Your Mortgage Refinancing Questions Answered
With low-interest rates, it is tempting to refinance your home loan. We understand it is a tough decision and you have questions. That’s why we’ve put together a few answers to common refinancing questions.
To determine whether or not it is a good idea for you to refinance, you should look at your specific situation and your motivation for refinancing. The most common reasons are lower refinance rates and/or payment, convert from an adjustable to a fixed rate, or a cash-out refinance to consolidate debt or improve your home. If your objective is to reduce your rate and payment, you should review your current interest rate and see how much you can save with a 0 point loan and then determine if it makes sense to pay points to reduce your rate further. If you are converting your adjustable rate into a fixed rate, you may see an increase in your rate and payment, but you'll get peace of mind knowing your rate will never increase again. If you are using the equity in your home to consolidate debt, your overall loan balance and payment may go up. Still, you will save more each month because you will eliminate the monthly obligations that you are paying off. Your mortgage lending officer can run some numbers for you and help you determine whether or not refinancing makes sense for you.
Every situation is different. It depends on what your current interest is and what your motivation is for refinancing. If your current rate is higher than what is available in the market, it probably makes sense to refinance. To get an idea of what you could save by refinancing, check out our mortgage calculator page and input numbers specific to your situation or call one of our licensed lending officers for some expert advice.
Typically, any second mortgage is paid off through the refinance. We will consolidate both loans into one new first mortgage, and you will only have one payment each month. If you'd prefer to keep your second mortgage intact, we may be able to ask your second mortgage lender to remain in the second position and allow us to refinance the first loan. This process is called subordination, and there is typically a fee charged by the second mortgage lender.
If the necessary documentation has been provided, you can usually be approved within 24 hours.
The law requires the lender, within three business days from the date you apply, to give you an itemized estimate of closing costs. Keep in mind that this is an estimate based on the information available at the time. Your actual closing costs may vary somewhat depending on certain costs (i.e., how much the appraisal costs, the actual closing date, the amounts of your real estate taxes and homeowner's insurance).
Fees associated with refinancing vary from lender to lender, but there are standard fees that are typical across the board. These fees include 3rd party fees such as appraisal, credit report, title, escrow, and recording fees. If you are paying points to lower the rate, the cost of each point that you pay equals 1% of your new loan amount. Aside from the closing fees, there will be prorated pre-paid costs for items such as property taxes, interest, and homeowners insurance (if applicable). If you have enough equity in your home, you can add all fees and pre-paid items into your new loan.
Standard documentation collected for a refinance transaction includes information regarding your income such as pay stubs covering the most recent 30 days and W-2s for the last two years, asset information such as bank or mutual fund/stock statements covering the last 60 days and current loan information such as your most recent mortgage statement and homeowners insurance declarations page.
There is no rule-of-thumb when it comes to refinancing because there are different reasons to refinance. If you are currently in an adjustable-rate mortgage looking to get into a long-term fixed loan, your rate and payment may increase, but you will be in a better long-term situation knowing your rate and payment will not change. If you are looking to consolidate debt, your loan amount and mortgage payments may go up, but your overall monthly outflow will decrease because you will have eliminated some or all of your credit card bills and other monthly obligation. It is a good idea to go over your specific situation with a mortgage expert to determine whether refinancing makes sense or not.
Most refinance transactions could take up to 45 to 60 days based on the complexity of the loan.
You sign your closing papers at Missouri Credit Union in the presence of the signing authority. You will review and sign all your loan documents and then present a certified or cashier's check to pay the closing fees and other applicable closing funds unless you decided to finance the closing funds into your new loan.
Do you have questions not answered here? Contact us today and we'll be happy to answer any questions you have!