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Understanding Refinancing:
What is Refinancing|
Is Refinancing Right For You? | The
Process |
Streamline & No-Cost Refinancing
The Process
The process of refinancing your home is very similar to the process
of getting a first mortgage. Visit our Banking
on a Mortgage section to review information about the loan
process.
Getting Started
Just like when you obtained your first mortgage, Information
gathering is the first step towards refinancing. The rest of the
process is fairly similar as well.
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Talk to mortgage professionals
and institutions that offer mortgages. |
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Look at current interest rates. Most lenders
post their current rates in their office, in newspapers
and on their websites. |
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Consider different refinancing options.
Loan products can vary by:
- Interest rate
- Number of points
- Term
- Additional costs |
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Decide on the refinancing plan you want
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Get the necessary paperwork completed
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Refinancing & Lenders
When seeking to refinance, the best place to begin is often your
original lender. They may offer you special discounts or waive
certain fees in order to keep your business. You can also check
with mortgage banking companies, commercial banks, community banks,
credit unions and other financial institutions. Mortgage brokers
may be a source of information about different mortgage products
available from a variety of sources. Other sources, such as real
estate professionals, family members, friends and coworkers may
also be able to help you research your options.
When you speak with other lenders, be sure to ask about:
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Interest rates & Points |
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Terms & APR |
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Lock-in rates & Loan Origination Fees |
As you may remember from your first loan, the lowest mortgage
rate may not always be the best choice for you. Rates are important,
but also consider the overall cost of the loan. Look at other
costs such as loan and origination fees and points. Ask what is
the annual percentage rate (APR) of the loan. The APR takes into
account the interest rate and fees. Ask for a “good-faith
estimate” in writing from each lender so you can understand
all of the costs and compare lenders.
Selecting a Refinancing Plan
After you decide on the refinancing plan that is best for you,
you’ll need to get all the documentation that you needed
for your first mortgage. You may want to look back at the Bank
section to see what information you might be asked to provide.
Remember, it is a good idea for an attorney to review the contract
before you sign it.
Points vs. Interest Rates
When researching mortgage options, you’ll probably find
that individual refinancing plans differ in rates and points.
Make sure you compare interest rates using the same number of
points. As a general rule of thumb, a ¼ percentage point
is equal to 1 percent of the loan amount and translates into a
¼ percent change in the interest rate. For example, a 9
percent loan with zero points is equal to an 8¾ percent
interest rate with 1 point. Talk to your mortgage provider to
understand the specifics in your case.
Be a Proactive Borrower: Tracking Interest Rates
Interest rates are often the motivating factor behind refinancing.
If you are considering refinancing, it is a good idea to look
at current interest rates.
Points
Points paid up front for refinancing and usually have to be deducted
over the life of the loan. There are certain specific instances
where points may be deducted in one year. Talk to your tax advisor
to find out how you should deduct the points you paid from your
taxes.
Refinancing Costs
As you may know from your first mortgage, the mortgage interest
you pay is tax deductible. Take into consideration that a lower
interest rate means that there is less interest to deduct; therefore,
your should consult your tax advisor to see how any change will
affect your taxes.
Next: Streamline & No-Cost
Refinancing
What is Refinancing|
Is Refinancing Right For You? | The
Process |
Streamline & No-Cost Refinancing
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