When we hear people say they want to refinance, they are usually talking about an existing mortgage they have on their home. In that case, it could be because they need a lower interest rate, but that is not always the situation. Sometimes people refinance because they are behind on their bills, or they want to do some home improvements. For whatever reason someone needs to do this financing, they should learn some important facts about it first.
Ask yourself a few questions first, before you make any decisions.
Is this a good time for me to refinance? Will I be able to make the mortgage payments if I decide not to refinance? How is my job and income situation? Am I going to have an increase in pay or will my pay stay the same? Will I have this job long-term?
If you plan to move within the next few years, it is not a good idea to refinance, unless you have a plan that will pay the mortgage at the time when you move. Maybe you will move and you will rent your home out and pay the mortgage by using that rent money. If you decide to rent out the home, you will need to change the homeowner’s insurance, have the renter get renter’s insurance, and when you tally up what the rent will be, you will need to figure in the mortgage payment, property taxes, and homeowner’s insurance (per month). That amount will be what you ask the renter or renters to pay. It is also a good idea to have a lease drawn up and have every rule on there that needs to be there.
What do I need to know about this process? What is the average interest rate now?
Any bank or lending company can tell you this. You can also go online and do a search for average mortgage interest rates for the year it is now. It does change, but the average as of October 2009, in the USA, is between 4-5%.
Who do I ask about refinancing?
Banks and private lenders do refinancing. You can search, online, for some private lenders. If you search for companies online, please check them out at the Better Business Bureau. Credit Unions are sometimes more lenient about loans, but the interest rates can be higher.
How many years should I get a mortgage for?
The mortgage most people choose is a 15 or 30 year fixed rate, conventional mortgage. An adjustable rate is not as popular, as the rates can go higher when the housing market is not good, so you are getting a different payment amount every 6 months, in some situations.
Will I have to pay a penalty fee for paying off an existing mortgage when I refinance?
Most lenders do charge a penalty fee for paying off a mortgage early, but it might be deducted from your refinance if you are to get cash back.
What types of mortgages are there?
Fixed rates, 15 & 30 years, conventional mortgages are your best choices.
Which lender is the better choice, a bank or a private loan company?
Most banks will charge a fee of approximately $500 to refinance. Some private companies do not charge this. Credit Unions may carry higher interest rates. Your credit score will determine the interest rate.
When I go to refinance, can I add my car into the payments?
Yes, you can add your car loan, a bike loan, and many other types of loans into the mortgage payments when you refinance. A lot of mortgage companies offer homeowner’s insurance, too, but it will cost you a lot less if you get that insurance from an insurance agency that you have used before.
When you are ready to refinance and have found the company you wish to go through, ask them any questions that you have and fill out the application for the loan. They will want your income and proof of that, your social security number, date of birth, and other personal information. They will check your credit. Most companies want people to have at least 650 or higher for a credit score. Some companies may want you to have an even higher credit score. You can refinance a home with an existing mortgage, a vehicle loan, and other types of loans. Ultimately, you can add mortgage, car payments, and other types of payments together into one payment when you go to refinance.
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