RefinancingTips
For qualified buyers, the refinance option is always on the table when choosing a
mortgage for your home, the key question is when to refinance to save yourself
significant money over the life of the loan.
I
nterest rates can fluctuate from low,
medium and high rates often reflective
of the current climate in the economy.
When the national debt ceiling is high
or teetering in a precarious position,
the home loan borrower may experi-
ence a higher rate. As the market calms
down and things begin to stabilize, the
interest rates may take a dive.
The borrower who is contemplating a
home loan refinance will do well to stay in-
formed on market trends and be ready to refi-
nance in a New York minute when the time is
right.
Refinancing to pull cash out
For many home owners, their piece of real estate is their cash cow
to pull out some equity for an emergency.
Refinancing at a lower rate allows a borrower to take out a lump
sum of cash from the home and add the balance to the end of the
loan.
No matter how tempting it may be to pull cash from your home,
this is one decision that should be thought out very carefully. The
new loan will have a higher monthly mortgage payment and may be
extended from a short-term loan to a long-term fixed loan that you
will be repaying for many years with interest.
Before signing on the dotted line, be sure you are in a stable finan-
cial situation to cover the added costs.
Refinancing and cash withdrawal
One of the best reasons to pull cash from the equity in your home
is to invest the dollar amount into the property's rehabilitation.
14 | Property Lines: At Home edition 2015 | www.dailyastorian.com
Whether you’re a buyer or a seller, the expe-
rience of reaching an agreed-upon offer can
be an extremely exciting one.
But even if you’re on top of the world, be pre-
pared to take a fall. Escrow and lending pro-
cedures and rules vary by state and
sometimes by bank, leading to a number of
complicated issues that can terminate a deal.
Inspections
Most purchase offers have an inspection
contingency. This allows the purchaser to
back out in case the home inspection reveals
serious problems.
If you didn’t put this contingency in your
contract, you may lose the earnest money
you put up at the front of the offer process.
Negotiating with the seller to have the home
repaired can hold up the purchase and delay
the closing date.
Refinancing and your
credit score
Another factor to consider when refinanc-
ing your property is to compare the initial loan
product you signed that matched your credit
score to a new lower rate offered by the banks.
Borrowers with less-than-perfect credit are
subject to somewhat higher interest rates. The
interest rate on a mortgage matters as to how much the total cost
will be for the home over the life of the loan.
Finding a lower interest rate and getting your mortgage locked-in
can save you tens of thousands of dollars on a 30-year fixed loan. As
your credit score improves over time, you may be eligible for a new
and dramatically lower interest rate through refinancing.
REAL ESTATE
ROADBLOCKS
Appraisal Issues
Home owners with sufficient equity that are thinking of selling
their house will do well to take out a refinancing loan to get the
property in better selling condition.
The wrong reason to pull cash from your home is to buy items
with little to no appreciation value. This would include a brand new
automobile, which will begin to depreciate as soon as you drive it off
the car lot, vacations, shopping sprees, and other frivolous purchases.
Do invest into yourself with education, business start-up capital if
you have a sound and viable business plan, or for emergency cash for
divorce, medical or other needs.
The bank will have the home appraised in
order to protect its interest in the home. The
appraisal fee generally is paid by the buyer
and will help the bank make sure the home
is worth at least as much as you will be pay-
ing. This gives you an idea of what you’re get-
ting into and gives the bank a value for the
home in case of a foreclosure.
If the appraisal comes in too low, the seller
will likely have to lower the selling price or
the buyer will have to pay cash for the differ-
ence. It may be possible to get a more favor-
able second opinion from a different
appraiser, but many banks have an in-house
appraiser they use for this process.
What does it cost to Refinance?
In a nutshell, the answer is yes. Depending on the type of loan you
wish to secure and which loan broker or banker handlers your paper-
work, you will have to pay from one to three percent of the new loan
balance to refinance.
Handing over the commission money to your agent is a fair and
square deal. They will earn their cut by shopping the banks to get
you locked-in to the best market rate. In addition, he or she will en-
sure that all your complicated paperwork is in good legal order and
coordinate the deal with the banks.
Trying to refinance on your own may seem doable, but there are
many bumps in the road that a skilled loan officer can protect you
from. Meeting critical deadlines, arranging for an appraiser to inspect
your home, and making sure the banks do not take advantage of
their clients are three of the top reasons to never go it alone.
Cold Feet
As human beings, we are allowed to change
our minds. In realty however, this can have a
consequence. The agreed-upon contract will
outline justifiable reasons for either the buyer
or seller to back out without penalty.
These reasons can include not waiving a con-
tingency or missing a deadline. Every deal is
different, and failing to hold up your end of
the bargain can lead to the loss of earnest
money or even legal ramifications.