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Reasons
to Refinance
 | Lower
your monthly payment
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| Drop
PMI (Private Mortgage Insurance)
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| Lower
your interest rate
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| Pay
off your mortgage sooner: Sometimes called the “Equity Builder”
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| Cash
– Out Refinance
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| Debt Consolidation |
| Home Improvement Financing |
Questions to
Ask Before Refinancing:
How much would I save on monthly
payments?
Consumers save about $30 for
each half-percentage-point drop in interest rates on a $100,000 loan. The
savings would be twice as much for a $200,000 loan or if the percentage drop was
1% instead of 0.5%. You can use this as a gauge to estimate the savings for your
loan.
What are the upfront costs?
Upfront costs on a mortgage
loan generally range from 1% to 2% of the loan amount, but they can be
significantly higher or lower. These fees range from "points"--
prepaid interest -- to fees for title insurance, appraisals and document
preparation. The Real Estate Settlement Procedures Act requires lenders to
provide a good-faith estimate of these fees to consumers within three days of
applying for a loan. If the actual fees at closing are significantly higher than
the good-faith estimate, consumers have the right to cancel the deal.
3-Day Right of Rescission
How long would it take me to recoup the upfront costs through
the monthly savings?
Divide the upfront costs of
the loan by your monthly savings. The result is how many months it will take to
recoup the refinancing costs.
How long will I remain in the home?
If you plan to live in the
home well past the point that the refinancing costs will be paid through monthly
savings, refinancing makes sense.
What
is the difference between a Second Mortgage and a Home Equity Line of Credit?
Second
Mortgage
A
second mortgage provides you with a fixed amount of money repayable over a fixed
period. In most cases the payment schedule calls for equal payments that will
pay off the entire loan within the loan period. You might consider a second
mortgage instead of a home equity line if, for example, you need a set amount
for a specific purpose, such as an addition to your home.
Home Equity Line of Credit
A
home equity line of credit is a form of revolving credit in which your home
serves as collateral. Because the home is likely to be a consumer's largest
asset, many homeowners use their line of credit only for major items such as
education, home improvements, or medical bills and not for day-to-day expenses.
With
a home equity line, you will be approved for a specific amount of credit —
your credit limit, the maximum amount you may borrow at any one time under the
plan. Many lenders set the limit on a home equity line by taking a percentage
(say, 75 percent) of the home's appraised value and subtracting from that the
balance owed on the existing mortgage.
Many
home equity plans set a fixed period during which you can borrow money, such as
10 years. At the end of this "draw period," you may be allowed to
renew the line of credit. If your plan does not allow renewals, you will not be
able to borrow additional money once the period has ended. Some plans may call
for payment in full of any outstanding balance at the end of the period. Others
may allow repayment over a fixed period (the "repayment period"), for
example, 10 years.
Once
approved for a home equity line of credit, you will most likely be able to
borrow up to your limit whenever you want. Typically, you will use special
checks to draw on your line. Under some plans, borrowers can use a credit card
or other means to draw on the line.
There
may be limitations on how you use the line. Some plans may require you to borrow
a minimum amount each time you draw on the line (for example, $300) and to keep
a minimum amount outstanding. Some plans may also require that you take an
initial advance when the line is set up.
Refinance Loan Program Guide:
This
Guide is designed to help me asses your situation and determine what Loan
Programs are best for you.
Loan Program Questions:
1. What is the loan for? Lower
payment, debt consolidation, MIP removal, reduce term, other
2. How long do you
intend to keep the property?
____2 years or less, ____ 3-5 years, ____ other
3. What is the balance of your first mortgage? ___________ Second
Mortgage? ______________
4.
What is your current interest rate? _______
Fixed: _____ ARM: _____ Interest Only: ______
5. What is your monthly
payment (including principle and interest)? ___________
6. What is your current
term/program? ____30 Year Conventional, ____30 Year FHA/VA
____15 Year Conventional, ____15 Year FHA/VA, ____Other
7. Does your mortgage have a
pre-payment penalty? ____No, ____Yes
If yes, how much? _______________
8. If consolidating debt,
what is the total amount you wish to consider? $__________
9. If receiving cash, how
much would you like to receive? ___________
10. What is the current value of your home? ___________
11. What program are you interested in?
____Year Fix, ____ARM, ____ Interest Only
12. What loan term are you interested in: __30, __20, __15, __3/1,
__5/1, __7/1, __10/1, and __10/20
The following is a list of
documents generally required when applying to refinance. You may or may not need
them all, but for a fast and easy loan process, have these items available when
you're ready to complete your mortgage application.
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Copy of Warranty Deed
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This document provides full legal
description of property.
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Proof of Income:
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Typically,
you'll need to show original pay stubs for the last 30 days. If self
employed and/or
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more
than25% of salary is from commission 2 previous years Income Tax Returns.
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2004
& 2005 - All pages.
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Copy of Homeowners Insurance:
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Your
policy will verify that you have current and sufficient coverage on your
home.
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Copies of Your W-2 forms for 2004 & 2005
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Required
for each loan applicant and helps verify past employment and income history.
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Copies of Asset Information:
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Including
accounts holding money for closing costs, statements for savings, checking
and 401K
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accounts
and investment records for mutual funds or stocks. Last 30 days activity.
All pages of
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statements.
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Copy of Current Mortgage Statement:
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This
will help retrieve pay off information quickly.
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Paying off Debts:
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Provide
account statements verifying current balance and payment mailing address.
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