Tag: 15 year mortgage

How can I lower my monthly mortgage payments?

So, you’ve had a home for awhile, but you feel like your budget is just too tight. You scrimp and save, but it’s never enough. If the biggest expense you have is your mortgage, maybe it’s time to refinance your mortgage.

Refinance to a lower rate

Rates are very low. Right now, for a 30-year mortgage, the fixed rate can be as low as the high 3’s to low 4’s. Fifteen-year loans may even be in the high 2’s. Refinancing may be a great way to lower your overall mortgage payments by dropping your interest rate. This could help to save you thousands over the life of your loan. If your interest rate is over 4.5% now is a great time to review refinance options.

Drop your PMI

The only type of mortgage where Private Mortgage Insurance (PMI) drops off when you have 20% equity is the Conventional loan. Other types of loans, like the FHA, require PMI for the life of the loan. PMI usually costs 0.5 or 1% of the entire loan. It protects the bank from defaults. For you, it’s an extra cost — one that, once you’ve paid off 20% of the original loan value, you can refinance to remove. While it may not seem like a lot of money, 1% of a loan over the life of a 30-year mortgage can really add up over time. 

Extend your mortgage term

One reason folks often have trouble paying their monthly mortgage is that they think that a 15-year term is better than the 30-year. While it’s true that a 30-year mortgage takes longer to pay off, the monthly payments are lower. If your goal is a lower monthly budget, switching from a 15 to a 30-year will certainly do the trick. The only downside is the term of the loan is longer if you pay the minimum payments.

Also, if you already have a 30-year mortgage and refinance to a new one, you could still reduce your monthly payments.

Refinance from an FHA loan to a Conventional loan

You may have started with bad or low credit when you initially bought your house and had an FHA loan as the result. Or maybe you didn’t have enough money for a larger down payment. As your credit improves, you could have an opportunity to refinance your loan to a conventional mortgage. There are two advantages when refinancing an FHA to a Conventional loan: First, you could get rid of the Private Mortgage Insurance payments if you’ve paid 20% of the mortgage. Secondly, the interest rates for a Conventional loan may be lower than they are for FHA loans.

If you are thinking about refinancing your mortgage, contact one of our professional loan officers at 800-555-2098 to schedule an appointment. We can sit down and look at your financial situation and help you figure out the best way to lower your monthly mortgage payments.

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15 vs. 30-Year Loan: Which is right for me?

What’s the deal with 15 and 30-year mortgage loan rates? If you’ve ever shopped around for a new mortgage, you’ve seen lenders advertising rates for both. There are pros and cons to both, depending on what you want to do with the mortgage. But there’s also the unknown fact that “15 to 30” aren’t the only term options. Which is right for you? Well, it depends.

What stage are you in life? Are you just starting a family? Are your kids going off to college and suddenly you’re an empty-nester with too much space? The key to determining which loan will work best for you is finding out how much is in your budget and what fits your life phase. When sitting down with one of our loan consultants, it’s important to let them know what your life goals are so they can help match up a loan term that fits your lifestyle.

15-Year Loan

A 15-year loan has one advantage over a 30-year loan no matter what: less interest paid over time. Because of the nature of the loan, you’ll pay it off faster, so you wind up paying a lot less interest over time. The caveat is that the payments are going to be higher each month. A 15-year loan will tighten your wallet until it’s paid off, but it’ll be paid off in half the time.

How much is the difference between the two terms? If you use our mortgage calculator and put in a mortgage worth $150,000, the interest at the end of the term for 15 years is about $61,000 (at 4.875% interest.) That same loan, when the term is changed to 30 years, more than doubles to about $135,000 dollars in interest over the life of the loan.

30-Year Loan

So, why would anyone want a longer term loan? For starters, the payments for 15 years, using the same scenario, is about $1,200 month. That same loan, at 30 years, only requires about $700 dollars a month.

A 30-year term is great for the home of your dreams. If you have no desire to leave that home, or downsizing and retirement are decades away, a 30-year loan is probably the best option. Although you pay more money overall, it gives you more flexibility during the time of the loan.

One common misconception about these loan terms is that 15 or 30 are the only options. Through Riverbank Finance, you can secure a loan for 15 to 30 years or somewhere in between. That’s right! So, for example, if you’re retiring in 25 years, you could set a 25-year term so your home is paid off right in time for retirement. For Riverbank Finance, it’s all about customizing your mortgage to fit the lifestyle you desire.

For more information, or to speak with a loan officer, call Riverbank Finance at (800) 555-2098 to schedule an appointment.

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Waiting to Buy a Home in West Michigan?

5 reasons why not to wait to buy a home

5 Reasons Why You Shouldn’t Wait to Buy

Timing can mean the difference between getting a home at a good value or missing out completely. Right now, the West Michigan housing market is red hot. If you are thinking about buying a house in West Michigan, here are five reasons you shouldn’t wait much longer:

1) The growing economy.

Grand Rapids has entered a new life outside of its history as a rust-belt city. Currently it is listed at 31st in Forbes Best Places for Businesses and Careers. Unemployment is at 3% with jobs growing at a rate of 2%. That growth, in turn, means homes purchased in the region will increase their worth as investments.

2) Increased demand for homes.

In 2016, Grand Rapids ranked third for housing shortages, according to the National Association of Realtors. Forbes Magazine forecasts that 2017 will be similar to last year in terms of housing demand. Last year, homes averaged 52 days on the market. Experts believe the window of opportunity will be even shorter in 2017. Securing your mortgage is key, so you can get the home you want before it’s too late.

3) Interest-rate increases.

The Fed increased interest rates in March 2017 for only the third time since the 2008 financial crisis — and there’s no sign the rates will decrease again anytime soon. In fact, the rates may increase again before the year is over. Currently, the National Association of Realtors averages nationals rates at 3.39 percent for 15-year mortgages and 4.14 percent for 30-year mortgages. To see what kind of rate you could get for a mortgage, try our mortgage rate calculator.

4) Deregulation.

The Trump Administration has moved toward rolling back the Dodd-Frank Act, the Obama-era federal reform legislation that put the government in charge of regulating the financial industry. Trump’s financial deregulation may benefit mortgage seekers by loosening restrictions on lenders. Home buyers would be able to secure loans easier, but it would mean the pool of available home buyers would likely increase.

5) Options for imperfect credit.

If your credit is imperfect, options are available that could help you buy a house anyway. FHA loans require a 580 credit score with a 3.5% down payment. However, you can still get an FHA loan with a credit score between 500 and 579 with a 10% down payment. Another option is asking a friend or relative with a better credit history to co-sign on your loan. Just be careful about co-signing, because you could strain your relationship with the person if you run into any financial trouble. Other than FHA and co-signing, you can always pay down your debt, decreasing your debt-to-income ratio, or find a way to increase your housing-to-income ratio.

Given the rise of interest rates, a high demand for homes, and a potential ease in mortgage regulations, 2017 is shaping up to be another year when demand will outpace the available supply of homes. So, the longer you wait, the less likely you are to get the kind of home you want within your budget.

To start the process now, check out our pre-approval page or contact one of our mortgage loan officers for more information at 1-800-555-2098.

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Brexit gives mortgage seekers the gift of low mortgage rates!

Brexit Lowers Mortgage Rates!Mortgage rates have dropped yet again in the wake of the Brexit (Britain voting to leave the European Union).  The world markets have been very volatile since the news broke early Friday morning. Financial instability brings lower mortgage rates. Now is the best time to buy a home or refinance your mortgage to a lower rates that we have seen in years.

At the start of 2016 average mortgage rates for a 30 year fixed rate mortgage hovered around 4.00%. Industry experts advised that rates would continue to climb as the Federal Reserve announced plans to increase their rates throughout 2016. The results have been quite the opposite with current mortgage rates hitting as low as 3.50% for prime borrowers.

June 2016 Mortgage Rates

What Do Low Mortgage Rates Mean for Home Buyers?

With mortgage rates near the lowest point in 3 years, home buyers are able to afford more house for the same payments. Here is an example from Riverbank’s Conventional Mortgage Calculator with a home buyer getting a loan of $250,000 to buy a home.

January 2016 with a 30 year fixed rate mortgage at 4.25% would give the home buyer a principal and interest payment of $1229.85.

June 2016 with a 30 year fixed rate mortgage at 3.5% would give the home buyer a principal and interest payment of $1122.61 which is a $107.24 per month savings.  For the same payment of $1229.85 a home buyer would be able to get a mortgage of $273,882. This increases their buying power by $23,882 for the same payment!

Why Refinance to a Lower Mortgage Rate?

There are several “rules of thumb” when it comes to refinancing your mortgage to a lower rate. Some say if you can drop your rate by ½ of a percent then it makes sense. Others say if you can do it with no costs then it makes sense. The true answer will be different for each individual circumstance.

The way to tell it if makes sense to refinance your mortgage is if you will save more money than the costs of getting a lower rate. For example if it costs $3000 in closing costs but you save $250 per month you will recover your costs in 12 months ($3000 / 12 = 12 months). In this example if you plan on keeping your home for at least 12 months, then anything after that would be money in your pocket.

Should I Refinance to a 15 Year Mortgage Term?

Many home owners are taking advantage of the low mortgage rates to pay off their mortgage faster without increasing their payment significantly. By refinancing to a 15 year mortgage you may save thousands of dollars in interest over the life of your loan. How is that for retiring early?

Here is an example of a home owner refinancing to a 15 year mortgage from a 30 year mortgage.

The homeowner has a $250,000 mortgage and is currently at 4.5% on a 30 year fixed rate. If he pays the minimum payment he will have paid $206,018.10 in mortgage interest. See Riverbank’s Mortgage Amortization Schedule Calculator for more information.

This home owner decides to refinance to a 15 year fixed rate mortgage at 2.875%. If he pays the minimum payments on his new loan his total interest will only be $58,063.75 which saves him $147,954.35!

With these low mortgage rates, now is a great time to start saving. Call a licensed loan officer today at 1-800-555-2098 and request your free rate quote.

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**Mortgage Rate Disclaimer: Recent rate but rates, loan products & fees subject to change without notice. Your rate and term may vary. Fees & charges apply and may vary by mortgage product. Subject to underwriting approval. Application required; not all applicants will be approved.  Important information relating specifically to your loan will be contained in the loan documents, which alone will establish your rights and obligations under the loan plan. Call for details at 1-800-555-2098.

Five Easy Ways to Pay Off your Mortgage Faster

5 easy ways to pay off your mortgage faster.

If you are a person that plans for the future then you most likely have given thought about paying down your mortgage. For many families, your mortgage is the largest debt you have above car loans, student loans, credit cards and personal loans.  You should put an equal amount of focus on paying off this debt quickly as you plan for your retirement.  Here are five easy ways that you can pay your mortgage off faster.

Refinance to a 15 Year Loan and Shorten Your Mortgage Term

A clear answer to pay off your home loan faster is to refinance to a shorter loan term. By shortening your term to a 15 year mortgage or 20 year mortgage, you may be able to avoid thousands of dollars in unnecessary interest over the years of your loan.

For example, if you currently have a 30 year home loan and have paid 5 years, you still have 25 years remaining. Let’s say, your current mortgage payment is $1200 dollars and refinancing to a 15 year mortgage gives you a payment of $1500 monthly. To calculate the total costs of paying off your current mortgage we can use simple math: $1200 x 12 months x 25 years = $360,000 in total payments. After refinancing to a 15 year mortgage we can use the same math: $1500 x 12 months x 15 years = $270,000 in total payments. Refinancing to a 15 year mortgage in this example would save you $90,000 over the life of the loan and allow you to pay off your mortgage quickly.

Enroll in a Bi-Weekly Payment System

Another great option to pay off your mortgage quicker is to enroll in a bi-weekly payment system. There are several great companies that may assist you in paying bi-weekly however it is best to check with your current mortgage servicer to see if they offer this service without additional costs.

Paying bi-weekly is exactly as it sounds; paying a ½ mortgage payment every other week rather than paying once a month.  Doing this payment system allows you to pay down the principal faster which saves on compound interest.

Here is the secret to how bi-weekly payments work: If you pay a half payment every other week, that is 26 half payments made in one year (52 weeks in a year / 2 weeks = 26 payments). This is equivalent to 13 full payments (26 weeks x 1/2 payments = 13 full payments) rather than 12 payments made by paying once per month.

Essentially paying bi-weekly allows you to force yourself to pay one additional payment towards the principal annually. The compounding effect of paying bi-weekly on a 30 year mortgage allows you to pay off your mortgage in 24-26 years. Paying your mortgage on a bi-weekly payment system can save you thousands of dollars in interest and help you pay off your home loan sooner.

Apply Unexpected Income to Your Mortgage Principal (holiday bonuses, tax refunds, yard sales)

Throughout the year you may come into unexpected money from things such as holiday bonuses, tax refunds or even cash yard sales. Did your great Aunt Susie pass and leave you a few thousand dollars inheritance? Did you have a good night at the Casino?  If you have a high level of self-discipline, you may allow this unexpected money to go to work for you by applying it directly to your mortgage.  Applying this additional money to the principal of your mortgage will allow you to pay off your home faster.

Downsize to a Smaller Home to Pay Off your Mortgage Quicker

Another great option to pay off your mortgage more quickly is to downsize to a smaller house. As you get ready for retirement, chances are, you will not need as much space. Your children have already moved out and you have extra bedrooms simply collecting dust. It might make sense to considering selling your home and downsizing to a smaller house or condo.

By selling your current home, you may have equity that you could apply towards the purchase of a smaller, more affordable home or condo. For example, if you sell your home for $300,000 and have a $200,000 mortgage remaining, you would receive $100,000 from the equity. If you buy a new home for only $150,000 then you would only need a $50,000 mortgage. With a home loan that small you should be able to afford a 10 of 15 year home loan which will allow you to be debt free quickly.

Refinance to a Lower Interest Rate and Payment but Continue Paying the Same Amount

The last option to pay off your mortgage more quickly is a less apparent option as the previous examples. Most people would agree that it is beneficial to refinance to a lower rate and payment but many do not think past the initial monthly savings. Rather than buying a new car with the savings from your new, lower mortgage payment, you may want to considering paying the same as you were comfortable paying before your refinance. Every dollar above the minimum payment would go directly towards your mortgage principal and pay off your mortgage quicker.

Use these examples to rethink your retirement and pay off your mortgage quicker. With your mortgage being one of your largest investments, even a small change can compound into major savings over a 30 year period. For a free home loan analysis with a licensed loan officer in your area, call Riverbank Finance at 1-800-555-2098 or request information below.

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