Reasons to Refinance
Seemingly every day I encounter someone who should take a serious look at reﬁnancing their mortgage but does not pursue one. The primary reason is that they do not know that they should or how to review their mortgage. To help you determine if a mortgage review and possible reﬁnance is the right decision, I have put together a list of scenarios that make a reﬁnance a great option:
- Taking Cash Out: Utilizing the equity in your home to take cash out to consolidate debt or pay for home renovations can be much less costly than other ﬁnancing options.
- Reduction or Removal of Mortgage Insurance: If you purchased your home with and FHA loan or less that 20% for a down payment then you are most likely paying mortgage insurance. Reﬁnancing into a conventional loan could lower or even remove mortgage insurance.
- Increase in Equity: If your home has appreciated in value, it is likely the increase could help you lower your rate or drop the pesky mortgage insurance.
- High Interest Rate: If you have an interest rate above 6%, there is a reasonable chance that a reﬁnance could lower your rate. Not only can a lower rate reduce your monthly payment, but it will save you $1000’s over the loan term in interest.
- Shorter Loan Term: Reducing the term on your mortgage will save you $1000’s in interest. The payment can be slightly higher, but the savings in the long run are substantial.
There should always be a goal in mind when considering a reﬁnance.
Do’s and Don’ts During the Mortgage Process
- Notify the lender is your compensation changes from your loan application
- Notify your lender is your address changes at any point
- Obtain homeowners insurance with the minimum coverage equal to the amount of your total loan or replacement value of the home
- Keep a paper trail of any large deposits
- Notify the lender if you move funds from one account to another
- Acquire any additional credit lines or make any large purchases on existing credit
- Change jobs. A change in compensation may aﬀect your ability to qualify. Lenders may verify employment on the day of closing as a quality control check.
- Co – Sign with anyone to obtain a line of credit or make a purchase. It will show up on your credit report as an additional debt.
- Negotiate your contract with an allowance and expect to get money back at closing. An allowance can be used to pay closing costs or prepaids. If you are doing an escrow holdback, that is ok as the money will be held in escrow.
Have a great month and let me know if you have any speciﬁc questions pertaining to your own personal situation.
By Andrew Augustyniak, Branch Manager Prime Lending