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| There many things to consider when refinancing your home loan. The fees associated with a refinance may add up, so many mortgage companies can, as an option, waive fees associated with refinancing the loan. This fee reduction can amount to large savings for the home owner but may result in a slightly higher interest rate than expected. It is important to talk about your loan options with your ICM loan professional. Additionally, the amount of time you plan to spend in your home may impact your decision to refinance. Many mortgage lenders allow home owners who expect to live in their home for a minimum of three to five years to pay “points” and closing costs upfront. This option ensures the home owner obtains the lowest interest rate available.
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Saving money is important to many consumers in today's economy and refinancing your home loan is one way you can lower your monthly payments. A careful analysis combined with the advice of your ICM mortgage professional will ensure that you make the right decision. The costs associated with refinancing are similar to those incurred when obtaining an original home loan. These may include legal fees, application fees, settlement costs, and other related fees. When refinancing, additional fees can arise and they can include a fee charged if you paid off your original mortgage early (prepayment penalty) as well as any points associated with the refinance. Typically the cost runs between one and eight percent of the total amount of the home loan depending on the situation and the type of loan. However, many mortgage brokers can offer zero point loans and low-cost refinancing. Therefore, even if your rate change is less than one percentage point, you may still be able to save money by refinancing. Contact your ICM home loan advisor to discuss the various costs and laws governing the fees charged by mortgage companies and the potential savings you can enjoy.
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The decision on whether or not to refinance has, in the past, meant balancing the savings of a lower monthly payment against the costs of refinancing. In recent years, mortgage lenders have introduced "no cost" and low-cost refinancing packages that minimize or completely eliminate the out-of-pocket expenses of refinancing. With traditional refinancing, the interest rate for your new mortgage is often about two (2) percentage points below the rate of your current mortgage. However, with the newer low and no-cost refinancing programs offered, home owners can find it valuable to refinance to obtain a smaller reduction in interest rates and still save money.
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Many mortgage lenders will offer a refinance package where you refinance for more than the balance remaining on your old home loan. In the mortgage world this is called “cashing out”. Fluctuations in the economy may cause interest rates to drop which may allow you to refinance your present loan and take out extra cash, without increasing your monthly payments. The extra cash that results from refinancing can be used for many purposes. One of the smartest ways to use these funds is to pay off any loans with higher interest rates. If you are in a positive position regarding debt you may be interested in using the money for a more enjoyable purpose, such as building an addition on to your home. However you decide to spend the money, your ICM mortgage professional can help you through the process.
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When home owners make the decision to refinance their home loan they must decide which interest rate will work best for their situation. There is typically a range of interest rates available to choose from, each at a different cost, paid in "points". A point is equal to one percent of the loan amount. You can "buy" a rate lower by paying more points or, reduce points paid by accepting a higher rate. When you work with your ICM home loan professional, you will be able to analyze the different interest rates and related points, which can save you money. Some combinations of interest rates and points may cause your monthly payment to increase though. Be sure to discuss all options with your home loan advisor before making a decision.
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The costs associated with refinancing are similar to those when obtaining an original home loan which could include legal fees, application fees, settlement costs, and other related fees. When refinancing additional fees may arise and they can include a fee charged if you paid off your original mortgage early (prepaymnet penalty), the points associated with the refinance, and the home loan interest rate. Typically, costs run between one to eight percent of the total amount of the home loan depending on the complexity of the situation. In most cases, loan costs and fees are paid from the proceeds of the new loan.
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Refinancing more than once can make sense for many. Timing is important because when interest rates are falling quickly you can reduce your monthly payments even further. The money that Americans are saving can be used to build emergency cash funds, build additions onto their homes, or they can save it for a child’s college fund.
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Home owners have two rate options when refinancing their home loan: fixed rate mortgages and adjustable rate mortgages, often referred to as ARMs. ARMs have been attractive because they offer very low introductory rates but due to financial market instability these rates can jump quickly and homeowners may find themselves paying more than they had bargained for. Adjustable rate mortgages are not always unpredictable though. Homeowners who know the length of time they plan to stay in their home may secure an ARM for that specific amount of time, which will save the homeowner money and avoid rising payments.
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There are tax implications involved in most refinance loan transactions. These can often benefit the borrower. Please
consult a tax professional to be fully informed.
| | Refinancing your Seattle home loan is a great way to gain extra cash. Seattle refinances are popular among Seattle home owners and our Seattle mortgage brokers are experienced with Seattle refinances. Contact us today to learn more about your Seattle refinance.
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