When you’re in the market to get new mortgage loan financing it can seem like it’s an endless navigational process to figure out what loan amount, what interest rate, what program and what option is best suited to meet your needs. Here are three pricier types of mortgages to be aware of…
Cash-out refinances cost more because the lender is giving you cash in exchange for credit. It’s the same concept when you do a cash advance on a credit card, the interest rate is substantially higher, whereas on a mortgage the interest rate is not necessarily substantially higher, but it does cost more. Expect a .25 more in rate when cash-out refinancing when the prime offered rate.
Rate and term refinance for purchases for multi-family property for either a primary or a rental property can get pricey. Depending on how many units the property has it is reasonable to expect to pay more in extra closing costs, e.g. discount points and a larger amount down.
Rental property can tend to be pricey especially if the loan-to-value is greater than 70 percent. It is not unreasonable to expect to pay anywhere from one to maybe as much as two points for such a transaction with excellent credit.
Before the Covid-19 pandemic, more mortgage options were available. Options for points vs no points were readily available. The Coronavirus then changed the pricing structure on mortgage rates causing rates to fall and pricing to offer more options in the form of paying points for lower rates. If you are in the market for a mortgage, it may be worthwhile to consider all options including paying some form of points to secure a historic interest rate.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com