Thinking of Refinancing?With the interest rates being so attractive, many people are asking me if they should refinance their home. The answer is maybe! Factors such as how much longer you plan to live in the home, and what the monthly savings will be versus what the cost of refinancing will be need to be considered. The benefit needs to outweigh the cost. Reasons for refinancing may include getting a lower interest rate, getting a different type of mortgage than you currently have that has terms more favorable to you, to stop paying mortgage insurance, or to tap into your home's equity.
There are several questions that you need to ask your mortgage banker prior to making a decision.
1. Does the quote I'm receiving include Taxes and Insurance? Always request a breakdown of all closing costs, the rate, and any other costs related to the loan.
2. How much money will I need to bring to closing? Closing costs can include a variety of fees such as origination fees, appraisal, underwriting, and processing fees.
3. What are my out of pocket costs? Is the lender requiring you to pay the fees up front and/or what fees are they adding to your mortgage balance?
4. Do I have any equity that is eligible to "cash out"? Depending on the amount of equity you have, you may have the ability to "pull out" money (which will increase your loan balance) to pay toward other debt, or to do home improvements.
5. What is the term of the loan? Mortgage loans can be 10 to 30 years (or even 40) and the costs and interest rate will vary depending on the loan program. The loan program that you choose should align with your personal financial goals.
When you refinance your mortgage, you are applying for a new loan. This means that you will have to complete an application and provide documentation to verify your income, assets, debt-to-income ratio, credit score, and job (or income) history. Your home will have to appraise for a high enough value to support the mortgage refinance, and you will have to prove that you can afford the new monthly payments. If it is financially advantageous to you, it's worth the effort. The key is to make sure up front that is the case by getting all of the facts.
Have questions? I'm here to help! Please call or email me today with your real estate related inquiries. Whether you need to sell your home, are thinking of purchasing a home, or just have general questions that I can assist with, I will be here for you.