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As rates continue to rise, this could be your last chance for many years to lock in a lower rate. As rates and mortgage amounts go up, the impact on your bottom line increases. Over time, this difference in rates can cost you thousands of dollars. 

Are you a good candidate for refinancing? When you refinance your mortgage, you pay off the remaining balance on your current loan and get a new one. You can get a new rate and new terms. You can get a cash-out refinance where you tap into the equity to extract cash and then get a new mortgage. You can even pay money in and take out a smaller mortgage. Those with adjustable-rate mortgages may be good candidates for refinancing. As mortgage rates climb, so will your monthly payments. If you lock in a fixed-rate mortgage now, you may be able to save thousands of dollars later. The same is true for people with high-rate mortgages who have since improved their credit. Today, most people aren't getting ARMs because the rates are about the same as fixed-rate mortgages. If you have an ARM, now is a good time to refinance into a fixed before rates get even higher. 

Cash-out refinance options. If you have outstanding higher-rate consumer debt and an above-market mortgage interest rate, a cash-out refinance might  be be a good option. That way you can consolidate all the debt into one presumably more affordable monthly payment. With a cash-out refi, you can use that money to pay off credit card debt (which usually carry higher interest rate) and get a new mortgage with better rates. 

What does refinancing cost? Refinancing fees vary by lender and state. Calculate when you'll break even on the new mortgage by taking into account the costs of refinancing and any prepayment penalty for paying off your mortgage early. On average, borrowers can expect to pay between 3 and 6 percent of their balance in refinancing fees. 
  • Application fee: We only charge a $28 credit report fee. 
  • Loan-origination fee: Our origination fee is 0 percent. 
  • Discount Points: It depends on if you want to lower your rate and pay loan-discount points. This is a discretionary expense. 
  • Appraisal fee: It varies from $525 for Conventional appraisal to $725 for FHA appraisal. Please inquire about our special appraisal credit program
  • Title and Escrow fee. 
  • Property insurance. Not really a fee since you have to incur this cost with or without refinancing.  
All of the above costs can be rolled into the new loan amount or you can ask the lender to pay them in exchange for a slightly higher interest rate (known as no-cost refinancing). 





Posted by Sam Kader on October 8th, 2018 12:42 PM
Rising home values and interest rates have many homeowners turning to home equity products to meet their personal financing needs. Because it's secured by property, taking a cash-out refinancing or a Home Equity Line Of Credit (HELOC) is typically one of the best options for consumers and cheaper than using a credit card or unsecured forms of borrowing.  Equity which is the difference between your home's value and mortgage balance accumulates from paying down your loan and from the increase in home prices over time. Recent tax law changed the rules about deducting interest paid on a home-equity loan or line of credit. You can only deduct the interest on a home-equity loan if you use the money to buy or improve your home. You can't deduct it if you use the money to consolidate debt or buy a boat or pay your kids college tuition. You can also deduct interest up to a combined mortgage balance of $1,000,000. 

HELOCs typically have an interest only initial period followed by payments of principal and interest. These lines of credit usually have a floating interest rate tied to an index such as the bank prime rate. Borrowers will see a big payment jump when the loan switches from interest-only to a fully amortized loan. Their interest rate will also rise when mortgage rates increase. A HELOC makes more sense if you plan to sell the property or move before the fully amortize payment period begins. Depending on how much you borrow and your FICO score, a HELOC interest rate is about 5.5% or 5.62%. 

Cash-out refinance is a good option if you have specific purpose for the funds such as home improvement or debt consolidation. You can choose a fixed rate of 4.25% or 4.5%. If you currently are paying monthly mortgage insurance, cash-out refinancing is good way of having it removed and getting funds as well towards that home improvement that you've been planning.  

Today's home equity borrowers have far higher credit scores and borrow less and lenders are more responsible in their underwriting of home equity then they were Pre-Crisis of 2016. In 2017, homeowners borrowed only $262 billion with cash-out refinances which represents only a paltry 1.25% of available equity. Here are 7 most popular uses of  cash-out and HELOC: 

  1. Home improvements accounts for 42.9% with Average Property Value of $206,824, Average Loan Amount of $38,662 and Average Loan-To-Value of 67%. 
  2. Debt Consolidation accounts for 38.2%. Average property value of $206,435, Average Loan Amount of $37,000 and Average Loan-To-Value of 74%. 
  3. Emergency expenses account for 0.2%: Average Property Value of $212,213, Average Loan Amount of $35,747 and Average Loan-To-Value of  58%. 
  4. Down payment on investment property accounts for 0.3%. Average Property Value of $301,025, Average Loan Amount of $103,625 and Average Loan-To-Value of 71%.
  5. Retirement income accounts for 1.3%: Average property value of $293,388, Average Loan Amount of $74,207 and Average Loan-To-Value of 56%. 
  6. Other Investment purposes accounts for 7.8%: Average Property Value of $252,992, Average Loan Amount of $80,241 and Average Loan-To-Value of 70%. 
The biggest danger of taking home equity is not being able to repay your loan or needing to sell you home in an emergency sale or losing it to foreclosure  Homes are our greatest asset, use it wisely and protect it as we are living longer and are more responsible of our own financial security. 
Posted by Sam Kader on June 27th, 2018 9:45 PM

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