NJ Refi... Pinch Me... I think I'm dreaming

The world is in the tank... from Real Estate and Lending, to our foreign policy, and our future prospects are looking pretty dim. That shouldn't stop you from taking care of you...now...today. Lets start with your home loan.

If you're looking at the option of refinancing your mortgage loan, then there are some things you MUST be aware of. Let's take a look at things systematically and see if we can make some sense of it Stick with us for a bit. I'm sure you'll find this post beneficial for you, especially if you want to refi to get a lower rate than what you currently have.

Before you can consider an NJ Refi, you've got to look at the value of your home and compare it to the size of your loan. If you're in an equity position, you'll have an easier time getting that loan approved and having your original loan paid off. So, how do we determine if you're in a positive equity position? Let's use $100,000 since it's an easy number, mathematically. If your home is worth $99,000 and you want to refi for $100,000 you are actually in a positive equity scenario. The challenge, of course, is that you don't have enough equity for most banks to feel comfortable loaning you money on a 1% spread (of loan v.s. equity). What many banks want to see is a 20% equity position or greater. So using the $100,000 as the loan amount, your value should be $80,000 or less. By getting a refi, with a 20% equity position, you are most likely to not have mortgage insurance. If you avoid mortgage insurance then you are avoiding the cost of it which would unnecessarily increase your payment by the amount of the insurance payment.

By the way... mortgage insurance is a policy that the bank takes out to protect themselves incase you default on the loan. It's not a policy that benefits you in any way. I'm no tax specialist, so what I'm going to say is just opinion... and in my opinion you should avoid having to pay it, if you can. It's certainly something that you should weigh, when considering a refi on your NJ home, and it may be unavoidable, but you need to be armed with this information to make the best decision you can.

If you're not in a 20% equity position you still may have options. There are some banks that will allow an NJ Refi, with a 10% equity position, but as discussed above, you may have mortgage insurance tacked on to your loan. If you're not in, even a 10% equity position and your loan amount fits the guidelines, you may qualify for an FHA loan. With an FHA loan you only need 3.5% of the purchase price, as an equity position. In our scenario above, if you were trying to get a loan for $100,000 then your value would need to be at $96,500 or less. There are some advantages and disadvantages to an FHA loan, which we will not cover in this article. For the most part, it's a good loan, for the time at least. By the way... you can get an FHA loan with a greater equity position. If you already have an FHA loan but want to refi for a better rate, you might consider an FHA Streamline Refi. They'll save you money and time, since they will typically use the appraisal and income information that's already on file.

Rather than getting a full blown appraisal to find out if you have enough equity (and based on your equity, which direction to go) you should call a LOCAL Realtor. Most Realtors are happy to provide a "CMA" which will give you an "approximation" of value. They'll usually do this for free since they're hoping to get your business if/when you decide to sell your home. Now... you may have noticed that I said they'll give you an "approximation" of value. That's because, determining value is not a science at all. If you asked 5 appraisers and 5 realtors to value your home you might likely get 10 different numbers. It's really a "best guess", since upgrades, lot size, view, and location are all subjective to ones personal belief or system of doing things.

One challenge many NJ homeowners are experiencing is that their home is worth less than they owe, which puts you in a "negative equity" situation. There have been some attempts made, by our current administration, to help homeowners in this scenario still be able to refi their loan. The first attemt was to allow a refi at 110% of the homes value (i.e. if your home is worth $100,000 but you need $110,000 you could still qualify) and there have been talks about a 125% refi too. This is really a "short refi" and that's a very tricky subject. You'll find a couple posts on our site, dealing with this and there are some specific lenders you may want to work with to make sure that type of a loan goes through. You can also look on the Making Home Affordable website for updates to this. We will not be able to deal with that type of refi on this article. Watch for an upcoming article where we'll spend more time, specifically on a short refi. installment loans no credit check no teletrack - You can get these loans from building societies, banks, private lenders and the Internet.

Remember to take some time to check how long it will take you to recapture your refi costs before you start your NJ Refi. If your desire is to keep your home for a long period of time (5 years or more) then your refi will typically make sense. Recapture is how long it will take you to pay for the refi, when considering your reduction in payment. Once you've recaptured your refi cost, then you're in the black and actually saving money. A quick example is... I refinance my loan and am going to save $100 per month but it cost me $1,000 for the refinance. It would take me 10 months to recapture the cost of the loan (100 x 10 = 1000). If I plan on owning the home for 12 months or more, it would make sense to continue with the refi, since it will put $200 or more dollars in my pocket after the recapture.

I hope you found some great value in this article. Please visit our site for more value when considering an NJ Refi.