Recent reports show that some homeowners
are borrowing to the constant enticement of lower home
loan rates. Considering
the continuing low interest rates on home loans, is it time
for you to consider purchasing a home?— Or refinancing
your existing home. Some homeowners are said to be refinancing
their existing loan over and over. If you are in the market
for a new home, then this is one of the best times to purchase
a primary mortgage. But as far as refinancing, in my opinion,
I don't feel that many of the constantly refinancing homeowners
understand all of the facts (and high cost) surrounding home
refinancing. The major items to consider are:
1. Each time you refinance a new 30-year loan, you start
over paying a new 30-year loan. If a homeowner does this
every 5 years for 20 years, then at the end of 20 years you
will have 30 years left to pay on your mortgage instead of
10 years-had you not refinanced your original loan.
2. It will cost you a hefty sum of money each time you refinance
your existing home loan or purchase one for a new home. And
even the so-called no-cost loans will cost you. The purchase
price of a new loan is either 2%-4% of the new loan or in
the case of the no-cost loans; the fees are added into your
loan as a higher interest rate. You will therefore pay for
the cost in your monthly payments.
3. There are several resources to help you make a wise decision
when it comes to choosing a loan for a new home, and understanding
how detrimental constantly refinancing your existing home
can actually be.
The U.S. Department of Housing and
Urban Development offers numerous resources on its Web
site, www.hud.gov, for homebuyers.
It publishes an eight-page booklet, "Looking For the
Best Mortgage," which offers advice on finding the best
deal. General tips include:
1. Contact several mortgage lenders and brokers for information.
2. Obtain all cost information, including interest rates,
points, fees, down payment requirements and private-mortgage
insurance.
3. Negotiate. Mortgage deals vary from day-to-day. Once
you find a deal you like, lock it in.
4. Federal law prohibits discrimination in mortgage lending.
5. Understand your credit. If it's
not good, finding a loan could be difficult. To obtain
a copy of your credit report,
contact www.experian.com.
Lois Center-Shabazz is the founder of MsFinancialSavvy.com
and author of the 3-time award-winning personal
finance book, Let's Get Financial Savvy! ISBN
#0971979502.
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