MORTGAGE refinance is an option available to property mortgagers who want to revise the terms of the mortgage loan they are shouldering. In essence, it involves the full repayment (including the remaining principal, due interest as on the date of repayment and premature loan closing penalty), with a new mortgage loan using the same property as the lender's security.
In South Carolina, there are many lenders and brokers that are keen to refinance your mortgage.
Brokers in South Carolina
But you should arm yourself with certain basic knowledge about mortgage refinance before you approach them for advice and action.
Let's therefore take a quick look at some of the issues concerning mortgage refinance, so that you don't depend entirely on the lender or broker for knowledge.
- First, you should know that a mortgage refinance loan is technically the same as a mortgage loan. The terms and legal framework governing mortgage refinance are the same as those for mortgage loans. The word 'refinance' is used only to distinguish the fact that the property being offered for mortgage is already mortgaged under a prior loan.
- Second, you should know why in the first place do you want to exercise the option of mortgage refinance. If you are comfortable with the monthly repayments you are making on your original mortgage loan, then the only justification for refinance would be in taking advantage of lower interest rates. But there's a catch to it too, which shall cover further down this article.
- Third, if you are not comfortable with the payments you are making against your original mortgage, then it can make sense to opt for refinance even if the rates interest are higher. The logic is that you might want to increase the period of repayments by lowering monthly payments. So, even if the interest rates are higher by a few points, you can still lower your monthly payments by prolonging the life of your loan. Or, if you can afford to pay more than you are paying, you might again want to opt for refinance so that you can quickly close the loan account.
- Fourth, you may be facing an unforeseen financial problem and you want a lump sum of cash. There is a possibility that mortgage refinance will get you the cash.
- Fifth, your current financial situation makes it necessary for you to spend less, but you are confident your situation will improve a few years down the line. In such a case, you might close your existing mortgage loan account if it is a fixed rate loan, and take an adjustable rate mortgage (ARM) loan. In ARM loans, you pay a low interest rate in a specified number of initial years, and then have the rate adjusted thereafter.
The above are just five scenarios which might justify mortgage refinance. There can be many other scenarios too, and it is certainly not possible to describe each of them in an article of this size.
Suffice it to say, the need for mortgage refinance varies from case to case, and you should be certain that you need it.
Now, the catches. You must be aware that interest rates are not the only indicator of the cost of mortgage refinance. Since refinance involves closing of an existing loan account, you have to take into account the penalty lenders usually charge for premature closure of a loan account.
You must also take into the upfront payments, fees and other charges that you have pay for new loan. Taking all this into account, the benefit of a low interest rate alone might just be wiped out. Therefore, what you should look for is the 'annual percentage rate (APR)' instead of just the interest rate.
This is not to discourage you from mortgage refinance. This is just a cautionary notice. The best way to decide whether you need mortgage refinance is to visit the websites of two or three mortgage loan lenders or brokers, and use their online calculators. Some of the URLs where you can access free online mortgage calculators are: www.erate.com, www.mortgagefinance.com, and www.bankrate.com.
These calculators will provide you with approximations of the refinance options that make sense to you after factoring in information specific to you (e.g., your credit profile), the property (e.g., type, exact location or ZIP code), your existing mortgage loan (e.g., its remaining life), and the refinance loan you are seeking (e.g., the type and amount of refinance).
If the calculators show encouraging results, then it would be the time to contact lenders or brokers. In many cases, you can request personal contact without obligation through the website itself.
You can also access lists of lenders and brokers in your city in South Carolina through the Internet, using appropriate search words in www.google.com.
There is no dearth of mortgage lenders and brokers in South Carolina. It is also very easy to access their services. But, given the competitiveness of the market in South Carolina, especially in the bigger cities, some lenders / brokers may not tell you all the facts unless you ask specific questions.
To be able to ask the appropriate questions, you should be aware of basics of mortgage refinance and some details of what's in store for you in the market, before you sit across the table with lenders or brokers.