Today, most Americans have real estate that was acquired using a mortgage, which indicates that the mortgage in the United States is one of the most popular banking products. This is mainly due to the fact that the level of mortgage rates in this country is considered one of the lowest. Now the rate on mortgages in the United States in most banks ranges from 2.5 to 4% per annum, and the loan period is 15 or 30 years. Turning to the bank, borrowers can count on the possibility of acquiring almost any home you like, as well as take advantage of programs that offer mortgage refinancing .
Features of the mortgage in the United States.
The main feature of mortgages in this country should be attributed to a more loyal attitude of banks to real estate, which will be acquired through a mortgage loan. If in our country, banks are reluctant to issue loans for housing under construction, then American credit organizations are ready to provide loans, both for the purchase of real estate under construction and for the purchase of finished housing. Another feature is that most banks offer borrowers a loan with a floating interest rate, the size of which will periodically change. Using this method allows banks to earn more, but it brings a number of inconveniences to borrowers, since the size of the monthly payment is constantly changing and not always downward.
Is it possible to issue a mortgage in America to foreign nationals?
Unfortunately, US mortgage banks practically do not lend to foreign citizens. As a rule, only clients of large foreign banks who are ready to offer such a service to their clients who already have accounts with them at the place of registration will be able to buy mortgage property in this country. In addition to the standard documents required for a mortgage , such borrowers should be prepared to submit letters of recommendation from other credit institutions, a certificate from the credit bureau, and in some cases a green card or a foreign citizen registration card. Requirements for documents may vary significantly from different banks. Based on the information received, the bank will make a decision on the borrowing of the borrower or on the refusal to provide a mortgage loan.
So, a mortgage in America makes it easy to purchase real estate, both at the construction stage and in the secondary markets, and banks take minimal interest for using borrowed funds. At the same time, it will be rather difficult for foreigners to use the mortgage, since there are practically no mortgage products for foreigners.
Mortgage lending has returned to the pre-crisis level and more and more banks are ready to offer various loan programs that allow you to purchase real estate through borrowed funds. Among the many loan products offered today, mortgage refinancing occupies a special place.
This type of mortgage loan provides the borrower with the opportunity to transfer the service of an existing loan to another bank.
In practice, this procedure is as follows:
- A borrower who wants to refinance his mortgage loan must prepare a standard set of documents required for a mortgage and submit it to a new lending bank.
- The received package of documents is analyzed by the bank regarding the borrower’s solvency, as well as the possibility to accept real estate acquired under a previously issued mortgage loan as collateral.
- The new creditor bank repays the obligations of the borrower in the bank where he initially took out a loan.
- The borrower draws up a mortgage in the new lender bank.
Thus, refinancing a mortgage represents the repayment of an old loan and the receipt of a new mortgage. At the same time, some banks offer to refinance not only the loans of their competitors, but also those that they issued earlier.
Should I refinance a mortgage?
The use of the refinancing scheme is justified in cases where the following conditions are simultaneously met:
- interest rate on a previously issued loan is higher than the one at which you can take a new mortgage;
- the borrower does not plan to carry out a full early repayment of the mortgage in the next few years.
In the case when the loan term is 10 years and the difference with the old interest rate is only 1%, the borrower can save from 10 to 20% of his own funds.
At the same time, a number of shortcomings in refinancing a mortgage loan should be noted:
- Since the procedure is nothing more than repaying the old mortgage and obtaining a new one, this requires considerable time on the part of the borrower;
- The borrower needs to re-conduct apartment appraisal and mortgage insurance procedures , and, as a result, incur certain financial expenses;
- During the renewal period, the bank reserves the right to charge interest at a higher rate until the borrower’s real estate is pledged to it.
Despite the fact that the mortgage refinancing process has certain disadvantages and entails additional costs, skillful use of this product allows not only to significantly reduce the borrower’s credit load, but also its total overpayment for using borrowed funds.