Refinancing Handbook
Content
WHAT EVERY HOMEOWNER SHOULD KNOW ABOUT REFINANCING
This Free Report Provided By:
Toll Free at 1-888-562-6200 or email us at [email protected]
Churchill Mortgage Corporation 761 Old Hickory Blvd., Suite 400 Brentwood, TN 37027 www.ChurchillMortgage.com 1-888-562-8634 615-370-8634
WHAT EVERY HOMEOWNER SHOULD KNOW ABOUT REFINANCING
CONTENTS Page
Surrounded by a sea of refinancing confusion.................2 Basic terms I need to know about refinancing.................3 When should I refinance my home mortgage? ................6 Be aware of refinancing myths…………………………….6 Things to consider in refinancing my home ………..……7 Should I refinance my ARM? ………………………..…….7 What is involved in refinancing my home mortgage…....7 Example of savings from refinancing..............................8 What if I’m still not sure I should refinance? .................9
SURROUNDED BY A SEA OF REFINANCING CONFUSION!
You have probably heard of many “lifesaving” tips people have thrown you to help you determine the right time to refinance your home. You may have heard that the interest rate on the new loan must be at least two percent less than the old loan or it is not a good decision. Another frequently quoted, but just as frequently incorrect statement, is that if your loan is less than two years old, you shouldn’t refinance it now. Neither of these statements is entirely correct, and it can be extremely difficult to receive unbiased and accurate information about the refinancing decision and process. It is our desire to offer you a clear, concise guide to help rescue you from that sea of refinancing confusion. This report has been designed to provide unbiased information that will help you make an educated decision about whether you should refinance your home mortgage.
2
BASIC REFINANCING TERMS
The mortgage industry is continuously changing—it’s a challenge just to keep up. New regulations, programs, and terms are always being created; therefore, the first step to understanding the refinancing process is to learn the language! Adjustable Rate Mortgage (ARM) — A loan that allows the lender to adjust the borrower’s interest rate and payments at prescribed times and sometimes with prescribed limits. Lower interest rates are customary. Amortized Loan — A loan which is paid off in equal installments during its term. Annual Percentage Rate — The actual interest rate the borrower pays when all the costs of obtaining credit are included. Appraisal — A report made by a qualified appraiser setting forth an opinion of estimate of value. The term also refers to the process by which the estimate is obtained. Appraised Value — An estimate of property value made by a qualified expert. Appreciation — An increase in the value of a property. Appreciation may be the result of an increased demand for property, any improvements or additions made, improvements to the neighborhood, etc. Balloon Mortgage — A mortgage with periodic installments of principal and interest that, at the end of such a period, do not fully amortize the loan. The balance of the mortgage due is usually paid in a lump sum at a specified date, usually at the end of the term of such periodic installments. Closing — The process that brings a loan into legal existence, including the signing of all loan documents, their delivery to the appropriate parties, and the disbursing of at least some of the loan funds. Closing Costs — These are costs which are not controlled by the lender and are required for anyone purchasing a home regardless of loan amount or lender. These include expenses such as attorney fees, title insurance, survey, recording fees, appraisal, and termite inspection. All of these services are provided by independent professionals who are not affiliated with your lender. You can usually figure on your closing costs being approximately 1 to 1½ percent of your loan amount. Comparables — Properties used in an appraisal report that are substantially equivalent to the subject property. Conventional Loan — A loan that may or may not require Private Mortgage Insurance. (Any loan amount with 20 percent or more down payment will not require PMI. Any loan amount with zero to 19 percent down payment will require PMI.) This type of loan is subject to the qualifying guidelines set forth by FNMA (Fannie Mae) or FHLMC (Freddy Mac). Credit History — This is a “snapshot” of your past and present debt, current available credit, and a rating of your debt repayment history. This is very important to a lender so that they can know if you are a good credit risk.
3
Credit Report — A document completed by a credit-reporting agency providing information about the buyer’s credit cards, previous mortgage history, bank loans, and public records dealing with financial matters. Deed — The formal written document that transfers the rights of ownership and possession (the title) from the seller to the buyer. Discount Point — A unit of measurement used for various loan charges; one point equals one percent of the amount of the loan. Down Payment — The difference between the loan amount and the sales price of the home you are percentage—for example: a 3 percent down payment on a $70,000 home would be $2,100. Equity — The owner’s interest, or the amount of cash the owner has, realized, paid in, or invested in real estate. Escrow Payment — The portion of a borrower’s monthly payment that is set aside by the lender in an escrow account to pay the taxes, hazard insurance, mortgage insurance, ground rents, and other special items as they come due. FHA Loan — A loan that is insured by the Federal Housing Authority. This type of loan is geared toward providing mortgages for moderate to low income families and is subject to the qualifying guidelines set forth by the Federal Housing Authority. Fixed-Rate Mortgage — The type of loan where the interest will not change for the entire term of the loan. Good Faith Estimate — Provides a breakdown of the estimated closing charges. Home Equity Loan — A loan under which a property owner uses his or her residence as collateral and can then draw funds up to a prearranged amount against the property. Interest Rate — The percentage of interest charged on the amount of money borrowed. This rate will vary slightly from lender to lender and will vary according to the type of mortgage chosen (30-year fixed, 3-year adjustable, etc.). Now is an excellent time to refinance with rates that are the lowest in over 30 years! Loan-to-Value Ratio (LTV) — The ratio, expressed as a percentage, of the amount of a loan (numerator) to the value or selling price of the property (denominator). Usually the higher the percentage, the greater the interest charged. Origination Fee — The fee that the lender charges the borrower to cover the cost of issuing a loan commitment. It pays for processing the loan which includes collecting information about the borrower’s creditworthiness and the property. The fee is usually computed as a percentage of the mortgage loan. It usually does not include fees for appraisals, credit reports, inspections, and loan document preparation.
4
Points — An amount equal to one percent of the principal amount of a note. Loan discount points are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan to a competitive position with other types of investments. Pre-Paid Costs — These are the costs that cover your escrow account for the future payment of interest, property taxes, and homeowners’ insurance. Property taxes are set by the appropriate government taxing authority and, unfortunately, are not negotiable. Depending on the regulatory agency (FHA, Fannie Mae, etc.), you will be required to prepay anywhere from 2 to 11 months of property taxes at closing. Premiums for homeowners’ insurance are set by the insurance company you select, and you are required to pay your first year’s homeowners’ insurance plus two additional months at closing. You can usually figure on your prepaid costs being approximately 1 to 1½ percent of your loan amount. Private Mortgage Insurance — This insurance is required for most loans that have a down payment of 20 percent or less. Private Mortgage Insurance insures the lender in the event that you default on your mortgage payment and the lender is forced to sell your property at a loss. Title — The evidence of the right to, or ownership in, property. In the case of real estate, the documentary evidence of ownership is the title deed which specifies in whom the legal state is vested and the history of ownership and transfers. Title may be acquired through purchase, inheritance, devise, gift, or foreclosure of a mortgage. Title Insurance — An insurance policy which protects the insured (purchaser or lender) against loss arising from defects in title. This is a one-time charge for the policy and is required on every purchase or refinance transaction. Underwriting — In mortgage lending, the process of approving or denying a loan based on an evaluation of the property and the applicant’s creditworthiness and ability to repay the loan. The underwriter analyzes the risks involved and selects an appropriate loan term and interest rate. VA Loan — A loan that is insured by the Department of Veteran’s Affairs. This type of loan is available only to veterans and is subject to the qualifying guidelines set forth by the Department of Veteran’s Affairs.
5
WHEN SHOULD I REFINANCE MY HOME MORTGAGE?
Put very simply, the decision to refinance a home should be based on whether you will own the property long enough to recapture the expense connected with the new loan. The way to figure this can be as easy as subtracting the proposed new house payment from the existing payment to find out what the monthly savings will be. Then, divide the monthly savings into the cost of refinancing to determine how many months it will take to recapture that cost.
Existing payment – Payment after refinance = Monthly savings Refinancing costs ÷ Monthly savings = Months to recover cost
There are some situations in which a refinancing decision should invariably be made. If you are able to negotiate a “no-cost” mortgage (you pay no points or closing costs) and if the new mortgage rate is lower than your existing rate, then refinancing your loan may be of financial benefit to you. If the remaining mortgage balance, including points and closing costs, can be refinanced at a reduced monthly payment and still be paid off within your existing mortgage payment term, then refinancing would be advisable. Lastly, you can generally count on it being time to refinance when your new mortgage rate is at least one to two points lower than your existing rate and you plan to stay in your home for at least three to five years. However, sometimes refinancing can be accomplished with a NO RISK REFINANCE that costs no money out of pocket, and adds nothing to the principal balance. Ask your Churchill loan officer about this program.
BE AWARE OF REFINANCING MYTHS
One widespread myth that needs to be dispelled is the idea that lowered monthly payments are the financial yardstick by which refinancing is measured. Monthly payments are only comparable if they are based on the same loan duration! In fact, lowered monthly payments can be achieved even at a higher mortgage rate if the new mortgage has a longer term than the remaining years of the old mortgage. Another common misconception about refinancing if the new rate is not at least two points lower than your existing mortgage rate, then refinancing is not worth the time and trouble. In many cases, especially if you are planning to stay in your home at least three to five years, even a one point reduction can make an enormous difference in your overall home mortgage cost. In addition, with the constant technological advances in the mortgage industry, obtaining a mortgage loan or refinance is now faster and easier than ever. If you have any confusion or apprehension about your refinancing decision, most mortgage companies will consult with you at no charge or obligation.
6
THINGS TO CONSIDER IN REFINANCING MY HOME
To accurately sum up your refinancing decision, you need to thoroughly consider the following factors: 1) The amount of reduction in the mortgage interest rate. 2) The amount of reduction in the monthly payment. 3) Any prepayment penalties on the old mortgage. 4) The amount of closing costs, including any points, loan origination fees, application fees, inspection fees, appraisal fees, title insurance, mortgage insurance. etc. 5) The number of years you plan to keep your home. 6) If the current loan is an adjustable rate mortgage (ARM) and the predictability of a fixed rate loan is desirable. 7) Is there a desire to build equity more quickly by converting to a shorter term loan? 8) Is there a desire to draw on equity for some important financial need? If you decide that refinancing is not for you at the present time, please contact us to be placed on our “Rate Watch Service” so we can track your desired terms and contact you when they are available.
SHOULD I REFINANCE MY ARM?
In deciding whether to refinance an ARM, you should consider these questions: 1) Is the next interest rate adjustment on your existing loan likely to increase your monthly payments substantially? Will the new interest rate be 2 or 3 percentage points higher than the prevailing rates being offered for either fixed-rate loans or other ARMs? 2) If the current mortgage sets a cap on your monthly payments, are those payments large enough to pay off your loan by the end of the original term? Will refinancing to a new ARM or a fixed rate enable you to pay your loan in full by the end of the term? We will be able to help you answer these questions and reach the decision that is right for you.
WHAT IS INVOLVED IN REFINANCING MY HOME MORTGAGE?
When you refinance, the proceeds from your new mortgage loan are used to pay off your old mortgage. Even if you use the same lender, this is true. You are not simply re-negotiating the terms of the old mortgage—such as reducing the interest rate—you are making a new mortgage. The old note you signed will be returned along with the mortgage contract, and your lender will file a Mortgage Record Change. You will sign a new note and mortgage contract which your new lender will record. No money will pass through your hands unless you borrow more than your old mortgage balance. However, you must pay for points and closing costs unless you finance those as well as the old mortgage balance.
7
You need to expect that your home will have to be appraised again and possibly be inspected. Your credit history will be reviewed again, and there will probably be changes in your mortgage and title insurance. Of course, money doesn’t just grow on trees; but if it is truly the right time for you to refinance, then with the money you will be saving after 12 to 18 months, you should begin to feel like your money trees are in full bloom!
EXAMPLE OF SAVINGS FROM REFINANCING
From the table shown here, you see that refinancing to obtain a mere 1% decrease from 9% to 8% would show immediate savings. If refinance costs were approximately $2,000, the entire costs could be recouped in about 2½ years. The greater the spread between your current mortgage rate and your new rate, the greater your savings.
REFINANCING SAVINGS ON A $100,000 LOAN
Your present mortgage rate % 14 13.5 13 12.5 12 11.5 11 10.5 10 9.5 9 Current monthly payment $1,185 1,145 1,106 1,067 1,029 990 952 915 878 841 805 Monthly payment @ 8% $735 $735 $735 $735 $735 $735 $735 $735 $735 $735 $735 Monthly savings @ 8% $451 411 372 333 295 256 216 181 144 107 71 Annual savings @ 8% $5,412 4,932 4,464 3,996 3,540 3,072 2,616 2,172 1,728 1,284 852
8
What if I’m still not sure I should refinance?
If after reviewing this report you are still not sure whether you should refinance your home, it is time to call on someone specifically trained to help you interpret your individual mortgage situation. Our loan officers will meet with you at no cost to consider your refinancing needs. We are trained to take care of all those details for you, and we will gladly meet with you at your convenience to discuss your specific refinancing situation. This consultation is absolutely free, and there will be no obligations—no salespeople hounding you—if you decide this is not the right time for you to refinance. Remember that refinancing your home mortgage need not be a tedious, overwhelming task. Give us a call and let us show you just how quick and hassle-free creating increased cash flow through your home mortgage refinance can be!
Churchill Mortgage can assist you and make sure you avoid making costly mistakes in obtaining your financing. We underwrite and fund the majority of our loans in-house. What that means for you is that we have the opportunity and ability to offer a variety of methods in financing to fit every client’s needs. We hope that this information is useful to you in your pursuit to purchase, refinance or build the home of your dreams! We have learned that the best way to serve you is to think of ourselves as your Super Servant. You have our guarantee that we will carefully listen to your individual needs and work our hardest to get you the best deal around. We want to be your Personal Lender for Life!
For additional information concerning your mortgage needs, please contact:
Toll Free at 1-888-562-6200 or email us at [email protected] We look forward to serving you!
Exclusively Endorsed by Dave Ramsey:
Voted Favorite Mortgage Company by Readers of Parent Magazine:
9
This Free Report Provided By:
Toll Free at 1-888-562-6200 or email us at [email protected]
Churchill Mortgage Corporation 761 Old Hickory Blvd., Suite 400 Brentwood, TN 37027 www.ChurchillMortgage.com 1-888-562-8634 615-370-8634
WHAT EVERY HOMEOWNER SHOULD KNOW ABOUT REFINANCING
CONTENTS Page
Surrounded by a sea of refinancing confusion.................2 Basic terms I need to know about refinancing.................3 When should I refinance my home mortgage? ................6 Be aware of refinancing myths…………………………….6 Things to consider in refinancing my home ………..……7 Should I refinance my ARM? ………………………..…….7 What is involved in refinancing my home mortgage…....7 Example of savings from refinancing..............................8 What if I’m still not sure I should refinance? .................9
SURROUNDED BY A SEA OF REFINANCING CONFUSION!
You have probably heard of many “lifesaving” tips people have thrown you to help you determine the right time to refinance your home. You may have heard that the interest rate on the new loan must be at least two percent less than the old loan or it is not a good decision. Another frequently quoted, but just as frequently incorrect statement, is that if your loan is less than two years old, you shouldn’t refinance it now. Neither of these statements is entirely correct, and it can be extremely difficult to receive unbiased and accurate information about the refinancing decision and process. It is our desire to offer you a clear, concise guide to help rescue you from that sea of refinancing confusion. This report has been designed to provide unbiased information that will help you make an educated decision about whether you should refinance your home mortgage.
2
BASIC REFINANCING TERMS
The mortgage industry is continuously changing—it’s a challenge just to keep up. New regulations, programs, and terms are always being created; therefore, the first step to understanding the refinancing process is to learn the language! Adjustable Rate Mortgage (ARM) — A loan that allows the lender to adjust the borrower’s interest rate and payments at prescribed times and sometimes with prescribed limits. Lower interest rates are customary. Amortized Loan — A loan which is paid off in equal installments during its term. Annual Percentage Rate — The actual interest rate the borrower pays when all the costs of obtaining credit are included. Appraisal — A report made by a qualified appraiser setting forth an opinion of estimate of value. The term also refers to the process by which the estimate is obtained. Appraised Value — An estimate of property value made by a qualified expert. Appreciation — An increase in the value of a property. Appreciation may be the result of an increased demand for property, any improvements or additions made, improvements to the neighborhood, etc. Balloon Mortgage — A mortgage with periodic installments of principal and interest that, at the end of such a period, do not fully amortize the loan. The balance of the mortgage due is usually paid in a lump sum at a specified date, usually at the end of the term of such periodic installments. Closing — The process that brings a loan into legal existence, including the signing of all loan documents, their delivery to the appropriate parties, and the disbursing of at least some of the loan funds. Closing Costs — These are costs which are not controlled by the lender and are required for anyone purchasing a home regardless of loan amount or lender. These include expenses such as attorney fees, title insurance, survey, recording fees, appraisal, and termite inspection. All of these services are provided by independent professionals who are not affiliated with your lender. You can usually figure on your closing costs being approximately 1 to 1½ percent of your loan amount. Comparables — Properties used in an appraisal report that are substantially equivalent to the subject property. Conventional Loan — A loan that may or may not require Private Mortgage Insurance. (Any loan amount with 20 percent or more down payment will not require PMI. Any loan amount with zero to 19 percent down payment will require PMI.) This type of loan is subject to the qualifying guidelines set forth by FNMA (Fannie Mae) or FHLMC (Freddy Mac). Credit History — This is a “snapshot” of your past and present debt, current available credit, and a rating of your debt repayment history. This is very important to a lender so that they can know if you are a good credit risk.
3
Credit Report — A document completed by a credit-reporting agency providing information about the buyer’s credit cards, previous mortgage history, bank loans, and public records dealing with financial matters. Deed — The formal written document that transfers the rights of ownership and possession (the title) from the seller to the buyer. Discount Point — A unit of measurement used for various loan charges; one point equals one percent of the amount of the loan. Down Payment — The difference between the loan amount and the sales price of the home you are percentage—for example: a 3 percent down payment on a $70,000 home would be $2,100. Equity — The owner’s interest, or the amount of cash the owner has, realized, paid in, or invested in real estate. Escrow Payment — The portion of a borrower’s monthly payment that is set aside by the lender in an escrow account to pay the taxes, hazard insurance, mortgage insurance, ground rents, and other special items as they come due. FHA Loan — A loan that is insured by the Federal Housing Authority. This type of loan is geared toward providing mortgages for moderate to low income families and is subject to the qualifying guidelines set forth by the Federal Housing Authority. Fixed-Rate Mortgage — The type of loan where the interest will not change for the entire term of the loan. Good Faith Estimate — Provides a breakdown of the estimated closing charges. Home Equity Loan — A loan under which a property owner uses his or her residence as collateral and can then draw funds up to a prearranged amount against the property. Interest Rate — The percentage of interest charged on the amount of money borrowed. This rate will vary slightly from lender to lender and will vary according to the type of mortgage chosen (30-year fixed, 3-year adjustable, etc.). Now is an excellent time to refinance with rates that are the lowest in over 30 years! Loan-to-Value Ratio (LTV) — The ratio, expressed as a percentage, of the amount of a loan (numerator) to the value or selling price of the property (denominator). Usually the higher the percentage, the greater the interest charged. Origination Fee — The fee that the lender charges the borrower to cover the cost of issuing a loan commitment. It pays for processing the loan which includes collecting information about the borrower’s creditworthiness and the property. The fee is usually computed as a percentage of the mortgage loan. It usually does not include fees for appraisals, credit reports, inspections, and loan document preparation.
4
Points — An amount equal to one percent of the principal amount of a note. Loan discount points are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan to a competitive position with other types of investments. Pre-Paid Costs — These are the costs that cover your escrow account for the future payment of interest, property taxes, and homeowners’ insurance. Property taxes are set by the appropriate government taxing authority and, unfortunately, are not negotiable. Depending on the regulatory agency (FHA, Fannie Mae, etc.), you will be required to prepay anywhere from 2 to 11 months of property taxes at closing. Premiums for homeowners’ insurance are set by the insurance company you select, and you are required to pay your first year’s homeowners’ insurance plus two additional months at closing. You can usually figure on your prepaid costs being approximately 1 to 1½ percent of your loan amount. Private Mortgage Insurance — This insurance is required for most loans that have a down payment of 20 percent or less. Private Mortgage Insurance insures the lender in the event that you default on your mortgage payment and the lender is forced to sell your property at a loss. Title — The evidence of the right to, or ownership in, property. In the case of real estate, the documentary evidence of ownership is the title deed which specifies in whom the legal state is vested and the history of ownership and transfers. Title may be acquired through purchase, inheritance, devise, gift, or foreclosure of a mortgage. Title Insurance — An insurance policy which protects the insured (purchaser or lender) against loss arising from defects in title. This is a one-time charge for the policy and is required on every purchase or refinance transaction. Underwriting — In mortgage lending, the process of approving or denying a loan based on an evaluation of the property and the applicant’s creditworthiness and ability to repay the loan. The underwriter analyzes the risks involved and selects an appropriate loan term and interest rate. VA Loan — A loan that is insured by the Department of Veteran’s Affairs. This type of loan is available only to veterans and is subject to the qualifying guidelines set forth by the Department of Veteran’s Affairs.
5
WHEN SHOULD I REFINANCE MY HOME MORTGAGE?
Put very simply, the decision to refinance a home should be based on whether you will own the property long enough to recapture the expense connected with the new loan. The way to figure this can be as easy as subtracting the proposed new house payment from the existing payment to find out what the monthly savings will be. Then, divide the monthly savings into the cost of refinancing to determine how many months it will take to recapture that cost.
Existing payment – Payment after refinance = Monthly savings Refinancing costs ÷ Monthly savings = Months to recover cost
There are some situations in which a refinancing decision should invariably be made. If you are able to negotiate a “no-cost” mortgage (you pay no points or closing costs) and if the new mortgage rate is lower than your existing rate, then refinancing your loan may be of financial benefit to you. If the remaining mortgage balance, including points and closing costs, can be refinanced at a reduced monthly payment and still be paid off within your existing mortgage payment term, then refinancing would be advisable. Lastly, you can generally count on it being time to refinance when your new mortgage rate is at least one to two points lower than your existing rate and you plan to stay in your home for at least three to five years. However, sometimes refinancing can be accomplished with a NO RISK REFINANCE that costs no money out of pocket, and adds nothing to the principal balance. Ask your Churchill loan officer about this program.
BE AWARE OF REFINANCING MYTHS
One widespread myth that needs to be dispelled is the idea that lowered monthly payments are the financial yardstick by which refinancing is measured. Monthly payments are only comparable if they are based on the same loan duration! In fact, lowered monthly payments can be achieved even at a higher mortgage rate if the new mortgage has a longer term than the remaining years of the old mortgage. Another common misconception about refinancing if the new rate is not at least two points lower than your existing mortgage rate, then refinancing is not worth the time and trouble. In many cases, especially if you are planning to stay in your home at least three to five years, even a one point reduction can make an enormous difference in your overall home mortgage cost. In addition, with the constant technological advances in the mortgage industry, obtaining a mortgage loan or refinance is now faster and easier than ever. If you have any confusion or apprehension about your refinancing decision, most mortgage companies will consult with you at no charge or obligation.
6
THINGS TO CONSIDER IN REFINANCING MY HOME
To accurately sum up your refinancing decision, you need to thoroughly consider the following factors: 1) The amount of reduction in the mortgage interest rate. 2) The amount of reduction in the monthly payment. 3) Any prepayment penalties on the old mortgage. 4) The amount of closing costs, including any points, loan origination fees, application fees, inspection fees, appraisal fees, title insurance, mortgage insurance. etc. 5) The number of years you plan to keep your home. 6) If the current loan is an adjustable rate mortgage (ARM) and the predictability of a fixed rate loan is desirable. 7) Is there a desire to build equity more quickly by converting to a shorter term loan? 8) Is there a desire to draw on equity for some important financial need? If you decide that refinancing is not for you at the present time, please contact us to be placed on our “Rate Watch Service” so we can track your desired terms and contact you when they are available.
SHOULD I REFINANCE MY ARM?
In deciding whether to refinance an ARM, you should consider these questions: 1) Is the next interest rate adjustment on your existing loan likely to increase your monthly payments substantially? Will the new interest rate be 2 or 3 percentage points higher than the prevailing rates being offered for either fixed-rate loans or other ARMs? 2) If the current mortgage sets a cap on your monthly payments, are those payments large enough to pay off your loan by the end of the original term? Will refinancing to a new ARM or a fixed rate enable you to pay your loan in full by the end of the term? We will be able to help you answer these questions and reach the decision that is right for you.
WHAT IS INVOLVED IN REFINANCING MY HOME MORTGAGE?
When you refinance, the proceeds from your new mortgage loan are used to pay off your old mortgage. Even if you use the same lender, this is true. You are not simply re-negotiating the terms of the old mortgage—such as reducing the interest rate—you are making a new mortgage. The old note you signed will be returned along with the mortgage contract, and your lender will file a Mortgage Record Change. You will sign a new note and mortgage contract which your new lender will record. No money will pass through your hands unless you borrow more than your old mortgage balance. However, you must pay for points and closing costs unless you finance those as well as the old mortgage balance.
7
You need to expect that your home will have to be appraised again and possibly be inspected. Your credit history will be reviewed again, and there will probably be changes in your mortgage and title insurance. Of course, money doesn’t just grow on trees; but if it is truly the right time for you to refinance, then with the money you will be saving after 12 to 18 months, you should begin to feel like your money trees are in full bloom!
EXAMPLE OF SAVINGS FROM REFINANCING
From the table shown here, you see that refinancing to obtain a mere 1% decrease from 9% to 8% would show immediate savings. If refinance costs were approximately $2,000, the entire costs could be recouped in about 2½ years. The greater the spread between your current mortgage rate and your new rate, the greater your savings.
REFINANCING SAVINGS ON A $100,000 LOAN
Your present mortgage rate % 14 13.5 13 12.5 12 11.5 11 10.5 10 9.5 9 Current monthly payment $1,185 1,145 1,106 1,067 1,029 990 952 915 878 841 805 Monthly payment @ 8% $735 $735 $735 $735 $735 $735 $735 $735 $735 $735 $735 Monthly savings @ 8% $451 411 372 333 295 256 216 181 144 107 71 Annual savings @ 8% $5,412 4,932 4,464 3,996 3,540 3,072 2,616 2,172 1,728 1,284 852
8
What if I’m still not sure I should refinance?
If after reviewing this report you are still not sure whether you should refinance your home, it is time to call on someone specifically trained to help you interpret your individual mortgage situation. Our loan officers will meet with you at no cost to consider your refinancing needs. We are trained to take care of all those details for you, and we will gladly meet with you at your convenience to discuss your specific refinancing situation. This consultation is absolutely free, and there will be no obligations—no salespeople hounding you—if you decide this is not the right time for you to refinance. Remember that refinancing your home mortgage need not be a tedious, overwhelming task. Give us a call and let us show you just how quick and hassle-free creating increased cash flow through your home mortgage refinance can be!
Churchill Mortgage can assist you and make sure you avoid making costly mistakes in obtaining your financing. We underwrite and fund the majority of our loans in-house. What that means for you is that we have the opportunity and ability to offer a variety of methods in financing to fit every client’s needs. We hope that this information is useful to you in your pursuit to purchase, refinance or build the home of your dreams! We have learned that the best way to serve you is to think of ourselves as your Super Servant. You have our guarantee that we will carefully listen to your individual needs and work our hardest to get you the best deal around. We want to be your Personal Lender for Life!
For additional information concerning your mortgage needs, please contact:
Toll Free at 1-888-562-6200 or email us at [email protected] We look forward to serving you!
Exclusively Endorsed by Dave Ramsey:
Voted Favorite Mortgage Company by Readers of Parent Magazine:
9
