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Commonly Asked Questions: 1) Is it worthwhile to refinance now that rates are so low? It depends on what you are hoping to accomplish by refinancing. Is it to lower the monthly payment? Is it to save money over the life of the loan? Is it to pay the loan off sooner? Is it to consolidate debt and bring all your monthly payments down? Or is it to take cash out of the property for some other purpose? The following points may help you to decide before you contact your lender. For a rate and term refinance, which is the type of call we have been receiving most, the rule of thumb used to be a minimum 2.0% difference in your current rate vs. what you would get with refinancing. That was when closing costs ran about $1,500-2,000, and it made sense to roll the closing costs into the loan, credit was loose, property taxes were manageable and property values continued to rise. Now, because of increased risk and uncertainty in the marketplace, secondary market investors are now charging delivery fees based on “adverse market conditions”, credit scores, loan to value, multi-units, investment properties, “cash-out", and are requiring that taxes and homeowners insurance be escrowed to ensure that they get paid. The lower the credit score, or the higher the loan to value generally results in higher fees. This is based on individual circumstances. If you currently pay your own taxes directly to the town or municipality you live in, escrowing one twelfth of the annual property taxes and one twelfth of the annual homeowner’s insurance in with the principal and interest payment to the lender will increase your monthly payment. In addition, depending upon when the taxes and homeowner’s insurance premiums are due and when your loan closes, a certain number of months may need to be collected at closing to fund the escrow account (thereby increasing the closing costs). The intent is that between what is collected at closing and what is received from you (the borrower) on a monthly basis, there will be enough funds in the escrow account to pay the tax installments or homeowner’s insurance premiums when they are due. Thus, closing costs, when there are delivery fees and escrows included, can run between $3,000-8,000 or more depending on the size of the loan and the amount of the property taxes. Since you have to pay your taxes and keep the property insured anyway, having the lender collect that from you on a monthly basis and send it off can be a good budgeting tool. It may just require rearranging how you currently budget for this expense. If you are unable to pay the closing costs out of pocket and have to increase the loan amount, you will not achieve the maximum savings from refinancing to a lower interest rate. If your loan amount is small – under $100,000, or you’ve been paying down principal for some time, or have 10-12 years left, it may not be worthwhile to refinance. It helps to run an amortization schedule to see how much remaining interest you have to pay if you are looking at the big picture (which we recommend you do) and not just the change in the monthly payment. And of course, if you do not plan to stay in the property for the amount of time it takes to recover your closing costs, it may not make financial sense to refinance. All of these factors need consideration before deciding whether to refinance. However, despite all of these variables, there are many instances when it makes sense to re-structure, and when real savings can be achieved by refinancing. 2) OK, if I have done my homework and determined that it is worthwhile to refinance, can I lock my rate and then submit my loan application after? The Brattleboro Savings & Loan is unable to lock your rate without a complete and pre-approved loan application in process. The reason for this is a rate lock is a contract between the borrower, the bank and the investor, to hold a specific loan amount, rate and term for a specific number of days. If something delays or prevents your closing, you will forfeit your 1.0% rate lock fee and may incur additional financial penalties. 3) Do I have to go through the whole process of filling in the application and getting a new appraisal even though nothing has changed? Yes, we need to have a new appraisal done and current dated information about your financial ability to repay the loan. In order for us to use your time and ours wisely and efficiently, please have all of your information available, including the $400 appraisal fee when you submit your application. Our on-line application is the fastest way to receive a response and to secure a place in the processing queue. You can access it by clicking on the "Apply Now" button on the left side of this page. Please refer to the mortgage checklist for what documents are needed. If you are working with a specific loan officer, you must select his/her name from the dropdown menu. If you don't have time to apply today, please bookmark this page or note our web address is: www.brattleborosavingsmortgage.com. If you prefer a face to face meeting, please call your loan officer to set up an appointment; because of heavy volumes we need your patience and flexibility in scheduling a date. Thank you for visiting our website. We appreciate your business and look forward to working with you! Helen C. Wachtel Assistant Vice President Senior Mortgage Officer
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