Tacoma's #1 Mortgage Expert

With interest rates at historic lows, many homeowners are considering refinancing.  One question that seems to come up often is, should I pay closing costs or not?  Here is a list of options to consider when looking at refinancing.  Each option has it's benefits, so there's no one size fits all answer.

Interest Rate  Points/Origination Fee
4.25%           .875%
4.50%           -.875%  *
4.875%         (-1.50%)*
* indicates a payment to your lender or broker - known as a "premium"

1. No Closing Cost Refinance - 4.875% with a 1.50% Premium Paid To Your Lender or Broker: Like the title says, it means you do not pay closing costs. The next question is who is paying them?  Indirectly you are.  By taking an interest rate higher than the market rate, the lender or broker can use the "Premium" in the interest rate to pay all your costs.  For the purposes of this example, let's take a look at how this no cost refinance works. 

Your lender or broker will be paid 1.50% of $400,000 * 1.5% = $6,000.  They will use this money and pay your closing costs of approximately $2,500.  Leaving them $3,500 in gross revenue.   

2. Low Closing Cost - 4.50% with a .875% Premium Paid To Your Lender or Broker: This is a combination of the No Closing Cost & Full Closing Cost Option.  The lender or broker is paid their origination fees, and your are paying 3rd party costs, like title, escrow fee, credit reports, appraisal etc. In the above example your lender is being paid 400,000 * .875% = $3,500 gross revenue. You are responsible for the third party costs of $2,500.

3. Full Closing Costs - 4.25% with a .875% Loan Fee:  In this example, you will pay the origination fee plus the 3rd party closing costs.  That means you pay $3,500 loan fee + $2,500 in 3rd party fees or $6,000 total closing costs.  

Now look at the monthly payments:

$400,000 Loan Amount * payments exclude taxes and insurance

4.25%   = 1,967   Cost: $6,000
4.50%   = 2,026   Cost: $2,500
4.875% = 2,116   Cost: $  0.00

Compare: 4.25% v 4.875%
monthly savings: 2,116 - 1967 = 149 lower payment by selecting the 4.25% rate.  Now look at the total costs divided by the savings: $6,000/149 = 40.26 months or 3.35 years to break even.  That means after 3.35 years, the lower rate and paying the closing cost would have paid off.

Compare 4.875% v 4.50%
monthly savings: 2116 - 2026 = 90 lower payment by selecting the 4.50% rate.  Now look at the total costs divided by the savings: $2,500/90 = 27.78 months or or 2.3 years to break even.  That means after 2.3 years, the lower rate and paying the closing cost would have paid off.

Compare 4.50% v 4.25%
monthly savings: 2026 - 1967 = 59 lower payment by selecting the 4.25% rate.  Now look at the total costs divided by the savings: $3,500/59 = 59.32 months or or 4.9 years to break even.  That means after 4.90 years, the lower rate and paying the closing cost would have paid off.

A few other factors to consider is the loan to value ratio of the new loan to your home's value.  If for example, adding closing costs to your loan puts you into a higher loan to value bracket, you may opt to go with the lower closing cost or no cost option.  Or if you have to pay private mortgage insurance by adding in closings cost, you may opt to go with the low or no closing cost option. 

For additional refinancing question, feel free to contact me directly at (253) 472-1500.  Ask for Kevin or visit us online at www.alltechmortgage.com

http://www.zerofeehomeloans.com - Lowest mortgage rates in 4 years! Lower your rate without paying any closing costs. Even if you only save .50% off your current rate, you are saving money. No up front costs! Visit us online today. Locally based in Tacoma, we work with all the top mortgage companies.

Tacoma, WA - Mortgage Rates

Interest rates for home loans under $506,000 in Pierce, King and Snohomish counties continued their trend under 5.00% for the second straight week.  We are starting to see a lot of refinance activity, especially those with equity and good credit scores.  What some people don't realize is that there are several factors that determine the final interest rate they will pay on a mortgage.  Gone are the days you can call and just ask "What's Your Rate?"  Here is a brief list of all the factors that can increase or decrease the interest rate you will pay on a mortgage or home loan:

1. Credit Score -Your most important score is the middle score.  For example if you have a high score of 759, a mid score of 739, and a low score of 702, the 739 becomes your "decision score"  The next step is to look at which bureau is reporting your mid score.  If you notice any errors or discrepancies from that bureau, for $30.00 you can request a "rapid re-score" If you can get your mid score up by just 1 point, it could save you $1,000 in fees on a $400,000 cash out refinance loan.  Not a bad investment...

2. Loan To Value Ratio (LTV) -This is the amount of your new loan divided by the value of your home.  Anything below 60%LTV is usually golden.  Once you go above 60%, then the interest rate depends on the next factor - Purchase or Refinance. 

3. Purchase or Refinance - The interest rates for refinance and purchase home loans can be different depending on factors 1 & 2.  As a general rule, purchase home loans have less factors that determine the final interest rate.

4. Refinance - Rate Term vs Cash Back - This factor applies to refinancing when you are paying off any debt other than the underlying first mortgage.  Once you start paying other debt with the exception of a purchase money second mortgage, your interest rate quote will likely go up.  This includes things like HELOC's, credit cards, car loans and other personal debt.  Plus there are several new rules coming Jan 1, 2009 that limit your ability to do a rate term refinance if the previous loan you just closed was a cash out refinance.  The new rules require you to wait 6 months before your eligible to refinance again.  Also if you home was listed for sale on the MLS, certain rules require you to wait 6 months before you can refinance.

5. Loan Amount - Loans under $417,000 generally have the lowest interest rates.  Although the new High Balance loans up to $506,000, with low loan to values under 75% LTV, and a high credit score will qualify for the lowest interest rates.

6. Subordinate Liens - If you plan on keeping your current Home Equity Line of Credit open and having your lender subordinate their lien, in some instances your interest rate may be higher.

7. Paying Property Tax & Insurance - If you plan on paying your own property tax and insurance, most lenders will charge an extra .25% fee to do so.  That's $750.00 on a $300,000 loan.

All Tech Mortgage Inc. is your gateway to great mortgage products from Washington State's top mortgage lenders. We shop, compare rates & fees and connect you with the best mortgage banks in the Northwest. The interest rates we quote are typically .25% - .50% lower than most national mortgage companies. Plus our fees are some of the lowest in the industry. 

We specialize in No Cost and Low Closing Cost Refinance home loans.  All Tech Mortgage offers true wholesale pricing from our lending partners.  At All Tech Mortgage, we never expect your business, but hope to earn it with our aggressive pricing, speed, and overall efficiency.

Good news for home buyers or borrowers looking to take advantage of today's low interest rates.  This puts mortgage rates at historic lows.  Here's a sample of a recent rate quote from All Tech Mortgage this morning:  12/10/2008

Refinance:  Paying off the existing first mortgage

Value of home: 350,000

Loan Amount: 280,000 Current Rate 6.25%

Loan Type:  Conventional

Fico Score: 746

Rate Quoted:  4.875% 30 day lock (4.984% apr)

Loan Fee:  1% + 3rd party closing costs or 5.25% with 0 loan fee with 3rd party costs

Monthly Payment Savings: $212.00

Rates fluctuate daily so if you are considering refinancing or buying a new home -- The time to lock in and Save is Now!

For high loan balances up to 75% LTV with credit scores + 740, Paying off the existing first mortgage only, the above scanerio will work with loan amounts up to $506,000.

Serving Northwest Homeowners since 1996  WA Mortgage License: 510-MB-18885

With the right combination of factors, low loan to value, high credit score(above 740), borrowers are able to get the new conforming plus loan limits of $506,000 in Pierce, King & Snohomish counties at conforming interest rates.  Here's a quote from today 12-9-2008.

Sales Price or Appraised Value:   $700,000

Loan Amount:  $506,000

Credit Score:  740

Current Rate:  5.125% (5.226 apr) with a 1% loan fee, plus other third party costs, ie. title, escrow, appraisal, etc.

That's the same rate/fee structure for conforming loans as well.  

Benefiting from the Federal Reserves program to purchase mortgage backed securities, mortgage applications surged last week.  "The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended November 28 soared a record 112.1 percent to 857.7, the highest reading since the week ended March 21 when it reached 965.9."

It's great to see home buyers starting to come off the sidelines and inquire about mortgage rates for purchasing and refinancing.   "Interest rates are at their lowest level since the week ended June 24, 2005, when they reached the same level. Interest rates are sharply below the peak of 6.59 percent reached during the summer, but only slightly below the 2008 low of 5.49 percent in January, according to the trade group."

All Tech Mortgage is a mortgage company that provides consumers with the lowest mortgage rates in Tacoma and surrounding communities.  As one of the premier Washington State mortgage companies, All Tech Mortgage has been originating mortgage loans for over twenty years in the Tacoma - South Puget Sound area.  We are a full service Washington State based licensed mortgage broker.