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FAQ ’ s

  • What is the difference between a refinance and a second mortgage? Which one should I choose?

A home equity loan, often called a second mortgage, is borrowing against the equity in your home with a new loan, on top of the mortgage loan you already have. Refinancing is when you renegotiate the term or type of mortgage plan you currently have by trading in your old loan for a new one. You can also refinance your first and second mortgages in order to combine your monthly payments.

Refinancing is useful if interest rates have dropped below your current rate and if you plan on staying in your house for longer than 3-5 years. If you switch the loan term, from say a 30 year to a 15 year, you would save thousands of dollars in interest, and would build the equity in your home faster. Home Equity loans on the other hand, are a good choice if you only plan on being in the home for less than three years, or you are trying to finance a home improvement project and need a large amount of cash for it.

  • What can I expect at Closing? What are all the costs involved?

During closing you should expect to pay processing fees, a loan origination fee, underwriting, property taxes, insurance (title, hazard, and/or mortgage), prepaid interest or discount points, an escrow account deposit, and administration costs (recording fees, notary fees, etc.). The average range of closing cost fees can run anywhere from $800-$3,000. One trick is to look for the plans that come with the fees bundled together. Not many companies offer this option, but some realize that it is a great selling point.

Your protection under RESPA, or the Real Estate Settlement Procedures Act, requires the lender to provide you with an itemized statement of all closing costs. So you should be prepared for every cost, no matter how small, before the closing date. And you in turn should receive: a mortgage note, deed of trust, a truth-in-lending statement, a settlement statement, and a binding sales contract reviewed in advance by your lawyer (if buying a new home).

 

 

 

 

 

 

 

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