Mortgage Refinancing Myths
Here are the two most common myths about mortgage refinancing that too often keep homeowners from taking advantage of the benefits of refinancing their home loans:
“I need to own my home at least twelve months before I can refinance.”
“I should only refinance my home loan if I can save at least one-percent or more on my interest rate.”
Not true! If you have a second mortgage, are paying mortgage insurance, or need cash for whatever reason, the interest rate may not be the main determining factor in deciding whether to refinance your loan.Not true! We can refinance your home loan at any time using either your home’s original purchase price as its value or a new appraised value in many cases! This will still let you change your loan program and allow for cash out if you need it. Refinancing your current loan may also eliminate your PMI (mortgage insurance), pay off a 2nd mortgage or get cash even if you’ve only been in your home for a few months.
Your home may have increased enough in value for you to eliminate your mortgage insurance requirement and still take out cash to pay off some credit cards, for example. Even if we refinance your mortgage at the same interest rate you have now, you could still save hundreds or even thousands of dollars in non-tax-deductible interest and mortgage insurance by refinancing your loan!
There are many situations in which the interest rate on your new loan does not need to be lowered in order for refinancing your mortgage to make sound financial sense. I offer my clients a free, written analysis of the benefits of refinancing so you can make an educated decision with regards to refinancing your loan — call me or inquire online for your free analysis!
Commonly Asked Questions About Mortgage Refinancing
What does it cost to refinance my home loan?
Since refinancing a home loan is really replacing one mortgage loan with another, there are certain costs associated with a refinance loan. Your new loan will be processed and underwritten in the same manner as when you originally purchased your home, with many of the same requirements: escrow and title, a new appraisal if required, prepaid interest, tax and insurance escrows (if you request), underwriting, processing, etc.
However, as far as mortgage refinancing costs are concerned, these can be added to the loan amount and don’t need to be paid out of your pocket — the costs can be financed into the new loan so you don’t need to worry about coming up with these fees out of your savings as you did when you purchased your home. Alternatively, you can also elect to pay these fees yourself rather than financing them in the new loan if you prefer not to add to the amount you owe on your home.
What are “points” and should I pay them when I refinance my home loan?
Regardless of what you may have heard or read about the pros and cons of paying “points” (one point = 1% of the loan amount) to obtain a better rate and/or for broker-lender fees, the truth is that there is no one right answer for everyone under every circumstance. The only way to know with certainty whether it makes sense to pay points or not when you refinance a mortgage is to see a written comparison analysis between different rate and fee structures so you can see for yourself if it makes sense to pay points.
I offer a free written analysis to all of my clients before we refinance your loan so you can compare the different rates and long-term costs or savings for both “points paid” and “no points” refinance loans. The results are sure to surprise you no matter which loan program you may be considering!
What about these advertisements for “no fee” or “flat fee” refinance loans? Are these real?
Many mortgage lenders try to gain your business by attempting to get you to focus on only the fee portion of a mortgage loan. Unfortunately, it’s what most of these companies are not telling you that can lead you into taking a loan that’s not in your best interests.
While it’s possible to refinance your loan with minimal or no closing costs in many cases, the interest rate you ultimately pay will be higher than what you could obtain if you chose to include fees as part of your loan. By not paying fees (or paying minimal fees) you could end up paying thousands of dollars more in interest expense than if you’d have elected to include fees to begin with, particularly over the life of a long-term loan such as a 20- or 30-year fixed mortgage.
Conversely, paying points and fees for short-term fixed or adjustable rate loans may not make good financial sense either, particularly if you know that you will likely sell your home or refinance the loan you have within 2 to 7 years. You may be wiser to pay a slightly higher monthly payment over a short term in exchange for lower points and fees because you most likely will not end up owning the home or keeping the loan you have long enough to recoup those extra costs.
Remember, the best way to know if you’re getting the right loan at the right price is to see a written comparison before you agree to a new loan. I offer this analysis at no charge to my clients considering a refinance loan.
Call me or inquire online about refinancing your home loan today. I can show you how to save hundreds or even thousands of dollars by choosing the right loan and pricing for your unique situation.
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