How to Find the Best Refinance for You

Whenever you are considering refinancing you have to Weigh the Costs and the Benefits.

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 Typical Reasons for Refinancing Include:

• You need to Lower Your Mortgage Payment Example #1
• You need to Consolidate Credit Card Debt Example #2 
• You have a Dangerous Adjustable Rate
• You would like to Shorten the Term of Your Loan and save money on accumilated interest
• You would like to Do a Home Improvement
• You would like to Take Advantage of a No Cost Rate Adjustment  Example #3
• You would like to Send Someone to School
• You need to Follow the Instructions of a Divorce Decree and refinance your spouse off the note and deed.
• You need to Save a Home by refinancing it out of foreclosure

ConventionalFinancing  Example #4

FHAStreamline  Example #5

H.A.R.P  (Refi)    Example #6

AdjustableRateMortgages   Example #7

MyMortgageProcess 

AutomatedUnderwriting   Example #8

FrequentlyAskedQuestions

Sample Dialogue of the Refinance Discussion

My job as your mortgage consultant  is to find the best loan for any given situation. I always ask the questions, "How long do you intend to be in the home?" or "How long do you intend to be in the loan?"

• If you know for a fact that you will be in the home more than 5 years you should be considering either a 30 Year Fixed or a 7/1 ARM.
• If you know for a fact that you will be in the home less than 5 years you should be considering a 30 year fixed or a 5/1 ARM
• If you know for a fact you will be in the home for less than three years you should be considering a 3/1 ARM or a 30 year fixed where I pay costs for you        

Visit my Mortgage Calculators Section for more Helpful Tools that will help you Make a Decision

Usually when we consider a refinance, we compare the new payment vs the old and calculate the monthly savings. Then we take the monthly savings and divide that number into the total closing costs figure. That number determines our break even point. For example, lets say it is 24 (months). If you intend to stay in the home or loan longer than 24 months it make sense to make the loan.

If you are doing a cash out debt consolidation refinance, typically you are taking the money to consolidate debts such as credit cards or perhaps do some sort of a home improvement. If the cash out refinance causes your mortgage payment to go up $50 but it  wipes out $20,000 in debt and $500 in credit card payments we have to discuss and weigh the cost - benefit of doing that loan. In this case we will divide the closing costs by $450 savings per month. These are the kinds of topics we need to talk about in our initial discussion.

A secondary part of the refinance discussion is the discussion as to how we are going to treat your escrows. You can either:

• set the new loan amount to cover payoffs, closing costs and the cost of new escrow account 
• you can waive escrows and pay taxes and insurance on your own once a year
• you can swop escrows by determining your balance with your current mortgage lender and then setting your new loan amount so you are writing a check at closing for the amount of money you will be re-imbursed 

1.) Setting the new loan to cover the escrows is the most painless way. You will not have to write a check at closing and in 3-5 weeks your current escrow balance (which is your money) will be reimbursed to you from your current mortgage lender.

2.) Waiving escrows is where you pay your insurance and taxes on your own. This option is O.K for the customer who doesn't mind writing two large checks once a year but I do not recomend this for salaried employee who has limited savings. If you don't budget your moeny well, writing that check might hurt a little bit.

3.) Swopping escrows is where we calculate what your existing escrow balance is and what you will be getting back in 3-5 weeks and then set the new loan amount where you are writing a check for that much money at closing. This works to keep your new payment lower because for each $1000 in mortgage loan that you finance, the monthly payment goes up approximately $6.50 per month.

We can discuss your goals over the phone and then I will email you a Good Faith Estimate of what I have to offer.  Once the estimate is in front of you, we will dig a little deeper in our discussion to make sure we are all on the same page.

For your protection, The new Good Faith Estimate requires that we Guarantee Costs quoted to the customer.

Examples:

 Example #1 Lower Your Payments

We will do the math. If we bring your payment down $200 a month and it costs $3500 to refinance, your break-even on doing the loan is 17 and 1/2 months. In other words, the loan pays for itself in 18 months. Over the life of the loan, this will also save thousands of dollars in interest. Ask for an amortization schedule.

Example #2 Consolidate Credit Card Debt

Same breakeven analysis as the lowering your payments mortgage but on this one we have to take into account the cash flow savings of paying off credit cards. In other words if we take $10,000 and payoff three cards with total payments of $500 each month, we figure the $500 savings plus the change in the total mortgage payment.

 Example #3  Reduced or No Closing Cost Loans

We can always pay costs. Your rate goes higher when we pay costs but in some case it makes sense. Someone who plans to be in the home less than 4 years should look at a no cost option. If you intend to be in the home for the long run, it makes sense to pay your own costs and take the lower rate.

Example #4   Conventional Financing

These Fannie Mae and Freddie Mac loans typically accomodate credit scores  over 700. Usually we get less than 80% financing to avoid mortgage insurance although the program will go as high as 90% with mortgage.  There are pricing adjustments due to loan purpose, credit score, cash out and a number of other different factors.

Example #5    FHA Streamline Refinance

Excellent alternative for current FHA customers who want to avoid the cost of an appraisal. No out of pocket expense to reduce interest rate, have a month without a payment, have return of escrow money, return of existing up front PMI premium. The new loan needs to be less than the previous FHA loan.

 Example #6    HARP Refinance

Half of the HARP legislation was about helping customers modify their mortgage and the other half of HARP was aimed at helping existing homeowners who put 20% down and saw equity disappear. For a qualified borrower this program allows for up to 125% loan to value of the home. e.g If your home is worth 100,000 we can do a loan for $125,000. Fannie Mae's version of this refinance is called the DU Refi Plus. Freddie Mac also has their version of this loan called the Freddie Mac Home Relief loan. We look up your creditials on line to determine which program you qualify for. Homeowners who initially did 90% financing or had 80/10 or 80/15% financing are handled on a case by case basis.

Example #7 Adjustable Rates

The new adjustable rates are amazing! Conventional 5/1 Arms are running around 3.75%. FHA 5/1 Arms for less than perfect credit are in the same ballpark. Adjustable rate mortgages have earned a bad reputation because of the the sub-prime meltdown, but todays arms have a much lower margin, and much lower start rate.

 Example #8  You Need to Check the Findings

Every mortgage in todays worls is run through some sort of underwriting engine. The "findings" will determine if you are a yes, no or maybe. Sometimes the findings are surprising generous to customers who have lots of assets or have good credit. These findings are especially important for comoners who are looking at a HARP refi or a Freddie Mac Home Relief loan.