Refinancing During A Pandemic
Our Mission
To promote a fair and
vibrant marketplace, we
serve consumers,
businesses, and
communities through
education, advocacy, and
complaint resolution.
Serving Los Angeles
County Consumers and
Businesses since 1976
Foreclosure
Prevention
Program
Chelo Jovellanos, Foreclosure Prevention
Counselor
[email protected]acounty.gov
Ani Davtian, Foreclosure Prevention Counselor
[email protected]y.gov
Contact DCBA:
dcba.lacounty.gov
(800) 593-8222
Agenda
What Is Refinancing
Factors You Should Consider
When Refinancing
Types Of A Refinance
Consequences Of A
Refinance
Refinance Scams
Questions
What Is
Refinancing?
Refinancing is the
replacement of your
existing debt or mortgage
with another debt or
mortgage under different
(more favorable) terms.
Acquiring a new loan to pay
off an existing lender.
Only loans paid off before
their maturity date.
Why You Might Want To Refinance During COVID-19
Could save you money
Provide you with extra cash
Consolidate debt including junior liens and unsecured
debt
Change your loan type (adjustable to fixed-rate)
May be used to remove another person from the
mortgage (divorce, etc.)
Lower monthly mortgage payments
Low interest rates now due to the COVID-19 Pandemic
3.03% as of October 30, 2020
Factors You Should Consider When Refinancing
Market Trends (including
current interest rates)
Your personal financial
health (credit score)
Use the mortgage
refinance calculator
to
calculate the payment
for the interest rate and
compare rates offered
(see example)
Review your current
“loan conditions” (loan
docs, mortgage
statements – how much
is left to refinance?,
current equity or the
market value of your
home)
Consider possible loan
fees and any
prepayment penalties
for the new loan
If the new loan results in
at least a 1%, and
preferably a 2% decrease
in your interest rate,
refinancing may be worth
considering
Mortgage Calculator
Using an online mortgage calculator, enter:
1. The amount of your loan
2. The term (30-year note)
3. The interest rate
Calculate the payment for each interest rate.
The lower rate saves $628/mo.
Lower interest rate and shorter time result in reducing interest paid over loan’s
life : $98,399
Current
Mortgage
Refinanced
Mortgage
Refinanced
Mortgage in a
shorter period
Mortgage Amount $200,000 $200,000 $200,000
Term 30 year 30 year 20 year
Interest Rate 8% 2.969%
(11/2/2020)
2.969%
(11/2/2020)
Monthly Payment $1,468 $840 $1,106
Monthly Savings $628 $362
Refinancing for Different Property Types
Primary Residence Secondary Residence Investment Property
• Lowest rate
• Documentation
to prove
residence
• Tax-deductible
on mortgage-
interest loans
and mortgage
insurance
• Higher interest
rate
• Higher credit
score to qualify
• More
requirements to
qualify
• Higher interest
rate than for
other properties
due to higher
risk the lender
must take on
• Most challenging
to refinance
• Guidelines to
approve for
refinancing are
stricter
Shopping For A Refinance
During A Pandemic
At this time, rates are
fluctuating quicker than usual
Can be handled by two separate
banks or by getting a new
mortgage loan with the same
lender
Don’t be afraid to shop around
and compare each lender’s
current rates, availability and
satisfaction scores
Starting Your Refinance: The Process
Application: Some of the
documents your lender might need
include your:
• Two most recent pay stubs
• Two most recent W-2s
• Two most recent bank statements
Locking In Your Interest Rate
Underwriting
Home Appraisal
Closing on the New Loan (Escrow:
Title Search, closing costs,
disbursement of funds)
What A Refinance May Cost You
Factors:
Obtain quotes from multiple lenders
Your home’s value
2% - 3% payment expectation of the total value
of the loan
Fees
Discount points
Application fee
Attorney’s fee (if in foreclosure)
Title search
Appraisal fee
Local fees
In some cases, you can roll your closing costs
into your loan
Discount (Mortgage) Points
Fees to pay to reduce your mortgage interest rate and monthly payment
Buying down the rate
1 discount point = 1% of the mortgage amount; lender typically cuts the interest rate by
0.25% negotiable and depends on the lender, as mortgage rates fluctuate daily
How points change payments on a $200,000 mortgage
https://www.nerdwallet.com/blog/mortgages/discount-points/
The Break-Even Point
The time it will take to recoup the cash you used to refinance your loan
Expenses:
Break-Even Point: $7,330 / $628 = 12 months or 1 year to break even
$7,330 / $362 = 20 months or 1 year and 8 months to break even
Types of
Refinance
Loans
Cash Out
Rate and Term
Consolidation
Home Equity Line Of Credit (HELOC)
Reverse Mortgage
Cash-Out
Refinance Loan
BORROWING
MONEY FROM THE
EQUITY OF THE
HOUSE
COMMON WHEN
THERE IS A RISE IN
THE EQUITY OF
YOUR HOME
Rate And Term
Refinance Loan
This type of refinancing is the
most commonly used.
This will pay off your loan with
your current lender and allow
you to pay a lesser amount with
a lower interest rate.
Consolidation Refinance Loan
Consolidation refinancing involves
taking out a new loan to pay off
other loans.
Doing so will help the borrower
pay off one loan instead of
paying multiple loans.
Home Equity Line Of Credit (HELOC)
A Home Equity Line Of Credit lets you
borrow a fixed amount, secured by the
equity in your home, and receive your
money in one lump sum
Your first mortgage can be refinanced with a
HELOC
Home equity loans have a fixed interest
rate, fixed term and fixed monthly payment
Reverse Mortgage
A reverse mortgage is a mortgage loan, usually
secured by a residential property, that enables the
borrower to access the value of the property. To
qualify,
The borrower must be 62 years of age or
older
Must use home as principal residence
Must either own the home or have a low
mortgage balance
Must not be delinquent on any federal debts
Consequences Of A Refinance
Restarts your
mortgage clock
Extend the term
of your mortgage
Requires good
credit to get a
lower rate
Running your
credit will slightly
lower your score
Could raise your
monthly expenses
Could potentially
owe more money
Refinance With Bad Credit
Less favorable
terms
Higher rates
Higher fees
Hard money
lenders
Refinance Scams
Fake mortgage “relief” plans
(Mortgage Foreclosure Relief)
Guaranteed rock-bottom mortgage
rates for a nominal fee
Home Repair, Improvements and
Products Scam
Debt Management Scam
Identity Theft
Avoiding Scams And
Getting Assistance
Know the common scams
Beware of upfront fees
Beware of suspicious emails
Contact your lender first about
refinancing
Research other lenders’
information
Contact
MAILING BY PHONE
Headquarters
500 W. Temple St. B-96
Los Angeles, CA 90012
Consumer Services
(800) 593-8222
Multilingual Staff Available
Think you
have been a
victim of
fraud or
identity theft?
File a report with your local law
enforcement agency
File
For the Federal Trade Commission
• File a complaint online
• Go Online: reportfraud.ftc.gov
Commission
Contact the local District Attorney’s office
• 211 W Temple St. Suite 1200, Los Angeles, CA 90012
• Phone Number (213) 974-3501 Fax: (213) 974-1484
Contact
Regulatory Agencies
Brokers- CA Department of Real Estate:
www.dre.ca.gov
Finance Lenders, Banks or Credit Unions:
dfpi.ca.gov
Federal Agencies – Office of the Comptroller of the
Currency:
occ.treas.gov
Federal Reserve: federalreserve.gov
Federal Deposit Insurance Corporation: fdic.gov
National Credit Union Administration: ncua.gov
