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Resorting to Home Refinance Loans

Mar 3, 2008
When the Federal Reserve lowered the prime interest rates to 4.5%, many homeowners jumped at the chance to apply for a home refinance loan. Some homeowners might have refinanced the home two years before and believed that the lower interest rate would reduce their monthly house payment considerably. When all of the paper work was completed and the new payment was stated, these homeowners realized that refinancing cost them more when all things were considered.

The items considered for a refinance loan are the identical items that would be considered on the first home loan that a applicant applies for when they purchased the home initially. All requirements for providing proof of income must still be met, and some homeowners find that changes in income, no matter how minute, can have a monstrous effect on the new interest rate that they get.

The handling fees for the refinance will be duplicated again, because each home mortgage loan requires filing fees, lender fees, title fees and will have closing costs applied. Some homeowners will choose not to refinance a home mortgage loan after they get all of the costs upfront and realize that the lower interest rate is not a bargain that they can take advantage of at that particular time.

The refinancing of a home mortgage loan is great if the homeowner purchased a home at a higher rate. If the homeowner has a second mortgage loan on the property for repairing the roof or installing a central air cooling system and heater, then the outstanding balances on that loan might hinder their ability to get another loan on the property, even if that loan is to refinance the first mortgage. The homeowner might be better off keeping the home and building equity if possible.

A homeowner will often regret not being able to take advantage of low interest rates. Some will get so discouraged about all factors of home ownership and place the house on the market to rid themselves of the property taxes that go with home ownership. They might try one last effort to refinance the home, and find that the lender will not consider a refinance at that time because the house has been placed for sale on the real estate market.

Homeowner's have other loan options that might relieve the financial stress they are under. They might inquire about a home equity loan if they have owned the home for a considerable amount of time. This extra cash could be used for a variety of things and can even be used for making repairs to the house. Some homeowners will use the home equity loan balance to pay off the second mortgage on the home, so that they can reapply for a home refinancing loan in the very near future.

Many lenders realize the stress that some homeowner's are under because they hold a home mortgage loan that features an adjustable rate mortgage. The monthly payments for the home have probably doubled and the homeowner might be at risk of losing the home through foreclosure because they cannot keep up with such high payments. Lenders are willing to reconsider refinancing loans of this type in an effort to boost the economy. The payments that are behind will usually be added to the loan and can be paid back over a specific payment period that makes home ownership more affordable.
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