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Questions and Answers
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Should I refinance now? Is it smart to pay points? I hear a lot about “No Closing Costs” loans – how does that work? Are interest rates higher for a cash-out refinance? When should I "lock in" an interest rate? Do I have to pay the costs of the loan out of my pocket? How long does it take to refinance? Should I refinance from an adjustable-rate to a fixed-rate mortgage? Q. Should I refinance now? The answer to this question really depends on what your financial needs and goals are. For instance, a lower interest rate and lower payments are good reasons to refinance. There are of course additional factors to consider. Here are a few things to ask your self when considering refinancing:
Q. Is it smart to pay points? If you're refinancing your mortgage, and you are staying in the property for 5 to 10 years, points can be an excellent choice for you. Points are used to BUY a lower interest rate. The longer you own your home, the more benefit you will derive from paying points. Understand that points paid on a refinance can be deducted from your taxes only in small increments — 1/30th a year for a 30-year mortgage, etc. - meaning it could be several years before your lower rate makes up for the points you pay. If you're buying a home however, points paid may be a deductible expense for that year. Consult your tax advisor to be sure Q. I hear a lot about “No Closing Costs” loans – how does that work? “No cost loans” is really a misnomer, as we all know – there is no free lunch. Typically what happens is that the cost of the loan is rolled into a slightly higher interest rate. So, since you are not paying costs at the time of closing the loan, many call it a no cost loan – “no cost out of pocket” is much more accurate. The loans are an excellent idea under the right circumstances; example – you are planning on reselling the home within a few years. Q. Are interest rates higher for a cash-out refinance? The interest rate you pay on a cash-out refinance loan will generally be the same that you pay on a non-cash-out loan. There may be a slight adjustment to the cost of the loan for certain cash out refinance loans, usually larger jumbo loan amounts. Using the equity in your home to pay off other bills can be a smart thing to do. Personal debt (car loan, bank loan, credit cards, etc.) are not tax deductible loans, typically a mortgage loan is. You may be able to deduct the interest on the money you take out to pay off that debt. It would be prudent to consult our loan professionals and your tax or financial advisor to be sure. Q. When should I “lock in” Link an interest rate? Of course this is always the magic question! No one can predict interest rates, if anyone could, they would own the world! Generally speaking though, rates go up much faster than they come down. So if you're thinking about buying a home or refinancing your mortgage – Always try to lock in a sweet rate when they are available, and above all, DO NOT try to “pick off” the market – only about one in a thousand or so are lucky enough to capture rates at the exact bottom – not good odds at all. Just as rates rise faster than they go down, interest rate ‘bottoms’ typically last only one to two days – yes we said days! Always take a decent rate that works for you and lock it in! Q. Do I have to pay the costs of the loan out of my pocket? The general answer is no. If you have acquired enough equity in your home, you can add the cost of financing to the new loan amount. Another way to cover the costs of acquiring the new loan is to opt for a slightly higher interest rate. Q. How long does it take to refinance? With Changemyrate.com - since 1989, refinancing normally takes between two and four weeks, depending on a few variables.
It depends on your situation. Generally, it's a good idea to get the lowest fixed-rate possible. However, if you're in the first year of a five-year Adjustable Rate Mortgage (ARM) and you plan on moving in three years, it may not make sense for you to refinance. One of our refinance experts can help you make the best decision.
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