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Low Mortgage Rates Give Homeowners Another Refinance Opportunity

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Mortgage refinancing just got more attractive, thanks to the combination of a plunge in mortgage rates in recent weeks and the end of a much-maligned federal fee on refis. The average rate on a 30-year refinance fell to 3.03 percent this week, down from 3.11 percent last week, according to Bankrate’s national survey of lenders.

Many in the mortgage industry expected the refinancing boom to fade away as the economy recovered from the coronavirus recession. Instead, the spread of the Delta variant of COVID-19 has roiled financial markets.

For homeowners, there’s a new opportunity to cash in on low refi rates. “A lot of people who may have thought they missed the boat the first time around may be interested now,” says Sebastian Hart, senior manager of capital markets at mortgage lender Better.com.

Mortgage refinancing rates are moving in borrowers’ favor for a couple of reasons. In one driver, mortgage regulators said last week they were ending a widely criticized surcharge on refinances. That announcement from the Federal Housing Finance Agency came Friday morning, and by Friday afternoon, lenders were dropping refi rates.

“As soon as this announcement was made by the FHFA, lenders were hot on it,” says Robert Humann of Credible.com.

Homeowners have responded, too, by taking advantage of the drop in rates. “Our pipeline jumped 20 percent in a week,” says Gordon Miller, owner of Miller Lending Group in Cary, North Carolina.

Mortgage rates drop across the board

The federal fee of 0.5 percent of the amount of a refinance was paid by lenders rather than borrowers. In response, lenders last year boosted refi rates by about 12.5 basis points, or 0.125 percentage points.

Some lenders slashed rates on 15-year fixed-rate loans to less than 2 percent, and they dangled deals on 30-year refinances of well below 3 percent. The moves might rekindle a refinancing boom that was in full swing earlier this year.

The other factor pushing mortgage rates down is the resurgence of the coronavirus, which is sparking new questions about the future of the economic recovery. Reflecting those concerns, the yield on 10-year Treasury bonds has fallen to 1.28 percent as of Wednesday. The 10-year Treasury — a key benchmark for 30-year mortgage rates — stood at 1.5 percent a month ago.

How to refinance your mortgage

Step 1: Set a clear goal

Have a compelling reason to refinance. It could be cutting your monthly payment, shortening the term of your loan or pulling out equity for home repairs or to repay higher-interest debt. You may also want to roll your HELOC into a refi.

What to consider: If you’re cutting your interest rate but resetting the clock on a 30-year mortgage, you might pay less every month but more over the life of your loan. That’s because amortization schedules front-load interest charges in the early years of a mortgage.

Step 2: Check your credit score

You’ll need to qualify for a refinance just as you needed to get approval for your original home loan. The higher your credit score, the better refinance rates lenders will offer you — and the better your chances of underwriters approving your loan.

What to consider: Lenders became stricter about extending credit during the pandemic, so the typical mortgage borrower’s credit score is higher now than ever. While there are ways to refinance your mortgage with bad credit, it can make sense to spend a few months boosting your credit score before you start the process.

Step 3: Figure out how much home equity you have

Your home equity is the value of your home in excess of what you owe your mortgage lender. To find that figure, check your mortgage statement to see your current balance. Then, check online home search sites or get a real estate agent to run an analysis to find the current estimated value of your home. Your home equity is the difference between the two. For example, if you still owe $250,000 on your home, and it is worth $325,000, your home equity is $75,000.

What to consider: You may be able to refinance a conventional loan with as little as 5 percent equity, but you’ll get better rates and fewer fees (and won’t have to pay for private mortgage insurance, or PMI) if you have more than 20 percent equity. The more equity you have in your home, the less risky the loan is to the lender.

Step 4: Shop multiple mortgage lenders

Getting quotes from multiple mortgage lenders can save you thousands. Once you’ve chosen a lender, discuss when it’s best to lock in your rate so you won’t have to worry about rates climbing before your loan closes.

What to consider: In addition to comparing interest rates, pay attention to the cost of fees and whether they’ll be due upfront or rolled into your new mortgage. Lenders sometimes offer no-closing-cost refinances but charge a higher interest rate or add to the loan balance to compensate.

Step 5: Get your paperwork in order

Gather recent pay stubs, federal tax returns, bank statements and anything else your mortgage lender requests. Your lender will also look at your credit and net worth, so disclose your assets and liabilities upfront.

What to consider: Having your documentation ready before starting the refinancing process can make it go more smoothly.

Step 6: Prepare for the appraisal

Mortgage lenders typically require a mortgage refinance appraisal to determine your home’s current market value.

What to consider: You’ll pay a few hundred dollars for the appraisal. Letting the lender know of any improvements or repairs you’ve made since purchasing your home could lead to a higher appraisal.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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