MORTGAGE BASICS / Refinance

Most lenders charge fees to refinance a loan. So, if you plan to only stay in the property for a couple of years, your monthly savings may not accumulate to recoup these costs. Example: A lender charged $1,000 to refinance your loan that resulted in saving you $50 each month; it would take 20-months to recoup your initial costs. Some lenders will charge a slightly higher than average interest rate on refinance loans, but will waive all costs associated with the loan. This will depend on the interest rate on your current loan.

Closing costs can change from lender to lender, mortgage broker to mortgage broker. MDO Mortgage does not charge any fees other than a credit report, normally $31 per borrower. Depending on your situation closing costs can be as little as 1% to 2%. Closing costs can be paid by you or the lender. Speak to us about a no closing cost option.

A point is a percentage of the loan amount, or 1-point = 1% of the loan, so one point on a $100,000 loan is $1,000. Points are costs that need to be paid to a lender to get mortgage financing under specified terms. Discount points are fees used to lower the interest rate on a mortgage loan by paying some of this interest up-front. Lenders may refer to costs in terms of basic points in hundredths of a percent, 100 basis points = 1 point, or 1% of the loan amount.

Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan’s interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.

Mortgage rates can change from the day you apply for a loan to the day you close the transaction. If interest rates rise sharply during the application process it can increase the borrower’s mortgage payment unexpectedly. Therefore, a lender can allow the borrower to “lock-in” the loan’s interest rate guaranteeing that rate for a specified time period, often 30-60 days, sometimes for a fee.

It’s unsure how interest rates will move at any given time, but your lender may estimate where interest rates are headed. If interest rates are expected to be volatile in the near future, considering locking your interest rate may be good because it allows you to qualify for the loan. Or, if your budget could handle a higher loan payment, or lender’s lock fees, you may want to let interest rates “float” until the loan closing.

Even with poor credit getting a home loan is still possible.

Even if you have had late payments we can still help, there are loan programs tailored to those with credit issues.

There are two important things to consider when choosing one lender over another one:

  • Quality of Service – Especially for first-time homebuyers who will have many questions about the total financing process and available loan options. Finding a lender with outstanding service skills that you trust will comfortably guide you every step of the way, so ask questions, even before you fill-out an application.
  • Cost of Services – It’s good to ask potential Mortgage Brokers upfront what they charge for their services and any fees involved. They should be able to give you facts and get you through the financing process so that you feel confident knowing that you made a good decision by choosing them. Usually Mortgage Brokers have much lower fees than lenders who have larger overhead costs.

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