Renance Guide
MORTGAGE
Contents
Table of CONTENTS
Meet Your Loan Ocer
Reasons to Renance
Types of Renance
The All In One Loan
TM
Mortgage Terms
How Often Can You Renance
Before You Renance
The Renance Process
Meet the Appraiser
Renance Tips & Tricks
About EPiQ Group
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5
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Renance
Our loan ocers are here to act as your nancial counselor throughout the
mortgage renance process. Renancing your mortgage can
help set you up for a successful nancial future. We want to make that
transaction as smooth as possible.
MEET YOUR
Loan Ocer
THE ADVANTAGE
We are able to deliver personalized customer service with the resources of
a local lender. Borrowers prefer working with EPiQ Group because of our:
Reliable
Prequalications /
Preapprovals
Competitive
Rates
Robust Menu of
Loan Products
Transparent
Communication
Dependable
On-Time Closings
%
A mortgage renance can help you lower your monthly mortgage payment, change your loan terms, remove
mortgage insurance, or withdraw cash for home improvement projects. There will be times during the life of
your loan when renancing is a good idea, and there will be other times when it’s not the best option.
THE 5 TOP REASONS HOMEOWNERS CHOOSE TO REFINANCE ARE:
Reasons to REFINANCE
Lower Interest Rate
Your mortgage interest rate is determined by your nancial prole at the time of loan
origination and greater economic inuencers like the Federal benchmark interest rate.
If interest rates are lower than they were when you originated your original loan, you
may benet from an interest rate renance.
Shorten the Term of the Loan
Mortgage terms range from traditional 15- and 30-year terms to 10, 7, 3, and even 1-year
options. Usually, shorter loan terms carry a lower interest rate, and you’ll pay less interest
over time.
Change from Adjustable-Rate to Fixed-Rate
An adjustable-rate mortgage will uctuate but a xed-rate mortgage will maintain the same
interest rate throughout the life of the loan. An adjustable-rate mortgage will have a lower
interest rate initially but may increase over time. Renancing to a xed-rate mortgage
ensures the interest rate will stay the same for the duration of the loan term.
Renance to Cash Out Home Equity
If you have at least 20% equity in your home, you can renance to withdraw home equity.
Most nancial planners recommend using home equity for something like a home renovation
or to responsibly pay down debt. If you have another investment opportunity, consult a
nancial planner before moving forward with a cash-out renance.
In some cases, switching to a dierent loan program can help lower your monthly mortgage
payment. Renancing to lower your payment may extend your mortgage terms, depending
on the type of loan.
Lower Mortgage Payment
THE
All In One Loan
TM
Renance
Types of REFINANCE
Cash Out Renance
Some homeowners may choose a cash out renance to raise the balance of their mortgage
loan to pay for other expenses. Not to be confused with a Home Equity Line of Credit
(HELOC), a cash out renance involves originating a new mortgage for a larger value than
the original loan. In the case of a cash out renance, the monthly mortgage payment will
increase to cover the cost of the larger loan. For a HELOC, the lender issues an agreed
amount of money using the borrower’s equity in the home as collateral.
Renovation Renance
When a home is need of repair or remodel, renovation nancing may be a better option
than taking out a personal loan or using a credit card. With home prices on the rise, many
homeowners are choosing to stay in their home longer and complete repairs or remodels
through renovation nancing, rather than shopping for a new, more expensive home that ts
their needs. With a renovation renance the cost of the renovation is nanced into the cost of
the existing mortgage into one convenient monthly payment.
Cash In Renance
A cash in renance allows the borrower to lower their loan-to-value amount by making a
payment toward the loan principal to potentially lower the monthly mortgage payment. A
cash in renance is a great option for a borrower who has the funds available through a
bonus, inheritance, or other source.
The most common type of renance is known as a “rate and term renance” or a renance
to get a lower interest rate or change the terms of the original loan. Homeowners may also
renance into a dierent type of loan. For example, a rst-time home buyer who used an FHA
Loan might benet from switching to a conventional mortgage loan after they have had several
years to build their credit and improve their nancial prole.
Rate and Term Renance
Most Americans nance their home over a period of 30 years. During that time, you spend thousands of dollars
on mortgage interest, without making a signicant dent in your mortgage debt.
Mortgage interest is one of life’s biggest nancial obstructions.
What if your mortgage could help nance your healthcare needs, send your kids to college, grow your retirement
savings, and help you prepare for unexpected costs?
The All In One Loan
TM
allows you to plan for your nancial future.
All In One Loan
TM
Advantages
• Pay o your mortgage sooner
• Build equity faster
• Save thousands on mortgage interest
• Access funds 24/7
Combine banking and borrowing into one account. Apply all deposits toward your mortgage principal rst, reduce
the cost of mortgage interest, and access your equity whenever you need it.
Apply extra funds that would’ve gone to interest on:
Closing Costs
Below is an overview of the types of closing costs you may
incur. When you apply for your loan, you will receive a
Loan Estimate and a booklet that will explain these costs in
detail. At loan closing, you will receive a Closing Disclosure
summarizing your actual loan costs and fees.
Appraisal Fee – Conducted by an independent appraisal
company, this pays for a statement of property value for the
lender. You will receive your own copy.
Credit Report Fee – This covers the cost of the credit
report that is run by an independent credit-reporting
agency and is used to prequalify you for a loan and to
underwrite your completed loan application.
Impound Account – If you choose to have an impound
account, have a government funded FHA or VA Loan, or
if your down payment is less than 20%, the lender may
require you to establish an account held in trust for you
by the lender to pay the costs of your property taxes
and insurance. Your monthly payment will include the loan
Principal, Interest, Taxes, and Insurance (collectively, P.I.T.I.).
Loan Discount – Often called discount points, a loan
discount is a one-time charge used to buy down your
specic transaction’s interest rate. One point is equal to 1%
of the loan amount.
Loan Origination – This fee covers the lender’s costs
for originating your loan.
Title Charges and Document Preparation – The
title company may charge one-time fees for a title search
and examination, document preparation, notary fees,
recording fees, courier fees, and a settlement or closing fee.
There are two title policies with a one-time fee: a lender’s
title policy, which protects the lender against losses due to
defects on title, and a buyers title policy, which protects the
borrower against defects on the title.
Prepaid Interest – Amount accrued on a daily basis
from the date of loan closing to the due date of your rst
loan payment.
Taxes and Hazard Insurance – You will be expected
to pay for property taxes upfront, including the entire
years’ hazard insurance premium. In addition, you may be
required to allocate property taxes and property insurance
(may include homeowners, ood) into a reserve account,
called an impound account, held by the lender.
My Mortgage Payment
Your monthly mortgage payment is made up of several
components. This housing expense is commonly referred
to as P.I.T.I. or Principal, Interest, Taxes and Insurance.
Mortgage Insurance, Flood Insurance, and Homeowners
Association fees may also be a portion of your total
payment.
Principal – The portion of your payment that is applied to
pay down your mortgage.
Interest – A charge for the use, or loan, of money. The
interest is calculated on unpaid principal balance.
Taxes – The county assessor charges property tax based
on the valuation of your home. For example, in California,
there are two tax installments due each year; one in
November, the second in April.
Insurance – This pays for losses from certain hazards,
including re. This standard insurance pays for replacement
costs based on actual cash value.
Homeowners Association (HOA) Dues – Fees paid
by homeowners within a community of homes, condos,
townhouses, or planned unit developments (P.U.D.). HOA
dues are collected to cover the cost and maintenance of
communal areas to the property.
Mortgage Insurance (MI) – Depending on your loan
program or the amount of your down payment, you may
be required to have MI. Anything less than 20% down - a
higher note of default - requires MI. Because loans with
small down payments involve substantially more risk for
the lender, they require insurance as a hedge against
borrower default. The cost of MI varies according to your
loan type, down payment, and credit score. FHA Loans
charge a fee for life-of-loan mortgage insurance, called
Mortgage Insurance Premium (MIP). VA Loans charge
an upfront Guaranty Fee in lieu of a monthly mortgage
insurance fee.
Mortgage TERMS
A mortgage renance is the right option in many cases. Renancing your mortgage loan can help
shorten the loan terms, lower your monthly payment, remove mortgage insurance, and more.
IT’S NOT HOW LONG YOU STAY IN YOUR HOME,
It’s how long you stay in your loan.
HOW OFTEN CAN YOU
REFINANCE YOUR MORTGAGE?
Depending on the loan program, a mortgage loan
will require a seasoning period before you renance.
In most cases, the borrower must have made at least
six consecutive monthly mortgage payments on the
loan being nanced, and the renance can occur no
earlier than 210 days after the rst payment is due.
Check with your mortgage loan ocer to learn more
about your specic loan program.
SCENARIO:
Brady and Melissa renanced their home twice in one
year – how does that work and how did they benet?
“We originally renanced our 30-year xed-rate
mortgage to get a lower interest rate and remove
Private Mortgage Insurance. When we bought our
home, we were rst-time home buyers and put down
less than 20%. With our rst renance, we were
able to lower our interest rate from 6.25% to 5.0%.
We renanced again to a 15-year xed-rate loan,
to secure an interest rate of 4.25%. Our payments
are higher, but we will be paying less interest in the
long-term. We were also able to secure a ‘fee-free
renance’ by accepting a higher interest rate, the
lender paid for closing costs.”
Source: NerdWallet
Renance
Renance
Once you’ve decided you’re ready to renance and have met with a loan ocer to determine the type of
renance you will need, you’re ready to get started!
The Renance PROCESS
Consent to Proceed
A Notice of Intent to Proceed with Loan Application (NIPLA) is a letter signed by you to grant
the lender permission to proceed with your application.
Submit Documents
Paperwork please! You’ll need signed disclosures, bank statements, W2s, tax returns, and
more. Getting these documents together ahead of time will help speed this up.
Get a Loan Estimate
Lenders are required to provide a Loan Estimate (LE) within 3 days of receiving your loan
application. The LE estimates the fees and closing costs that will be associated with your
mortgage renance and will summarize your new loan terms and monthly payment.
Get a Home Appraisal
Even though you had a home appraisal when you bought your home, the value might have
changed. The renance appraisal will account for any upgrades you’ve made to your home and
any home value appreciation that has occurred in your market since your home purchase.
Receive a Final Decision
Once you’ve nished everything above, an underwriter will review your complete application and
issue a nal decision.
Close Your Loan
When you receive nal approval, you’re ready to close. You’ll have to sign all of your paperwork
and pay any lender’s fees at this time.
Just like when you purchased your home, you will need to complete a mortgage application with
information about yourself and the home. This can be completed through the DMHome App,
over the phone, or in person.
Complete the Renance Application
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Before you make the decision to renance your mortgage, complete the important checklist below.
Before You REFINANCE
Do you want to shorten your loan term? Lower your interest rate or monthly mortgage
payment? Withdraw cash for a home renovation project? Dening your renance goal will
determine what type of loan renance you will need.
Dene Renance Goal
A mortgage renance is a new loan origination, and just like when you nanced your original
purchase you are going to need all of your important documents. Get your bank statements,
W2s, pay stubs, government-issued identication, and other documents together ahead of
time to streamline the process.
Locate Relevant Documents
For example, if you are interested in a cash-out renance to pay down other debt, explore
alternative options and like payment plans with your credit cards or a student loan renance
and weigh your options before settling on a cash-out mortgage renance.
Compare the Alternatives
Since a mortgage renance is a new loan origination, you will typically have to pay lender fees and
closing costs. Meeting with a loan ocer ahead of time can help you estimate how much those
costs will add up and help you determine if you can aord a mortgage renance at this time.
Calculate the Cost to Switch
One of the most common reasons to renance is to lower the monthly mortgage payment
or overall cost of the loan. Since a renance will be a new loan origination, make sure to
calculate the “break even” point and determine how long it will take to start saving money with
your mortgage renance.
Calculate the “Break Even” Point
Renance
Once you’ve decided you’re ready to renance and have met with a loan ocer to
determine the type of renance you will need, you’re ready to get started!
MEET THE
Appraiser
Buying a new home or renancing your current mortgage will typically require a home
appraisal to determine its fair market value. The appraiser operates independently to
make an unbiased decision.
An appraisal diers from a home inspection in that an appraiser determines the value of
the house and the inspector determines what repairs are needed and what they will cost.
The appraiser will compare the price of the home for sale with the value of other homes
in the area and give the buyer, seller, and lender a detailed report on how the value was
calculated.
Appraisal fees generally range from $450 to $750, depending on the market. In most
cases, the homeowner will be responsible for the cost of the appraisal. The nal appraisal
report is based on the size and condition of the home, the number of permanent xtures
like lights and faucets, details about any renovations you’ve completed, notes about the
changes in the value of surrounding properties, maps and photographs as needed, and
the detailed market analysis based on comparable homes.
A low appraisal might prevent the renance transaction from moving forward. Other
options apply based on the loan program, and the homeowner should consult a real
estate professional for further information.
Once you’ve decided you’re ready to renance and have met with a loan ocer to determine the type of
renance you will need, you’re ready to get started!
Renance TIPS AND TRICKS
Gather important documents ahead of time. Meet with a loan ocer and review what type of
renance will help you achieve your goals.
Be Prepared
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Keep up with Your Credit Score
A renance is a new mortgage origination. Be proactive about maintaining a good credit
score, be responsible about paying down debt, and avoid opening new lines of credit.
2
Use Rising Home Prices to Your Advantage
In most cases, your home’s value has appreciated since you purchased it.
3
Consider Paying More
The terms of your loan will inuence how much interest you pay over time. A shorter loan
term will cost less in mortgage interest over time, but you’ll have a higher monthly payment.
Depending on your budget, the higher monthly payment may be worth the lower interest rate.
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EPIQ Lending™ is an equal opportunity lender, NMLS# 1936984. Loans made or arranged pursuant to California Financing Law License No 60DBO109420. For more information on our company, please visit
www.epiqlending.com. To verify our complete list of state licenses, please visit https://www.epiqlending.com/corporate/licensing and www.nmlsconsumeraccess.org.