Devil In The Details – ReMortgage
Author: Ryann Cairns
In the last few years with the economy in what seemed like it was going to be a perpetual recovery period, interest rates just kept dropping. So the temptation to refinance has remained strong. By refinancing your mortgage, you can drop your payment by $100-$200 plus your payment is affecting your equity so much better that’s it’s a smart move usually.
However, just as you and I are having that temptation, tens of thousands of others every day are rushing to cash in on the interest rates. We know they won’t last so we want to lock them in. Mortgage banks and credit providers are equally as eager to provide the service. But because of the rush to the market and the aggressive business going through these agencies, you have to be on guard to make sure mistakes either intentional or unintentional do not get made during the refinancing.
Mistakes can cost you money and the step of refinancing is about saving money. One study in disclosure and compliance reflected that up to three quarters of the loans being refinances are not in compliance with the Real Estate Settlement Procedures Act, in disclosing fees to customers of the lending institutions.
If you don’t know about the fees, you don’t know what you are paying for or if you ever got those services. You also don’t know about escrow or down payments that may be refundable when the process ends. If you don’t get those refunds when it’s all over, nobody will make that happen if you don’t.
It isn’t always a deliberate thing that such details get missed. The sheer glut of business can make that happen. There is a massive amount of clerical and technical detail to attend to plus the mortgage companies may be subcontracting out the work or bringing in temp workers who are not their most knowledgeable folks. So it’s up to us to watch their backs and make sure things get done right.
Stay in the Game – Most mortgage companies assume that you do not know what the processes are on a refinancing and or don’t want to know. They base that belief on how blindly most customers trust their system. So the first step is to let your agent know from the beginning to the end of the process that you DO want to know what is going on in the greatest detail possible.
So inform yourself of the legal terminology such as the Real Estate Settlement Procedures Act that we discussed earlier. Get a copy of this and other pertinent laws so you know what they are required to disclose and when. If you come to your first meeting armed to the teeth with this kind of detail, the mortgage company will know that they are not dealing with the routine customer who just applies for the loan and comes back for closing.
Come to each meeting with a check list of what needs to be done and build a calendar on when that is going to be done and by who. Get names, phone numbers and email addresses so you can follow up. The old principle of “the squeaky wheel gets the grease” will kick in and your loan not only will comply with the legalities, it will fly through so they don’t have to deal with your demands.
It sounds somewhat nosey but this is your loan, your finances and your money involved, you have a right to know what is happening. Patient – Professional – Persistent Now be prepared as you become that kind of “demanding customer” that you might catch some attitude from the clerical crew.
Be patient, professional but persistent. If the clerical people become resistant or hostile to your requests, have the chain of command ready to start working your way up to their boss until the compliance occurs. Your diligence will pay off when you are at the end of the process and you know no detail fell through the cracks. But don’t let down your guard at closing.
Remember that after closing there are numerous documents that will be processed and sent to you to keep you in compliance as well. Keep your lists going so you get everything you need to document this transaction and reference in the future. Also keep your calendar in force because there will be escrow funds released and other refunds that should be on a schedule.
If their due dates pass, begin following up. Finally, as you build you’re filing system, save your checklists and calendars. These will be helpful the next time you refinance and save you time and money as well. Why Now May Be the Right Time to Re-finance At one time in history when an individual purchased a home, they made a commitment to pay out that loan over the course of 15, 20 or 30 years and never gave another moment’s thought to trying to get a better deal on their mortgage.
In recent years, that trend has begun to change as an increasing number of homeowners are stopping to take a second look at their first mortgages and ask whether it would be possible to re-finance their home. The process of re-finance a home is basically obtaining a new mortgage, usually with better terms and using the proceeds from that loan to pay off the first mortgage. Usually, the re-finance is obtained from a completely different lender than the first mortgage.
There are circumstances when a homeowner may be able to work out a better deal on a re-fianance with their existing lender, so that is definitely an option worth looking into. Interest rates are, for the most part, lower now than when most homeowners purchased their home and obtained their first mortgage. Additionally, more banks and lending institutions are competing for the business of homeowners, which is driving down the cost of mortgages and compelling lenders to offer very attractive terms.
What all this means to homeowner is an opportunity to save some money. Two of the primary reasons homeowners generally wish to re-mortgage their homes is to either reduce their monthly mortgage payments or pay off the loan sooner. The first option can be accomplished through obtaining a new mortgage loan with a lower interest rate and retaining the same mortgage term length. This technique will drive down the cost of the monthly mortgage payment.Many homeowners who wish to free up some monthly income to take care of other expenses choose this option.
The second alternative occurs when a homeowner obtains a mortgage with a lower interest rate, but keeps their monthly mortgage payments at the same amount. In this scenario, more money is being paid toward the principle balance of the loan every month, which will result in paying off the loan sooner. The latter can be very beneficial for individuals who would like to retire early, purchase a second or holiday home or who are looking at financing a child’s education.
Another reason an increasing number of homeowners are choosing now to re-fianance is the ability to tap into the equity built into their home. During the course of a mortgage, every payment made on the loan raises the equity by reducing the principle of the loan. If the home is located in an area where property values are on the rise, or if a homeowner makes home improvements following the purchase of the property, the equity value can be even greater.
Homeowners who find the need to raise money are realizing that one of the best and easiest ways to accomplish this is by re-fianancing their home. This type of cash out option allows homeowners to get cash in hand for a variety of options, however the most popular include the purchase of a new car, funding a vacation or holiday, financing the cost of home improvements or paying for major expenses such as medical bills and education costs.
Another common reason people choose a cash out option when they re-fianance is to pay off debts. When the homeowner re-fianance their loan in order to tap into the equity they have built up, the new loan will essentially be for the new appraised value of the home. It is possible in some situations, however for a homeowner to be able to obtain cash from the equity in their home as well as save on their monthly mortgage payments or pay off the loan sooner than would have occurred with the first loan.
Whatever the reason a homeowner has for wanting to re-fianance their home, there are a multitude of attractive mortgage deals available on the market today. Lenders are quite motivated to offer the best terms possible to homeowners in order to snag their business. Homeowners with good credit may find they are in a position to choose between re-fianance offers from lenders and financial institutions. In that situation, the best advice for a homeowner is to shop around, compare annual percentage rates as well as loan terms and take the time to compare all of the terms of each loan to one another. In today’s competitive market there is usually a re-fianance deal to suit a homeowner’s needs.