When is it worth it for me to refinance?
Determining when refinancing makes sense can depend on a number of factors. The two most important are what your closing costs are and what your payment savings are. I have always advised clients that ideally you want to have a break even point of 12 months or less. If you take your cost to refinance and divide it by your monthly savings, you want the breakeven period to be 12 months or less. Remember, the more you owe, the lower the change in rate necessary to make it advantageous to refinance. The less you owe, the higher the change in rates necessary to make it worthwhile. For loans over $200,000 a change as low as .25% is typically worthwhile.
Why do I have closing cost on a refinance?
Unfortunately, some, not all of the documentation has to be done over again. This results in costs as part of the transaction. Some items can be used over depending on when you purchased your home and the type of transaction you did. We will review your individual file to save you as much money as possible.In addition, many clients are opting for our no closing cost mortgage. This option has a slightly higher interest rate; however, there are no closing costs. This allows you to save money without spending money. In addition, should rates drop even lower, you can refinance a second time with no closing costs again!
Can I lock in my interest rate?
On a refinance transaction, before you can lock in your interest rate, we require that your loan application be submitted before locking you in. In addition, we will collect an application deposit from you to lock in your interest rate and start the application process. When your loan closes, the application deposit is refunded to you. Should your loan be declined, it is refunded to you less any appraisal cost. Should your loan be approved and you elect not to close, the application deposit is non-refundable. To help expedite this process, the following is a check-list of documentation that we will need to insure a fast approval process:
1. Updated mortgage application (easiest if done at my website http://www.danmoralez.com/)
2. Copies of your last two paystubs
3. Copies of your two most recent bank and/or investment account statement(s) (all pages, front & back)
4. Copies of your most recent retirement account statement(s) (all pages, front & back)
5. Your signed application disclosures returned (provided after formal application is made)
6. Copy of your current homeowners insurance policy or your agent’s name and phone number
When rates are dropping, the faster we can get your paperwork the quicker we can get your closing completed.
What if I lock and interest rates go lower than what I locked at?
An interest rate lock is just that, a lock. By locking in, you are guaranteed the rate you lock in at, whether or not market rates go up or down, you get what you locked in at. This is one more reason why I suggest our no closing cost mortgage. You can lock in and close with no closing cost. Should the market continue to move in your favor, you would close on your mortgage application and then would have the ability to refinance a second time at no closing cost. Keep in mind, when you lock we do collect an application deposit. Should you not close your transaction at the terms you have locked into, you could forfeit your application deposit. In cases of extreme market movements (rates moving by more than .375%) the bank may allow you to renegotiate your lock terms.
Do you offer a no closing or reduced closing cost option?
Absolutely, these have become some of our most popular refinance options.
No closing cost options allow you to refinance with no cost or fees. The best part is you can lock in a lower rate now and close without having to worry about closing cost. If rates go even lower, you can do it again with no cost or fees. So what's the catch? Depending on your loan size, your rate may be slightly higher than the average market rate. However, if you are saving money even at the slightly higher rate, it makes complete sense to refinance for no closing cost.
Many clients will opt for reduced closing cost option. Generally speaking, this option has costs of $500 to $800 and will allow you to get an aggressive rate. Depending on your loan size, the cost to take advantage of this option may vary. We will show you all cost and rate options, whether it be paying all cost, some cost or no cost, we will help you review each option and the cost associated with them to insure you have the option that is best for your financial picture.
As a reminder, an application deposit is collected on all applications whether or not you choose a no or reduced closing cost option. That deposit is refunded to you at the time of closing (see above for additional details).Will paying closing cost get me a better rate?Yes, paying closing cost will get you a better rate. However, it may not make sense to pay $1200 to $1800 in closing cost if the difference in rate is small. This is because it may take you longer to make back your cost. In addition, if rates were to drop further, you could be out the investment of closing cost. Our recommendation in today’s market is to look at both options and make sure you pick the option that is best for you. We will help you do the math to make sure you understand both options and have selected what is the best deal for you.
Rate's are going lower, I am going to wait.
While it is your option to wait, you need to be aware of the risk in waiting. Here are some thoughts about waiting for rates to go even lower:
1. Mortgage money comes from Wall Street and the bond market in particular. The dynamics of how mortgages are priced are extremely complex. While we may think rates will continue to drop, the truth is any number of events can cause rates to go against us. Keep in mind we live in a global economy and now more than ever we are seeing foreign markets affect what is happening in the US. In addition, investments in US housing loans have been hurt by the recent housing crisis. While you can wait for rates to drop lower, remember, you are playing with fire and can get burnt. This adds more strength to the no closing cost options as you can close with no closing cost and secure a lower rate today and do it again if warranted.
2. Mortgage guidelines are changing. Your ability to refinance can be affected by the change in mortgage guidelines. This is especially true if you financed 95 to 100% of what your home was worth when you purchased it. In addition, if you had a loan that had PMI, several of the PMI companies are increasing rates, which would reduce substantially your savings on your mortgage.
3. Property values can affect your ability to refinance. If you purchased a home and had 15 to 20% down and were able to avoid PMI, you need to be concerned about whether or not your property has decreased in value. A decrease in value can lead to PMI where you may not have had it previously.If you financed 95 to 100% of what the house was worth when you purchased it, you may be unable to refinance all together if your property value has decreased. Bottom line, there is a fine line between good and greedy. You can get a good deal with no cost or you can get greedy and play with fire (not recommended)
What are mortgage rates?
I am often asked why we don’t post rates on the internet like other lenders do. The truth is each rate quote is custom. So why do other lenders post rates and we don’t if each rate is custom? In my opinion, it is misleading to almost every client. Some clients may qualify for rates better than on the website because of their loan characteristics and others for rates worse. So what factors go into determining your rate? Here is just an abbreviated list:
Credit Score
Equity – Down Payment
Property Type
Loan Type
Loan Term
Number of Units
Occupancy
Debt Ratios
Closing Cost
Escrow Accounts
Second Mortgages
Mortgage Insurance
I have to be honest, that is a very short list of the many factors that can have an impact on your mortgage rate. It is important to remember that each characteristic can and will have an impact on your cost of mortgage money. In order to accurately price your mortgage, it is important that we have all a complete mortgage application so that we can give you detailed accurate figures. Lenders who quote a rate sight unseen don’t know your credit score, equity position, debt ratios or any other pertinent factors. Quoting rates like that is like a doctor who gives a diagnosis to you even though they have never met you and don’t know what your symptoms are.
How do I get started?
The fastest way to start is by submitting an updated mortgage application on our website http://www.danmoralez.com/. As soon as we receive your application, we will confirm it and contact you to quickly review the details and your options.
We will also need your supporting documentation (see above). Please forward that information as soon as possible to us. This will help to insure a quick closing and the best rates possible for you.
Can I ask you a favor? If you have a friend or family member who could benefit from our services, would you be so kind as to pass along their contact information to us or to refer them to our mortgage practice. Our success is dependent on the referrals of our clients. Please don’t keep us a secret. Thanks again for making The Dan Moralez Mortgage Team your choice for home financing.
