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The decision to refinance Virginia home loans are dependent on
many things, including how long you plan to be in the
house, how much lower the interest rate will be on your
new loan, the closing costs for the new loan, your equity
position in the home, and whether you plan to
refinance home loans cash out. With a plain-vanilla
refinancing or also called a rate and term Virginia refinance
home loans,
you're trying to take advantage of lower interest rates to
lower your monthly payments. If you have enough equity in
your home, you may even have a side benefit of being able
to stop paying Private Mortgage Insurance
PMI.
To take advantage of a lower rate you'll have to close on
a new loan and pay the closing costs associated with that
loan. That's true even if you opt for a no-cash or
low-cash closing. With a no-cash or low-cash closing, the
costs still are there, they just are paid for either with
a higher interest rate or are included in the principal
balance of the loan. (There's truly no such thing as a
free lunch.)
If you don't plan on being in the house very long, then
the lower payments associated with the refinancing won't
cover these closing costs.
Don't worry about the points you paid at closing on your
current loan when you're considering a refinancing. They
aren't relevant to the analysis because they're sunk
costs. Look instead at what you can save going forward.
Compare APRs when deciding between loans. You may be able
to refinance with your current lender and pay less in
closing costs, but you need to be sure that its rate is
competitive. Most often you think your saving a larger
amount in closing but the refinance rates are higher. Even
1/8th difference in rate can mean thousands of dollars over a
short period.
You'd rather refinance once and lower your interest rate
by a point or more than do multiple refinancing for
smaller interest rate savings.
It may not be cheaper to refinance with the same mortgage company
It just seems logical that it would be easier and less
expensive for your existing lender to refinance your home.
After all, they know your payment history, and they know
the property.
The holy grail of refinancing is when the lender just
reduces your interest rate and doesn't require you to
close on a new loan. This can only happen if you are just
rolling your existing balance and aren't looking for a
cash-out refinancing.
So, why doesn't it happen more often? The problem is that
the mortgage market is divided into three lines of
business: mortgage origination, mortgage servicing and
mortgage lending.
If the firm that originated your existing mortgage didn't
retain the servicing, then you aren't a current customer.
If the firm servicing the mortgage doesn't do originations
in your market, then they may not be interested in your
business.
Finally, mortgage investors are looking for packaged or securitized mortgages that are part of a pool of
mortgages, so they aren't interested in your stand-alone
business.
Ask your current servicing provider what cost savings they
offer to current customers who refinance with them. You
also need to find out what terms competing lenders offer.
Saving a few hundred dollars in closing costs doesn't mean
much if you can get a lower interest rate from another
lender. Compare many lenders for low rates before talking
to your current servicing provider, so you will be able to
recognize a good deal and determine your refinancing
savings.
If you are going to apply at several lenders, you should
do it within a 30-day period. Your
credit score won't be
hurt by comparison shopping for a mortgage if you
concentrate your applications within this time frame.
That's because Fair Isaac & Co. Inc. (the company that
works with the credit reporting agencies to provide your
credit score to lenders) considers these multiple mortgage
inquiries as one inquiry when calculating your credit
score.
There is an important difference between the rate and the APR.
The annual percentage rate adjusts the
mortgage interest rate to reflect estimated
closing costs, including points paid at closing
and mortgage insurance.
The Truth-in-Lending Act requires lenders to
provide the APR when advertising a mortgage loan
and provide prospective borrowers with the loan's
APR upon request. APRs aren't perfect, since
closing costs are estimated and the lender can
round off by up to a quarter percent. In general, neither the lender nor anyone else may
charge you a fee until you have received this
information. With so much refinancing taking place, you need to
have confidence that your lender will be able to
complete your loan origination in a timely and
efficient manner.
Is mortgage refinancing right for you?
If you have been living in your home for a while,
it might be the right time to consider refinancing
your mortgage. There are many good reasons to consider
refinancing including lowering your interest rate,
consolidating your bills, shortening your loan
term, switching from an adjustable to a fixed rate or
taking advantage of your home's equity.
Rate Reduction
Generally, if your closing expenses can be
recovered within the first 30 months of the new
loan, mortgage refinancing
is probably a good idea.
Loan Term Reduction
There are several advantages to reducing the
term of your existing loan. Although you may
experience slightly higher monthly payments,
a loan term reduction due to mortgage refinancing
often translates into a significant reduction in
interest costs, as well as a more rapid build-up
of equity.
Switch From Adjustable to a Fixed Rate, or to a New ARM
You may have an
adjustable rate mortgage (ARM)
you're not entirely satisfied with. Maybe the rate
is
higher than you like, or the potential for rate
increases looms ahead.
If you plan on staying in your home at
least five years, now might be an excellent time
to switch to the payment security of a fixed-rate
loan. Or, if you plan on moving in less than three
years,
consider
refinancing
to a new ARM to take advantage of the low starting
rates that may be available. Even if the new ARM's
rate rises at the first adjustment interval, the
starting rate may be low enough to offset any
increased payment costs.
Mortgage
Consolidation
If you are carrying a first and second
mortgage on your home, and want to
combine the two
loans into one favorable rate, mortgage
refinancing might be for you.
Tax-free Cash
Via Equity
Many borrowers have built up significant home
equity over the years through appreciation and
principal reduction. These borrowers may refinance
an existing mortgage to a larger loan amount, with
the additional funds used for any purpose -
investment, car, tuition, debt consolidation, etc.
And, unlike any other consumer loan, the interest
paid on the
"cash out"
could be 100% tax deductible!
(Consult your tax advisor).
Balloon Payment
Due
If you have a balloon mortgage with a lump sum
payment due in the near future, consider
refinancing if you are comfortable with the
current rate environment.
Find Out the
Facts First
If you are thinking about refinancing,
but aren't sure whether it will really save you
money, it may well be worth a visit to your mortgage
professional who can help you calculate how much
your new monthly payments will be, as well as the
cost of refinancing.
Going Through the Process
When refinancing your home, lenders will need
many of the same documents you supplied for your
first closing. A new credit check, survey, title
search and insurance, an appraisal, and an
inspection are usually required. Depending on the
loan program you select, you may also be charged
loan origination fees and, perhaps, points. As mortgage interest
rates begin to drop, many homeowners' thoughts
turn to refinancing. And with good reason! When
your existing loan is replaced with one that has a
lower rate, you benefit from lower monthly
payments.
LOOK FOR FREE LOCK-INS THAT LAST FOR 60 DAYS OR
MORE
While it typically takes about 45 days from the
time of application to get to closing, delays of
two months or more can occur. Look for a
lock-in
that lasts for 60 days or more. There should be
some lenders in your area willing to offer a 60
day "lock-in" for free.
Be careful, however. The loan officer may say the
lock-in is free even when a fee or a higher rate
is charged for the lock-in protection.
KNOW YOUR RESCISSION RIGHTS
If your deal turns sour at closing, consider
starting over. You have three business days from
the date of closing to mull it over. If you decide
to reject the deal, you must notify the lender in
writing within the three-day period. The lender
then has 20 days to return your fees.DON'T ASSUME YOU WON'T QUALIFY BECAUSE YOU HAVE
LITTLE EQUITY IN YOUR HOME -- BUT CHECK YOUR COSTS
CAREFULLY
Many lenders require that you have at least 10
percent equity in your home (i.e., a loan-to-value
(LTV) ratio of 90 percent or less). Beware,
however, that low equity loans can involve
relatively high mortgage insurance costs.
You may only qualify if your current loan is owned
by Fannie Mae or Freddie Mac. You can find out if
your loan is owned by these organizations by
calling the company to whom you send your monthly
payments. That company may not own the loan, but
it can find out whether the secondary market
agencies do by searching a computerized database.
MAKE "APPLES TO APPLES" INTEREST RATE
COMPARISONS
Make sure you
compare
mortgage rates using a
constant number of points. An 8 percent rate tied
to 2 points is a lot more expensive than an 8
percent rate tied to 0 points.
When faced with the need to compare different
rate/point combinations among lenders, consumers
should first convert each quoted rate to one based
on a constant number of points and then find the
lender with the lowest rate. In making this
conversion, consumers should use a traditional
rule of thumb that equates each point to a 1/4 of
1 percent change in the interest rate. This would
make an 8 percent loan with 0 points equivalent to
a 7.75 percent loan with 1 point.
DON'T JUDGE A LENDER BY ITS APPLICATION COSTS
Lenders who lure you with no costs at application
can lay the fees on heavily at closing. Keep your
eyes focused primarily on the interest rate and
points.
For more answers to your questions regarding a your
refinance home loans.
Look here for more options to
refinance home loans!
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