Refinancing a home loan in Denver
Refinancing is a popular choice for individuals seeking to replace existing mortgage arrangements with other debt negotiated on different terms. Borrowers may be seeking better terms on their financing or they may be looking to get rid of a 2nd mortgage and consolidate their debt arrangements. There are a wide variety of lenders and re-fi experts operating in Denver and the state of Colorado so it is highly likely that anyone looking at refinancing will find a solution whatever their financial circumstances.
If the desire to alter debt terms is due to financial difficulties then this does limit the options available to the borrower and is often termed "debt restructuring". Any program of debt restructuring achieves the same end result of a typical re-fi deal, the simplification of debt repayments and the realization of improved terms that make repayments more manageable.
Cash Out Re-Fi
It may be the case that a homeowner is looking for cash out re-fi which means that they are looking to borrow money against the value of their home, perhaps to spend on another project, invest in a business or possibly to repay other creditors who have terms that are less favorable. If a homeowner meets the minimum requirements of the mortgage company then there is no reason why refinancing is not an attractive option. Lenders move rates and offers all the time and mortgage brokers have knowledge of who is trying to attract new customers in the market by offering enticing rates. Even if the low rate is offered for a fixed period, it may be possible, especially if fees are low, to fix at a temporary low rate and to seek a further refinancing deal further down the line.
Changing circumstances usually lead to an individual to call a mortgage broker and specifically state ," I am looking to refinance my home loan." Interest rates have been broadly stable as the Federal Reserve has sought to bring economic stability to the markets by freezing interest rates at a record low. A forecast of higher future interest rates usually leads to a glut of refinancing deals as borrowers look to insulate their debts against future interest rate rises. Another common reason for seeking a refinancing deal is an improvement in economic circumstances. Those with better credit profiles usually qualify for more competitive home loans so if an individual knows that their credit profile is likely to have been improved because a debt has been settled, They may try to find out whether this has a positive impact on their credit profile. Whilst it may not look very attractive if refinancing results in a marginally smaller loan repayment each month, the cumulative effect of competitive interest rate benefits can lead to savings worth thousands of dollars each year and the term of the debt can be dramatically reduced.
Short Term Mortgages
Shorter term mortgages are usually associated with lower interest rates and the swifter repayment term means that the absolute cost of borrowing will be far lower than previously planned prior to refinancing. It may be possible to shorten the term of a mortgage by simply overpaying on the scheduled repayment each month. This will bring down the outstanding capital on any loan and therefore reduce the interest cost.
It is worth noting that refinancing is not always the recommended option for borrowers. Anyone who has had a loan outstanding for a long time is likely to have a limited amount of capital tied up in their home loan. This is because the interest allocated to a home loan is usually amortized and using the most common method of amortization, that is generally accepted by accountants, the early repayments are deemed to have contained a proportionately higher amount of interest within them. Consequently a mortgage with a long history of repayments will be reducing considerably in size with each payment and if a borrower were to start again with a refinanced mortgage deal the payments made would largely be allocated to interest and the capital value of the loan would remain. This could be a burden on the borrower that is unnecessary at their stage in life and highlights why re-fi deals are not always the option that is in the best interests of the borrower.
Home Equity Loans
There are alternatives to refinancing such as consideration of a home equity loan rather than using a refianancing deal that releases cash against the equity value of the property that is not covered by a mortgage. If any mortgage has an early repayment penalty this may reduce the appeal of a refinancing package. Fees for refinancing may range from three per cent of the outstanding principal value to as high as six per cent. For this reason a refinancing deal is not something that is agreed without due consideration. Even with additional fees it is likely that a refinancing deal would prove more attractive for borrowers. The expertise of a mortgage specialist can be enlisted to not only find the best deals but to offer advice and support in what can be a complex market.