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  • Mortgage refinancing rates for Minnesota (MN) homeowners

    Homeowners looking to improve their mortgage rates in Minnesota (MN) have plenty of window shopping to do. With the variety of options available to them, the odds are good they’ll find a solution that evens out very well.


    Refinancing in Minnesota can save hundreds or thousands of dollars on an individual’s home mortgage each year. So, when fluctuations in interest rates start happening, it can motivate many people to go back to the lender, or find a new one offering better terms.


    Borrowers with the best credit scores stand to win most, but even those with lower scores can choose among many smart refinancing possibilities.


    Factors affecting refinance interest rates in Minnesota

    The biggest factor affecting the interest rates of lenders is the U.S. Federal Reserve—America’s central bank. The government manipulates financing rates (adjusting percentage points) to help stimulate the economy.


    The general rule of thumb is this: When the economy needs a boost, the feds lower interest rates so the banks can lend at cheaper rates to you. To help prevent bubbles, the feds raise interest rates, which makes the banks less enthusiastic about making any risky loans—at least in theory. The adjusted percentage points will help counteract inflation or deflation—again, in theory.


    All this means home buying and refinancing increases with a decrease in current interest rates. 



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    Minnestoda MN refinance mortgage rates

    Minnesota homeowners could save hundreds or thousands of dollars by refinancing (Photo/Wikipedia)


    Types of refinancing loans in Minnesota

    Fannie Mae and Freddy Mac loans are government lending programs designed years ago to offer discounted mortgage financing opportunities for qualifying borrowers. Many of the mortgages offered by non-government lenders eventually get purchased by Fannie and Freddie. That’s because the government wants to encourage more home buying. So by purchasing the loans from lenders (and bunching them together to sell to investors as something called “mortgage backed” securities), the lenders have more capital to offer more loans. It’s a win-win for everybody—in theory.


    Depending on the home and mortgage type, a buyer may qualify for a loan from the Fair Housing Act (FHA), Rural Development (RD) from the USDA, or Veteran’s Administration (VA). These are also government sponsored, assisting first-time homebuyers, home buyers with less than perfect credit, homeowners interested in refinancing and more.


    A homeowner may opt to get a second mortgage in addition to the primary home loan. This is popular for homeowners who need funds for things like home improvement and debt consolidation. It’s important for homeowners to know that banks may foreclose on a second mortgage easier and often charge a higher interest rate. Buyers can save thousands of dollars by refinancing the primary mortgage along with any home equity loans.


    A cash-out refinance in Minnesota is another way homeowners can generate funds they may need for other expenses in life. A cash-out refi taps into the equity in someone’s home, so they are products meant for people whose home values have gone up since their purchase, or who have paid off a significant amount of what is owed on the mortgage. Here’s how an example of how a cash-out refi works:


    • Owner purchases a home for $100,000 and puts 20 percent down, leaving a principal of $80,000
    • Owner makes payment over a number of years and now only owes $75,000 of principal
    • Owner does a cash-out refi with a lender who pays off the mortgage principal and creates a new loan for $100,000, distributing $25,000 of cash to the owner.


    When loans are refinanced, someone has to do the paperwork. And that costs money. Those fees are usually distributed over the course of a loan. A no-cost loan is a way to avoid those fees, which can cost several thousand dollars. However, a no-cost loan will carry higher rates to compensate for the upfront payment the lender did not receive.


    A refinance on a home worth 20 percent more than the loan amount may qualify for good rates and no closing costs. Mortgage companies may allow a borrower to buy down the points on a loan. One point equals one percent on a mortgage. A $100,000 mortgage would cost $1,000 per point. Buying down percentage points reduces the interest rate. For example, a 7 percent rate would drop to 5 percent if a borrower had the option to pay down 2 points.


    The bottom line is you’re not going to get anything for free. However, knowing all of your options could save you significant amounts of time and/or money.


    Differences in loan length

    15-year loan’s interest rates may not be as low as 30-year refinance rates in Minnesota. However, a buyer who gets a 30-year loan and pays it off in 15 years enjoys the best of both options. Early repayment can save more than half of the final purchase price, since lenders make more profit over a longer period even at lower refinance mortgage rates.


    To help pay your mortgage off sooner than later, consider overpaying each month. Even an extra $100 a month could reduce a mortgage by several years. It takes a little bit of discipline and sacrifice, but when you’re approaching major life events like your child’s college tuition or wedding, or your retirement, wouldn’t it be nice to not have to come up with a mortgage payment?
    Over the course of your life, your home is one of the biggest investments of your time and money. Make sure it’s financed in a way, so the investment keeps giving back to you.


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