Weighing the Opportunity Cost of a Refinance
There are many types of mortgage loans that are used to refinance an existing mortgage. On this page we have broken down the many categories of refinances so that you are able to identify which is the best for you. Before we ever pull credit we send you a detailed estimate about your loan that we will review together and make sure that we are on the same page.
Rate Term Refinances– The majority of the Refinances that we help with here at DHL Mortgage are rate term refinances. “Even lowering your payment a few hundred dollars has a dramatic impact on the total interest paid over the life of the loan.” Anyone who has a mortgage with mortgage insurance should look at doing a rate term refinance about two years after you purchase your home. If you take a savings of $200 over 30 years it really begins to add up. If you take your savings and apply it as a principal payment that will knock years off of future mortgage payments. Let us do the math! Call or email for a free estimate. During every refinance there are a few nice things that happen.
1.) First we lower your payment and save you money or maybe we consolidate debt or do a home improvement. All good.
2.) Second you will skip a month’s mortgage payment. Sometimes we can skip two if we time your closing around the first of the month. (Ask us about this)
3.) Third, you will get your old escrow money back in about 2-3 weeks after closing. The escrow money is your money that was set aside for taxes and insurance. So between missing one or two payments and getting your old escrow money back , that can be quite a boost to your monthly cash flow.
Whenever we look at a Refinance we will do a breakeven analysis to see how long before the loan pays for itself
1.) When ever we look at a refinance we do a break even analysis to determine how long before the loan pays for itself. Not even considering the month without a payment and your old escrow money back we will divide the monthly payment into the closing costs. This number should be anywhere from 12 months to 48 months.
2.) Whenever we look at a new loan we create an amortization schedule of the old loan and an amortization schedule of the new loan. This will show the power of interest and the huge amount of accumulated interest you save over time.
Cash Out Refinances– A Cash Out Refinance mortgage is where we pull equity from your home toeither do a home improvement or consolidate debts. Quite often younger borrowers who are still improving in their work situation but have the demands of life will rely on a cash out refinance to wipe away credit card debt or perhaps pay for a new A/C.
Reverse Mortgage Cash Out Refinance– A reverse mortgage is an excellent mortgage for seniors who have had a lifetime of building equity and now wish to rely on their home to make life a little nicer. With a reverse mortgage you remain on title and will be able to eliminate your monthly mortgage payment and even receive a monthly tenure payment for life. You can also do things like take a lump sum or do a home improvement. When the borrower passes away the home is sold and the proceeds are passed on to the family.
Cash Out Refinance 203K mortgage-A 203K mortgage is a FHA loan that allows for home improvements to a any single family residence. There is a streamline 203K that allows for $35,000 in repairs and there is a larger version of this loan that allows for more money. FHA guidelines apply.
Refinancing a spouse off a deed– About 10% of all refinances are when couples divorce and one spouse retains the home and the other is moving out. We will do the loan with only one borrower on the loan. If the couples are already divorced then most likely the court decree will allow up to one year for the spouse remaining to do this. If the couple is still married the spouse leaving will have to acknowledge the transaction by signing the mortgage but he or she will not be on the deed which is the obligation to the lender.
Delayed Financing– Delayed Financing is a cash out loan mortgage that is becoming more popular these days. Some homeowners, if they are able, will pay cash for the home and get a loan on the house after they move in. We will need to show source of funds on how you purchased the home, just like a purchase but the pricing is considered a cash out refinance.