As many of you know, interest rates are at record lows. With this comes a lot of questions on refinances I thought I could answer for my referrals partners and clients.
What should you watch for when refinancing your home loan?
Closing cost and interest rate?
Be aware that when you find rates online they are typically quoted with a 1% origination fee/discount point(1% of the loan amount). Higher fee's don't always mean lower rates! When shopping for a mortgage be aware just because one lender charges a higher fee it doesn't necessarily mean they will have the lowest rate. There are also low and no cost loans available too. Ask for a good faith estimate or closing cost estimate from the loan officer. Lenders are required to provide this to you within 3 days from your application.
Credit and rate?
When applying for conventional financing your interest rate and point situation is directly related to your credit score. For example, a 740 credit score on a 20% down Mortgage may have a 30 year fixed rate of 4%. If the same client has a 620 credit score, they would receive a rate of 4.75% or be charged 3% discount points to lock in at the 4% rate. Credit is very important in today's market, so when calling for a quote. A loan officer may not be able to tell you the "days" rate without you knowing your credit score.
Appraisals and rate?
Your loan officer uses a value of your home to give you an estimate for your refinance. Keep in mind when they quote you a rate, it is directly related to an established value of your home. Some loan programs offer a lower rate for a better debt equity position. Make sure you ask the loan officer what value their using to give you the quote. www.zillow.com can show you local sales in your neighborhood and you can also check your tax records to get an idea of what your homes worth. But be aware that these websites are only a bearing for value and are not an appriasal. When your home is appraised, the appraiser will only be using comparables sales from homes in your neighborhood that sold in the last 6 months. In today's market they tend to appraise your home conservatively low. You will be required to pre-pay for your appraisal when locking in your interest rate.
How can I gain by refinancing?
· After refinancing at a lower rate, you could make lower monthly mortgage payments.
· Alternatively, you could build up equity in your home faster if you refinance into a short term loan. For example a 15 or 20 year term vs a 30 year term.
· If you currently have an adjustable rate mortgage, you can lock into a fixed rate mortgage and gain the security of knowing your mortgage payments won't change for the life of your mortgage.
· Finally refinancing your mortgage could allow you access to some of the equity you've built up in your home. It could be the source of funds for a renovation or addition to your home, pay some bills, buy a new car or finance a child's education.
Where are interest rates at currently?
30 Year- 4.25%- A.P.R. 4.426%**
20 Year- 4.125%- A.P.R. 4.745%**
15 year- 3.75%- A.P.R. 4.055%**
How do I look into refinancing?
Contact me today for a free custom quote.
Andy Burton
Mortgage Advisor
Advisors Mortgage LLC
MN: (651) 501-0969 WI: (715) 760-0259
** Assumes a 60 day lock. For conventional mortgage amounts $175,000 to $417,000. Rates are for informational purposes only. This is not an offer to enter into a lock agreement or extend credit
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