mortgage refinance Tag

With mortgage rates once again on the rise, refinancing a mortgage is once again becoming a vogue topic. At City Creek Mortgage, we’re here to help if you determine that refinancing your mortgage is the best way to save yourself some cash and open up financial flexibility.

We’re also here to make sure you don’t fall into one of the few traps of refinancing. There are a few mistakes some people make during this process that turn it from a positive financial event into a negative one – here are some of these mistakes, and how to avoid them.

Unrealistic Value

Home prices have climbed back to reasonable levels after the housing bubble collapse last decade, but that doesn’t mean you can afford wild assumptions about your home’s value. Overestimating value can torpedo a refinance before it gets started – you have to do lots of budgeting based around this number, and you need to have 20 percent equity in the home before refinancing is typically approved. If needed, speak to real estate agents in the area or check online to get a feel for what similar properties are selling for.

Wrong Term

Refinancing is often about getting a better rate, but it can also be about changing your loan term. There are 15-, 20- and even 30-year loan options available, and you need to have an idea of which one makes the most sense for you – a longer term means more interest but lower payments monthly, while a shorter term means less interest and faster payoff, but higher payments. In some cases, an online mortgage calculator can help you determine which option fits your budget.

Waiting to Lock In

It can be tempting to hold out for that lowest rate possible, but this can backfire too. If you miss out and rates start to climb, you could be looking at a bigger jump than you might think. Once you get a rate you’re comfortable with, confirm with your lender and lock in the rate right away. You’re safe if rates go up, but you can always refinance again later if rates drop again.

Closing Costs

Never forget about closing costs! All that money you might be saving through refinancing could disappear in a hurry through loan origination fees, application fees, appraisal fees, title fees and any attorney fees. Make sure these are built into your refinancing situation.

Want to learn more about refinancing mistakes to avoid, or interested in any of our other mortgage services? Speak to the brokers at City Creek Mortgage today.

For many people locked into a current mortgage loan, looking to refinance can be a smart option. There are several market factors that may contribute to your determination regarding when it’s right to consider refinancing, and at City Creek Mortgage, our brokers can help you break down these factors.

What are some of the key signs that it might be time to refinance? Let’s take a look.

Breaking Even

If all you’re looking for is to break even on a property, refinancing is often a great way to go. Calculating the breakeven rate for a refinance situation involves dividing the costs of refinancing (origination fees, closing costs and others) by the amount you’ll be saving each month. So for instance, if you’re taking a 30-year, $1 million loan from 7.5 percent to 4.5 percent interest, this would result in monthly savings of just under $2,000. If the refinance cost was, say, $20,000, it would take you roughly 10 months to break even.

Shortening Terms

If you have the cash to undertake a larger monthly payment, this is commonly a very good long-term saver. Changing from a 30-year loan to a 15-year term will up your monthly amount significantly, but due to reduced interest, it can save you thousands and thousands of dollars over the life of the loan.

Reducing Rate

In the past, a general rule of thumb for refinancing was two percentage points – if the market was this much lower than your current mortgage rate, refinancing was seen as a good idea.

In recent years, though, this may have changed. Larger mortgages and lower closing costs have led to many situations where even a 0.5 percent change can result in major cost savings, particularly if lender fees can be waived.

ARM Interest Rising

For people on adjustable-rate mortgages, benchmark interest rates may soon be going up. If this risk isn’t something you’re comfortable with, refinancing to a fixed-rate situation could be a good idea to get you more stability.

Cash-Out Refinance

If you’ve built up equity in your home, there are times where you can use this to pay off outside debts carrying higher interest rates. This sort of consolidation does come with a few risks, though, so speak to your broker about the details.

Want to learn more about the common reasons for refinancing, or interested in scheduling a consultation? Speak to the brokers at City Creek Mortgage today.

After the housing bubble burst and record low interest rates eventually surged a few years ago, refinancing a mortgage has become a popular move among homeowners. With the potential ability to lower monthly payments in prime position, it’s no surprise more people have begun to take advantage.

We offer many refinance options at City Creek Mortgage, but we also caution our clients to be careful and consider all their options. There are situations where a refinance might not be the right call, or when misconceptions within the industry may lead you down the wrong road. Let’s look at a few of these misconceptions to help you avoid them in the future.

Refinancing Equity

The housing crisis helped create this particular myth – it’s true that many lenders prefer at least 20 percent equity be held in the home before a refinance, but it’s not a requirement. Many types of FHA or VA loans will offer refinances to people below that threshold, and the HARP program is designed specifically for people with little or no equity.

Mortgage Rates

Many people naturally think their bank will offer the best rate for a refinance, but this isn’t always the case. Lenders won’t give special rates just because you belong to them. This is why using a strong mortgage broker can be successful – it can help compare several loans and find the best rates from a larger selection of lenders.

Cash on Hand

Another common myth is that you need extra cash on hand for a refinance. While it’s true that refinancing comes with closing costs and other fees, there are plenty of situations where these can simply be rolled into your loan. This trade-off may come with a higher rate, but our brokers can help you figure out if it’s worth it for you.

Housing Costs Reduction

Finally, there’s a common assumption that a refinance situation will lower housing costs over the life of the loan. While a refinance does offer short term benefits, these will almost always be paid in some format over time. This is great for many people who may need a bit longer a term (with smaller payments), but know that it could cost in the long run.

Want to learn more about mortgage refinancing or any of our other mortgage services? The brokers at City Creek Mortgage are awaiting your call.

If you got a home loan at a time when interest rates were higher, then watched as interest rates have dropped to record lows over the past few years, you might be thinking about refinancing into a lower interest rate. While the refinance process is not right for every homeowner, there are some advantages that you might want to consider. If you’re interested, here are some insider tips to help you get the most from your refinance process.

Don’t Focus on the Monthly Payment

If you have been paying on your 30-year mortgage for the past 10 years, and you refinance into a new 30-year loan, your payment will automatically go down. Chances are you will be financing a lower amount of money (unless you borrowed against your home with equity loans and have a higher principal balance today), and you just extended your total payment period from the original 30 years to 40 (the 10 you already paid, plus 30 more) and you may end up paying more in interest over the long run even with a better rate. Instead, focus on the interest rate you will be getting to determine if it’s worthwhile to refinance.

Consider Shorter Maturity Loans

If you can afford it, talk to your lender about the benefits of a shorter loan, such as a 15-year loan instead of a 30-year loan when you refinance. Your monthly payments might be a little higher, but these loans offer a lower interest rate and allow you to put more money toward the principal balance of the house and pay less in interest over time. It’s important to make sure you can afford the higher payments before you do this, though, as you don’t want to get in over your head and end up missing payments.

Follow Your Loan Officer’s Instructions

Just like when you applied for your initial loan, the refinance process requires a lot of paperwork and information. Lenders want to make sure that you are qualified for the new loan, that you can afford to pay it, and all your paperwork is in order. It might seem frustrating to have to fill out forms and provide documentation for things like your income when you were already approved for a home loan on the same house before, but if you fail to provide the right information in a timely manner, the result could be denial of your refinance loan request.

Keep in mind that just because you filled out the application to apply for a refinance, that doesn’t mean you are officially approved yet, so don’t go out and spend the money you think you will save until the loan goes through. Find out more about refinancing with City Creek Mortgage today.