Mortgages and Refinancing

With interest rates at historic lows, many of our listeners and clients have been asking about refinancing their mortgages. Today, Shanna Tingom from Heritage Financial tackles some of these questions.

What are the different loan types?

• Primary
• Fixed Second or Second
• HELOC
• Also a Second mortgage

What happens to my 2nd or HELOC if I refinance my primary loan?

• 2nd or HELOC will need to be subordinated. The lender needs to agree to let you keep it, and this usually adds more time to underwriting.
• Alternatively, any balance may be able to be included in the new primary mortgage and then the loan closes, so you could need to apply for a new 2nd or HELOC once you are done with your refinance.

When does it make sense to refinance?

• Current rates are lower than the existing rate. Usually want this to be at least 1% below your current rate, but the cost to refinance plays into that decision.
• Have a large HELOC or 2nd balance and the interest rate on that loan is high enough that it makes sense from a cashflow perspective to refinance the primary loan even when there isn’t a significant rate difference between current rates and the rate on the existing primary loan.

What is the process to refinance? Can someone else (my advisor) handle this for me?

• Someone else cannot handle this for you.
• Do research on options. Nerdwallet.com can be a good resource, local credit unions, trusted mortgage broker.
• Give them all the same details, including an approximation of your credit score, and ask them to provide what they believe your options are including all costs.
• Some will balk…avoid them.
• Once you have quotes, compare. We often review and weigh in for clients.
• Apply with the lender you chose.
• Paperwork to collect.
• Appraisal may be needed.
• Underwriting.
• Sign.
• Fund.
• Check sent to you or wired for cash out.

What if my house is paid off? What are my choices?

• Any of the three loans are options.
• Need to figure out your need to know which makes sense.

For more information on anything related to financial planning, find Shanna Tingom at https://www.heritagefinancialaz.com/