With mortgage interest rates as low as they are, many homeowners are looking into refinancing their homes. There are many reasons to refinance, for some it’s as simple as lowering their payment, others want to get cash out. Everyone always has lots of questions when it comes to refinancing. Here are some answers!
One of the major questions is what are the benefits of refinancing? This should be one of the things you consider when looking into refinancing your home. Everyone is a little different when it comes to the benefits -it depends on your reason for refinancing. You need to consider the cost of the refinance. Benefits can be:
- Lower payment
- Shorter term
- Cash out
- Get rid of mortgage insurance – especially if you have a FHA mortgage and move to a conventional mortgage
What kind of documentation will you need to provide? Refinancing is simply replacing your current mortgage with a new one, so you will need to provide much of the same documentation you provided when you bought your home. Expect to give a recent paystub, two months of bank statements and 2 years of w2’s and possibly your federal taxes. You may need to give your current mortgage statement. They will need your insurance agent’s contact information. They may need court decrees and also retirement statements. It will depend on your situation. You may need an appraisal – sometimes you can get an appraisal waiver which can save you money at closing.
What options do I have for refinancing? This may depend on your current loan and also on your current situation. If you have an FHA loan, you may want to refinance to a conventional loan so you can get rid of the mortgage insurance if your loan to value is sufficient. If you have a VA loan, you may want to stay with a VA loan to allow you to do a VA Interest Rate Reduction Loan – this is a simple loan that just lowers your payment. Many people will shorten the term of their loan -taking a 30 yr loan to a 15 yr loan.
Suggestions to anyone considering refinancing would be talk to a lender – it may be the person that did your last loan, it could be a referral from your financial planner or your realtor. Just make sure you compare your situation and look at the numbers. There are times that I tell clients not to refinance. It depends how long you will be in the home and how long it will take you to recoup the cost of the refinance. If I tell someone not to refinance, I’ll always give them my reasons. I want you to understand why I am giving you that suggestion!
Interest rates are great – but make sure it makes sense for you to refinance before you sign on the dotted line!!
Leslie Vanderwerf, NMLS ID#335509, Cross Country Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
