Refinancing a mortgage seems straightforward…after all isn’t it easier the second time around? Still, some situations involve a mind boggling number of decisions that borrowers must navigate. While everyone’s needs are different, there are common questions that many borrowers have about refinancing options and the best time to refinance:
Much of this decision depends on the breakeven point – which is when your $100 per month in savings equals the closing costs for the refi. Additionally, compare how much of the new payment will be going towards principal vs the existing because that determines the lifetime of the loan. These decisions usually involve amortization schedules and other more complex factors so, consult with…read more
Usually, in divorce situations, the parties are left with two options: one party has to refinance to get the other party off the loan OR the home has to be sold.
Getting an appraisal during a renovation, is not advisable since the goal is to achieve the highest appraisal value possible in order to lower the loan to value (LTV) for a refinance. Unfinished construction projects will not help the value of the home in these cases.
You want the highest appraisal value possible in order to lower the loan to value (LTV) when you get your refi. A lower LTV improves the refi terms that you’ll qualify for. Some confuse appraisals with assessments and worry that a higher appraisal leads to higher property taxes. A refinance doesn’t result in property taxes getting re-assessed.
If you’re able to refinance and get rid of your mortgage insurance, you should do that regardless, even if it’s not pulling cash out. If you are pulling cash out to pay off credit card debt, the good news is your scores will probably go up, so you’ll qualify for a better rate when you go to buy a new house. Read more…
Lenders have to use appraisal management companies to have the appraiser assigned. They’re not able to pick and choose their own appraiser.
You may be able to refinance out of your FHA loan into a conventional loan. And assuming you have at least 20% equity, you would be able to get rid of the private mortgage insurance. Depending on your credit score and other factors, you may be able to lower your rate, but when you pull cash out on a conventional loan, there is an interest rate adjustment that increases the rates. So you’ll want to talk to a loan officer about your situation.
Assuming the goal is to lower monthly expenses and/or the amount paid to interest, keep an eye on rates. You’ll want to measure the break-even point when your cost savings on a better rate have offset the cost of the refinance (yes the closing costs can be significant).
As far as your standing with your current mortgage, the more equity you have, the better. Also it’s important that you’ve been making your mortgage payments on time for the last 12 months. On that note, your credit score is going to be important, so if that FICO isn’t at/near its best, you may not qualify for the best terms.
Lastly, your debt-to-income ratio is another factor for qualifying for a refi…so if you are dealing with a lot of debt or shortfall in income, you may want to wait until you’re in a better financial position.
Many people get an adjustable rate mortgage (ARM) because they expect to only have the mortgage for a short period of time and usually that period is usually the fixed rate period before the rate starts adjusting with the market. So if your ARM is about to hit that adjustable period, it’s often a good idea to start looking at the benefits of refinancing it into a fixed-rate mortgage to prevent against potential increases in interest rates.
The short answer: it depends. For most homeowners, refinancing into a shorter-term loan makes sense. The most common scenario involves homeowners with a 30-year mortgage who refinance into a 15-year term because it will allow them to pay off their home quicker and benefit from the lower interest rates these mortgages have. Keep in mind the 15 year term will come with a higher monthly payment and the rate improvement for going from 30 to 15 year doesn’t always make this higher payment worth it.
There are a few steps you can take to ensure you get the best refinancing terms you can. These include:
1. Ensure your credit is at its best: in addition to making payments on time and reducing the amount of revolving credit, review your report regularly to look for potential errors that might reflect negatively on you. FYI, Experian, TransUnion, and Equifax all offer free access to your credit report once a year.
2. Paying down debt ahead of time will help move your debt to income ratio into a more favorable light, improving your chances for getting the best rate.
3. Hire a broker. Brokers have access to loan products and rates from multiple banks. Not every lender will have the exact same rates, closing costs, or turn-in times. Having a skilled broker do it for you will take a lot off your plate.
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