Refinance your mortgage now: there's still time to take advantage of the lowest home mortgage rates in 30 years - Real Estate

ALWAYS THE BUSINESSMAN, CHARLES DAVID MOODY JR. OF Atlanta was motivated to find a way to use falling interest rates to boost disposable income. His decision: to refinance the remaining $450,000 on his 30-year, fixed-rate loan with a 7.25% interest rate through Atlanta's Citizens Trust Bank. By refinancing to a 30-year, fixed-rate loan at 6.25%, the owner-operator of C.D. Moody Construction Co. Inc. (No. 92 on the BE INDUSTRIAL/ SERVICE 100 list with $30 million in sales) cut his monthly mortgage payment from $2,900 to about $2,200. Moody plans to use the $8,400 he expects to save this year to expand his investments in stocks and help pay $25,000 in annual tuition costs for his 17-year-old son, Charles III, who plans to attend Morehouse College next year. Moody, 47, and his wife Karla, 46, a registered hospice nurse, are also saving to send their 16-year-old daughter, Karia, a high school sophomore, to college in another two years. "Refinancing has really helped us free up cash to pay toward tuition," Moody says with a smile. He cautions borrowers to make sure that they take any savings they realize from refinancing and turn it into an investment that will improve their financial outlook. "I wouldn't take it and go buy a big-screen TV or some jewelry," he says. "You want to use the savings on something that will bring you a good investment return or build value in an important asset." Moody is just one of a growing number of Americans who have jumped onto the refinancing bandwagon, a trend that is expected to continue throughout the year. Mark M. Zandi, Ph.D., chief economist and co-founder of Economy.com, says that more than $2.5 trillion in mortgages were refinanced over the last two years, and another $1.2 trillion in mortgages are expected to be refinanced in 2003, making up nearly 20% of all mortgage originations (refinances plus purchases) this year. The average rate on a 30-year, fixed-rate mortgage for the United States in 2003 is projected at 6.2%, according to the Mortgage Bankers Association of America. Millions of Americans have refinanced anywhere from one to three times since 2001, and Zandi suggests that there is still a fairly large pool of refinancing applicants in the marketplace. But experts say the refinancing stampede that hit record levels during the past two years will eventually slow. Consumers who refinance stand to benefit in a number of ways. They can cut their interest rate, which reduces mortgage terms and interest expense and increases their overall cash flow. They can also take out built-up equity in their home to pay off outstanding debt, such as credit cards, or make home improvements to increase the overall value of their home. When Lori Allen of Reeders, Pennsylvania, refinanced her home mortgage in January, it helped solve a number of cash flow problems. The 39-year-old financial assistant at Aventis Pharmaceuticals needed to pay off $4,500 in school, municipal, and property taxes that threatened to setback attempts to improve her damaged credit rating. Also, she wanted to delete other lingering bills that were squeezing her budget. "It would have been hard for me to come up with $4,500 on my own," says Allen, whose husband died of a brain aneurysm 10 years ago. "I'm a single parent in a one-income household, so had I not been able to refinance, it would've been hard for me to stay on top of my current bills. Now, I don't have to play catch up." Allen refinanced the original $154,000 30-year, fixed-rate mortgage at 10.35% interest into a $175,000 20-year, fixed-rate mortgage at 8% interest. Although she signed the original loan agreement in 1999, she didn't begin making payments until 2001 because the builder experienced significant delays constructing her home. Otis T. Harper II, senior mortgage officer for United National Mortgage Corp. in Easton, Pennsylvania, which issued the loan, says Allen's refinance was more complicated than most. First, the refinanced loan amount jumped from $154,000 to $162,000 because Allen had to pay a substantial prepayment penalty for paying her initial loan back within 24 months. Harper then rolled the $4,500 in back taxes into the loan, added closing costs, and an additional $3,000 to pay off other personal bills. Further complicating matters was Allen's credit rating. "Her credit scores were kind of low," says Harper, "so we offered her a mortgage credit program, which doesn't take her credit card history into account. Instead, it looks at how you've paid your mortgage. If your mortgage history has no missed payments or payments that were 60 days late, we take that into account as to the kind of interest rate we can offer." Perhaps what helped make the loan most possible for Allen was that her house appreciated in value from $175,000 to $225,000. Allen estimates that shaving more than two percentage points off her loan and shortening the payback period from 30 years to 20 years will save her $168,154 over the life of the loan. To help keep her credit rating blemish-free, she has elected to have the $900 biweekly mortgage payments automatically deducted from her checking account Now, with the outstanding bills eliminated, her goal is to improve her credit rating over the next two years so that she can refinance again to a regular bank loan, which should carry an even lower interest rate than she has now.

A School Loan Consolidation Primer By: Jay B Stockman

Hey Dad!, my son screamed from our front door, "I did it, I was accepted to Boston University.". My momentary exhilaration was overshadowed by the financial realities of college, especially private college. A quick calculation of my costs for 4 years of tuition, and expenses came to roughly $250,000, a very intimidating figure. Overwhelmed I thought, how could I possibly afford to send him to college? Fortunately, there are various options available to finance this academic endeavor. Federal programs are the single, largest source of school loan consolidation. The first step in applying for this type of aid is going on the Free Application for Federal Student Aid (FAFSA) website, at http://www.fafsa.ed.gov/, and fill out a comprehensive questionnaire. It generally takes around 7 days to process, at which point you will receive a Data Release Number, and Estimated Financial Contribution. It is important to find out if the school you will be attending participates in the federal student aid programs, most do. There are several federal programs available for student aid, assuming school participation. The Federal Stafford Loans, are available to both undergraduate and graduate students. First-year undergraduates are eligible for loans up to $2,625. Amounts increase for subsequent years of study, with higher amounts for graduate students. The interest rate is variable, but never exceeds 8.25 percent. The Federal PLUS Loans are unsubsidized loans made to parents; the interest rate is variable, but never exceeds 9 percent. Federal Work Study provides jobs to undergraduate and graduate students, allowing them to earn money to pay education expenses. These are the major federal sources of loan money for college. Private education loans are also available from a variety of sources to provide supplemental funding when other financial aid does not cover costs. These loans are not sponsored by government agencies, and are offered by banks or other financial institutions. Sallie Mae is a unique loan that consists of a comprehensive package of both private and federal loans. After accumulating 4 years of undergraduate education loans, it is best to consider a School Loan Consolidation Program. Very simply, you can elect to combine all your outstanding loans into one student consolidated loan, which may create more favorable terms and simplify repayment, benefiting both the borrower, and the lending agency. Major benefits include the convenience of lower monthly payments, a single fixed rate, and one payment per month. There is a minor downside, however, students who do not consolidate their Stafford loans will have a 6-month grace period after graduation to begin making payments. Students who consolidate must begin making payments within 60 days of their consolidation. Both parents and students are eligible to consolidate student loans. The school loan consolidation program streamlines repayment by eliminating different terms, repayment schedules, and lenders. Will I be able to afford my son’s college education? Careful financial planning, and research should make this endeavor a reality. While it is true that college tuitions continue to rise, there is more financial aid available to compensate for the increases. Ultimately, a good education is your best investment.

Prime time to refinance student loans - graduates who have Stafford loans face a number of choices, including refinancing at 7.46%

College graduates with outstanding Stafford loans have until January 31 to refinance with the federal government at an attractive 7.46%, or consolidate their loans with a private lender for comparable interest savings. The deal is part of the recently passed amendments to the Higher Education Act. With the Federal Direct Loan program, the changes set a variable rate that's pegged to 91-day Treasury bills (currently 7.46%) and capped at 8.25%. A borrower who is paying off loans over ten years at a fixed 8.25% could save about $50 in interest for every $1,000 of debt by refinancing to 7.46%. But you can probably do better overall by refinancing with Sallie Mae (or Citibank, USA Group and others with similar programs). Sallie Mae offers a fixed-rate loan at 8.25%, but you can shave a quarter-point off that rate by signing up for automatic debits from your bank account, and one or two more points by making 48 on-time payments. That puts the loan rate at 7% or even 6% (depending on the repayment plan you choose) in the fifth year and beyond. If you're paying off loans at 8.25% or more without such "borrower benefits," it pays to refinance. STRETCHING IT OUT. Once you've made that decision, you'll have to choose either the standard ten-year repayment term or an alternative repayment plan that reduces your monthly payments but stretches them out over a longer term. Conventional wisdom argues for retiring the debt as quickly as possible. But for many borrowers, the alternatives are a better choice--if not a practical necessity. For instance, Beverly Hyken of Jacksonville, Fla., couldn't swing a payment of $208 a month on $17,000 in Stafford loans at 8.25% (plus another $50 a month toward a separate loan) on her entry-level pay as a radio news producer (typical salary, about $20,000). So she's starting off with interest-only payments of $117 a month. If she continues those for four years, then makes steadily rising payments for another 11 years (eventually reaching $210), she'll pay a total of $29,371, allowing for a two-point reduction in the interest rate after four years of on-time payments. That's a savings of nearly $2,000 compared with the Federal Direct Loan program, in which Hyken would pay $31,096 over 15 years at 7.46%, with payments beginning at $106 and rising to $276. She also could have chosen an extended loan term with level payments, or payments calculated annually on the basis of income. (You can work through your options using the calculators at www.ed.gov/directloan and www.salliemae.com.) DEBT CAN BE CHEAP. Affordability may not be the only reason to extend repayment. Consider Mack Lee Sullivan, a doctor of emergency medicine, who will start repaying his student loans in July when he finishes his medical residency at the Albert Einstein College of Medicine, in New York City. With accrued interest, Sullivan expects to owe more than $200,000, which would cost roughly $2,500 a month to repay over ten years. Even with high earnings, that's too much income to commit to student-loan payments (Sullivan might have a tough time, for example, qualifying for a home mortgage). And there's an even better reason for him to string out his student debt: It's cheap. If Sullivan pays off his loans over 30 years through the Sallie Mae program, in 26 of those years he could be paying just 6% or 7% interest. (For borrowers earning less than $55,000 and filing individually or $75,000 and filing jointly, some of the interest would even be tax-deductible--up to $1,000 in 1999, $1,500 in 2000 and $2,500 a year after that.) Using a graduated-repayment plan, Sullivan would start with payments of about $1,200 a month, rising to about $1,700. It's likely he'd invest at least part of his savings; even on a resident's salary Sullivan has managed to invest $850 a month in stocks and mutual funds. If he keeps up the savings habit (especially by funding a retirement plan with pretax dollars) and earns, say, 10% a year, he'll be way ahead when he finally sends off that last student-loan payment in (gulp) 2029. To apply for refinancing, contact your lender, Sallie Mae (800-524-9100) or the Federal Direct Loan program (800-557-7392). COPYRIGHT 1999 The Kiplinger Washington Editors, Inc. COPYRIGHT 2000 Gale Group