When requesting refinance quotes, you may pay points for a lower rate - In refinancing, a mortgage company usually offers a range of interest rates at different amounts of points. A point equals one percent of the loan amount. For example, three points on a $100,000 mortgage loan would add $3,000 to the refinancing quote charges. Mortgage Loan Outlet offers Free Refinance Quotes for 1st and 2nd Mortgages and home equity loan refinancing online.
Analyzing various interest rates and associated points may save you money.
As a rule of thumb, each point adds about one eighth to one quarter of one percent
to the interest rate the mortgage company is offering.
Generally, the lower the interest rate on the loan, the more points the lending
institution will charge. Some companies offer refinancing with no points, but
generally charge higher interest rates.
To decide what combination of rate and points is best for you, balance the
amount you can pay up front with the amount you can pay monthly. The less time
that you keep the loan, the more expensive points become. If you plan to stay
in your house for a long time, then it may be worthwhile to pay additional points
to obtain a lower interest rate.
Some companies may offer to finance the points so that you do not have to pay
them up front. This means that the points will be added to your loan balance,
and you will pay a finance charge on them. Although this may enable you to get
the financing, it also will increase the amount of your monthly payments.
Fixed interest rate mortgage: Principal and interest payments are amortized over the life of the loan, be it 10, 15, or 30 years.
Adjustable-rate mortgages: Lenders offer multiple ARM products and some loans, called hybrids, provide fixed-rate terms (typically three, five, seven, or 10 years) that become variable when that term ends. For example, with a 5/1 ARM, the fixed period lasts for five years and adjusts annually thereafter.
Interest-only loans: Payments consist of only interest for the first five to 10 years of the loan. After the interest-only period, borrowers have 20 to 25 years (depending on the loan terms) to pay off the principal plus interest.
Zero down mortgage loans: Many lenders offer financing of the entire purchase price of the property. Typically closing costs are paid outside of the loan, but there are a few mortgage products that also allow financing above 100%.
FHA home loans: FHA lenders offer low 3 percent downpayment that doesn't have income restrictions or first-time homebuyer requirements.
Reverse mortgages: Elderly or retired property owners can tap their home equity for expenses and increase their monthly income; rather than paying the lender a monthly payment, the homeowner receives money from the lender; mortgage is repaid from the home’s equity when occupants sell the property, move out permanently, or die.