Refinancing

Reasons To Refinance

Borrowers may consider refinancing for several different reasons:

  1. A Lower Monthly Payment The interest rate on your mortgage is tied directly to how much you pay every month for your mortgage. You may be able to get a lower rate because your credit has improved or because of changes in the market. Lower rates mean lower payments, allowing you to build equity in your home more quickly.

  2. Debt Consolidation Consolidate consumer debt into your mortgage.

  3. Cash out a portion of the home's equity Generally, most homes will increase in value, and are therefore a great resource for extra income. Increased value gives the opportunity to pay for major expenditures such as home improvements, medical costs, credit card debt, or college tuition.

  4. Shorten your loan Shorten your loan term to own your home and to clear the loan.

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The Costs of Refinancing Your Home

Refinancing includes the following fees:

  • Origination charge Includes application and processing fees.

  • Discount points Points are usually tax deductible. On refinances you may be able to finance points as part of your mortgage amount. One point equals 1% of your mortgage amount. You could possibly qualify to be able to pay one or more points to lower your interest rate.

  • Prepayment Penalty Your current loan may have a penalty for an early payoff.

  • Other charges Such as appraisal, credit report, title search, title insurance and attorney fees.

Are You Eligible To Refinance?

Determining your eligibility for refinancing is similar to the approval process of getting a mortgage.

Your lender will consider the following:

  • Income

  • Assets

  • Credit Score

  • Other Debts

  • The current value of the property

  • The amount of money you want to borrow

Income

Do you have a reliable source of income?

  • Income can come from various place, such as primary, second, or part-time jobs, overtime, bonuses, and commissions.

  • Other sources of income may be acceptable, such as retirement or veteran’s benefits, disability payments, alimony, child support, and rental or investment income.

Debts and credit history

Do you pay your bills, loans, credit cards and other debts on time?

  • Your payment habits are looked over before any decisions regarding loaning money are made.

  • Your credit history and credit score will be reviewed as well.

  • Check your credit history and correct any problems that you might have before applying for a loan.

Assets and available funds

Do you have enough available funds for a downpayment and closing costs?

  • You may use various accounts such as savings accounts, investments, and retirement funds to help pay for a downpayment and closing costs.

  • In some cases, you may be able to use gift funds toward closing costs and your down payment.

  • You also need to show that you have additional funds in your accounts to cover several months of mortgage, tax, and insurance payments.

The Property

What is the market value of the property you want to finance?

  • A property appraisal will be issued to make sure the value of your property meets all underwriting requirements.