Keys & Credit
The no-fluff real estate and mortgage podcast that helps you make smarter moves with confidence.
Hosted by Realtor Bill Jerikovsky and Mortgage Lender Barb Miller, this show cuts through the jargon and industry hype to bring you honest, practical insights on buying, selling, and financing homes. Whether you're a first-time buyer, seasoned investor, or just trying to decode your credit score—Bill and Barb keep it real with bite-sized episodes.
💡 Real answers. 🙅♂️ No sales pitches. 🏡 Just straight talk on homes, loans, and everything in between.
New episodes drop weekly.
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Barb Miller NMLS ID: 329237
Guaranteed Rate, Inc. dba Rate, NMLS #2611
Bill Jerikovsky RE/MAX RESULTS
This Podcast is edited and produced by Kody Hughes - Focal Point Media
FocalPointKody@gmail.com - 320-224-9828
Keys & Credit
Mortgage Reset: When Refinancing Actually Makes Sense
Navigating the refinance maze doesn't have to be overwhelming. In this straightforward conversation, we cut through the confusion surrounding mortgage refinancing to reveal exactly when it makes financial sense – and when it's better to stay put.
Ever wondered if that half-percent rate drop is worth the hassle? We break down the mathematics of refinancing, explaining how loan-to-value ratios work differently for rate improvements (95% LTV) versus cash-out options (80% LTV). You'll discover why refinancing immediately after purchase often limits your options, and learn about specialized programs like VA Interest Rate Reduction Loans that make the process easier for certain borrowers.
The episode highlights one of refinancing's most powerful applications: debt consolidation. Through real examples, we demonstrate how transforming high-interest debts into mortgage debt can free up hundreds in monthly cash flow – though we emphasize the importance of breaking the debt cycle afterward. We also expose industry tactics to watch for, including misleading teaser rates and hidden discount points that can cost borrowers thousands.
Most importantly, we reveal the critical calculation many homeowners miss: the break-even point. By understanding how long it takes for monthly savings to offset closing costs (which typically run 2-6% of your loan amount), you'll gain clarity on whether refinancing aligns with your long-term housing plans. Whether you're considering a rate reduction, shortening your loan term, or tapping equity for renovations, this episode provides the practical framework to make refinancing decisions with confidence.
Have you navigated a refinance recently? Share your experience and questions – we'd love to hear what worked (or didn't) for you!
0:00 Welcome to Keys and Credit
2:38 When Interest Rates Justify Refinancing
6:15 Refinancing Different Loan Types
10:05 Tapping Equity for Financial Goals
16:25 Understanding Refinance Costs and Fees
20:57 Break-Even Points and Smart Decisions
Welcome to Keys and Credit. Try it again, beep. Welcome to Keys and Credit. Your no fluff, no nonsense. Real estate and mortgage podcast. I am Bill the no bulls**t realtor.
Speaker 2:And I am, Barb, your straight talking lender. What are we talking about today, Barb? We're going to talk about refinancing and when it's a good time. Okay, so you know, during COVID, a lot of people did refinance, but a lot of people have bought since then and maybe they did not refinance during that timeline. But we want to talk about when is a good time to refinance. When is a good time?
Speaker 1:When is a good time to refinance Barb with Rate Inc?
Speaker 2:Well, so basically, what a refinance is? You're replacing your current mortgage with a new mortgage, so new terms and new rate. You'd want to think about maybe refinancing when the interest rates are maybe a half a percent to a point lower than where you're currently at, because that's going to save you hundreds of dollars on your monthly payment so say it's only a half a percent lower.
Speaker 1:Would it be worth it after all the costs that come in?
Speaker 2:it depends right if your loan amount is 200 000. Maybe not okay if your loan amount is 500 or 600 000. It.
Speaker 1:Okay. I have a question when it comes to the debt, not the debt to income, the loan to value, uh-huh, okay. So say, somebody bought a house with us yesterday and they want to refinance it in six months because interest rates went from six and a half down to four. We'll just say four, okay, okay, we're just rolling with it. Would it be worth it for them to do it in six months?
Speaker 2:It could be Right.
Speaker 1:What about their loan to value? What if they're?
Speaker 2:Well, so if they're refinancing a conventional loan and they put 5% down, you can do a rate and term refinance at 95% loan to value. So 5% down is 95% right, and so it's a rate and term. So you're reducing the interest rate and you may be reducing the term as well, or you could still be at a 30.
Speaker 1:Okay, but it would be worth it just because of the interest rate decrease, correct, okay, now could they pull equity out of their house. So they've been in there for six months. Interest rates come down. Is there going to be a lot of equity in there to pull out, or are they just refinanced for a lower payment?
Speaker 2:probably a lower payment. It depends upon the value at that time, sure, but it probably didn't grow enough because if you're pulling cash out, you have to be at at 80% loan-to-value.
Speaker 1:That's what I was getting at.
Speaker 2:So you're not going to necessarily be at 80%. Well a new loan would be at 80%, so you'd really have to be at 70% if you wanted 10% of your equity Right.
Speaker 1:So the 95% that's just a strict refinance.
Speaker 2:Yeah right, in term Refinance it's called. That's all Okay.
Speaker 1:All right, okay, all right, uh, conventional or conventional. What about fha? Fha, you can do a streamline, can?
Speaker 2:you refinance one fha into another, you can you can.
Speaker 1:Just for a lower interest rate, correct. What about va and usda?
Speaker 2:you can, you can okay, so you um va. You have to make seven payments before you can do what's called a va.
Speaker 1:You were telling, were telling me that I remember that conversation. I'm like what the fuck are you talking about? What are you talking about? So a VA, earl?
Speaker 2:interest rate reduction loan. You're just redoing the interest rate those you don't necessarily. You can do a no, you wouldn't necessarily need to provide your bank statements and pay stubs and W-2s.
Speaker 1:Well, and VA is super lax when it comes to that stuff. Well, yes, I don't want to say lax, but they have different requirements.
Speaker 2:Well, their thoughts are if your rate is going down and you have made seven on-time payments, it's only going to benefit you by having a lower rate, because your payment's going to be lower.
Speaker 1:Yeah, because VA is more for their people than it is for just making money, right.
Speaker 2:Correct the Veterans Affairs Association. Yeah, or whatever you want to call it. Yep, yep, okay All right.
Speaker 1:When is a good time to? Well, let's say you need to pull money out of your house for, say, college funds, car repairs, debt. When's a good time to?
Speaker 2:do that when you're at around 70%, depending upon how much money you need.
Speaker 1:Like, are we?
Speaker 2:talking $50,000, $100,000 of your equity you need out. It depends upon where the value is. So how?
Speaker 1:would they figure that out?
Speaker 2:The 70%. Well, they could talk to their realtor, they could do a market analysis and say hey, I think your value is going to come in at XYZ. They can reach out to me as a lender and I have systems that can look at potentially what the value would be. But of course it's going to come down to an appraisal.
Speaker 1:Okay, I was going to say so. If I did a CMA a market analysis, what that called if I did a CMA and handed it to you, you could start with that number for refinance, Right? But once again, you're going to have to have an appraisal then.
Speaker 2:Okay, that makes sense you need to know kind of where your value is, to see if what your goals are are going to work Right. Because you need to look at okay, my mortgage balance is here. I really need $25,000. The value potentially is going to be here when I add my mortgage amount plus how much I need plus closing costs am I going to be below 80%.
Speaker 1:Here's a question for you. So some people need to take out money from their house, from their equity, to pay off debt, to make their lives easier. Now, when you go to refinance, you can figure in what they're paying off, right, right? And what their payments are now and what their new payment will be.
Speaker 1:So then, you look at what the difference is yeah, because some people, um, they hold up financing or refinancing because of their or selling the house because of their current debt. Right, but if you can see, because rate will see the current debt, um, and they're paying off credit card a and B and car C, you can actually pay that off for them.
Speaker 2:Correct At closing.
Speaker 1:And then they can take whatever's left. So now they have, hopefully, a lower house payment if they did it right Sometimes close to the same or higher, but they'll have less payments and a little bit of money in their pocket, right? So just because they have that debt doesn't mean they can't refinance, right? Right, because you can pay it off with the funds or the equity from the house.
Speaker 2:Correct, you can see that.
Speaker 1:Correct, so something to think about there right, right, absolutely.
Speaker 2:Because if your payment's going down because maybe the rate's a little bit lower, and let's just say their debt payments were $1,200, and we paid it off and maybe and maybe it increased it 400. Well, they're saving $800 a month that they can then utilize elsewhere, right?
Speaker 1:Yeah, it helps their budget. Yeah, that's yeah. So refinancing in certain. So I've never refinanced. I've always been super. I'd always stay away from refinancing just because I want to take my equity from the current house, move it into the next one, so on and so forth. And the only reason I'm in the situation I am now, which we all know what that is, is because I did that so many times. I never refinanced right. But when I help people refinance theirs, or when they call and they want to say buy a new house or do renovations there's another one too They'll call and say, hey, you know what we're thinking about selling. If not, we're going to renovate our house. I'm like, well, let's talk about equity Refinance. What money you got all that stuff? And sometimes they have so much equity and their interest rates are in such a different area they'll pull out $10,000, $20,000, $30,000, $40 are done.
Speaker 1:they've increased their value and now that equity goes right back up, Right, so they have that back again to use later. So refinancing the stigma of should I refinance or I shouldn't, you know blah, use it.
Speaker 2:Well, sometimes people will refinance, especially when rates are lower and we can do odd terms.
Speaker 1:What in the hell is an odd term.
Speaker 2:Okay.
Speaker 2:I mean, we have an odd producer, you bought your home and it's on a 30-year term, so you have 30 years, your, your loan is amortized over 30 years to pay it back. Okay, you call me and you're like all right, well, I've been in my home for 27 years. If I refinance, sure, the rate's going to go down one percent, so it's going to go from seven to six. Okay, I can do a 27 year loan. Oh, so you don't lose any of your traction, because so it's not a strict has to be 30, not with me.
Speaker 2:You could go with um an odd term, so and that's helpful. So because a lot of times you won't want to lose that traction, Because really at the end of the day we want our mortgage, gone right.
Speaker 1:And if you look at I don't know if you've ever looked well, I'm sure you do the first payment versus the 30th payment or the 360th payment, whatever it is on the 30th, Two bucks in interest and the last payment you're paying, or I'm paying, sorry, the first one you're paying all interest and the last payment you're paying, like two bucks in interest, Right, so you don't want to lose that stuff.
Speaker 2:No, you don't. You don't, so you can go to odd term. Or sometimes maybe you're on a 30, and we look at what the 20-year rates are. Can you do an?
Speaker 1:odd term on a regular first-time mortgage Like a first? No, you can't. No, that's just a refinance option. Yeah.
Speaker 2:Okay, and why would you want to? Because?
Speaker 1:three years in interest is huge. That's a lot of money, well I know.
Speaker 2:but where rates are at today. You may as well just go with the 30, right and, especially if you're a first-time buyer, get in with the minimum right. You can always pay more towards principal Okay and whittle away your principal. So sometimes when we look at refinancing we'll look at a 25 and a 20 and maybe even a 15 year term option and what those payments look like, depending upon where your rate is today and what rate you could get on a 20 year. You sometimes could potentially have a lower payment or just a little bit above, and I would show you the difference in the interest savings from let's just say once again, you're at 27 years that interest of the seven years you're saving by going to a 20 plus dropping your rate.
Speaker 1:So, say someone, calls and says you know what, barb, I want to refinance my house. I want to do 30 years, because interest rates are great. I know what's going on, so this is what we want to do.
Speaker 2:if you see something better, oh yeah, I'm sure of course we're going to show all options right and if they want to do a 30.
Speaker 1:That's great, right, uh-huh, but you show it to them anyways.
Speaker 2:Yes, absolutely because it's their goals, it's their budget and so we want to help them, guide them.
Speaker 1:You know most people what's most comfortable they hear all this crap on the internet or through social media or whatever they want. Most of the stuff that you hear is wrong. It is, unless it's coming straight from the source, but if you're hearing it from Drunk Uncle Bob or whoever else, usually Barb has a better option.
Speaker 2:We want to explore all options because we don't want to cut ourselves short.
Speaker 1:Yeah, like coming back to the debt, to income stuff, a lot of people think they can't refinance because they have that credit card, right, or they have that car loan, you know. But if you pay that off, say your car loan is only 10 grand and you're going to pull out 30 grand in equity, I mean you're still your car loan's paid off right, that payment's gone, your house loan's cheaper and you got a $20,000 check in your pocket. I mean, you know.
Speaker 2:So really, basically, you're trading your loan for a better deal.
Speaker 1:Yeah, your current loan right.
Speaker 2:So interest rate yes, you're going to. You should shoot for 1%, but a half a percent would be, you know, still maybe worth looking at and maybe maybe you're on a variable interest rate. There is a lot of arms that are being sold.
Speaker 1:Why.
Speaker 2:Sometimes it's a better deal. How?
Speaker 1:is an adjustable an arm is an adjustable rate mortgage. Okay, and we're going to find out. So my mentality, which is probably most people's mentality, is that they're the devil, because that's what happened in the downturn.
Speaker 2:Right, right.
Speaker 1:So why are they a good thing?
Speaker 2:Okay. So if you have someone moving here from Colorado, okay, and they know that they're going to be transferred to New York in two years, oh, they would maybe want a variable interest rate, it wouldn't matter. It wouldn't matter a lower interest rate, lower payment, and they already know in the future they're moving and they're selling their house.
Speaker 1:So on an arm is it set for a couple years it is.
Speaker 2:It's usually a five-year, seven-year, 10-year arm.
Speaker 1:And then it starts going wonky to whatever Yep, yep, all right.
Speaker 2:So really, what you're doing is it's going to be a lower interest rate. You're betting that the rates are going to. Reason why you'd want to refinance is to go to a fixed rate Okay. And also, you need to determine, too, what the costs are versus refinancing. What do you mean? Well, there is cost associated with refinancing, right You're?
Speaker 1:telling me. This isn't free. Rate Inc isn't going to finance your shit for free, cody. No, there is cost associated.
Speaker 2:Son of a bitch, hang on, I've going to finance your shit for free, cody.
Speaker 1:No, there is cost associated. Son of a bitch, hang on, I've got to tell you that one too.
Speaker 2:So you have to figure out what the break-even point is. Okay, so cost, depending upon the lender, is anywhere from 2% to 6% of your loan amount. Okay, probably not 6%, but I mean some.
Speaker 1:So be careful, shop around. Probably the ones that rhyme with Wells Fargo.
Speaker 2:I'm guessing it's those types. What you want to do is, if someone is selling you a song and dance and it seems too good to be true, it may be how do you know?
Speaker 1:This is a lot of the shit that we get into Well you want to see how do you know if? It's a song and dance Well okay.
Speaker 2:If you hear like rates are going for 6% and all of a sudden someone's advertising for Right, right away, you know that they're charging you a boatload in discount points to get that.
Speaker 1:And there really isn't any fours in the market right now.
Speaker 2:Half the people that heard, that don't know what that means? Okay, sure, let's talk about discount points and how they get their 6% to 7% down to 4% because they're not paying for it. They are paying for it in discount point.
Speaker 1:No, the lender's not paying for it, correct, the loan mortgagee, is it the mortgagee? Mortgageor, mortgageor, mortgageor? The mortgageor would be paying for it, correct, right. And they don't tell you that. Here's another bullshit tactics that they use. They'll say so. Barb's going to say you know what Our interest rate, our refi rate, is? What are we at right now? Throw a number Six and a half Sure.
Speaker 2:Around there. Okay, we're going to say around six and a half percent, and then the lender.
Speaker 1:That rhymes with Wells Fargo. But what they don't tell you is you have to pay six points to get there. You gotta pay six, six points, you gotta pay six percent. That comes out of.
Speaker 2:So, for example, on a two hundred thousand dollar loan. That would be, you know, 12 grand yeah so 12 grand. So just in discount so that, and then lender fees and title fees.
Speaker 1:That big discount or that big variance in interest rates that people put out there, so just be careful, shop around. It's bullshit is what it is. I'm going to tell you that one too. What people don't understand is that costs you a lot of money, but there's so much going on and there's so much money moving around, it's hard to see that.
Speaker 2:Well, yeah, they have hidden fees.
Speaker 1:Even in the CDs, the closing disclosures at closing tables. If they know what they're doing, right? If, say, the lender knows that they're trying to weasel this stuff in, they can zip right through it and you won't even know it.
Speaker 2:It's just part of the law, it really is you know so, Yep, so they'll have hidden fees or they'll advertise teaser rates. Sorry, I went down a rabbit hole on that one.
Speaker 1:No, that's fine. Messed up your whole flow. No, that's fine.
Speaker 2:And so then you've got to also determine how long you're planning on staying in the home, Because if you're planning on staying in the home only another year because maybe your wife is having a baby and the house is getting too small, then it maybe probably doesn't make sense.
Speaker 1:There's another question, as I throw a pen at you Is there a prepayment penalty for early payout?
Speaker 2:Generally no, depending upon the loan type.
Speaker 1:No, Okay. So if you refinance your home and just to do some improvements to get it to sell and then you sell it, they don't give a shit right, they just don't care.
Speaker 2:Okay, all right. No, all right, see.
Speaker 1:Good, don't care. Okay, all right. No, all right. See, good to know, good to know. That's stuff we could use too for people. If you're going to list your house and you want to get top dollar, so you need 20 grand to get 60 out of it, you can do a refi you can do well, or you can do a home equity like that's what I say cash out or something like that, or whatever it is equity um, and there's no prepayment on that correct and rate.
Speaker 1:does that as well, right, correct, way better than everybody else.
Speaker 2:All.
Speaker 1:I see when I look over, here is like half of Cody's face.
Speaker 2:It's really funny because every now and then he just like pops over. I'm stuck in the office so I can give an example. So for example, let's just say Sarah had a $300,000 loan.
Speaker 1:Who's Sarah?
Speaker 2:Where'd Sarah come from. It's just an example.
Speaker 1:No one we know Is Sarah married? Okay, sorry, anyways.
Speaker 2:Sarah no one we know has a $300,000 loan and she's at 6%. Okay Okay Okay. She refinanced to four and a half percent, saving 250 a month, but she paid 6,000 in closing costs. So her break even point is two years, because you take the two 50 divided by the 6,000 and it'll determine how many months it takes for you to get to the break-even point.
Speaker 1:So that's where she was when she started Yep.
Speaker 2:So in this, example, if Sarah's going to be longer than two years let's just say her goal was maybe five it would make sense for her to refinance because her break-even point is that two years, so those 36 months after she's going to have a lower principal balance than if she stayed on the same path she was at right now and this is why we let barb do this stuff.
Speaker 1:Like when someone calls and says hey, bill, I want to refinance my house. Hey, I wanted, I can. I have a very limited knowledge of this stuff, enough to be dangerous, right enough to get the road paved for you. Honestly, that's about it. But when it comes to the complicated stuff like this, like break even, nobody would think about that. They'd say you know what, I'm bringing all this money out. This is gonna be great, let's go buy ferrari, right? Barb's gonna be like well, it's gonna take you like 37,000 years to break even for that. Is that something you want to do?
Speaker 2:right, you know, because you have to be cautious. What am I using my equity for? Because, like you had said earlier, you want that equity for the next home you're buying right so you have to be diligent, Like if you are going to be paying off short-term debt short-term meaning credit cards or car loan then you also want to be diligent after you tap into that equity, that you're not increasing those credit lines again.
Speaker 1:You don't start over. You don't start over, right? I mean yeah.
Speaker 2:Yeah. So, yeah, I can dig it. There is a reason to refinance. You just have to be careful. You have to know where your value is before you spend money on an appraisal.
Speaker 1:So here comes the sales question what the costs are. Are you going to sell them on it? Are you going to try and figure out what they're doing, if it's a good idea or not?
Speaker 2:Oh, I'll definitely tell them if it's a good idea or not.
Speaker 1:You're damn right or not. Sometimes there is an or not in there. People don't want to hear it. They'll call Barb and say say hey, this is what I want to do. Here's our plan. Is it going to work? A sales lender or a transaction lender or a I don't know goal like money goal? I don't know how lending works if you've got quotas or what, nope, well, I'm sure you don't. But I don't know how some lenders work. But if they say, oh yeah, let's just do it, and they do it and you just dig yourself a hole.
Speaker 2:Well, they're commission-based just like realtors. Okay Right, a realtor may walk into a buyer, into a house and say, oh, it's listed at $275. You should offer $315, and if it doesn't appraise, then you have an issue right. So back to refinancing. You call someone may be like, oh yeah, hands down, this is the best deal for you, right? Look at the rates, look at the fees. Kind of do your homework on what you think your house is worth if it's going to appraise for the goals that you want.
Speaker 1:If you want to do a rate and term, you should be okay you want to listen to what questions your lender is asking you, Because if they're just asking you, oh, we're not advertising. If they're just asking you questions on how to get this pushed through right, versus questions from Barb, why are you doing this? What's your plan?
Speaker 2:What's your goals?
Speaker 1:Is this a good idea?
Speaker 2:I'm always going to say what's your goals, what's your goals?
Speaker 1:I mean pretty simple statement, right? Pretty simple question.
Speaker 2:And your goals are your goals and it's great. So then it may be a good idea.
Speaker 1:You can tell them the consequences of this action. Yeah, right, this is what Barb has seen 400,000 fucking times in the past 10 years, right, right? So this is going to be the consequence of your action. If it's a good one, sweet. If it's not, it's your decision, right? It really is it really is.
Speaker 1:I mean we always say that we work for people. I tell someone, hey, you know what? Putting in an offer $20,000 over a house is a bad idea? And they say, bill, do it, we're doing it going to work. And you say, do it, at least you told them right. Right, at least you told them right. Thanks for tuning in to keys and credit, where the only thing inflated isn't the market, it's your knowledge. Um, you found this helpful. Share with a friend. Leave us a review. It helps more than you think more than you think.