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Ready to Refinance Ask These 5 Questions First
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Refinancing a mortgage for a better interest rate can save you money, but make sure you're aware of extra fees and other considerations. • Many homeowners with mortgages have considered refinancing at some point or another. Refinancing a mortgage essentially replaces your current mortgage with a new loan. It’s an especially enticing choice for people who want to decrease their interest rate, lower their monthly payments, pay off the loan faster, tap into home equity, or turn an adjustable-rate into a fixed-rate loan. But hold on. Just because rates are at historic lows doesn’t mean that refinancing is the right decision for everyone. • Once you’ve decided that refinancing is worth exploring, find a mortgage representative who can clarify all the financials and explain all your options. While you’re discussing this, it’s important to ask the right questions—and lots of them. Ready to refinance your home? Before you jump in and start the refinancing process, here are some questions you should plan to ask your mortgage lender. • 0:07 - 1. ‘Does my quote include taxes and insurance?’ • When applying for a loan, a lender will provide an estimate that gives a breakdown of all closing costs, the rate, and all other related costs with the loan. • 0:23 - 2. ‘How much money do I need to bring to closing?’ • On average, homeowners can anticipate paying 2% to 3% of the loan amount to refinance a mortgage. So refinancing a $300,000 home loan, for example, could cost $6,000 to $9,000 and would be due at or before closing. Just as with your current home mortgage, the refinancing process will also include closing fees. • 0:44 - 3. ‘What are my out-of-pocket costs?’ • Discuss with your loan officer any additional fees you may be responsible for that are not included in your closing fee estimate. These may be included as separate costs, such as insurance and a property survey. Out-of-pocket costs vary, depending on each buyer’s situation. • 1:01 - 4. ‘Do I have room to cash out any equity?’ • Most lenders prefer to see some equity if you are to qualify for a loan. Usually, the more equity there is in a home, the easier it is to refinance. Experts say at least 20% equity is needed if you don’t want to pay private mortgage insurance. However, even with less, you can still refinance, but the terms may not be as favorable. Hassieb says that since each buyer’s loan may be different, this would be assessed on a case-by-case basis. • 1:14 - 5. ‘How long is the term of the loan that you are quoting me?’ • When you refinance, you will have a new term and amortization schedule. Each time you refinance your property, the clock is reset for the term length. The cost to refinance a mortgage can vary based on such factors as interest rate, credit score, loan amount, and lender. As a homeowner, if you want to get a better mortgage refinance deal, you should shop around and make lenders compete for your business. • More Real Estate Finance: • Real Estate Finance • ********* • Find your home on https://www.realtor.com • • ********* • Download our mobile app: https://www.realtor.com/mobile • • ********* • Follow us on: • Facebook: / realtor.com • Twitter: / realtordotcom • Instagram: / realtordotcom • Pinterest: / realtordotcom • • ~-~~-~~~-~~-~ • Learn More about the home buying process: Home Buying 101: How Do I Get Started? • • How to Buy a Home: How Do I Get Start... • ~-~~-~~~-~~-~ • • #realtor #realestate
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