Closing Costs

Should you consider financing closing costs, escrow reserves, orother cash needed at closing?

When you refinance, any equity that has been built up in your home may be able to be “cashed out” to pay for credit card balances, college tuition, home improvements, or other revolving debt. The same is true for refinancing costs: if there is sufficient equity in your home, you may be able to consolidate the closing costs with your mortgage.

Some of the closing costs for a new or refinanced mortgage include settlement costs and fees, prepaid interest, escrow reserves, state or local government charges, or sometimes extra funds required to pay off your existing mortgage. Some or all of those costs can usually be financed as part of your new mortgage loan.

But you have to be careful. It is no talways possible to borrow up to 100 percent of your home’s value. Many loan programs are based on what’s referred to as a “loan-to-value” ratio. You may qualify for a very advantage refinanced mortgage if you borrow no more than 80 percent of your home’s value,but may not qualify for the same terms if you borrow 90 percent. Dell Franklin can help qualify you for refinance loan programs for as much as 95 percent of your home’s value in most cases, but a lower loan-to-value ratio will ensure better terms for the duration of the loan.

The important thing to remember is that the up-front costs for refinancing your mortgage can be reduced in exchange for higher monthly payments for the life of the loan. The value of your home and the amount of your new mortgage determine whether or not you can do this and what loan-to-value ratio will give you the best value over the term of the loan.

If you have had your current mortgage for a few years, then you have probably built up enough equity to finance closing costs and still have a smaller loan balance than the original. A lower balance will qualify you for a favorable mortgage program as determined by the loan-to-value ratio.

Many homeowners find that it is advantageous to pay the closing costs from personalchecking, savings or money market accounts. This lowers the amount you are required to borrow for a new refinancedloan, and results in a lower monthly payment. Dell Franklin can work with you to find an advantageous refinancingprogram for you based on your ability and willingness to pay closing costs andthe amount that you wish to borrow. Letthe experienced mortgage professionals at Dell Franklin Financial help you makethe best decision when you decide to refinance your mortgage!