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You've already invested in your home once; maybe it's time to give your investment a check-up. With a refinance loan, you generally can reduce your monthly payments - this can leave you with more disposable income to save for your future, allow you to pay off existing debt, or cash in return. Moving from an adjustable rate mortgage (ARM) to a fixed rate mortgage can save you even more a month. LOWER YOUR INTERST RATE
One of the most common reasons for refinancing a mortgage is to obtain a lower interest rate. Generally, if you can reduce your interest rate by 2% or more, this will help to improve your finances, as your monthly payment will be lower. REFINANCE YOUR ADJUSTABLE RATE LOAN
If you have an adjustable rate mortgage (ARM), it's time to consider refinancing when interest rates are low. If you lock in a low fixed rate loan, you won't have to worry about future fluctuations in your monthly mortgage payment. GET CASH FROM YOUR HOME
If you have ample home equity, you can refinance your loan and get an overdraft facility (OD) for just about anything, including renovating the whole house, paying bills as consolidating debts, buying a car or even take your dream vacation! Costs of Refinancing
When you refinance your mortgage it is important to understand the costs and fees you'll have to pay and how long it will take you to recover those costs. Refinancing is similar to applying for an original mortgage, so you can expect yo pay similar costs. Some of these may include:
- An application fee, which covers the lenders's cost to process your application.
- A fee for title search
- A title of the insurance policy, which protects the lender for any lost due to a discrepancy in the title (you may be able to have your settlement company re-issue your current title policy at a reduced rate, saving you some cost).
- A fee to have your property valued.
- A survey may be needed to confirm that there is no change to the land or physical structures which would affect it's potential sale.
- An evaluation and processing fee for your loan which is usually a percentage of your loan.
- Any other fees depending on the type of mortgage refinancing you are seeking.
Other Cost and Consideration
Some refinance costs may be waived under certain circumstances. For example, a valuation may not be necessary if you refinance with your original lender. You may be able to get a lower rate or have some of the fees dismissed through negotiation. Be sure to ask your loan officer if you are still subjected to a prepayment penalty. The penalty impose would be 1%-2% depending on the bank. Recouping Your Costs Over Time
To determine if you're likely to recover the fees you pay to refinance within an acceptable amount of time, just divide your total refinancing cost by your total monthly savings. This will show you approximately how long it will take to recover your up-front costs through your lower monthly mortgage payment. If you find it would take longer to recover your costs than you plan to remain in your home, you may not want to refinance your mortgage. Your lender can help you make this decision.
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