Utah Mortgage Refinance
One of the most commonly asked questions by homeowners has to do with refinancing the home in Utah. While the answers to this question might seem at times to be obvious, there is often a little more to evaluating the numbers than to simply go with a rule of thumb buzz that may be floating out there. Utah mortgage refinance advertisements tout no cost mortgage refinances as the best thing since sliced bread, or focus entirely on interest rate without discussing the closing costs and possible buy down points. So how do you determine if a refinance is good for you?
First, lets review the pros and cons of the no cost refinance. Regardless of claims made via advertisements or any other medium, a no cost mortgage refinance may be your most expensive option. The reason for this is that you always pay a higher interest rate in exchange for not paying closing costs. Some mortgage companies push the no cost refinance because the advertisement is easy to explain. In the background however is a slew of numbers that are crunched to make these loans work. Basically speaking, mortgage companies are paid by the lender- even if that lender is itself- based on the interest rate charged. The higher the rate, the more the lender is paid in yield spread and service release premiums. Some lenders take that added money and use it to cover your closing costs. As a result, these mortgages are good for short term mortgages. If you plan on moving inside a year or two it may be an excellent option. If you plan on staying more than 2-3 years you will usually pay more in interest on these loans than you would have paid in closing costs on a regular Utah mortgage refinance.
Secondly, lets tackle the “don’t refinance unless you save 1%” rule. Many professional and amateur financial experts use the reduction in interest rate thumb rule as a general recommendation for the masses. The problem with this rule of thumb is that the savings you get is often related to the loan size you have. All mortgages have fixed closing costs that have to be covered, regardless of loan size. These costs include the appraisal, underwriting and credit report fees, including other title charges and so forth. As a result, the smaller the loan size the greater the reduction in interest rate needs to be in order for you to make your closing costs profitable. Someone with a $300,000.00 loan size may benefit by a ¼% reduction in rate, while someone with a $75,000.00 may need a full 1% reduction to make the refinance beneficial.
Finally, it is important to determine how long you plan to keep the mortgage. The longer the mortgage is kept, the greater the savings you realize from the refinance. If you know you will keep the mortgage for more than 5 years you do not need as great a reduction in rate to realize savings.
These are a few of the factors you should consider when deciding on refinancing. At Trillion Mortgage, we are committed to offering sound advice on determining if a Utah mortgage refinance is a good step for you, and if so what kind of a refinanced loan is in your best interest. To get a free consultation, simply fill out the “get a quote” section and we will contact you. You may also call us at 855-2Trillion (855-284-5546). We are eager to assist and remain committed to assisting you in getting the best value available.
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Refinancing Your Mortgage for Greater Financial Flexibility
Are you a homeowner with an existing mortgage? In past generations, once a homeowner secured their mortgage, they did not touch it. They made payments as originally financed and never deviated from that.
In today’s world, however, it can make good sense – sound financial sense – to refinance your original mortgage loan:
Cash Out Equity.
According to Wikipedia, home equity is calculated by establishing the FMV (fair market value) of the property and subtracting from that number, any outstanding liens on that property. Your home’s equity can increase for two reasons: because you have paid down the loan (reducing the indebtedness) or if the value of the property increases.
Over time, as a homeowner pays off a substantial portion of their mortgage loan, they build up more equity. Homeowners see refinancing as a way to pull out cash value from their home and put it to some other use – perhaps to make home improvements or to pay off medical or credit card expense, or even to use the cash as a down payment to buy a second home.
A cash-out of some of your home’s equity may be possible, even if you have not yet paid off much of your loan. If your home has greatly appreciated in value, significantly increasing beyond the amount that you originally financed, you may be able to secure a new loan, refinancing it so that it reflects your home’s present property value, rather than the past one, and taking out the difference as a direct-to-you cash payout.
Reduce Your Interest Rate.
Another common reason why homeowners will see to refinance their existing mortgage is to reduce their loan costs by taking advantage of lower interest rates. Over the life of your loan term, even a small reduction in your interest rate can save you thousands of dollars in interest charges. When interest rates go lower, you can “lock in” a lower rate, but you may need to act quickly, before mortgage interest rates begin to trend upwards.
Lower Your Monthly Payments.
In addition to lowering your interest rate you can always refinance to lower your monthly payments. Sometimes homeowners will take out a variable interest rate loan, and variations in that rate can cause your monthly payment to become too large. By refinancing your home mortgage you may be able to get a fixed-rate mortgage or secure other loan terms that will lower your monthly payments. Lower monthly mortgage payments means freeing up cash for other expenses and needs that you might have.
Whatever your mortgage refinancing needs, Trillion Mortgage can help you – we can secure refinancing on conventional loans as well as VA and FHA loans.