There are many reasons for refinancing and there are no general ‘rules of thumb’ on when to do so. Based strictly on securing a lower interest rate, we measure the potential cost to the interest savings, not your payment savings—which can skew the results because you are often borrowing less money. We then measure how long it may take to recover those potential costs. In many cases, there are no or very little costs passed on to you the borrower. In these circumstances even a small improvement in rate can save tens of thousands of dollars over the life of your loan. We also consider how long you currently have left on your mortgage and importantly what the savings may mean to you and finally what you intend to do with the benefits of a lower rates. For example, if you plan to put your monthly savings toward investments or toward your principal each month you can likely reduce the time you have the mortgage for many years. Essentially, the reasons for refinancing are often part of a solution for other life challenges and opportunities including home repair or expansion, school expenses, changes in family dynamics, and a host of other factors when life is happening. No matter what the reason, if you are considering refinancing please call us for a professional, detailed analysis of the benefits and challenges associated with it even if the plan is just to lower your current rate.
The best answer is ‘maybe’. Even if you plan to stay in the property for a long period of time, unless the points give you a cost-effective return based on the time it takes to recover the costs it may not be a good idea to pay them. Of course, in many cases points can give you the advantage of lower payments or stronger borrower power. Our process is designed to simplify and illustrate your options, make recommendations according to all your plans and circumstances and validate your final decision.
Points - both discount points and origination points
Pre-paid interest. The interest paid from the date the loan closes to the end of the month.
Title or abstract fee
Borrower Attorney fee
Mortgage rates can change from the day you apply for a loan to the day you close the transaction. If interest rates rise during the loan process it can increase your mortgage payment unexpectedly and reduce your borrowing power. To avoid an increase in rate, you can option to lock it in advance of the loan closing for a specified period—often 15 to 45 days, but as many as 90 days before expected closing. Longer lock periods often have higher costs associated with them. The decision to lock is important and is most often based on your transaction timing and market fluctuations. We carefully track and monitor market expectations and trends to best advise our clients on when to lock their rate.
At New Vintage Mortgage, we have an upfront process to streamline and reduce documentation as much as possible based on the most current guidelines. The less complex your circumstances, the less documentation is needed. In some cases, the documentation may be cumbersome, but we utilize industry-backed automated algorithms to determine the least amount of paperwork for your circumstances.
Credit scoring is a method creditors use to help determine your credit worthiness, whether to offer you credit, and on what terms. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is reported by creditors to the credit bureaus to create your credit report. Using a statistical program, Credit Bureaus compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt as agreed. A total number of points — a credit score — helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due according to the terms of your credit agreement.
The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).
Because your credit report is an important part of many credit scoring systems, it is very important to make sure it is accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:
Equifax Information Services LLC
P.O. Box 740241
Atlanta, GA 30374-0241
Experian (formerly TRW)
P.O. Box 4500
Allen, TX 75013
Trans Union TransUnion LLC
City View Plaza I
#48 State Road PR-165
Guaynabo, Puerto Rico 00968
Phone: (800) 916-8800
These agencies may charge you up to $9.00 for your credit report.
NOTE: Starting in 2020, everyone in the U.S. can get 6 free credit reports per year through 2026 by visiting the Equifax website or by calling 1-866-349-5191. That’s in addition to the one free Equifax report (plus your Experian and TransUnion reports) you can get at AnnualCreditReport.com.
You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian, and TransUnion. Authorized by Federal Law we recommend you access your free credit reports through the following website: https://www.annualcreditreport.com
Credit scoring models are complex and will vary among creditors according to the type of credit you apply for. So, a score modelled to measure your credit risk when requesting credit to buy a car will be different than scores use to measure risk when buying a house.Scoring models generally evaluate the following types of information in your credit report:
Payment history: Have you paid your bills as agreed?
Payment history is a significant factor. Your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.
Amount of credit used compared to available credit
Scoring models will evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.
Credit history: How long have you had accounts open and reporting.
Generally, models consider the length of time accounts are open your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
Number of inquiries: Have you applied for new credit recently?
Many scoring models consider whether you have applied for credit recently by looking at “inquiries“ on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make “prescreened” credit offers which are not counted.
How many and what types of credit accounts do you have?
Although it is generally good to have established credit accounts, too many accounts with balances may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, credit from high-cost finance companies may negatively affect your credit score.
At New Vintage Mortgage we understand credit and can advise on the best strategies for maintain and improving credit scores to maximize the effect credit will have on your mortgage interest rate and costs. We can offer complimentary credit report analysis and in addition to our close relationships with credit repair companies specifically focused on the mortgage process, we have tools and services which can quickly remove items reported in error or not properly removed from your report in the past. We can also build ‘what if’ scenarios, modeling out potential credit score improvements based on actions you can take before or during the loan process, such as paying off or rebalancing debt. Do not hesitate to reach out for professional guidance. Credit is such a critical component of the lending process. We encourage you to seek our advice and feedback on any credit improvements you are trying to make or issues you may have. Contact us today
An appraisal is an estimate of a property’s fair market value based on, among other things, other homes similar in style, size, proximity, features and how long ago they were sold. It is a document generally required by a lender before loan approval to ensure the property value is aligned with the loan program being sought. An appraisal is performed by an Appraiser typically a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.
On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage insurance may be issued from private companies Private Mortgage Insurance (PMI) guaranteeing then portion of the loan amount above 80% will be covered in the case of a default. This has the effect of lowering the lenders risk on the loan, which can keep your interest rate lower. There are various options you can choose from when paying less than 20% down PMI being one of them. Other options include, ‘Lender Paid’ options such as paying a lump sum upfront, building the insurance into a higher interest rate. You may also have an option to use federal government down payment assistance programs from entities such as the Federal Housing Administration or Veterans Administration. A New Vintage Mortgage loan expert can advise you on the best approach to take when refinancing or purchasing a home.