Should You Refinance Your Home In 2019?

how much are closing costs Should You Refinance Your Home In 2019?Did you refinance your mortgage a few years ago when refinance rates were at near historic lows? Depending on your situation today’s refinance rates still might be lower and you could find yourself asking, “Should I refinance my home loan again?” There are arguments against serial mortgage refinancing because it becomes too difficult to recoup your closing costs; however, there are also situations when it makes perfect sense to refinance your home one more time. Here are several of the pros and cons of home refinancing to help you make an informed decision and avoid losing your hard-earned cash.

Serial Mortgage Refinancing Gets Expensive

Financial analysts and reporters are always predicting that refinance rates have bottomed out and speculating how the market will correct to over six percent. Despite this, depending on the type of mortgage you’re shopping for it’s still possible to get refinance rates as low as 2.87%.

Granted that’s a 5/1 Adjustable Rate Mortgage and you really need to know what you’re doing with a home loan like that; however, there are still 30 year fixed rate deals to be found in the neighborhood of 3.12%.

If you got less than a stellar deal several years ago you might be surprised to find that you can qualify for attractive rates with several of today’s best mortgage lenders.

When Is Home Refinancing a Bad Idea?

One of the biggest problems with refinancing any mortgage loan is that you’re resetting the clock on your home loan’s amortization. Mortgage amortization is a fancy term that simply describes the process of paying down your home loan over time.

Your mortgage loan is front-loaded with interest, meaning in the early years the majority of your payment goes into the lender’s pocket as interest. Over the years this gradually shifts and you begin building equity in your home at a faster rate. As soon as you refinance the rate you’re building equity all but grinds to a halt.

If you’ve been paying ten years on a 30-year fixed rate mortgage and you refinance with another 30-year home loan, you’re right back where you started stuffing cash in your lender’s pockets.

Depending on where you live in the country slowing your progress of building equity could also result in being underwater, meaning you owe your lender more than your home is worth.

There’s More To Life Than Low Mortgage Rates

Continue reading Should You Refinance Your Home In 2019?

Should I Refinance Now That Current Mortgage Rates Are Rising?

Do current mortgage rates have you asking the question should I refinance my home? Demand for refinance rates is down significantly now that current mortgage rates are pulling away from record lows. Did you miss out on historically low rates or should you act now before current mortgage rates climb higher? Here are several tips before you refi to help you answer the question “Should I Refinance” before it’s too late.

Should I Refinance My Home Loan?

While it’s true that the average refinance mortgage rates on a 30-year fixed-rate home loan have recently gone up by 1/5 a percentage point they’re still near all-time-lows.

The simplest way to answer the question “Should I Refinance” is to look at how long it’s going to take you to break even recouping the costs of taking out a new home loan. Every mortgage has settlement charges like the loan origination fee that have to be paid at closing, either by you or someone else.

The more you pay closing on your refi the longer it’s going to take you to break even before you start benefiting from current mortgage rates. One of the most common mistakes you can make is focusing only on getting the lowest current mortgage rates at the expense of fees. When you compare quotes from today’s best lenders it’s important to compare current mortgage rates AND fees. Here’s how to get the lowest refinance mortgage rates and fees using the new Good Faith Estimate.

Don’t Forget to Check Your Credit First

Once you’ve answered the question “should I refinance” you’re ready to start shopping from today’s best mortgage lenders… almost.

When’s the last time you checked your credit reports and score? If you aren’t saying on top of your credit reports you might find that mistakes are dragging down your credit score. Have you already started shopping for a lender and are finding the refinance mortgage rates you’re being offered are higher than what lenders are advertising? The likely culprit is your credit score.

Before you do anything else go to the government-mandated website AnnualCreditReport.com and review all three of your credit reports from TransUnion, Experian and Equifax. The government requires the three credit bureaus to give you access to your credit reports every year but doesn’t require they give you a credit score. If you’d rather not pay for your credit score you can get your TransUnion score for free at CreditKarma.com with no strings attached.

You’ll find that credit scores vary between the three bureaus and mortgage lenders rely on your middle score when quoting refinance mortgage rates. If your scores are 680, 700, and 710 at Equifax, Experian and TransUnion your middle score is 700. Not happy with your credit score? The fastest way to boost it is by paying down the balances of your credit cards below 30% of your limit. Don’t zero them out completely, it actually helps to carry a small balance.

How to Compare Current Mortgage Rates & Fees

Now that you’re ready to begin shopping from today’s best mortgage lenders you want to start requesting quotes. There is a right way to request mortgage refinance quotes that doesn’t waste your time and protects your credit score.

First, make sure the refinance mortgage quotes that you’re getting do not include discount points. Paying points with current mortgage rates makes no sense. You’ll find that lenders advertise interest rates that include points first because they’re lower and seem more attractive. If you’re curious as to how discount points affects your payments there is a table on page three of the Good Faith Estimate but as a starting point make sure your quotes do not include discount points.

Second, make sure you’re giving the loan officer your Social Security Number to get an accurate refinance quote. Some homeowners refuse to give their Social Security Number because they think they’re protecting their credit score from lender inquiries. While it’s true that lender inquires do lower your credit score it’s the only way to get an accurate quote.

If you don’t provide your Social Security number you’re relying on the loan officer’s best guess for your refinance mortgage rates. You need accurate quotes to answer the question “Should I Refinance” and giving your SSN is the only way to get them.

You can protect your credit score from excessive lender inquiries by limiting all of your refinancing quotes to a 14-day period. If you do this your credit score will only get dinged for one lender inquiry.

How to Use the Good Faith Estimate to Shop for the Best Mortgage Lenders

Keep in mind that the Good Faith Estimate is just an estimate but it’s the best way to compare offers from different lenders. Also, make sure you’re comparing refinancing offers from identical mortgage offers. It makes no sense to compare refinance mortgage rates from a 15-year fixed rate home loan to a 30-year adjustable rate mortgage. Your quotes need to be for identical mortgage programs. That’s the only way to make an apples-to-apples comparison of lender fees.

Next, use page two of your Good Faith Estimate to comparison shop mortgage origination fees. Most brokers will tell you that paying one percent of your home loan is standard for the loan origination fee. This is the fee paid to the person or company arranging your home loan and I’ve found community credit unions that charge as little as $400 for loan origination. Remember, the less you pay settling on your new home loan the quicker you break even and the faster you’ll benefit from today’s refinance mortgage rates.

Beware Mortgage Yield Spread Premium

Huh? Yield Spread what? This is a credit found on page two, box 2a of your Good Faith Estimate, and yes, Yield Spread Premium is still legal. The only thing that changed is that mortgage brokers are not allowed to take the credit as a commission.

What is Yield Spread Premium? Simply put, it’s a credit you get for accepting higher than market refinance rates. Think of Yield Spread Premium as discount points in reverse. For every .25% you allow the lender to mark up your interest rate you’ll get a credit of one percent of your loan amount. This credit is used to pay your origination fee and other settlement costs.

The higher your closing costs the more markup you’ll need to cover. This is how those “no fee” and “no cash out-of-pocket” mortgage refinancing offers work. The problem with accepting Yield Spread Premium is that you’re giving up the lowest current mortgage rates which means you’ll have a higher payment for the entire time you keep the loan. Instead of breaking even you’re going to reach a point where you’re losing money by having the lender cover your closing costs. If you can afford the fees it’s almost always better to pay closing costs yourself if you plan on keeping your home.

How to Calculate Your Break-Even Point

Are you still questioning should I refinance? One way to put your mind at ease about paying for a new home loan is to calculate how long it’s going to take to recoup your out-of-pocket expenses. You can use a simple mortgage calculator like this one to calculate the number of months it’s going to take you to reach your break-even point.

Simple Mortgage Calculator

Loan Amount: Years: Mortgage Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

Once you know how much your monthly payment is going down from current mortgage rates divide your total closing costs by your savings. (The difference between the old payment amount and the new) This will tell you approximately the number of months it’s going to take breaking even.

I say approximately because it doesn’t factor in taxes or changes in term-length. As long as you’re keeping the same term-length (term-length is the number of years) or going shorter, the approximation works. (If you’re going longer, say from a 15-year to a 30-year mortgage you’ll probably never break even.)

Once you know how long it’s going to take you to break-even recouping your mortgage settlement fees you can answer the question “Should I Refinance.” If you’re comfortable with the amount of time it’s going to take breaking even then mortgage refinancing probably makes sense. Remember, the better you shop for fees and the less you pay for things like loan origination the faster you’ll reach your break-even point.

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You can learn more about paying less for current mortgage rates by avoiding lender junk fees and markup by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to help you make an informed decision answering the question “Should I Refinance.”

Why VA Refinance Rates Are The Best Deal Going

Are you a vet that hasn’t taken advantage of VA refinance rates? If so, you’re missing out on the best deal going in mortgage loans. If you’ve already got one you could qualify for an Interest Rate Reduction Refinance Loan (IRRRL) to take advantage of low VA refinance rates. Here are the basics you need to know about VA refinance rates to take advantage of the financial benefits you earned by serving.

VA Refinance Rates Are Still At Record Lows

VA home loans are made by private lenders and guaranteed by the Department of Veteran’s Affairs. Like any home loan they come in several different types and your eligibility is based on how long you served or on your current duty status. Your VA loan eligibility can only be used for a home that you personally occupy. The program requires a decent credit score to qualify and offers VA mortgage rates for purchase as well as cash-out refinance.

The Interest Rate Reduction Refinance Loan Is a Gem

Once you’ve got a VA home loan one its best features is your ability to take advantage of VA refinance rates with the program’s Interest Rate Reduction Refinance Loan (IRRL). This is essentially a VA Streamline Refinance which allows you access to lower VA refinance rates without a credit check or home appraisal.

VA home loans are very similar to FHA home loans with the added benefit of not requiring you to carry mortgage insurance. FHA mortgage insurance can add hundreds of dollars to your monthly payment making these loans more suitable for homeowners with credit challenges.

IRRRL Basics You Need to Know

The most attractive feature of the VA streamline refinance is that you don’t need credit underwriting or a home appraisal. You can use an IRRRL to take advantage of VA refinance rates with a no-cost or no cash out of pocket home loan, meaning your new lender will roll all the costs into the balance of the new mortgage or pay your loan origination fee and other closing cost with yield spread premium.

Keep in mind if you choose the latter you’re giving up the lowest VA refinance rates in exchange for the lender paying your fees, which also means you’ll have a higher mortgage payment.

If you’re refinancing an existing Adjustable Rate Mortgage with fixed VA refinance rates keep in mind that your interest rate and payment amount could increase. Also, cash out refinancing is not allowed with the Interest Rate Reduction Refinance Loan and you must already have a VA mortgage on the property.

Many lenders offer IRRRL refinancing with term lengths of 15 or 30 years. Because lender participation in the VA guarantee program is voluntary for lenders you’ll find differences in what banks and lenders offer. It is possible that a lender might deny your application for IRRRL because lenders are not required to participate. Also, differences in closing costs like the loan origination fee make comparison shopping important for any VA home loan.

Comparison Shopping for VA Refinance Rates

Just because you’re getting VA refinance rates doesn’t automatically mean you’re getting a good deal.

In fact, the fees you pay closing on any home loan make or break the deal you’re getting. You’ll have to pay the VA a funding fee which is a percentage of your home loan based on your VA eligibility.

The fees you pay closing on your VA mortgage, regardless of the type are set by the lender and are not regulated by the VA. This includes any discount points, the loan origination fee and any junk fees the lender tries to slip past you.

The less you pay closing on your new home loan the more benefit you’ll get form VA refinance rates. Simple comparison shopping using the Good Faith Estimate will ensure you’re not overpaying at closing if you go about it correctly.

How to Shop for the Best VA Refinance Rates

Before you start shopping for a lender for your VA refinance it’s important to make sure your credit score is as high as possible. You can do this by making sure that your credit reports are accurate at AnnualCreditReport.com and by paying down the balances on your credit cards below 30% of your limit. Once you’re satisfied with your credit score you’re ready to start shopping for a lender.

Do you know which mortgage fees are required and how much is reasonable to pay at closing? Should you pay discount points and what about that loan origination fee?

Discount points are a relic of the 1980s when homeowners were paying for double-digit mortgage rates. Essentially you’re paying this fee to buy down your mortgage rates. For every discount point you agree to pay at closing you typically lower your interest rate by .25 percent. VA refinance rates are still near historical lows making discount points an unnecessary expense that chances are you’ll never recoup.

Despite this lenders advertise VA refinance rates that include discount points to make their offers seem more attractive, often burying the fees in impossibly small print.

When requesting VA refinance quotes make sure you’re getting zero discount point quotes

If you’re interested in seeing how paying discount points affects your monthly payment there is a table on page three of the Good Faith Estimate.

Loan Origination Fees & Yield Spread Premium

The most important fees you’ll want to focus on when shopping for VA refinance rates are found on page two of your Good Faith Estimate. Page two is all about understanding estimate settlement charges. Keep in mind that the fees found on your VA refinance quotes are only “estimates” and could change on your HUD-1 Settlement Statement.

Page two, box A, item one is the loan origination charge. This is the fee paid to the person or company arranging your VA home loan and most brokers will tell you that one percent is reasonable. This might be a reasonable amount; however, you can do a lot better. I’ve reviewed small community and military credit unions that charge as little as $400 for loan origination. Remember, the less you pay for the mortgage origination fee, the more benefit you get from VA refinance rates.

Item 2 of box A is any yield spread premium based on specific, quoted VA refinance rates. For the uninitiated, yield spread premium is a credit paid by the lender for accepting higher than market interest rates. This credit is used to pay the loan origination fee and other closing costs. Yield Spread Premium works like discount points in reverse. The lender pays you the credit because you’re accepting a higher interest rate meaning your payments will also be higher.

Should you accept yield spread premium to pay your closing costs? If you’re strapped for cash and can’t pay the fees yourself this might seem like your only option. Remember that you might also be able to roll these fees into your mortgage balance without agreeing to higher VA refinance rates.

The next section on page two of your Good Faith Estimate is box B, which details specific lender fees that you can and cannot negotiate. Comparing these fees from a variety of banks, credit unions and other lenders will give you a good idea of what’s reasonable allowing you to negotiate to pay less.

How to Protect Your Credit Score When Shopping for Refinance Rates

One last thing to keep in mind when requesting quotes for VA refinance rates. Make sure you’re giving the loan officer your Social Security number. This will ensure that you’re getting an accurate quote. Many homeowners refuse to give their Social Security number when shopping for VA refinance rates because they think they’re protecting their credit score. If you do this you’re relying on that loan officer’s best guess as to what interest rate you’ll qualify, which is almost always a waste of everyone’s time.

The trick to protecting your credit score from excessive inquires when shopping for VA refinance rates is to limit all of your quotes to a two-week period. (14 days) If you do this you’ll only get dinged for one mortgage lender inquiry on your credit report and will protect your credit score.

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You can learn more about getting the lowest VA refinance rates without paying unnecessary lender fees by checking out my free Underground Mortgage Videos.

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Should I Refinance My Home Mortgage?

Do you lack home equity or have credit challenges? If so, you might think that the low refinance rates being offered by today’s best mortgage lender are out of your reach. The good news is that government refinance programs exist that can help you overcome the problems that make refinancing impossible. Here are six good reasons to help you answer the question “should I refinance” and save money on your next home loan.

Should I Refinance My Mortgage Loan?

If you’ve got home equity but have a low credit score you can still take advantage of low refinance rates. You might not qualify for what lenders are advertising, but you can still benefit from mortgage refinancing by lowering your payment amount. The best way to find out if paying for a new home loan is beneficial is by using a simple mortgage calculator.

Have you already started shopping for today’s best refinance rates? If so, enter the interest rates you’ve been quoted here along with your loan balance and desired term length.

Simple Mortgage Calculator

Loan Amount: Years: Mortgage Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

Once you’ve determined how much your payment will go down each month from refinancing you can figure out if paying for a new home is worthwhile by approximating your break-even point.

You do this by adding up all of your closing costs including the loan origination fee and dividing by the amount you’re saving each month. This is only an approximation because it doesn’t factor in things like changes in term length or taxes; however, it’s still useful for our purposes.

Dividing your costs by the savings you determined with my simple mortgage calculator tells you the number of months it’s going to take you to break even recouping your out-of-pocket costs. If this time frame is acceptable to you then refinancing probably makes sense.

Stop! Read This Before You Do Anything Else…

If you haven’t started shopping for refinance quotes you’ll need to hold off for a moment. Have you checked your credit reports? If not, your first step needs to be proofreading your credit files for errors.

You can do this for free by vising the government mandated website, AnnualCreditReport.com. Did you find mistakes? If so, each of the credit bureaus has an online process for disputing the error. Once you’ve done this you’ll want to allow enough time from the outcome of the correction to be reflected in your credit score.

Once you’re satisfied that your credit reports are accurate the quickest way to boost your credit score is to pay down the balances on your credit cards below 30% of your limit. Your credit score will take a hit when mortgage lenders run you credit; however, you can minimize the impact by limiting all of your refinance quotes to a 2 week (14 day period).

When you shop for refinance rates this way you’ll only get dinged once for a mortgage lender checking your credit. Some people think they can avoid this hit by refusing to give their Social Security number when requesting mortgage quotes. If you do this you’re relying on someone’s best guess of what your interest rate will be which is almost always a complete waste of time.

Still Not Convinced Refinancing Your Home is the Right Choice?

Here are six of the most common reasons for paying for a new home loan in today’s economy:

  1. Lowering Your Mortgage Rate
  2. This is the most common reason for refinancing. With refinance rates below four percent for many homeowners you can lower your payment by hundreds of dollars. If you have credit problems you probably won’t qualify for rates this low; however, using a simple mortgage calculator like the one above will help you decide if your mortgage refinance is worthwhile.

  3. Lowering Your Monthly Payments Despite Poor Credit
  4. Bad credit mortgage refinancing can accomplish this in two ways. First, if you qualify for a lower refinance rate your payment will go down. If not, you can still lower your payment by extending the term length of your home loan. This isn’t recommended for everyone as it can make recouping closing costs difficult and slow your rate of building home equity. If you slow building equity in your home you run the risk of being underwater in an economic downturn. Common mortgage term lengths for refinancing include 15, 30, and even 40 years. (again, not recommended)

  5. Easing Pressure on Your Budget
  6. Once you qualify for lower refinance rates or a lower payment amount from extending your term length, you’ll get a lower payment. This frees up cash in your monthly budget to pay down other bills, which will help improve your credit score. Reducing debt and using credit responsibly will help you pay less to lenders in all aspects of your finances.

  7. Build Equity at a Faster Rate
  8. If your goal is to pay off your mortgage as quickly as possible you can do this by shortening your tem-length. The most common term-length in this case is a 15-year fixed or adjustable rate mortgage. Your payments will be higher in this case than you would get with a 30-year mortgage; however, you’ll pay significantly less in lender finance charges and build equity in your home at an accelerated rate.

  9. Lock in Your Payment With a Fixed Rate Mortgage
  10. Are you currently paying on an Adjustable Rate or Interest-Only mortgage? If you’re worried what will happen when your fixed rate period ends or that balloon payment is due there is no better time than the present to refinance with a fixed-rate mortgage.

  11. Consolidate Credit Card Debt With Your Mortgage
  12. Again this one isn’t for everyone as treating your home like a bank account has risky and dangerous consequences. Depending on how much home equity you have and how good your credit rating, you may be able to roll all of your credit card and consumer debt into your mortgage balance with cash-out refinancing. Enlisting the help of a good mortgage broker could help you find a lender willing to facilitate the transaction. Remember to use a simple mortgage calculator first to see how increasing your loan balance will affect your payments and your ability (or inability) to recoup your closing costs.

What if You Have an Underwater Mortgage?

Underwater homeowners (meaning you owe more than your home is worth) can benefit from the Home Affordable Refinance Program (HARP 2.0), if you qualify.

The biggest stumbling block when qualifying for HARP is that Fannie Mae or Freddie Mac must back your mortgage AND they must have done so prior to June 1st, 2009. If you meet these qualifications and are current on your payments you could qualify for today’s best refinance rates with a streamline like refinance loan.

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Is a HARP Refinance Right For You?

Is the government refinance program known as HARP 2.0 right for you? The Home Affordable Refinance Program (HARP 2.0) has undergone a number of revisions intended to get more people qualified. If you have less than 80% equity in your home and are struggling this government refinance program is worth looking at. Here are the basics you need to know about getting your HARP 2.0 application approved.

Am I Eligible for HARP 2.0?

The deciding factor for most folks is whether or not Fannie Mae or Freddie Mac purchased their mortgage before June 1st, 2009. If your mortgage is held privately by a lender like Bank of America or Wells Fargo you are not eligible for HARP 2.0.

If you’re not sure if your mortgage is privately held both Fannie Mae and Freddie Mac have a way of checking online.

Fannie Mae Loan Lookup:

http://www.knowyouroptions.com/loanlookup

Freddie Mac HARP Eligibility Lookup:

http://www.freddiemac.com/avoidforeclosure/harp_eligibility.html

HARP 3.0 is rumored to remove the Fannie Mae or Freddie Mac government refinance program requirement; however, these changes have yet to materialize.

Once you verify that Fannie Mae or Freddie Mac have your mortgage you need to be current on all your payments for the last six months. Beyond the six month requirement you must also have made 11 of your last 12 payments on time and have less than 20% equity to qualify.

I’m HARP 2.0 Eligible, Now What?

HARP is set to expire at the end of 2013. The next step for you once you’ve determined that you’re HARP 2.0 eligible is to shop for a lender. This is where it gets tricky for many homeowners. What you might discover is that even though you’re qualified for this government refinance program is that your lender denies your application.

What the #$%@?! I’m eligible, why was my HARP refinance application denied?!

Lender Overlays: The Fly In Your Soup

HARP 2.0 has come a long way to get underwater homeowners qualified for mortgage refinancing. Where it hasn’t made great strides is limiting risk for mortgage lenders. Overlays are special rules lenders use to limit their risk with the program. These rules include limits on loan-to-value, minimum credit score and income. It’s not uncommon for homeowners with 125% loan-to-value or higher to find their current lender denies a HARP refinance application.

Was Your HARP Refinance Denied? Keep Trying…

Not all mortgage lenders enforce overlays with the Home Affordable Refinance Program and the ones that do all play by their own rules. Just because one lender denies your HARP application doesn’t mean another one will. That’s why shopping around for a government refinance program approval is so important.

Remember once you’re approved you’ll still be required to pay fees to close on your HARP refinance.

Just like lender overlays closing costs vary widely from one lender to the next and some fees are negotiable. The loan origination fee is an example of one negotiable closing cost that you’ll want to pay as little as possible on your HARP refinance. Other fees like discount points drive up your out-of-pocket costs reducing the benefit you’re getting from today’s low mortgage rates.

Click Here For More Details…

You can learn more about getting the best deal on your HARP refinance by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to get you started refinancing with today’s best mortgage lenders