How to refinance an old mortgage
The economy is down in the dumps and real estate prices are at an all time low, but there is some good news. People who bought a home with a high interest are now able to refinance at record low rates.
If your mortgage interest rate is over 6 now might be a great time to talk to a bank or mortgage broker about refinancing. You want your new rate to be at least 2 points lower for it to really pay off.
First, you need to check your credit score. Credit standards are stricter today than a few years ago. A credit score over 700 will ensure you get the best available rates. Banks usually have the most competitive lender fees, so check around.
Next, calculate closing cost. This includes loan origination fees, escrow amounts, cost of appraisal and document fees. Usually for a refinance on an average priced home 2,500 is a safe amount to save for.
Finally, once you have made the decision to refinance and have chosen a lending institution, be ready to wait a few weeks for an appraisal to be completed. An appraisal is required for all home loans now. You will pay for the appraisal up front, usually around 400. This will determine if your home’s value is enough to qualify for the loan amount you are asking for.
Be prepared to pay private mortgage insurance if you don’t currently, it is required with all loans now with a balance of more than 80 of the homes value.
Refinancing can save a pretty penny. As an example if your mortgage on a 150,000 home is at 7.5, a common rate in 2007 – the peak of the industry, and you can secure a rate of around 4.25 now, you could save around 350 a month. Refinancing is a lot less of a headache than buying your home. You already know you want to live there, you just want it to cost less!
