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Refinancing Your Los Angeles Mortgage
Los Angeles and the rest of California is suffering from a sub-prime mortgage crisis. It's something that has steadily grown over the past decade as hoards of people with sub-prime mortgages are finding them to be much more expensive than your traditional fixed rate mortgage. With this crisis occurring, one area that more and more homeowners are turning to in an effort to save their homes from default and foreclosure is refinancing.
However, if you are a part of the group suffering in this sub-prime mortgage crisis, Governor Schwarzenegger says not to despair as this crisis is not going to last. In fact, Governor Schwarzenegger and U.S. Treasury Secretary Henry M. Paulson Jr. have a message of hope to Los Angeles and California residents. There are new federal and state initiatives in place that are designed to haul the fluctuating mortgage monthly payments for those homeowners who are suffering or going to be suffering from huge increases in the cost of their monthly mortgage payment.
The federal government has estimated that some 1.8 million homeowners with adjustable rate mortgages may be facing foreclosure in the next two years. One way that some of these homeowners can stop themselves from becoming a victim of these mortgages is if they refinance their adjustable rate mortgage to a fixed rate mortgage.
Should You Refinance Your Los Angeles Mortgage?
When you refinance your mortgage, you are essentially taking out a new home loan and then using some or all of that money to pay off your existing mortgage. In some instances, you are able to lower your interest rate, which can result in savings, or you can switch your mortgage from an adjustable rate mortgage to a fixed rate mortgage to save yourself from higher costs as your interest rate begins to increase.
Refinancing a mortgage isn't a quick and easy process. In fact, it's a long process and it has a cost. Your refinancing cost is in the form of points, closing costs and private mortgage insurance premiums that you have to pay when you take out a new loan. Additionally, any lost tax savings are also a part of the cost of refinancing your mortgage as well.
Many people think they can refinance to save themselves money. In part, this is true. For instance, if you refinance your Los Angeles mortgage because your cash flow is pretty tight at the moment, then you may be saving yourself money on a monthly basis in terms of your cash flow. However, if you look at the loan ten years from now, you're costing yourself more money in interest. If you extend the term of your mortgage to lower your monthly mortgage payments, you are actually paying more in total interest on your mortgage in the long run. So, yes, you're saving money right now, but you're losing money in the end.
Now, let's say you are refinancing your Los Angeles mortgage because you're trying to avoid the sub-prime crisis and you're in an adjustable rate mortgage. By switching to a fixed rate mortgage, you may feel as though you are paying more, but you're actually saving yourself money in the end. Why? On an adjustable rate mortgage, it's exactly that - adjustable. This means that you will end up having a fluctuating interest rate and a fluctuating mortgage payment and you never know when that fluctuation will occur. This mortgage can quickly and easily get more expensive for you and there's not much you can do unless you get out of it. With a fixed rate mortgage, you have the consistency of a monthly mortgage payment that isn't going to jump around on you and cost you more one month than it would the next. Each month you have the same mortgage payment as the month before. If you can get a rate that is similar to your low adjustable rate, then you can avoid the higher costs of the mortgage when the interest rates start to go up.
As you can see, refinancing your Los Angeles mortgage is a personal decision and there are several reason why you may want to refinance, but when it comes down to it you need to determine whether or not you are really saving yourself any money. Refinancing for short-term relief typically means you'll be paying more in the long run, you just won't feel the effects of it at the moment. Refinancing for long-term relief may seem more expensive now, but the additional cost will pay for itself in terms of consistency later.
The Cost of Refinancing
There are those lenders who offer "no points, no closing costs" refinancing options, but it is important that you look into these carefully before you sign up for this deal. Typically, there are several terms that you must meet and if you decide you want to pay your house off more quickly, you may have to pay pre-payment fees.
Typically, you will have to pay points and you will have to pay closing costs. Points are defined as prepaid fees. One point typically equals one percent of the amount of the mortgage loan and any points you are charged are usually deducted from the mortgage proceeds that you may receive. Mortgage lenders will typically charge a point as a loan origination fee as well. Beyond that fee, you may have to pay additional points if you are getting a loan that has an interest rate below the market rate at the time. This allows the lender to make a little bit of their money upfront and in return, you get a lower interest rate. So, if you're going to be living in your home for a long period of time, it is often in your best interest to pay more points so that you can get a lower interest rate to save yourself more money in the long run.
Closing costs will vary depending on the fees that you are charged. For instance, there may be an appraisal fee, title search fee or other fees for recording and processing your mortgage. If your loan-to-value ratio is greater than eighty percent, you may be required to carry private mortgage insurance as well. The premiums for this type of mortgage typically become a portion of your monthly payment. Because of this, you may actually be reducing your savings on the refinance. Also, be aware that there are often hidden costs involved with refinancing a mortgage as well and you want to do your best to become aware of those.
Living in Los Angeles
Aside from the cost of housing in Los Angeles and the sub-prime mortgage crisis, Los Angeles is still a great place to live if you love the California lifestyle.
There are ton of things to do to keep you busy in this city and you'll be able to keep yourself busy for quite some time in Los Angeles as it is simply impossible to do everything all at once. This list of things to do in Los Angeles is by no means complete, but they are a few of the favorites of those people who live in Los Angeles.
Perhaps if you save on your Los Angeles mortgage refinancing you can visit "the happiest place on earth." Where's that? It's Disneyland of course! You also won't want to miss Disney's California Adventure as well.
If you live in Los Angeles, you're not a true resident if you haven't made your way to Hollywood. Hollywood Boulevard offers you a close-up of why the celebrities love Los Angeles. Thanks to the renovations and renewals that have been made, you can enjoy the Walk of Fame, Mann's Theatre and the Entertainment Museum even more. Other notable places to visit include Venice Beach, Rodeo Drive, Knott's Berry Farm, Santa Monica Beach and Pier and Six Flags Magic Mountain.
