REFINANCE (Is Refinancing The Right Option?)
Q. Should I refinance?Sometimes it makes sense to refinance . Sometimes it does not. It depends greatly on your individual situation and what your financial goals are. For instance, you may want to lower your interest rate and/or monthly payment, but you need to ask yourself some questions:How long do you expect to be in your home? How much equity do you have in your home?
Are you willing to pay points to get a lower rate? Will having lower payments more than make up for the closing costs , fees and points if any?
Q. Should I refinance from an adjustable rate to a fixed rate?
Generally, it's a good idea to get the lowest fixed rate possible, but you also have to consider your situation. If you're in the first year of an adjustable rate mortgage (ARM) and you plan on moving in three years, it probably doesn't make sense for you to refinance. However, if the rate on your ARM is about to adjust and you think the rate will go up, then it may make sense to get a long-term fixed-rate mortgage, especially if you don't plan on moving in the next seven years or so.
Click here to Contact DTN for more informationQ. Are interest rates higher for a cash-out refinance?
The interest rate you pay on a cash-out refinance loan will generally be the same as what you pay on a mortgage where you don't take cash out. There may be an incremental fee associated with a cash-out refinance loan depending on the specific loan you choose and the loan-to-value ratio. Using the equity in your home to pay off other bills can be a smart thing. Consider taking some money out to pay off high-interest credit cards bills, auto loans and any other debts you have that have non-tax-deductible interest. Please consult your tax advisor to find out whether you may be able to deduct the interest on your new loan.Q. When should I "lock in" an interest rate?
Nobody can predict what interest rates will do. But historically, rates rise faster than they come down. So if you're thinking about buying a home or refinancing your mortgage, lock in your rate now—you can always refinance later if rates drop again. Any near-future drop in interest rates may not be drastic enough to impact your monthly mortgage payment. Of course, every situation is different, so it's important to consider all of your options.Q. Should I pay points to get a lower rate?
Paying points may or may not be your best option, depending on what you're doing. Points paid on a loan you've refinanced can be deducted from your taxes only in small increments—1/30th a year for a 30-year mortgage, for example. This means it could be several years before your lower rate makes up for the points you pay. However, if you're buying a home, points paid are a tax-deductible expense for that year. Please consult your tax advisor.
Click here to Contact DTN for more informationQ. Are there really loans with no closing costs?
There are few loans that truly have no closing costs. Sometimes lenders may not charge application fees and agree to pay the appraisal and title fees, but they may increase the interest rate in return. Lenders can also roll the costs into the amount of your loan. So, because you're not paying costs up front, it's called a "no closing cost" loan. While slightly increasing your mortgage might be acceptable to you, keep in mind that it's not really a cost-free loan.Q. How long does it take to refinance?
With Quicken Loans, refinancing normally takes between two and four weeks, depending on a few things:Do you have a recent home appraisal? Are you in an area that appraisers can get to easily? Are there plenty of other comparable homes in your neighborhood? Usually, getting the home appraisal is what slows the process down the most. During refinancing booms, appraisers can be difficult to schedule. Also, having your paperwork ready helps to speed the process along much faster.
Click here to Contact DTN for more informationQ. How much money will I need to bring to the closing?
A general guideline is that you'll need two percent of the home's purchase price for prepaid interest to cover the time between the date you close your loan and the date you make your first mortgage payment. Some states may also require pre-payment of property taxes . When refinancing however, your old mortgage will most likely have money in an escrow account that can cover these costs. Some borrowers get short-term loans while their escrow transfers back to them, but most pay the money at the closing knowing they'll get it back when their escrow is returned.Is it Time to Refinance Your Mortgage?
There are times when it makes sense to refinance your mortgage. It's important to have a clear financial objective in mind so that you're more able to choose the most appropriate loan. Ultimately, the decision is up to you to decide when it's best for you to refinance, based on your individual financial situation.Refinance from an Adjustable Rate Mortgage (ARM) to a Fixed-Rate
It's important to consider what mortgage rates are doing. Since mid-2004, the Federal Reserve has raised interest rates several times and is expected to keep raising rates in the near future. This means that if you have an adjustable rate mortgage (ARM), it may adjust to a rate that's higher than a fixed-rate mortgage . Now might be a good time to consider refinancing to a fixed-rate loan.However, you must also consider the amount of time you plan on being in your home. If you're only going to be in your home for a few more years, it may make sense not to refinance out of your ARM. If you're going to be in your home longer than seven years, it might be a smart move to refinance to a fixed-rate mortgage.
Click here to Contact DTN for more informationRefinance from a Fixed-Rate Mortgage to an ARM
Again, you need to consider how long you plan on being in your home. Many people move within nine years so it may not make sense to pay a higher interest rate for a 30-year fixed-rate mortgage when you're not going to be in the home that long. Doing so may be costing you money. Consider refinancing to an ARM instead — you'll get a lower rate and lower your monthly mortgage payment.Lower Your Monthly Mortgage PaymentA drop of just one half to three quarters of a percentage point in interest can lower your monthly payment. If you don't refinance, you may be paying too much every month for your loan, and that's never a good financial move. There are a few different ways you can lower your monthly mortgage payment.First, you can simply refinance to a lower interest rate. A lower rate generally means a lower monthly payment.
Click here to Contact DTN for more informationSecond, you can change the term of your mortgage. For instance, if you have a 15-year mortgage, you can lengthen the term to 30 years. Since the balance of your mortgage is spread out over a longer period of time, your payment is lower. However, if you have a 30-year mortgage and one of your financial goals is long-term savings, you may want to consider shortening your term to 20 or even 15 years. Your payment will be higher, but you will pay much less in interest over the life of the loan, saving you thousands of dollars in the long run.The third way to lower your payment is to refinance to an interest-only loan. Basically, with an interest-only loan, the minimum amount you are required to pay is the amount of interest for a certain period of time, though you can pay as much principal as you like. But you get the flexibility to pay less if you need or want to divert your money elsewhere, such as contributing to your 401k or saving for your child's college tuition.
Click here to Contact DTN for more informationGetting Cash from Your Home
The equity you have in your home can act like a savings account that you could access through a home equity loan or a cash-out refinance. This is usually done when you want to finance an important home improvement, pay for college or pay off high-interest credit card debt. Whatever your reason, this may be the right option for you.Consolidating High-Interest Credit Card DebtThe difference between credit card debt and a mortgage can, financially speaking, mean thousands of dollars. Why? Because unlike your mortgage, the interest you pay on a credit card is not tax-deductible and you pay a higher rate than you would on your mortgage. Because of this, credit card debt is often referred to as "bad debt" whereas your mortgage is considered "good debt." Using your home equity to pay off your high-interest credit card debt can save you money in the long run. Using your home equity, rather than your credit cards, to finance expensive purchases can also be a smart move. Be sure to consult your tax advisor.Deciding on when to refinance your mortgage will depend on the circumstances of your situation: how long you'll be in the home, what your financial goals are, whether interest rates are dropping, etc. It's up to you to decide if it's right for you.Refinance ChecklistCompleting a loan application is the first thing you'll do when refinancing your mortgage. You may also need to provide a variety of documentation to help your mortgage lender approve you for a home loan. The documentation will vary depending on the lender you choose, your loan program, and your personal financial situation.Refinance Tools Refinance Process Video Article - Homeowner Tax Tips Free Refinance Guide Talk to a Refinance Expert! The following is a list of documents generally required during the refinance application process. You may or may not need everything on our refinance checklist, but for a fast and easy loan process, have these items available when you're ready to complete your mortgage application.
Click here to Contact DTN for more informationProof of income: Typically, you'll need to show original pay stubs for the last 30 days. Copy of homeowners insurance : Verifies that you have current and sufficient coverage on your home. Copies of your W-2 forms: Required for each loan applicant and helps your lender verify past employment and income history. Copies of asset information: Including accounts holding money for closing costs, statements for savings, checking and 401K accounts and investment records for mutual funds or stocks. Copy of title insurance : Helps your mortgage lender verify the taxes, names on the title and legal description of the property. Once you've begun the refinance process, your DTN refinance expert will tell you which documents you'll need to get approved. They may vary depending on where you live and which loan program you've selected. But keep in mind — the more information you have ready before you apply, the less time it will take to get approved and close your loan.
Click here to Contact DTN for more informationCash-Out Refinance Versus Home Equity LoansLet's say you have a home that's worth $150,000 and you owe $100,000 on the mortgage. That means you have $50,000 of equity in your home, which is like having $50,000 in a savings account. A cash-out refinance allows you to access that equity. For instance, if you need $10,000, you can refinance your mortgage so that you owe $110,000 and the lender then gives you $10,000 in cash at closing.Refinance Tools Home Value Calculator Article – Home Equity Loan Options Should You Refinance Calculator Talk to a Refinance Expert! With a home equity loan, you keep your original mortgage and take out a second mortgage for the amount of equity you are tapping into.Since every homeowner's situation is different, your best option will depend on your specific circumstances. DTN has several mortgage options to choose from. When you compare home equity loans and cash-out refinance further, there are four things you should consider in order to determine what's best for you:
Click here to Contact DTN for more informationSpeedHow fast do you need the money? Home equity loans close considerably faster than a refinance – in as little as five days. That might be important to you.CostHome equity loans typically require minimal fees. Refinancing, on the other hand, may carry higher loan fees and possibly points .RateBecause a home equity loan is a second mortgage , it typically has a higher rate than a cash-out refinance (a reflection of its higher risk to the lender). But if you already have a great rate on your mortgage, it may be worthwhile to get a home equity loan — even at a higher rate — rather than refinance and lose the low rate you already have on your first mortgage.TermWhen refinancing, you are generally limited to a term of 15 or 30 years. With a home equity loan, you have more flexibility and can take advantage of a shorter term — greatly reducing your overall interest costs.A DTN mortgage expert can help you compare a cash-out refinance or a home equity loan. With your own personal mortgage expert to guide you, you'll have no trouble determining which type of loan is right for you.
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