Guide To Refinancing Your Mortgage

Guide to​ Refinancing Your Mortgage
Refinancing your mortgage can mean great savings for you​ and your family .​
Replacing your existing mortgage with a​ lower interest loan,​ changing the​ term of​ your loan,​ or​ even consolidating all your debts into this new loan could save you​ money,​ both monthly and over the​ life of​ the​ loan.
The rule of​ thumb is​ when interest rates are 1.5 to​ 2% lower than you​ are currently paying on​ your mortgage,​ it's time to​ consider refinancing .​
Would Refinancing Be Worth It?
Refinancing can be worthwhile,​ but it​ does not make financial sense for everyone .​
There are a​ number of​ items to​ consider,​ such as​ how long you​ plan to​ stay in​ the​ house .​
Most sources say that it​ takes at​ least 3 years to​ fully realize the​ savings from a​ lower interest rate,​ given the​ costs of​ the​ refinancing.
Refinancing can be a​ good idea for homeowners who:
* Have an​ adjustable-rate mortgage (ARM) and want a​ fixed-rate loan to​ have the​ certainty of​ knowing exactly what the​ mortgage payment will be for the​ life of​ the​ loan.
* Want to​ build up equity more quickly by converting to​ a​ loan with a​ shorter term.
* Want to​ draw on​ the​ equity built up in​ their house to​ get cash for a​ major purchase or​ for their children's education.
What Are the​ Costs of​ Refinancing?
Costs can vary significantly from area to​ area and from lender to​ lender,​ so the​ following are estimates only .​
Your actual closing costs may be higher or​ lower than the​ ranges indicated below.
Application Fee $75 - $300 .​
This charge imposed by your lender covers the​ initial costs of​ processing your loan request and checking your credit report.
Appraisal Fee $150 - $400 .​
This fee pays for an​ appraisal,​ which is​ a​ defensible estimate of​ the​ value of​ the​ property.
Survey Costs $125 - $300.
Homeowner's Hazard Insurance $300 - $600.
Lender's Attorney's Review Fees $75 - $200 .​
The lender will usually charge you​ for fees paid to​ the​ lawyer or​ company that conducts the​ closing for the​ lender.
Title Search and Title Insurance $450 - $600 .​
This charge will cover the​ cost of​ examining the​ public record to​ confirm ownership of​ the​ real estate,​ and the​ cost of​ an​ insurance policy.
Home Inspection Fees $175 - $350.
Loan Origination Fees 1% of​ loan .​
The origination fee is​ charged for the​ lender's work in​ evaluating and preparing your mortgage loan.
Mortgage Insurance 0.5% - 1.0% .​
Depending on​ the​ type of​ loan you​ have and other factors,​ another major expense you​ might face is​ the​ fee for private mortgage insurance.
Points 1% - 3% .​
Points are prepaid finance charges imposed by the​ lender at​ closing to​ increase the​ lender's yield beyond the​ stated interest rate on​ the​ mortgage note .​
One point equals 1% of​ the​ loan amount.
Prepayment Penalty .​
a​ prepayment penalty on​ your present mortgage could be the​ greatest deterrent to​ refinancing .​
The mortgage documents for your existing loan will state if​ there is​ such a​ penalty .​
In some loans,​ you​ may be charged interest for the​ full month in​ which you​ prepay your loan .​
In the​ future,​ always make sure there is​ NO prepayment penalty.
In Conclusion
A homeowner should plan on​ paying an​ average of​ 3 - 6 % of​ the​ outstanding principal in​ refinancing costs,​ plus any prepayment penalties and the​ costs of​ paying off any second mortgages that may exist .​
Whether or​ not that is​ a​ wise decision is​ purely a​ numbers matter.

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