One of the biggest reasons people look for az refinance (az refi) is because of the debt they currently carry…

Getting a plan in place does take a lot of the emotional stress and psychological burden away.  It provides a relief knowing that what you are doing does have a means to an end.  So here’s some tips to help put a plan together.

However, there are professional companies out there who do this for a living, please note, these are only the things I’ve done to help manage my personal finances.

1) Don’t Get Any More Debt.

2) Log How You Spend Your Money.

3) Get Better Interest Rates or Payment Terms.

AZ refinance and getting on a better AZ mortgage can save $,000’s of dollars a year.  But make sure that there aren’t any large set up fees for your new loan or any exit charges for your existing loan because these can eliminate all the benefits of moving in the first place.

Shop around, speak to a loan officer,contact a number of refinance agencies.  But be careful not too submit too many applications.  I’ve heard that each time you apply for a loan, whether you take the finance or not, it can impact your credit score and your credit score can impact the loan type and rates you pay (bit of a vicious circle).  For more on Credit Scores click here.

Consolidating your debt for your Credit Cards, (which you are no longer going to use for spending) is another great way of reducing your outgoings.  So AZ Refi isn’t always about your big debt (mortgages, car loan etc), but also the smaller debt sums you have.  You can often transfer debt from one company to another and get a better rate, but contacting your current financial institution with the threat of leaving them means they are very open to renegotiating your terms.

4) Your Debt Payment Plan.

Now you know where you spend your money, and you’ve got the best rates you can through your AZ refi activities, you are best to list these expenses in order of what costs the most in terms of interest payments.  Whatever the most expensive debt is, this is what you should plan to pay off first.

Make sure you pay on time every month and if you overpay slightly, it’s amazing the impact this can have over the longer term.  But make sure if you are going to overpay one debt, it’s the one that will have the biggest impact i.e. the one with the biggest interest rate.

Conclusion

Take back control!

Applying what we’ve discussed above are simple tactics that will erode the debt you have, but more importantly, they become habits that will create financial abundance when move into a positive cash positions. But the key is START TODAY.

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The biggest obstacle to many looking for AZ Refinance (AZ refi) is a poor credit score, so you should research this and fix any issues before you start a dialogue with any AZ mortgage company.

You get  credit score from a credit report which is simply a record of your borrowing and repayment history.   All financial institutions like Banks, credit card companies etc report your payment history to one, two or all three of the major credit reporting agencies in the United States.  These are Equifax, TransUnion and Experian.

There are two types of financial notification these companies track.  The first is “applied for” credit (meaning that you requested to borrow money from the r

eporting lender), and second is “not applied for” credit (meaning bad checks, bills, civil judgments, i.e bills that are not a result of a credit application). If you pay all your bills on time, you will not have “not applied for” credit entries listed in your credit report.  The three credit agencies listed above provide AZ Refi lenders with this information in the form of a score so they can assess your worthiness for AZ refinance.

The result of all this data kept by the credit agencies is to provide a number.   If your score slips below a certain number and you are looking for an AZ refinance, your loan options tend to be more limited.  Below a certain which at the time of writing was about 720, then loan entitlement is known as “subprime” and you are typically restricted on loan to value and pay 2-3% higher loan rates and fees than “prime” customers.  This is why it’s so important that you look after this score.  It can hit you very hard in the pocket!

There are many other variables that impact az refi, but this one on it’s own can actually impact these others for the better or worse.  So get a credit score report done ASAP.  There are many companies that will do it for free (initially), but beware of ongoing charges.  I’ll post more on this subject in future articles.

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What does APR Really Mean?

APR is a term that can be a bit confusing, but you should understand what it’s about if you are considering refinancing.  Although we focus on people refinancing in Arizona (or AZ Refi as like to call it), the APR of any loan is very important, especially if you are looking to save money.  This is a term that lenders use to disclose how much they well ultimately charge you, so let me explain what it’s all about.

The Annual Percentage Rate (APR) is required to be disclosed by law when providing any loan or financing option.  It’s very useful for any potential borrower, because it allows you to compare lenders. The APR takes into account any fees and rate variations involved with an AZ Refi or purchase.

All things being equal, it is very useful to determine which loan would be most competitive when searching for an Arizona refinance deal.  However, mortgage companies and other lenders tend to calculate APR differently. The rules provided to the lenders in calculating APR are a grey area.

Typically, the fees that are included in the AZ Refi APR calculation are:

Points (discount and origination), prepaid interest, processing fees, underwriting fees, preparation fees for any document and PMI (private mortgage insurance).  So you can see why it can be difficult to compare like for like without a common calculation like APR to give you a clue.

Application fees for any loan and life insurance are sometimes inclusive in the APR calculation, so it’s worth asking the question of the lender as to what it included.

Another set of fees that are not usually inclusive in the AZ Refi APR calculation (but which you should definitely work into your personal loan calculations) are the following:

Title, Appraisal, Credit, Transfer Taxes, Recording, Home Inspections, Notary and Attorney fees, Escrow and document preparation.

APR does not give you an indication of the length of your rate lock.  A lender with a 15 year loan rate lock may carry a lower APR than one with a 30 year lock.

It is not easy to compare loans with different loan lengths.  The 15 year loan will carry a higher APR due to the fees amortized over a shorter loan term.

Always get a Good Faith Estimate (GFE) to compare loan cost when completing an AZ Refi (Arizona refinance) or purchase loan.  This an estimate of your settlement charges and loan terms.  APR can be easily manipulated due to some of the factors we have discussed. The GFE will break down the loan cost and true interest rates which is what your mortgage payment will be based on.  Just be sure that the lenders are consistent with the loan terms provided on the GFE when you get to the closing table.

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Types of AZ Refinance Mortgages Available to You

There are four different types of refi loans. Depending on your financial situation and your goal for refinancing will help you decide which is best for you.

1.The Adjustable (or Variable) Rate Mortgage (ARM).

This type of mortgage means that the interest rate is varied and “Adjusted” by the borrower, usually according to whatever rules they choose to apply.  However, quite often the rate by which the interest varies is usually similar to a State or National banking index.  Because these rates are adjustable by the bank or financial institute, they can go up at their discretion and you are liable to pay the corresponding increase in interest.  BUT, to be competitive with other organizations and to win your business, they can equally be competitive.

The benefit with this type of deal is that when general interests rates are low, so will your refinance loan interest rates, so you pay less, or pay interest.  This means you can pay less each month and have more money in your pocket, or you can pay the same but pay off more the capital sum (the amount you’ve borrowed).

2. The Fixed Rate Mortgage (FRM)

The  fixed rate mortgage gives you a fixed rate for a fixed period of time.  This could be the duration of the total loan period, but is more likely to be for a shorter period like 2, 3 or 5 years.

The benefit of this type of AZ refi is that you know exactly how much your repayments are every month.  If general interest rates should sky rocket, you don’t have to worry about finding the extra interest each month.  This makes budgeting much easier and makes life a little less stressful.  The downside is that should the general interest rates fall, or the financial institute decide to drop their rates to be more competitive, you don’t receive the benefit of a lower payment each month.  Your repayments stay exactly the same, which can be quite painful!

3. The Interest Only Mortgage

An interest only loan, is one where you pay, as by definition, only the interest due against the amount of money you have borrowed.  Obviously the benefit of this is that your monthly payments are low, BUT you are not paying off any of the money you have borrowed.  So at the end of the term, let’s say 25 years, you still owe the full amount you borrowed.

So why would you have such an AZ refi deal?  Well you would do this if you had another way to pay off the loan on completion of the period.  This might be in the form of other investments or you intend to downsize at retirement and release a lump of capital from your property which you would to pay off your debt.  But if you intend to continue to live in your house and haven’t another way to organized to pay off the debt, then you put your home at risk of repossession.

These types of mortgages are more commonly used for investing in property rather than to buy your principle place of residence, otherwise known as your home.  If a property is bought as an investment and is rented out, then you can sell it at the end of the term, pay off your debt and hopefully have money left over, while still living in you own home.

4. The Tracker Mortgage

This final type of AZ refi to consider is similar to the ARM in that the interest rate does vary, but unlike the ARM, this one usually only varies by the fluctuations of predefined rate to which it is tracking, like a federal monetary index.  The lending body cannot increase the rate at their discretion, he rate is usually set by a percentage above the rate which it is tracking.

I guess you could say that this gives you some of the best features of both the ARM and the FRM.

If you are in the market for an AZ refinance deal, keep in mind that you literally have hundreds of different loans to choose from and most of them are variations of these different loan types.  Many financial institutions will offer packages that mix these deals together  For example you could be on a fixed rate for a period of time and then go to an ARM or Tracker for the duration of the loan.

Although it may seem that the best deal would be go for short term fixed rates and then keep refinancing, the lenders quite often have large exit penalties to tie you in, so read the small print.  You may have also paid a large setup fee, so although you have a low fixed interest rate and pay a favorable monthly repayment, you should consider all the costs.

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