Monthly Archives: October 2013

How a Refinance Works?

Many consumers are apprehensive of asking for refinancing of their loans as they are not really sure how a refinance works, though it can help save them quite a few dollars every month, adding to thousands of dollars over the span of loan. Here’s a simple example. On taking a loan of $300,000, payable over a period of thirty years and carrying 6% rate of interest, you’ll need to pay $1,811/month and the total amount of interest you would have paid for the duration of the loan would be $285,845. The same amount carrying interest @4 ½%would cost you $1,579/month and the total payable interest for the length of loan would come to$203,100. Now, as far as how a refinance works, it’s not really different from the process you followed while applying for the first mortgage. Refinance offers you the added advantage of fulfilling your present loan.

Application

Once you decide to go for refinancing, you need to obtain an application from your selected lender. Should you have any doubts, talk to their representative. Fill up all the details asked for in the application, attach all the needed supporting documents and submit the same along with the requisite fee. You’ll need to provide copies of your tax returns and W-2 forms for the last 2-3 years along with your paystub for one month and bank statements for three months. On choosing you original banker for refinancing, you are required to submit only those documents that aren’t there already. Sign all the relevant disclosure forms like privacy, servicing truth-in-lending and good faith estimate.

Underwriting

The bank analyses your application and scrutinizes your credit report. Using your financial statements, the underwriter gets your monthly income for comparing that to your latest monthly payment and debt, already contained in your credit report. Normally, the bank wouldn’t like above 28% of your income going to housing requirements including mortgage, tax and insurance and no more than 36-40% towards serving your debts on the whole. However, these figures may vary a bit with various lenders. If your debt has increased since you availed the original loan, in all likelihood you’ll be disqualified even if the payment is smaller. The lender will order an evaluation of your property to ascertain correct loan-to-value ratio for providing new loan. Once again, you are not likely to qualify if the value of your property has dropped.

Commitment

After the lender has decided to provide you funds, you’ll receive a commitment letter from them, promising to lend you cash, enabling you to pay your present loan. The conditions stipulated in the letter must be strictly adhered to for closing the deal. You’ll be given a definite amount of time for accepting the offer. You just sign that letter and send it back to the lender along with the required fees, if any.  After you accept their offer, you get about 30-60 days for closing the loan.

Closing

Get in touch with your lender and fix a date for closing the deal. Having fixed the date, approach your present lender and ask for a payoff statement. The statement gives all details pertaining to principal amount, interest thereof, cancellation plus administrative charges payable on loan. Usually, lenders charge some fee for providing this statement and take 2/3 days for issuing the letter. Ensure to collect it before the closing date. At the time of closing, you’ll need to sign all documents connected to your new loan. The new lender will transfer funds to your new account after three business days and file a new lien to replace the previous one.

Now that you are aware how a refinance works, you will appreciate the benefits of refinancing and save your money.

How to Invest in the Canadian Stock Market?

Investors often tend to overlook the potential offered by the Canadian stock market, and keep patronizing the American Exchange in New York City. The Canadian market, comprising of a number of domestic and multinational companies, is a significant market. You’ll find it gainful to invest in the Canadian stock market, on considering enhancing your financial investment in North American trade. Here you’ll know how to invest in the Canadian stock market

Instructions

  1. Talk to one of the financial advisors registered with Toronto stock exchange. You’ll find a lot of American brokers, having regular access to Toronto’s stock floor. Before investing you funds, you should study the services offered by the broker and success rate of his clients.
  2. Find out high performing shares, bonds and equities for trading though Toronto stock exchange that has an abundance of registered brokers and hundreds of local and foreign companies that have huge investments all over Canada.
  3. With help of TSX Venture Exchange, you can survey the potential of venture capital in Canada. This exchange contains a number of venture companies that include a wide range of technology and speculative goings-on.
  4. You may patronize the NGX market for trading of natural gas futures or electrical systems of Canada.  You may use the NGX market and buy stocks of that country’s natural-resource development and get returns as a result of the sturdy growth of customers. Natural-resource businesses collect profits from trades through particular trading fees.
  5. You can examine the public disclosure and profit statements of publicly traded companies of Canada, using the System for Electronic Document Analysis and Retrieval (SEDAR). It is mandatory for all companies to put forward those forms every month, for the benefit of astute traders on Canadian stock market.
  6. You can regulate your stock ticker to reproduce the movement of various indexes and stocks wherein you invested in the Canadian Stock Market. The website of the Toronto Stock Exchange provides an all-inclusive form allowing you to keep an online track of industrial sectors that interest you.

Tips & Warnings

Make investments in Canadian income trusts, using the Canadian stock market. Such trusts on the Toronto stock exchange enable you to investment in companies that pay dividends as per their quarterly cash flow. You’ll find such trusts perfect when looking for an experienced company having strong potential for growth over a long term.

How Often can You Refinance?

 

Refinancing of your mortgage has quite a few benefits but as a homeowner you may not be sure how often can you refinance. Given an opportunity, is it worth opting for refinancing!

Well, you may choose to refinance anytime and any number of times as there is no prescribed limit for how often one can go for refinancing but the issue is will it be worthwhile for the homeowner. Perhaps, getting refinanced all too often is neither helpful nor desirable in most cases.

Usually, any lending institution will be keen to refinance your loan, irrespective of your financial circumstances as it makes money due closing expenses coupled with your borrowings.

Restrictions are generally imposed when you want to get your mortgage refinanced from an individual lender. For instance, one lender may insist on your having the home for a minimum period of one year before offering to refinance you, while another may ask you to have some specified amount of equity accumulated against your home, say ten percent, before refinancing your mortgage.

So, it is not a matter of how often can you refinance, but when it will be helpful for you to opt for refinancing.

A Critical decision

Though you get the option of refinancing almost anytime you want, you have to assess how beneficial it will be for you at any given time. Though refinancing is not difficult, it is a big responsibility. Moreover, the procedure for refinancing is quite like getting your initial mortgage.

It means that on opting to get your loan refinanced, you are going to spend the same amount of cash as you would have done at the time of initial mortgage. So, you have to assess if the expenses to be incurred for refinancing will justify your decision and prove helpful in the long run.

Most experts are of the opinion that refinancing of your mortgage is worthwhile when the rate of interest charged on refinancing is at least two percentage points less than the rate that you may be paying already. Yet, in certain exceptional cases, it may prove worthwhile if the chargeable rate of interest is less by 1.5 percentage points. As per the thumb rule, the difference needs to be two percent to make refinancing worthwhile.

Other than this aspect, you also need to think of your plans for the house before deciding for any refinancing. If you are going to live in that house for just one or two years, it may not be a good idea to ask for refinancing.  Refinancing is recommended for only those homeowners who are going to live in that home for at least three years. The decision may therefore vary with individuals.

Refinance Benefits

If you want to assess if refinancing is indeed going to be helpful in your case, you should have a frank discussion with a reliable professional. Here are the most important benefits that homeowners look forward to due refinancing:

  • To gain by having a fixed rate of interest by refinancing an adjustable-rate mortgage (ARM).
  • To switch over from one ARM to another, offering a lower rate and probably more attractive terms and conditions.
  • To changeover to a loan with a shorter repayment term, thus helping building equity in the home speedily.
  • To withdraw funds against the equity that is already built-up in the home for another purpose.

Conclusion

It doesn’t really matter how often you can refinance, as most financial institutions will be happy lending you funds anytime you choose to have the same. So, your criteria should be the ongoing market rates of interest, how long you intend living in that home and the kind of benefits you are expecting from refinancing your mortgage.

In case you don’t find refinancing worthwhile, but are inclined to seek some changes in your present mortgage, you should talk to your present lender. Tell him the modifications you wish to have in the present agreement and how is that going to help you. It may work else you always have the option of getting a second mortgage.