Thursday 21 June 2007

Refinancing

Refinancing can be a wise financial move for several borrowers but it may not be a good strategy for many. In order to benefit from this process, you need to find out how long you plan to occupy your property and whether you can balance the costs of refinancing the mortgage against your savings.

Related Readings

• How to refinance your current mortgage
• Which is the right time for Refinance?
• Mistakes in Refinance committed by mortgage seekers

Related Forum Discussions

• Should I need a title insurace at the time of refinance?
• Is it possible to refinance after bankruptcy?
• Should I refinance my home to consolidate the debts?
• Can i refinance my home which is filed for Federal tax lien?
• Is the cash from Refinance - Taxable?

A large number of borrowers in the California mortgage industry seem to refinance their mortgages using a Pay Option adjustable rate mortgage (ARM). With this kind of an ARM you can get full control over your monthly mortgage payments.

The Pay Option ARM provides you with the choice to make low monthly-deferred interest payments or an interest-only option along with the 15 year amortized payment and 30 year amortized payment options. It benefits all kinds of borrowers, especially self-employed or commissioned borrowers and those who are in such a financial position that does not allow them to go after huge payments. The program is specially meant for those who have fluctuating income and can support high payments on a monthly basis.

The California refinance Pay Option ARM is such that the monthly payments cannot increase more than 7.5% above the previous year for the initial 5 years of the loan period. There is also the option to convert into a fixed rate mortgage after the first 3 years.

With this kind of a refinance loan, you get the chance to make fully amortized payments when you are financially strong and then shift to the low deferred interest payment scheme if required. You get the flexibility to make payments depending upon your monthly cash flow. And, in case you are a first time buyer or looking for a new home, then this can be the best option to fulfill your dreams with the lowest payment possible.

You can refinance your existing mortgage loan with some discount points to get a lower interest rate. A portion of the loan paid should be deductible on that financial year and the balance must be deducted or amortized throughout the loan period.

For example, Kathleen has a mortgage loan balance of $60,000. She decides to refinance the original loan borrowing $80, 000 so that she has an additional $20,000 to conduct repair work on her principal residence. She paid $3,000 in points.

Since, she actually paid the points so she will be allowed to deduct 25% of the total points (i.e, 25% of $3,000 = $ 750) in the year and the remaining $2,250 in points would be deducted (amortized) over the life of the loan.

Is there a program for a 52 year old permanently disabled single parent as of Dec 1999? I am prevented from making additional money to continue making my monthly payment to Colorado Housing and Finance Authority as a hardship loan due to multiple operations. I have lived here 24 years. I have considered refinance wih CHFA but concerned they might say no and request sign off of my loan because my financial income has recently changed due to the operations and inability to earn more money as the loan was originally set up with. Reverse mortgage or any similar program for "non senior" but permanently disabled would help.

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