Residential Home Refinancing

Now is the time to improve your financial position in today's very low interest-rate market.

Mortgage Trust Group has been in the Mortgage and Loan business for 15 years, serving a variety of financial needs with a personal focus, and attention to detail that assures your financing and planning is a success.

Would Refinancing Be Worth It?

Refinancing can be worthwhile, but it does not make good financial sense for everyone. A general rule is that refinancing becomes worth your while if the current interest rate on your mortgage is at least two percentage points higher than the prevailing market rate. This figure is generally accepted as the safe margin when balancing the costs of refinancing a mortgage against the savings.

Refinancing can even make sense in some circumstances where your current interest rate is less than two points higher than the current rate. Refinancing can also help you draw money out of the value of your house for major life expenses. Many people use the large equity value of their houses to pay for home improvements, a second or vacation home, to buy investment properties, to pay for their own or a child's education or for vacations.

There are other considerations, too, such as how long you plan to stay in the house. Most sources say that it takes at least three years to realize fully the savings from a lower interest rate, given the costs of the refinancing. (Depending on your loan amount and the particular circumstances, however, you might choose to refinance a loan that is only 1.5 percentage points higher then the current rate. You may even find you could recoup the refinancing costs in a shorter time.)

Refinancing can be a good idea for homeowners who:

• Want to get out of a high interest rate loan to take advantage of lower rates. This is a good idea only if you intend to stay in the house long enough to make the additional fees worthwhile.
• Have an adjustable rate mortgage (ARM) and want a fixed-rate loan to have the certainty of knowing exactly what the mortgage payment will be for the life of the loan.
• Want to convert to an ARM with a lower interest rate or more protective features (such as a better rate and payment caps) than the ARM you currently have.
• Want to build up equity more quickly by converting to a loan with a shorter term.
• Want to draw on the equity built up in your house to get cash for a major purchase or for your children's education.

If you decide that a refinancing is not worth the costs, ask your lender whether you may be able to obtain all or some of the new terms you want by agreeing to a modification of your existing loan instead of a refinancing.

Should You Refinance Your ARM?

In deciding whether to refinance an ARM you should consider these questions:

Is the next interest rate adjustment on your existing loan likely to increase your monthly payments substantially? Will the new interest rate be two or three percentage points higher than the prevailing rates being offered for either fixed-rate loans or other ARMs?

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 a new ARM or fixed-rate enable you to pay your loan in full by the end of the term?

What Are The Costs of Refinancing?

A variety of activities are performed to complete the refinancing process. Most costs are simply added into the loan amount.

Application Fees

This charge imposed by your lender covers the initial costs of processing your loan request and checking your credit report.

Title Search and Title Insurance

This charge will cover the cost of examining the public record to confirm ownership of the real estate. It also covers the cost of a policy, usually issued by a title insurance company, that insures the policy holder in a specific amount for any loss caused by discrepancies in the title to the property. Be sure to ask the company carrying the present policy if it can re-issue your policy at a re-issue rate. You could save up to 70 percent of what it would cost you for a new policy.

Lender's Attorney's Review Fees

The lender will usually charge you for fees paid to the lawyer or company that conducts the closing for the lender. Settlements are conducted by lending institutions, title insurance companies, escrow companies, real estate brokers, and attorneys for the buyer and seller. In most situations, the person conducting the settlement is providing a service to the lender. You may want to retain your own attorney to represent you at all stages of the transaction, including settlement.

Loan Origination Fees and Discount Points

The origination fee is charged for the lender's work in evaluating and preparing your mortgage loan. Discount points are prepaid finance charges imposed by the lender at closing to increase the lender's yield beyond the stated interest rate on the mortgage note. One point equals one percent of the loan amount. For example, one point on a $75,000 loan would be $750. In some cases, the points you pay can be financed by adding them to the loan amount. The total number of points a lender charges will depend on market conditions and the interest rate to be charged. The expertise of the lender comes in handy to save you many thousands of dollars during the life of the loan.

Appraisal Fee

This fee pays for an appraisal which is a supportable and defensible estimate or opinion of the value of the property.