When it comes to refinancing, it's one of those times when one size does not fit all.
For many homeowners, it makes sense to stick with a conventional 15- or 30-year mortgage.
But for those who have a lower mortgage loan balance and a lot of equity in their home, there’s another enticing option: Dupaco Community Credit Union’s Mini Mortgage.
A Dupaco Mini Mortgage allows homeowners to refinance for a lower rate while getting the balance paid off in 10 years or less.
The closing costs are minimal, because an appraisal is not required. Mini Mortgage participants pay $150 to $285, compared to the approximately $1,800 in closing costs that come with a conventional mortgage.
"Members are taking advantage of it more since the rates are competitive, the closing costs and turnaround time frame are appealing, and the loan is financed local and held at Dupaco," says Jill Rothenberger, lending consultant supervisor at Dupaco.
To qualify for a Mini Mortgage, the homeowner's first mortgage loan balance must be at 65 percent loan to value or less based on the tax assessed value. The interest rates start at 4.2 percent and can be as low as 3.25 percent depending on the borrower's cooperative relationship with Dupaco and the loan to value.
The time frame it takes to complete the Mini Mortgage refinance process is about two weeks versus 60 days for a conventional refinance.
Another added bonus is that it is a consumer loan, so the interest is calculated on simple interest instead of compound interest and payments can be applied weekly, bi-weekly or semi-monthly to save on interest and get the loan paid off even quicker.
"We always tell our members that if they would like to pay extra toward the principle, apply it on a day when the interest has already been satisfied," Rothenberger says. "Simple interest is still the most cost savings way to take out a loan."
One important note is that Dupaco does not escrow with the Mini Mortgage. But Dupaco will set up a special savings account and debit the escrow amount automatically for members.
"The only difference is that we do not receive a duplicate tax or insurance bill, and the member has to pay those themselves," Rothenberger says.
By Emily Kittle