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Have you ever refinanced??

post #1 of 15
Thread Starter 
I'm gonna admit it, I'm not the brightest bulb in the chandalier!!

What is the biggest reason people refinance? We need to do some updates on our house.........and was thinking if we refinanced, we could get some equity out of the house ........ or is that an equity loan???
post #2 of 15
some people refinance for a lower interest rate. if its not a fixed intrest rate a few years down the road the intrest rate can go way up so people refinace to get a cheaper rate.
post #3 of 15
Refinancing is usually done for lower rates, or to change banks. We've tried, but our house has been in construction limbo for a while. We're finally almost done siding it, at which time we should be able to refinance and consolidate some of our loans.

If people are looking to get money, they often go with a home equity loan. A word of caution, though: If you fail to pay those loans off, the bank can and will take your house. Far better to stick with credit cards and risk getting a stern talking-to, in my opinion.
post #4 of 15
Thread Starter 
Lisa, if we get an equity line of credit, wouldn't that loan automatically be paid off if we ever sell the house, or are you just refering to making the monthly payments?? Credit card interest isn't tax deductible either from what I understand, where as I think a home equity loan might be?? You can tell I'm not too versed on this subject...........LOL
post #5 of 15
I was primarily speaking to the monthly payments - but that equity loan will only be paid off in the event of sale if your house sells high enough. You never know, with how the market fluctuates sometimes.
post #6 of 15
From what I understand you can refinance and get a lump sum of money, a few thousand dollars, to do whatever you want with. that would be added to what you owe on your home. I know a guy that is going to do that for the second time to buy a new race car!! I don't know what the difference between a home equity loan is and a refinancing loan is.
post #7 of 15
kittylover4ever, I used to do refinancing for a living so feel free to ask me anything. I can answer most ?'s...

People refin for tons of reasons... pymt relief: consolidating all cr cards & stuff w/your mortgage you can get a lower mos pymt and only pay 1 pymt p/mos instead of $100 to visa, $100 to MC, $1000 for mortg...you can wrap it all into 1 debt and pay maybe $800p mos. freeing up $400 of disposable income.

Cash Out: alot of ppl need cash out, for home improvements, lux purchases like a boat, college for their kids etc. You can borrow $ against your property and use it for whatever you need.

Lower Int rate: some ppl refin for a better rate...which really equals a better pymt and more $ to your principle balance owed. If your paying 7% you can get it refin @ say 4% and pay the same pymt more $ goes to your actual bal owed on the property.

An equity loan is any loan against property (or something you have value in like a boat or car in which you can borrow against). Your mortgage is the loan you pay the bank for your home. If the home is valued @ $100,000 and you've paid into it $25,000, you can borrow an amt up to that 25G back as a second mortgage (they like to use the catchy "home equity loan" cause mortgage sounds so tied down or final). Most lenders/banks will allow you to borrow 100% LTV (loan amt to the value of your home).

2nd Mortgages: these can either be closed end (set up w/a certain rate, a certain pymt, for a set term like 15 yrs) or revolving (set up like a credit card, where it's a revolving loan amt that you can borrow against...the loan amt is 25G's maybe you only need 10G's now and then later you can borrow 5G's with an open amt of available credit) Interest is calculated like a credit card but for a much better rate (only the rate is not as good as a 1st mortgage).

All loans/mortgages against the property are aka liens against the title of the property. If you would sell your home, you HAVE to satisfy all liens or pay off all liens owed before releasing the title to the new buyer.

Obviously, people have different needs. The best option would be to completely refinance pay the lowest possible int rate, throw in a few high pymt cr card bills, free up some cash flow for yourself and just pay it off. But ppl might want the revolving loan if say they have to keep borrowing and paying off the amts, like self employed ppl may need 5G's now, but are expecting income soon so they can pay it back.

One last thing... if you pay your 30 yr mortgage bi-weekly you will shave off 10-13 years off your loan. It works like this: your pymt amt is $1000, so you pay $500 every 2 weeks (when most ppl get paid). What happens is that every calendar year there are 2 mos with 3 pay periods...you pay the $500 every 2 wks through those mos that you have an extra pay check and end up paying 1 extra mortgage pymt p/yr. Every year for so many years, knocking off interest and paying more to your principle amt faster and you get paid out of your loan years faster!!!

If you have any ?'s about PMI, points, fees, etc feel free to PM me, I'm on TCS all day at work!!!
post #8 of 15
Thread Starter 
Wow Heather, thanks. You know your job! Do you typically pay closing costs when you refi??
post #9 of 15
There are always closing costs. It can be:
appraisal fee (it used to be about $300 in my area)
title insurance (it used to be about $1000-$1500)
Points (if the company charges pts...it's a % of the loan for "handling" paperwork, filing of docs etc. the co I used to work for charged 1% but on a $200,000 loan it's alot...not everyone charges it though.)

Oh, and PMI can sometimes be required. That's usually on a purchase though, as opposed to a refi...that would be private mortgage insurance. Some places require it on their loans, in case you don't pay, or you die, they still get their money from this mortgage insurance company. It only protects the bank/lender, it doesn't really protect you at all.

Now, alot of times you can get the closing costs wrapped into the loan amt so you don't have to shell any $ out of pocket. But it depends on you loan to value... it the value of your home is $100G's and you still owe $80G's and you wanna refin for the whole $100G's again, giving you $20G's out for home repairs, then you have to pay the closing costs out of pocket. But if you only need $15G's and the closing costs are $5G's then you can wrap it all into the loan amount.

I had to actually take training classes in all this. I got out of it years ago, it was kinda like the movie "Boiler Room" very high pressure sales. And the company I worked for was making it harder & harder to sign the loans cause of all the laws changing, and it's commission based...
Glad to help! It's so stressful going through all that! Any more ?'s just shoot them my way!
post #10 of 15
4-got to mention...they have to legally show you a paper that has all of your closing costs itemized, and it has to be signed by you in a refi (at least in PA)... this will tell you how much you are paying for each little thing...and you can specifically ask them about points and fees and ask to see that page before signing your next 30 years away! Good luck!
post #11 of 15
Originally Posted by LuckyGirl
4-got to mention...they have to legally show you a paper that has all of your closing costs itemized, and it has to be signed by you in a refi (at least in PA)... this will tell you how much you are paying for each little thing...and you can specifically ask them about points and fees and ask to see that page before signing your next 30 years away! Good luck!
Is the document the HUD-1 Settlement Sheet? They are only required to provide you with it 24 hours before closing. We just bought a house and had the builder pay $4000 in closing costs (more than sufficient according to the good faith estimate), but ended up have to pay $800 out of our own pocket at the last minute (on top of earnest money and appraisal fee).
post #12 of 15
Thread Starter 
When we bought our home, we asked the sellers to go halvsies (is that a word?) with us, and they did. They paid $2000 and we paid $2000.
post #13 of 15
Originally Posted by kittylover4ever
to go halvsies (is that a word?) .
I use that word!

Our constuction loan bank screwed us over royally so you have to be careful. They made us use some of the money to pay off medical debts after they already approved the loan which i am pretty sure is illegal. But we are slowly but surely costing that tbank moeny./ We have like 2 bucks left in the account and they send us a statemnt monthly about that 2 bucks!
post #14 of 15
One word of caution. Be careful about refinancing to consolidate debt. It sounds good, but usually people follow their old habits and rack up more debt and then you will not only be in the same boat, but your mortgage will be bigger.

Also, if you get a home equity loan, read the fine print. We did that with our last house, and when it sold, we found out there was a big penalty for early pay off.
post #15 of 15
We are one of the lucky people that bought and paid off our mrtge in 14.5 yrs!!
But we refinanced twice in a matter of months to get a better interest rate.
We now have a 75K line of credit with our bank that is tax deductible which we have used to buy our farm "up north".
I don't like home equity loans as a means of debt consolidation as it could cause problems down the road if spending habits do not change.
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