California Platinum Loan Advice: How Can We Quickly Determine If It Is Financially Prudent for Us to Refinance Our 30-Year Mortgage?

Refinancing a mortgage is a lot of work. But if you’re thinking about it, there are a few situations where your financial results will be well worth the effort. If you’re wondering if it makes financial sense for you to refinance your 30-year fixed rate mortgage, we’ve put together some factors to consider that will influence your decision.

Can you lower your mortgage interest rate?

Even if you lower your mortgage interest rate by less than 1%, you could benefit financially by refinancing your 30-year mortgage. If you’ve got a substantial mortgage, a rate reduction of .25% could save you money. You could be surprised to learn that your closing costs will be modest. The money you could save over the life of your mortgage will add up to more than just pocket change. If you have less than 20% equity in your home, you’ll also need to include mortgage insurance in your calculations.

You may also be able to locate refinancing options with low to minimal closing costs, including a VA Streamline or IRRRL refinance loan for Veterans and an FHA Streamline refinance loan.

Should you refinance an adjustable rate mortgage (ARM) to a low fixed-rate mortgage?

As this article is written, home loan interest rates are low, and few people are opting for adjustable rate mortgages (ARMS). But if you have an older ARM, it could make financial sense for you to refinance it to a low fixed-rate 30-year mortgage. There’s no guarantee that mortgage interest rates will remain low. Locking in your interest rate at a low APR could make excellent financial sense.

Can we refinance our mortgage to reduce our debt burden?

If you have significant equity built up in your home, you may be able to use a cash-out refinance to use the funds to pay down high interest-rate debt. If you’re paying off high-balance, high-interest rate credit cards, you could save thousands of dollars by using a cash-out refinance. This option makes sense only if you have enough equity in your home and can continue to keep your monthly mortgage payments affordable.

Finally, you may be able to refinance your mortgage by shortening the term of your loan. If you plan to stay in your home and can afford the monthly payments on a 15-year mortgage instead of a 30-year mortgage, you will save thousands of dollars by cutting the loan term in half. Contact us here at California Platinum Loans to find out if a refinance makes financial sense for your particular situation.

Sources

https://www.investopedia.com/mortgage/refinance/when-and-when-not-to-refinance-mortgage/

California Platinum Loans

  https://californiaplatinumloans.com

Ever Wondered If Your Old Debts Will Remain On Your Credit Forever To Wreck Your Home Buying Plans In The Future?

Is buying a home on your “to-do” list for this year? Or, have you been postponing your home-buying plans because you’re worried you may have old debts hanging around on your credit report? And what about your current debts? How much can you owe and still qualify for the 30-year fixed rate or 15-year fixed rate mortgage you want?

First, here’s what you need to know about how long old debts can stay on your credit report.

In general, an old, unpaid debt will stay on your credit report for seven years from the date it was reported delinquent. In addition to making sure your credit report is accurate and you’ve addressed any potential unpaid debt records that aren’t yours, you also need to make sure your debt-to-income ratio is as good as possible.

What is my debt-to-income ratio, and how is it calculated?

Lenders calculate two debt-to-income ratios when determining how much you can borrow for a home loan. The first type of debt-to-income ratio or DTI adds your mortgage payment, homeowners’ association fees, and mortgage insurance together, then divides them by your monthly income.

For example, if your house payment was $1,000 a month and you paid $200 a month in mortgage insurance, and your monthly gross income was $4,400 a month, your front-end DTI would be 27%.

The second type of DTI is the “back-end” DTI. This ratio adds your housing costs to your monthly revolving debt payments, which can include car loans, student loans, credit card payments, and alimony or child support. So, for example, if you had the above $1,200 housing costs, plus an additional $800 in debt payments between your car and student loans, your “back-end” DTI would be $2,000 divided by your income of $4,400 or 45%.

What are the “ideal” and maximum DTIs to be approved for a loan?

Have you heard of the “28/36” rule? Ideally, your front-end DTI for housing costs shouldn’t be more than 28%. Your back-end DTI shouldn’t exceed 36%. While there are some exceptions, the second DTI example we provided of 45% is higher than the maximum DTI for the majority of lenders, although you may be able to find some specialized lenders up to 50% DTI.

In general, the lower your DTI ratios for both front-end and back-end, the better your opportunities will be for a home mortgage. And, you can get on top of your credit and ensure you have no old derogatory reports that could be holding you back.

Sources

https://www.quickenloans.com/blog/debt-considered-getting-mortgage/

https://www.creditkarma.com/advice/i/long-collections-credit-report/

California Platinum Loans

  https://californiaplatinumloans.com

Have You Ever Thought About How The Annual Percentage Rate And The Interest Rate Differ? Let us Quickly Learn What They Are First

If you’ve been checking interest rates online, you may see loan programs offering 3.7% interest for 30-year fixed-rate mortgages or 3.55% for a 15-year mortgage. But looking again, the same loan also says 3.82% APR. What does that mean? What is APR, anyway?

APR means “Annual Percentage Rate”

Sometimes the interest rate quoted by lenders will be the same as the APR (Annual Percentage Rate). But APR can also be quoted at a higher percentage than the loan’s basic interest rate. The basic interest rate a lender indicates includes only interest charged on the actual mortgage amount. APR reflects the interest charged when lender fees are included.

Why is it important to know the difference between interest rate and APR?

Let’s say Lender A. is offering a $380,000 30-year fixed-rate mortgage for 3.8% interest. But the APR is 4.1%.

Another lender is offering a $380,000 30-year fixed-rate mortgage for 3.9% interest. But this lender has fewer additional costs and fees and their APR is 4.0%. Which loan would be the better deal?

The APR isn’t the only criterion for selecting one mortgage lender over another, but it can be an important one because it is tied directly to your monthly mortgage payment. The lower the APR, the lower your monthly payment will be.

You can calculate APR for a loan on your own by using a simple formula: the total cost of fees and interest divided by the principal (amount of the loan), divided by the number of days in a year (365). Then, multiply that number by 100 and you will have the APR.

Most lenders automatically do this calculation for you, but you can find advertisements with a simple interest rate being featured in bold numbers, while the APR is in smaller, less visible numbers. No matter what lender you’re considering, you should always check both the simple interest rate and the Annual Percentage Rate (APR). Thanks to federal law, the Truth in Lending Act, lenders must provide you with a statement disclosing all the charges related to your loan, and how much it will cost to repay the loan in full before the end of its term.

Knowing the APR for the mortgage you’re considering is important, but just a reminder. The APR for a 15-year fixed-rate mortgage isn’t comparable to one for a 30-year home loan or an adjustable-rate mortgage (ARM). Working with a home loan professional, you can compare APRs and other loan terms to choose the best mortgage for your needs.

Sources

https://www.quickenloans.com/blog/annual-percentage-rate-what-is-apr

California Platinum Loans

  https://californiaplatinumloans.com