Refinancing small mortgages can be difficult, but you may be able to get a lower interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds. rate without refinancing through HELOC alternatives.
Q: I have a house. The original mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. I took out was for $110,000 at 7.5 percent, and I still owe $37,000.
My problem is that no one will refinance the $37,000. They all want to do a much bigger loanA Loan is an amount of money that is lent to a borrower, who agrees to repay it plus interest. for over $100,000. I do not want to do that. Can I take out a home equityYour share of ownership in a company. Stockholders are often referred to as equity investors, because they invest in the equity of a company. loan to pay off the $37,000 at a lower interest rate? Will I save money if I do that?
I’ve been in the house for 23 years. I already refinanced the loan once and still have 10 years to go.
A: If you only have 10 years to go on your loan, you likely won’t save much by refinancing at this pointA Point is one percent of a loan amount..
You’re probably better off simply paying down your loan faster. You’re almost done paying the interest on the loan. If you refinance (that is, if you could get anyone to refinance for less than $50,000 to $75,000), you’d start the clock ticking all over again on the interest rate.
You might be able to do a home equity line of credit (HELOC) or a home equity loan. A HELOC is flexible, and you borrow what you need, when you need it. There aren’t that many banks doing true HELOCs anymore, especially for more than $30,000. Most are doing simple home equity loans, or the standard second mortgages.
The problem is that second loans might have a 15 or 30-year amortizationAmortization is a payment plan which enables the borrower to repay his debt gradually through monthly payments of principalPrincipal is the amount of money you borrow if you're getting a home loan. If you're buying a bond, the principal is the amount you're lending. Typically, you'll buy bonds with a face value of ,000. If you buy a ,000 bond, your principal is ,000. and interest. Amortization tables allow you to see exactly how much you would pay each month in interest and how much you repay in principal, depending on the amount of money borrowed at a specific interest rate. schedule. You don’t want that. What you should try to get is a 10-year amortization schedule and an interest rate that is somewhere around 5.5 percent or less.
Assuming you have excellent credit (above 700 for some lenders, and above 750 for others), Bankrate.com says there are home equity loans in Georgia being offered at interest rates as low as 5.49 percent.
That isn’t today’s 3.87 percent 30-year fixed-rate mortgage that is available for home buyers with excellent credit and at least a 20 percent down payment. But it is less than what you’re paying now, particularly if you can get a loan that’s amortized based on the $37,000 you owe. It should reduce your payments some, perhaps even substantially.
As you consider your options, you might want to review your loan statement to see how much of your loan payment is interest and how much is going towards reducing the principal on your loan. If you see that very little is going towards your monthly interest payment and you compare how much you’d pay on a new loan for your monthly interest payment, you’ll actually be able to compare the loans and what you might save.
If you talk to a good mortgage lenderA Lender is a person, company, corporation, or entity that lends money for the purchase of real estate. or mortgage brokerA Mortgage Broker is a company or individual that brings together lenders and borrowers and processes mortgage applications. and go through the numbers, you might find that keeping your current loan might make sense to you, especially given the costs you might face in refinancing your loan.
Just remember, when refinancing the goal isn’t just to lower your interest rate, it’s to lower your interest rate, reduce your payment and pay off your loan faster. If you can get all three, without paying too much in points and fees, you’ll hit a grand slam.