TIME TO CONSIDER REFINANCING YOUR HOME MORTGAGE?
According to recent news reports, interest rates on home mortgages have dropped down to their lowest rates in the past year (See More). In addition, home values have generally been rising. These two factors may mean that it is a good time to investigate the benefits of refinancing your home mortgage. A refinance involves getting a new home loan and using the proceeds to pay-off your existing home loan.
The higher your existing loan balance and interest rate, the greater the potential benefits are from refinancing to a lower rate. In addition, a refinance may be an opportunity to switch from a variable rate to a fixed rate loan, locking in the lower rate, or use the opportunity to get a shorter term loan, such as a fifteen year instead of a thirty year loan so as to save on interest over the long term (and fifteen year loans generally carry a lower interest rate than thirty year loans) or to eliminate any mortgage insurance you are paying on your current loan.
However, refinancing your home mortgage does involve some closing costs. You will need to compare these closing costs to your savings to determine if the refinance is beneficial. Closing costs involve both those due to the lender for expenses related to making the loan, and to an attorney for handling the closing of the loan. The lender charges may include items such as an application fee, appraisal fee, credit report fee, origination fee or points. These fees do vary by lender and by loan product, so a borrower can benefit from shopping around. The closing costs charged by an attorney will include the legal fee, title search and title insurance. Some lenders will encourage a borrower not to use an attorney to do the closing, or will suggest to the borrower that the lender uses a company that can do the closing for the borrower, or even simply have a notary rather than an attorney close the loan. Over many years of performing loan closings, our experience has been that the issues that result from closings performed by title companies or notaries expose borrowers to additional risk than a closing performed by an attorney. Among these risks are payoff funds not being properly applied, mortgages not being properly released, and sensitive client information not being properly protected. Unfortunately, there is very little to no oversight in Connecticut of closings that are not performed by an attorney. Furthermore, it has been our experience that the non-attorney closings are no cheaper for the borrower than those that are performed by an attorney, despite promises by the lender of savings from not using an attorney. Yes, you may be saving on “attorney’s fees,” but you are usually paying other fees that minimize or eliminate any purported overall savings.
One of the services performed by the attorneys of our firm is real estate closings including residential refinance closings. For more information, please contact one of our real estate attorneys HERE.