There are basically two types of mortgage refinance options in Arizona (or any other state for that matter):
1. A cash-out Arizona refinance (a.k.a. debt consolidation refi) is one option.
Many people refinance their mortgages with additional “cash-out” because mortgage rates are usually the lowest loan rates available to the consumer. With the possible exception of student loans, refinancing your mortgage is the best way to borrow money if you want the lowest possible interest rate.
2. The second, more common refinance option is called a Rate & Term refinance.
This type of refinance is called “rate & term” because that is precisely what is affected with this type of refinance- the interest rate and the new term. Your loan balance does not change or is changed very little. We will write about the two types of refinances in more detail below.
We realize that this is a long article. It can be confusing at times and almost always boring! If you would rather speak to a human being instead of reading about your refinance options, just call us at (602) 358-8717 or fill out the form located at the bottom of this page.
Of course, like most anything, there are advantages and disadvantages to a cash-out refinance.
One disadvantage is that they usually have higher interest rates than a standard rate & term refinance.
On the other hand, one advantage is that– even with the higher rate penalty for cash out– this is still almost always the best way to borrow money, regarding interest rates. It will likely be impossible to find a lower interest rate when cash is needed. In addition:
The interest on a first mortgage refinance is always tax-deductible. If you take out a second mortgage, unless you use it for home improvements, you cannot use the interest as a tax deduction. So, for example, if your refinance is for the purpose of paying off credit card debts, you will get a tax deduction on the interest that you would not get with any other type of loan.
A refinance on your first mortgage will be slightly more expensive then taking out a line of credit. However, those additional costs can be rolled into your new refinance, so it is not as though you need to dip into your savings. The costs of a refinance include Arizona title insurance and a full appraisal of your home (about $350).
When refinancing in Arizona, you have 3 days to cancel. You have three days to look over the paperwork and be sure that you made the right decision to refinance. Even after you sign all of the paperwork at the title company, you still have the right to cancel for thee days, until midnight on the third day.
The “Rate & Term” refinance is the type of refinance in which you simply lower your interest rate. For example you currently have a 7% interest rate and you refinance it to 6%- it’s that simple.
You can have a rate & term finance with zero costs or you can actually pay extra to “buy down” your rate. However, the question that we get asked the most is, “Do you have no-cost refinances?”
Yes, we do. However, when you refinance your mortgage, genuine, legitimate fees are generated. For example, the title company- which has nothing to do with the bank- needs to get paid. The appraiser needs to get paid. So how can a lender offer a no-cost refinance?
“Zero-cost” refinances are really a misnomer, because there is a cost- you will always get a higher interest rate on a zero cost refinance. Sometimes this is ideal! If you plan on fixing up your home and selling it in a year, you don’t want to invest a couple of thousand dollars into closing costs to get a lower rate, because you won’t be in the home long enough to recoup your closing costs.
How much you pay for closing costs is entirely up to you. As mentioned above, you can have a zero-cost refinance (great for short-timers) or you can pay points and buy down your rate. If you plan on staying in the house for at least five years, you will be much better off paying closing costs and getting the lowest possible rate. You pay more up front, but in the end, you save so much more on your monthly payment that you will usually break even in several years. We will help you figure out your “break even” point for every single loan. You tell us how long you plan on staying in your home and we will recommend the most logical refinance options. And, we will make sure that you understand.
This is a difficult question to answer in a general sense.
Typically, most lenders will tell you that it takes between 30 and 60 days to close any type of mortgage loan in the current market. However, we can close escrow an Arizona refinance in as little as two weeks. Timeliness is usually helped or hindered a great deal by the loan applicant.
However, we will break it down so you can understand exactly why some loan refinances close in two weeks and others take two months.
How long it takes to refinance your particular mortgage loan can vary depending upon several factors.
The most important thing to consider is our client’s own unique situation.
How is your credit score?
If it’s outstanding, your refinance will close much more quickly then if you have poor credit or no credit at all. If you don’t have any credit, for example, it will be up to your mortgage loan officer to help you gather alternative forms of credit.
An example of alternative credit could be a letter from your landlord stating that you have paid your rent on time for the past year, a utility bill, auto insurance payments, etc.
Do you keep good records?
We will always need documentation for a mortgage loan. Sometimes, the documentation is extremely minimal (with VA or FHA streamline refinances, for example)– and sometimes we need a lot more (if you are self-employed for example).
If you do not save all of your check stubs or bank statements, it will be up to your loan officer to contact your bank and your employer to obtain the necessary paperwork. If you do not keep your tax returns, we will need to contact the IRS to get a copy of those.
If you do not have check stubs and it takes your human resources department one week to send us copies of your old stubs, that means it will take one extra week to close your refinance loan (or purchase loan for that matter).
The bottom line: If you have great credit and you own a filing cabinet, we can refinance your Arizona mortgage within 30 days…sometimes within two weeks.
If you have questionable items on your credit report and you do not keep any records, it will take a little longer. Again, depending on what we need to gather and the cooperation we receive from your financial institutions and employer.
We hope this offers you some insight in the refinancing your Arizona home loan.
For more information on our other loan products go to our home page at www.azwm.com.