Are you struggling to qualify for refinance mortgage rates with today’s best mortgage lenders like Amerisave because of your loan-to-value ratio? While the President promises to submit broad based mortgage refinancing to Congress, many homeowners are qualifying for better refinance rates with cash-in mortgage refinancing. In fact, according to Freddie Mac one half of mortgage refinance transactions today paid to qualify. Here are several tips to help you decide if cash-in mortgage refinancing is right for you.
What is Cash-in Mortgage Refinacing?
Everyone’s familiar with borrowing against your home equity when refinancing; however, cash-in options are a relatively new phenomenon spurred on by the housing crisis. If you’re underwater in your existing home loan qualifying for mortgage refinancing can be difficult unless you’ve got sufficient money on hand to pay down your home loan balance to a suitable loan-to-value ratio.
According to mortgage giant Freddie Mac, 49% of mortgage refinance transactions in the fourth quarter of last year were of the pay to qualify variety. That’s the highest levels in nearly 26 years. As for those equity tapping mortgage refinance loans responsible for putting so many homeowners underwater, they’re down to 15 percent and the lowest levels in 26 years.
Is Cash-In Mortgage Refinancing Right For You?
Mortgage refinance rates are at their lowest levels in sixty years which is motivation for most to take advantage and lower their payment amount. The average homeowner saves nearly $3,000 a year by lowering their interest rate by 1.5% on a $200,000 home loan.
Should you consider cash-in mortgage refinancing? Well, first of all you have to have sufficient money on hand to buy yourself a favorable loan-to-value ratio. Second, you have to have a high enough credit score to qualify for today’s low refinance mortgage rates and pay the loan origination fee, discount points, and closing costs.
It is possible to recoup your out-of-pocket expenses, including the expenses you’re paying up front to qualify from the lower payment amount. While recouping the money you paid to qualify is actually repaying yourself it’s nice to know you’ll get that money back, including lender fees and any mortgage broker fees.
How to Recoup Your Closing Costs
The goal for cash-in mortgage refinancing is simple, lower your payment as much as possible allowing you to recoup your out-of-pocket expenses as quickly as possible. The way to do this is qualify for the lowest possible refinance rates while avoiding junk fees. The most commonly overpaid fees are the mortgage loan origination fee paid to the broker and discount points paid to the lender. There’s no sense paying discount points if the benefit you’re getting from buying down your mortgage rate doesn’t allow you to recoup the fee.
Remember to Calculate Your Break Even Point
You can figure out how long it’s going to take to get your cash back by adding up your total costs, including the cash-in and dividing by how much your payment will go down each month. This will tell you the number of months it’s going to take to break even. If you refinance or sell your home before the break-even point you’re actually losing money, no matter how low your new interest rate.
Bonus Tip: Some unnecessary fees you’ll want to avoid when refinancing your home include rate lock fees, application fees, loan processing and courier fees. These fees are pure junk and make it more difficult, even impossible to break even recouping your closing costs. Don’t be afraid to call out your lender on junk fees or threaten to take your business elsewhere. Mortgage brokers and lenders are a dime a dozen and in this economy you can find honest professionals willing to work for your business.
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You can learn more about your cash-in mortgage refinancing options, including strategies for avoiding unnecessary lender fees by checking out my free Underground Mortgage Videos.
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