Mortgage Refinance Q&A
Here are some frequently asked questions that you may have about refinancing your mortgage, along with answers to these questions.
Q: What is refinancing?
A: "Refinancing" your mortgage means taking out a new mortgage to pay off your current mortgage.
Q: Why should I refinance?
A: You may want to refinance to:
· Lower your interest rate.
· Pay off your home sooner.
· Lower your monthly payments.
· Change your mortgage from an adjustable rate mortgage, or ARM, that may change to a fixed rate mortgage that will stay the same for the entire term of the mortgage.
· Borrow extra money against your home to pay off other bills.
Q: When should I refinance?
A: Refinancing may be a good idea if:
· You plan to stay in your house for the next few years.
· The interest rate for a new mortgage is less than your current mortgage.
· You want a mortgage with a monthly payment and interest rate that will stay the same for a long time.
Q: When should I not refinance?
A: Refinancing may not be a good idea if:
· You plan to move in the next few years.
· You have had your current mortgage for a long time.
· The interest rate for a new mortgage is the same as or more than your current mortgage.
Q: How much can I save by refinancing my mortgage?
A: How much you can save depends on:
· Current interest rates
· Your credit score
· Your debt-to-income ratio
· How much your home is now worth
· How much you have left to pay on your current mortgage
· Any fees/costs involved in refinancing
Our Refinance Comparison Calculator can help you find out how much you can save by refinancing your mortgage. If you're thinking about refinancing to change your mortgage from an adjustable rate mortgage to a fixed rate mortgage, or deciding whether adjustable rate mortgage refinancing or fixed rate mortgage refinancing is right for you, our Fixed vs. Adjustable Rate Calculator can help you make an informed decision.
Q: How do I get started?
A: Refinancing your mortgage is a lot like applying for your original mortgage:
1. Gather any necessary paperwork, such as:
· Personal ID
· Paperwork for your current mortgage
· Pay stubs for the last month
· Tax returns for the last two (2) years
· Copy of your homeowners' insurance policy
· Copy of title insurance paperwork
· Bank account statements
· Investment account statements
· IRA, 401k, or 403b statements
· Any other paperwork your lender asks for
2. Get a copy of your credit report and credit score.
3. Talk to several lenders and compare their interest rates, fees, terms, and monthly payments.
Q: Are there government sponsored refinancing programs available?
A: There are government sponsored refinancing programs that you may be eligible for. Some government sponsored refinancing programs are run by:
· Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
· Federal Housing Administration (FHA)
· Federal National Mortgage Administration (FNMA or Fannie Mae)
· Department of Housing and Urban Development (HUD)
· Veterans Administration (VA)
When talking to lenders about refinancing options, ask lenders if you are eligible for any government sponsored refinancing programs. Some of these programs may offer you lower interest rates and fees than most other refinancing options. Contact us for more information.
Q: How much does it cost to refinance?
A: The exact amount it costs you to refinance depends on your lender, your credit record, current interest rates, and fees. The fees involved in refinancing include appraisals, origination fees, points, legal fees, insurance, documentation, prepayment fees, and others.
Q: How do I compare refinance options?
A: When comparing mortgage refinancing options, there are other things to think about besides your monthly payment or interest rate. For example, a mortgage refinance that offers you the lowest interest rate or lowest monthly payment may not have the lowest fees. On the other hand, a mortgage refinance with low fees or no fees may have a higher interest rate or monthly payment.
Your breakeven point will help you decide what refinancing options are right for you.
To find your breakeven point, divide the total costs of a new mortgage (any fees/costs) by your net monthly payment savings to find out how many months it will take to pay off the cost of refinancing.
Our Refinance Comparison Calculator can help you compare refinancing options.
Q: What are some other things to think about when refinancing?
A: Make sure you get everything in writing, read everything carefully before you sign it, ask legal and financial experts to help you understand anything that isn't clear, and watch out for anything that's "too good to be true."
Q: Where can I learn more about refinancing?
A: Visit our Mortgage Refinance page to find out more about refinancing your mortgage.
Related Articles:
Step-by-Step Refinancing Checklist
These are general recommendations not applicable to all financial situations. Every financial situation is unique. Further, the suggestions and recommendations contained within the content provided are not an assurance of any future result. Be sure to discuss your specific financial circumstances with a legal or financial expert before you take action. Contact us for more information.
