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Refinance

• When should I refinance?
• Should I refinance if I plan on moving soon?
• What are points?
• Should I pay points to lower my interest rate?
• What does it mean to lock the interest rate?
• Should I lock-in my loan rate?
• I've had credit problems in the past. Does this impact my chances of getting a home loan?
• I've only been late a couple of times on my credit card bills. Does this mean high interest rates?
• How can I find the best deal?

When should I refinance?
It is often said that you should refinance when mortgage rates are 1.5% lower than the rate you currently have on your loan. Refinancing may be a viable option even if the interest rate difference is less than 1.5%. A modest reduction in the loan rate can still trim your monthly payment. For example, the monthly payment (excluding taxes & insurance) would be about $770 on a $100,000 loan at 8.5%. If the rate were lowered to 7.5%, the monthly payment would be about $700, a savings of $70. The significance of such savings in any scenario will depend on your income, budget, loan amount and the change in interest rate. Your trusted Lendingladies.com Loan Officer can help calculate the different scenarios.

Should I refinance if I plan on moving soon?
Most lenders will charge fees to refinance a loan. If you plan to stay in the property for less than a couple of years, your monthly savings may not get a chance to accumulate and recoup these costs. Let's say a lender charged $1,000 to refinance your loan, but it resulted in a monthly savings of $50. It would take 20 months (1,000 divided 50) to recoup the initial costs before you start to realize some savings. Some lenders will charge a slightly higher than average interest rate on refinance loans, but waive all costs associated with the loan. The attractiveness of these loans will depend on the interest rate you are being charged on your current loan. Speaking with your endingladies.com Loan Officer will help clarify this issue.

What are points?
Points are costs that need to be paid to a lender in order to receive mortgage financing under specified terms. A point is a percentage of the loan amount (one point = one percent of the loan). One point on a $100,000 loan would be $1,000. Discount points are fees that are used to lower the interest rate on a mortgage loan (you are discounting the interest rate by paying some of this interest up-front). Lenders may express other loan-related fees in terms of points. Some lenders may express their costs in terms of basis points (hundredths of a percent). 100 basis points = 1 point (or 1 percent of the loan amount).

Should I pay points to lower my interest rate?
If you plan on staying in the property for at least a few years, paying discount points to lower the loan's interest rate can be a good way to lower your required monthly loan payment (and possibly increase the loan amount that you can afford to borrow). If you only plan to stay in the property for a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front. Ask your Lendingladies.com Loan Officer how long it would take for your monthly savings to recoup the costs of the discount points.

What does it mean to lock the interest rate?
Due to the nature of interest rate movements, mortgage rates can change dramatically from the day you apply for a mortgage loan to the day you close the transaction. If interest rates rise sharply during the application process, it could make a borrower's mortgage payment larger than he/she previously thought. To protect against this uncertainty, a lender can allow the borrower to 'lock-in' the loan's interest rate, guaranteeing the borrower the prevailing loan rate for a specified period of time (often 30-60 days). A lender may or may not charge a fee for this service.

At Lendingladies.com your Personal Loan Shopper will help you decide when it is the best time to lock your rate. You can also ask them to sign you up for free “Rate Alert” email updates that will inform you when interest rates are at your desired level.

Should I lock-in my loan rate?
No one knows for sure how interest rates will move at any given time, but your lender may be able to give you an estimate of where it thinks mortgage rates are headed. If interest rates are expected to be volatile in the near future, you may want to consider locking your interest rate if rising rates will no longer allow you to qualify for the loan. If your budget can handle a higher loan payment or if the lender's lock fee seems excessive for your means, you might want to consider allowing the interest rate to 'float' until the loan closing.

I've had credit problems in the past. Does this impact my chances of getting a home loan?
Obtaining a home loan is possible even with poor credit. If you have had credit problems in the past, a lender will consider it to be a risk to lend to you. To compensate for this added risk, the lender will charge you a higher interest rate and usually expect you to pay a higher down payment on your home purchase (typically 20-50% down).

I've only been late a couple of times on my credit card bills. Does this mean I will have to pay an extremely high interest rate?
Not necessarily. If you have been late less than three times in the past year, and the payments were no more than 30 days late, you probably have a pretty good chance at getting a home loan at a competitive interest rate. Lenders guidelines will vary, but most lenders will excuse a couple of minor 'late-pays' as long as the borrower can provide a reasonable explanation (i.e. job transition, illness). If the late-pays were 60+ days late and cannot be explained, you may have to settle for a higher interest rate.

How can I find the best deal?
Remember that financing for a borrower can be structured in several different ways. You can pay higher fees and get a lower interest rate, or you may lock in at a slightly higher interest rate but pay lower fees. In order to make an 'apples to apples' comparison ask your Personal Loan Shopper what the interest rate is for a zero discount point loan (based on a 30 or 60 day lock period). Then ask what the charge is for an origination fee, as well as any other fees typically charged for a loan, (i.e. broker fee, processing fee, appraisal fee). The reputable Loan Professionals at Lendingladies.com will not hesitate in answering these questions for you.