- What's the difference between New and Refinance?
- Should I refinance?
- Why do people refinance?
- What's the difference between Home Equity Loans and Refinance Loans?
- How much can I save if I refinance?
- How much cash can I get out of my home equity?
- Can I use that cash to consolidate my debts?
- Can I consolidate my first and second mortgages?
- What are the costs associated with refinancing a First Mortgage?
- How can I lower my interest rate and/or monthly payments?
- What is the APR and how does it affect my refinance?
- What loan choices do I have for refinancing?
- What type of loan products do you have?
- Is it a good idea to order my credit report before applying?
- What type of documentation do I need for refinance?
- When does my refinance loan actually close?
- When do I pay my closing costs?
- What happens at the closing meeting?
When you refinance your mortgage, you're actually replacing it with a brand new mortgage loan. In doing this, expect to go through a mortgage application process very similar to that of your original mortgage. Refinancing is often a sound financial choice that can allow you to meet a variety of needs, such as lowering your monthly payments; change from adjustable to fixed rate loan; take cash out of your current home equity; or eliminate private mortgage insurance, to name a few.
A good rule of thumb is to first review your current interest rate. It's usually not worth refinancing your current mortgage unless your new interest rate is 1/2% to 5/8% lower than your current interest rate. If, however, you want to minimize your closing costs as much as possible, the current rate should be at least 1% lower. One of the key differences between the mortgage refinancing process and the initial home buying process is your experience. Since you've been through the mortgage process at least once, you know how to get organized and what to expect. Give us a call to see if rates are favorable for your refinance!
The most common reasons why people wish to refinance may include: to lower their monthly payments; change from adjustable to fixed rate loan; take cash out of their current home equity; eliminate private mortgage insurance.
Using your home's equity to get tax-deductible(*) borrowing power for big-ticket expenses such as college tuition or home improvements is an option many homeowners choose. Both cash-out refinance and home equity loans are usually tax deductible(*), but the similarity ends there. Comparing the features of each loan will help you reach the best decision.
|Cash-Out Refinance||Home Equity Financing|
|One loan and one monthly payment||Choose between a one-time loan advance or a revolving line of credit.|
|Your existing mortgage is refinanced for a higher overall amount using some of the accumulated equity in your home||You can borrow all or part of your home's equity.|
|Get immediate cash and spread the payments out over a longer timeframe||Flexibility of a shorter term to help build equity faster OR reduced monthly payments by spreading the cost over a longer term.|
|Usually a lower interest rate than home equity financing||You can borrow more money - sometimes up to 90% of the value of your home. With a line of credit, interest is paid only on the money you actually use, and you can access it whenever you want without having to reapply.|
|(*) always check with your tax advisor.|
This question needs the use of a calculator.
Call LBS Financial and we'll compare your current loan to today's interest rate, show you your potential monthly savings, and present various loan options. Or
apply online now!
Yes! Credit cards, car loans, student loans, revolving credit and other debts can be consolidated. An LBS Financial loan specialist will present the potential options for debt consolidation.
Yes! Provide our LBS Financial loan specialist with the details of your first and second mortgages, and we will present the potential options for consolidating your mortgages. Or apply online now!
Although the majority of financial institutions apply many of the same closing costs as to those of your original home loan,
below is a comparison chart of what other financial institutions and LBS Financial charge:
|Customary Fees & Charges||Other Financial Institutions||LBS Financial|
|loan origination fees||Yes||If applicable|
|loan discount points||Yes||No|
|document preparation fees||Yes||If applicable|
|appraisal fees||Yes||If applicable|
|credit report fees||Yes||No|
|mortgage insurance||Yes||If applicable|
|tax service||Yes||If applicable|
|flood determination fee||Yes||If applicable|
|abstract or title fee||Yes||If applicable|
|recording fee and transfer taxes||Yes||If applicable|
|notary fee||Yes||If applicable|
During a refinance, you may have costs for adjustments or prorations. These are called pre-paid costs, such as property taxes, prepaid interest, and homeowner hazard insurance.
You can usually lower the rate by paying more points. Points are fees paid to the lender at closing. Each point is equal to 1% of the loan amount. For a $100,000 loan, a point equals $1,000. Two points would be $2,000. If you have the cash, it's a good way to save money on interest over the life of your loan.
Home loans are more than interest rates and points. They also involve other costs, fees and expenses. The APR expresses the annual cost of a loan as a percentage, factoring in not only its rate, but also the points and other costs, fees and charges over the life of the loan. This is why most people call it the "true rate" of the loan. To make an accurate comparison, compare loans with the same terms, interest rates and points. Then look at the APR. The loan with the lower APR is the less expensive loan.
At LBS Financial, you'll find a number of home loans for every type of refinance. The goal here is to match the benefits of a specific loan type with your goals.
So, let's first look at your goals or needs:
|Your Situation||Consider the following strategy|
|Have little cash||Equity loan|
|Need low closing costs||First Mortgage and under $100,000|
|You need home improvements||2nd Mortgage or PRIMO Home Equity Line of Credit|
|Only need less than $729,751||Conforming fixed-rate loan|
|Need over $729,750||Jumbo fixed-rate loan|
|Want to lower your rate and payment but plan to stay over 5 years||Fixed rate loan|
|Want to lower your rate and payment and sell within 5 years||ARM|
|Add a room or other improvement||Equity cash-out refinance or Primo Home Equity Line of Credit|
|Want to avoid jumbo interest rates||Ensure loan amount does not exceed $729,750|
|Want to avoid monthly private mortgage insurance||Loan-to-value at 80% or less on 1st mortgage|
|Financing a 2nd home (vacation)||30-year fixed-rate|
|Want consistent monthly payments||Fixed-rate loan|
Our LBS Financial loan specialist will be happy to go over the options in more detail.
|Loan Products||Brief Description|
|Fixed Rate||15, 20 or 30-year|
|Adjustable Rate (ARM)||
|Conforming||Loan amount under $729,750|
|Jumbo||Loan amount over $729,751|
|Non-owner occupied||Up to four units|
|2nd Home||Single Family Dwelling, conforming or jumbo|
|2nd Mortgage||15-year only|
|PRIMO Home Equity Line of Credit||
Please ask your LBS Financial loan specialist for details on each one.
Wise investors usually order a credit report to review its accuracy. This step gives them a chance to address any errors or mishaps before approaching the lender. As part of the refinance process, LBS Financial will eventually order your credit report, so it's a good idea to address it beforehand so as to avoid delays.
To help speed up a refinance requiring standard processing, here is a list of the information you should collect and have ready when you apply for your loan.
Original documentation, when requested, is preferred and will be returned to you promptly.
|Loan Application||Loan application form||Loan application form signed and dated by all applicants|
|Self-employed||Most recent two full years of tax returns (individual, corporation, or partnership)|
|Other Income||Child support, alimony, or separate maintenance||
|Assets||Evidence of sufficient funds when closing||
|Obligations||Evidence of financial obligations (debts)||Copy of the fully-executed Divorce Decree indicating amount of child support, alimony, or separate maintenance payments|
The closing (or settlement) of the loan is an actual meeting that takes place at the Escrow Office, one of our branch offices, or the escrow's signer can come to your home or place of employment. At that time, you'll be asked to sign the closing documents and pay any outstanding closing costs you are responsible for.
Prior to the closing, our Residential Lending Department closer will contact you to let you know the amount of funds you must bring to the Closing Meeting. Personal checks are not accepted -- cashier's checks only.
- The respective closing agent reviews the settlement sheet with you.
- You sign all loan documents, such as the mortgage or Deed, note and Truth-in-Lending Disclosure, to name a few.
- You then present a certified or cashier's check to pay closing costs (if applicable).
- If your monthly payments are to include property taxes and insurance, a new escrow account (or reserve) is opened when the loan is funded.
- The Right of Rescission period begins. You have 3 business days to decide whether to go forward with the transaction.
- Unless you decide not to accept the loan, the day after the Right of Rescission period ends, the loan is funded by the Lender. The funds are transferred to the Escrow, who in turn, instructs the Title company to set up recording of the documents. The Deed and any other documents are usually recorded the following day. Once recording is confirmed, the Escrow agent can disburse funds for any payoffs. Remaining funds are sent to you with the HUD Settlement Statement.
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