Lower the interest rate
The quickest way to pay less for your home refinancing loan is to pay less for the cost of borrowing money. Most interest fees are tied to the rates that the lender must pay to their investors. An interest fee that is even one percent lower can make hundreds of dollars difference in the overall cost of the home mortgage refinance. Many times, the amount of interest rate that you will pay as the cost of borrowing money is dependent upon the credit scores which show on your homeowners credit report. Keep your credit score in the high 700s or even 800s and you will pay much less for mortgage loans.
Reduce the loan term
Another way to reduce the cost of home refinancing is to shorten the number of monthly or periodic payments for the duration of the loan. Amortized payments spread over 20 years cost a little more each month, but not as much as the cost of a 30 year mortgage loan. So, pay slightly more each month for fewer years and you will make huge savings on the total amount of interest that you pay over the cost of the loan period.
Pay a little extra each month
Even if you can’t shorten the term of the loan from 30 years to 15 years, you can add five or ten dollars with each payment to apply to the principal. You will save hundreds or even thousands of dollars in interest payments as you reduce the principal balance each month. Be sure that you do not agree to a home refinancing loan that charges a pre payment penalty, as this would reduce the effectiveness of this cost saving measure. It is amazing what a difference just a few extra dollars daily–about the cost of a cup of coffee– will buy over the course of a 30 years mortgage payment amortization.
Pay a little cash up front
Another trick that can save you hundreds or even thousands on a home refinancing loan is to make your first installment payment at loan closing. This acts as an advance payment against the principal and will save much in interest over the course of the loan. Depending on the loan term, just a few dollars can reduce the impact of the interest rate by significant amounts over time.
Negotiate on loan fees
If a borrower is not diligent about negotiating every aspect of the home refinancing loan, he or she can find themselves paying a lot more money for the loan than required. There will be brokers fees, loan origination documents, title searches or other costs added to the loan fees. You will find your portion of the loan proceeds can be significantly reduced by not stopping the creeping fees. It is important that you make sure you understand each component of the refinancing loan you are negotiating and insist on the lowest possible rates on each and every factor. If you apply each dollar saved to the repayment of the loan, you will gain even more reduction in the cost of your loan.
Financial Planner
March 27, 2009 at 10:04 am
Some people don't see opportunities because they're usually dressed in overalls and look a lot like work….With that said, go to the county clerk's office. They've got a huge book of all the public records, specificially the addresses and names of people who have bought homes. Then you have to look up their numbers on reversephonedirectory.com or some other site.
kdube151
March 27, 2009 at 10:09 am
Rates are now at 5% and the one above me is right you want to decide how long you intend to stay in the home.
I don't know what you owe on your house but that will also be a huge factor if it's worth refinancing.
Belinda J
March 28, 2009 at 6:32 pm
There are a few things you need to take into consideration. The good news is that you don't owe a lot on this house. The bad news is that the interest rate is high, and refinancing is difficult because of his bad medical bills.
The first thing to do is to find out when the medical bills will come off of his credit report. In most states, it is in seven years. He could repay them, which is the right thing to do, or he could wait for them to drop off and let the drop off help fix his credit score.
So, then, the question becomes "what does waiting cost us?". Well, at 12% interest on $20,000, you are paying about $200 a month in interest. The rest of your payment is going to the principal balance and taxes. If you can drop that to 8% interest, the per month interest cost drops down about $135. So, it would save you $65 a month to refinance. But, it might cost you $4,000 to pay off the medical bills and $2,000 to refinance. So, that $6,000 in costs would have to be compared against $65 a month in savings. It will take almost 8 years to make that a worthwhile trade.
Stay away from using the TSP as a source of financing. For two reasons. (1) You can borrow for a house, but you can't borrow for retirement, and there is great value in saving for retirement when you are younger. And (2) If your boyfriend leaves his job for any reason (illness, layoff, just quits), that money is due in FULL within 30 days. If he cannot pay it in full within 30 days, then it is considered a withdrawal and will be reported to the IRS. He will have to pay taxes and penalties of close to half of the amount, and he will not be able to finance it.
My recommendation: Find ways to pay a little bit extra against the loan to reduce the balance. Increasing the payment by just $300 a month will get this paid off in about 5 years. Maybe you could get a part time job and use that pay as an extra payment against the house. Or, when the medical bills drop off his credit report, look again at refinancing with a bank. You also might want to check with your city/county to see if there are any low-income loans that you could use to offset some of this loan.
See if some of the land could be sold or leased to someone to generate some income.
Also, there is a website where you can do a self-screening for government assistance programs. See if that has something to help. http://www.benefitscheckup.org.
Good luck. And don't discount being a stay at home mom when people ask for work experience – that is plenty of work. Just find ways you can translate what you do at home into what needs to be done on a job. For example, you are a cook, cleaner, record keeper, caretaker. Or find ways you can volunteer in the community, maybe at the library or PTA, to develop references for jobs outside the home. There are not a lot of legitimate work at home situations.
bigwhitedogs
March 28, 2009 at 8:59 pm
I've worked in finance for over 20 years(part of that time in mortgage) and anytime the company is with the bbb you can be 1000000% reassured that it is a legitamite company. It is actually highly unlikely to have any problems with a mortgage company and about 90% of major problems come from large companies. So I would not worry.
Locksley of Robyn
March 29, 2009 at 3:03 am
It's great you're willing to help him. Your name will have to be on title if you plan to use the property as collateral. You should have a side agreement (in writing) that he will deed you an undivided 50% interest and when the property is sold you will be repaid plus what ever profit you agree on. Completely legal.
realtor.sailor
mbm
March 29, 2009 at 3:38 pm
Think of a mortgage as a monthly loan. If you the current principle on your mortgage is $200,000 and the loan is a 6% APR loan, the interest owed for that month is $200,000 * (.06 apr /12 months) in interest, or $1,000 in interest. If your payment is $1,200 per month, the extra $200 goes to reduce principle. As time goes on, the loan balance is reduced because of the principle payment. Also, since the principle is reduced each month, the calculated interest payment is less so more of the total monthly payment is applied to the principle (loan balance).
It doesn't matter if the length of the loan is 30 years, 15 years, or seven years or if you are making the first payment, the twenty-first payment, or the 183rd payment – the calculation is the same for the interest, which is current loan balance times the apr/12 months. What does vary with loan length is the total payment of interest plus principle; the shorter the overall loan length, the higher the monthly payment (principle plus interest) has to be so the principle portion will reduce the loan balance to zero in the time frame.
So, if you were to refinance your seven-year-old loan at the exact same interest rate, the amount you would pay for month one on the interest portion will be the exact same as it would have been at the seven year point under the old loan — but if you refinance back at 30 years, the amount of principle you pay will be less that month, which is why the payment is lower.
However, what this means is that in month two under the new loan, your principle (current balance) will be slightly higher on the new loan because the lower payment you made meant a lower amount applied to principle, so the interest amount calculated in month two will be slightly higher than it would have been on the old loan. You will not only pay a higher total interest amount over the next twenty-three years because of this growing gap in principal owed (compared to the old loan), but — as you suggested in your question — you will continue to pay interest for seven more years.
A real comparison is to run an amortization schedule between your current loan and any refinance you are considering and look at the total interest that will be paid over the remaining twenty-three years compared to the total interest you will pay over the entire length of the new loan.
Good luck.
mickey
March 29, 2009 at 9:39 pm
I'm not answering these questions for you. If finance or business is going to be your major or future career please go ahead and purchase a BA II Plus from Texas Instuments. Good luck in any classes that are above this level because to be honest this stuff is just intro level first month of the class stuff.
Get the BA II plus it will help you greatly.
-*
March 30, 2009 at 7:46 am
You will see a very little down adjustment only if you have a debt that is tie to prime rate like ARM, HELOC and CC rates. Anything that is not tie to prime rate will have no impact from this rate reduction.
Shana
March 30, 2009 at 6:12 pm
A Let x equal no of months to spend the same amount under each deal.
then 510 x = 420.50 x +2500
89.50 x = 2500
x = 2500 / 89.50 = 27.93.. or 28 months
B No further calculation is necessary. After 28 months he is ahead by 89.50 every month so
YES is the answer from the result of A.