Refinance - Debt Consolidation - Cash Out


When I should refinance?

It is often said that you should refinance when mortgage rates are lower than the rate you currently have on your loan. However, it really depends on your financial goals. Refinancing may be a viable option even if the interest rate difference is 1% or less. A modest reduction in the loan rate can still trim your monthly payment. For example, the monthly payment (excluding taxes & insurance) would be about $770 on a $100,000 loan at 8.5%. If the rate were lowered to 7.5%, the monthly payment would be about $700, a savings of $70. The significance of such savings in any scenario will depend on your income, budget, loan amount and the change in interest rate. Your trusted lender can help calculate the different scenarios.

 

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Should I refinance if I plan on moving soon?

CTC Mortgage will charge fees to refinance a loan. If you plan to stay in the property for less than a couple of years, your monthly savings may not get a chance to accumulate and recoup these costs. Let's say a lender charged $1,000 to refinance your loan, but it resulted in a monthly savings of $50. It would take 20 months (1,000 divided 50) to recoup the initial costs before you start to realize some savings. Some lenders will charge a slightly higher than average interest rate on refinance loans, but waive all costs associated with the loan. The attractiveness of these loans will depend on the interest rate you are being charged on your current loan.

 

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How much will it cost me to refinance?

In many cases you will have to pay much of the same costs that you had to pay with your current home loan (title search, title insurance, misc. lender fees, etc.). The sum of these fees could cost you up to 2-3% of the loan amount. If don't have the money to pay for associated loan costs, look for lenders that offer 'no-cost' loans. These loans will charge a slightly higher interest rate, so ask a lender if it would still make sense to refinance using this type of program.

 

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What are points?

It is an upfront cash payment required by the CTC Mortgage as part of the charge for the loan, expressed as a percent of the loan amount; e.g., “2 points” means a charge equal to 2% of the loan balance.

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Should pay points to lower my interest rate?

If you plan on staying in the property for at least a few years, paying discount points to lower the loan's interest rate can be a good way to lower your required monthly loan payment (and possibly increase the loan amount that you can afford to borrow). If you only plan to stay in the property for a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front. Ask CTC Mortgage how long it would take for your monthly savings to recoup the costs of the discount points.

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What does it mean to lock the interest rate?

Due to the nature of interest rate movements, mortgage rates can change dramatically from the day you apply for a mortgage loan to the day you close the transaction. If interest rates rise sharply during the application process, it could make a borrower's mortgage payment larger than he/she previously thought. To protect against this uncertainty, CTC Mortgage can allow the borrower to 'lock-in' the loan's interest rate, guaranteeing the borrower the prevailing loan rate for a specified period of time (often 30-60 days). CTC Mortgage may or may not charge a fee for this service.

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Should I lock-in my loan rate?

No one knows for sure how interest rates will move at any given time, but your lender may be able to give you an estimate of where it thinks mortgage rates are headed. If interest rates are expected to be volatile in the near future, you may want to consider locking your interest rate if rising rates will no longer allow you to qualify for the loan. If your budget can handle a higher loan payment or if CTC Mortgage's lock fee seems excessive for your means, you might want to consider allowing the interest rate to 'float' until the loan closing.

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I've had credit problems in the past. Does this impact my chances of getting a home loan?

Obtaining a home loan is possible even with extremely poor credit. If you have had credit problems in the past, CTC Mortgage will consider you to be a risky borrower to lend to. To compensate for this added risk, CTC Mortgage will charge you a higher interest rate and usually expect you to pay a higher down payment on your home purchase (typically 20-50% down). The worse your credit is, the more you can expect to pay for an interest rate and a down payment.

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I've only been late a couple of times on my credit card bills. Does this mean I will have to pay an extremely high interest rate?

 

Not necessarily. If you have been late less than three times in the past year, and the payments were no more than 30 days late, you probably have a pretty good chance at getting a home loan at a competitive interest rate.CTC Mortgage may excuse a couple of minor 'late-pays' as long as the borrower can provide a reasonable excuse explaining them (i.e. job transition, illness). If the late-pays were 60+ days late and cannot be explained, you may have to settle for a higher interest rate.

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