Scroll down to get the skinny on mortgages & get a free mortgage quote too!
|
Get your Free Mortgage Quotes:
|
Whip Your Credit into Tip-Top Shape:
|
Get Your Free Car Insurance Quotes:
|
|
Scroll down to get the skinny on mortgages & get a free mortgage quote too!
|
|
|
Refinance Q&A What kind of loan should I get? When should I "lock" the loan? What about a "no closing cost" loan? Should I convert from an adjustable rate loan to a fixed rate loan?
People refinance for a couple of reasons:
A refinance should not cost more than 1%-2% of the loan size. The first type of costs are the "out of pocket" costs that you will have to pay to get the process rolling. This usually includes the cost of an appraisal (around $350) and the credit report (around $25). There usually isn't anything else out of pocket. The other loan costs are typically added into the loan. If a refinance cost a lot of money, instead of giving you cash, people wouldn't do it as much. What kind of loan should I get? There are a couple of basic loan types:
If you plan on staying in the property for many years, then a loan that is fixed for a longer term, such as 30 years, may the right. If you plan on only living in the house for 2 years, then a loan that is fixed for 3 or 5 years may be right for you. For a refinance generally no. Check with your tax advisor on the deductability of points in a refinance. The lower rate you receive in a refinance is sometimes not worth the upfront cost of paying points. When you purchase a property paying points can make sense if you want a lower payment and will keep that loan for a while. When should I "lock" the loan? A loan is "locked" when a lender or broker gets a written commitment about the exact interest rate you will receive. Until it is locked, you don't have a "final rate". People sometimes try to research prevailing interest rates and try to play the market by seeing if they can lock their rates when they are a little bit lower. Predicting interest rates is hard. Locking the loan sooner rather than later may the right option. It's just one more thing to get out of the way. What about a "no closing cost" loan? There is no such thing as a free lunch. A "no closing cost" loan means that the closing costs are included in the interest rate. You pay a higher rate. For some people this is worth it, as it minimizes their fees in a cashout refinance and maximizes the cash they receive in hand. Should I convert from an adjustable rate loan to a fixed rate loan? If you plan on keeping your property for a while then converting to a fixed rate loan may the right thing to do. This protects you from the risk of constantly rising interest rates over time. If you plan on selling your property soon then the risk of rising payments may not be as important, or worth the cost of refinancing.
|