A mortgage loan can be quite burdensome and, in several situations, the borrowers of such loans prefer to, either opt for a mortgage modification, or a consolidation, or a refinance. The problem is that, often as borrowers, we do not understand when is the best moment to opt for refinancing. Payment of the loan is an important pointer to the mortgage refinance loan, which leads us to the first point, the installment payment.
Installment Payment of the Original Mortgage Loan
Well, first indicator is the mortgage installment payment. Secured loans such as mortgage loans and real estate loans are borrowed with a good credit report and a good income. However, uncertainty in life causes late payments of installment.
While the loan is being approved and underwritten, the lender makes a calculation that is known as a debt to income ratio calculation. In the debt ratio calculation, the lender ascertains where or not the borrower will be able to afford the loan. In fact the installments are set according to the income of the borrower.
There are cases where the income of the borrower is used up by unexpected and unfortunate incidences, such as, illness in the family, death, divorce, disability, etc. After which the ongoing mortgage rates and installments tend to become very expensive for the borrower. Thus, the two best options that the borrower can avail are a mortgage modification or a mortgage refinance.
Lower Rates and Better Installments
In cases where other lenders offer better interest rates, many people are tempted to opt for refinancing. Costs such as service fees, APR (Annual Percentage Rates) and service charges are generically referred to as 'mortgage rates' or 'interest'. Most of the time, the interest rate, is expressed in percentage of the total amount lent.
It is seen that when the economic conditions improve, lenders start offering lower interest rates. In such a situation, if the current loan of the borrower has a high interest rate, then he starts feeling that the current loan that he owes is an expensive deal.
The conclusion of the given situation is that, in cases where the borrower gets a better interest rate, he or she should go for refinancing a loan, after all, it's not wrong, but in some cases hurts the credit history and report.
Debt Consolidation Loan
In several cases, debt consolidation is an option that requires a refinancing. There are several situations where home owners fall upon dire financial difficulties, and cannot afford their home equity loans or common mortgage loans. In such cases, the mortgage loan can be refinanced. The new debt consolidation loan becomes a long-term loan, that has a very small per month installment.
One of the best ways to ascertain whether it would be appropriate for you to go in for a mortgage refinance loan is to ascertain three facts. First, after research, ascertain if the rates of the loan are reasonable or not, and are they affordable. Secondly, one needs to consider whether the mortgage payment can be made on time or not, as several late or default payments are dangerous for the credit report. Lastly one needs to consider the current debt to income ratio (monthly income minus the monthly liability). Apart from that, you can also make use of reliable mortgage calculators to ascertain the feasibility of the refinanced loan.
With the information given above, I hope you will be able to make a really good and successful decision.