Should I Refinance Now Or Will Rates Drop Again?

Do you feel like you’ve missed the boat on the lowest refinance rates and are asking the question “Should I Refinance now or wait for mortgage rates to go down again?” It’s not unreasonable to question home refinance rates and fees when the so-called experts keep saying that rates have already bottomed out. So if you’re struggling with the question “Should I Refinance” here are several tips to help you and find the best deal while avoiding unnecessary lender fees.

Should I Refinance My Mortgage?

Refinance mortgage rates started going up several weeks ago. Do you feel like you missed the boat and are hoping they fall again? Recent history suggests when there’s an upturn in mortgage rates they reverse direction, even when the experts claim they’ve bottomed out. Mortgage refinance rates always seem to find a way to spiral lower.

Many financial advisors are saying a downward correction is unlikely to happen this time. The Federal Reserve is planning to cut back spending money to boost the economy’s recovery, which is why refinance rates fell so low. When news about the economy is good the bond market is weak which usually means higher mortgage rates.

The opposite is also true and one thing you can count on in this country is bad economic news, which means lower refinance rates.

Continue reading Should I Refinance Now Or Will Rates Drop Again?

How to Pay Less Refinance Closing Costs

Refinance closing costs are going down as much as 7% nationwide according to one lender’s recent survey. Mortgage rates are still at historically low levels making the most important aspect of refinancing (that you control) the fees you pay. Here are several tips to help you pay less refinance closing costs and get the best deal on your next home loan.

How Much Are Typical Refinance Closing Costs?

The mortgage fees you pay and how much depends on where you’re living and what kind of home loan you choose. Every mortgage loan has fees and refinancing is no exception. There are so-called no fee refinance offers out there but you’ll always be trading higher mortgage rates for the lender paying your loan origination fee and other closing costs.

The survey I mentioned claims that on average closing costs are down 7% from the previous year nationwide. It’s worth noting that the same survey had closing costs up 37% the year before thanks to new government regulation.

How much you end up paying when all is said and done depends on the state you live in along with the amount of your loan. If you live in a high-cost state like New York, California, or Maryland you can expect to pay more at closing than someone in Missouri which had the lowest average closing costs.

Some states like Florida levy a tax on all mortgage transactions driving up cost. Here are the top 5 most expensive states when it comes to refinance closing costs:

  1. New York where closing averages $5,435
  2. Texas where closing averages $4,619
  3. Pennsylvania where closing averages $4,467
  4. Florida, closing averages $4,395
  5. Oklahoma where closing averages $4,352

Which states have the lowest closing costs?

  1. Missouri where closing only averages $3,006
  2. Kansas, averaging $3,193
  3. Colorado where closing averages $3,193
  4. Iowa, averaging $3,257
  5. Arkansas where closing averages $3,325

Across the country refinance closing costs average $3,750, just shy of 2% of the home loan amount. Most brokers quote an outdated “rule of thumb” that closing costs should be 1.50%. There isn’t a state in the Union that came in close to 1.5% in the last survey.

How to Pay Less Refinance Closing Costs

The good news is that some of the mortgage fees you pay when refinancing are negotiable. The most commonly overpaid refinance closing costs include the loan origination fee and discount points, all negotiable. Loan origination is the fee paid to the person or company arranging your loan. I’ve seen origination fees as low as $400 with community credit unions or as high as 2%.

The less you pay for loan origination the better off you’ll be. If you don’t have cash to pay the originator you could accept a higher mortgage rate in exchange for the lender paying all or part of your closing costs. Don’t be afraid to haggle with potential brokers and lenders over loan origination.

Suppose for example you’re being quoted 30-year fixed refinance rates at 4.0%. In Texas the refinance closing costs for this mortgage average $4,619. You could accept slightly higher refinance rates at 4.25% and pay zero closing costs. On a $250,000 mortgage the difference in your monthly payment is $36.31.

Which is the better choice? It depends on what you’re already paying and how much longer it’s going to take you to break even recouping your out-of pocket mortgage refinancing expenses. If you’re unable to break even because of a higher payment amount or term length you’re going to be losing money, no matter what your interest rate.

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You can learn more about paying less refinance closing costs with today’s best mortgage lenders by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to get you started paying less refinance closing costs and getting more…

No Closing Cost Refinance

No closing cost refinance offers allow homeowners short of cash take advantage of today’s low mortgage rates. Sounds good, but if lenders offer no closing cost refinance loans then why isn’t everyone refinancing this way? There is of course a catch which could wind up costing you thousands of dollars unnecessarily. Here are the pros and cons of no closing cost refinance offers to help you make an informed decision for your next home loan.

How Does No Closing Cost Refinance Work?

There’s no free lunches for pretty much everything these days and this is doubly so when it comes to mortgage refinancing. No closing cost refinance loans still have closing costs, every mortgage has fees regardless of what you’re doing; however, in this case the lender is paying your underwriting and loan origination fees for you.

Why would a lender pay your mortgage fees for you? They do this because you’re accepting higher than market refinance rates, meaning your payments will be higher than necessary for the entire duration of your home loan. This markup of your interest rate is called Yield Spread Premium. The cash lenders pay can be used to pay your broker’s fee or in the case of no closing cost refinance offers all of your fees.

Yield Spread Premium is Alive & Kicking

Many homeowners incorrectly think the use of Yield Spread Premium was outlawed in the United States. This is simply not the case. The only thing that changed was that if your mortgage broker accepts lender paid compensation in the form of Yield Spread Premium they cannot also charge you the loan origination fee. This “double-dipping” is partially what earned mortgage brokers a reputation for being money-grubbing used car salesmen.

How does Yield Spread Premium work? It’s a pretty simple concept to wrap your head around. For every .25 percent you agree to pay above par refinance rates the lender pays one percent of your home loan towards the origination fee and closing costs. Since your monthly payment is based on your mortgage rate and term length any amount of Yield Spread Premium on your loan is going to result in higher payments.

Is No Fee Mortgage Refinancing Worthwhile?

For some people who simply don’t have the cash to take advantage of today’s low refinance rates it can be worthwhile, especially if you’re paying six percent or higher on your existing mortgage. Here’s an example to illustrate what the markup does to your payment on a typical mortgage refinancing transaction.

Suppose you’re going to refinance your home for $300,000. Your current home loan has an interest rate of 6 percent and a monthly payment of $1,798. Considering 30 year fixed refinance rates are currently right around four percent mortgage refinancing makes sense for any homeowner in this situation. In this example we’ll use $6,000 as estimated closing costs including the origination fee, appraisal, attorney fees and underwriting fees. In order to cover $6,000 in mortgage fees you’d have to accept half a point in Yield Spread Premium to get your fees paid. In this case refinance rates of 4.5 percent would get the job done; however, what does this markup do to your payments?

If you paid your own closing costs and closed with refinance rates of 4 percent your monthly payment would be $1,432. The no closing cost refinance at 4.5 percent gets you a payment of $1,520 per month. That’s a difference of $88 per month or $1,056 per year. After five years you’ll have paid $5,280 for $6,000 in closing costs. Considering that the average homeowner refinance every 4-5 years in this example the no closing cost refinance offer makes sense if you ditch the mortgage after five years. Keep this home loan for any longer than five years and you’ll start losing money.

Should you take one of these no closing cost refinance offers? On paper they can seem like a good deal when you run the numbers, especially if not having cash would prevent you from lowering your payments with today’s ridiculously low refinance rates. Just make sure that your loan contract doesn’t include a prepayment penalty as this would make getting out of the loan a losing proposition down the road when you’re ready to sell or refinance again.

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You can learn more about getting the best deal on your next home mortgage while avoiding unnecessary points and fees by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
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Here’s a quick sample to help you find today’s best mortgage lenders without falling for unnecessary discount points or fees…

How to Avoid Paying Your Loan Origination Fee

mortgage payment How to Avoid Paying Your Loan Origination FeeIf you’re considering mortgage refinancing you might wonder if you have to pay the origination fee. There’s more to getting a good deal than just focusing on a specific lender like USAA Mortgage Rates; the fees you pay including the origination fee can make or break the deal you’re getting. Here is everything you need to know about that origination fee to make sure you’re getting the best deal when mortgage refinancing.

Origination Fee Definition

The origination fee found on your Good Faith Estimate is paid to the person or company arranging your home loan. Sometimes you’ll get offers without it; this doesn’t mean the broker isn’t getting paid but that someone else, usually the lender is paying the origination fee for you.

There are no free lunches when it comes to your home loan so why would the lender agree to pay your broker origination fee? Settlement charges are paid by the lender in exchange for higher refinance mortgage rates. In addition to paying your broker fee the lender could also pay your closing costs; however, will raise your interest rate twice.

Should you agree to higher rates to get your origination fee paid? Refinance rates are now near a sixty-year low, something you’re unlikely to see again this lifetime. If you’re currently paying six-percent or more on your existing home loan then it could be well worth your while to accept a higher interest rate in exchange for the lender paying the origination fee.

You can figure out if refinancing in this way makes sense by approximating your break-even point. The break-even point is simply the amount of time it’s going to take you to recoup your out-of-pocket expenses from the lower payment amount.

How to Approximate Your Break-Even Point

Notice that I say “approximate” your break-even point. Some people in the business get all bent out of shape and start waving their arms around when you talk about breaking even recouping closing costs. The reason is that your break-even point doesn’t take into consideration changes in term length. The term length of your home loan is defined as the amount of time you have to pay the mortgage back. How does term length affect breaking even recouping your out-of-pocket expenses?

If you’re currently paying on a thirty-year home loan and refinance with a 15-year term length you’ll break even faster because you’re paying less interest after the first year than if you continue paying on a 30-year mortgage. Conversely, if you’re paying on a 15-year mortgage and refinance with a 30-year term it’s going to take you longer to break even then the approximation allows. You’re paying more in interest than you were before so breaking even takes longer. If you’re keeping the same term on your refi (15 year to 15 year or 30 year to 30 year) then this discussion is purely academic.

Now that I’ve satisfied the naysayers (if you’re one and aren’t satisfied too bad) here’s how to approximate your break-even point. First, figure out how much your payment will go down each month based on the new mortgage rate. (be sure and compare your payment with and without the origination fee markup)

Second, look at the total closing costs on your Good Faith Estimate and divide this figure by the amount you’re saving each month. This will give you the number of months (approximately) it will take you to break even recouping your out-of-pocket expenses. If this timeframe is acceptable and you don’t plan on selling or getting another mortgage then it probably makes sense to avoid paying your loan origination fee.

How Much Refinance Rate Markup?

How much higher can you expect your refinance rates to be if the lender pays the origination fee and/or closing costs? That depends on how much the broker is charging you. A reasonable amount to pay for loan origination is one percent of your mortgage amount; however, many brokers will try to charge your more.

Don’t be afraid to negotiate the amount of your mortgage origination fee as a condition of doing business. As for your refinance rates, the lender will typically pay one percent of your mortgage amount for every .25 percent you accept in higher interest rates. Whether or not it makes sense to take higher mortgage rates in exchange for the lender paying your settlement costs depends on your personal situation.

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You can learn more about getting the best refinance rates without paying lender junk fees or markup by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
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Here’s a quick sample showing you how to avoid paying the lender junk fees that cost your neighbors thousands of dollars…

Overpaying The Loan Origination Fee Could Screw Up Your Refi

If you’re considering taking advantage of today’s best refinance mortgage rates to lower your payment or ditch that Hybrid Adjustable Rate Mortgage, there are several things you must know about closing costs to avoid overpaying. One of the most important fees to consider when refinancing is the loan origination fee. What is it and how much is a reasonable amount to pay for mortgage origination? Here are several tips before you refi to help you avoid pay too much for your next home loan.

Loan Origination Fee Definition

Simply put, the loan origination fee is the fee paid to the person or company arranging your refi. Also called origination points, this fee is typically paid to a broker or faceless giant like Amerisave or Wells Fargo Refinance. How much should you pay for the loan origination fee? One percent of your home loan amount is perfectly reasonable; however, it’s not uncommon to find brokers charging double this amount, even more.

Mortgage loan origination fees are negotiable, so when shopping for a broker offer to pay one percent as a condition for doing business.

The reason your loan origination fee is so important is that you’ll need to recoup your out of pocket expenses from mortgage refinancing before gaining any benefit from a lower payment amount. Here’s an example to illustrate why recouping your loan origination fee is so important:

Should I Refinance My Mortgage?

Suppose for instance that you’re refinancing your home mortgage for $275,000 and the old interest rate was 6 percent. Once you find an honest mortgage broker willing to work for a one percent, the loan origination fee portion of your closing costs will be $275,000. There are other lender fees to consider and negotiate; however, for the purpose of this discussion we’ll assume that the total closing costs on this transaction are $5,500.

Assuming you’re able to lock in today’s going refinance mortgage rate of 4 percent your new monthly payment will be $1,312. The old payment at 6 percent was $1,648 which represents a monthly savings of $336. You can easily determine how long it will take to recoup your closing costs by dividing the total out-of-pocket expenses by the amount you’re saving each month. This will tell you the number of months it’s going to break even recouping your expenses from mortgage refinancing. In this example it’s going to take ($5,500/$336=17) seventeen months to break even. (Which is really good… your results may vary)

The average homeowner refinances their mortgage every four to five years. If you engage in this kind of serial mortgage refinancing before recouping your cash you’ll be losing money no matter how low your refinance rates.

There are of course other fees to consider besides your loan origination fee. Paying lender junk fees will lengthen the amount of time it takes to break even by raising your total closing costs. Some examples of junk fees you’ll encounter when refinancing your home include rate lock fees, application fees, processing fees and courier fees. If you find any of these on your Good Faith Estimate when shopping for mortgage rate quotes consider finding another broker to arrange your next home loan.

Click Here For More Details…

You can learn more about avoiding unnecessary fees and markup on your next home loan by checking out my free Underground Mortgage Refinancing Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
  • Free Underground Mortgage Videos

Here’s a quick sample to help you pay less for the loan origination fee while avoiding lender junk fees…