Real Estate Guidance

Refinancing the Mortgage

When refinancing a mortgage, you essentially pay off one mortgage and take out another. Why do that? There are several possible reasons. While most of these may end up benefiting, you have to weigh the costs as well. Generally refinancing will cost about 5% of the mortgage value.

By refinancing you may be able to get a lower interest rate than the previous mortgage thus lowering your monthly mortgage payment. This is usually recommended if the interest rate goes down by 2 percent or more. In other cases you should weigh the numbers to see whether there will be any real benefit.

You may also want to change the time period of the mortgage to one better suited to your present circumstances and present economic conditions. For instance if there is a lower interest rate you can shorten the period with hardly any change in monthly payment.

Exchanging the mortgage from an adjustable rate or ARM mortgage to a fixed rate mortgage, or to do the converse, may also be a motive for refinancing. Benefits will depend on whether interest rates are expected to go up or go down.

Other motives can include getting full access to the equity of the real estate or to consolidation of debts. If you want to finance a big expense it may be beneficial for you to tap the equity by refinancing. Mortgage payments are also tax deductible thus increasing the attractiveness of this method of financing. However be careful, you are basically using debt backed by your home. So make sure that the purchase or expense is really worthwhile.

If your motive is consolidation of debt, basically paying off high interest rate debt such as credit card debt by using lower interest mortgage loan, then make sure that you do not accumulate credit card debt again. Otherwise the point of the whole exercise will be lost.

To conclude, you should have a clear idea about your motives, and cost and benefits, before refining your mortgage.

Role of the Real Estate Broker

Basically a real estate broker or agent is the intermediary between the buyer and the seller in a real estate deal. Under law a real estate broker has what is called a fiduciary relationship with clients. This obliges the broker to act in his or her clients’ best interest.

From seller’s side, a real estate broker helps to market the property using various methods in order to get the best possible price. Services offered by a real estate broker may include, giving an analysis of the current state of market, appraising the property, general marketing of property, guiding clients during the process of selling, preparing the necessary documentation and contracts, and auctioning of property if that is the requirement, among others.

While buyers can enter into a signed agreement with a real estate broker (thus obliging buyers to pay commission on conclusion of the deal) to search for a property at best possible price for them, that is not necessary. Buyers can deal with seller’s real estate broker or with others under a verbal agreement.

Brokers who assist in the deal without representing either the buyer or seller are known as transaction brokers and are not bound by the fiduciary relationship.

Real estate brokers are compensated depending on the role they played, by a commission based on a percentage of the gross transaction price of the deal, or through an hourly consulting fee.

Generally real estate brokers are required to have a license. In fact in some States of US unlicensed brokers are not entitled to receive commission and their activity is illegal. In some other states lawyers are allowed to deal with real estate matters in the same way as licensed real estate brokers. Buyers and sellers can also come to a deal without brokers.