How to Refinance Your Mortgage
Know what will influence the rate that you will receive., Understand that advertised rates are not reliable., Know the costs associated with refinancing., Find out whether your lender has a prepayment fee associated with your current mortgage.
Step-by-Step Guide
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Step 1: Know what will influence the rate that you will receive.
Here are the elements that will determine the rate you will receive:
Loan size Your credit score Paid points When is the closure of the loan? Locked or floating rate Debt to income ratio -
Step 2: Understand that advertised rates are not reliable.
Experts say that when mortgage refinancing companies publish their rates, it is most likely that only about 10% of applicants get to use them.
The displayed low rates are used to lure people.
It's not always wise to fall for them. , It probably doesn't make sense to refinance if the costs and fees associated with refinancing are bigger than the amount of money you would have saved after refinancing.
Figure out up front how much you're likely to be charged for refinancing.
It is not uncommon to pay between 3% and 6% of your principal in fees.Some possible fees you could face include:
Application fee: $100
- $300 Appraisal fee: $300
- $700 Loan Origination fee: up to
1.5% of the loan principal Points: up to 3% of the loan principal.
One point is equal to 1% of the total mortgage amount.
Inspection fee, Attorney Review fee, Survey fee, and Title Search and Insurance fee: $1,500
- $2,500 , Some lenders will charge you a one-time fee if you decide to pay off your existing mortgage early.
Why is that? Because the lender stands to lose a certain amount of money if they can't make extra money off of interest payments.
Know, however, that some states have banned prepayment fees.
Mortgages insured or guaranteed by the federal government, as well as loans insured by federal credit unions, are also barred from levying prepayment fees.How much can you expect to pay if you encounter a prepayment fee? Prepayment fees generally weigh in at one to six months' worth of interest payments. -
Step 3: Know the costs associated with refinancing.
-
Step 4: Find out whether your lender has a prepayment fee associated with your current mortgage.
Detailed Guide
Here are the elements that will determine the rate you will receive:
Loan size Your credit score Paid points When is the closure of the loan? Locked or floating rate Debt to income ratio
Experts say that when mortgage refinancing companies publish their rates, it is most likely that only about 10% of applicants get to use them.
The displayed low rates are used to lure people.
It's not always wise to fall for them. , It probably doesn't make sense to refinance if the costs and fees associated with refinancing are bigger than the amount of money you would have saved after refinancing.
Figure out up front how much you're likely to be charged for refinancing.
It is not uncommon to pay between 3% and 6% of your principal in fees.Some possible fees you could face include:
Application fee: $100
- $300 Appraisal fee: $300
- $700 Loan Origination fee: up to
1.5% of the loan principal Points: up to 3% of the loan principal.
One point is equal to 1% of the total mortgage amount.
Inspection fee, Attorney Review fee, Survey fee, and Title Search and Insurance fee: $1,500
- $2,500 , Some lenders will charge you a one-time fee if you decide to pay off your existing mortgage early.
Why is that? Because the lender stands to lose a certain amount of money if they can't make extra money off of interest payments.
Know, however, that some states have banned prepayment fees.
Mortgages insured or guaranteed by the federal government, as well as loans insured by federal credit unions, are also barred from levying prepayment fees.How much can you expect to pay if you encounter a prepayment fee? Prepayment fees generally weigh in at one to six months' worth of interest payments.
About the Author
Martha Murphy
Creates helpful guides on cooking to inspire and educate readers.
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