Home Refinance Programs

Fundamentally, people refinance because they either want to save money or spend money. This article discusses the most common circumstances in which you might save money by refinancing.

One way to save money is to obtain a loan with a shorter life compared to your current loan. For more information, read Switching to a 15 year loan. If you are attempting to save money by reducing your interest rate, read Should I pay points or closing costs? and Switching to a 15 year loan. If you are attempting to save money by consolidating debt, read Cash Out Refinance.

1. Home Refinance Programs
2. The advantages we offer you for your refinancing needs include
3. Zero Point / Zero Fee Loans
4. What are the benefits of a zero-point/fee loan?
5. What are the disadvantages of a zero-point/fee loan?
6. Zero-point/fee loans can be advantageous

There may be conditions which require you save money in the short-run. An Adjustable Rate Mortgage (ARM) with a low start-rate can temporarily lower your mortgage payments. Depending on the loan, you could substantially reduce your payments for a year or more.

You will Save Money!

You might believe you'll save money in the long-run by switching from an ARM to a fixed-rate loan--and you could be right. In this case, you're assuming that rates will eventually increase enough to justify the cost of refinancing. There is less certainty of saving money in this scenario because the future is unknown and rate comparisons are hypothetical.

Whatever your reason for refinancing, the process begins by comparing the various loan options you have available, including keeping your current loan. Real estate loans usually have income tax effects. Before rushing into a new loan, consider having your figures checked by your tax advisor. Talk to your current lender. They may reduce some of their fees in an effort to keep your business, or because they may have reduced paperwork.

Obtain an Amortization Schedule

[Back to the top of this page]

For each loan you are considering, obtain an amortization schedule and Good Faith Estimate(GFE). A complete amortization schedule will identify the principal and interest portion of your monthly payments over the life of the loan. With it, you can accurately determine the interest paid within any time period. The (GFE) will itemize costs associated with obtaining the loan. The immediate costs of the transaction will be shown on the GFE, while the interest expense over time will appear on the amortization schedule. The information in these documents is required to make an informed decision regarding the best loan for you.

Home Refinance Programs

[Back to the top of this page]

Find out if now is the right time to refinance! You may be able to lower your monthly payments or reduce the time it takes to pay off your loan. You may also be able to save even more if you use your refinance proceeds to pay off credit card or other installment debt, since mortgage interest is usually 100% tax-deductible, and interest on consumer debt is not.. Here are some important reasons to consider refinancing:

• - Get a lower mortgage rate and reduce interest costs.
• - Convert an adjustable rate mortgage to a secure, fixed-rate mortgage.
• - Consolidate your first and second mortgages into a mortgage with a lower rate.
• - Get cash for family wants and needs.

The advantages we offer you for your refinancing needs include:

[Back to the top of this page]

• - Low rates
• - Easy online application
• - All types of mortgage programs
• - Guidance and advice from an experienced loan professional

Ready to refinance your current mortgage? Apply online to be pre-approved for the loan you want.

Find out if now is the right time for you to refinance your current mortgage to lower your monthly payments, pay of your mortgage faster, take cash out, or combine your first and second mortgage.

Zero Point / Zero Fee Loans

[Back to the top of this page]

The Hype

"Now you can lower your monthly payment at no cost to you." Sound familiar? Many people took advantage of the historic downtrend in interest rates during the 1990s. Reducing your monthly payment can be, and often is a good idea. If you invest the monthly savings, you'll be doing everything possible to maximize the benefits of refinancing. In the 90s, many people refinanced numerous times with zero-point/fee loans--and why not? When you can lower your mortgage payment for "free", shouldn't you always do so? As you'll see, simply because you can refinance with a zero-point/fee loan, doesn't mean you should.

The mechanics

Rebate pricing (yield spread pricing, service-release premium) makes zero-point/fee loans possible. Simply put, you pay a higher-than-market interest rate in exchange for cash. The cash is used to pay your closing costs. Here is a hypothetical example of rate/points combinations. The negative points are rebates. One point is 1 percent of the loan amount.

• 7.25%, 2 points
• 7.75%, 1 point
• 8.00%, 0 points
• 8.50%, -1 point
• 9.00%, -2 points

What are the benefits of a zero-point/fee loan?

[Back to the top of this page]

On a $100,000 loan, you can pay 9 percent interest and receive two points, ($2,000) which you can use to pay your closing costs.

You can lower your monthly payment with no out-of-pocket expenses. In the short-run, you can save money. There may be some recurring costs collected from you at closing, but you'd pay these costs if you didn't refinance. They are not a cost of the transaction. Recurring costs include property taxes, insurance and pre-paid mortgage interest.

What are the disadvantages of a zero-point/fee loan?

[Back to the top of this page]

The obvious disadvantage is that you're paying a higher rate in order go obtain the rebate. If you pay closing costs from your personal funds, you receive a lower interest rate. If you keep the loan long enough, (approximately two to three years) you'll pay more than if you had paid points, closing costs and received a lower rate.

Not quite as obvious is something that can happen each time you refinance: you extend the time you have a mortgage. Suppose you purchase a home and obtain a $100,000, 9 percent, 30-year, fixed-rate loan.

After three years your loan balance is $97,750. You get a new, $97,750, 8.5 percent, 30-year, zero-cost/fee loan. After another three years your loan balance is $95,330. You obtain a new, $95,330, 8 percent, 30-year, zero-cost/fee loan. You keep the 8 percent loan and pay it off over 30 years.

This scenario may seem unlikely, but many people refinanced this way more than once in the 90s. In this situation, refinancing cost more than holding the original, 30-year, 9 percent mortgage. This scenario will cost more because you twice exchanged a 27-year mortgage for a 30-year mortgage. Your home will be mortgaged for thirty-six years instead of thirty.

Zero-point/fee loans can be advantageous.

[Back to the top of this page]

Make sure the rebate covers your closing costs. Don't increase your new loan amount by adding your closing costs to it. For example if your old loan amount was $100,00, your new loan amount should be $100,000. Zero-point/fee loans are especially attractive when rates are declining and you plan to sell your home in fewer than two to three years.