CASHOUT-REFINANCE

More mortgage borrowers continue to refinance their mortgages at a higher frequency than ever before; even with the rise in mortgage rates this year. The adjustable rate mortgages are nearing the first interest-rate adjustment, which is an encouragement to most to either refinance to a lower ARM or to a fixed rate mortgage. Other borrowers who may have considered home equity loans for home improvements or other needs are turning to cash out refinance options now when the prime rate is above 8 percent.

Besides changing from adjustable rate mortgages to fixed rate mortgages borrowers are cashing out their equity. The Freddie Mac loans are ranging from at least 90% or better of the refinance loans, for amounts at least 5% above the original mortgage. A recent report from this mortgager shows that homes refinanced during the third quarter of 2006 had experienced a median price appreciation of 33% since the original loan was made; and the median age of the loan was 3.4 years.

The borrowers are tapping into the equity to pay off high-interest credit cards, funding home improvement projects, or financing college. The interest paid is tax deductible.

If you are planning to move fairly soon it would not be wise to use a cash out refinance, because it involves closing costs, legal fees, and other expenses which may add up to thousands of dollars, which you will not be able to reclaim if you move within the next few years.

Refinancing bad Credit

For borrowers with less than perfect credit, a refinance loan is the smartest way to get needed cash. Bad credit means a credit score which would be below 620. This figure is based on borrowing habits, payment history and other financial factors. Lenders use it when deciding whether to make a loan and what interest rate to charge. The lower the score, the higher the risk but since the refinance loan is secured by real property, the risk is minimized and the interest rate should be better.

If we have problems with credit and are having trouble getting a much needed loan we may want to try and pay off some of the debt first and then try again. We could try different lenders the market is very competitive now and you may end up paying 1.5% more than those with good credit, but if you need the money and it is within your budget you may want to try. As always do plenty of research, ask the lenders questions, search for the best deal and use your weapons, credit repair secrets revealed and bankruptcy mortgage deals, use the internet as well. The ultimate goal is to get the best deal for you.

Happy Surfing,