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7 Steps to follow while refinancing your current mortgage

Posted on: 13th Sep, 2004 01:01 am

Refinancing is a good option that can help you to get rid of high interest debts. But you can only benefit from it if you can secure a lower rate on your loan and also make minimum payments to the lender. You can try shopping for some of the best rates and costs while you are into refinancing. Besides, an awareness of the entire loan process also helps you get through the deal easily. This article contains an overview of the refinance process in simple steps so that it will be easier for you to interpret what the process is all about.


Steps to follow:

  1. Decide how long you are going to stay in the property.

  2. Contact your first lender and find out what he has to offer. Otherwise start shopping with other lenders.

  3. Get pre-qualified for the loan
    • Decide upon the type of mortgage

    • Check out the factors that may influence the interest rate on your loan. These are:
      1. Your credit score.
      2. Loan amount.
      3. Number of points paid.
      4. Lock-in-rate.

  4. Compare the interest rate on offer with that of your existing loan.

  5. Get pre-approved with a lender.
    • Calculate the monthly loan payments

    • Subtract new payments from current monthly payments. The difference gives you the savings that you can earn by getting a low rate.

    • Divide the monthly savings by the total closing costs. That gives you the number of months within which you can recover the closing costs. This time period is known as the Break-even period.

    • Compare the months obtained with the time period you're staying in the house. If it exceeds the time period, then refinancing may be a good choice.

  6. Follow the simple steps that will take you to loan closing, that is, towards finalizing the deal.

  7. At closing time you'll have to sign the loan documents and the mortgage note. Besides, you will have to pay for the closing costs and prepayment penalty.

Related Readings
i have a 30 year first mortgage at 7% that i pay bi-weekly with about 10 years to pay off. i also have a monthly 20 year second mortgage with about 18 years left at 8% of $95,000 that i pay monthly. should i refinance just the second mortgage? if so, what is the % rate for second mortgage refinances?
Posted on: 28th Dec, 2008 06:04 pm
Hi Jimmy Jams

Yes, you can refinance the second mortgage. You can even refinance both the mortgages into a fixed rate mortgage. At present the rates are going low. Before refinancing the property, you should do some mortgage shopping. This will help you in knowing about the market rates. You can then compare the rates and go for the best deal. To know about the current mortgage rates, check out the following link:
http://www.mortgagefit.com/rates/

This community also has a large number of mortgage lenders. You can speak to them and seek a no obligation free mortgage consultation from them. Let's hope they will able to help you.

Thanks.
Posted on: 29th Dec, 2008 02:28 am
For how long I can leave in the property if I stop paying the mortgage.
Posted on: 30th Dec, 2008 08:22 pm
Hi penelope

If you do not pay your mortgage dues for 90 days, the lender may start foreclosure proceedings and after the foreclosure sale, you will have to leave the property. However, if you are 30-60 days late, you may speak to lender and check out the options to avoid foreclosure.

Thanks.
Posted on: 31st Dec, 2008 12:44 am
Jimmy,

Depending on your situation, you may want to refinance BOTH of your loans and roll them into one with a much lower interest rate. Your rates are high.

Eric
"http://www.dreamhomefinancing.com"

[Link deactivated as per forum rules. Thanks.]
Posted on: 04th Jan, 2009 05:05 pm
We are looking into refinancing a $100,000 loan that is 2 1/2 yrs old at 6.75%. We are not looking to get cash out, but see if we can take advantage of the lower interest rates. The entire process is a little confusing. I came across the term "rate and term" refinance and wonder if this is something we could get? We were told by credit union that we "had" to borrow $100K because refinancing our balance of 90K was inconvenient. Can you help me make sense of this?
Posted on: 10th Jan, 2009 09:29 am
Hi Ting,

In a rate and term refinancing, the interest or term of an existing mortgage will be changed. This differs from a cash-out refinance wherein new money is advanced on the loan. Rate and term refinances can carry lower interest rates than cash-out refinances. You can contact your lender and check out this option but it will be lender's discretion whether he will be ready for offering you such a loan.

You may also speak to the other lenders to know whether they offer will offer you such a loan. You may also seek a no-obligation free mortgage consultation from the lenders of this community. It will help you in knowing the type of rates and terms you may expect to get.

Thanks
Posted on: 13th Jan, 2009 12:00 am
Is it possible to refinance our current residence to rent it out? We are looking for a bigger house but don't think there's anyway we could sell our house. My husband seems to think it will be easier and smarter to rent it out. How difficult will the process be with his credit score being below 600?
Posted on: 13th Jan, 2009 12:05 pm
Welcome,

You can definitely refinance your current home and give it on rent. However, you should note that as your credit score is below 600, no lender will be ready to offer you a refinance. Try to improve your credit score first and then look out for a loan. To know about ways to improve your credit, check out the given link:
http://www.mortgagefit.com/credit-rating/credit-repair.html
Posted on: 13th Jan, 2009 11:28 pm
Can I negotiate the fees involved in refinancing my home? I will need to borrow approx $145,000 my home will appraise for approx $200,000
Posted on: 15th Jan, 2009 07:34 am
Hi jchristy,

You can try negotiating the fees for refinancing the property but whether to accept it or not will be your lender's discretion.

Thanks.
Posted on: 16th Jan, 2009 12:56 am
jchristy, there are some fees that are simply non-negotiable. for example, fees paid to outside vendors, such as appraisers, credit reporting agencies, etc. also, you'll encounter fees for legal work that are not going to be negotiable with a lender (you can certainly bargain with your attorney).

you can certainly ask to have fees waived wherever possible. as niicss points out, your lender will make those decisions, of course.
Posted on: 17th Jan, 2009 06:05 am
In addition to what George had mentioned, there are more fees that you cannot avoid such as recording fees and the fees related to title searches and title insurance. In fact, the title insurance is regulated. If your lender tells you that you do not have to pay those fees then the lender is paying them for you. In return, you are most likely paying a higher rate. Do your homework to be sure you know what you are getting.
Posted on: 17th Jan, 2009 06:52 pm
I have a 2nd mortgage. If I wanted to refinance my original mortgage, would i have to first pay off my 2nd mortgage? Can I refinance my 1st mortgage for a higher amount than I owe, and use the cash out to pay off the 2nd mortgage?
Posted on: 28th Jan, 2009 09:02 am
the second question first: yes, you can do that, depending on the equity you have in your home, of course.

first question: you might not have to pay off the second mortgage, again depending on equity you have. what would be required in that case is for the second mortgagee to resubordinate its lien to the new first mortgage.
Posted on: 28th Jan, 2009 09:05 am
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