House Refinance Center
No Cost Refinancing
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| The Term that fits your needs When you are ready to refinance you have to decide which mortgage term that is best for you. The mortgage term is the length of time required to pay off the loan in full. If you have the money to make the monthly payments, the 15 year term is the best deal for you. The interest rate is generally lower than the 30 year term, and you build equity faster. You have to look at your finances, and prepare a five year plan. If over the next five years, you think that you will have major expenses, such as the payment for a wedding, replacing a car, sending your kids to college, or paying for a relative in a nursing home, you should strongly consider the longer term. The most important thing about homeownership is paying your mortgage on time every month. The chart below shows how a 15 year term differs from the 30 year term. You can also compare the 20 year term, and the 25 year term. The original mortgage amount is $150,000 and the interest rate is 5.19%. Each situation is unique, so please feel free to use our calculators to see which term is best for you. |
Mortgage Rate = 5.19%, Terms are 15, 20, 25 and 30 years
| Mortgage Tip The 30 year fixed mortgage is still the most popular choice of loans for borrowers. Many prefer the lower monthly payments and they promise to make that lump sum payment once a year. They plan on using their income tax refund. However, we know that the refund always end up going to something else. The car breaks down. The dog has to visit the vet. There is always something else to spend the money on. To make sure that you pay down your mortgage as soon as possible, select the 20 year term over the 30 year. This forces you to save. In our example, the monthly difference in the payment is $183.01. Over one year you would have saved $2,196.12. After four years you can see an obvious dent in your mortgage balance. For calculators click here. |
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| No Cost Refinance No cost refinancing occurs when the borrower pays no fees or out-of-pocket expenses. The lender or mortgage broker pays the closing costs. What most lenders and mortgage brokers fail to tell the borrower is that the money he saves upfront is collected on the back end. This is done through a complicated process called the yield spread premium (YSP). The yield premium spread is one of the ways that a mortgage broker gets paid for steering a borrower into a home loan with a higher interest rate. For example, on a loan of $600,000 with YSP of 2% the broker's fee is $12,000. If the closing costs are $5,000, the broker will have this amount deducted from his $12,000. The broker does expose himself to some degree of risk because of the Early Pay Off (EPO) clause in the contract between the lender and the broker. It basically says the if the borrower refinances or sells the house, within a stated period of time, usually 60 to 120 days, the compensation to the broker has to be repaid. You have to do your homework. Ask questions and do not be pressured into signing documents you do not understand. Politely ask to take the loan documents to your lawyer for review. Usually, if the new refinance mortgage is 2.0% better than what you currently have, then the deal is okay. However, you still have to crunch the numbers and see how low the rate will go if you paid the fees upfront out-of-pocket. |