Unsure about whether a Milwaukee refinance is the best option for you? Read on to learn some important info about Milwaukee in general and about Milwaukee mortgage refinancing in particular. Milwaukee is just like every other city in the world, struggling with unemployment and homes going into foreclosure. The unemployment rate in Milwaukee is 10.2%, higher than any other city in the state, which makes it harder and harder for individuals to keep their homes.
While home sales are up in Milwaukee compared to the rest of Wisconsin, this is largely due to the fact that there are so many homes to choose from and people and banks are selling homes for well under their appraised value. In fact, the average value of a home in Milwaukee is $203,386 but the average price of a home being sold in Milwaukee is $152,857. There were also 1,816 homes foreclosed on in August 2009, according to First American CoreLogic.
As a Milwaukee resident, you should be concerned about these numbers because they are not decreasing; things will get worse before they get better and if you are living from paycheck to paycheck it may be time for you to explore your options in regards to lowering your monthly payments. If you are already in a situation where you cannot afford your current bills, then it is time for you to consider the options available to you as well. Refinancing can be a very wise move, or a damaging one.
A Milwaukee Refinance May be the Answer
Not being able to pay your bills is scary, but that pit in your stomach gets even worse when you cannot pay your mortgage payment. That is because what you might lose is much more than a simple credit card or even a home phone, you are talking about your home, and when that is gone, where do you go? There is a high price to pay when you lose your home. Everyone in your family suffers and your credit does too. If your home goes into foreclosure and your finances improve, it will still be several years before your credit is in good enough shape to purchase a home again.
When the housing market did not improve with the new stimulus package, the government stepped in and told banks that they should be more lenient with homeowners and allow them to modify their loans so that they could avoid foreclosure, something that seemed like a good idea to homeowners everywhere. However, when they tried to modify their loans, many found that the process is muddied and confusing and the approval process is long and arduous. What’s more, the banks have no incentive to make the process easier as they are now mandated by law to waive all late fees associated with the current loan, as well as roll any legal fees into the new balance of the mortgage.
Many Milwaukee homeowners find themselves stymied by the modification process and realize that they cannot complete the process without professional help. There are companies that will help with the loan modification process; however, they typically charge hefty fees that are quite unaffordable for those who are in a position where they might lose their home. Luckily, you still have some options.
Of course, refinancing in one possibility. Many people do not realize that even with late payments they will probably be able to refinance their homes with their current bank or with another banking institution. This is especially appealing to those individuals who have an ARM loan and know that, while they can make their payments right now, when the ARM adjusts again they will no longer be able to. In fact, you may be feeling the pinch right now as 58% of Milwaukee ARM loans increased the past summer.
Refinancing your Milwaukee loan may be the only option that you have left before foreclosure becomes the only option. If you are only now feeling the heat from an increased ARM or you can see that in the near future you could be out of a job or working in a position that pays less, but you have made all of your mortgage payments up until now, then you could be in a position to get a very good interest rate on your loan. Right now the average interest rate on a refinance loan is 4.99%. Even if you have been struggling to make your payments, the average interest rate is 5.6%, which is still a very good rate and could make a big difference on your interest rate.
Perhaps you are wondering why a bank would make it so hard to modify a loan but would be willing to refinance a loan for a person who has less than perfect credit. The first answer is that loan modification rarely works out for the bank. While they might make some money initially, unless the job market improves dramatically, the homeowner is going to be in the same situation in six months as he is today. As such, the bank once again faces foreclosing on the homeowner. Now they are paying the same legal fees twice (as the first fees were rolled into the mortgage), and they have no hope of recouping the fees that they have lost.
Refinancing the loan, however, offers the homeowner a better rate on their monthly mortgage in the long run, makes it more affordable for you and allows the bank to basically take back all of the equity that you have built in your home.
Let’s say you loan your neighbor $100 and she agrees to pay you $10 a month for one year, making your repayment $120. Now, six months into the loan she explains that she cannot afford the $10 a month and needs to change it $8 a month for an additional year for the remaining $50 she owes you. Now, instead of receiving $120 from her, you are going to receive $146 from her for your initial investment of $100.
Consider this type of deal from a bank's point of view. They are in business (hopefully) for the long haul. One person is not waiting for you to pay off your loan, the bank is. And the longer you take, as long as you are making regular payments, the more money that they will make.
Consider Whether You Should take Advantage of a Milwaukee Refinance
The truth is that refinancing a loan will not be for everyone. It would be nice if it could solve everyone’s problems, however if you have no equity in your home (meaning you have owned if for less than five years), then you probably already took advantage of the low interest rates being offered in Milwaukee over the past three years and you already have the lowest interest rate that you can get. However, lack of equity should not stop you from at least checking to see what kind of rates that you can receive. You never know what you might find.
If you have owned your home between five and seven years then a refinance may work for you and if you have owned longer than seven years then you have established solid equity in your home and you should have no difficulty refinancing your home and getting a better interest rate and more manageable payments.
Top 3 Types of Milwaukee Refinance Loans
There are several types of loans to choose from when you are refinancing. You can choose from an ARM, a fixed rate loan or a balloon loan. Each of these loans has something interesting to offer to you. For example, a balloon loan offers you an interest rate as low as 2%. However, in seven to ten years the loan will become due and you will need to pay off the balance of your mortgage.
A 3/1 ARM is being offered at an average of 4.5% in Milwaukee (rates constantly change so consider this rate as just an example as of the time of the writing of this article), and if you think you are going to be in a better financial situation in three years, then you might consider this loan. However, the standard rule of thumb is to estimate your payments at an 8% interest rate. If you cannot afford that payment you should avoid an ARM loan.
A fixed rate loan offers you a higher interest rate than the other two types of loans. However, it also offers stability in payments. There will be no concern about the changing rates in an ARM, you will always know what you need to pay from month to month.
Compare Milwaukee Refinance Rates!
No matter which kind of Milwaukee loan that you choose, you should compare the rates of different lending companies to determine where you can get the best rate. While your bank may appeal to you, they are not going to tell you what their competitors are offering for an interest rate. Try using the free quote tool offered at no cost on this page. It may be your best option for getting the best rate, and deciding if this is the right time to refinance. Use the tool above to start comparing Milwaukee WI mortgage refinance rates online today!