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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 purchased the house 09/07 at 6.25% interest rate
can I refinance to a lower rate or is it too soon?
Posted on: 19th May, 2009 10:55 am
this is a fine time for you, kate. rates are not at all bad, so you ought to be able to do well for yourself.
Posted on: 19th May, 2009 11:07 am
i have a tax attorney who said that i need to get at least 2 banks to give me 2 letters of refusal to refinance my home equity loan. i have federal tax liens against my peronsal residence. if i can get the refusal letters they might consider subordinating the liens. if they do that i can get a reverse mortgage and make them an offer in compromise. where is the flaw in this plan ?
Posted on: 21st May, 2009 08:19 pm
Hi mkw,

You can get a reverse mortgage, but you will have to pay off the tax lien as well as the existing mortgage on the property.
Posted on: 22nd May, 2009 12:00 am
I have an investment hause,and purchased 4 years ago.
15 years and 5.75 rate.
I just want to get lover rate than this and make little more cash from this rental.

I am paying 889 each month

Do you think it is worth to refinance?
Posted on: 01st Jun, 2009 06:50 am
not right now, jasmin. you can get a lower rate, but not without paying closing costs. you can do the math with a friendly lender, but i'm not of the opinion that it would be beneficial to you at this point.
Posted on: 01st Jun, 2009 06:56 am
What if I own outright and my only mortgage is the reverse?
Posted on: 05th Jun, 2009 02:29 pm
Hi GEgrams,

If it's a reverse mortgage, you won't have to pay the dues to your lender now. After your death, your heirs need to refinance and pay off the dues or the lender would sell off the property to recover the payments.
Posted on: 05th Jun, 2009 10:48 pm
my husband is retired,Iam sick and do not work.We are on a30yrfixed for 110,000.00 Wewould like to stay in our home,so we are thinking about a40yr fixed because rent is as high as our house payment. We do have 80% of eouity in our home.WHAT TO DO
Posted on: 06th Jun, 2009 09:32 pm
What is your interest rate right now?
Posted on: 07th Jun, 2009 03:04 pm
we want to going from a 30 yr loan to a 15 yr loan. Loan amount 122,000. Original price of home in 2004 155,000. How do you figure break even period. Why would points be charged if lender says there is no broker involved? Credit is good. Was checked last week. Is the 2% rule or at least 1.8% something to stay with in deciding whether to do the deal? Where does the money go that is between the interest rate stated and the APR interest rate. What is APR The definition I just read didn't mean much to me. "Rate of Interest which includes charges on mortgage loan and interest payment. What charges are those. Isn't the rate the charge or interest to be paid for borrowing the principle?
Posted on: 16th Jul, 2009 03:32 pm
I am recently divorced and my ex-husband will quitclaim the property to me. The loan is a 30yr @ 6.375, we have paid on it for 3yrs. I want to refinance it in my name. What are my options? My balance is appox. 95,000.00. Do all refinances have a 20% down? I don't have that kind of money.
Posted on: 23rd Jul, 2009 08:58 am
kw, do you have an idea of what the home value might be? that's critical, though you can obtain a refinance on an fha loan up to a maximum of 97% if you are not taking cash out on the loan, or up to 85% if you are seeking cash out.

if you can find out what homes in your area are selling for (comparable homes), that'll give you an idea as to your value and you can take it from there.
Posted on: 23rd Jul, 2009 09:04 am
I know that my assessed value is 104,000.00
Posted on: 23rd Jul, 2009 09:16 am
well, that's a start - generally, assessed values are a percentage of appraised (real) value; in my area, it is 70%. it will be worth your trouble to check in with a local lender - fha seems like a quite viable product in this situation. if the lender can't at least give you an inkling of what the home might be worth, see if you can get a local realtor to provide an estimate.

as i said, you can go to 97% of value if you're not cashing out on the transaction. that would accommodate your loan amount plus some closing costs, if you needed to finance them.
Posted on: 23rd Jul, 2009 10:02 am
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