October 26th, 2012 10:15 AM by Nathan Rufty
California mortgage rates are very flexible and vary significantly. This is depending on which type of California mortgage you take. The FHA California mortgage rates are fairly constant and predictable in comparison to jumbo loans and mortgages. This therefore calls for careful planning of your refinancing so that you are not inconvenienced or burdened at a latter day.
If you are ready to refinance your mortgage then you should know that refinancing the home loan offers many benefits including lower mortgage rates. Moreover, you can switch to fixed rate mortgage from adjustable rate mortgage. Alternatively, you can roll up the current 1st mortgage and home equity into a single mortgage. Before you consider refinancing, consider the following.
Know the current home value & Loan to value ratio
You can get estimates of these from your local real estate agent. Thereafter divide the mortgage balance by the home value to get its value to loan ratio. A case example of someone with a home value of $200,000 and mortgage balance of $150,000 has an LTV of 75%. In most cases, lenders do not permit refinancing of more than 80% of the home value. The only exception is FHA insured loans as they have liberal lending.
Interest rates and Credit scores
Before you settle on mortgage refinance loans, it’s important that you check your credit reports and scores with Equifax, major credit bureaus Experian and TransUnion. As much as mortgage lenders can approve loans for borrowers who have compromised credit, to get the best California mortgage rates you need a credit score of At least 720.
Breaking even
If you have plans of selling the home in some years to come, it may not be possible to break even in refinancing. This usually requests making enough payments at low rates in order to save more than refinancing cost. It may be possible to refinance the home without out of pocket closing costs meaning there is no breaking even point, but you will have a smaller difference in monthly payment from larger loan balance or higher interest rate.
Closing costs
You can draw comparison of current California mortgage rates with the proposed refinance terms at low rates. Doing accurate estimation of savings needs complex calculations. You will need to deduct closing costs from the project savings.
Refinancing cautions
Many homeowners have lost homes after cash out refinancing to fund expensive vacations, buying ski boats and their home values crashed. Ensure the refinancing gives you value.
When looking for the best California mortgage rates, you need to factor in various rates that are there. Choose wisely when shopping for the most attractive rates to consider for the mortgage. This will save you a lot of long terms and expensive repayments when are very unnecessary. In fact, you should get to know if there are any other incentives or breaks that are offered that will make it more comfortable for you to finish repaying. How financing is not a big challenge if you have a steady income, the repayment bit needs careful planning so that you do not misplace important priorities.