. Let us look at the common benefits that mortgage refinance is supposed to bring, so that you can judge where one of these benefits would apply to you:]
- Debt consolidation: Homeowners burdened with debts can use mortgage refinance as a way to consolidate their debts at a lower interest rate than the net rate they are paying for their different debts. Consolidation of debts means combining all, or some, of their debt accounts into one debt account. This single debt account can be the mortgage refinance account -- through which the homeowner can save thousands of dollars through the life of the loan.
- Meeting with immediate financial needs: Immediate financial needs can be for one of many purposes -- such as additions or renovations to your house, buying a new car, paying for education, meeting with a medical bill not covered by insurance, preparing for a vacation... the list can go on. Cash-out mortgage refinance can bring a lump sum of cash to the homeowner with which he or she can meet with the immediate need. Of course, the cash-out is more substantial if your home equity (i.e., the market value of your home) has increased since you purchased it -- which is quite likely in Oregon, particularly in the bigger cities of the state.
- Coping with a decline in financial status: No matter what motivational writers write, it does sometimes happen in life that things just don't work out despite best efforts, intentions, and planning. Worse, people sometimes find their earnings decline for some reason or the other. Mortgage refinance can help such homeowners in Oregon cope with this kind of situations. Either a cash-out refinance or a refinance that reduces monthly payments -- are a solution.
- Exploiting an improvement in financial status: Motivational writers are not always wrong. Lots of homeowners improve their financial status through time through hard work, better planning, promotions at the workplace -- or simply luck. In such a situation, you might want to increase your monthly payments so that you clear off the mortgage debt earlier than you planned. Any cash-out that comes from the refinance can be ploughed back as 'points' (1 point = 1% of the refinance loan) to reduce the effective interest rate on your refinance loan, thus further lightening the mortgage.
It follows from the above that mortgage refinance can assist people in different need-situations in different ways. The benefits are not always a function of interest rates in the market. Even if rates are on the higher side, you can take advantage of mortgage refinance by extending the duration of your loan.
How to go about it
In most cases, homeowners would know how they want mortgage refinance to benefit them. Then they proceed to the nitty gritty of obtaining it. In case you are not in any pressing need to for a refinance, it would make sense to explore the possibility, especially if interest rates are lower than that at which you took your purchase mortgage loan. Remember however that the 'lowest rates' advertised by lenders / brokers apply only to homeowners with above-average credit rating. Others get it at rates higher than the lowest advertised. Also, remember that the commission you have to pay your broker will higher if your credit rating is lower. The usual range for broker commission in Oregon is 1% to 10% of the loan amount.
Given the technical complexities involved in mortgage refinance in Oregon as well as in the other states of the US, it is highly inadvisable for a majority of homeowners to go about it without professional assistance. This writer recommends that you go about the process through a broker because the broking professionals know about different offers from different lenders as opposed to lenders, who will try to sell you only what they have to offer.
But before you approach brokers, this writer advises that you independently obtain some basic information on what you are entitled to from the market. This will make your negotiations with brokers easier and also convey to the brokers that you are not totally innocent of the market. You can obtain this information from the comfort of home or office. Just log on to a few websites of mortgage refinance lenders or brokers and use the online calculators most such sites have. You don't necessarily have to visit websites of only Oregon-based firms because the overall terms and conditions are applicable to all states -- with only four exceptions (Guam, US Virgin Islands, Alaska, and Hawaii).
To use the online calculators, all you have to do is enter the details they ask for. The main details include your personal credit profile, type of home, the amount of loan you want, the outstanding balance on your existing mortgage account, the number of years you want to keep your ownership of the property, the points you are willing to pay, the exact location of your property in Oregon, and the type of loan you want (i.e., fixed-rate, adjustable rate, interest-only, jumbo, and so on).
Within seconds of your entering the required data into the online calculator, you will -- without obligation -- be given information on terms of refinance you are may be entitled to. These results will not be 100% accurate, but will be fairly indicative. Use these findings as the base of your negotiations with brokers in your city in Oregon. The websites that provide online mortgage and mortgage refinance calculators also provide directories of brokers/lenders in your city. Those that don't provide directories have a provision for you to request a broker or lender to contact you. There are many such websites on the Internet, of which the ones this writer has evaluated and found good, are: www.mortgageloan.com, www.erate.com, www.bankrate.com, and www.interest.com.