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With interest rates at historic lows, refinancing is an increasingly attractive option for many homeowners who could save a substantial amount of money on their mortgage interest repayments. Besides, refinancing enables homeowners to spread their mortgage over another 15 to 30 years depending on the terms agreed. In any case, they can benefit from lower interest rates to have lower monthly mortgage payments.

Due to the credit crisis, requirements for refinancing are quite tight, particularly after Freddie Mac and Fannie Mae have changed the percentage of home value that can be financed. This has put the savings from refinancing to a lower rate out of the grasp of millions of Americans. Yet, the banking industry, enabled also by the President Obama’s $75 billion ‘Homeowner Affordability and Stability Plan’, has made refinancing possible based on certain requirements that need to be met.

Here are the factors that you need to consider to determine if they you are qualified for refinancing:

A) General Requirements

1. Debt-to-Income Ratio (DTI)

Before approving an application for refinancing, lenders calculate your debt-to-income (DTI) ratio. In simple terms, they weigh household debt against household income to see if the money your household spends is more than the money your household earns. In general, lenders ask information about your income, debt and housing costs. A high DTI ratio may delay the process of refinancing so it makes more sense to payoff some of your debt before applying. Normally, an accepted DTI ratio is maximum 38 percent, but it depends on the lender and the flexibility of the programs offered.

2. Loan-to-Value Ratio (LTV)

The loan-to-value ratio calculates the amount you want to borrow for refinancing as a percentage of the total current value of the house. In simple terms, lenders weigh the amount you want to borrow against the value of your house. Under the current conditions, mortgage refinancing is allowed where the loan-to-value ratio does not exceed 80% with a form of credit insurance. For instance, if your home is worth $280,000 and you want to refinance for $220,000, the loan-to value ratio is 79%, which is accepted. Yet, a major consideration is the credit insurance required. In some parts of the U.S. it is difficult to obtain because they are viewed as declining markets by insurers with the risk of further deterioration in values.

President Obama’s ‘Homeowner Affordability and Stability Plan’ allows for a 105% loan-to-value ratio provided you have a good record of mortgage payments, your loan is backed by Fannie Mae or Freddie Mac and you are do not owe more than 105% of your home’s value. If you meet these requirements, then you qualify for refinancing under the ‘Homeowner Affordability and Stability Plan’ even if you owe between 80-105% of your mortgage.

3. Credit Score

Credit score is very important when applying for refinancing. If your credit history is damaged, lenders will offer you refinancing with higher interest rate and terms that might not make it an attractive option. Having a good credit score and a good track record of mortgage payments, you are more likely to be offered a lower interest and better terms.

B) Under the ‘Homeowner Affordability and Stability Plan’

If you plan to ask for refinancing under the ‘Homeowner Affordability and Stability Plan’, you need to meet further criteria, as follows:

1. Having a conforming loan, backed by Fannie Mae or Freddie Mac

Nearly 60% of conforming loans are backed by Fannie Mae or Freddie Mac. Bought by these mortgage companies and sold to Wall Street, conforming loans may range between $417,000 to $729,500 in more expensive areas like Washington, DC, San Francisco or Boston. However, as you cannot know if your loan is backed by Fannie Mae or Freddie Mac, you should ask you lender if you qualify under Obama’s housing plan.

2. Having a loan on or before January 2009

Under Obama’s housing plan, only loans that started on or before January 1, 2009 are eligible for refinancing under this program.

The ‘Homeowner Affordability and Stability Plan’ has several provisions that are quite favorable for homeowners, but you need to properly investigate them before applying fore refinancing.

All in all, lenders will look at a combination of your debt-to-income ratio, loan-to-value ratio, and credit history, but also at your financial condition to determine if you qualify for refinancing your mortgage. However, before applying, you need to be sure that refinancing is a good option for you. So, it’s better to talk with your lender to evaluate your options.

Christina Pomoni has acquired her MBA Finance from the American College of Greece. Her advanced familiarity with financial statement analysis, capital budgeting and market research has been acquired through her professional career at high-esteemed organizations. As part of her long journey, Christina has served as an Equity Research Associate at Telesis Securities (EFG Eurobank) and a Financial & Investment Advisor at ING Group. Besides, having lived at Chicago, IL, Boca Raton, FL and Paris, France has helped her, not only to be a successful professional, but mostly to see life under a more creative and innovative perspective.

Since 2005, Christina provides high quality writing services to numerous websites and research companies contributing her knowledge and expertise. Her areas of specialization are Business, Finance & Investment, Society, Politics & Culture. She also has a very good knowledge of Entertainment, Health & Fitness and Computers & Technology.

Christina currently designs the website of her own writing company. Believing that knowledge is the road to opportunity and development, her mission is to promote her already established knowledge to a growing number of visitors and to provide high quality writing services to meet the most demanding customer requirements.

Article Source:http://www.articlesbase.com/mortgage-articles/how-to-determine-if-you-qualify-for-refinancing-your-home-1656626.html

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First time house buyers can claim tax relief on their house mortgage interest repayments for the first seven years of their mortgage term.

The tax relief available is provided on a reducing scale. For the first two years of their mortgage repayments, first time buyers can claim tax relief of 25 percent per year.

For the next three years, that is the third, fourth and fifth years of the mortgage, first time buyers are entitled to tax relief at a rate of 22.5 percent per year.

In the final two years of the seven year period, first time buyers are allowed a rate of 20 percent a year.

In January 2009, the amount of interest that is allowed on a mortgage was increased to 20,000 euro for a married couple and 16,000 euro for a single person.

Non first time buyers are allowed tax relief on mortgage interest repayments at a rate of 15 percent per year. This relief period also ends after seven years.

Home mortgage tax relief is given at source (TRS), Mortgage interest relief is given, by your lender, either in the form of a reduced mortgage payment or a credit to your funding account.

A qualifying loan for the purpose of mortgage tax relief is a secured loan, used to purchase, repair, develop or improve your sole or main residence. Mortgage tax relief can also be claimed in respect of the interest charged or paid on main residences or respect of mortgages paid for separated/divorced spouses, and dependent relatives for whom a dependent relative tax credit is being claimed.

Switching to a new mortgage lender or a different mortgage type to achieve a better interest rate is not treated as a new loan by the Revenue. However, moving home and taking out a new mortgage for this home with a new or existing lender is eligible for relief for 7 years from the date of first payment on the new home loan.

As a first-time buyer, it is important to be aware of the fact that a mortgage loan comes with a variety of associated charges and costs. Although currently first time buyers do not have to pay stamp duty, other charges involved include legal fees, buildings insurance, removal costs, land registry fees, lender’s valuation costs and survey fees.

There are two things to bear in mind when applying for a mortgage: what is the percentage of the house value you can receive as a mortgage, possibly up to 92 percent, and what earnings limit will the lender impose, a typical example being three and a half times your salary.

This article is only intended as a basic general summary and you should always seek professional advice where necessary.

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We all know about the current state of the mortgage market and the lending situation with banks. If we can afford to put up at least a 10% deposit then we are in with a chance to just even be accepted for a mortgage. These deals are of course offering poor rates. A quick search and you will find the best deal will be around 6.5%, that is the same kind of rates we saw two years ago when the Bank of England base rate was 5%. Of course we all know the banks are being very cautious with their lending.

The mortgage application process is a long process. My suggestion is to make use of a mortgage calculator to find out if you would be wasting your time by applying for a mortgage at the moment and something else you’d want to avoid, damaging your credit rating. Mortgage calculators will of course be based on industry averages and will only be estimates. You can use them as guidelines and to help you decide if you can afford a mortgage and will likely be offered a mortgage based on the mortgage calculators results.

The most useful mortgage calculator at the moment is probably the mortgage repayment calculator. Enter in the mortgage amount, the length of the loan and the interest rate and it will come back with the monthly repayment amount. This will allow you to work out whether you can afford the monthly interest repayments. The reason why this is the most useful mortgage calculator is you can insert different a range of interest rates so you can ensure that when interest rates rise you will be able to afford the repayments. This mortgage calculator will ensure you don’t run the risk of losing your home.

There are many finance calculators on the internet that will answer commonly asked queries so I’m sure whatever figure you are after you will be able to find a  mortgage calculator that will be able to answer it for you. There are calculators that will work out how much you can borrow for a buy to let mortgage, how much you would need to save each month to reach your deposit target and many that can give you an idea of how much your property is worth.

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