Refinancing Explained

 In Common Questions, Refinancing your Mortgage

Rates are still low.  If you haven’t refinanced your current mortgage in the past few years, now might be a good time to do it. Here are the answers to some common questions people have about refinancing.

How Much Does is Cost to Refinance?

How much does is cost to refinance?  The closing costs for a refinance are almost the same as they are for a purchase transaction. Title fees will be less because there aren’t any fees related to the transfer of the title, but other than that, most of the fees will be about the same.  Figure about $2,000 for the loan closing costs, and then there is the money needed to set up a new escrow account, plus the cost associated with points you may pay to get a lower rate.  The main difference between the closing costs for a refinance and a purchase transaction is you can include the closing costs in the new loan amount with a refinance, but you cannot include them in the loan amount with a purchase.  In other words, it is possible to refinance without paying any money out of pocket.

Can I Get Any Cash Back at the Closing?

Can I get any cash back at the closing?  Yes, you can get cash back at the closing, up to 80% of the value of the house.  As an example, if your house is worth $750,000, you can get a cash-out refinance loan for up to 80% of that, which would be $600,000.  You need to subtract the amount you owe on your current mortgage, and also subtract the closing costs, but the rest of the money you get can be for anything you want to spend it on.

If I don’t want any cash back, are there limitations on how large the refinance loan can be?  If you are not getting any cash back, you can go up to 97% of the value of the house when you refinance.  

Do I Need an Appraisal?

Do I need an appraisal?  Sometimes you do not need an appraisal.  The only way to tell for sure is to run the loan file through the underwriting software that Fannie Mae and Freddie Mac have.  Those are the companies that purchase loans from lenders, and if they say you don’t need an appraisal, you don’t need one.

Can I Combine Other Debt?

Can I combine other debt, like high-interest rate credit cards, with my current mortgage when I refinance?  Yes, you can consolidate debt, pay for college, buy another house, go on vacation, upgrade your house, or do anything else you want with the money you get with a cash-out refinance.

How Much Can I Save?

How much can I save each month if I just want a lower rate?  That question can only be answered if we know what your current mortgage balance is, how much your taxes and homeowner’s insurance are, and what your credit score is.  It’s very easy for us to figure the savings out for you, but we need to know about your current mortgage and your credit score before we can even begin to tell you the savings. 

Will I Have to Pay Mortgage Insurance?

Will I have to pay mortgage insurance when I refinance?  If your loan-to-value ratio is below 80%, you will not have to pay mortgage insurance when you refinance.  That means if the new loan is for greater than 80% of the value of the house, you will need to pay mortgage insurance.  There are some loan products that don’t require mortgage insurance, but they generally have higher interest rates, so it doesn’t make sense most of the time to get a loan like that.  The only exception would be for a VA loan, which never has mortgage insurance.

How Do I Start?

How do I start if I want to refinance?  It’s very easy and it’s free.  All you have to do is contact us and we can answer any questions you might have.

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