Important Steps for a Mortgage Refinance
Considering a mortgage refinance? Many people are, and many have already refinanced their home loan. It can be a very complicated process for those who aren’t financial or legal experts, since a mortgage is actually a financial and legal document.
There are also many misconceptions about refinancing and typically the average person has several misunderstandings about what is involved. To help you through this let’s go over a few important steps when it comes to a mortgage refinance.
You first need to understand that a mortgage refinance is actually a brand new mortgage, not just some adjustment that gets done on your original agreement. This is important to know because you need to qualify for a mortgage refinance; if you’ve had blemishes to your credit rating since your original mortgage or setbacks in earnings, you may not qualify the way you assume you would.
There are also processes you go through with a refinance just like you did with your original mortgage, including a home inspection and appraisal, a credit check, a closing, and so on.
So if you are still considering a mortgage refinance, the first thing you should do is contact your lender and arrange to meet with him or her to see about your current situation. They can give you some preliminary numbers about what new rate you may be offered as well as tell you the prepayment penalties and points you would be charged to set aside your original mortgage.
These numbers are very important. You need to figure what your new mortgage payment would be with your new interest rate and then compare your savings with the total amount of penalties you would be charged. To go through a mortgage refinance, you’re also going to be charged closing fees just like you were with the original mortgage.
These fees include that inspection, the appraisal, a title search, your credit check, a fee for the broker, processing fees, and so on. You can usually count on about $1,500 in fees on top of those prepayment penalties.
The only way you can be sure if your mortgage refinance is a good idea is to compare the savings you would get with the total of your fees and penalties. If the savings doesn’t offset those costs by much, you might do well to wait. Your lender can also tell you how to improve the mortgage refinance process.
For example, you may be eligible to pay more of a penalty up front in exchange for an even lower rate, or you may want to work on improving your credit score so that in six months or a year they can offer a better rate at that time. Your lender should help with all these steps in a mortgage refinance, so don’t hesitate to call him or her and go through these things.
While the process of a mortgage refinance might be a bit tedious and time consuming, it the end it can definitely all be worth it!