Refinancing Your Arizona Mortgage

By: Mike Hamel

Refinancing your Arizona mortgage could save you thousands if interest rates have dropped by a percentage point or more since you got your first mortgage. It is an easy way to tap into equity to remodel your home, buy a new car, or pay off high interest credit cards and other bills.

Refinancing your Arizona mortgage for debt consolidation won’t increase what you owe, but it could make your debt more manageable with lower interest rates, fixed repayment terms, and tax savings.

Refinancing could help you shorten the time it takes to pay off your mortgage; convert an adjustable rate loan to a fixed rate loan; or lower your monthly payments.

Refinancing Basics

Refinancing means getting a new mortgage to pay off your existing one. The new loan can be for more money, depending on how much equity you have in the home. Equity is the difference between what you owe and the home’s market value. Refinancing accounted for almost half of all mortgages in 2006

When you apply for mortgage refinancing, the lender will order an appraisal of your house to determine its market value, check your FICO score and credit report to determine the interest rate you will be charged, and verify your personal information such as employment, bank accounts, and financial obligations.

The mortgage lender is required by law to give you (1) A Truth-in-Lending disclosure, which includes a summary of the total cost of credit and other specifics of the loan. (2) A Home Buyer's Guide to Settlement Costs. (3) Annual Percentage Rate (APR) information that spells out the interest rate, discount points, broker fees, and other mortgage expenses.

If it is an adjustable-rate mortgage, the lender must also provide an ARM disclosure. This will have info on the costs of the ARM and the past performance of the index to which the interest rate is tied.

Subprime Refinancing

Subprime mortgages are made to borrowers with credit scores below 620. The Federal Reserve Board reported that almost 20% of U.S. mortgages made in 2006 were subprime loans. In 1999, the number was only 5%.

Arizona ranks number two in the nation in bad credit mortgages; with almost 17 percent of Arizona homeowners having subprime loans.

The average interest rate on a subprime mortgage is three percent higher than on a prime credit loan. “At its best," says Keith Ernst of the Center for Responsible Lending, “the subprime loan market is providing credit to people who couldn't get it in the prime market “But at its worst, it is providing unaffordable loans."

Refinancing Quote

If you plan to stay in your home for a few years, the lower payments will more than cover the cost of refinancing. Local brokers like those at the Arizona Refinance Center () can help you get the right loan and the right repayment terms. Their online loan process is quick, convenient, and confidential.

It will cost you nothing to get a competitive quote on a new mortgage today.

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