Should You Refinance Your Home?

As mortgage rates hit a historical low, you may be wondering whether or not you should begin the process of refinancing your mortgage. At Frank B. Pallotta Law Firm, we are here to walk you through your options and guide you in the best way we can. 

Benefits of Refinancing

There are multiple advantages to refinancing your mortgage loan. If mortgage rates are exceptionally low to the point that it would lower your monthly mortgage payment, this would be a great opportunity for you to move forward with the refinancing process. 

Another great reason to refinance your mortgage is to shorten your loan term from a 30 year loan to a 15 year mortgage loan. This could seriously accelerate your goals to having your home completely paid off. 

If you have an adjustable rate mortgage (ARM), refinancing your mortgage could give you more predictable payments with a fixed-rate loan to lock in your rate for the remainder of the loan. 

You Should Refinance If…

If you’re facing a cash flow issue then a cash-out refinance issue may be the best plan for you. You can read more about this option in our latest blog post. Since mortgage loans usually have lower interest rates and are tax deductible, this might be a good option for you.

If you have reached 20% equity in your home then it is time to refinance to eliminate the lender-paid mortgage insurance (PMI) premium that is built into your loan.

Lastly, if you need to remove a person from your mortgage usually due to a divorce or to remove a co-signer no longer needed, the only way to accomplish this is by refinancing. 

What To Expect When Refinancing

Before you begin the refinancing process, there are a few things you’ll want to check first. Make sure you have at least 20% equity in your home. If you will still have to pay PMI even after you refinance for a lower interest rate, you will want to crunch the numbers to see if refinancing even makes sense for you. 

You’ll also want to check to make sure your credit score is at least 760 and your debt-to-income ratio is 36% or less. This will give you the best chances to get the lowest interest rate. 

Last but not least, be sure to calculate the break-even point and how refinancing will affect your taxes.

Ready to Call Your Real Estate Attorney?

If you think refinancing is the best next step for you or if you have more questions about what your options are, we are here to help you. Give us a call today and let our expert team guide you. With videoconferencing still in effect under COVID-19 Executive Orders, Frank B. Pallotta Law can make your refinance closing even easier.

What You Should Know About Home EQUITY

We can set all the right plans for our future but no one could predict things like a global pandemic, an economic recession or a natural disaster. When those things hit, it’s important to know what options you have to get your hands on some cash if you need it.

If you need a cash-out refinance or a home equity line of credit, there are some important things to know about the process and how that will impact you long term. 

What is a Cash-Out Refinance?

When you have a cash-out refinance, you are borrowing against your home equity to obtain funds. With this type of refinancing, you receive your check at closing and the amount of this loan is then added onto the mortgage that you owe. Since mortgage rates tend to be lower than other types of debt and are tax-deductible, this route can be a very cost-efficient way to borrow.

Doing this results in a new mortgage loan which may have different terms than your original loan. These terms could range from a different type of loan, a different interest rate or a longer or shorter time period for paying off your loan.

Before your check is cut, proceeds are first used to pay off your existing mortgage and any closing costs or prepaid items. You can expect similar closing costs to your original mortgage at your cash-out refinance closing.

What is a Home Equity Line of Credit?

Home equity line of credit (HELOC) is taken out in addition to your existing mortgage. Since this is considered a 2nd mortgage, it will have its own term and repayment schedule separate from your 1st mortgage. However, if your house is already paid for and fully owned by you (no mortgage), some lenders allow you to open a home equity line of credit and the HELOC will be your 1st and only mortgage.

With a HELOC, you can withdraw from your available line of credit as needed during your draw period, which is usually about 10 years. During this period, you’ll make monthly payments with principal and interest. After the draw period ends, the repayment period begins with 20 years to repay the outstanding balance.

HELOC usually has no (or relatively small) closing costs.

Ready to Call Your Real Estate Attorney?

If you’re in need of taking any equity out on your home, the best next step is to call Frank B. Pallotta Law today. Our expert team will guide you through your current situation and make you feel confident in choosing the right decision between a cash-out refinance or a home equity line of credit. And with videoconferencing still in effect under COVID-19 Executive Orders, Frank B. Pallotta Law can make your refinance closing process entirely stress free. 

Refinancing Myths (and Why You Shouldn’t Believe Them)

“Refinancing” is a scary word for many people, but it doesn’t have to be. For many homeowners, refinancing can not only lower your monthly payments and help with your monthly budget, but it can save you thousands of dollars in the long run.

YOU’RE NOT TOO LATE.

For years now, we’ve been hearing that interest rates will be on the rise, and although there have been some small increases, you’re still in a great position to drastically lower your interest rate. The general rule is if your mortgage interest rate is more than one percent above the current market rate, you should consider refinancing.

IT’S NOT TOO TIME CONSUMING.

Don’t brush off refinancing just because it seems like a long and daunting process. An informational call with a lender to see how rates compare will only take a few minutes. There are also some programs for streamlining the application process. And besides, isn’t the amount of money you could save worth the time and effort?

ARMS CAN BE REFINANCED, TOO.

Seeing your Adjustable Rate Mortgage (ARM) increase after the introductory period can be incredibly stressful and place a squeeze on your budget. Many people assume they’re stuck, but ARMs can be refinanced, just like fixed-rate mortgages. You can even switch to a shorter term fixed-rate mortgage, such as 15 or 23 years. The longer you’re planning to stay in the home, the more sense it makes to look into refinancing.

If you have more questions or concerns about refinancing your mortgage, we’re here to help! Give us a call today and let our expert team guide you through the process.

How You Can Finance Your Home Renovation

Outdated kitchen. Overrun backyard. Unusable basement space. If you have a home renovation project on the mind, the first thing you have to consider is how you are going to finance it. Here are the most common options to make your dreams become a reality.

Cash 

Paying in cash is the most straightforward financing option, just save until you have enough money to cover the expenses. This will help eliminate spending outside your budget; however, it can also extend your timeline.

Mortgage Refinance 

If you’ve been making payments on your home for a few years and your interest rate is higher than current market rates, you may be eligible for a mortgage refinance, reducing your payments and freeing up some money.

Cash-Out Refinance 

You can tap into your home equity and borrow up to 80 percent of your home’s value to pay off your current mortgage, plus take out more cash to cover the renovations. This option is encouraged only when you’re making improvements that will increase the value of your home, as it can add a lot of interest and fees.

Home Equity

Getting a home equity line of credit allows you to borrow money against the value of your home. You receive usually up to 80 percent of your home’s value, minus the amount of your loan.

Retirement Funds 

Homeowners can consider pulling money from a 401K or IRA account, even though they aren’t specifically meant to cover a home renovation. This option might incur additional penalties or tax payments, but may be worth it when making improvements that will benefit you financially in the long run.

If you do decide to refinance your mortgage to cover renovation costs, we’re here to help! Give us a call today.

What is a Cash-Out Refinance?

Refinancing your home means asking a lot of questions. Like any major financial decision, you want to be sure you have all of the information you need to make the best choice for you and your family. Understanding the way refinancing works can seem overwhelming, but that’s okay! If real estate finance was easy, you wouldn’t need us around. We’re here to help explain a few things that you need to know. 

Today’s Lesson: Cash-Out Refinances

In real estate, there are two basic refinance options: rate-and-term and cash-out refinances. While a rate-and-term refinance could help you save money over time, a cash-out refinance could be a good option for anyone looking for a boost of cash flow in the short term. Cash-out refinancing means that your home equity is converted into cash by creating a new mortgage for a larger amount than what you currently owe. 

For example, if you took out a $200,000 home loan and have paid off $100,000 over time, this means you have $100,000 worth of home equity. If you wanted to convert $50,000 of that equity into cash, you could opt for a cash-out refinance. In this scenario, you would get a new loan for $150,000 — the remaining balance on your original loan plus the $50,000 cash. You pay the balance on the first loan ($100,000) and keep the remaining $50,000. You still owe that $100,000, but you’ll be paying a new lender at a new interest rate.  

Lenders will look at your property’s loan-to-value ratio to calculate how much equity you have, and how much you could potentially cash out. If your home has drastically increased in value since you purchased it — but you’re not ready to sell anytime soon — a cash-out refinance could be a good option. This type of refinance could also be a smart choice if you want to renovate your current home, because you’re essentially using the equity you already have to increase the value of your home. 

Cash-out refinances typically come with much higher interest rates than your initial mortgage, so they’re not always the right option for someone looking to save money long-term. Instead, a cash-out refinance could work for someone looking for extra money in the immediate future. It’s not a get-rich-quick scheme, though. You might be getting a boost of cash right away, but could end up paying more over time. 

As always, make sure you’re working with a team of trusted experts. There are so many individual factors to consider when refinancing your mortgage, and you’ll want someone who has the time to answer all of your questions and make sure your specific needs are meant. If you think a cash-out refinance is right for you, give us a call today!

What is a Rate-and-Term Refinance?

Mortgage rates are lower than in recent years, which means now is a great time to think about refinancing your existing home loan. A mortgage refinance is a big decision, and making the right choice now could save you thousands of dollars in the future. If you’ve never considered refinancing before, you’re probably finding yourself overwhelmed with questions and unfamiliar terms. And that’s okay! If real estate finance was easy, you wouldn’t need us around.   

We’re here to help explain a few things you might want to know.

Today’s lesson: Rate-and-Term Refinance

A rate-and-term refinance changes the interest rate on your loan, the term (or length) of the loan, or both. Unlike with a cash-out refinance, this type of change doesn’t advance any money on the loan — which means you won’t see a lump sum of cash. Instead, this type of refinance can save you money by lowering your monthly payment or by allowing you to pay off your loan faster (saving you money in interest). Rate-and-term refinances are driven by drops in market interest rate values. 

If you purchased your home during a time of high market interest rates, you might want to consider a rate-and-term refinance now while the rates are lower. This type of refinance is also a great option for homeowners who have seen positive changes in their financial situation since they purchased. If your consumer credit score has improved drastically over the last few years you’ve owned your home, you could qualify for a much lower interest rate. 

Rate-and-term refinances aren’t right for everyone. If you’ve only been in your home for a few years and you haven’t experienced any major financial changes, you might be better off waiting a few years or looking for a different type of refinance. 

No matter what you decide, make sure you’re working with a team of trusted experts. There are so many individual factors to consider when refinancing your mortgage, and you’ll want someone who has the time to answer all of your questions and make sure your specific needs are meant. If you think a rate-and-term refinance is right for you, give us a call today! 

Are You Ready to Refinance?

As mortgage rates dip lower and lower, you might be wondering if it’s time to think about refinancing. Many homeowners could find themselves able to negotiate a lower rate, and be able to pay off their home loans sooner than they initially planned. If you’re thinking about refinancing your mortgage, here are a few things to consider before you do: 

Know how much your home is worth.

The amount of equity you have on your home is one of the most important factors in refinancing. Your loan to value ratio, or LTV, is what lenders use to calculate how much equity you have. The less equity you hold, the higher your rate will end up being. A real estate agent can compare your home to similar homes in the area and create a competitive market analysis, so you can have a better idea of how your home is currently valued. 

Have clear financial goals.

There are a few reasons that homeowners decide to refinance. You could lower your monthly payment and give yourself extra room in your budget for other expenses. Another option is to continue making the same payment, but pay off your loan a few years earlier than expected. Some homeowners opt for a cash-out refinance, where you borrow more than the balance due and take the difference as a lump sum of cash. This money can then be used to pay off other debts, such as credit cards or student loans, or used to finance remodeling or other expensive home improvements. There is no right or wrong option — it’s best to work with a financial planner or lending expert to decide what will work for you. 

Don’t wait too long.

The mortgage interest rate market is as fickle as the stock market, and interest rates can change quickly. If you feel comfortable with the way the math is adding up, work with a loan officer (and a closing attorney!) that you trust. Get the necessary paperwork — such as current mortgage statements, pay stubs and bank statements — in order so you’ll know you’re fully prepared. Once you and your loan officer find the best rate for you, be sure to request a written confirmation of the rate you’re being offered. Remember, if it’s not in writing, it’s not legally binding! 

Refinancing your home mortgage can seem like an overwhelming and impossible task, but it doesn’t have to be! We’re here to help connect you with the best agents and loan officers in town, and make all of the necessary paperwork and negotiations are completed properly. Contact us today!