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FAQ
Will I save money by refinancing?
The purpose of most refinance loans is simply to save money. The goal
is to minimize your expense over the life of the loan or to minimize
your monthly payment in the near future.
If you can get your cost back within a year and have lower payments
thereafter then refinancing probably makes sense for you. With this
type of refinance keeping the cost down is important.
How do I know when it is a good
time to refinance?
The old rule of thumb on refinancing held that the interest rate would
need to decline by at least 1 1/2% for the refinancing to be
worthwhile. A more accurate measurement would be to consider the
savings in monthly payment, the costs of the loan transaction, and the
term of the new loan compared to the old term. The key is to determine
whether the benefits of payment savings and/or term reduction exceeds
the costs of the transaction.
The rule widely published years ago was to only refinance if you could
lower your mortgage interest rate by at least 1 1/2 percentage points.
This general rule of thumb was a simple way to analyze the refinance,
allowing consumers to consider the rough costs of refinancing. That
rule no longer holds true in today's market, because you can refinance
your mortgage for no closing costs, or no points.
What are the costs involved in refinancing?
The closing costs, including lender fees,
are typically 1% to 2% of the loan amount. In addition, you may choose
to pay points in order to get a lower rate, or accept a higher rate in
exchange for having the lender pay some or all of your closing costs.
How does a refinance closing work?
The refinance closing will be conducted the same way that your loan
was closed when you first purchased your property. Soon after your
loan is approved your loan consultant will send a list of documents
you’ll need to bring to the closing. You’ll also be sent an Estimated
Settlement Statement that tells you the amount, if any, you’ll need to
bring to closing in the form of a cashier’s check, as well as an
outline of how the funds from your new loan will be disbursed.
What is Private Mortgage Insurance (PMI) and why would I
need it?
In most cases, if your first mortgage amount is greater than 80% of
the property’s value, the lender may obtain Private Mortgage Insurance
(PMI) to safeguard its investment against the possibility of default.
PMI is collected monthly along with the mortgage. |
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