It's generally a good time to refinance when mortgage rates are 2% lower than the current rate on your loan. It may be a viable option even if the interest rate difference is only 1% or less. Any reduction can trim your monthly mortgage payments. Example: Your payment, excluding taxes and insurance, would be about $770 on a $100,000 loan at 8.5%; if the rate were lowered to 7.5%, your payment would then be $700, now you're saving $70 per month. Your savings depends on your income, budget, loan amount, and interest rate changes. Your trusted lender can help you calculate your options.

It is always worth noting what your rate is floating at, as well as any fees and penalties associated with refinancing your loan with a different lender (i.e. often three months' interest penalty in Cayman).

A point is a percentage of the loan amount, or 1-point = 1% of the loan, so one point on a $100,000 loan is $1,000. Points are costs that need to be paid to a lender to get mortgage financing under specified terms. Discount points are fees used to lower the interest rate on a mortgage loan by paying some of this interest up-front. Lenders may refer to costs in terms of basic points in hundredths of a percent, 100 basis points = 1 point, or 1% of the loan amount.

Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan's interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.

This is an uncommon, but growing practice in Cayman. At the very least understanding the dollar value that equates to a point on your loan is important in being conversant on your debt.

The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the "true cost of a loan." It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees.

The APR does not affect your monthly payments. Your monthly payments are strictly a function of the interest rate and the length of the loan.

In Cayman lenders are not in the practice of providing a holistic view of loan costs, so it's important for the borrower to be educated on extraneous costs associated with their debt such as legal fees, bank fees, registration fees, the valuation cost and other various disbursements.

Because APR calculations are effected by the various different fees charged by lenders, a loan with a lower APR is not necessarily a better rate. The best way to compare loans is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program terms at the same interest rate. You can then delete the fees that are independent of the loan such as homeowners insurance, conveyancing fees, escrow fees, attorney fees, etc. Now add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.

The following fees are generally included in the APR:

• Points - both discount points and origination points
• Pre-paid interest. The interest paid from the date the loan closes to the end of the month.
• Loan-processing fee
• Underwriting fee
• Document-preparation fee
• Escrow fee (if any)

The following fees are normally not included in the APR:

• Conveyancing or abstract fee
• Borrower Attorney fee
• Home-inspection fees
• Recording fee
• Stamp duty
• Appraisal fee

Mortgage rates can change from the day you apply for a loan to the day you close the transaction. If interest rates rise sharply during the application process it can increase the borrower’s mortgage payment unexpectedly. Therefore, a lender can allow the borrower to "lock-in" the loan’s interest rate guaranteeing that rate for a specified time period, often 30-60 days, sometimes for a fee.

Credit scoring is a system creditors use to help determine whether to give you credit. In the Cayman Islands there is no formal credit scoring system, so lenders rely on representations made by you about your income, assets and debts in order to evaluate your creditworthiness and ability to pay.

An Appraisal is an estimate of a property's fair market value. It's a document universally required by Cayman lenders before loan approval to ensure that the mortgage loan amount is not more than the agreed lon to value (LTV) on the property. The Appraisal is performed by an appraiser (typically registered with the Royal Institution of Chartered Surveyors) who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.

Simply put, LTV is stated as a ratio of the dollar value of the mortgage sought divided by the purchase price/property value. Depending on market conditions and creditworthiness banks can lend up to 90% LTV, but will often offer 80%.

The property is officially transferred from the seller to you at "Closing" or "Funding".

At closing, the ownership of the property is officially transferred from the seller to you. This may involve you, the seller, real estate agents, your attorney, the lender’s attorney, bank representatives, secretaries, and other staff. You can have an attorney represent you if you can't attend the closing meeting, i.e., if you’re off island. Closing can take anywhere from 20 minutes to several hours depending on contingency clauses in the purchase offer, or any escrow accounts needing to be set up.

Most paperwork in closing or settlement is done by attorneys and bankers. You may or may not be involved in some of the closing activities; it depends on who you are working with and their capacity to resolve matters independently.

Prior to closing you should have a final inspection, or "walk-through" to ensure requested repairs were performed (or if not that a "punch list" is well documented), and items agreed to remain with the house are there such as drapes, lighting fixtures, furniture, etc.

In most cases the settlement is completed by your lawyer in which you forward all materials and information plus instruct the realtor to release escrow on your deposit so the firm can make the necessary disbursement. Your representative will deliver the check/wire to the seller, and then give the keys to you.