Top Refinance Questions

From the desk of Michele Roberts

Should I refinance now?
Is it smart to pay points?
I hear a lot about “No Closing Costs” loans – how does that work?
Are interest rates higher for a cash-out refinance?
When should I "lock in" an interest rate?
Do I have to pay the costs of the loan out of my pocket?
How long does it take to refinance?
Should I refinance from an adjustable-rate to a fixed-rate mortgage?

Q. Should I refinance now?

The answer to this question really depends on what your financial needs and goals are. For instance, a lower interest rate and lower payments are good reasons to refinance. There are of course additional factors to consider. Here are a few things to ask your self when considering refinancing:

• How long you expect to be in the home?
• How much equity you have in the home?
• What your closing costs will be
• To get that low rate, will you have to pay points?
• Will your lower payments make up for the closing costs, fees and points if any?

Q. Is it smart to pay points?

If you're refinancing your mortgage, and you are staying in the property for 5 to 10 years, points can be an excellent choice for you. Points are used to BUY a lower interest rate. The longer you own your home, the more benefit you will derive from paying points.Understand that points paid on a refinance can be deducted from your taxes only in small increments — 1/30th a year for a 30-year mortgage, etc. - meaning it could be several years before your lower rate makes up for the points you pay. If you're buying a home however, points paid may be a deductible expense for that year. Consult your tax advisor to be sure

Q. I hear a lot about “No Closing Costs” loans – how does that work?

“No cost loans” is really a misnomer, as we all know – there is no free lunch. Typically what happens is that the cost of the loan is rolled into a slightly higher interest rate. So, since you are not paying costs at the time of closing the loan, many call it a no cost loan – “no cost out of pocket” is much more accurate. The loans are an excellent idea under the right circumstances; example – you are planning on reselling the home within a few years.

Q. 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 that you pay on a non-cash-out loan. There may be a slight adjustment to the cost of the loan for certain cash out refinance loans, usually larger jumbo loan amounts.Using the equity in your home to pay off other bills can be a smart thing to do. Personal debt (car loan, bank loan, credit cards, etc.) are not tax deductible loans, typically a mortgage loan is. You may be able to deduct the interest on the money you take out to pay off that debt. It would be prudent to consult our loan professionals and your tax or financial advisor to be sure.

Q. When should I “lock in” Link an interest rate?

Of course this is always the magic question! No one can predict interest rates, if anyone could, they would own the world! Generally speaking though, rates go up much faster than they come down. So if you're thinking about buying a home or refinancing your mortgage – Always try to lock in a sweet rate when they are available, and above all, DO NOT try to “pick off” the market – only about one in a thousand or so are lucky enough to capture rates at the exact bottom – not good odds at all. Just as rates rise faster than they go down, interest rate ‘bottoms’ typically last only one to two days – yes we said days! Always take a decent rate that works for you and lock it in!

Q. Do I have to pay the costs of the loan out of my pocket?

The general answer is no. If you have acquired enough equity in your home, you can add the cost of financing to the new loan amount. Another way to cover the costs of acquiring the new loan is to opt for a slightly higher interest rate.

Q. How long does it take to refinance?

With Nustar Mortgage, refinancing normally takes between two and four weeks, depending on a few variables.

• Often times, the home appraisal is what takes the longest to obtain. And during refinancing booms, appraisers can be difficult to schedule. Our loan application will make applying faster than ever, it will even supply you a list of supporting documents you will need for your loan.
• Time needed to obtain supporting documents from you and third parties, if any.

Q. Should I refinance from an adjustable-rate to a fixed-rate mortgage?

It depends on your situation. Generally, it's a good idea to get the lowest fixed-rate possible. However, if you're in the first year of a five-year Adjustable Rate Mortgage (ARM) and you plan on moving in three years, it may not make sense for you to refinance. One of our refinance experts can help you make the best decision.

The Loan Application Process

We will want to verify certain information about you and the property. Borrower information will include verification of income and employment, assets, and your credit history. You, the applicant, as part of your application process, will usually provide some of this information.
Other information, such as your credit history, will be obtained directly from the credit bureaus.

For the property itself, we will order an appraisal in most cases and a legal description of the property, such as a title report. We have 'approved appraisal company" lists, so if you have an old appraisal, we may be able to accept it.

The Loan Approval Process

During the "processing" and/or "underwriting" period, your credit, assets, income and other determinants are checked and compiled. Your loan is either approved with conditions, or approved without conditions or declined. Conditions are further documentation or checks we will need to finalize your loan before funds can be dispersed. Some borrowers become frustrated by conditions that surface at the end of a loan transaction and can't understand why they are being raised so late. Final conditions are sometimes added for final approval. We do our best to help you through the process - remember, we are simply trying to meet conditions imposed by other sources.

Since most loans are sold and serviced by other parties, the lender must verify that the loan can be sold upon close. Not to worry, no other terms of your loan can be changed after you have signed your final loan documents. When all conditions are met, your loan documents are drawn up and forwarded to the place of settlement or closing, typically a title and/or escrow company.

IMPORTANT NOTE: Do not make any adverse changes to your financial "picture" during the loan process. Things as simple as applying for a new department store credit card to purchase a new appliance will at least force an explanation to be given and at worst may cause your loan not to fund and the approval to be withdrawn. Many times a final credit report update and additional calls to your employer may be required before funding the loan. Be patient and your loan will flow smoothly.

Old Ideas No Longer Apply

If interest rates fall below your current mortgage rate, refinancing may be a great idea.

From the desk of Michele Roberts.

The old idea that rates must be 2 full percentage points below your existing loan is not true. A drop of as little as 1/2% could save you thousands of dollars.A variety of loan terms, no-point rate options and lower closing cost loans have greatly decreased the rate difference needed to make refinancing profitable.

We as consumers spend substantial amounts of time trying to make our savings and investments earn more. One avenue which is sometimes overlooked is seeing how much we can decrease our debt payments. Since a mortgage is usually the largest debt we have, it pays to concentrate most on reducing that payment first.

For more information on Refinancing a home loan visit www.financialsolutionsgroup.info

There are five major reasons to consider refinancing an existing mortgage:

From the desk of Michele Roberts

1. Decrease monthly payments from a higher fixed rate to a lower fixed rate.

Example: If the rate is 7.5% now and a homeowner switches to a 6.5% rate, he or she will save 1% on the mortgage less the costs of refinancing. On a $200,000 mortgage, for example, the savings will be over $50,000 over 30 years by reducing the interest rate by just that one percentage point.

2. Improve monthly cash flow with lower payments.

Cash flow may be tight after moving into a new home. Switching to an adjustable rate program where the rate is fixed for the next three to ten years could provide breathing room needed. Similarly, for those who are in a 15 or 20 year term loan, switching to a 30 year term can also increase monthly cash flow.

3. Switch to a fixed rate program to eliminate payment changes of adjustable rate mortgages (ARMs).

Homeowners with one year ARMs will see their rates rise as rates move up. Using programs that hold rates steady for three, five or seven years, you can refinance into a low fixed rate.

4. Withdraw funds from the equity in a home.

If cash is needed for home improvements, college education or to consolidate debts, the borrower may be able to refinance 75% to 80% of the current value of the home if it has been owned for one year or more.

5. Shorter loan terms

Probably the best incentive to refinance is found by refinancing into a shorter term loan while keeping the loan payment stable. A borrower can save tens of thousands in interest by reducing the term of the loan.

Visit financialsolutionsgroup.info for information on fixed rate loans and other programs.