As a longtime user of a major loan origination system (LOS), one of the most common issues that I face in the pre-qualification phase is the issue of whether or not it makes sense to refinance in this environment. Many have refinanced into what would have been a wonderful rate historically, only to see the rates erode an additional percent. The loan pre-qualification software built into my LOS does not give me any clear way to reasonably compare the old loan scenario with one or more new loan possibilities. Loan Analyzer provides me with some needed tools to make this determination.
Loan Analyzer is a conventional Windows-based program that is available as a download (or CD request) from the company Web site (http://www.agosoft.com/). Anyone may use the software as a demo for two weeks. Paying the licensing fee converts the software into a fully functional version. To protect the buyer’s investment, Agosoft, Inc. also includes updates and upgrades to the software for a period of 18 months. The program operates a conventional display panel with menus at the top. In addition, at the right are located a number of tabs that provide information, such as Current Loan, New Loans A through C, Reports, Summary, and several others.
I was quite impressed with the addition of a wizard, which allowed me to walk through a scenario step by step, first deciding whether my major goals included a lower payment, more rapid payoff of the loan balance, or debt consolidation. I entered my existing loan information, including the interest rate, remaining loan balance, and remaining term. In my case, I entered an existing 15-year loan only eight months old, and compared this with three other scenarios: a new 15-year loan with a one percent lower contract rate, a 30-year loan with a half-percent lower contract rate, and a T-bill adjustable with a start rate 1.5 percent lower than the existing loan.
Loan Analyzer allowed me to look at the short-term advantages to be gained by lower monthly payments, and measure this against the increased loan size resulting from financing $2,000 in new closing costs (as well as the longer time it took to pay off a new loan).
Over a dozen reports were available, which could be used in a preview mode as well as regular print mode. The reports gave me detailed information on the four different loan scenarios, and even provided one report comparing all four loans on one page. Closing cost comparisons were also available as a report. Short- and long-term gains, as well as a specified time period, were also available in the reports.
When I completed my analysis, I was able to export the desired loan as a new loan into my copy of Calyx Point, ready to start additional pre-qualification or processing of the information as a loan file. The results were a bit surprising. As predicted, a new 15-year loan and 30-year loan resulted in a lower payment. I would expect the savings to start to be significant after about five years, once the closing costs were finally paid for by the better interest rate in the new loan. But after 10 years, my principal balance was still several thousand dollars higher on the new loan. Since most customers desire rapid principal reduction through a 15-year loan, this would negate some of the advantages of the new 15-year loan.
In this environment of questionable stock market appreciation, paying off the house earlier makes a lot of sense. Loan Analyzer helped me to decide that my eight-month-old refinance was good enough, all things considered.
This is a great tool for mortgage professionals when they need to advise their clients who refinanced in the last year and are thinking of doing it again. I found the software relatively easy to use. It only took me about 30 minutes to figure out the nuances of the product.