12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!Read More »
The How-to-Refinance Toolkit: What Rising Rates Mean for Refinancing
By Richard BarringtonNFNS Columnist
One thing mortgage
borrowers understand about how to refinance is that falling interest rates
create opportunities to replace old loans with new ones, and at lower interest
rates. Does this mean that when interest rates are rising, it's game over for
refinancing? Not necessarily.
Your how-to-refinance toolkit should include tactics for how
to benefit from refinancing even in an environment where the interest is rising.
Check the Vintage on
Your Mortgage
While interest rates have risen overall since bottoming out
in 2003, they are still considerably lower than they were through most of the
1970s, ‘80s, and ‘90s. If you have a fixed-rate mortgage that was initiated
seven or more years ago, chances are you could still save by refinancing.
Shorter Should Be
Cheaper
There is a built-in factor that favors refinancing as the
remaining term of your mortgage gets shorter. In general, 15-year mortgages
have lower interest rates than 30-year mortgages. This differential has
averaged nearly half a percent since the early 1990s. By the time you get down
to the last 15 years of a 30-year mortgage, you might be able to do better with
a new 15-year loan than with the remaining 15 years at your original 30-year
interest rate.
The ups and downs of market interest rates will have a lot to
say about what is feasible, but all things being equal, shorter loans generally
carry lower interest rates.
Debt Management
Refinancing can also be an important debt-management tool. By
spreading your remaining balance over a longer period of time, it can lower
your monthly payments. Naturally, extending the term of a loan means you will
pay more in the long run, but if this makes the difference between making your
monthly payment and not, it could be the best option.
About the Author
Richard Barrington is
a freelance writer and novelist who worked as investment industry executive for
over twenty years.
About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.