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Home Refinancing and Equity Loans Tips

Home Refinancing Lock-In Issues

With lock-in issues, in home refinancing, always remember to try and look for a 60-day period. Although this is just a rare opportunity, there are some lenders out there who would be willing to give you your 60-day lock-in for free. This is extra advantage for you and it won’t hurt you trying to look for one. When you find a 60-day free lock-in period, you must be careful though even if the loan officer will say it is free because even if it is so, sometimes there are very high charges on the lock-in protection. You can always ask about this to be sure that you are in the right track and refuse by all means if you find it not reasonable for you.

Equity and Qualifying for Loans

Most of us thought that we cannot qualify for an equity loans because we only have little equity in our home. Although this is the usual case, rest assured that you can qualify for a loan in all possibilities and even if this is the situation.

Most lenders require at least a10% equity in your home or the so-called loan-to-value (LTV) ratio that is set at 90% or less. This is almost the same case with the lock-in issue where there is always a possibility that you can get a lender who is willing to give you a chance by underwriting loans. In underwriting loans, the borrower has only 5% equity in the home. The catch here however is that a low equity loan usually takes with it a relatively high cost in mortgage insurance.

Comparing Home Equity Loan Rates Using Tie Ups

In any loan, the first move is always to seek and compare interest rate. However, in home equity loan we add the rates to points to compute their tie up and arrive at the least interest rate. This is the standard and as an example, if say, you have 2 home equity loan offers where the interest rate is both set at 10%, the first loan is set to tie up with 3 points and the other with 1 point. Of the two, the loan with a 10% interest rate tied up with the lower point is cheaper (in this case the 10% tied up with 1 point is cheaper).

In a case where there are two different rate and point combination from lenders, converting the quoted rates and turning it into 1 constant number in points and from there, all you have to do is to find the lowest rate offer from a lender. This way, you can be sure that you will get the lowest interest.

Converting Values for Your Loan

To convert values, there should be a constant value where a point is to be equated to ¼ of 1 % change in the interest rate according to some reports. In true value, this would be equivalent to 7.75 percent loan with 1 point in an 8% loan with 0 point. So all this tells you only one simple truth that you should be cautious of – points and interest rate are the primary basis for any lender offer and not some no-application cost scheme. In the end, some of these schemes will take you to high fees on closing so you have to keep yourself always aware of this lure. When this happens, be sure that you know about your rights in rescission discussed below in this article.

Refinancing and Rescission Rights

What is a rescission right? Rescission Right in home refinancing is all about your home equity loan or line of credit. According to federal law in your rescission right, you can back off or even cancel some types of home loan without the need to pay anything and eventually avoid loosing money. In some cases, this is also called as a cool-off period when you try to refinance under a new lender for your loan. This is called as your right of rescission. Under this right, the person looking for loan will be given a 3-day period where he/she can back out from the loan offer right before you get cash without any questions asked. Also part of this is that the lender must give up his claim to your collateral property and must refund in full the fees that you paid.