Mortgage refinancing involves paying off an original mortgage note and creating a new loan. Many borrowers elect to refinance their home when interest rates are lowered. Others engage in refinancing to change the length, terms or type of mortgage loan.
Entering into mortgage refinancing requires the same financial scrutiny which occurred when taking out the original loan. Borrowers should organize financial records including bank statements, tax returns, payroll records, and list of income and expenses.
Your house is a valuable asset, so take time to understand the refinancing process and shop around for home loans. Taking a few hours to become informed can literally save you thousands of dollars. Unless you are a mortgage finance expert, it is time to brush up on your home loan knowledge.
The Internet is an exceptional resource for mortgage refinancing advice and tips, comparing interest rates and lenders, and determining which type of loan is best suited for your needs. The authority on home refinance is the Federal Reserve Board; the central bank for the United States.
"A Consumer's Guide to Mortgage Refinancings" is available at FederalReserve.gov and provides a comprehensive home loan guide and finance resources. The guide provides answers to frequently asked questions including, "Why Consider Refinancing?", "When is Refinancing Not a Good Idea?", "Are You Eligible to Refinance?" and "What Will Refinancing Cost?"
Many people fail to realize costs are involved when refinancing mortgages. Fees might be assessed on both the original and new loan. If borrowers are refinancing a first and second loan, they could end up paying fees and costs on three separate loans.
Refinancing closing costs can range between 3- and 6-percent of the outstanding principal. Also referred to as settlement costs, fees vary by lender and state. Common fees include: loan application, loan origination, home appraisal, inspection and survey, title search and title insurance, and attorney review.
Common fees associated with original and second mortgage loans include prepayment penalties or fees to close the loan. If you haven't looked at your mortgage note in awhile, now would be a good time to review the terms.
The Federal Reserve Board website also provides mortgage worksheets to help determine if you are eligible for mortgage refinancing. This step alone can save you time and the agony of rejection. Not to mention mortgage lenders generally charge an application fee ranging from $75 to $300.
Refinancing your home loan is not a decision to make on a whim. As with all real estate transactions there are pros and cons. If you go in blind or obtain misleading information it you could cost you a fortune or even lead to foreclosure.
Don't waste time searching for answers. Study the information provided by the Federal Reserve Board, fill out the mortgage refinancing worksheets, than shop around for the best home loan using the mortgage shopping worksheet provided at the website.
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