Loan Officers And Mortgage Brokers
When beginning your search for a lender, keep in mind that loan officerswho represent the banks, credit unions, and other financial institutions that they work forare paid partly based on the transaction that you make. That does not necessarily make loan officers bad people it just means that you should do a little work on your own to make sure you get the best deal. It is thus important to understand the full variety of available options and the pros and cons of each.
Mortgage brokers do not work for lenders but, instead, serve as an intermediary between you and the lender and can help you compare the services of many lenders and work to secure you the best rate. They are sometimes paid a fee by the borrower to provide assistance with finding a mortgage and facilitating the loan origination process, but more typically they are paid by the lender in exchange for bringing business to that lender.
Like loan officers, making a sale is how they get paid. Here again, a little knowledge and some comparison shopping are likely to serve you well. And as with many traditional financial services, there are now several online tools available to help you avoid broker fees.
A small difference in your interest rate can add up to huge savings over the term of your mortgage.
Set A Clear Financial Goal
There should be a good reason why youre refinancing, whether its to reduce your monthly payment, shorten the term of your loan or pull out equity for home repairs or debt repayment.
What to consider: If youre reducing your interest rate but restarting the clock on a 30-year mortgage, you may end up paying less every month, but more over the life of your loan. Thats because the bulk of your interest charges are in the early years of a mortgage.
What To Watch Out For
Reducing the interest rate on your mortgage and in turn your monthly payment may seem like a no-brainer, but there a few additional things to consider before refinancing. If you are replacing a 30-year mortgage with another 30-year mortgage, you may see a reduced monthly payment, but you may actually pay more over the life of the loan. Refinancing a 30-year mortgage with another 30-year mortgage can add extra years to the amount of time you will repaying the debt. This means you will pay more in interest over the combined lives of both loans than what you expected to pay for the original loan.
A great way to avoid paying this extra interest is to refinance a 30-year mortgage to a 15-year mortgage. By taking on a loan with a shorter term you will pay off your mortgage in fewer payments, reducing the amount of interest you will pay over the life of the loan. However, it is important to note that this strategy will increase your monthly payment, since larger payments will be required to pay off your balance in a shorter amount of time. This can be a terrific strategy for people who have lived in their homes for several years and have strong enough incomes to handle an increase in the monthly payments.
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Tap Into Your Home Equity
When you make payments on your mortgage, you build equity in your home. Your home equityOpens a popup. is the difference between your property’s market value and the outstanding balance of your mortgage plus any other debts secured by your property. If you need funds, you can refinance your mortgage to access up to 80% of your home’s appraised value1 in cash.
Estimate your available equity and find out how much you may qualify to borrow with our home equity calculator.
Benefits Of Refinancing Your Mortgage
There are numerous benefits to refinancing your mortgage. While most of them revolve around reducing your monthly payment, a new mortgage can have a shorter term, stabilize your payment with a fixed interest rate or help you use the equity you have built up in your home. These are the most common reasons homeowners decide to refinance:
In most cases, homeowners can refinance their homes at any time to take advantage of savings or draw on some of the equity for other use. Before signing any papers and making it official, its critical to understand all the costs of refinancing. These include going over your credit profile, understanding your credit score, finding the refinance quote that reflects your best options and determining how much you will pay in upfront costs.
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Should I Refinance My Mortgage
If interest rates have dropped since you signed your mortgage, you might think about refinancingOpens a popup.. But before you take the leap, there are a few things to consider.
When you refinance your mortgage, you replace your existing mortgage with a new one on different terms. To find out if you qualify, your lender calculates your loan-to-value ratio by dividing the balance owing on your mortgage and any other debts secured by your property into the current value of your property. If your loan-to-value ratio is lower than 80%, you can refinance.
The lender also looks at your monthly income and debt payments. You may need to provide a copy of your T4 slip, notice of assessment or a recent pay stub your mortgage statement a recent property tax bill and recent asset statements for your investments, RRSPs and savings accounts.
How Can You Remove A Co
In most cases, youll need to refinance your mortgage to remove a co-signer. However, some lenders might be willing to take someones name off of a loan without rewriting it. You can contact your lender to see if its possible to change the loan. Keep in mind that if your lender agrees, whoever is left on the loan will need to be able to qualify for the loan on their own.
Note that all parties may also have to file a quitclaim deed, which is a formal document relinquishing the rights to property. This will remove the co-signers name from the deed and will effectively transfer ownership to you.
The process of removing a co-signer without refinancing your mortgage can be complex, so it could be a good idea to consult an attorney for help.
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How Much Does It Cost To Refinance A Mortgage
Now that you know five reasons to refinance and the ways you can do it, you can anticipate what it might cost. As we mentioned earlier, you are responsible for closing costs and other fees during a refinance, just like you were when you took out your first mortgage. It varies by lender, but the overall cost ends up being about two to six percent of your loan amount. So, if youre taking out a $200,000 loan, you may be looking at $4,000 to $12,000 in closing costs.
But what exactly makes up closing costs? Here are some that are likely to make an appearance:
Refinance closing costs will vary depending on your lender, loan amount, loan type, credit score and more. With the help of our refinance calculator, you can get an estimate of how much your refinance may cost.
What Documents Do I Need To Refinance My Mortgage
To refinance your mortgage, youll need to supply identification, income verification and credit information. Be sure to ask your lender for a list of documents youll need. The faster you can give the lender everything they need to process your loan, the quicker youll be able to close.
Heres a general checklist:
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Want To Refinance Your Mortgage Do These 7 Things Now
Leslie CookKristen Bahler10 min read
For many homeowners, refinancing a mortgage is an opportunity to reset their finances.
With interest rates over 5%, the window of opportunity is getting smaller and smaller. But there are many homeowners who can still take advantage of a rate and term refinance, lower their monthly payments and free up money to put towards other expenses.
About 700,000 U.S. homeowners can reduce their current mortgage rate by at least 0.75 percentage points and save an average of $310 each month, according to estimates from the data and analytics company Black Knight.
Other types of homeowners, like those interested in taking advantage of their home equity with a cash-out refinance, shortening the term of their loan or converting an adjustable-rate mortgage into a fixed-rate loan, could also still benefit from a refinance.
If you’re considering a mortgage refi, it’s best to start the process as soon as possible. Here’s how to do it.
You Want To Pay Off Your Home Early
If you decide to shorten your repayment term , youll have a higher monthly payment but you also might be able to pay off your loan faster. With a shorter loan term, youll be paying much less in interest charges, which will bring the overall cost of your mortgage down.
Tip:Find out if refinancing is right for you
- Actual rates from multiple lenders In 3 minutes, get actual prequalified rates without impacting your credit score.
- Smart technology We streamline the questions you need to answer and automate the document upload process.
- End-to-end experience Complete the entire origination process from rate comparison up to closing, all on Credible.
Find Out: How to Pay Off Your Mortgage Early
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If You’re Thinking Of Refinancing Your Home Here’s What To Consider According To A Community Loan Officer
Editor’s Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate as the Fed rate changes. CNBC will update as changes are made public.
During this era of economic uncertainty, refinancing your mortgage can give you some breathing room by lowering your monthly payments and/or saving you money over time. Americans are applying for refinancing loans at a 38% higher rate compared to last year, in part because the Fed slashed interest rates when the coronavirus pandemic hit and borrowing is now more affordable.
But at the same time, refinancing can be a little complicated, especially if your is less than ideal or you’re not completely sure what to expect.
When you refinance, it means you’re essentially taking out a brand new loan on your property, often for the remainder that you owe . Ideally, this new loan comes with better terms than your old one. This depends on a number factors, including how much equity you have in the house and what your credit score is when applying.
While refinancing sounds great on paper, it may not always put you in a better position. It’s best to weigh the pros and cons, taking your personal situation into account.
CNBC Select spoke with Darrin Q. English, a senior community development loan officer at Quontic Bank, about the pros and cons of refinancing your home. Here’s what to keep in mind.
The Bottom Line: Make Sure Youve Met All Home Refinance Requirements Before Applying
Refinancing your existing mortgage can afford you many benefits, including allowing you to borrow on your homes equity, get rid of mortgage insurance, lower your monthly payments or shorten the term of your loan. However, you should take the time to ensure you meet all requirements beforehand.
Rocket Mortgage is ready to guide you seamlessly through every step of the refinancing process. Fill out an online application today to find out which refinancing options you qualify for. You can also give us a call at 326-6018.
Get approved to refinance.
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Tap Home Equity Carefully
About one-in-four homeowners are equity-rich, according to a recent study.
That means they have at least 50% equity in their home money that can be tapped with a cash-out refinance to accomplish other financial goals.
But one common mistake is using that equity to finance short-term expenses.
For instance, a car with a five-year life may not justify a 30-year mortgage loan. Youd still be paying off that car more than 20 years after you stopped owning it.
Not to mention, if you are buying a new car, often there are car financing rate offers better than a mortgage, says Jon Meyer, The Mortgage Reports loan expert and licensed MLO.
Likewise, a home refinance is an expensive way to pay for a month-long cruise. And while using equity to pay off high-interest credit card debt can create monthly savings, you could still be paying off that debt for decades.
Homeowners may receive more value by investing their equity in home improvements, a college education, or a promising business venture with proceeds from a cash-out refinance.
Will your equity, if tapped, yield long-term returns? If the answer is yes, then a cash-out refinance might be your next step.
Or, if youre looking for a shorter-term way to borrow against your equity, consider getting a home equity loan or home equity line of credit instead of a cash-out refi.
Free Up Money Each Month
If interest rates have fallen since you first got your mortgage, a rate-and-term refinance can replace your loan with a new one that has a lower rate, meaning you pay less to your lender each month.
Theres a significant opportunity to reduce your monthly cash requirements, says Glenn Brunker, president of Ally Home. Depending on the size of your mortgage, it could be $75 or $100 per month, or even several hundred dollars a month.
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Change Your Loan Type
There are many reasons a different type of loan may benefit you. Perhaps you originally got an adjustable-rate mortgage to save on interest, but youd like to refinance your ARM to a fixed-rate mortgage while rates are low.
Maybe you finally have enough home equity to refinance your FHA loan to a conventional loan and stop paying for private mortgage insurance.
What Does It Cost To Refinance
The total cost to refinance depends on a number of factors like your lender and your homes value. Expect to pay 2 6% of the total value of your loan.
The nice thing about refinancing is that you may not have to pay those costs out of pocket, especially since the adverse market refinance fee was eliminated.
In some cases, you can get a no-closing-cost refinance so you dont have to bring any money to the table. Be aware that closing cost is then paid over the life of the loan in the form of a higher rate.
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You Want To Reduce Your Monthly Payment
When you refinance your mortgage, you take out a new home loan with a new loan term. If you choose to extend your repayment term, you could get a lower monthly payment, which will give you more breathing room in your budget. You might also end up with a reduced monthly payment if you qualify for a lower interest rate.
What Is Refinancing And Why Refinance
Refinancing a mortgage can have many benefits, such as a lower interest rate and monthly payment, refinancing from an adjustable rate mortgage to a fixed rate mortgage, or reducing your term to pay off your mortgage faster. However, staying in your current mortgage may be a better option if the costs of refinancing outweigh the savings.
Since refinancing involves paying off your current mortgage and taking out a new one, the costs incurred may be similar to those you paid for your original mortgage. Refinancing fees can add up to as much as 5% or more of your loan amount, depending on where your property is located. These fees and costs may include, but aren’t limited to:
- Processing/underwriting fee
- Escrow reserves for property taxes and insurance
- Discount points for a lower interest rate
Before you consider refinancing your mortgage, ask yourself the following questions:
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Prepare For The Appraisal
Mortgage lenders typically require a mortgage refinance appraisal to determine your homes current market value.
What to consider: Youll pay a few hundred dollars for the appraisal. Letting the lender or appraiser know of any improvements or repairs youve made since purchasing your home could lead to a higher appraisal.
Other Ways To Save On Your Mortgage
If refinancing isn’t a good fit for you right now, that’s OK. There are still other things you can do to reduce your monthly mortgage payment. If you’re not in a hurry, you could wait to refinance until rates drop again.
In the meantime, you could try a loan modification if you’re unable to keep up with your mortgage payments and are worried about foreclosure. This is where you work with your lender to reduce your monthly payment, often by lowering your interest rate or extending the loan term. You must demonstrate significant financial hardship to do this, and the modification you’ll get will depend on your lender and your personal situation. But oftentimes, banks are willing to work with you because it can be a big hassle for them to foreclose upon a home.
If you choose to do this, be sure to ask your lender about any associated costs and read the fine print so you understand what you’re signing up for. You may still want to keep an eye out for a good time to refinance in the future if you think you can reduce your costs even further.
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Why Should I Choose To Work With You
Although this may seem general, its a great question to really understand why a particular individual wants your business. Are they just looking to close a quick refinance, collect their commission and move on, or are they more focused in on expanding their customer base, building a relationship and working with you for the long haul?
Do they talk about guiding you through your mortgage refinance now and also helping you in the future? Do you believe they want to earn your trust and business for a lifetime? Thats the kind of loan officer youll want to work with.
