Content provided in partnership with

Business Services Industry

A loan again - mortgage refinancing

Entrepreneur, July, 1996 by Lorayne Fiorillo

<< Page 1 Continued from page 1. Previous | Next

* Talking with bank loan officers can lead to a great deal. Banks sometimes lower their rates to get a chance at a new customer's future business, including auto loans, lines of credit, credit cards, checking and savings accounts and business accounts.

* Mortgage bankers are lenders who offer deals they finance. Mortgage brokers, on the other hand, act as middlemen between you and the lender. If your application fails at one lender, brokers can try others with whom they have a relationship. If your credit report is spotty, this can be your best selection. Some mortgage brokers act as mortgage bankers, able to bid your loan out or take it on themselves.

Most Popular Articles in Business: Research and Markets : Tesco Plc - SWOT Framework Analysis; Do Us a Flavor - Ben & Jerry's Issues a Call for Euphoric New Flavors; eBay made easy: ready to start an eBay business? These 5 simple steps will ...; Katrina's lawsuit surge: a legal battle to force insurers to pay for flood ...; Wal-Mart's newest distribution center opened last month near the southwest ...; More »

* Though the Bailey Brothers Savings and Loan is no longer in existence, your loan can still have a wonderful life at a midsized bank or thrift. Some are especially competitive in the adjustable-rate area. Commercial banks and some large brokerage firms have begun aggressive credit programs to service their best clients. If a jumbo loan is what you're after, they can do the deal easily.

* Brokerage firms often allow clients to use securities as collateral for the loan, so you don't have to rob Peter to pay Paul.

* Your tax, legal or financial advisors may be able to refer you to an appropriate lender. Whatever you do, you'd better shop around.

* MAKING ADJUSTMENTS

With interest rates near 20-year lows, most borrowers are focusing on fixed-rate loans. For some, however, adjustable rate mortgages (ARMs) are a better idea. If you're sold on a house whose monthly payments put it out of reach, the lower payments of an ARM could help you close the deal.

But don't position that easy chair in the corner just yet. While the initial rate may be alluring, ARMs rise when interest rates increase--and the increased rate can be a doozy!

Adjustable mortgages change their rates on a schedule. Delayed ARMs fix an initial rate for a certain period before converting to annual adjustable loans. Schedules include 3-1, 5-1 and 7-1. That means the loans are fixed for three, five and seven years before converting to a one-year adjustable.

Rates on ARMs are running about half a point less than on fixed-rate loans--not a great deal of savings but still an increase in monthly cash flow. Should you decide to stay in your home, some lenders provide a conversion option that allows you to switch to a fixed loan--for a fee--provided you do so before your loan begins to adjust.

ARMs are not for everyone. However, if you're planning to live in your home for just a few years or don't have sufficient income to make higher payments but plan to increase your earnings, they could save you money.

If refinancing makes sense for you, watch mortgage rates carefully and be ready to pounce when rates drop. Whatever option you choose, getting the right loan can help you get the most from your home.

All figures are courtesy of Market Street Mortgage Corp. and show principal and interest only. Down payments and closing costs are not included. Interest rates are for illustrative purposes only and are subject to change without notice.

Business Services Industry

A loan again - mortgage refinancing

Entrepreneur, July, 1996 by Lorayne Fiorillo

Find Research Guides for:

Find Featured Titles for: Health

Most Popular Articles in Business

Most Popular Publications in Business