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house refi

Refinancing your mortgage can drastically lower your monthly payments, especially since rates are still very low. The decision to refinance should be an easy one, right? Not so quick.

Refinancing isn’t for everyone or every financial situation. Here are five times you should hold off on refinancing your mortgage:

  1. You Don’t Plan on Staying in the House

If you plan on selling your home in the next five years, then hold off on refinancing it. The move will likely only waste your time and money. Selling too soon after refinancing means you won’t live in your home long enough to capture the savings benefits of lower rates. Plus, you’ll still owe any fees associated with the new loan.

We made the mistake of refinancing our other home from a 30-year mortgage to a 15-year mortgage. Our broker had talked us into it, saying it was a smart option. It wasn’t. The decision to refinance ended up costing us more initially and monthly, especially since we sold our home just nine months later.

  1. The Savings Don’t Add Up

The reason why many individuals choose to refinance their mortgage is that they want to get a lower interest rate. Before you jump on the refinance wagon, do a little bit of calculating. Find out how much the refinance will truly cost you compared to how much it will save.

Also, realize that a refinance can add years to your loan. Don’t automatically believe that you are benefiting from lower monthly payments if your loan has been extended an additional five years.

  1. You Are Trying to Pay Off Your Loan Sooner

As I mentioned before, we refinanced our home to a 15-year loan because we wanted to pay off our mortgage faster. On paper, the numbers made sense, and the change was only going to cost us an extra $300 a month, which seemed doable. However, it would have been better for us to keep the 30-year loan and make the extra payments on our own terms. This would have given us more wiggle room in our budget for unexpected costs.

  1. You Are Switching to an adjustable-rate mortgage

Adjustable rate mortgage (ARM) rates are tempting to jump on, especially since they guarantee a low rate for a certain amount of time. However, interest rates eventually will go up. It’s just the ebb and flow of the economy.

With an ARM, you will pay more of the principal faster, which is nice, but you better be prepared to pay higher payments when the rates go up.

  1. You Aren’t in the Right Position to Finance

If for some reason your home has dropped in value, refinancing your home can tack on extra costs, such as private mortgage insurance. Borrowers with small down payments — or refinances with little equity — have to pay PMI until their equity reaches 20% of the home’s value. For example, if you bought your house for $250,000, paid off $30,000 of it, but the value of your house dropped to $225,000, you would have very little equity in the home and in most cases have to pay for PMI.

Another thing to consider before you refinance is your credit score and job history. If your score has dropped even just a little, you could miss out on qualifying for the lowest rates, which would make the whole refinance process not worth it. Also, if you recently switched career fields, i.e. going from a teacher to a computer system administrator, your pay might be higher, but your duration of employment might make you ineligible for a refinance.

Refinancing is a good choice if it means you can ditch annoying PMI fees and score a lower interest rate. However, a refinance is not for everyone, so be sure to crunch the numbers first.

refinance

Even though we as a company counsel our clients never to take interest rates into consideration when obtaining a mortgage, we understand it is a hot button issue, as well as potentially cost saving.  That said, your mortgage is a financial plan, not an interest rate.  To that end, let’s dive into the “math” of when it makes sense to refinance in regards to rate:

Homeowners who can lower their mortgage rate by 1 percent or more are generally in a great position to refinance.

But what if you can only lower your rate by 0.5 percent — or even 0.25 percent?

The answer might be yes, especially if you can get the lender to cover your closing costs and still generate savings.

The “right” amount to lower your mortgage rate is not set in stone. It depends on your refinance goals and how much you want to pay upfront to get your rate as low as possible. 

Is it worth refinancing for 1 percent? 

Refinancing for a 1 percent lower rate is often worth it. One percent is a significant rate drop and will generate meaningful monthly savings in most cases.

For example, dropping your rate 1 percent — from 3.75% to 2.75% — could save you $250 per month on a $250,000 loan. That’s nearly a 20% reduction in your monthly mortgage payment.

Those monthly savings can be put toward daily living expenses, emergency funds, investments, or paid back into your mortgage to pay the loan off early and save you even more in interest.

Refinancing for a 1 percent lower rate:

Refinancing for a 1 percent lower rate:

Keep in mind, “breaking even” with your closing costs isn’t the only way to determine if a refinance is worth it.

A homeowner who plans to move or refinance again before the break-even point might opt for a no-closing-cost refinance.

No-closing-cost refinancing

A no-closing-cost refi typically means the lender covers part or all of your closing costs, and you pay a slightly higher interest rate.

Accepting a higher rate will eat into your monthly savings. But if you can avoid closing costs and still save month-to-month, there’s no break-even point to worry about.

It’s often a win-win situation for borrowers who only plan to keep their new loan a few years.

Another option could be rolling the closing costs into your new loan.

This will increase your principal balance and total interest paid. But if you’re going to keep the loan for more than a few years, rolling closing costs into the loan amount may be more affordable than accepting a no-closing-cost loan with a higher interest rate.

Is it worth refinancing for 0.5 percent?

There are two common scenarios where refinancing for 0.5 percent could be worth it:

  • If you’ll keep the new loan long enough to recoup closing costs
  • OR, if you can get the lender to cover your closing costs

First, let’s look at a break-even scenario:

Remember, the less your rate drops, the less you save each month. So it takes longer to recoup your closing costs and start seeing “real” benefits.

For example, dropping your rate 0.5 percent — from 3.75% to 3.25% — could save you about $150 per month on a $300,000 home loan.

That’s a decent monthly savings, but it will likely take you over 3 years to break-even with closing costs. So you want to be sure you’ll keep the refinanced loan for at least that long.  

Refinancing for 0.5 percent — break-even method:

Refinancing for 0.5 percent — break-even method

When is it worth it to refinance? 

How much lower you can get your interest rate isn’t the only thing you should consider before refinancing. 

The overall benefits, of course, can be huge. 

A lower interest rate means you’ll have smaller monthly mortgage payments. And it often means you’ll save thousands (maybe tens of thousands) by the time your loan is paid off.

But you have to weigh those savings against the inherent downsides of refinancing: 

  • You have to pay closing costs, which are typically 2-5% of the new loan amount 
  • You restart your loan term from the beginning, usually for another 30 or 15 years
  • If your new interest rate isn’t low enough, you might actually pay more interest in the long run because you pay it for a longer time

Plus, most people don’t actually stay in their homes long enough to pay their mortgages off. 

So, you should make sure the savings you calculate are realistic, and based on the amount of time you plan to keep your mortgage. 

This is all to say that the numbers in this article are only examples — use them as guidance, but of course make sure your refinance decision is based on your own loan details and financial goals. 

Mortgage refinance

There are many reasons to refinance your mortgage, some obvious and some a bit more obscure and/or different.

I figured I’d compile a list of the many reasons I can think of to refinance.

Some of the situations are complete opposites of one another and will depend on your unique financial goals and/or risk appetite.

But most will be appealing at times when interest rates are low, as they are now.

1. To get a lower interest rate

This one is the no-brainer that everyone will agree on. If you want a lower interest rate, then refinancing is the way to go, assuming mortgage rates are lower now than when you took out your original mortgage.

The classic rate and term refinance allows homeowners to reduce their interest rate so they can enjoy a lower monthly payment.

The potential downside to this is resetting the clock on your mortgage, though you can also go with a shorter term at the same time to avoid that, and save HUGE money over the term.

2. Because your borrower profile has improved

Another reason to refinance has to do with your unique borrower profile.

Say you improved your FICO scores over the past year and cleaned up some other negative stuff. Or perhaps your home value increased enough to push your LTV into a lower tier.

If your borrowing profile has improved significantly since you first took out your mortgage, you might be entitled to a much lower interest rate than what you previously qualified for.

This could be a good time to inquire about a refinance to save some money each month.

3. To change loan products (FHA to conventional)

It could also be that you started out with a loan product you weren’t too fond of because it was the only way to qualify.

But now that you’re a better borrower with more home equity, you’ve got more options to choose from.

Instead of paying mortgage insurance for life on an FHA loan, you can refinance your mortgage into a conventional loan instead, thereby removing the lifetime PMI and potentially snagging a lower interest rate at the same time.

4. To reduce the loan term

Then we’ve got the folks who want to aggressively pay down their mortgages, or at least not pay them down at a snail’s pace.

If this is you, there is a huge benefit to refinancing from a 30-year fixed into a shorter term loan such as the 15-year fixed.

These shorter term mortgages also come with lower interest rates so you can pay your mortgage off a lot faster without potentially breaking the bank, depending on the rate you had and where rates are today.

5. To increase the loan term

The exact opposite group might refinance to extend their loan term, which will cost them a lot more in interest but save them in monthly payment.

Not everyone wants to pay down their mortgage in three years, and for some it’s very difficult to make large monthly payments.

Perhaps a change in circumstance means a 30-year term is more sustainable moving forward.

6. To switch to a fixed-rate mortgage

We’ll put this in the common reasons to refinance. Just about everyone will suggest that you refinance out of an ARM and into a fixed mortgage if you think rates are rising.

The same is true if your hybrid ARM that was fixed for X amount of years is about to hit its first rate adjustment.

To avoid the costly rate reset you can move to a FRM before that happens. And with rates so low today, you might even get a lower fixed rate than what you had on your ARM.

7. To go adjustable instead

Of course, things also move the other way. It’s entirely possible to switch from a boring old 30-year fixed mortgage to an ARM if you want some payment relief, or simply feel you’re overpaying.

It’s also possible to refinance out of one ARM and into another ARM to not only obtain a new (hopefully lower) rate but also restart your fixed-rate period on the new ARM.

Plenty of wealthy individuals move from ARM to ARM to take advantage of cheap short-term rates while they put their money to work elsewhere.

8. To Go fully-amortized

Another common scenario might be a borrower with an interest-only mortgage who is facing a recast. The interest-only period typically only lasts 10 years before the mortgage must be paid back in full.

To avoid a steep monthly payment increase, a homeowner might opt to refinance out of the interest-only product and into something fully-amortizing. Or perhaps even another interest-only product to extend that benefit.

9. To go interest-only

Conversely, a borrower sitting on a lot of home equity might decide it’s time to make interest-only payments to improve monthly cash flow.

This can also free up cash for other expenditures or investments the homeowner may be looking at.

After all, you don’t always want all your eggs in one basket if you’ve already got a ton of them in your house.

10. To get cash

Speaking of cash flow, you might refinance simply to get cash out of your home.

The age-old cash out refinance is a great way to free up your home equity and put it to work.

Perhaps you want to make some home improvements, or buy a second home or an investment property. Maybe you want to diversify and move your cash out of your home and into the stock market instead.

11. To buy someone out

In certain situations, you may need/want to add or remove someone from title and/or the mortgage. If this is the case, a refinance can be an appropriate vehicle to do.

Maybe there was a divorce and you’re buying someone out. Or maybe you’re ready to fly solo and remove mom and dad as co-signers.

Again, this could be a good time to snag a lower interest rate and/or make a loan product change too.

12. To protect your investment

You might also refinance to tap into some of the equity you’ve gained over the years. Home values are known to seesaw over time and it could be a good opportunity now to get some of that cash for the future.

It doesn’t hurt to put aside some dry powder, especially when interest rates are low. And if you can do so while home values are high and your property is owner-occupied, that cash can be put to work elsewhere. Diversify.

13. To drop PMI

I spoke about switching loan products to drop mortgage insurance, but you can also dump private mortgage insurance by refinancing if you’ve got a low enough LTV.

If your home increased in value and/or you paid it down enough to ditch the PMI, a refinance might save you a lot of money via both a lower interest rate and from the absence of said PMI. It’s a one-two punch!

14. To apply a lump sum to lower your LTV

Similarly, you might have come across some money recently and as such have the ability to take a big chunk out of your mortgage balance.

If you’re one of those people who likes to pay down the mortgage as quickly as possible, applying a lump sum to lower the balance (and the LTV) will lead to a lower monthly payment, assuming you refinance (or recast).

A lower interest rate and/or shorter loan term could apply here as well to really speed up the loan payoff.

15. To consolidate multiple mortgages

Here’s a classic reason to refinance. You’ve got multiple mortgages (hopefully just two) and want to consolidate them into a single loan.

A refinance is often a great way to accomplish this, especially if you wind up with a lower interest rate to boot.

Many second mortgages have sky-high interest rates or are adjustable (hello HELOC), so this can be a conservative money-saving move.

16. To consolidate other debt

Another typical reason to refinance is to consolidate other non-mortgage debt, such as credit cards and other higher-APR debt.

Mortgages tend to have the lowest interest rates around, and they allow you to pay the debt very slowly, which makes it easier to manage.

Just be careful not to go on a spending spree because you still haven’t paid off the old debt, you’ve merely transferred it.

Best place to start?  Use a calculator so you can see for yourself the power of a refinance.  Go here and see the money you can save and financial goal you can achieve: <CLICK HERE>

Mortgage Interest Rates

The elements of understanding a mortgage seem simple enough.  Your home, rate, term, taxes, insurance, and appreciation; with the primary focus being typically on the interest rate.  However, what if we said your attention shouldn’t be on the interest rate?

There never seems to be other elements of a mortgage transaction that people talk about more than the interest rate.  People are extremely fixated on this number.  Yet, what history shows is that the “interest rate may be the most irrelevant piece of the mortgage transaction.”

Mortgage Let’s Get Back to Basics

There are many stages to a mortgage.  They coincide neatly with the many stages of your life.  First-time homebuyers the focus 95% of the time, is “Can I afford the payment?”  Later stage homeowner, it is “Am I building equity in my home?” However, payment and interest rate are often secondary in the true cost of a home.  Today’s borrowers when looking to refinance need to understand the cost of their home.  There is a cost and scenario that very few understand.  However it is the simplest practice that anyone can do to understand cost.

Understanding Your Mortgage Cost Interest Rate?

Let’s keep it simple. We’ll use some simple math to truly understand your mortgage cost or your home cost:

EXAMPLE

$350,000 Mortgage Amount

5.5% Interest Rate

30 Year Term

$1987.26 Principal and interest payment.  This excludes taxes and insurance.

(PLEASE NOTE THIS IS JUST FOR ILLUSTRATION PURPOSES)

That is the cost of your house, correct?  Nope. You have forgotten the most critical step in the process.  See below:

You now take $1987.26 and multiply that by 360 = $715,413.26

That is the cost of your home in mortgage amount and interest payments!  That is more than double the original cost of the home.

However, there is good news…

You have more options than the normal “go-to” terms and conditions.  You have the ability in a refinance to pick the best financial options that make sense for you and your situation.  While a mortgage should be about payment for most, a proper mortgage and proper refinance can do more than that.

EXAMPLE:

$350,000 Mortgage Amount on Refinance

2.99% Interest Rate

15 Year Term

$2415.35 Monthly Payment excluding taxes and insurance.

(PLEASE NOTE THIS IS JUST FOR ILLUSTRATION PURPOSES)

Now, let’s do the math and see what the cost of your home is now?  Take $2415.35 and multiply by 180, the total number of your payments.  That equals $434,763.00

Real world numbers for you:  $280,650.26.  That is real money savings.  Actual dollars, that you work for, that are saved — and almost $300,000 dollars at that!  You may ask, “I am paying slightly more per month!”  That is 100% correct. Your net savings in actual money coming from your checking account at some point is $190,650.26.

Want to see how it works for yourself?: <CLICK HERE>

Understanding Your Mortgage: Why We Shouldn’t Pay Attention to Interest Rates

The above was a crude example to get you to focus on the fact that the cost of a mortgage is not all about the interest rate and payment.  When doing a refinance, you don’t have to be conditioned to “accept” terms of 30 years.  

Truly understanding your mortgage is seeing what in real dollars you are paying today, 5 years from now, 11 years from now and beyond.  That way, you have a plan for putting significant money back in your pocket for retirement, a college fund, and so on.  What would it look like to be debt-free or mortgage-free in 15 years?  Understanding your mortgage is about understanding your options.

Refinance Your Mortgage

For many homeowners that purchased or even refinanced their home about 2 to 3 years ago, thinking they cannot be a part of this refinance boom, are wrong!

Median home-sale price reaches an all-time high of $335,613!

What does this mean to you and me, those that are not selling their home?  Our home has increased in value, possibly to an all-time high!  With that, regardless if you refinanced 24, 36, or even 18 months ago, chances are you have more options than you ever thought possible.

So what do you do with this “found money,” or equity?  Here are a few things homeowners ages 24 to 84 are doing right now:

  1. First, they are solidifying their financial plan.  They are asking themselves, what will an infusion of cash mean to their finances?  What can or will they accomplish by refinancing their home?
  2. How much in consumer debt do they owe?  Outside of your mortgage, the average American household has over $35,000 in consumer debt.  $35,000 and rising.  The cycle of consumer credit cards is never-ending.  Personal loans at the touch of your iPhone.  Debt is increasing: what is your plan? 
  3. End of a mortgage.  The end of your mortgage for many seems too far off in the distance.  However, with rates still at historical lows, this is your chance to lock in a 15-year and save $100,000+.
  4. 2020 taught us we cannot just be employed.  Being an entrepreneur or a gig worker offers greater advantages than any job.  Now is the time to look at your financial plan, your home, and say I am ready to take the next step as an entrepreneur and open that storefront.  Expand your business.  Your home can make that happen.
  5. Ignore the hyperbole of politicians.  If you are waiting to have your student debt eliminated, do it yourself.  Take advantage of the equity in your home and pay off the massive student loan burden that you may be sitting on.
  6. Retirement.  Your home is the ultimate cash flow tool.  No, not a reverse mortgage, but the cash in your home that can supplement your income or healthcare needs post-retirement.
  7. Uncertainty.  Remember, markets come and go.  Rates come and go.  Cash has always been and will always be king.  When you have access to the cheapest money in the last 50 years, take advantage of it!

These seven are that just seven plans to use your home as a financial tool.  In other words, it’s what people call a smart money homeowner.  There are hundreds. You may never see a time like this again, or rates like this again.  Your financial situation quite possibly 20 years down the road will be shaped by the action you take today! Let get a plan together here: https://refi.com

Refinance Your Mortgage

If 2020 taught us anything, even the most “secure” companies and industries are laying people off.  Those left behind regardless of position have been asked to do 2x or 3x as much with the same compensation.  Maybe now, you have the itch to do your own thing!

Smart Debt?

Debt without question is a natural course of doing business or being an entrepreneur.  Just like our personal lives, there is good debt vs. bad debt.  Let’s break it down:

  1. Credit card balances and cash advances:  No, never.
  2. Kabbage:  This service will lend based on accounts receivable. There are lengthy costs associated with it.
  3. Factoring:  Same concept as above, but even more expensive.
  4. Loan against 401k:  No, no, no.  Did we mention NO!
  5. Title loan on your car:  32% interest (varying by state) is a no-win situation.
  6. Borrowing from friends and family:  Only a good idea if you never want to talk with them again.
  7. SBA loan:  Sounds simple on paper.  In reality, it is very difficult to get.  You have to not “need” the loan to get it.

The above are perfect examples, and yet still more exist. Another risk is using the wrong assets to start your business.

Should I or Shouldn’t I?

Good debt, or smart debt, is about managing your risk and money. It is about taking the pressure off your business to have the ability to pay you immediately.  It allows you to have a low-interest rate and a long term that can be tax-deductible.  Good debt?  That is your home.

People would say never put your home on the line!  Well, the reality is your home is always on the line.  Whether you utilize smart debt, good debt, or refinance.  

Here are a couple of ways you can utilize a refinance:

  1. Your ability to pay off all your debt to a single payment.  Savings of a hundred, maybe even a thousand plus per month.
  2. Securing your best asset (your home) to the lowest possible payment with cash out!
  3. Keep your cash in the bank.  Let’s say you have $40,000 in savings and $40,000 in available equity.  Cash is king, keep that in your bank balance.  Borrow $40,000 in the form of a refinance to start and run your business.

Experts are experts.  There is smart risk vs high risk.  There is smart debt vs bad debt.  Refinancing your home for rate and term or cash out is the most powerful business tool you have (outside of yourself).  Use good debt smart debt to build your business and your dreams.

 

Refinance Your Mortgage

Most people don’t realize what an important financial step refinancing is. Circumstances change, and mortgages should too. If you’re wondering whether or not you’re a good candidate, here are some of the top reasons why refinancing could be right for you:

  • Your mortgage interest rate is higher than the current market interest rate.
  • You have other debt you need to reduce; such as credit cards & student loans.
  • You’re planning to stay in your home for several years.
  • You want to make home improvements.
  • You want to pay off your mortgage sooner — going from 30 to 15 in your term.
  • You have college tuition to pay.
  • You have an adjustable-rate mortgage and you want to lock in a fixed rate.
  • Your credit score has improved.

Whether you’re looking to get a better interest rate or take equity out of your home for renovations, we’ve put together a step-by-step guide on why you should refinance and how to do it.

Why Refinance?  Let’s Run Through the Top Reasons!

Your life changes and your mortgage should change with it. Whether you’re moving, staying put, have a lot of expenses, or experience a change in finances, making sure your home loan is keeping up with you is of the utmost importance. Your mortgage should always be your financial tool. It should always accomplish more than a roof over your head. 

Here are the most common reasons homeowners choose to refinance:

Your Mortgage Interest Rate Is Higher than the Current Market Interest Rate

Even a small reduction in your interest rate could save you a lot of money in the long run. A refinance can help you ensure you’re getting the lowest interest rate possible. The result? More money in your pocket, for you and your family.

You’re Planning to Stay in Your Home (This Matters)

There’s no better time than right now to evaluate the type of home loan you have. When you know you’re living in your current home for several years, refinancing is a great step toward setting long-term goals.

You Want to Pay Off Your Mortgage Sooner

When rates fall, you could refinance to a lower rate and a shorter term, helping you pay off your mortgage sooner.  You should never just default to a 30-year term.  You have options as aggressive as your finances and your goals.  What does your life look like at the end of your mortgage?

You Have an Adjustable Rate Mortgage and You Want to Lock In a Fixed Rate

If your payments are already fluctuating, it is time for a fixed-rate mortgage.  It will keep your payments steady. Your rate will stay constant in a rising-rate environment. Believe it or not, rates will rise!  It may be time to lock in for long term stability.

You Have Other Debt You Need to Reduce (Most Common!)

Do you have credit card debt, student loans, or any other high-interest debt? Non-Tax Deductible Debt? A cash-out refinance could help you reduce or eliminate your debt. Debt consolidation is one of the most popular reasons people refinance. 

It is all about the cost of money. When mortgage money is this low, you have to take advantage of today’s rates or cost of money.  Why pay a high interest rate, no tax deductibility, and lower your credit score?  Plus, you are paying more monthly.

You Want to Make Home Improvements

Would your home benefit from a new kitchen, new windows or an addition? A cash-out refinance is one of the most affordable ways you can fund home improvements.  Equity is power and the ability to create additional equity is driving long term value regardless of market conditions.  Especially if you are planning to stay long term.

You Have College Tuition to Pay

Refinancing with a cash-out option can help you or your loved ones reach their educational goals as well. Whether you’re returning to school or you’re paying for your child’s college tuition, refinancing could help make it happen. Student loans can be debilitating for your child; there is a better alternative.  This is often the second biggest expense in your lifetime!

Your Credit Score Has Improved

If you’ve worked hard to improve your financial situation by paying off credit accounts that were weighing down your score, it’s time to call your Home Loan Expert. You could qualify for a much lower interest rate if your score has substantially improved.  Credit score matters. If you paid the price to get into the home, it is now time to take advantage of “A” credit interest rates.  Why continue to overpay on your single biggest bill!

Refinance your mortgage

If you run your own business (25% or more), are a gig worker or a independent contractor — and you want to refinance, it could be more challenging for you to secure financing. It can be harder to prove how much income you have without a steady paycheck or W-2. That’s why most lenders have stricter rules for self-employed borrowers.

Is it difficult to get a mortgage when self-employed?

It’s a common misconception that it’s always more difficult for self-employed applicants to get a loan than regular salaried or hourly workers with a W-2 from their employer.

In all cases, the basic criteria to get approved are the same: You need to have a good credit history, sufficient liquid available assets and a history of stable employment.

Challenges can crop up, however, if you’ve only been working for yourself for a short time or make less money than lenders prefer.  Self-employed borrowers often take full advantage of the legal tax deductions and write-offs that are allowed by the IRS; unfortunately, this means that they often show a low net income — or even a loss — on their tax returns. That can make it tougher to qualify for a mortgage. You need to work closely with your CPA to ensure he or she knows you are looking to refinance your mortgage.  That you need to have tax returns and financial statements that show the strength of your income and business.

The self-employed mortgage has been changing.  Before the 2008 housing crisis, this would’ve been less of a problem. Loans that required no documentation or stated income were readily available to borrowers. Today, lenders scrutinize income and other qualifications more thoroughly, particularly in the last number of months due to the coronavirus downturn. This means documentation is king!

Here is where you are focused:

  • Two years of federal income tax returns (personal and business).
  • Recent business bank statements.
  • A year-to-date profit-and-loss statement that shows revenues, expenses and net income.
  • A copy of your business license.
  • A letter from a CPA verifying that you’ve been in business for at least two years.
  • Your credit score and credit history, focusing on ensuring this is tight and right.
  • Always make sure you separate business and personal expenses.
  • In preparing for a refinance, steer clear of expensive business loans you personally guarantee. IE. Kabbage or receivable financing companies.

Work with an experienced loan officer who understands self-employed business records and documentation.  This person can help you present your business earnings and liabilities in a clear and understandable way that facilitates the approval process.

Table with wooden houses, calculator, coins, magnifying glass with the word Loan agreement. The contract for the purchase of a house or apartment on credit. Loan for property and real estate. Flat lay

The origin of words can be fascinating and at times ominous. That is why the word mortgage is intriguing! 

“Word nerds will notice an eerie root word in ‘mortgage’ — ‘mort,’ or ‘death,’” Weller writes. “The term comes from Old French, and Latin before that, to literally mean ‘death pledge.’”

For many US homeowners that is the case.  They believe that getting a mortgage, something that they are pledging 29% or more of their gross monthly income, is a life sentence.  At refi.com we look at things a bit differently.  We ask a simple question:

“What does the end of your loan look like?”

Smart money homeowners are asking this question.  Why?  Simple: a mortgage is not a means to an end in terms of homeownership, it is a vehicle in which to achieve financial goals.  So, what does the end of your loan look like?

In the current economic environment, people are looking at the cost of money and their financial picture a bit differently:

  • Does it make sense to refinance and add tax-deductible years to your mortgage to pay off debt to maximize cash flow?
  • Is it time to trim off 15+ years off your mortgage, because the current rate environment allows you to refinance to a 15 year or 10 year loan?
  • Is it time to refinance to ensure you have liquidity for college tuition?
  • Want to start a business?  If you can get a business loan, they typically range 10%+. Use your most important asset (your home) to your advantage.

Take scenario one as an example:  What if in 5, 10, 15 years you could receive a 30% increase in your income?  What would that do for you or your family?  What could that do for retirement?  When you no longer have to pledge a huge amount of your monthly income to a mortgage, cash flow increases 10 fold!

You are NOT pleading until death 30% of your money to a mortgage company or bank.  The end of your loan is within your sight.  Today’s rates are allowing you to see the future, and it could be mortgage free!

Let’s have a conversation today about what the end of your loan will look like: https://refi.com/endofloan

Refinancing

FHA Mortgage Insurance Might Get Cheaper This Year

Many insiders are confidently predicting a big cut in the Federal Housing Administration’s (FHA’s) annual mortgage insurance rates.

FHA borrowers currently pay 0.85% annually in mortgage insurance premiums (MIP). That’s $1,700 per year, or $140 per month, on a $200,000 mortgage.

So it’s no wonder a possible MIP rate cut is big news. It could help new home buyers and refinancing homeowners save big on their housing payments. Real dollars in your pocket savings, prior to any debt consolidation in your refinance!

What an MIP Reduction Could Mean For You 

There’s good news and bad news.

The bad news is that if you already have an FHA loan if and when the reduction takes effect, you won’t see any savings. You would have to refinance into a new FHA loan to see the reduction.

The good news is that if you haven’t applied for an FHA loan yet if/when the cut is announced, you can likely take advantage of the new, lower fees.

But just how much would home buyers and refinancers stand to save? A 25-basis-point reduction means MIP rates would fall by 0.25%. So, you’d be paying 0.6% of your loan balance each year instead of the 0.85% that nearly all FHA borrowers now pay now. These mortgage insurance rates are calculated annually but charged monthly.

Example: 0.25% MIP rate cut

Let’s say you plan to borrow $200,000 with an FHA loan. Your MIP rate at current levels would be 0.85%, making an annual charge of $1,700 — or $140 per month.

Now let’s assume the new MIP rate falls to 0.6%.

Your annual charge tumbles to $1,200. And your new monthly MIP cost would be exactly $100 per month. That’s a saving of $500 a year, which few of us would sneeze at. But there’s a possibility that the savings could be even bigger!

Example: 0.50% MIP rate cut

American Banker wondered whether the Biden administration might “potentially go even further.”

So how does the math work if annual MIP rates were to be cut a little more — to 0.5%? Assuming the same $200,000 loan, a 0.5% rate would reduce the annual payment to $1,000. And that would make the monthly payment just $83 versus $140 per month at current levels. That would save you $700 a year over your current payment.

Refinance Considerations

If and when this occurs, how do you get the current FHA mortgage benefit? Simple, a full refinance.  In most cases, it’s time.  Rates, current financial conditions (debt), and the length you have had your current mortgage means it is time for a mortgage overview and financial checkup!