Rating:
0 user(s) have rated this article
Abstract:
Depending on your financial situation, refinancing your mortgage may save you money especially if you are looking to pay for a major purchase such as college tuition, home renovations, or an upcoming wedding.
"Refinancing Your Mortgage – It May Save You Money," is the last segment of a four part interview with Dwight Crawford, a licensed loan officer. Fool, a website popularized for its accurate and useful info on banking related stuff, strongly recommends the assistance of such experts on loaning in its mortgage calculator page, making this interview a must read for people interested in getting a mortgage.
Please reference the previous interviews: Griffiths:
I recently refinanced my own house mortgage because I needed a lower monthly mortgage payment. I realized after getting into a 15-year mortgage that it was simply too he aggressive to manage with my income each month. Other than wanting a lower monthly mortgage payment, why do most people seek to refinance their home?
Crawford:
A mortgage refinance is done for many reasons. The most popular is to save money. Refinance loans are used to convert equity into cash. That cash can be used for debt consolidation, home improvements, children’s education, retirement, investments, weddings and even vacations.
Griffiths:
How can our readers determine what makes sense for their financial situation? When is it good to consolidate debt onto a single credit card, versus a home equity loan, versus refinancing your home loan while taking cash out or no cash out? Sometimes too many choices make decisions much more complicated.
Crawford:
This is a great question! We consumers, with the responsibility of homeownership, have the daunting task of making the right financial decisions for ourselves and families. The options are endless. What I advise my clients is to start at the end and work backwards. What I mean by this is to have a very specific monetary goal that you are working towards and then define the path of least resistance with the least cost and the maximum return. The key to this type of goal setting is to weigh how this is going to effect you both short and long term. Let me be more specific using the examples that you mentioned.
Transferring balances on credit cards:
The “Pros” of this is typically a much lower rate of interest, which should give you a faster principle reduction on your debt.
The “Cons” are whether you will realistically be able to payoff the debt before the introductory rate increases. Another major con to balance transfers or what I like to call credit card juggling, is the long term effect that this has on your credit scores. The length of credit history that you have with all of your creditors will drive your scores up or down. If I keep opening and closing accounts, it hinders the credit bureaus from giving a long-term evaluation on how I pay any given creditor. This will lower your credit scores.
Home Equity Loans versus Refinance Loans:
Ask yourself the following; by refinancing will I save more money both short and long term? Do I have a great deal on my first mortgage or can I do better? Will I have access to more of the equity in my home from refinancing the loan or will the equity loan achieve my goals with less cost?
Cash versus no cash:
My personal feelings about cash is simple, we can never have too much. If by refinancing or by taking an equity loan, I can reduce my monthly outlay and still get cash, I will do it every time. If my outlay is going up I need to make sure that the additional expense can be justified. What I mean by this is if you are taking the cash to invest in something that will increase your income go for it. If you are taking the cash out for a child’s education and you prefer the tax deductions that you can get from the mortgage versus the limited deductibility and future debt for your child, go for it.
Always look at the pros and cons!
Griffiths:
What kind of closing costs and expenses can a person expect when refinancing there home?
Crawford:
Closing cost will always differ from lender to lender. The national average on a refinance loan ranges from five to six percent of the loan amount. This will vary based on the type of loan, credit history, a borrowers ability to prove income and assets and a host of additional factors. Again look at what you are getting for the cost.
Griffiths:
Mortgage refinancing isn’t as straightforward as a home equity line or loan. Would you please describe what the process is before you can close on a refinance loan?
Crawford:
Lenders are looking at three major factors, credit, collateral, and the ability to pay. The process of a refinance loan or a home equity loan always starts with an application. This is where you supply the bank or broker with the basics about you. The next step is to review your credit and find the program that best fits your needs wants and qualifications. After you and your advisor have come up with the best program and you have reviewed the cost as well as the long and short term effects that this loan will have on you, you supply your advisor with income documentation, homeowners insurance, as well as a series of signed state, federal and bank documents the loan will be submitted.
The next step is the collateral or as I like to call it, your home. The lender will set up a time to have an appraiser come to your home and do an inspection. This typically is your only out-of-pocket expense. During this time your lender has ordered a title report, verified the income documentation, ordered payoffs on the debts that you are paying off and reviewed your credit for final approval. When the appraisal comes back and everything is fine, homeowners insurance will be updated. This process will take from 10 days up until a month. The difference in time is based on the borrower being able to supply the required documents and the ability to have the appraiser see the house as soon as possible.
Griffiths:
A home mortgage is the largest ticket item I have ever purchased and I imagine the same is true for most of our readers. I know how to comparison shop with confidence for clothes, an electronic gadget, and even a car, but home mortgages are a completely different animal.
If a person is in need of five mortgages during their lifetime they are a frequent shopper! As you can imagine, this can be quite intimidating for people who don’t work in the mortgage loan industry. How can you be confident that you’re getting the best interest rate, the best points, etc. when refinancing a mortgage?
Crawford:
Like all decisions, get the facts and go with your gut. Build a relationship with a mortgage professional that you trust. If you refinance your home five time in your life, go back and find the professional that gave you the best service, response time, answered your questions and calls and generally under-promised and over-delivered.
Dwight Crawford is a licensed loan officer, Certified Mortgage Consultant as well as the Chief Executive Officer of the Charlotte, NC based Crawford & Associates Professional Mortgage Planners. With over 15 years in the residential, commercial and small business mortgage lending world, Mr. Crawford is dedicated to education of his clients to show them that a mortgage is not just a bill that has to be paid but it is an invaluable tool to eliminate debt and to create wealth. For a private consultation Mr. Crawford can be reached directly at 516-395-3246 or by email at crawford.associates@hotmail.com.
How would you rate this article?
User Feedback
Post your comment