Creating a Refinance Loan Comparison
Objective
This SOP outlines the steps to create a refinance transaction, establish an existing scenario, and generate a comparison for client presentation.
Key Steps
Step 1: Create Existing Scenario 0:00
Welcome back to the refinance transaction process.
Begin by creating an existing scenario for the refinance deal.
Name the scenario (e.g., 'Part Existing Scenario').
Select the same property used in the refinance deal.
Step 2: Input Key Metrics 0:28
Enter the following key metrics:
Estimated value (pulled from the property card).
Origination month.
Loan type (e.g., conventional fixed).
Enter the original loan rate (e.g., 4.5%).
Input a higher rate for comparison (e.g., 7%).
Fill in the estimated principal balance.
Step 3: Validate Payment Information 1:39
Confirm the estimated principal and interest payments.
Check the most recent payment month.
Input estimated county tax and homeowners insurance if applicable (note: escrows are waived for this refinance).
Step 4: Add Second Mortgage (if applicable) 2:18
If there is a second mortgage, add it:
Input origination month (e.g., March 2023).
Enter the amount (e.g., $100,000).
Input current rate (e.g., 8.5%).
Confirm the current principal balance and payment details.
Step 5: Create Comparison 3:04
Navigate to create a new comparison.
Select the existing scenario first, followed by the new refinance option.
Save the comparison to generate a side-by-side view.
Step 6: Review Comparison Results 3:29
Analyze the comparison:
Review existing scenario details (loan type, rates, second mortgage).
Compare total monthly payments (existing vs. new).
Calculate cash flow improvement and closing costs.
Step 7: Calculate Break Even Point 4:36
Divide the closing costs by the monthly cash flow improvement to find the break-even period.
Step 8: Finalize and Present 5:14
Ensure all values are accurate and updated.
Prepare to present the refinance transaction and comparison to the client.
Cautionary Notes
Ensure all data entered is accurate to avoid discrepancies in the refinance scenario.
Double-check the rates and terms before finalizing the comparison.
Tips for Efficiency
Use templates for existing scenarios to save time.
Regularly update property card information to ensure accuracy in metrics.
Familiarize yourself with the software tools to streamline the process.