How to Refinance your Home - Loans Guide

Home Refinancing Basics

In recent years, millions of homeowners have taken advantage of low rates and refinanced their mortgages. This article describes the advantages and possible pitfalls associated with a "refi."

Before You Start

• Remember that refinancing to reduce debt can be a smart move, but refinancing in order to borrow more for consumer purchases (car, vacation, etc.) could set you back significantly.
• Read the fine print on your current mortgage to learn whether you'll be assessed penalties or fees for "getting out" of that loan early.
• Make sure you know whether you have a fixed or variable interest rate and what the terms are.

1.Home Refinancing Basics

In recent years, Americans seeking to take advantage of low interest rates have lined up to refinance their mortgages. In fact, refinancings hit an all-time high in 2003, and remained high in both 2004 and 2005, according to the Mortgage Bankers Association of America.
But while it's true that refinancing has the potential to help you reduce the costs associated with borrowing money to own a home, it is not necessarily a strategy that makes sense for every individual in every situation. So before you make a commitment to refinance your mortgage, its important to do your homework and determine whether such a move is the right one for you.

2. To Refinance or Not

The old and arbitrary rule of thumb said that a refi only makes sense if you can lower your interest rate by at least two percentage points for example, from 9% to 7%. But what really matters is how long it will take you to break even and whether you plan to stay in your home that long. In other words, make sure you understand -- and are comfortable with -- the amount of time it will take for your overall savings to compensate for the cost of the refinancing.
Consider this: If you had a $200,000 30-year mortgage with an 8% interest rate, your monthly payment would be $1,468. If you refinanced at 6%, your new monthly payment would be $1,199, a savings of $269 per month. Assuming that your new closing costs amounted to $2,000, it would take eight months to break even. ($269 x 8 = $2,152). If you planned to stay in your home for at least eight more months, then a refi would be appropriate under these conditions. If you planned to sell the house before then, you might not want to bother refinancing. (See below for additional examples.)

3. Remember -- All Mortgages Are Not Created Equal

Don't make the mistake of choosing a mortgage based only on its stated annual percentage rate (APR), because there are a variety of other important variables to consider, such as:
The term of the mortgage -- This describes the amount of time it will take you to pay off the loan's principal and interest. Although short-term mortgages typically offer lower interest rates than long-term mortgages, they usually involve higher monthly payments. On the other hand, they can result in significantly reduced interest costs over time.
The variability of the interest rate -- There are two basic types of mortgages: those with "fixed" (i.e., unchanging) interest rates and those with variable rates, which can change after a predetermined amount of time has passed, such as one year or five years. While an adjustable-rate mortgage (ARM) usually offers a lower introductory rate than a fixed-rate mortgage with a comparable term, the ARM's rate could jump in the future if interest rates rise. If you plan to stay in your home for a long time, it may make sense to opt for the predictability and security of a fixed rate, whereas an ARM might make sense if you plan to sell before its rate is allowed to go up. Also keep in mind that interest rates hovered near historical lows in recent years and are more likely to increase than decrease over time.
Points -- Points (also known as "origination fees" or "discount fees") are fees that you pay to a lender or broker when you close the deal. While a "no-cost" or "zero points" mortgage does not carry this up-front cost, it could prove to be more expensive if the lender charges a higher interest rate instead. So you'll need to determine whether the savings from a lower rate justify the added costs of paying points. (One point is equal to one percent of the loan's value.)

How Much Would You Save?
A homeowner with a 30-year, $200,000 mortgage charging 8% interest would pay $1,468 each month. The table below illustrates the potential monthly savings and the various break-even periods that would result from refinancing at different rates.
Rate After Refinancing	New Monthly Payment	Monthly Savings	Months to Break Even*
7.5%	$1,398	$70	29
7.0%	$1,331	$137	15
6.5%	$1,264	$204	10
6.0%	$1,199	$269	8
5.5%	$1,136	$332	7
5.0%	$1,074	$394	6
*Assumes $2,000 closing costs. Rounded up to the next highest month.

A Closer Look at Mortgage Fees

Using data collected during 2003, researchers at Bankrate.com determined the average fees charged to consumers who borrow money to buy a home. Based on a loan of $180,000, the fees broke down as follows: Average Lender/Broker Fees Administration fee: $336 Application fee: $205 Commitment fee: $498 Document preparation: $194 Funding fee: $228 Mortgage broker fee: $839 Processing: $320 Tax service: $73 Underwriting: $269 Wire transfer: $31 Third-Party Fees Appraisal: $327 Attorney or settlement fees: $445 Credit report: $29 Flood certification: $17 Pest & other inspection: $68 Postage/courier: $45 Survey: $174 Title insurance: $605 Title work: $200 Government Fees Recording fee: $76 Various taxes: $1,339

4. Stick With What You Know?

Finally, keep in mind that your current lender may make it easier and cheaper to refinance than another lender would. That's because your current lender is likely to have all of your important financial information on hand already, which reduces the time and resources necessary to process your application. But don't let that be your only consideration. To make a well-informed, confident decision you'll need to shop around, crunch the numbers, and ask plenty of questions.

Summary

• The decision to refinance should only be made if the long-term savings outweigh the initial expenses. To calculate your break-even point, divide the cost of the refi by your monthly savings. The resulting figure represents the number of months you will need to stay in the home to make the strategy work.
• Don't select a new mortgage based only on its annual percentage rate.
• Also evaluate the term of the loan, whether the interest rate is fixed or variable, and the relative merits of paying up-front fees in exchange for a lower rate.
• Your current lender already knows you and has your financial information on file, so you may be able to get a better deal that way, instead of going to a new lender.
• To get the best possible refinancing deal, you'll need to shop around, crunch some numbers, and ask a lot of questions.

Checklist

• Shop around and conduct a detailed cost assessment (with a financial professional, if necessary) to identify which mortgage offers the greatest financial benefits.
• Read the entire contract before signing. Don't let anyone pressure you or rush you to make a hasty decision.
• If refinancing results in lower monthly payments, use those savings to pursue other important goals, such as preparing for retirement and college costs.

NRI home loans on the upswing

BankBazaar.com

Most NRIs give a lot of thinking before investing in property in India and most of the time put off the plan due to effort, research and planning involved and in some instances if they do not have enough funds for the same. For such individuals there is always the NRI home loan.

RBI defines NRI as "An Indian citizen who holds a valid Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a NRI."

The NRI loans are made available for the following purposes:

Purpose of the NRI Home Loan

Self-construction of a property on a plot of land.

Finance the purchase of a plot of land allotted by a society/development authority.

Renovate/improve an existing property in India.

Purchase of a house either under construction or on a resale.

Non-resident Indians are also permitted to purchase an existing house or flat. The RBI has not prohibited banks from providing financing to NRIs for the purchase of a second house, but the loan on the house is for the self-occupation of the NRI upon their return to India. Loans are also offered to NRIs against NRE deposits. These loans can be repaid out of NRE funds but the interest would be charged at a commercial rate. Loans to Non-Resident Indians are also provided against FCNR deposits. 

Difference between a normal & NRI Loan  

NRI home loans can be availed by any NRI with as much ease and convince as any resident would avail a home loan. However some difference between the two kinds of loans exists in terms of tenure, documents, repayment etc.

Interest rate is little costlier for NRI than Indian residents, it is 0.25% to 0.50% more for NRIs. The NRI gets the only 85% cost of the property as a loan amount.

The tenure of loan is also short ranging from 7 years to 15 years. The size of the loan depends upon the borrower's repayment capacity.

Up to 36 times of the gross monthly earnings of the applicant may be issued as loan. However, there is a maximum limit. Calculation of eligibility is same as that of Indians living in the country.

Difference between a normal & NRI Loan  

The re-payment can be made as equated monthly Installments (EMI) through Non - Resident Ordinary (NRO) account or the Non Resident External (NRE) Account.

For security, most banks insist that the first mortgage of the property should be in their name. If the property is under construction then adequate additional security is required such as guarantee of third party (either resident or non-resident).

Tax benefits

NRIs cannot claim tax benefits on home loans in India as they have to pay tax in the nation where they work and earn. However, they need to file tax returns to become eligible for home loans. However, if they pay tax in India for income earned in India, they can claim tax rebate for the home loan. 

The current scenario

An estimated 25 million NRIs living in 130 countries have remitted US$52 billion so far this year (December 2009). In fact India topped the list of countries in remittance flow followed by China and Mexico, according to World Bank report on Migration and Development Brief.

The impact of global slowdown, job losses and unviable job offers has necessitated a section of NRIs to return to Indian shores.

According to housing finance companies and banks disbursing home loans to NRIs/PIOs in Dubai, there has been a sudden surge in demand for residential property across Indian cities and particularly for Tier II cities in the wake of the economic slowdown in the emirate.

Southern cities in particular Bangalore, Chennai and Hyderabad are driving the demand though minimal level demand exists for other cities as well. Most of the NRIs keen to invest in real estate back home are looking for home loans as they are unable to get loans locally due to the current tight liquidity situation across US.

What experts say?

Experts agree that despite turbulence in mature markets, the "emotional appeal" of buying a property in India may be stronger now. However, this in turn has created a price increase in the last six months.

Popular property portals claim that the number of queries from NRIs has surged nearly 15-20 per cent over the last two-three months. However, just how many of these 'queries' translate into actual sales remains to be seen, say people behind the business.

The focus on NRIs for these portals is stronger now as many are looking to come back to India apart from those who wish to invest in properties. Another factor that seems to favour NRIS is the FDI Policy that permits FDI up to 100% from foreign/NRI investor under the automatic route has boosted NRI confidence. Banks have attractive NRI housing schemes to accommodate the housing needs of NRIs.

From the stables of HFCs, NRI housing finance plans with suitable repayment options are available. The easy interest rates on housing finance and the improved lifestyle that developers have created has enabled NRIs to acquire property not only for investment, but also for personal use.

Access to NRI loans - at the door step

The response to the real estate market has been so encouraging from the overseas community that it has prompted housing finance companies (HFCs) to set up branches in countries where there is a high NRI concentration, as in the case of ICICI Bank.

The bank has representative offices in Dubai, New York, Bahrain, Singapore and the UK to tap potential property investors there.

ICICI Bank, Sundaram Home Finance Limited, LIC Housing Finance, HDFC, CanFin Homes, Citibank and a host of other scheduled banks are vying for lending opportunities to NRIs.

However the final decision on whether the time is right to buy a house, whether to use one's own funds or to take a loan, whether to go for an independent house or an apartment, and which home loan provider to use must be made by the NRI himself/herself after careful analysis.

What this means for the realty market

Builders are looking to make up for the huge losses in the past year or so.

With growing NRI interest in Indian properties, reports suggest that the realty prices have rebounded to 2007-2008 levels, which however cannot be good news for people scouting for homes with toned down prices.

This is again an example of how a reaction in one corner of the globe can affect another.

Sometime back the same scenario happened with rentals, which shot up with a lot of NRIs returning home to take up jobs in India.

Source: BankBazaar.com - An online marketplace for your personal loan and home loan needs.

House Price Recovery Just A Head Fake, Says Alpert, Especially In New York

In the second half of 2009, house prices staged a surprising recovery, leading many to conclude that the housing bust was done.
Keep dreaming, says Dan Alpert of Westwood Capital.
The rise in the second half of 2009 was mainly the result of pent-up demand combined with a tax-break, subsidized mortgage rates, and other incentives.  The housing market is still awash in excess inventory, and Alpert says this will eventually drive prices down to 8%-10% below the lows of early last year.
The good news?
House prices should bottom this year and then begin to recover.  Also, for the hardest hit areas, such as those in California or the sand states, the bust is probably over.  Prices have fallen so far in those areas that Alpert thinks they're bottoming now.
So where is the sky still falling?
Places where price-to-rent ratios are still well above historical norms, such as New York City.
A staggering amount of excess inventory means the housing crash in NYC is alive and well, Alpert says.

2011 SIBOR Rate

2011 SIBOR Rate
We review the latest 2011 SIBOR Rate of Singapore banks and financial institutions in the current interest rate environment.

Here are the latest 2011 SIBOR Rate for your interest.

Note that 2011 SIBOR Rate is for personal use only. Kindly do not use 2011 SIBOR rate to calculate your housing home loan payments.


14 Jan 2011 Latest 2011 SIBOR Rate:

3-month 7 Jan 2011 SIBOR =

Irda sounds out insurers on nuclear accident cover

|MUMBAI: A year after private nuclear plants became a possibility in India following the Indo-US nuclear deal, the insurance regulator is deliberating with companies to cover liabilities arising out of nuclear accidents, which is essential for such plants.

“Our discussions on insurance covers for nuclear risks are at a preliminary stage,” Irda chairman J Hari Narayan told ET. “We need to examine global practices of covering such a liability before taking a final view,” he said.

The nuclear treaty of last year allows India to carry out nuclear trade, have options for nuclear power and access to sensitive technology which are also used for nuclear weapons. But the absence of rules for insurance in the sector prevented progress in setting up new plants.

Currently, nuclear risks are not covered by any policy, as insurers do not have the wherewithal to estimate liabilities. All property insurance covers exclude losses due to nuclear reaction, nuclear radiation or radioactive contamination.

In most countries, operators of nuclear plants buy insurance cover as they are liable to pay compensation for any damage. Normally, the liability is limited by both international conventions and national legislation. The state has the responsibility to accept any liability more than insured. The absence of such covers here may make it difficult to fund relief, if an accident occurs.

The US, for instance, is not bound by any international nuclear liability convention. The liability from a nuclear accident is addressed by the Price Anderson Act of 1956, which provides $10 billion in cover without cost to the government. It covers power reactors, research reactors and all other nuclear facilities. More than $200 million has been paid by US insurance pools in claims and costs of litigation since the Price Anderson Act came into effect, all of it by the insurance pools.

The beginning of discussions itself may not lead to a set of rules soon, since the negotiations with global re-insurers are going to be hard. “There is now scope for private sector participation in nuclear power generation. We have been working with international re-insurers to form a pool to cover nuclear risks. But that will take some time to fructify,” said Yogesh Lohiya, chairman, GIC.

Incidentally, a partial cover for nuclear power plants was introduced by Oriental Insurance earlier under the chairmanship of Mr Lohiya. “At that time, providing a cover was difficult, as re-insurers wanted inspection of the site, which was not possible. Despite this, we managed to arrange cover for the cold zone of nuclear plants,” he said. A nuclear power plant has a “hot zone”, which is the critical area where the nuclear reactions take place and a “cold zone” where steam generated turbines are operated.

A pool mechanism, as in the case of terror insurance, may be a suitable one, said M Ramadoss, CMD at Oriental Insurance. Under a pool the premium collected by various insurers under terror cover are kept in a separate account. For any claim beyond a prescribed amount, the company dips into the pool resources to pay for claims. But that may not be enough, since claims from nuclear accidents could be huge and it may need government support.

Special Deposit Schemes: Pension puzzle persists

A week from now, India’s retirement funds will be again sizing up investment options which will yield them decent returns needed to meet the pay-out obligations of their members who are due to retire.

Every year, in the first week of January, retirement or provident funds receive interest payments aggregating Rs 10,000 crore or more on their investment in Special Deposit Schemes or SDS as it is popularly known. The scheme, which was first floated by the government in 1975, was later extended several times and until further notice a few years ago. The SDS has a corpus of over Rs 1,15,000 crore, which has not grown after the goverrnment stopped reinvestment of interest in the scheme. Instead, pension and provident funds have to park the interest which accrues every year in other instruments such as government or state government securities or bonds of state owned firms.

Over five years ago, the government had set in motion an exercise to restructure its liabilities on this count. There were a couple of options—one being to pay off the investors or the retirement funds by offering cash. The second one being to wind down the scheme by issuing marketable government securities in lieu or against the SDS. The first option was obviously ruled out given the cash strapped status of the government while the other proposal to issue G-Secs met with political resistance as it would have meant lower returns for subscribers.

The Employees Provident Fund Organisation, which says it is running the largest social security scheme in the world has a large chunk of its corpus in SDS (Rs 55,000 crore in the scheme) while several other retirement funds have over 20-30 % in this scheme. The challenge for these funds now is to plan ahead for meeting their liabilities considering that in 2012 many of them will see a lot of their members retiring. Clearly, engaging in asset -liability matching would be difficult with a substantial part of the coprus locked away in an open-ended scheme, which the uncharitable term as a ponzi scheme.

Not just that. Over the last few years, most funds had the comfort of high yielding securities issued by state-owned companies on their portfolio. Some of these investments are due to be redeemed in the next year or two and that is when maximising returns would prove to be tough. Fund managers who handle money for these retirement vehicles say that even if the SDS were to be wound up—it would still help as the redemption amount can be invested in a range of short term instruments which could then be switched to longer maturity instruments when rates move up.

In a high interest rate regime, it is tempting for fiscal policy mangers to maintain status quo on this as the SDS offers money to finance the deficit at a relatively lower rate. But as it moves towards fiscal consolidation, the government can surely think of working out a road map for restructuring these liabilities.Clarity on this is what counts for those dealing with long term funds.

J&K Bank ties up with Maruti Suzuki

SRINAGAR: Jammu and Kashmir Bank today said it has entered into an agreement with Maruti Suzuki

India Ltd (MSIL) to finance the latters' customers.

The MoU to this effect was signed by President of the Bank G A Regoo and MSIL Chief General Manager R S Kalsi in the presence of the bank's Executive Director A K Mehta here, according to a statement by the bank.

On the pact Mehta said:"such pacts provide companies like J&K Bank and Marauti opportunities to serve their customers better... This tie-up will open new vistas for both the companies".

"As per the scheme modalities, MSIL and its dealer network will collaborate with J&K Bank to facilitate vehicle business," Regoo said.