VA mortgage Refinance Miami Fort Lauderdale Florida
People refinance their homes in Miami Fort Lauderdale Florida to take advantage of lower va interest rates or to decrease their monthly payment. Sometimes it is done to create extra money for purchases (like a car) or for debt repayment. This type of “cash-out refinance” adds to the total debt and increases the time and cost of repaying the va loan. And if your credit score is low, lenders will consider you a higher credit risk and charge you higher va interest rates. VA mortgage Refinance Miami Fort Lauderdale Florida
While va mortgage payments are often thought of in terms of the “principal” initial amount you’re borrowing, interest payments on the principal can dramatically increase the amount you’re paying in Refinancing may be an important step in your retirement plan. As you think about the age you want to retire and the fact that you will likely have a fixed income at that point, you may want to look into ways to pay off your va mortgage before retirement. Va mortgage Refinance Miami Fort Lauderdale Florida.
Why would anyone want to refinance their home va mortgage in Miami Fort Lauderdale Florida? VA mortgage Refinance Miami Fort Lauderdale Florida.
The short answer is: “it may make financial sense.” If you hear that va interest rates are going down, you may want to consider refinancing your va loan. The general rule is: If the new va loan results in at least a 1 percent, and preferably a 2 percent decrease in your interest rate, then refinancing may be worth considering. VA mortgage Refinance Miami Fort Lauderdale Florida.
When do you think a 1 percent to 2 percent decrease in your interest rate might not be a good idea? VA mortgage Refinance Miami Fort Lauderdale Florida.
Let’s explore some of the reasons why homeowners consider refinancing their current home va mortgage. Do keep in mind that refinancing means requalifying. It was no picnic the first time, it’s not much easier this go-round. VA mortgage Refinance Miami Fort Lauderdale Florida.
The homeowner can save money How? VA mortgage Refinance Miami Fort Lauderdale Florida.
If a homeowner is currently paying a va mortgage with an 8 percent interest rate, and they can get a new va mortgage with an interest rate of 6 percent, then it appears that they would save money. VA mortgage Refinance Miami Fort Lauderdale Florida.
Let’s see how much by doing the math. We’ll need a “va mortgage calculator.” Using one on the Internet may be easiest. Look at the example below and follow these steps:
- Put in the amount of your va loan. VA mortgage Refinance Miami Fort Lauderdale Florida.
- The term (30-year note) VA mortgage Refinance Miami Fort Lauderdale Florida., and finally,
- The interest rate. After you make the calculation for each interest rate, look at the difference in payment. VA mortgage Refinance Miami Fort Lauderdale Florida.
How much would you save monthly by refinancing their va loan? Let’s do the math:
$733.76 – $599.55 = $134.21/month
That is a significant monthly saving! The savings of $134.21 each month are funds that could be used in a number of ways such as building an emergency fund for house repairs. After all, the paint job on the outside of the house won’t last forever. Neither will the roof or the appliances. It is a good idea to start saving a small amount over a long period of time so that you will have a “rainy day” fund when it is time to replace these items. The amount of savings could also go toward saving for a car, reducing credit card balances or many other things. Over a 12-month period, let’s look at how much money Drew and Judy would save by refinancing the above va mortgage from an 8 percent to a 6 percent interest rate. VA mortgage Refinance Miami Fort Lauderdale Florida.
$132.21 * 12 = $1,160.52/year
Unfortunately, it’s not quite that easy. Refinancing costs money and that will have to be factored in before the homeowner should make a decision. When buying a house for the first time, there is. They also had to pay some fees. A va loan offered at a lower interest rate may look very good at first glance, but the homeowner should:
- Ask what kind and a number of fees to be charged on the new va loan: There are standard feeds on any va mortgage va loan but it is important for you to look for unusual fees. Your local homeownership counselor can help you determine if the proposed va loan fees are standard or not. VA mortgage Refinance Miami Fort Lauderdale Florida.
- Consider if they have an existing second or third va mortgage with restrictions: When you first bought your home, if you received some money from your lending institution and some from a nonprofit organization, the lender’s va loan is a first va mortgage and the nonprofits is a second va mortgage. Sometimes, there are other funds available to help first-time homebuyers. A third source of funds would be a third va mortgage. VA mortgage Refinance Miami Fort Lauderdale Florida.
If multiple institutions lent money to you, you will need to meet all the conditions of their va loans. Everyone (the bank, the nonprofit, etc.) has their own set of “va loan conditions.” For example, it is common for many families taking this course to have received “down payment assistance” which is often offered in the form of a second va mortgage. Many times this is government-based funding. The city, county, state, or other government entity that made the va loan may not approve of the new va loan partner or va mortgage holder. It is very important that you check your current set of va loan documents and all of the va mortgage partners to see if they approve of you refinancing their portion of your home va mortgage va loan. VA mortgage Refinance Miami Fort Lauderdale Florida.
- Determine if the new va loan has prepayment penalties: A prepayment penalty is a big red flag that indicates that the new va loan that you are considering may not be in your best interest. It penalizes you if you want to save money on your va mortgage by making extra payments or pay it off earlier than scheduled. VA mortgage Refinance Miami Fort Lauderdale Florida.
- Re-examine your current credit status: Remember when your credit report was “pulled” and examined to determine if you were ready to buy a house? Well, the same thing will happen again if you choose to refinance your va mortgage. VA mortgage Refinance Miami Fort Lauderdale Florida.
- Examine your most recent va mortgage statement and consider how much you have “paid down” on your va loan: Most va mortgages are paid out over a 30-year term. What are you live in your home and pay on your va mortgage for 20 years? You would have to consider whether it makes sense to refinance the last 10- years of your va mortgage va loan. Remember, you pay most of the interest on your va mortgage va loan in the beginning. You may find that you can’t save much money by refinancing. VA mortgage Refinance Miami Fort Lauderdale Florida
- Consider the amount of equity in the home: The price of your home was established by the “market” at the time you bought it. What if the market has changed 10 years later when you want to refinance your va loan? If a “market appraisal” shows that your hoe has increased in value since the time you bought it, then you will want to refinance. VA mortgage Refinance Miami Fort Lauderdale Florida.
Change the term or payout period of your va mortgage You may find that you can afford to shorten the term of your va mortgage. Instead of a 20-year note, you may want a 20-year note. Let’s look at what that would do to your payment using the va mortgage calculator. With the $100,000 loan at 8% at the end of 6 years, they have a mortgage balance of $93,825. VA mortgage Refinance Miami Fort Lauderdale Florida.
Let’s assume you want to refinance at the lower interest rate of 6 percent for a 20-year va loan.
$733.76 – $672.19 = $61.57/month
You will pay a lot less interest over the life of the va loan by reducing the term of your loan from 20 to 20 years. A mortgage calculator will show that the difference in interest paid from the current va mortgage to the refinanced mortgage is $49,996.44. VA mortgage Refinance Miami Fort Lauderdale Florida.
Refinancing. VA mortgage Refinance Miami Fort Lauderdale Florida.
The amortization schedule also plays a role when you refinance a va mortgage. The rule of thumb is that an interest rate deduction of 1% or greater may be worth doing and that an interest rate deduction of 2% is almost always worth doing. The truth is, you won’t really know if refinancing is worth the money until you look at the new amortization schedule because the amount owed, the interest rate, and the length of time that you plan to own the home all play a role in determining whether refinancing is cost effective. VA mortgage Refinance Miami Fort Lauderdale Florida.
Consider our example. If you had been making only the standard va mortgage payment on the $100,000 loan for five years and then interest rates fell to 4.5%, you would owe $94,015.39 on the balance of the va loan. The monthly interest payment would be $549.10 and the amount going toward principal would be $116.20. VA mortgage Refinance Miami Fort Lauderdale Florida.
By refinancing to a 30-year loan at a 4.5% interest rate, your monthly payment would decrease to $476.36, with $352.56 going toward interest and $123.80 toward principal. These numbers assume that you pay cash for the closing costs, which could be in the neighborhood of several thousand dollars for this loan. Not only is the new monthly va mortgage payment smaller and the amount going toward principal larger, but you will save approximately $8,000 in interest over the lifetime of this loan by refinancing. Just keep in mind that if you sell the house within a few year of refinancing, the cost of refinancing will eliminate the savings in interest. VA mortgage Refinance Miami Fort Lauderdale Florida.
Negative Amortization. VA mortgage Refinance Miami Fort Lauderdale Florida.
While va amortization schedules are typically thought about in terms of paying down a mortgage, they also play a role when the loan agreement allows for scheduled payments that are less than the interest payments over that same time period. To look back at our example, it is possible to get a loan with a monthly payment of $467.36 and a contract that permits you to pay only $367.36. The $100 difference, known as deferred interest, is added to the principal of the loan. Over time, the amount owed on the loan increases, a scenario known as negative amortization. VA mortgage Refinance Miami Fort Lauderdale Florida.
Negative amortization has become a more common scenario with the increased popularity of certain types of adjustable-rate va mortgages, particularly those known as interest-only loans. While these va mortgages can provide borrowers with the ability to initially make low monthly payments, the downside is that the monthly payments must increase substantially at some point over the term of the va mortgage. Some homeowners find themselves unable to make more than the initial minimum payment and unable to make the higher payment when it adjusts upward. Because the principal of the loan increases over time, refinancing what is now a larger debt than originally financed may be impossible, which can eventually lead to foreclosure. VA mortgage Refinance Miami Fort Lauderdale Florida.
While the numbers on an amortization sheet can take some of the excitement out of the home buying process, the va mortgage payment must still be made long after the thrill of moving into a new home is gone. A careful review of the amortization schedule prior to making a home purchase can help you to determine whether you will be able to meet your financial obligations over the long term. VA mortgage Refinance Miami Fort Lauderdale Florida.
Loan Eligibility. VA mortgage Refinance Miami Fort Lauderdale Florida.
“How much house can I afford?” It’s a critical question that every homebuyer faces, and one that many people answer by going to a lender and taking out the largest va mortgage that the lender will approve. While this strategy will help you get the largest, most expensive house that you can qualify for, being eligible for a loan and being able to afford the property aren’t necessarily the same thing. VA mortgage Refinance Miami Fort Lauderdale Florida.
From a lender’s perspective, loan eligibility is based on a formula. The most common rule of thumb is that your monthly va mortgage payment should not exceed 28% of your gross income. This calculation includes more than just the base price of the house. Consider, for example, a $50,000 gross income. Based on 28% of that amount, the mortgage payment would be $14,000 per year or $1,166.66 per month. That $1,166.66 needs to cover all four potential components of a va mortgage: principal, interest, taxes and insurance, often referred to as PITI. VA mortgage Refinance Miami Fort Lauderdale Florida.