Tag Archives: Refinance

5 tips to refinance

The Resolution you Should Keep. Refinance.

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5 reasons to refinance

“Should I refinance my mortgage?”

This is one of the most common questions we help our clients answer. 

When you refinance your existing mortgage, you are essentially paying off the existing mortgage debt and replacing it with a new loan. Many of the same costs are involved in refinancing a loan as are in first−time financing.

There is an old adage in the mortgage business that states that if you can improve your interest rate by at least two percentage points, then it is a good time to refinance. While that may work as a general rule of thumb, the truth is that there are many reasons to refinance. Here are the top five we see.

1. Lower Interest Rate 

Securing a lower interest rate is one of the top reasons for refinancing. A lower rate can make a large different in your monthly payments, and save you money on the financing fees! 

 

2. Build Equity Faster 

If you’re in a position to make a higher monthly payment due to a salary increase or other good fortune, you may want to refinance from a 30-year loan to a short (15 or 20 year) term loan. Adjusting the term enables you to build equity faster and save a large amount of money on the interest paid over time! 

 

3. Change your Loan Program 

Some homeowners who start in an ARM (Adjustable Rate Mortgage) discover they’d rather switch to a more stable Fixed Rate mortgage. While an ARM may have been the more attractive loan program when you first purchased, we can compare different Fixed Rate programs to find which would save you more money. 

 

4. Credit Score Improvement 

If you’ve increased your credit score since you first applied, you may be in position to refinance with a lower rate with your higher score! We’ll evaluate your current loan, then compare the rates with your new score to find you the best program that’ll lower your monthly payments! 

 

5. Getting Cash Out 

With a Cash Out Refi you’re able to tap into the equity that you’ve built in your home. You may want to put money towards home improvements, send a child to school, or pay off other debt with the equity you’ve accrued through your mortgage.  

 

Before you decide to refinance, think back to when you purchased your home.

  • Did you pay points to get a lower rate?
  • Has it been long enough that you’ve made your money back?
  • Is there a pre-payment penalty on your loan?
  • What is the purpose of this refinance? 

Refinances EMPOWER you to change

the terms of your original mortgage!

All of these factors are important to consider when you’re weighing if you should refinance your home. Give us a call at 952-405-2090 to set up your FREE initial consultation. We can help you determine if now is the right time for you to refinance. 

Are you ready to resolve your refi questions?

Refinance: refinance

 verb

re·​fi·​nance | \ ˌrē-fə-ˈnan(t)s  , (ˌ)rē-ˈfī-ˌnan(t)s, ˌrē-(ˌ)fī-ˈnan(t)s \

refinanced; refinancing; refinances

Definition of refinance

: to renew or reorganize the financing of something : to provide for (an outstanding indebtedness) by making or obtaining another loan or a larger loan on fresh terms refinance a mortgage

cash back refinance

Cash out and rate-and-term will save you money

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How can a cash out refinance save me money?

There are 2 categories of refinance

1.“rate-and-term” 

2.“cash out”

Both will save you money

rate-and-term

The First type, rate-and-term, replaces your existing loan with one that has a better rate and/or terms. You might replace an ARM or balloon loan with a fixed-rate loan, for example. Or you may decide to lower your rate AND shorten your term. Some borrowers have been able to refinance from a 30-year loan into a 15 or 20-year loan, reducing the term, without appreciably raising their payments.

A borrower does not receive any significant amount of cash in a rate-and-term refinance; lenders generally consider that any cash proceeds above $2,000 pushes the loan into a cash out category.

There are always certain costs involved in any mortgage transaction; there will always be fees for title, escrow, underwriting and document preparation, for example. Borrowers can add these fees to their new loan to avoid having to pay them in cash. Financing these items is not considered cash out.

When you are deciding whether to do a rate-and-term refinance, you should evaluate it in two primary ways: first, how long will it take to recover the cost of doing the loan? For example, if the closing costs amount to $3,000 and the reduction in rate gives a saving of $1,500 per year in the first year.” For most people, this time frame is more than satisfactory, but you should make your own decision. The second criterion is net savings over some time, say five years, ten years or more. 

Homeowners with adjustable rate mortgages (ARMs) may decide to refinance into a fixed rate loan, even though their rate may initially be higher, they might feel more secure knowing that their rate will never change. This is more of a defensive strategy to guard against the possibility of a higher rate in the future, but it may not “save money.”

cash out

The other type of refinance, a “cash out,” the borrower receives cash of more than $2,000 at closing. This is accomplished by getting a new loan that is larger than the balance of the old one plus closing costs. Borrowers can use that money for anything. Homeowners have used cash out refinances to pay off consumer debt, like car loans, student loans, and credit cards. Using home equity to pay off credit cards can drop the payment dramatically! But paying down installment loans can create a false economy. A $30,000 car loan with an interest rate of 6% will have a payment of $500. Paying off that loan with the proceeds of a home refinance will effectively drop the payment to $150. It does NOT make sense to finance a car for 30 years. 

Contact Us. We can help you get pre-approved for a mortgage and determine how much house you can buy this next time around.  Rainbow Mortgage, Inc. is a broker so we have access to many different lenders and their loan programs which translates into more options for you!

 

How Can a Mortgage Professional Help With Divorce?

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It goes without saying, but I’ll say it anyway…divorces are complicated! There are many questions that an experienced mortgage professional can help answer before you finalize your divorce.

 

For example:

Can one of us afford the family home or do we need to sell it?

Will I have enough income to qualify for a mortgage after the divorce?

Is my credit score good enough to qualify?

Will I have enough assets to refinance or purchase a new home?

Do I have the right job and/or job history for mortgage qualification?

What’s my home worth?

Will the family home appraise high enough to pull out equity to cover the cash I owe my spouse, or do I need to pull funds from another source?

What’s the consequence if my Ex-spouse keeps the home but can’t refinance it into their name after the divorce?

What’s the best loan for me post- divorce?

Attorneys are not mortgage experts and there are many nuances in the mortgage world that can totally derail the perfect divorce settlement. Rainbow Mortgage Inc. takes a very proactive role in assisting our attorney friends and their clients in making sure their post decree housing goals are met.  We help you to (1) make realistic decisions about what is possible, (2) understand your loan options, and (3) structure a mortgage loan focusing on your post-divorce goals.  We are happy to help you by participating in client-attorney meetings to discuss potential initial options, provide revised options (if necessary) prior to the final signing of the decree, provide an estimate of what your home is worth using our AVM tool (which is the same tool used by lenders to evaluate whether a value on an appraisal is reasonable) and at no cost to you or your attorney, review the decree prior to it being sent to the judge.

Here are a few examples of items in a divorce decree that have caused client issues in the past:

(1) The length of time that a person is to receive support payments does not meet lender guidelines to qualify for a mortgage loan.   Different loans have different guidelines however, standard guidelines require that a borrower prove that they will receive the income for a minimum of three years following the funding of the mortgage loan.  The dates listed in the decree must be carefully monitored and possibly adjusted if the divorce process goes on for an extended period before it’s finalized.

(2) Child care expenses are being shared and the decree lists a payment that is to be made monthly to a specified bank account- underwriters will sometimes consider this child support which can throw off a person’s monthly budget causing them to no longer qualify for a loan.

Divorces are complicated but the mortgage doesn’t have to be with the right professionals in your corner. We can offer you the help you need and why wouldn’t you take it?  Contact us for a FREE consultation and decree review.  We only get paid when you are happy with our service and your loan closes.  It’s a Win-Win for you!