How to refinance your mortgage | Is a refinance right for you
Should you refinance your mortgage? Everyone is talking about refinancing right now because mortgage rates are near an all-time low.
However, refinancing is not always a good idea. First of all, let’s look at what a refinance is.
A mortgage refinance is a new mortgage that replaces your existing mortgage by paying it off. There are many reasons to refinance. One might consider refinancing to lower the interest rate from their current mortgage. This is the most common reason. However, one should work with an experienced loan officer that asks specific questions to learn your motivations and needs. One should also only work with the loan officer if they can provide you exceptional advanced tools that can demonstrate an analysis of your refinance. The loan officer should be able to answer questions like: What is the typical cost to refinance? Is It a benefit to refinance?
What is the typical cost to refinance?
Cost will vary by state and since I am located in Texas, let’s address Texas cost. The first cost you should incur this is for an appraisal. An appraisal is done by a licensed appraiser to determine the current value of the home. Sometimes no appraisal is necessary but this depends on your credit score and historical data access by a program called desktop underwriter. That cost is normally $500-$1250 depending upon the size of the home and the area. This cost is normally paid out of pocket.
Most of the other cost can be financed into the loan. Here are some of the common cost; the credit report, flood certification, MERS registration, processing fee, underwriting fee, document preparation fee or attorney review fee, title company closing fee, title insurance, tax certification, government recording, and survey.
Sometimes these fees can be paid by the lender on your behalf for a higher interest rate. Often times people will come to me looking for a no-cost refinance. It is hard to do that in the new mortgage environment but in most cases that will mean that you will pay a higher interest rate than paying your own closing cost by including it in your new loan. Let’s look at some reasons why you should consider refinancing.
Reducing your interest rate.
This one is pretty obvious but how much lower of an interest rate is right for you? There is no rule that determines this. This will depend on your situation and the answers to questions such as, how long you intend to stay in the current residence, and how long it will take you to recover your refinancing cost. This is where an analysis tool can help you make these decisions.
Tapping into your home’s equity or cash-out refinance.
Often times people will refinance 30-year mortgage into a 15 or 20-year loan. This can save you tens of thousands of dollars in interest and enable you to be mortgage-free very quickly. One downside might be a higher monthly payment but again a good loan officer can show you the exact compares. overall financial situation. For instance, if you are carrying high-interest rate credit card debt is likely the interest rate is in the double digits. Taking a cash-out home refinance loan will provide you a much lower interest rate than those credit cards. A good loan officer can help you with a plan to use your newly found cash flow to cut years off of your mortgage as well.
Paying off your mortgage faster.
Oftentimes people will refinance 30-year mortgage into a 15 or 20-year mortgage. This can save you tens of thousands of dollars in interest and enable you to be mortgage-free very quickly. One downside might be a higher monthly payment but again a good loan officer can show you the exact comparisons.
Refinancing to rid yourself of FHA mortgage insurance or conventional mortgage insurance.
If you took out an FHA mortgage recently your mortgage insurance can never be canceled in most cases. Private mortgage insurance on a conventional mortgage can be removed if you have enough equity without refinancing. Your professional loan officer can advise you about that. However, refinancing to a more desirable rate can also accomplish the goal of ridding yourself of mortgage insurance. Home values have increased rapidly across the country and especially in the Dallas Texas market. Therefore, why not take advantage of this increased home value and rid yourself of costly mortgage insurance.
Refinancing into a home improvement loan.
Many homeowners would like to do upgrade to their homes. If you purchased your home more than three years ago it is likely that your home is worth 20% more than you paid for it. Refinancing into a home improvement loan cannot only help you to reduce rates, but it can also provide you the funds you need to finance a kitchen or bathroom remodel or even add in the pool you always wanted.
So you see there are many options for refinancing your mortgage but you really want to work with a professional loan officer that has the tools necessary to show you the real numbers.
For your own customized refinance analysis, simply send me a copy of your current mortgage statement. I will prepare your analysis free of charge without pulling your credit. If it looks good to you, I will take a complete application from you, pull your credit, collect your documentation and we can get you on your way to savings in 30 days or less.
Richard Woodward, NMLS 217454
Your Local, Direct, 5 Star Rated Mortgage Lender, Specialty Lending Manager
Office: (214) 945-1066
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Nexa Mortgage NMLS# 1660690
Licensed by the Texas Department of Savings and Mortgage Lending (SML) Mortgage Banker Registration. Service First Mortgage is an Equal Housing Lender. This is not an offer of credit or commitment to lend. Loans are subject to buyer and property qualification. Rates and fees are subject to change without notice. The views expressed on this site are those of the individual author and do not necessarily reflect the positions, strategies or opinions of Nexa Mortgage or its affiliates.
