Refinance

When you need a quick and easy refinance of your home or investment property, try First Rate Lending. Our customers have said that our speed of processing, knowledgeable staff, and aggressive programs set us apart from our competition.  Refinancing your mortgage can be an extremely beneficial move to help save you money and improve your financial future. Some common reasons to refinance might be to lower your interest rate, to reduce the term (length) of your mortgage, to lower your monthly payment, to remove mortgage insurance, or to take cash out of your home equity.

REFINANCE ISSUES TO REVIEW

There are many things to consider when refinancing your home loan. The fees associated with refinancing can add up quickly so, many mortgage companies will waive fees associated with refinancing applications and legal fees. This fee reduction can amount to large savings for the homeowner but may result in a slightly higher interest rate than expected. It is important to talk about your loan options with your loan officer. Additionally, the amount of time you plan to spend in your home will impact your decision to refinance. The amount of time you plan to own the property can influence the term and interest rate as you weigh short-term savings vs long term. Many mortgage lenders will allow homeowners who expect to live in their home for a minimum of three to five years to pay “points” and closing costs upfront. This option ensures the homeowner obtains the lowest percentage rate available.

EVALUATE YOUR ASSETS

Saving money is important to many consumers in today’s economy and refinancing your home loan is one way you can lower your monthly payments. A careful analysis combined with the advice of your mortgage broker will ensure that you make the right decision. The costs associated with refinancing are similar to those of obtaining an original home loan, which includes legal fees, application fees, settlement costs, and other related fees. When refinancing, additional fees will arise and may include a fee charged if you paid off your original mortgage early (prepayment penalty), the points associated with the refinancing, and the home loan interest rate.

DECIDING TO REFINANCE

The decision on whether or not to refinance has, in the past, meant balancing the savings of a lower monthly payment against the costs of refinancing. In recent years, mortgage lenders have introduced “no cost” and low-cost refinancing packages that minimize or completely eliminate the out-of-pocket expenses of refinancing. Using low or no-cost refinancing programs offered, homeowners can find more incentive to refinance and obtain a smaller reduction in interest rates.

Updating the terms of your mortgage can significantly improve your financial future. Some examples would be to refinance your 30-year loan into a shorter term loan like a 15 year fixed rate mortgage. The shorter term will often result in a much lower interest rate and will help you pay off your mortgage at an accelerated rate.  The inverse would be for a homeowner that is planning to sell their home in the near future or needs more financial flexibility. This type of homeowner may want to consider an adjustable rate mortgage, interest only payments, a longer term, or all of the above to improve their monthly cash flow.

WILL PAYING POINTS AFFECT MY RATE?

When homeowners make the decision to refinance their home loan they must decide which interest rate will work best for their situation. There is typically a range of interest rates at different amounts of points. Remember, a point is equal to one percent of the loan amount. When you work with one of first rate’s licensed mortgage bankers you will be able to analyze the different interest rates and related points to choose the right option for your financial future. Some combinations of interest rates and points may cause your monthly payment to increase though. Be sure to discuss all options with your home loan advisor before making a decision.

CONVERTING YOUR ARM TO A FIXED RATE

Homeowners have two rate options when refinancing their home loan, fixed rate mortgages and adjustable rate mortgages, often referred to as ARMs. ARMs are attractive in today’s economy because they offer very low introductory rates but due to financial market instability these rates can jump quickly and homeowners may find themselves paying more than they had bargained for. Adjustable rate mortgages are not always unpredictable though. Homeowners who know the length of time they plan to stay in their home may secure an ARM for that specific amount of time, which will save the homeowner money and avoid rising payments.

REFINANCE AND TAXES

Mortgage brokers are knowledgeable of the laws governing taxes that are related to mortgages. Many homeowners find the tax issues related to the home loan refinance process confusing, but your mortgage broker will guide you through the process. To explain briefly, the Internal Revenue Service (IRS) has ruled that interest paid for refinancing must be deducted over the life of the loan. However, if the home loan is being used to make improvements to your house, the borrowers may be permitted to deduct a portion of the interest right away. The exact tax laws concerning refinancing are complex and the details should be discussed with your mortgage broker or tax professional. The IRS website, www.irs.gov, may also be helpful when gathering general information on the subject of taxes and refinancing.