CONSOLIDATING high-cost debts into a single low cost debt is an advantage of mortgage refinance widely availed of in the state of Vermont. But there are many other advantages too, which are applicable to different people with different financial needs. Therefore, there is no one specific advantage of mortgage refinances that fulfills the financial needs of every mortgager.
This diversity of possible benefits makes it difficult for the uninitiated to decide on the refinance option and package best for them – or, if they are better off without refinance. This article traverses the underlying issues of mortgage refinance so that the reader emerges informed enough to take the right decision.
All states of the US are covered by the federal law concerning mortgage and mortgage refinance. Vermont is no exception. Yet, there are differences in the rules and regulations framed by different lenders in different states. These differences usually relate to the intensity of verification, extent of documentation, evaluation of borrowers and their properties, basic interest rates, points, and so on – i.e., rules and regulations over and above the federal parameters.
And, let’s face it, Vermont is a difficult state relative to, say, New York when it comes to mortgage refinance. This makes it all the more crucial for the borrower in Vermont to know the basics of mortgage refinance so that, when you apply for refinance, your chances of getting what you want are higher.
What you should know
Any business service-provider expects its customers to know what he or she wants. In mortgage refinance, the lender or the broker is of course willing to assist you in your decision-making, but it would be that much easier for them and to you if you are knowledgeable about the market’s offerings vis-à-vis your needs and requirements. The following are some of the crucial things that you should know before your sit down with mortgage refinance service-providers in your part of Vermont :
- Your Credit Profile : Nothing probably is more important than your credit profile for lenders to determine your eligibilities. Many of us like to believe that we have a good if not excellent credit profile, but the reality is often not so. Even if you are up-to-date with payments against all your debts, your credit-rating may not be high if any of your creditor – say the credit card company -- has had to call you up to remind you of your dues or if your case was passed to collection agencies. So, get your credit rating from one of the authorized agencies in Vermont. If your rating is low, talk to a professional consultant who advises on how to improve credit ratings (though this cannot be done overnight) or a mortgage refinance broker who knows lenders that are ‘soft’ on low credit ratings.
Remember, though, that the lower your credit rating, the higher interest you will have to pay to the lender and higher commission to the broker who gets you the loan. Despite the broker’s commission, it makes sense to use their services in Vermont instead of going directly to a lender. This is because the lender has only its own packages to sell and, unlike the broker, will not search the market for you.
- The APR Of Your Loan : Don’t for a moment be impressed with ‘lowest rates’ advertised usually by brokers. Interest rates are not the sole determinant of the actual cost of your loan because there are other costs too which you have to meet with upfront before you get the refinance.
- Examples Of These Costs Are : the broker’s commission, property valuation fees, penalty for premature ending of your existing mortgage loan account, ‘points’ that you may have to pay in one lump sum to reduce your monthly repayments (1 point = 1% of the loan amount), etc. All these costs added to the interest work out to the annual percentage rate (APR) of your loan. So, whenever you consider a mortgage refinance loan in Vermont, stay focused on the APR and don’t be misguided by ‘lowest interest rates’.
Your need for refinance: You should know why you need a mortgage refinance loan so that you can judge whether the terms of the loan you finally get suits your need. It may so happen that you don’t find refinance terms suitable to your needs; in such a situation, don’t go for refinance and look at the second mortgage option instead.
The usual needs fulfilled by mortgage refinance are: a) debt consolidation, b) getting a lump sum of money from a cash-out plan (possible only if the equity of your house has increased since you took your original mortgage loan), c) changing the terms of repayment to suit your new needs (e.g., reducing or increasing the duration of your mortgage commitment), d) changing the type of your mortgage from, say, fixed-rate to adjustable-rate, and so on. Some of these needs – such as reducing or increasing the duration of your mortgage commitment – may be fulfilled even if interest rates are higher than before (in such a scene, your monthly repayments may be higher or lower).
- Number Crunching : You need not be an accountant to calculate your eligibilities in the mortgage refinance market in Vermont. Indeed, you don’t even have to calculate. All you need to do is to log into the websites of mortgage lenders and use their online refinance calculators. These calculators do all the work for you and their results are reasonably reliable if you feed in correct data, particularly about your credit profile, the present loan that you are paying off, and the amount of refinance loan you need. The websites whose calculators you use need not necessarily be based in Vermont.
You can use websites of lenders / brokers based anywhere in the US because most of them ask you select the state and city you are in. The software logic that runs the online calculators takes into account differences between states, and shows results accordingly. Three websites this writer can recommend are: www.mortgageloan.com, www.erate.com, and www.bankrate.com. Online calculators also enable you to do your tax planning after factoring in your payments against your mortgage.
Once the online calculators have given you their results, you are no longer innocent of what the market holds for you. Now is the stage for getting in touch with lenders and brokers – preferably brokers – nearest to you. You can locate them through the same websites that you visited for your online calculations.
Talk to three or four brokers, compare their offers, tally them against you online calculator results (there shouldn’t be very wide differences), and make your choice. Yes, it’s easier to get mortgage refinance in, say, New York than Vermont, but you have a good chance in Vermont if you remember and act on what this article has conveyed to you.