How To Refinance Successfully
The idea time to refinance is when the current rate is two percentage points lower that what you have paid. However, nowadays because of the popularity of the “no cost” refinancing options, this benchmark does not seem to be valid anymore. Do not get fooled and think of the “no cost” refinancing options as free because it certainly doesn’t come free. It merely means that you do not have to pay anything out of your own at the time of closing. This is adjusted by fees charged by the lender which will again be adjusted with the new loan balance or a higher rate if you do not pay the lender up-front.
Before refinancing however, you should be able to determine how long it will take you to revive your costs. Consider monthly savings and cut down on unnecessary costs. Compare your monthly savings to up-front costs. If you choose to refinance you can manage to save a 100 dollars on your mortgage but you will still have to pay 2500 dollars for this privilege and this new loan has be kept for at least 25 months to reap the benefits. However, if you are planning to move much faster, then it is not such a good idea to refinance. But if you decide to stay longer than 25 months, refinancing can certainly work for your benefit.
Generally, you should follow a few rules of the thumb before deciding the refinance. Refinancing usually makes sense if the rates have become lower or reduced since the time of the original loan. It is a good idea if you want to use the equity that has grown since the time you bought your house. It can help you shorten your mortgage period and also is a sound idea if you want either a fixed rate mortgage or an adjustable rate one.
To start getting prepared to refinance you will have to prepare for the same process as your loan. You will definitely have to do all the same things you did to take out your current mortgage. Gather all essential documents, records and most importantly, make sure you have a good credit history. If your credit history is good with the current mortgage, the lenders will view you as a good risk which makes your refinancing easier to qualify. Your lender will have to validate your income, employment, account balances and everything else necessary so you need to prepare yourself for the process. You may also be asked to produce the last two year’s federal income tax returns if you are self-employed along with checking account and personal financial statements. It is also a good idea to bring a checkbook along to pay for a new appraisal and a credit report.
The costs of refinancing can depend from lender to lender but usually they are the same. They include an application fee, a title search and title insurance fee, an appraisal fee, a flood certification fee, a loan origination fee and a discount points fee. Once you have managed to establish your break-even point you can determine the value of a refinance.
Mindy Yong
(+65)91002985
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