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Term Extension On Home Loan Refinancing
Sometimes due to bad credit or market conditions, it is not possible to get lower monthly payments on your home loan by refinancing. This is due to the fact that those with bad credit usually can not get a lower interest rate and that sometimes, market conditions push the mortgage loans interest rate up. However, you can still get lower installments by refinancing your loan with a longer repayment program.
The term extension will get you lower monthly payments because the loans capital is spread over a higher number of installments. With this method, if you could not afford your current mortgage loans monthly payments, you can obtain lower and affordable installments that you will be able to pay without having to make sacrifices.
Home Loan Repayment Programs
The home loan repayment program or schedule is the duration in time of the home loan. It determines the number of installments you will need to pay throughout the whole life of the loan. Payments can be done one a monthly basis, on a weekly basis, or biweekly too. Depending on the way payments are done and on the duration of the loan, you will obtain the resulting number of monthly payments.
For example: if a home loan has a 10 year repayment program, you will have 120 installments to repay the loan if payments are made monthly. But if payments are made biweekly, you will have 240 installments that will of course be of a lower amount than in the case of the loan payable on a monthly basis.
A mortgage loan repayment program can be as long as 30 years. However, the average mortgage loan has duration of 20 years or just a bit more. Thus, if you need to obtain lower monthly payments, it is always possible to refinance your home loan in order to extend the repayment schedule and thus, obtain a lower installment in return.
Consequences of Extending the Loan Term
The consequences of extending the loan term are varied, some of them are positive and others are negative. Thus, you will need to ponder them in order to decide whether home loan refinancing for a longer repayment program is the right option for you. Basically you will need to compare the resulting terms with your needs in order to see if the costs of refinancing are equal or lower than the benefits.
Ultimately, by refinancing for a longer repayment program, you will obtain lower and more affordable monthly payments. If you are lucky enough to refinance with a lower interest rate, you might be able to compensate the higher costs that a longer repayment schedule represents with the savings that a lower interest rate provide, or at least part of them.
This is due to the fact that when you refinance for a longer repayment program you are actually adding interests to your overall loan repayment. Since interests are based on time, a longer repayment program implies more interests and thus an overall larger debt. Even if you obtain lower monthly payments, you are actually paying more on the long run. It is just that the costs are spread over more installments.
Home Loan to Buy a New Home
When you decide that it is time to buy a new home, you have many different decisions to make. The biggest and most important of these is your home loan. Not many people can pay cash to buy a home so they rely on a Bank, Finance, and or Mortgage companies. When you go there you will fill out many papers and talk to a loan officer. You will be required to bring information with you such as pay stubs, tax returns, and credit reports. Most mortgage companies will run a credit report on any one who is going to be responsible for paying back the loan. A credit report shows your history of how well you have paid your debts in the past. Many people can’t obtain a loan because of a credit score that doesn’t fall within the guidelines set by the lender. Maybe you lost a job or got sick and were out of work, so you were late paying some of your bills. If this happens to you there are companies that can help get your credit back on track and then you can buy your home. When you find the lender you think offers a variety of good loan programs, you will make an appointment and get the ball rolling. This is a process that can take some time to complete. Most home loans are for a large sum of money so the bank will do it’s due diligent to make sure they are comfortable with your ability to repay the loan you are asking for. You will hear many terms that are new to you, so if you don’t understand something have your loan officer explain it to you. When you get a mortgage it is usually a long term arrangement between you and the bank, in some cases you will agree to make monthly payment on your loan for 30 years. In many ways you can say that the bank owns the house with you, yes it is your home, and they can’t tell you what color to paint your walls, or if you can have pets, however if you can’t pay your loan as agreed to they can take your home away form you. My talking to a well qualified mortgage professional, you can find the best type of loan, terms, and conditions so that one day the home will be all yours and your loan obligation will be fulfilled. Loan officers are there to help you get a home of your dreams that you can afford and be very happy owning for a lifetime.