Q. Should I refinance?

If you’re in an adjustable rate mortgage, you may want to think about getting a fixed-rate mortgage.

Sometimes it makes sense to refinance. Sometimes it does not. It depends greatly on your individual situation and what your financial goals are. For instance, you may want to lower your interest rate and/or monthly payment, but you need to ask yourself some questions:

  • How long do you expect to be in your home?

  • How much equity do you have in your home?

  • Are you willing to pay points to get a lower rate?

  • Can you benefit from a lower mortgage payment and extremely easy refinancing with an FHA loan? Find out if you qualify for an FHA Streamline refinance by answering a few simple questions.

  • Will having lower payments more than make up for the closing costs, fees and points if any?

Q. Should I refinance from an adjustable rate to a fixed rate?

Generally, it’s a good idea to get the lowest fixed rate possible, but you also have to consider your situation. If you’re in the first year of an adjustable rate mortgage (ARM) and you plan on moving in three years, it probably doesn’t make sense for you to refinance. However, if the rate on your ARM is about to adjust and you think the rate will go up, then it may make sense to get a long-term fixed-rate mortgage, especially if you don’t plan on moving in the next seven years or so.

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 as what you pay on a mortgage where you don’t take cash out. There may be an incremental fee associated with a cash-out refinance loan depending on the specific loan you choose and the loan-to-value ratio. Using the equity in your home to pay off other bills can be a smart thing. Consider taking some money out to pay off high-interest credit cards bills, auto loans and any other debts you have that have non-tax-deductible interest. Please consult your tax advisor to find out whether you may be able to deduct the interest on your new loan.

Q. When should I “lock in” an interest rate?

Nobody can predict what interest rates will do. But historically, rates rise faster than they come down. So if you’re thinking about buying a home or refinancing your mortgage, lock in your rate now-you can always refinance later if rates drop again. Any near-future drop in interest rates may not be drastic enough to impact your monthly mortgage payment. Of course, every situation is different, so it’s important to consider all of your options.

Q. Should I pay points to get a lower rate?

Paying points may or may not be your best option, depending on what you’re doing. Points paid on a loan you’ve refinanced can be deducted from your taxes only in small increments-1/30th a year for a 30-year mortgage, for example. This means it could be several years before your lower rate makes up for the points you pay. However, if you’re buying a home, points paid are a tax-deductible expense for that year. Please consult your tax advisor.

Q. Are there really loans with no closing costs?

There are loans that truly have no closing costs. Sometimes lenders may not charge application fees and agree to pay the appraisal and title fees, but they mwill increase the interest rate in return. Lenders can also roll the costs into the amount of your loan. So, because you’re not paying costs up front, it’s called a “no closing cost” loan. While slightly increasing your mortgage might be acceptable to you, keep in mind that it’s not really a cost-free loan.

Q. How long does it take to refinance?

With All American Lending, refinancing normally takes between two and four weeks, depending on a few things:

  • Do you have a recent home appraisal?

  • Are you in an area that appraisers can get to easily?

  • Are there plenty of other comparable homes in your neighborhood?

Usually, getting the home appraisal is what slows the process down the most. During refinancing booms, appraisers can be difficult to schedule. Also, having your paperwork ready helps to speed the process along much faster.

Q. How much money will I need to bring to the closing?

A general guideline is that you’ll need two percent of the home’s purchase price for prepaid interest to cover the time between the date you close your loan and the date you make your first mortgage payment. Some states may also require pre-payment of property taxes . When refinancing however, your old mortgage will most likely have money in an escrow account that can cover these costs. Some borrowers get short-term loans while their escrow transfers back to them, but most pay the money at the closing knowing they’ll get it back when their escrow is returned.

Please call us with any questions 1-866-638-6363