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Questions to ask before refinancing |
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Before you decide whether to take advantage of attractive refinancing rates, there are some considerations to make. Refinancing is not a complicated process but it's not right for everyone.
Granted, this might be difficult to answer when you consider possible job transfers or other factors, but try and determine if you plan on staying in the home for the long-term. our mortgage lender can better assist you with the implications of your answer but it will ultimately help you decide whether you are better off paying points to lower your interest rate or if you should get a fixed-rate or adjustable-rate loan. Knowing how long you plan on staying in the home will help you figure out if you'll be able to break even with the refinancing or not. How expensive will it be to obtain the refinancing loan? When you apply for a refinancing loan you'll receive a "Good Faith Estimate" of closing costs that shows you how much you'll be charged to obtain the loan, including - origination and discount fees - appraisal costs - credit report - document preparation - title insurance - pest or led inspection and other related fees Compare these estimates with other refinancing offers and pay close attention to the line that shows you how much you can expect to leave with at closing (often called "Estimated cash at closing"). This is a close approximation as to how much you'll have to pay to obtain the loan. Decide if this is worth it to you to go after the refinancing loan. Is your credit strong enough to get an attractive rate? The advertised rate isn't necessarily the interest rate you'll receive if your credit history is marginal or poor. Depending on your credit record you may be paying less or more than average. If you think your credit might need some repair, take some appropriate steps to verify accuracy and work on fixing any negative items. How will you use the extra savings? While this won't have an impact on the outcome of your application, consider what you'll do with the money you save each month. Most make the decision to invest the difference between what they were paying and what they'll soon be paying so that they can build a stronger financial portfolio. Others use the extra cash for home improvement projects, bill repayment, or education. Regardless of why you want to refinance, always have a plan for the extra cash. Overall, a homeowner should plan on paying an average of 3%-5% of the remaining mortgage's principal in refinancing costs, plus any prepayment penalties associated with paying off the mortgage you are replacing. One way to save on these charges is to check with lender who holds your current home loan and ask if they might be willing to waive these fees. It should be said that the information herein about refinancing is meant to give you some insight so that you know some of the proper questions to ask when considering a refinancing loan. For best results and to ensure that you consider all of the implications of refinancing, we highly recommend that you speak with our network of mortgage lenders, real estate agents, attorneys or other financial advisors about what to expect. |
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