THE MORTGAGE INDUSTRY TODAY IS BOOMING! With real estate values climbing and interest rates at an all time low, homeowners are able to obtain great savings through refinancing and also finding benefits in obtaining cash-out from their home’s equity.Today’s interest rates for prime borrowers on a 15 year loan starts at 4.25% and 30 year loans are at 4.75%. Sub-prime rates start at 5.75%.
Many homeowners are refinancing their current mortgage loans to lower their interest rate and lower their monthly principal and interest payment. The way mortgage loans are designed, you pay both principal and interest every month. The key to paying off a loan is to keep the monthly minimum principal and interest payment low. Anything extra goes all directly into principal. By adding to the minimum payment every month you will cut the loan by a few years in the backend.
There are several situations where refinancing becomes a benefit. The rule to refinancing is that when you are able to lower your interest rate by more than a percentage point, you will exceed the cost to savings ratio. But with today’s low rates, many homeowners are cutting their rates by more than 4 percentage points.
A lot of over 55 year olds in the UK and worldwide have taken out interest only mortgages for a long time and now many of them can’t afford to pay them off before the end of their term. Because of this, an industry that was in the past, immoral, how now been “cleaned up” and refined/regulated. It is of course the equity release or reverse mortgage industry as it is known.
Because of this, the banks are now lending to over 55 year old home owners with a minimum property value of £70,000 in the UK in the form of a lifetime mortgage. This basically means that the bank lends on a % of their current equity they have within their property at various interest rates depending on the homeowner’s circumstances, which they don’t have to service and which only gets repaid when the last homeowner has either passed away or gone into full time care.
If this sounds like something that you may be interested in, here is a list of useful resources:
Some of the main reasons to refinance are:
- Lower interest rate
- Consolidate 2nd mortgage loan
- Lower loan term
- Lower monthly payments
- Payoff other personal loans and debt
- Take cash out from equity
The average credit card will have an interest rate of 18% to 25%. By consolidating your credit cards and personal loans, you can take advantage of the low mortgage interest rate and eliminate those high rate credit cards. Also by lowering your debt you are able tostart saving for your future. This is how you make your home’s equity work for you.